Week in Review: Bailout Bonuses, Marijuana and Eminent Domain Abuse
House Approves 90 Percent ‘Bonus Tax’
Sparked by outrage over the bonus checks paid out to AIG executives, the House approved a measure Thursday that would impose a 90 percent tax on employee bonuses for companies that receive more than $5 billion in federal bailout funds.
Chris Edwards, Cato’s director of tax policy studies, says the outrage over AIG is misplaced:
While Congress has been busy with this particular inquisition, the Federal Reserve is moving ahead with a new plan to shower the economy with a massive $1.2 trillion cash infusion — an amount 7,200 times greater than the $165 million of AIG retention bonuses.
So members of Congress should be grabbing their pitchforks and heading down to the Fed building, not lynching AIG financial managers, most of whom were not the ones behind the company’s failures.
Cato executive vice president David Boaz says this type of selective taxation is a form of tyranny:
The rule of law requires that like people be treated alike and that people know what the law is so that they can plan their lives in accord with the law. In this case, a law is being passed to impose taxes on a particular, politically unpopular group. That is a tyrannical abuse of Congress’s powers.
On a related note, Cato senior fellow Richard W. Rahn defended the use of tax havens in a recent Wall Street Journal op-ed, saying the practice will only become more prevalent as taxes increase in the United States:
U.S. companies are being forced to move elsewhere to remain internationally competitive because we have one of the world’s highest corporate tax rates. And many economists, including Nobel Laureate Robert Lucas, have argued that the single best thing we can do to improve economic performance and job creation is to eliminate multiple taxes on capital gains, interest and dividends. Income is already taxed once, before it is invested, whether here or abroad; taxing it a second time as a capital gain only discourages investment and growth.
Obama to Stop Raids on State Marijuana Distributors
Attorney General Eric Holder announced this week that the president would end federal raids on medical marijuana dispensaries that were common under the Bush administration.
It’s about time, says Tim Lynch, director of Cato’s Project on Criminal Justice:
The Bush administration’s scorched-earth approach to the enforcement of federal marijuana laws was a grotesque misallocation of law enforcement resources. The U.S. government has a limited number of law enforcement personnel, and when a unit is assigned to conduct surveillance on a California hospice, that unit is necessarily neglecting leads in other cases that possibly involve more violent criminal elements.
The Cato Institute hosted a forum Tuesday in which panelists debated the politics and science of medical marijuana. In a Cato daily podcast, Dr. Donald Abrams explains the promise of marijuana as medicine.
Cato Links
• A new video tells the troubling story of Susette Kelo, whose legal battle with the city of New London, Conn., brought about one of the most controversial Supreme Court rulings in many years. The court ruled that Kelo’s home and the homes of her neighbors could be taken by the government and given over to a private developer based on the mere prospect that the new use for her property could generate more tax revenue or jobs. As it happens, the space where Kelo’s house and others once stood is still an empty dustbowl generating zero economic impact for the town.
• Daniel J. Ikenson, associate director of Cato’s Center for Trade Policy Studies, explains why the recent news about increasing protectionism will be short-lived.
• Writing in the Huffington Post, Cato foreign plicy analyst Malou Innocent says Americans should ignore Dick Cheney’s recent attempt to burnish the Bush administration’s tarnished legacy.
• Reserve your spot at Cato University 2009: “Economic Crisis, War, and the Rise of the State.”
Republicans Rediscover Their Big-Government Principles
Sen. Chuck Grassley, who can always be counted on to stick the federal government’s nose where it doesn’t belong, is criticizing Attorney General Eric Holder’s teeny-tiny steps toward a less oppressive enforcement of drug prohibition. Holder said on Wednesday “that federal agents will target marijuana distributors only when they violate both federal and state law. This is a departure from policy under the Bush administration, which targeted dispensaries under federal law even if they complied with the state’s law allowing sales of medical marijuana.”
Grassley says that marijuana is a “gateway” drug to the use of harder drugs and that Holder “is not doing health care reform any good.”
As Tim Lynch and I wrote in the Cato Handbook for Policymakers:
President Bush . . . has spoken of the importance of the constitutional principle of federalism. Shortly after his inauguration, Bush said, “I’m going to make respect for federalism a priority in this administration.” Unfortunately, the president’s actions have not matched his words. Federal police agents and prosecutors continue to raid medical marijuana clubs in California and Arizona.
And as Justice Clarence Thomas wrote in dissenting from the Supreme Court’s decision to uphold the power of the federal government to regulate medical marijuana:
If Congress can regulate this under the Commerce Clause, then it can regulate virtually anything — and the Federal Government is no longer one of limited and enumerated powers.
That’s the principle that Chuck Grassley defends. Republicans claim to be the small-government party — and President Obama’s policies on taxes, spending, and regulation certainly justify a view that the GOP is, if not a small-government party, at least the smaller-government party — but they forget those principles when it comes to imposing their social values through federal force.
Federal Enforcement Policy Is Up in Smoke
Attorney General Eric Holder’s announcement that the federal government will end raids on medical marijuana distributors is terrific news.
The Bush administration’s scorched-earth approach to the enforcement of federal marijuana laws was a grotesque misallocation of law enforcement resources. The U.S. government has a limited number of law enforcement personnel, and when a unit is assigned to conduct surveillance on a California hospice, that unit is necessarily neglecting leads in other cases that possibly involve more violent criminal elements.
This shift in policy is also more mindful of the constitutional principle of federalism by allowing the states to try different policy approaches, and it is more respectful of the division of opinion within the medical community about the benefits of marijuana for certain patients. This de-escalation of the drug war is good policy and is long overdue.
