Cato: Court Ruling on Executive Order: Bad Legal Work All Around

This is a dog’s breakfast of a ruling on a dog’s lunch of an executive order. Somehow the Ninth Circuit judges manage to write 29 pages without discussing the heart of the matter: whether the Immigration and Naturalization Act, specifically section 1182, gives the president the power to do what he did. Nebulous discussions of due process may be nice (or not) but they’re superfluous if the president went beyond his statutory authority. But apparently the court didn’t care about that.

And of course this whole mess could’ve been avoided if the executive order had gone through proper interagency review in the first place, as well as being more narrowly tailored. As it stands, it’s both over- and under-inclusive. It’s over-inclusive because it sweeps in green card and other visa holders who’ve already gone through “extreme vetting,” as well as non-threatening graduate students and sick kids. It’s under-inclusive because it doesn’t even attempt to target the actually risky pool of nationals from non-covered countries (including European ones) who may have become radicalized—and doesn’t offer any concrete reforms to the visa- or refugee-vetting systems that could actually diminish the risk of terrorism on U.S. soil.

Read more at https://www.cato.org/blog/court-ruling-executive-order-bad-legal-work-all-around

Cato: The Right to Hope for Jury Nullification

Jae Lee came to the United States legally as a child but never became a citizen. In 2009, he pled guilty to a drug crime after his lawyer assured him that he could not be deported as a result. The lawyer was wrong, because the conviction made Lee subject to mandatory removal.

When Lee learned of this mistake, he asked the court to vacate his plea so he could instead face trial, arguing that his counsel’s assistance was ineffective. The district court denied this motion because of the overwhelming evidence against Lee, ruling that his conviction at trial was so certain that his counsel’s bad advice didn’t actually harm him, particularly given the much longer prison sentence he would receive if convicted after trial.

The U.S. Court of Appeals for the Sixth Circuit agreed that a jury wasn’t needed to determine Lee’s guilt and that denying the “chance to throw a Hail Mary at trial is not prejudicial” and therefore doesn’t violate Lee’s Sixth Amendment right to a jury trial. The court reasoned that that the only chance Lee had was acquittal by “jury nullification” and thus such a gambit was so irrational—and the idea of nullification so antiquated—that it is not to be allowed.

Lee is now pressing the matter at the Supreme Court, which has agreed to hear his argument, which Cato is supporting with this amicus brief. The idea of an independent jury’s nullification power is encompassed in the original meaning of the Sixth Amendment. Colonists frequently viewed juries as a shield against the crown, as juries frequently protected defendants against unjust and oppressive laws.

Read more at https://www.cato.org/blog/right-hope-jury-nullification

Cato: Cutting Legal Immigration Won’t Help Low-Skilled American Workers

Senators Tom Cotton (R-AR) and David Perdue (R-GA) recently introduced the Reforming American Immigration for Strong Employment (RAISE) Act.  If it were to become law, RAISE would cut legal immigration by 50 percent over the next ten years by reducing green cards for family members of U.S. citizens and lawful permanent residents, slashing refugees, and eliminating the diversity visa lottery.  These goals are in line with President Trump’s stated objective to cut legal immigration in most categories.

The RAISE Act’s goal is to increase wages for lower-skilled Americans by reducing the supply of lower-skilled immigrants.  Their press release argues that the “generation-long influx of low-skilled labor has been a major factor in the downward pressure on the wages of working Americans, with the wages of recent immigrants hardest hit.”  Under such a worldview, only a drastic reduction in green cards and the supply or workers can raise American wages - and it’s not crazy.

The National Academy of Sciences’ (NAS) exhaustive literature summary on the economic effects of immigration concluded that: “When measured over a period of 10 years or more, the impact of immigration on the wages of native-born workers overall is very small.  To the extent that negative impacts occur, they are most likely to be found for prior immigrants or native-born workers who have not completed high school—who are often the closest substitutes for immigrant workers with low skills.”  Although the effect is small, RAISE seeks to take advantage of the finding in the academic literature by inferring that if an increase in the supply of workers slightly lowers some wages then a decrease in that same supply will do the opposite.

Read more at https://www.cato.org/blog/cutting-legal-immigration-wont-help-low-skilled-american-workers

Cato: Why Trains in Europe Function So Badly

Over at KiwiReport, a writer named Serena Carsley-Mann asks a good question: “Why do trains in America function so different from trains in Europe?” Unfortunately, she mistakenly thinks the problem is that “trains in America function so badly.”

In fact, America has the most efficient rail system in the world. It is European trains that function badly. I’ve discussed this before in my blog, but since writers like Carsley-Mann continue to get it wrong, it is worth repeating.

According to a Pew study, freight shipped by truck uses about ten times as much energy, and emits far more greenhouse gases, per ton-mile than freight shipped by rail (see page 2). Because rail cars weigh more, per passenger, than automobiles, rail’s comparative advantages for passengers are much smaller, and unlike trucks it will be very easy for cars to close the gap: a Prius with a average of 1.67 occupants, for example, is more energy efficient than almost any Amtrak train. Thus, to save energy, it is better to dedicate rail lines to freight rather than to passengers.

This is what the United States has done, but it is exactly the opposite of what Europe has done. According to a report from the European Union, 46 percent of EU-27 freight goes by highway while only 10 percent goes by rail, while in the U.S. 43 percent goes by rail and only 30 percent by road. Thus, we’re using our rail system far more effectively than Europe. This is not just from an energy view but also from a consumer-cost view, as rails cost less than trucks for freight but more than cars for passengers.

Read more at https://www.cato.org/blog/why-trains-europe-function-so-badly

Cato: John McCain: America’s Foreign Policy Loose Cannon

President Trump’s testy telephone conversation with Australian Prime Minister Malcolm Turnbull quickly produced a reaction from one ubiquitous U.S. player on foreign policy issues, Arizona Senator John McCain. He contacted Australia’s ambassador in Washington to assure him of Washington’s undying devotion to the U.S. alliance with Australia and to that country’s security and well-being. The implicit message was that Canberra should not take Trump or his actions seriously. In so doing, McCain basically anointed himself as America’s shadow president, with the right and obligation to bypass the elected president and conduct relations with foreign governments and other parties.

His actions were entirely inappropriate. Granted, Trump’s conduct toward Turnbull deserves no praise. During the telephone call, a dispute arose over refugee policy, and an angry Trump reportedly berated the Australian leader and abruptly cut the scheduled one-hour session short after 25 minutes. Such behavior was that of a petulant adolescent rather than the expected behavior of a president of the United States.

Nevertheless, the Constitution empowers the president and his appointees to conduct America’s foreign policy. Even senators are not authorized to undercut their authority by engaging in direct, free-lance diplomacy with foreign leaders. Yet that is what McCain did.

Read more at https://www.cato.org/blog/john-mccain-americas-foreign-policy-loose-cannon

Cato: Democrats Should Be Heartened by Betsy DeVos

Unless something unexpected happens, tomorrow the United States Senate will vote on Betsy DeVos to be the next U.S. Secretary of Education. And if you are a Democrat sweating through nightmares over what a Trump administration will do to education, you should be pretty comfy with what DeVos has said she’d like to see happen under her watch. As she stated repeatedly in her confirmation hearing, she would not use federal power—and certainly not secretarial power—to impose anything, including school choice, on unwilling states and districts.

But isn’t the vote expected to be as close as last night’s Super Bowl at the end of regulation, with all Dems voting against DeVos and Vice President Mike Pence delivering the final, overtime vote for her? Yup.

You see, over the decades, Democrats, with copious help from Republicans, have tried to make the U.S. Department of Education what it was not originally intended to be, and what with absolute certainty it cannot constitutionally be: a national school board. This vision was exposed in a comment by Senator Patty Murray (D-WA), ranking member of the Health, Education, Labor and Pensions committee, when she warned all who were suffering through the festival of misinformation and grandstanding that was DeVos’s confirmation hearing, that if approved DeVos would “oversee the education of all of our kids.”

Read more at https://www.cato.org/blog/democrats-should-be-heartened-betsy-devos

Cato: Trump’s Exclusion of Immigrants from Specific Countries Is Not Legal

President Trump issued an executive order on Friday that includes a ban on the entry of virtually all nationals from several countries. The same day, the New York Times published my argument that the portion of the ban that bars immigrants or legal permanent residents violates the law, which bans discrimination against immigrants based on national origin.

Andrew McCarthy of National Review Online was kind enough to take the time to publish a response (“Trump’s Exclusion of Aliens from Specific Countries Is Legal”). Because Mr. McCarthy’s article demonstrates significant confusion over my argument, the facts, and the laws at issue, it surprised me to see National Review editor Rich Lowry also cite it favorably. Despite the weakness of its analysis, the piece provides me an opportunity to clarify and reinforce some aspects of my argument that brevity required me to excise from the Times.

1. The Constitution gives the power to make immigration laws to Congress. Mr. McCarthy writes:

"Under the Constitution, as Thomas Jefferson wrote shortly after its adoption, “the transaction of business with foreign nations is Executive altogether.” … In the international arena, then, if there is arguable conflict between a presidential policy and a congressional statute, the president’s policy will take precedence in the absence of some clear constitutional commitment of the subject matter to legislative resolution."

In other words, the president can ignore congressional limits in this area. He cites case law in which courts describe the president’s foreign affairs powers with respect to relations with foreign governments as expansive, but cites no case that concludes the president can ignore Congress to exclude immigrants. It is reminiscent of President Nixon’s famous argument that “when the president does it, that means it is not illegal.” It is Congress, not the president, that makes immigration law. “[O]ver no conceivable subject is the legislative power of Congress more complete than it is over… the admission of aliens,” ruled the Supreme Court in Oceanic Steam Navigation Co. v. Stranahan.

