DOT Moves to Support Even More Wasteful Transit Projects
The Department of Transportation (DOT) is proposing new rules that would allow it to fund exceedingly wasteful rail transit projects that do nothing to relieve congestion. While the existing rules require transit agencies to demonstrate that proposed new rail lines are at least minimally cost effective, the proposed rules focus instead on such vague criteria as “livability” and “environmental justice.”
This rule goes back to 1991, when Congress created the “New Starts” fund to provide grants to transit agencies that want to build new rail lines or other fixed transit lines (such as busways). There were no limits on how much transit agencies could ask for, and the agencies quickly discovered that cities that proposed the most expensive projects got the most money. This sent the cost of rail projects soaring.
For example, in 1986–before New Starts–Portland completed a 17-mile light-rail line that cost about $200 million. In 1998, after New Starts, it completed a 13-mile light-rail line that cost $950 million. Both received the same percentage of federal matching funds, but the second line was “gold plated” as part of Portland’s effort to capture “its share” of the New-Starts pot. Predictably, the city is now working on a 7-mile line that will cost $1.5 billion.
Happy Birthday, James Madison
Today marks the 261st birthday of James Madison, the politician and theorist who had more to do with the design of the United States Constitution than anyone else.
The morning also brings a sharp critique of judicial elections from the editorial staff of The New York Times. So I am led to wonder: What might Madison have thought of judicial elections?
Article II of the Constitution provides that Supreme Court judges shall be appointed by the president with the advice and consent of the Senate. Article III states that judges shall “hold their Offices during good Behavior.” In the national government, judges are neither elected nor directly responsible to the people. Despite being called “the father of the Constitution,” Madison did not initially support every part of the basic law drafted in Philadelphia. Perhaps he favored judicial elections.
His writings offer little guidance to his views about the judiciary. Alexander Hamilton wrote the essays in The Federalist Papers that dealt with the courts. Kevin R. C. Gutzman, the author of the recent book James Madison and the Making of America, notes that Madison objected at the convention to the proposal that Congress appoint judges. Madison said of Congress: “[M]any of the members were not judges of the requisite qualifications. The Legislative talents which were very different from those of a Judge, commonly recommended men to the favor of Legislative Assemblies.”
I share the intuition intimated by Madison. The legislature and the courts are different in kind. The one, charged with making the laws, should be much more political and directly responsible to the people in a republic. The other, charged with applying the laws including the basic law, should be less responsive to passing public opinion. But the judiciary is a republican institution, not an aristocratic imposition on American government. The people have delegated some of their sovereign power to the courts. In applying the law, the courts act on behalf of the people as sovereign rather than the people as voters.
Might the judiciary become corrupt and begin making laws? Yes. The people’s representatives may then impeach the justices or limit their jurisdiction. Such are the checks this generation of voters has on an imperial judiciary. An elected judiciary, on the other hand, would be neither checked nor separated from the legislature. It would, as Madison remarked, attract legislators who then exercise something like legislative power.
Agree with him or not, you have to admit: Madison was a remarkable individual who was called upon to think through basic political questions and then act on his answers. His answers were not always correct, but we profit by engaging his thinking. I suspect this conversation with “little Jemmy” will continue as long as the United States remains a constitutional republic.
This Week at Libertarianism.org
This week at Libertarianism.org, we posted new videos on self-esteem and libertarianism, the morality of drug use, and separating school and state. The week also saw an essay from George H. Smith and blog posts on Charles Murray and Michael Sandel.
Nathaniel Branden on Self-Esteem and Libertarianism
Nathaniel Branden is a psychotherapist and writer known for being both the founder of the self-esteem movement in psychology and a former associate of Ayn Rand. In this lecture given at a Libertarian Party of California event in 2000, Branden talks about the connection between the workings of free-market capitalism, the self-esteem movement, and the Information Age. In his words, “entitlement robs people of the sense of self-reliance” and the self-esteem that comes with that sense of independence.
National Surveillance Programs and Their State Impediments
Having originally come to Washington to defend federalism, I am always delighted to see the division of powers among the states and the federal government have its proper effect: to protect liberty and limited government.
As with REAL ID, the E-Verify federal background check system is meeting up with state resistance. The Republican Liberty Caucus of New Hampshire reported yesterday:
This afternoon, the House passed HB 1549, which would prohibit the state’s participation in the E-Verify system, with a nearly unanimous voice vote. The House also killed HB 1492, which would require employers to verify an employee’s eligibility to work in the United States using the E-Verify System, with a 226-59 vote.
E-Verify is essentially a national identification system that requires employers to verify all job applicants’ citizenship in a national database system before they can employ them. If the state agreed to participate, all citizens would have to be listed in this national database as a U.S. citizen in order to get a job.