New Podcast: ‘War on Drugs, War on Guns’
Attorney General Eric Holder said recently that in order to quell the violence spilling over from the drug war in Mexico he will push to reinstate the ban on “assault weapons” in the United States.
But, says Legal Policy Analyst David Rittgers in today’s Cato Daily Podcast, a policy like that won’t do much to quell violence.
The [drug] cartels have access to lots and lots of money because of our prohibitionist policies in the US. And because of this money they can get these weapons whether we have them legal or illegal…and they’ll have access to the black market to get fully automatic machine guns if they want them.
… If you like the war on drugs, you’re going to love the war on guns.
Good Coverage of AG Holder’s War on Guns
As I said earlier this week, Eric Holder’s push for an “assault weapons” ban is a misguided policy that will not have any serious impact on Mexican drug cartels. It really ought to be called a “ban on semi-automatic firearms with politically incorrect cosmetic features,” but that doesn’t exactly roll off the tongue. I am pleased to see that CNN is providing coverage of this that notes (1) the difference between semi-automatic sporting arms and machine guns and (2) that Mexican authorities are not releasing the serial numbers of firearms seized from the gangsters. This is probably because many of these guns are coming from the Mexican government, not American gun stores. The drug cartels are putting up billboards to recruit soldiers and policemen as hired muscle. Don’t be surprised when they walk off the job with the guns you issued them, and don’t shift the blame to the Second Amendment.
Holder’s “Assault Weapons” Folly
Attorney General Eric Holder recently announced that the Obama administration will seek a new federal “assault weapons” ban. This is an ill-advised policy that defies common sense.
The ban would be a revival of a law passed in the early years of the Clinton administration that expired in 2004. The law prohibited the sale of newly-manufactured magazines holding more than ten rounds of ammunition and having two of five cosmetic features on semi-automatic rifles. If you had a pistol grip and a detachable magazine, you couldn’t have a bayonet lug. More recent proposals have attempted to ban “barrel shrouds,” which the rest of the world calls “handguards” – the place you put your hand (instead of on a hot barrel) to prevent burning it while firing.
The emphasis here is on the cosmetic – any rational discussion of the issue ought to note that an “assault weapon” is any object you use to assault someone with – and banning the presence of a bayonet lug on the barrel of a rifle is senseless. Knives, tire irons, and bricks can all serve as “assault weapons.” This is an instance where quotation marks are not just appropriate, they are required.
Much of the public support for the law was based on a warping of the issue by gun control proponents to make the public believe that these firearms are machine guns. The fully automatic weapons that gun controllers use to push this agenda have been heavily regulated by the federal government since 1934 and not produced for civilian sale since 1986. Don’t take my word for it – here’s Josh Sugarmann of the Violence Policy Center: “The weapons’ menacing looks, coupled with the public’s confusion over fully automatic machine guns versus semi-automatic assault weapons-anything that looks like a machine gun is assumed to be a machine gun-can only increase the chance of public support for restrictions on these weapons.”
This intentional distortion has moved from advocacy groups to the attorney general’s office. Attorney General Eric Holder claims that the law is needed to counter Mexican Drug War violence, that American gun laws support “cartels employing automatic weapons and grenades.” Again, these devices are already illegal. It is far more likely that these weapons of war are from Mexican Army troops who deserted their posts for the higher pay that drug kingpins offer. The drug cartels have even taken the brazen step of setting up billboards meant to draw soldiers and police officers from their government jobs and into the drug trade. My colleague Ted Galen Carpenter wrote the book on how to deal with this issue. Holder’s War on Everything is not it.
It defies reason to think that multi-billion dollar criminal syndicates will not be able to get their hands on guns because of an American law banning cosmetic features and dictating lower magazine capacity. If the Mexican government gets better control of its own armaments, the cartels will simply go to the black market and buy the guns. Or make them. Guns are hand-crafted in the frontier provinces of Pakistan, and there is no reason that the cartels could not do the same in a country with far more industrial know-how. Three minutes of internet research will reveal plans to make fully automatic sub-machine guns, so enough capital to set up a machine shop and buy some sheet metal is all it would take.
The expired ban did not demonstrably impact crime anyway. The Centers for Disease Control conducted a study in 2003 that found no reduction of crime attributable to the law. This should come as no surprise, since most criminals’ weapons of choice are cheap, small caliber pistols. They traditionally dominate the ATF’s top crime gun list. There are some bad apples out there selling guns to people they know to be “straw buyers,” people who have clean records and re-sell the guns to those who don’t. Prosecute them. Enforce the existing laws before deciding to restrict the freedom of law-abiding citizens.
Predictably, both Harry Reid and Nancy Pelosi have temporarily quashed the issue. Let’s hope they keep it out of the halls of Congress, and focus instead on a sensible drug policy that impacts the demand created by an illicit drug market.
Pelosi and Reid realize that this proposal will do is come back to haunt Democrats in the 2010 mid-term elections, which historically trend against the president’s party anyway. Many Democrats attributed the flip of the House of Representatives to Republican hands in 1994 to the first “assault weapons” ban. Numerous experts believe that the reason Al Gore could not carry his home state of Tennessee in the 2000 election was his push for broader gun control. Blue Dog Democrats that ran on pro-gun platforms in conservative districts must be rolling their eyes. The rest of the country should do so as well, and send this proposal to the dustbin.
UPDATE: Since I started writing this, the “ban guns for Mexico’s sake” narrative has taken on a drumbeat’s tempo. 60 Minutes did this piece echoing the gun ban crusade, and the Wall Street Journal published this. Expect more of this nonsense.
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