Mr. McCarthy had no problem defending this view when the actions at issue were President Obama’s, which were also justified based on “security,” but now adopts it to defend President Trump’s. As my Cato colleagues wrote at the time, “it is not for the president alone to make foundational changes to immigration law—in conflict with the laws passed by Congress and in ways that go beyond constitutionally authorized executive power.”

Read more at https://www.cato.org/blog/trumps-exclusion-immigrants-specific-countries-not-legal

Cato: Five Reasons Congress Should Repeal Trump’s Immigrant & Refugee Ban

President Trump signed an executive order yesterday that would ban all Syrian refugees and almost all refugees from all countries from entering the United States for six months, while cutting the overall annual limit for refugees in half and banning for at least 90 days all immigration from seven majority Muslim countries. It implies that this ban could continue indefinitely for certain countries. These policies will not improve national security and will undermine America’s efforts to combat Islamic extremism and terrorism around the world.

1) The order violates the law. Under the Immigration Act of 1965, the president may not refuse to give visas to immigrants coming to live in the United States permanently due to their nationality. The provision is unequivocal in stating that no person may “be discriminated against in the issuance of an immigrant visa because of the person’s race, sex, nationality, place of birth, or place of residence.” While this does not apply to temporary visitors or refugees, I have previously explained in detail why the president cannot legally enforce this order against immigrants who are sponsored by employers or family members in the United States.

2) Refugees and immigrants from Muslim-majority countries are not a serious threat to Americans. The order would ban all people entering the United States from Iraq, Iran, Syria, Somalia, Sudan, Libya, and Yemen, and yet no terrorist from these places has carried out a lethal attack in the United States. Indeed, no Libyans or Syrians have even been convicted for planning such an attack. Moreover, the likelihood of being killed by any refugee from any country is just 1 in 3.64 billion a year. This discrimination is arbitrary and cannot be rationally justified based on a assessment of the risk. It is worth remembering that German Jews were turned away on a similar pretense that they could be Nazi spies—only to be killed in death camps.

3) The order aids the Islamic State. ISIS has said that it wishes to “compel the Crusaders to actively destroy the gray zone themselves,” forcing Western Muslims to “either apostatize… or [emigrate] to the Islamic State and thereby escape persecution from the crusader governments and citizens.” They want this overreaction. The only thing keeping ISIS from imploding are its new recruits which makes winning the propaganda war critical. Accepting refugees deprives ISIS of human resources. The Caliphate’s main source of income is the people it extorts. One refugee told the Times. “ISIS would not let us leave. They said, ‘You are going to the infidels.’” What could be more important than making the “infidels” more popular than ISIS?

Read more at https://www.cato.org/blog/five-reasons-congress-should-repeal-trumps-immigrant-refugee-ban

Cato: Trump’s Wall Plan Is Disgraceful, Belligerent, and Disastrous

Regardless of whether wall construction is funded through a discriminatory tariff on imports from Mexico or the border adjustment taxes envisaged in the GOP tax proposal, U.S. consumers and taxpayers will be flipping the bill.  The very idea of building the wall in the first place is a disgrace, but demonizing our neighbors and hatching plans that could subvert the Mexican economy and put another Venezuela on our southern border, is belligerent and potentially disastrous.

Hitting all Mexican imports with a 20% tariff is, unfortunately, something the president could do.  Under the Constitution, Congress is authorized to regulate foreign commerce, which includes imposing tariffs.  But over the years, Congress has delegated some of that authority to the president through various statutes. All of those statutes require that some condition be met (findings of a surge in imports; subsidized imports; unfair foreign practices that hurt U.S. companies; national security crises; public health or safety threats, etc.) before restrictions can be imposed. Sometimes the restrictions are limited in magnitude and duration, sometimes not.  Sometimes the actions are subject to judicial review, sometimes not.

Read more at https://www.cato.org/blog/trumps-wall-plan-disgraceful-belligerent-disastrous

Cato: Campaign-Finance Rules Chill Speech Unrelated to Election Campaigns

In 2014, the Independence Institute—a Colorado think tank—wanted to run a radio advertisement supporting the Justice Safety Valve Act, a bill granting federal judges greater discretion in sentencing nonviolent offenders. The text of the ad asked listeners to “call Senators Michael Bennet and Mark Udall”—Colorado’s two senators at the time—and tell them to support the bill.

But under the Bipartisan Campaign Reform Act of 2002 (BCRA, better known as McCain-Feingold), any organization that spends at least $10,000 on “electioneering communications” in one year is required to make several public disclosures, including “the names and addresses of all contributors who contributed an aggregate amount of $1,000 or more” toward the advertisement. Further, an “electioneering communication” is defined as any broadcast that “refers to a clearly identified candidate for Federal office” within 60 days of a general election. Since Udall was running for reelection that year, the ad would have qualified even though it had nothing to do with Udall’s campaign.

The Independence Institute challenged the rule as an unconstitutional burden on its First Amendment right to speak on issues of public concern. After losing before a three-judge district court, the Institute has now appealed directly to the Supreme Court. Cato, joining the Institute for Justice, has filed a brief urging the Court to grant the case a full hearing on the merits.

We make two broad points. First BCRA’s disclosure provision is undeniably content-based, which should subject it to strict scrutiny under the First Amendment (meaning the government needs to provide a compelling justification). The law applies only if a speaker chooses to make reference to a candidate for office, so the law expressly draws distinctions based on the expressive content of speech.

Read more at https://www.cato.org/blog/campaign-finance-rules-chill-speech-unrelated-election-campaigns

Cato: I’ll Take Unconstitutional Prosecutions for $1000, Alex

In 2011, federal authorities charged Calvin Walker, a Texas electrician, with 37 counts of fraud. Eighteen months later, Walker accepted a plea deal in exchange for all charges being dropped. That should have been the end of his legal saga. Yet two years later, Walker was again indicted for exactly the same alleged fraud, only this time by state authorities. He challenged this second prosecution as a violation of the Fifth Amendment, which guarantees that no person shall “be twice put in jeopardy of life or limb” for the same offense. But under a strange exception to the Double Jeopardy Clause created by the Supreme Court 60 years ago, both the state and federal governments are allowed to prosecute someone for the same act.

Cato has joined the Constitutional Accountability Center in filing a brief urging the Supreme Court to review of Walker’s case and overturn this misguided “dual sovereignty” exception. We make three principal arguments. First, none of the Framers would have contemplated such a large exception to Double Jeopardy protection. Even before the Founding, English jurist and legal theorist William Blackstone wrote that it was considered a “universal maxim of the common law of England, that no man is to be brought into jeopardy of his life, more than once, for the same offence.” And in congressional debates before the enactment of the Fifth Amendment, Rep. Roger Sherman observed that “the courts of justice would never think of trying and punishing twice for the same offence.”

Read more at https://www.cato.org/blog/ill-take-unconstitutional-prosecutions-1000-alex

Cato: Supreme Court Takes on the Empire State’s Language Police

In Federalist 10, James Madison warned of “a number of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens or to the permanent and aggregate interests of the community.” These groups—“factions” in Madison’s terms—come together to seek concentrated benefits from favorable legislation and regulation rather than competing in the marketplace, while spreading the costs throughout society.

While Madison conceded that such interests could not be stopped completely, he suggested that certain steps could be taken to mitigate the “effects” of these groups, and the damage that they can do to the public interest. The First Amendment is one such protection.

The New York legislature, however, ignored the First Amendment rights of both merchants and consumers when—at the behest of the credit-card lobby—it passed a law restricting how retailers can convey pricing schemes, as well as the public’s right to know about them. New York’s no-surcharge law—like those in 10 other states—insulate credit-card companies from consumer knowledge about who is actually causing the higher prices on goods when they use their credit card (“swipe fees”). The law does this not by restricting the merchants’ ability to charge different prices as between cash and credit payments—that’s legal everywhere—but by regulating the communications about the different prices.

To put it simply: the law allows merchants to offer “discounts” to cash-paying customers, but makes it a crime to impose economically equivalent “surcharges” on those who use plastic. By mandating how these merchants convey their pricing structure, New York is restricting speech on the basis of its content, which would seem to be an obvious First Amendment violation.

Read more at https://www.cato.org/blog/supreme-court-takes-empire-states-language-police

Cato: The IRS Believes All Bitcoin Users are Tax Cheats

The Internal Revenue Service has filed a “John Doe” summons seeking to require U.S. Bitcoin exchange Coinbase to turn over records about every transaction of every user from 2013 to 2015. That demand is shocking in sweep, and it includes: “complete user profile, history of changes to user profile from account inception, complete user preferences, complete user security settings and history (including confirmed devices and account activity), complete user payment methods, and any other information related to the funding sources for the account/wallet/vault, regardless of date.” And every single transaction:

"All records of account/wallet/vault activity including transaction logs or other records identifying the date, amount, and type of transaction (purchase/sale/exchange), the post transaction balance, the names or other identifiers of counterparties to the transaction; requests or instructions to send or receive bitcoin; and, where counterparties transact through their own Coinbase accounts/wallets/vaults, all available information identifying the users of such accounts and their contact information."

The demand is not limited to owners of large amounts of Bitcoin or to those who have transacted in large amounts. Everything about everyone.

Equally shocking is the weak foundation for making this demand. In a declaration submitted to the court, an IRS agent recounts having learned of tax evasion on the part of one Bitcoin user and two companies. On this basis, he and the IRS claim “a reasonable basis for believing” that all U.S. Coinbase users “may fail or may have failed to comply” with the internal revenue laws.

If that evidence is enough to create a reasonable basis to believe that all Bitcoin users evade taxes, the IRS is entitled to access the records of everyone who uses paper money.