You want to fix immigration, feds? You do it without putting American citizens into a national ID system. Good message.
Here’s the clear language of HB 1549, which the New Hampshire House has approved to govern release of motor vehicle records. It embraces legitimate law enforcement while rejecting national identification schemes.
III. Motor vehicle records may be made available pursuant to a court order or in response to a request from a state, a political subdivision of a state, the federal government, or a law enforcement agency for use in official business. The request shall be on a case-by-case basis. Any records received pursuant to this paragraph shall not be further transferred or otherwise made available to any other person or listed entity not authorized under this paragraph. No records made available under this section shall be used, directly or indirectly, for any federal identification database. (New language in bold.)
To learn more about E-Verify and its role as a nascent national identification scheme, read my Cato Policy Analysis: “Electronic Employment Eligibility Verification: Franz Kafka’s Solution to Illegal Immigration.”
What Is Causing Drug Shortages?
A number of people have asked me what is causing the current shortages in certain types of drugs. Here’s what I’ve been able to discern so far:
In general, there are two reasons why shortages might appear in a market. The first is high fixed costs. These include regulatory costs, the costs of converting a manufacturing plant to a new use, or the costs of creating a new factory. Industries with high fixed costs will see temporary shortages after either supply shocks (e.g., a factory goes offline) or demand shocks (e.g., an increase in the population needing a drug). The price mechanism eventually resolves such shortages. The duration of the shortage is related to the size of the fixed costs.
Shortages also appear when something interferes with the price mechanism’s ability to resolve a shortage. The classic example is government price controls (i.e., a binding price ceiling). Such shortages persist as long as the price controls (e.g., rent control) remain in place and binding.
From my study of the current spate of drug shortages, the best accounting for these shortages appears in this publication by the U.S. Department of Health and Human Services: “Economic Analysis of the Causes of Drug Shortages,” Issue Brief, October 2011.
I initially suspected these drug shortages were caused by Medicare’s Part B drug-payment system. Others, including Scott Gottleib and the Wall Street Journal, have made that claim. However, this study and a lengthy discussion with the U.S. Department of Health and Human Services’ assistant secretary for planning and evaluation have persuaded me that not only is Medicare’s Part B drug-payment system not the cause, that system doesn’t even impose binding price controls. Rather, it controls the margins that physicians earn for administering a drug. (If Medicare did impose binding price controls, would we see mark-ups of 650 percent or more for the shortage drugs?)
Rather, the shortages appear to be the result of a number of dynamics in the market for rare drugs:
Are New York City Crime Stats a Sham?
The Village Voice is reporting that the New York City Police Department has confirmed the allegations of a police whistleblower that at least one precinct, perhaps more, has manipulated crime statistics in a way that makes it appear that crime is down in the city, which makes police commanders and the mayor appear good to both journalists and the electorate. Here’s an excerpt:
For more than two years, Adrian Schoolcraft secretly recorded every roll call at the 81st Precinct in Brooklyn and captured his superiors urging police officers to do two things in order to manipulate the “stats” that the department is under pressure to produce: Officers were told to arrest people who were doing little more than standing on the street, but they were also encouraged to disregard actual victims of serious crimes who wanted to file reports.
Arresting bystanders made it look like the department was efficient, while artificially reducing the amount of serious crime made the commander look good.
In October 2009, Schoolcraft met with NYPD investigators for three hours and detailed more than a dozen cases of crime reports being manipulated in the district. Three weeks after that meeting—which was supposed to have been kept secret from Schoolcraft’s superiors—his precinct commander and a deputy chief ordered Schoolcraft to be dragged from his apartment and forced into the Jamaica Hospital psychiatric ward for six days.
This One’s a True Porker
The Senate passed a transportation bill this week to replace a House bill that was killed by fiscal conservatives for being filled with “pork and special interest projects.” Not surprisingly, the Senate bill is far worse.
Where the House bill authorized deficit spending to the tune of about $10 billion a year, the Senate bill would deficit-spend about $15 billion a year. Where the House bill had no earmarks and few big-government expansions, the Senate bill has several earmarks, discourages the states from leasing roads to private partners, and expands federal regulation of public and private transit and intercity bus systems.
Fiscal conservatives pinned their hopes on an amendment that would allow states to opt out of federal funding by raising their gas taxes by the 18.4 cents that the federal government collects, thus cutting out the feds as middle man. The Senate predictably and decisively rejected this amendment by 68 to 30. Sen. Barbara Boxer (D, Calif.) argued that the amendment would “devolve” the highway fund, which of course was the whole point.