Read more at https://www.cato.org/blog/irs-believes-all-bitcoin-users-are-tax-cheats

Cato: Washington DC Progressives Fight to Preserve Gas Stations

The number of gas stations in the United States has fallen by nearly 30 percent in the last two decade and the DC government says it is determined to arrest that decline, at least in this jurisdiction. Why it feels this way is a complete mystery, and that it has taken action on this front is absurd.

It is easy to surmise why we have fewer gas stations: more stringent regulations on underground gas tanks increased the cost of operating a station and spurred many operators to close their doors in the late 1990s. Also, many gas station operators these days see selling gas as primarily a way to attract a lot of shoppers to their store and are willing to cut their margin to the bone to get those ancillary sales. As a result, the average fuel sales (and non-fuel sales) of gas stations has been growing steadily. The days of a mom and pop station selling gas, fixing cars, and selling a little candy by the cashier are long gone.

In Washington DC, the number of gas stations has been further reduced by the sharp increase in real estate prices. The opportunity cost of operating a station jumps when the land would be much more profitable with a multi-story building on it instead of gas pumps.

Few people see this economic evolution towards fewer gas stations as a bad thing in and of itself: The economy today looks vastly different than the economy four decades ago–there are many more restaurants, fewer music stores, and a wide variety of entities today that didn’t even exist in the 1970s and 1980s. Few people across the country complain that it is difficult to buy gas–because if there were an excess demand, there would be an incentive for an entrepreneur to build a gas station.

Nevertheless, Washington DC has a Gas Station Advisory Board that must approve all station closings, and there is a good chance it will stand in the way of a developer hoping to convert a gas station into condos in tony Dupont Circle.

Read more at https://www.cato.org/blog/washington-dc-progressives-fight-reserve-gas-stations

Cato: Government Shouldn’t Retaliate Against Politically Active Citizens

The First Amendment guarantees the right to speak freely without fear of official retribution. One aspect of this right is that a government agency may not punish someone for speaking out, supporting a candidate, or running in an election. Allowing such retribution would be to allow the government to extort citizens into supporting a particular political orthodoxy.

But such extortion is exactly what happened in Nebraska. Robert Bennie, a financial advisor, became active in the Tea Party movement in 2010. Before then, he had never received any disciplinary action from the Nebraska Department of Banking and Finance, a regulatory agency that monitors brokerage advertisements for compliance with financial regulations. After Bennie became politically active, the Department suddenly began a campaign of investigations and threatening letters, despite the fact that Bennie remained fully compliant with all regulations.

Suspecting that these developments were retaliation for his political stands, Bennie sued the Department. Both the district court and the U.S. Court of Appeals for the Eighth Circuit agreed with Bennie that the government took an adverse action against him that was motivated in part by his First-Amendment-protected speech. And yet the courts nonetheless denied Bennie any relief, imposing yet another hurdle: the “ordinary firmness” test.

Under this test, a court must find that the adverse government action was “severe enough to chill a person of ordinary firmness from continuing to speak.” The district court found that the Department’s actions were not “severe enough” to meet this threshold, a holding which the Eighth Circuit affirmed.

Read more at https://www.cato.org/blog/government-shouldnt-retaliate-against-politically-active-citizens

Cato: Common Myths About Marijuana Legalization

This coming Tuesday, nine states will consider ballot initiatives that legalize marijuana for medical or recreational purposes under state law. Twenty-five states have already legalized marijuana for medical use, and four have legalized fully, and polls suggest many or most of the new initiatives will pass. Opponents nevertheless make strong claims about adverse consequences from existing and proposed legalizations. We argue, based on the evidence, that such claims are exaggerated, misleading, or outright false.

Legalizing marijuana dramatically increases use: Several countries (Portugal, the Netherlands, Australia, and part of the U.K.) have liberalized their marijuana laws with little or no impact on marijuana use. Research on U.S. medical marijuana laws suggests that adult marijuana use has increased only modestly. Preliminary data in Colorado and Washington, the two first states to legalize recreational marijuana, display similar trends in use before and after legalization.

Legalizing marijuana increases other substance use: Whether legalization affects other substance use depends on whether new consumers progress to drugs such as cocaine or heroin (the gateway effect) and whether existing consumers substitute marijuana for other substances.  No scientifically convincing evidence supports the gateway hypothesis for marijuana.  In fact, some research suggests that users substitute from alcohol toward marijuana after liberalization. Rates of cocaine use appear unchanged in the wake of recreational marijuana laws. Research on medical marijuana laws shows little impact on alcohol or cocaine use.

Read more at https://www.cato.org/blog/common-myths-about-marijuana-legalization

Cato: Could It Be Unconstitutional to Raise the Obamacare “Tax” for Not Purchasing Health Insurance?

As many predicted, especially us at Cato, the Affordable Care Act is beginning to make health insurance less affordable for many Americans. Part of the problem, in a nutshell, is precisely what my colleague Michael Cannon described in 2009, the young and the healthy avoiding signing up for health insurance and choosing to pay the fine, or, as Chief Justice John Roberts would call it, a tax.

MIT economist Jonathan Gruber, often described as an architect Obamacare, recently said that some of these problems can be alleviated by increasing the “tax” on those without insurance. “I think probably the most important thing experts would agree is we need a larger mandate penalty,” said Gruber.

Depending on how high the penalty goes, there could be a constitutional problem with that. In the opinion that converted the “penalty” into a constitutional “tax,” Chief Justice Roberts described the characteristics of the “shared responsibility payment” that made it, constitutionally speaking, a tax rather than a penalty. One of those characteristics is that the penalty was not too high: “for most Americans the amount due will be far less than the price of insurance, and, by statute, it can never be more. It may often be a reasonable financial decision to make the payment rather than purchase insurance, unlike the ‘prohibitory’ financial punishment in Drexel Furniture.” In Drexel Furniture, also known as the Child Labor Tax Case, the Court struck down a 10 percent tax on the profits of employers who used child labor in certain businesses. One reason the Court struck it down was because its “prohibitory and regulatory effect and purpose are palpable.”

Read more at https://www.cato.org/blog/could-it-be-unconstitutional-raise-obamacare-tax-not-purchasing-health-insurance

Cato: Not So Fast on a Universal Child Benefit

Sam Hammond and Robert Orr of the Niskanen Center have published a very thoughtful paper proposing the establishment of a Canadian-style Universal Child Benefit. They make a compelling argument that replacing the current mish-mash of child-centered social welfare programs with a single cash benefit would be both more efficient and more humane than what we have today. But, before we get carried away and rush down the road to another new entitlement, there are many questions that need further exploration.

Hammond and Orr call for the elimination of eight existing programs (the dependent tax exemption, the portion of food stamps (SNAP) going to child recipients, five separate school nutrition programs, and the dependent care credit). They would also fold the existing Child Tax Credit (CTC) into their new benefit. This would free up $147.5 billion annually, allowing for a $2,000 per child cash grant on a budget-neutral basis.  The benefit would be phased out for incomes above $75,000 for single heads of household and $110,000 for a married couple.

There are several important advantages to this approach. First, cash is almost always preferable to in-kind programs. Cash payments are transparent, treat recipients like adults, and allow for greater flexibility of individual preferences and circumstances.  Moreover, the shift to cash will help break up the concentrated lobbying power of special interests who benefit from in-kind programs, reducing the constant pressure to increase benefits.  In general, as I have argued, we should be transitioning our entire social welfare system to cash.

Second, Hammond and Orr’s approach would treat families more equitably.  For example, current benefits reward parents who purchase external child care services, but do not benefit traditional stay-at-home parents.  Existing programs also tend to benefit those individuals, often more educated and even middle-class, who have the time and expertise to navigate the bureaucracy, rather than those families most in need.  A universal child benefit would extend benefits to many who have not been able to access them.

Read more at https://www.cato.org/blog/not-so-fast-universal-child-benefit

Cato: Courts Should Stop Approving Unfair Class Action Settlements

Class actions play a vital role in our legal system. These lawsuits are often the only vehicle for injured plaintiffs to receive compensation when a defendant’s wrongs are widely dispersed and it would be impractical for a single individual to sue.

Yet the process of settling these suits is subject to perverse incentives on the part of the lawyers representing the injured parties. Class counsel often will seek the largest portion of the settlement award for themselves—structuring the settlement to maximize attorney fees—at the expense of class members.

Sadly, this sort of self-dealing on the part of class counsel is exactly what happened in Blackman v. Gascho. The case centers on a consumer class action filed against Global Fitness Holdings LLC, alleging that the between 2006 and 2012, the company sold gym memberships and incorrectly charged fees pertaining to cancellation, facility maintenance, and personal-training contracts. A group of plaintiffs sued Global Fitness over the fees, and the parties entered into a “claims-made” settlement.

Read more at https://www.cato.org/blog/courts-should-stop-approving-unfair-class-action-settlements

Cato: A Constitutional Amendment to Re-Empower the States

When the Framers designed our federalist system, they assumed that the federal government would be limited to those powers actually enumerated in the Constitution and that it would exercise those powers only when authorized by statute. Further, to give the states some say in the drafting of these statutes, one half of the federal Congress—the Senate—was elected by the state legislatures themselves and designed to reflect the interests of the state governments.

Today, none of these elements of our original design remain. The Supreme Court has allowed the federal government to control nearly limitless activities, supposedly as an exercise of its power to regulate interstate commerce. The executive branch acts as its own de facto legislative branch, “interpreting” statutes through executive actions and agency rulemaking to unilaterally give itself the powers it wishes to exercise. And after the passage of the Seventeenth Amendment, senators are now elected by popular vote, meaning there is no longer any direct link between the state and federal governments. The result of these three changes is that states have less power than ever – and there’s not much they can do about it.