I’ve long argued that the only way to devolve federal transportation spending to the states is to first take the pork out of the gas tax. The House bill did this by rededicating gas taxes to roads (making them once again a true user fee), distributing gas taxes using formulas (preventing Congress from earmarking), and paying for transit out of other funds. Once the pork was gone, Congress would lose interest and let the states take over. The Senate bill, of course, does none of these things, and in particular continues to dedicate a share of gas taxes to transit, which will make it a lot harder to devolve gas taxes to the states.
The only good news is that the Senate bill is just a two-year bill, which means the whole debate can begin again in 2014 if not 2013. But the House has just two weeks to accept or reject the bill, as the current law expires on March 31. If they can’t reach an agreement by March 31, they are likely to simply extend the current law, which is not a whole lot different from approving the Senate bill.
If the House had been able to pass its bill, it would have been in a much stronger position to negotiate some improvements to the Senate bill. As it is, it now has a choice between the bad law now on the books or the slightly worse bill passed by the Senate. Fiscal conservatives should encourage the House to reject the Senate bill and start the debate over.
Americans Favor Accelerated Withdrawal from Afghanistan
In case you haven’t heard, the war in Afghanistan is in a tailspin. Following the turbulent events of the past two weeks—including yesterday’s incident on a Helmand runway and the disarming of U.S. Marines before Defense Secretary Leon Panetta—Afghan president Hamid Karzai has demanded U.S. troops withdraw from villages and operate only from large NATO bases. Furthermore, the Taliban announced that it is breaking off peace talks with the United States.
These new developments further call into question the Obama administration’s ability to implement its strategy of a gradual transition of responsibilities to the Afghan national security forces by 2014. And the American people recognize this.
A USA Today/Gallup poll finds 50 percent of respondents support an accelerated troop withdrawal from Afghanistan, while an Washington Post-ABC News-poll shows 54 percent favor a U.S. military withdrawal even if it means the Afghan security forces are not “self-sufficient.” That same poll finds 60 percent believe the war is “not worth fighting.” A majority of Americans rightly understand the futility of staying the course. Leaders in Washington should, too.
Do Liberals Oppose Affordable Housing?
I’m a little behind on my reading, so you’ll have to forgive that the paper I’m about to talk about has been out for over a year. We tend to associate the push for more affordable housing, whether it is direct subsidies like the Section 8 Voucher program or lending requirements like the Community Reinvestment Act, with those more of the liberal persuasion. A empirical analysis, published in the peer-reviewed Journal of Urban Economics, by UCLA economist Matthew Kahn (believe me, no conservative or libertarian is he), finds that:
across California metropolitan areas from 2000 to 2008…liberal cities grant fewer new housing permits than observationally similar cities located within the same metropolitan area. Cities experiencing a growth in their liberal voter share have a lower new housing permit growth rate.
Yes the analysis controls for income, so this isn’t just a NIMBY effect, but does seem to be the result of either ideology or political preferences. So it appears that while liberals push for more federal housing subsidies, they fight against more housing, and hence less affordable housing, at the local level. Now you might suspect that the hope is that one off-sets the other. I wouldn’t be surprised to believe the citizens of, say, San Francisco want the rest of us to subsidize their lifestyle and also believe more federal subsidies can take care of affordable housing needs. But the unfortunate truth is that the two, increased federal subsidies and local supply restrictions, end up driving up housing prices, contributing to housing bubbles and ultimately do little to provide affordable housing. The reason is that increased demand, which is what most federal housing subsidies do, simply drives up price in the presence of inelastic supply. If liberals truly cared about the poor and needy, they’d deregulate their local housing market and actually allow for the provision of affordable housing.
Ex-Im Shenanigans, cont’d
Kudos to Tim Carney, who has a great piece in the Washington Examiner today highlighting some of the politics and policy substance behind the fight over reauthorisation of the Ex-Im Bank. It’s gratifying to see a journalist take a stand against outrageous corporate welfare. If only it were more common (I’m looking at you, New York “the bank is self-financing” Times).
My new paper on Ex-Im, in which I expand on this blog post from a few weeks ago, was released yesterday. You’ll find even more evidence –as if it were needed — of why the Ex-Im Bank, rubber stamped through Congress by both parties on behalf of their rent-seeking friends for almost 80 years, has got to go.
Suing the IRS for Fun and Liberty
This blogpost was coauthored by Cato legal associate Chaim Gordon.
On Tuesday, the Institute for Justice brought a lawsuit to stop recent IRS regulations that require independent tax return preparers to pay a yearly registration fee, take a competency exam, complete 15 hours of IRS-approved continuing education every year, and possibly subject themselves to mandatory fingerprinting. Our colleague Dan Mitchell observed two years ago that these regulations appear to be the result of “regulatory capture.” As the Wall Street Journal explained:
Cheering the new regulations are big tax preparers like H&R Block, who are only too happy to see the feds swoop in to put their mom-and-pop seasonal competitors out of business.