To solve that problem, Representatives Rob Bishop (R-UT) and Cathy McMorris Rodgers (R-WA) recently introduced the “Re-Empowerment of the States Amendment,” a proposal that would allow two thirds of the state legislatures to repeal any “Presidential Executive order, rule, regulation, other regulatory action, or administrative ruling issued by a department, agency, or instrumentality of the United States.”

Read more at https://www.cato.org/blog/constitutional-amendment-re-empower-states

Cato: There’s No Constitutional Right to a Taxi Monopoly

On Friday, the U.S. Court of Appeals for the Seventh Circuit handed down a pair of rulings rejecting the argument that taxi companies somehow have a protected property right in their monopolies. The opinions—both penned by Judge Richard Posner—are perhaps the courts’ strongest rebuke yet of taxi cartels’ desperate attempts to stay relevant in an Uber world, with Posner describing their claims as having “no merit” and “border[ing] on the absurd.” It’s nice to know that—in the Seventh Circuit at least—losing your monopolistic cartel due to technological disruption is not considered to be a constitutional violation.

In one case, Illinois Transportation Trade Association v. City of Chicago, incumbent taxi companies sued Chicago for allowing app-based ridesharing companies such as Uber and Lyft to operate, asserting that the city’s decision to allow such companies to enter the market without being subject to the same regulations covering traditional taxis constituted an unconstitutional taking of their property without just compensation (and also somehow violated the Fourteenth Amendment’s Equal Protection Clause).

In the other case, Joe Sanfelippo Cabs, Inc. v. City of Milwaukee, taxi companies sued Milwaukee for eliminating the hard cap on the number of taxi medallions in circulation, opening the market up to any applicant who met the requirements. Like in the Chicago case, the plaintiffs argued that the loosening of regulations to allow new market entrants violated the Takings Clause.

In both cases, the plaintiffs’ arguments more-or-less boiled down to: “We made a deal with the city years ago where we were promised monopoly control over this market. The government’s failure to protect that monopoly constitutes an eminent domain-style taking.” This is, of course, as the court described, an absurd argument. “‘Property’ does not include a right to be free from competition. A license to operate a coffee shop doesn’t authorize the licensee to enjoin a tea shop from opening.” No one is entitled to a government grant of monopoly power.

Read more at https://www.cato.org/blog/theres-no-constitutional-right-taxi-monopoly

Cato: Some Reasons Why Colombians Rejected the Peace Deal

President Juan Manuel Santos won the Nobel Peace Prize today for his efforts to reach a peace deal with the FARC guerrillas in Colombia, despite the fact that the agreement was rejected by a slim majority of voters last Sunday. The outcome of the plebiscite was definitely a stunner. No one saw it coming, not even the most enthusiastic opponent of the deal. But a closer inspection of the peace negotiations reveals that the writing was on the wall.

The main reason why nobody expected the NO campaign to win was the entirely one-sided coverage of the peace deal by the local media, something that was largely echoed by their international peers. For many years, the most important domestic outlets in Colombia have been under the government’s sway, downplaying the hardline adopted by the FARC during the negotiations and portraying the opponents of the deal as “far-right” or “enemies of peace.” There was little coverage of the real grievances that a significant number of Colombians had with the concessions given to the FARC and the low popularity of President Juan Manuel Santos.

On top of the biased media coverage, the government spent millions of dollars in publicity and in what Colombians commonly call “mermelada” (the outright use of public funds to get votes through pork and political patronage)—a practice that Santos is very fond of. Moreover, the YES campaign had the strong support of international actors, from the Cuban and the U.S. governments to the United Nations. Even Pope Francis promised to visit Colombia if the deal was backed by voters.

Despite all the odds, when faced with the biased question “Do you support the final accord to end the conflict and to construct a stable and lasting peace?” 50.24% of those who went to the polls said NO. Why?

Read more at https://www.cato.org/blog/some-reasons-why-colombians-rejected-peace-deal

Cato: Why Refugees Find Jobs Faster in the U.S. Than Germany

Since Germany first accepted more than a million asylees into its country, the successes and failures of the decision were bound to reverberate around the world. Yet despite this openness at the borders, Germany remained stubbornly closed inwardly, delaying the integration of the people it chose to accept. Most importantly, it retained employment restrictions that prevent asylum seekers from obtaining the jobs they need to survive. Fortunately, America has a much better system with much greater success.

In 2015, Germany waited the longest of any country in Europe to restrict the flow of asylum seekers from the Middle East. Yet once they arrived, the asylees who immediately sought work in Europe’s largest economy were greeted by bureaucracy. The law initially forbade asylees from seeking work for 9 months after their arrival, but was reduced to 3 months in November 2014. Then, inexplicably, at the height of the inflows, the German government banned working if the asylee was forced to stay a reception center, which could be up to 6 months.

After the initial waiting period, asylees did not receive unrestricted employment authorization. Instead, they would have to find a “concrete” job offer—i.e. a firm must promise to hire them if the permit is granted—then apply for authorization. Even then, companies can only hire them during the first 15 months if the jobs are offered first to EU residents, and the federal labor department agrees that no one was willing to take. They also set asylee wages, which can price out low-skilled workers.

The hoops don’t end there. Asylees still have to get the approval of the immigration office at the municipal level. Under the law, it would take four years before they could compete equally with EU citizens.

Read more at https://www.cato.org/blog/why-refugees-find-jobs-faster-us-germany

Cato: Of Millionaire “Fugitives” and the Rule of Law

Megaupload.com was once the 13th most popular website on the internet, with more than 82 million unique visitors and a billion total page views during its seven-year operation. The site allowed people to store files on the cloud for later use—and some users inevitably stored copyrighted TV shows, films, songs, and software. In 2012, the U.S. government charged the site’s owner, Kim Dotcom, and its operators with conspiracy to commit copyright infringement. The defendants are currently resisting extradition to the United States (Dotcom lives in New Zealand), as is their right under extradition treaties.

In 2014, the seemingly frustrated government moved to seize the defendants’ considerable assets in a civil-forfeiture action, claiming that the assets are probably connected to the alleged criminal activity. The government had a major problem, however, as the assets that they were seeking to seize were not located in the United States, but in Hong Kong and New Zealand. Under traditional rules of in rem jurisdiction—a legal theory that allows courts to gain jurisdiction over property—the court must have “control” over the property to entertain the claims, which the district court did not have in this case.

The district court, however, ignored fundamental principles of statutory construction, and agreed with the government’s argument that a federal statute—conferring only venue to the district courts in cases where property was located outside of the United States—also expanded the court’s jurisdiction and fundamentally altered the traditional requirement that courts have control over the property to assert jurisdiction over it.

This misreading of the statute also created a serious constitutional issue under Article III. It is a fundamental constitutional rule that federal courts can’t issue mere “advisory” opinions. When a court lacks control over property located in a foreign country, it necessarily relies on another sovereign to enforce that order, making it advisory as to how the other sovereign should enforce the judgement.

Read more at https://www.cato.org/blog/millionaire-fugitives-rule-law

Cato: You Have a Constitutional Right to Record Public Officials in Public

Millions have watched cellphone videos of police violating Americans’ rights. United States Customs and Border Protection (“CBP”) is trying to make sure the same doesn’t happen to them by banning video and photography—not in secure spaces or regarding special operations, but out in the open in the ordinary court of business.

In a case out of California, two citizens were taking pictures of border crossings from public sidewalks of what they believed were environmental problems and unlawful searches. CBP agents saw them, arrested them, seized their cameras, and deleted their pictures. The district court acknowledged that the recordings were protected by the First Amendment but found the government’s reasons for suppressing them to be so compelling that individual constitutional rights could be ignored in the name of national security.

Now before the U.S. Court of Appeals for the Ninth Circuit, Cato has filed an amicus brief supporting the photographers’ ability to record government officials in public. Americans have a First Amendment right to record law enforcement agents because it’s a way of accurately depicting government operations. The ability to describe government operations allows citizens to criticize those actions and petition for redress of grievances—a core purpose of the First Amendment. Even a Homeland Security report on “Photographing the Exterior of Federal Facilities” recognizes “that the public has a right to photograph the exterior of federal facilities from publically accessible spaces such as streets, sidewalks, parks and plazas.”

Read more at https://www.cato.org/blog/you-have-constitutional-right-record-public-officials-public

Cato: The “Pardon Snowden” Case Just Got Stronger

Yesterday, the Department of Justice Inspector General (DoJ IG) issued a long overdue Congressionally-mandated report on FBI compliance with the PATRIOT Act’s Section 215 “business records” provision between 2012 and 2014. It is the first such report issued that covers the initial period of Edward Snowden’s revelations about widespread domestic mass surveillance by the federal government. Since his indictment for leaking the information to the press, Snowden’s lawyers have argued that he should not be prosecuted under the WW I-era Espionage Act because his revelations served the public interest. The DoJ IG report provides the clearest evidence yet that Snowden’s lawyers are correct.

Read more at https://www.cato.org/blog/pardon-snowden-case-just-got-stronger

Cato: Nevada Supreme Court: Education Savings Accounts Are Constitutional, Funding Mechanism Isn’t

In a landmark decision, the Supreme Court of Nevada today upheld the constitutionality of the nation’s most expansive educational choice law. However, the court ruled that the funding mechanism the legislature adopted is unconstitutional. If the legislature creates a new funding mechanism–as it could and should in a special session–then the ESA program could be implemented right away.

Enacted in 2015, Nevada’s education savings account (ESA) policy was originally scheduled to launch at the beginning of this year, but it immediately drew two separate legal challenges from the government schooling establishment and the ACLU and its allies. Nevada’s ESA provides students with $5,100 per year (plus an additional $600 for low-income students or students with special needs) to use for a wide variety of approved educational expenditures, including private school tuition, tutoring, text books, online courses, homeschool curricula, and more. Families can also roll over unspent funds from year to year.

Read more at https://www.cato.org/blog/nevada-supreme-court-education-savings-accounts-are-constitutional-funding-mechanism-isnt

Cato: Transgender Rights Can Be Vindicated Without Constitution-Bending

The debate over transgender rights has risen in prominence in recent years, with the fight over access to public restrooms and locker rooms receiving particularly heavy public attention. The legal question at the heart of the first such lawsuit to reach the Supreme Court, however, is one not of civil rights law, but of administrative law: Should courts defer to agency interpretations of their own regulations, even when those interpretations constitute major, substantive changes to public policy via informal, non-binding pronouncements?

G.G. is a transgender high school student—minors are identified by letters in sensitive cases—who argues that Gloucester (Va.) High School’s policy disallowing him from using the facilities that correspond with his preferred gender identity violates federal law (Title IX of the Education Amendments) regarding sex discrimination in education. Upon being informed of G.G.’s conflict with the Gloucester County School Board, James A. Ferg-Cadima—a civil servant in the DOE’s Office of Civil Rights (OCR)—decided to get involved. He wrote a letter purporting to interpret the relevant regulation, stating that “[w]hen a school elects to separate or treat students differently on the basis of sex in [situations like this], a school generally must treat transgender students consistent with their gender identity.”

While the district court rejected this interpretation, the U.S. Court of Appeals for the Fourth Circuit deferred to the agency. The Gloucester County School Board now seeks Supreme Court review. Cato, along with three respected law professors (Jonathan Adler, Richard Epstein, and Michael McConnell), has filed an amicus brief supporting that petition.

We do so not because we necessarily oppose OCR’s position as a matter of policy—that’s a question for another day—but because we oppose its unconstitutional method of enacting that policy. OCR seeks to change federal law not through notice-and-comment rulemaking as required by the Administrative Procedure Act, but through an informal, unpublished letter written by a low-level bureaucrat.

Read more at https://www.cato.org/blog/transgender-rights-can-be-vindicated-without-constitution-bending

Cato: President Obama Keeps Making Unconstitutional Appointments

Under the default constitutional rule, all federal officials are nominated by the president with the “advice and consent of the Senate.” But sometimes, when an unexpected vacancy arises, appointing and confirming a replacement can take a while. Congress knows this, and that’s why it has enacted—and frequently updated—the Vacancies Act. The latest version, called the Federal Vacancies Reform Act (FVRA), authorizes the president to bypass advice and consent by appointing temporary “acting officers” to fill certain vacancies.

But Congress is keenly aware that such a unilateral appointment power can be easily abused. That’s why acting officers serve under a strict 210-day time limit. It’s also why “a person may not serve as an acting officer” if that person is nominated to be the permanent officer (with an exception only for longtime first assistants).

Nonetheless, in January 2011, President Obama nominated Lafe Solomon to be the permanent general counsel of the National Labor Relations Board (NLRB) while he was serving—and continued to serve—as the acting general counsel. When Solomon later brought enforcement proceedings against an ambulance company, SW General, that company objected on the grounds that Solomon was no longer validly serving as acting general counsel once he was nominated for the permanent job. The U.S. Court of Appeals for the D.C. Circuit agreed based on a straightforward reading of the text of the FVRA, but the NLRB appealed to the Supreme Court.

Read more at https://www.cato.org/blog/president-obama-keeps-making-unconstitutional-appointments

Cato: Congress Takes on the U.S.-Saudi Relationship

In yesterday’s Washington Post, a headline proclaimed: “Saudi Arabia is Facing Unprecedented Scrutiny from Congress.” The article focused on a recently defeated Senate bill which sought to express disapproval of a pending $1.15 billion arms sale to Saudi Arabia. Unfortunately, though the presence of a genuine debate on U.S. support for Saudi Arabia – and the ongoing war in Yemen – is a good sign, Congress has so far been unable to turn this debate into any meaningful action.

Yesterday’s resolution, proposed by Kentucky Senator Rand Paul and Connecticut Senator Chris Murphy, would have been primarily symbolic. Indeed, support for the bill wasn’t really about impacting Saudi Arabia’s military capacity. As co-sponsor Sen. Al Franken noted, “the very fact that we are voting on it today sends a very important message to the kingdom of Saudi Arabia that we are watching your actions closely and that the United States is not going to turn a blind eye to the indiscriminate killing of men, women and children.” This message was intended as much for the White House as for the Saudi government, with supporters arguing that the Obama administration should rethink its logistical support for the war in Yemen.

Read more at https://www.cato.org/blog/congress-takes-us-saudi-relationship

Cato: South Korea’s Preemptive Decapitation Strike Is a Bad Idea

Last week’s nuclear test by North Korea generated a wealth of commentary and analysis about the future of security on the Korean peninsula. The United States and South Korea quickly responded to the test. On September 13, the United States flew two B-1 bombers over South Korea in a show of force, reminiscent of bomber flights conducted after North Korea’s third nuclear test in March 2013. South Korea’s response didn’t feature any displays of military force, but in many respects it was more dangerous due to its implications for crisis stability.

Two days after the nuclear test, South Korea’s Yonhap News Agency reported on the Korea Massive Punishment & Retaliation (KMPR) operational concept. According to the news report, “[KMPR] is intended to launch pre-emptive bombing attacks on North Korean leader Kim Jong-un and the country’s military leadership if signs of their impending use of nuclear weapons are detected or in the event of a war.” The strikes would likely be conducted using conventionally-armed ballistic and cruise missiles. Jeffrey Lewis of the Middlebury Institute of International Studies summed up the concept, “[South Korea’s] goal is to kill [Kim] so that he can’t shove his fat little finger on the proverbial button.”

A preemptive decapitation strike against North Korean political leadership is a bad idea for a host of reasons.

Read more at https://www.cato.org/blog/south-koreas-preemptive-decapitation-strike-bad-idea

Cato: Micro-Housing, Meet Modern Zoning

Beginning in 2009, developers in Seattle became leaders in micro-housing. As the name suggests, micro-housing consists of tiny studio apartments or small rooms in dorm-like living quarters. These diminutive homes come in at around 150–220 sq. ft. each and usually aren’t accompanied by a lot of frills. Precisely because of their size and modesty, this option provides a cost-effective alternative to the conventional, expensive, downtown Seattle apartment model.

Unfortunately, in the years following its creation, micro-housing development has all but disappeared. It isn’t that Seattle prohibited micro-housing outright. Instead, micro-housing’s gradual demise was death by a thousand cuts, with a mushroom cloud of incremental zoning regulation finally doing it in for good. Design review requirements, floor space requirements, amenity requirements, and location prohibitions constitute just a few of the Seattle Planning Commission’s assorted weapons of choice.

As a result of the exacting new regulations placed on tiny homes, Seattle lost an estimated 800 units of low-cost housing per year. While this free market (and free to the taxpayer) solution faltered, Seattle poured millions into various housing initiatives that subsidize housing supply or housing demand, all on the taxpayer’s dole.

Read more at https://www.cato.org/blog/micro-housing-meet-modern-zoning

Cato: The Incoherence of Schedule I

Drug policy watchers learned earlier this month that the latest substance to earn Schedule I status is the obscure plant ​called kratom. So what’s Schedule I? By the letter of the law, Schedule I of the Controlled Substances Act contains “drugs, substances, or chemicals” that meet the following criteria:

"The drug or other substance has a high potential for abuse.
The drug or other substance has no currently accepted medical use in treatment in the United States.
There is a lack of accepted safety for use of the drug or other substance under medical supervision."

In this post, I’m not going to consider the penalties that apply to the use, possession, or sale of Schedule I substances. I’m just going to look at the criteria for inclusion. While they may appear plausible, these criteria are preposterous and completely indefensible as applied.

The most important unwritten fact about Schedule I is that all three of its criteria are terms of political art. Neither science nor the plain meanings of the words have much to do with what Schedule I really includes.

We can see this first in how Schedule I fails to include many substances that clearly belong there. These substances easily meet all three criteria. Yet they are in no danger whatsoever of being scheduled. It literally will never happen.

Solvent inhalants, such as toluene, have a high potential for abuse, have no accepted medical uses, and cannot be used safely even with close medical supervision. The same is true of obsolete anesthetics like diethyl ether and chloroform. Toluene, ether, and chloroform are all dangerous when used as drugs. Overdosing on each is relatively easy, they bring serious health risks at any level of use, and they have no valid medical uses today.

None, of course, will ever be scheduled, because each is also an essential industrial chemical. That they happen to be abusable as drugs is a fact that a crime-based drug policy can’t easily accommodate. And so that fact is simply ignored.

The substances included on Schedule I are an odd lot as well. Some clearly meet the criteria, but many do not.

Read more at https://www.cato.org/blog/incoherence-schedule-i-0

Cato: You Have the Right to Remain Silent Even if You Use Encryption

The Third Circuit last week held oral arguments on whether an individual can be forced to decrypt a drive with incriminating information on it. The Fifth Amendment prohibits any person from bring “compelled in any criminal case to be a witness against himself.” The Third Circuit will hopefully recognize that being forced to decrypt information is just the kind of testimonial act that the Fifth Amendment prohibits.

In a forced decryption case there are two kinds of subpoenas that could be issued. The first compels the individual to turn over the encryption key or password. This isn’t the kind of subpoena in the Third Circuit case, but it is useful in looking at why this is also not allowed. The other kind of subpoena is to produce the documents themselves.

With a direct subpoena of the password the password itself isn’t incriminating, but the Supreme Court has held that that the Fifth Amendment also prevents compelling incriminating “information directly or indirectly derived from such testimony.” The Supreme Court “particularly emphasized the critical importance of protection against a future prosecution ‘based on knowledge and sources of information obtained from the compelled testimony.’” While the password itself isn’t incriminating it clearly provides the lead necessary to get incriminating information from the encrypted drives. Another close analogy that seems to apply was that the Supreme Court clearly prohibited compelling a person to disclose a combination to a safe.