Indeed, as others have already noted, one of the architects of this licensing scheme is Mark Ernst, former CEO of H&R Block. These protectionist regulations were even cited by UBS as a reason to buy H&R Block stock, on the grounds that they will “add barriers to entry (or continuation) for small preparers.”
In defending the need for these regulations, IRS Commissioner Douglas Shulman’s most insightful explanation was that “in most states you need a license to cut someone’s hair.” This statement undoubtedly caught IJ’s attention because that “merry band of litigators” has devoted itself to fighting such senseless and corrupt regulations (including in hair salons).
But these regulations are not just misguided and corrupt. They are, as IJ’s complaint contends, simply beyond the IRS’s regulatory authority. The IRS claims the power to regulate tax return preparers under 31 U.S.C. § 330. But that statute only authorizes the IRS to regulate “the practice of representatives of persons,” and tax return preparers do not represent persons before the IRS and do not “practice” in the sense that lawyers do when they appear before a court. Taxpayers are only “represented” when they authorize someone to act on their behalf before the IRS in an exam, controversy, or litigation setting. This is especially clear in light of the statute’s plain purpose, which is to ensure that such representatives have the “competency to advise and assist persons in presenting their cases” (emphasis added).
Moreover, under the IRS’s expansive reading of the law, which puts under the agency’s purvey “all matters” connected with a “presentation” to the IRS, anyone who advises another about the tax aspects of a particular transaction could theoretically be guilty of unauthorized practice before the IRS. Congress clearly meant no such thing. In fact, Congress specifically amended 31 U.S.C. § 330 to allow the IRS to regulate the provision of written advice that the IRS “determines as having a potential for tax avoidance or evasion.” Such additional authority would be unnecessary under the IRS’s broad reading of the original statute.
IJ had previously warned the IRS that its then-proposed regulations were unfair to mom-and-pop tax return preparers and exceeded its statutory authority, but the IRS neither altered its plan nor explained why it thinks that it has the authority to regulate tax return preparers in the first instance. Now the IRS will have to explain its power grab to a federal judge.
Watch IJ’s excellent case launch video. IJ attorney Dan Alban explains the case in an editorial here and in an interview here.
Pool Closed Until Further Notice
Tomorrow is a deadline that looms large for worried pool operators at hotels and public recreation facilities across the country, as USA Today reports:
Hoteliers must have pool lifts to provide disabled people equal access to pools and whirlpools, or at least have a plan in place to acquire a lift. If they don’t, they face possible civil penalties of as much as $55,000.
As Conn Carroll at the Washington Examiner explains, the mandate has taken an even more irrational form than might have been expected. Because the elevator lifts are space-consuming, unsightly, potential hazards to curious children, and unlikely to be used very often, many pool operators assumed it would be enough to purchase a portable lift that could be wheeled over to poolside on user request and stored when not in use. No such luck: the Obama administration has announced that the lifts must not only be of permanent construction, but must apply to each separate “water feature”, so that a pool with adjoining spa would need two of them. “Each lift costs between $3,000 and $10,000 and installation can add $5,000 to $10,000 to the total.” Many budget hostelries are expected to simply shutter their pools until further notice rather than take the risk that entrepreneurial fast-buck artists will begin filing complaints against them for cash settlements, as in California’s notorious ADA filing mills.
I think Carroll probably goes too far when he suggests that the Obama administration made the rules unreasonable in order to give its friends in the ADA bar more litigation to file. The problem is more that this administration (and not just this one) has outsourced its thinking on the law to advocates in the legal academia-disabled rights-”public interest law” community, which tends to embrace interpretations and applications of the law geared to advance ambitious versions of social change. In the pool case, the federal appointee in charge (according to this blog post) was Samuel Bagenstos, who after his stint in the Obama Justice Department has now returned to legal academia, where he is perhaps the leading proponent of expansive ADA interpretation. (His view of abusive ADA suits — he puts the term “abusive” in quotation marks — is here.) Academia’s other best-known advocate of an expansively interpreted ADA (and a drafter of the law) is Chai Feldblum of Georgetown Law, who serves the Obama administration as head of the Equal Employment Opportunity Commission.
Don’t look to Republicans for relief on this. The Bush administrations both pere et fils were consistently wretched on it, and a large bloc of GOP members of Congress predictably joins the Democrats in opposing legislative ideas for even modest rollback of the ADA’s most extreme applications.
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