Read more at https://www.cato.org/blog/you-have-right-remain-silent-even-you-use-encryption

Cato: Using Antitrust Law to Protect the Right to Earn a Living

Teladoc, Inc. is a health services company that provides access to state-licensed physicians through telecommunications technology, usually for a fraction of the cost of a visit to a physician’s office or urgent care center. Teladoc sued the Texas Medical Board—comprised mostly of practicing physicians—because the board took steps to protect the interests of traditional physicians by imposing licensing rules such as requiring the in-person examination of patients before telephonic treatment is permitted.

Because the board isn’t supervised by the Texas legislature, executive, or judiciary, Teladoc argues that its self-dealing violates federal antitrust laws—and the federal district court agreed. The Texas Medical Board has now appealed to the U.S. Court of Appeals for the Fifth Circuit, where Cato filed an amicus brief urging the court to affirm the lower-court ruling and protect the fundamental right to earn a living.

Our brief argues that the Supreme Court has consistently held that the right to earn a living without unreasonable government interference is guaranteed by the Constitution, and that this protection dates back much earlier, to Magna Carta and the common law. Indeed, the right to earn a living is central to a person’s life and ability to pursue happiness. As Frederick Douglass wrote in his autobiography, “To understand the emotion which swelled in my heart as I clasped this money, realizing that I had no master who could take it from me—that it was mine—that my hands were my own, and could earn more of the precious coin—one must have been in some sense himself a slave… . I was not only a freeman but a free-working man.”

Read more at https://www.cato.org/blog/using-antitrust-law-protect-right-earn-living

Cato: Feinstein-Burr 2.0: The Crypto Backdoor Bill Is Still Alive

When it was first released back in April, a “discussion draft” of the Compliance With Court Orders Act sponsored by Sens. Dianne Feinstein (D-CA) and Richard Burr (R-NC) met with near universal derision from privacy advocates and security experts.  (Your humble author was among the critics.) In the wake of that chilly reception, press reports were declaring the bill effectively dead just weeks later, even as law enforcement and intelligence officials insisted they would continue pressing for a solution to the putative “going dark” problem that encryption creates for government eavesdroppers.  Feinstein and Burr, however, appear not to have given up on their baby: Their offices have been circulating a series of proposed changes to the bill, presumably in hopes of making it more palatable to stakeholders.  I recently got a look at some of those proposed changes. (NB: I referred to these in an earlier version of this post to a “revised draft”, which probably suggested something relatively finalized and ready to introduce.  I’ve edited the post to more accurately characterize these as changes to the previously circulated draft that are under consideration.)

Read more at https://www.cato.org/blog/feinstein-burr-20-crypto-backdoor-bill-still-alive

Cato: The Fourth Amendment Protects Your Cell-Location Data

When the federal district court in D.C. ordered a seizure of Alonzo Marlow’s cell service location information (CSLI) held by his cell provider, it held that the federal government didn’t need a warrant to obtain CSLI data from a person’s phone provider. The Stored Communications Act of 1986 (SCA) governs the searching of such data, and under § 2703(d) of that act, federal investigators need not demonstrate probable cause in order to search—but merely to show “specific and articulable facts” that there is criminal wrongdoing. Thus, the Fourth Amendment requirement that “no warrants shall issue, but upon probable cause” is effectively removed.

Cato has filed an amicus brief with the U.S. Court of Appeals for the D.C. Circuit, supporting the appeal of Marlow and his co-defendants. For purposes of the Fourth Amendment, cell phone data is a “paper” or “effect” in which there is a right of the people to be secure. The Supreme Court made clear in Riley v. California (2014) that giving police carte blanche to search a phone incident to an arrest would “in effect give police officers unbridled discretion to rummage at will among a person’s private effects.”

Read more at https://www.cato.org/blog/fourth-amendment-protects-cell-location-data

Cato: The Government Shouldn’t Get to Do Unconstitutional Things by Only Doing Them for Short Periods of Time

When people want to join together to spend money in an election campaign, federal law requires them to form a “political action committee” or PAC. Most PACs are allowed to donate up to $5,000 to any candidate in an election. If a PAC has been registered for less than six months, however, this maximum donation is inexplicably lowered to $2,700 per candidate.

Since the 1974 case of Buckley v. Valeo, the Supreme Court has consistently held that limitations on campaign contributions “implicate fundamental First Amendment interests.” And only two years ago, in McCutcheon v. FEC, the Court reiterated that such limits could only be justified if they reduce quid pro quo corruption (or its appearance). By that standard, the $2,700 limit on new PACs is clearly unconstitutional: If a $5,000 donation from a seven-month-old PAC does not run the risk of corruption, it’s hard to see how a $2,701 donation from a five-month-old PAC does. Making just this argument, a new PAC – the colorfully titled Stop Reckless Economic Instability Caused by Democrats (Stop REID) – sued the Federal Election Commission.

There was just one problem: Although this plaintiff PAC was less than six months old when the case was filed, it was more than six months old when the district court ruled. For that reason, the U.S. Court of Appeals for the Fourth Circuit held that it could not rule on the constitutionality of the $2,700 limit because the question had become “moot”; the limit no longer applied to the particular PAC that had brought the case.

Read more at https://www.cato.org/blog/government-shouldnt-get-do-unconstitutional-things-only-doing-them-short-periods-time

Cato: In Marijuana Policy, States Lead the Way

This November’s election could be a decisive turning point in the struggle to end U.S. marijuana prohibition. ​It’s been a long time coming.

As recently as the 90s, every major political faction was squarely in favor of prohibition. Only drug-addled hippies and libertarians thought otherwise. With just a few honorable exceptions, every significant public intellectual supported prohibition too. We libertarians walked a lonely road, patiently pointing out prohibition’s high costs and doubtful benefits. In some ways we’re still alone, because we certainly wouldn’t stop with marijuana. But let’s consider what progress we’ve made.

In November’s election, five states – Arizona, California, Maine, Massachusetts, and Nevada – may each legalize recreational marijuana for adults. State-level opinion polling is notoriously unreliable, but so far it’s favorable in Maine and Nevada​, and overwhelmingly favorable in California. It’s unfavorable in Arizona and Massachusetts, though the Massachusetts poll only asked a generic marijuana legalization question and did not reference the specific initiative. If recent history is any guide, things look good for this November: Of the seven legalization initiatives offered to voters since 2012, five have passed, in Alaska, Colorado, Oregon, Washington, and Washington DC.

Read more at https://www.cato.org/blog/marijuana-policy-states-lead-way

Cato: Washington’s First Obligation Is to Defend America, Not the World

The last NATO Secretary General, Anders Fogh Rasmussen, hailed from Denmark, which has 17,200 citizens under arms. That position did not allow him to deploy the American military, but it did give him unusual influence over U.S. policy.

Even as the American people tire of trying to solve other nations’ problems, Rasmussen wants the United States to continue its interventionist course. Politico recently interviewed Rasmussen, who promoted an “American-led world order”—at American expense, of course. Rasmussen’s greatest fear is the end of Washington’s unique global role: “What is at stake here is the American role as the global superpower.”

He agreed that Europeans should do more on behalf of their own defense, but offered no strategy to make serious and permanent increases a reality. Rasmussen was critical of Trump’s desire for better relations with Russia, even though in a conflict the Danes would do little to help defeat Moscow.

Rasmussen also complained that the GOP platform eliminated a pledge for military aid to Kiev. He worried: “The West risks losing a democratic Ukraine by undermining our support for the country.” But is the prospect of a “democratic Ukraine,” whatever that means in practice, worth war with Russia?

Of course, Rasmussen contended that it is “in America’s self-interest” to preserve “the international order.” But surely not only America’s interest. How about the interest of Europe, which today can’t be bothered to spend much on its own defense, let alone for operations elsewhere?

Rasmussen is prepared to be quite generous with U.S. lives. Washington has “a special obligation to maintain the world order and promote peace.” Indeed, it is America’s “destiny” to lead.

Read more at https://www.cato.org/blog/washingtons-first-obligation-defend-america-not-world

Cato: The Attack on Chile’s Private Pension System

Last month, a scandal erupted in Chile. The media discovered that the former director of the Chilean gendarmerie, the country’s penitentiary service, was receiving a pension of about $8,000 per month. Chile privatized its pension system in 1980. Instead of sending retirement money to the government, workers there put their money in private accounts that invest and accumulate savings to be used in old age. When Chile approved the reform, the military and some law enforcement agencies (such as the gendarmerie) remained in the old public system.

Although the abuse occurred within the old public pension system, which benefits a minority of Chileans, and the beneficiary in this case was a socialist political activist and ex-wife of the head of the lower house of Congress (also a socialist), the episode was used to attack the private system to which almost every Chilean worker belongs. The left declared that the private accounts managed by the private pension fund companies (known by their Spanish acronym AFP) provide low pensions, something that incensed many Chileans who saw that the AFPs do not pay the same level of pension evident in this particular case.

Before long, protests involving hundreds of thousands of people took place throughout the country under the slogan “No + AFP,” and demanded a return to the old pension system. Last week, President Michelle Bachelet announced a series of reforms that would give the state a larger role in peoples’ retirement.

Read more at https://www.cato.org/blog/attack-chiles-private-pension-system

Cato: Don’t Jail People for Not Paying Traffic Tickets Before You Even Convict Them

The City of Calhoun, Georgia, adopted a scheme by which bail was set to a pre-determined amount, resulting in Maurice Walker being held in jail for nearly 2 weeks on misdemeanor public drunkenness charges. Walker challenged detention on behalf of himself and those similarly situated, including person held on traffic offenses.

The federal district court got it right and enjoined the city from enforcing its scheme: when setting bail for criminal defendants, basic due-process principles require a judge to take into account the defendant’s income and set an individually payable amount. That rule exists to ensure against a manifest injustice, converting pre-trial liberty from a right into a privilege of the wealthy. But Calhoun is pursuing an appeal. As Cato points out in our amicus brief supporting Walker, the due-process rule that the city violated is quite literally as old as the common law.

Read more at https://www.cato.org/blog/dont-jail-people-not-paying-traffic-tickets-you-even-convict-them

Cato: Understanding U.S. v. Ackerman

The Supreme Court has eschewed the “reasonable expectation of privacy” test in its most important recent Fourth Amendment cases. It’s not certain that the trend away from the so-called “Katz test,” largely driven by Justice Scalia, will continue, and nobody knows what will replace it. But doctrinal shift is in the air. Courts are searching for new and better ways to administer the Fourth Amendment.

A good example is the Tenth Circuit’s decision last week in U.S. v. Ackerman. That court found that opening an email file was a Fourth Amendment “search,” both as a matter of reasonable expectations doctrine and the “distinct line of authority” that is emerging from the Supreme Court’s 2012 decision in U.S. v. Jones.

Here are the facts: AOL scans outgoing emails for child porn by comparing hashes of files sent through its network to hashes of known child porn. When it becomes aware of child porn, it is required by law to report them to the National Center for Missing and Exploited Children. NCMEC is a governmental entity and agent. (That point takes up the bulk of the decision; Congress has made huge grants of governmental power to the organization.) NCMEC opened the file without a warrant.

Nobody in the case disputed that the email is a “paper” or “effect” for Fourth Amendment purposes. The remaining question was whether the opening of the email was a search. If it was, it required a warrant.

The government persuaded the court below that NCMEC did no more than AOL did. The “private search” doctrine suggests that Ackerman can’t complain of the government learning what AOL told it by looking again.

Read more at https://www.cato.org/blog/understanding-us-v-ackerman

Cato: Why Should America Defend Europeans Who Won’t Defend Themselves?

Once again Donald Trump has shocked the foreign policy establishment. He suggested that maybe the U.S. should no longer defend its prosperous, populous allies in Europe.

The North Atlantic Treaty Organization made sense when created in 1949. War-ravaged Western Europe faced an aggressive Soviet Union. The American defense shield allowed Washington’s allies to recover and rebuild.

Nearly seven decades later the alliance has become a means rather than an end. The world has changed, yet Washington continues to guarantee the security of its 27 (soon to be 28) NATO allies (as well as Japan, South Korea, and others). Yet only four European nations bother to devote even two percent of GDP to the military, barely half America’s level.

Trump sees this as just a free-riding problem. He said he’d like to keep the alliance, but doesn’t know if it’s possible. “Many NATO nations are not making payments, are not making what they’re supposed to make,” he complained.” He “would prefer not to walk,” but if the Europeans don’t “fulfill their obligations to us,” perhaps Washington shouldn’t defend them.

A predictable firestorm erupted about America keeping its word and reassuring allies. The Trump campaign appeared to retreat ever so slightly: aide Sam Clovis downplayed the candidate’s remarks: “We just want people to follow the rules. We’re putting a marker out there.” Trump told the Washington Post: NATO is a “good thing to have” and “I don’t want to pull it out.”

Alas, Trump fundamentally misperceives the real problem. As I argue on Forbes: “The issue is not burden-sharing, getting the Europeans to do more. It is burden-shedding, turning responsibility over to the Europeans. There no longer is any geopolitical justification for America to defend Europe.”

Read more at https://www.cato.org/blog/why-should-america-defend-europeans-who-wont-defend-themselves

Cato: Supreme Court Leaves Meaning of “One-Person, One-Vote” Unclear

This morning, the unanimous Supreme Court ruled that Texas was constitutionally justified in drawing state electoral districts based on total population, even if this meant that great disparatives result among districts in numbers of voters. This was the case of Evenwel v. Abbott, in which Cato had filed a brief arguing that the plaintiff-voters’ proposed “citizen of voting age population” (CVAP) metric was a much better one to use when applying the “one-person, one-vote” standard.

While the eight-justice Court managed to achieve rare unanimity in an election-law case, at least in judgment, it did so only by declining to address the elephant in the voting booth. The Court failed to fill the gaping hole in its voting-rights jurisprudence: the question whether the venerable “one-person, one-vote” principle requires equalizing people or voters (or both) when crafting representational districts.

Read more at https://www.cato.org/blog/supreme-court-leaves-meaning-one-person-one-vote-unclear

Cato: Responding to Brussels

Just four days after Salah Abdeslam, the mastermind of last fall’s Paris attacks, was finally captured, the Islamic State (ISIS) has claimed responsibility for this morning’s terrorist attacks in Brussels. The attacks, which have killed more than 30 and wounded almost 200, provide another chilling reminder of how dangerous the world can be.

As Brussels tends its wounds, the simple question looms: How should Europe and the United States respond?

In and around official Washington, the script is becoming sadly predictable. Immediately following the news, administration officials assert their resolve and commitment to combating terrorism: “Attacks like these only deepen shared resolve to defeat terrorism around the world”

Close on their heels, administration critics line up to fear monger, launch cheap insults at Obama for not paying enough attention the terrorism, and to talk tough about striking back at ISIS. All the Republican candidates criticized Obama for staying in Cuba. Donald Trump took the opportunity to point out that he has long been in favor of closing up the border while Ted Cruz called on the president to recognize that “Radical Islam is at war with us” and for “empowering law enforcement to patrol and secure Muslim neighborhoods before they become radicalized.”

Finally, both Europe and the United States are likely to ratchet up the war on the ground against ISIS. To date this approach has born decidedly mixed fruit. On the one hand ISIS has certainly lost significant ground over the past year. On the other hand, very little of that success can be traced directly to U.S. or French military efforts.

Rather than go through the motions focused on short-term political gains, both Europe and the United States should pursue a long-term strategy. That strategy might take many forms but at heart a sound long-term approach needs three fundamental components.

First, a long-term strategy requires an enduring commitment to openness and tolerance. Both Europe and the United States benefit tremendously from immigration, both economically and socially, and from a vigorous marketplace of ideas sustained by diverse religious, racial, and ethnic populations. The costs of closing borders, polarizing society along ethnic and religious lines, and limiting civil liberties will far outweigh whatever benefits they might bring in the short run.

Read more at https://www.cato.org/blog/responding-brussels

Cato: Oregon Legislature Repeals Laws of Supply & Demand

Like the apocryphal story of the state legislature that passed a law dictating that pi equals 3, the Oregon state legislature has passed two laws that pretend the laws of supply & demand don’t exist. The difference is that, in reality, no state legislature ever did pass a law saying that pi equals 3, but Oregon’s legislature is totally ignoring basic economic principles.

First, earlier this week, the legislature passed a new minimum wage law increasing the minimum to as high as 14.75 per hour in the Portland area by 2022 (with lower minimum for other parts of the state). This will supposedly be the highest in the nation, but only in the unlikely event that no other state raises its minimum wage in the next six years. However, after adjusting for the cost of living, Oregon’s new minimum wage probably is the highest in the nation even before 2022.

Proponents claim the minimum-wage law will improve Oregon’s economy by putting more money in the hands of its residents that they will spend in Oregon businesses. The new minimum wage “is going to be good for Oregon families and is going to add to consumer purchasing power that will benefit our small businesses,” Oregon’s labor commissioner told a reporter. That’s like warming the bed by cutting off one end of a blanket and sewing it on to the other end. If increasing the minimum wage does so much good, why not increase it to $15 right away? Or $50? Or $500?

The reality is that a minimum wage law is a balancing act for politicians. They have to have the wage be just high enough to create a constituency for the wage that will support them but not so high that people who actually vote will lose their jobs. As a Congressional Budget Office study concluded, for every two people who benefit from a minimum wage law, one is put out of work. That’s okay if the people who are out of work don’t vote.

Read more at https://www.cato.org/blog/oregon-legislature-repeals-laws-supply-demand

Cato: Getting China to Become Tough with North Korea

It is no secret that the United States wants China to take a firmer stance toward its troublesome North Korean ally.  That was true even before the North’s satellite launch/long-range ballistic missile test.  And Chinese officials may be receptive to the argument that steps need to be taken to rein-in Kim Jong-un’s regime, even at the risk of destabilizing his government.  But as I point out in a China-U.S. Focus article getting Beijing to accept the risks entailed in becoming more assertive toward Pyongyang will require some major changes in U.S. policy.

At a minimum, Washington will have to respond favorably to China’s long-standing demand that the United States be willing to engage North Korea in wide ranging negotiations to reduce tensions on the Korean Peninsula.  Chinese officials are increasingly uneasy about Pyongyang’s behavior, especially the regime’s continued defiance of China’s warnings not to conduct more nuclear weapons or ballistic missile tests.  But Chinese policymakers also still cling to the belief that much of North Korea’s belligerence and recalcitrance is the result of the U.S.-led campaign to isolate the country.  Only by offering a comprehensive settlement to Pyongyang to finally end the state of war on the Peninsula, lift most economic sanctions, and establish diplomatic relations, will Washington convince Beijing that it truly seeks to an equitable outcome.

Read more at http://www.cato.org/blog/getting-china-become-tough-north-korea

Cato: Court Swats Away Immunity for Obviously Reckless Police Behavior

On Friday, a federal appellate court issued an opinion in Stamps v. Town of Framingham, holding that a SWAT team officer who points and accidentally fires a loaded semi-automatic weapon at a subdued 68-year-old grandfather is not immune from facing a lawsuit for using excessive force in violation of the Fourth Amendment.

Eurie Stamps was the stepfather of Joseph Bushfan, whom the police suspected of dealing crack. Effectuating a search warrant on Stamps’s apartment, the SWAT team raided the apartment at midnight on January 5, 2011.  Stamps—whose presence the SWAT team was aware of and who was not suspected of any wrongdoing—lay prostrate and motionless on the ground with his hands out while Officer Duncan guarded him. During the time that Duncan was guarding him, Duncan moved his finger to the trigger and accidentally fired, killing Stamps.

The real story is how this seemingly obvious outcome—that juries should be able to decide whether officers who finger the trigger of loaded guns pointed at non-threatening individuals use excessive force—even became an issue. At the district court, Officer Paul Duncan claimed that his actions aren’t subject to scrutiny because of a doctrine entitled qualified immunity.

Read more at http://www.cato.org/blog/court-swats-away-immunity-obviously-reckless-police-behavior

Cato: Feds To Young Women: Don’t Even Touch Alcohol Unless You’re On Birth Control

With the passage of the Twenty-first Amendment in 1933, the United States enacted Repeal and abandoned its failed experiment with Prohibition. And that settled that, right? At least until this week:

"Women of childbearing age should avoid alcohol unless they’re using contraception, federal health officials said Tuesday, in a move to reduce the number of babies born with fetal alcohol syndrome.

“Alcohol can permanently harm a developing baby before a woman knows she is pregnant,” said Anne Schuchat, principal deputy director of the Centers for Disease Control and Prevention. “About half of all pregnancies in the United States are unplanned, and even if planned, most women won’t know they are pregnant for the first month or so, when they might still be drinking."

And more (emphasis added):

"Further, the report states that because half of all pregnancies in the United States are unplanned, it’s risky for women to drink any amount at any time during which she may intentionally or unintentionally become pregnant."

Read more at http://www.cato.org/blog/feds-young-women-dont-even-touch-alcohol-unless-youre-birth-control

Cato: Europeans, not Americans, Should Spend More on Europe’s Defense

The U.S. plans on filling Eastern Europe with thousands of troops along with vehicles and weapons to equip an armored combat brigade. That will require a special budget request of $3.4 billion for next year.

An unnamed administration official told the New York Times, that the step “fulfills promises we’ve made to NATO” and “also shows our commitment and resolve.” Moreover, said another anonymous aide: “This reflects a new situation, where Russia has become a more difficult actor.”

However, the basic question remains unanswered: Why is the U.S. defending Europe? The need for America to play an overwhelming role disappeared as the continent recovered and the Cold War ended.

Today NATO involves collective defense, but “their,” not “our,” defense. Although the Europeans sometimes join America in “out of area” activities, for which no alliance is necessary, they have never come to, and are unlikely to ever come to, America’s actual defense. Applying Article 5 after 9/11 was a nice act of solidarity, but European support was never necessary to strike al-Qaeda and oust the Taliban.

Nor is there any serious military threat to Europe. Russia may be “a more difficult actor,” but it is not a suicidal aggressor. Russia has gone from Soviet Union back to Russian Empire.

Vladimir Putin’s Russia cares about border security. It wants to be respected and have its interests protected. It doesn’t act precipitously, but it does act.

Read more at http://www.cato.org/blog/europeans-not-americans-should-spend-more-europes-defense

Cato: Who Will Stand Up for the Constitution?

The Constitution has gotten short shrift in the ongoing presidential debates, save for an occasional mention by Rand Paul. Now that he’s out of the race, Politico reports this morning, in a piece entitled “Ted Cruz, born-again libertarian,” that Cruz is scrambling for Paul’s supporters, claiming that he’s the one remaining “constitutional conservative.” That’s rich, and here’s why.

If there is any test of libertarian constitutionalism, it concerns the proper role of the courts in limiting legislative and executive excesses, federal, state, and local. Even many conservatives today are rethinking their earlier views and arguing now that courts need to be more engaged in the business of limiting government and preserving liberty. And no Supreme Court decision in our history more symbolizes the divide between the earlier conservatives and the libertarians who’ve gradually brought this re-thinking about than Lochner v. New York, where the Court in 1905 struck down an economic regulation because it violated the right to liberty of contract protected by the 14th Amendment.

Read more at http://www.cato.org/blog/who-will-stand-constitution

Cato: What the President Should Do: End U.S. Support for the War in Yemen

Possibly the strangest foreign policy decision the Obama administration has made was their decision to support the Saudi-led war in Yemen. The White House has made quiet counterterrorism operations a key plank of its foreign policy agenda, and the administration includes a number of officials best known for their work on human rights issues, most notably Samantha Power. As such, the President’s decision to supply logistical, intelligence and targeting support for the Saudi-led coalition’s military campaign – a campaign which has been horrifically damaging to human rights inside Yemen, as well as detrimental to U.S. counterterrorism goals – was deeply surprising.

Less surprising was the fact that the conflict has turned into a disastrous quagmire. Yemen was already arguably a failed state when the intervention began in April 2015. The power transition negotiated in the aftermath of the Arab Spring was weak and failing, with Yemen’s perpetual insurgencies worsening the situation. Since the intervention began, the United Nations estimates that over 21 million Yemenis have been deprived of life’s basic necessities. Thousands have been killed. Even more concerning, United Nations monitors reported to the Security Council that they believed the Saudi-led coalition may be guilty of crimes against humanity for its indiscriminate air strikes on civilians.

Read more at http://www.cato.org/blog/president-obama-can-end-war-yemen

Cato: Iowa Moonshine: The Sordid History of Ethanol Mandates

In recent years, politicians set impossibly high mandates for the amounts of ethanol motorists must buy in 2022 while also setting impossibly high standards for the fuel economy of cars sold in 2025.  To accomplish these conflicting goals, motorists are now given tax credits to drive heavily-subsidized electric cars, even as they will supposedly be required to buy more and more ethanol-laced fuel each year.

Why have such blatantly contradictory laws received so little criticism, if not outrage? Probably because ethanol mandates and electric car subsidies are lucrative sources of federal grants, loans, subsidies and tax credits for “alternative fuels” and electric cars.  Those on the receiving end lobby hard to keep the gravy train rolling while those paying the bills lack the same motivation to become informed, or to organize and lobby.

With farmers, ethanol producers and oil companies all sharing the bounty, using subsidies and mandates to pour ever-increasing amounts of ethanol into motorists’ gas tanks has been a win-win deal for politicians and the interest groups that support them and a lose-lose deal for consumers and taxpayers.

The political advantage of advocating contradictory future mandates is that the goals usually prove ridiculous only after their promoters are out of office.  This is a bipartisan affliction.  In his 2007 State of the Union Address, for example, President Bush called for mandating 35 bil­lion gallons of biofuels by 2017, an incredible target equal to one-fourth of all gasoline consumed in the United States in 2006.  Not to be outdone, “President Obama said during the presidential campaign that he favored a 60 billion gallon-a-year target.”

Read more at http://www.cato.org/blog/iowa-moonshine-sordid-history-ethanol-mandates

Cato: Financial Transaction Tax Would Be Damaging

An editorial in today’s New York Times calls for a financial transactions tax – a tenths of a percent charge on the market value of every trade of a stock, bond, or derivative. My Working Papers column two years ago described the pitfalls of such a tax.  While tax rates in the range of tenths of a percent sound small they would have large effects on stock values.  Bid-ask spreads are now 1 cent for large cap stocks. A 0.10 percent tax would add 5 cents to the spread for a $50 stock.

The alleged purpose of such a tax is to reduce the arms race among High Frequency Traders who exploit differences in the timing of bids and offers across exchanges at the level of thousandths of a second to engage in price arbitrage.  In the Fall 2015 issue I review a paper that demonstrates that this arms race is the result of stock exchanges’ use of “continuous-limit-order-book” design (that is, orders are taken continuously and placed when the asset reaches the order’s stipulated price).

Read more at http://www.cato.org/blog/financial-transaction-tax-would-be-damaging

Cato: Stop Reassuring Saudi Arabia, a Worse Threat to the Middle East than Iran

Secretary of State John Kerry recently traveled to Riyadh to reassure the Kingdom of Saudi Arabia and other Gulf states that the U.S. stood with them. “Nothing has changed” as a result of the nuclear pact with Iran, he insisted.

Washington’s long relationship with Riyadh was built on oil. There never was any nonsense about sharing values with the KSA, which operates as a slightly more civilized variant of the Islamic State. The royals run a totalitarian system which prohibits political dissent, free speech, religious liberty, and social autonomy.

At a time of heavy U.S. dependence on foreign oil a little compromise in America’s principles might have seemed necessary. Today it’s hard to make a case that petroleum warrants Washington’s “special relationship” with Saudi Arabia. The global energy market is expanding; the U.S. will soon become a petroleum exporter. The royal regime cannot survive without oil money and has continued to pump even as prices have collapsed.

In recent years Washington also treated Riyadh as an integral component of a containment system against Iran. Of course, much of the “Tehran problem” was made in America: overthrowing Iranian democracy ultimately led to creation of an Islamist state.

Fears multiplied as Tehran confronted its Sunni neighbors along with Israel and continued the Shah’s nuclear program. Overwrought nightmares of Islamic revolution throughout the region encouraged America’s fulsome embrace of the KSA and allied regimes.

But this argument for supporting the Saudi royals has become quite threadbare. Saudi Arabia is well able to defend itself. In 2014 it came in at world number four with $81 billion in military expenditures, a multiple of Iran’s total.

Read more at http://www.cato.org/blog/stop-reassuring-saudi-arabia-worse-threat-middle-east-iran

Cato: Will China Accept Taiwan’s Political Revolution?

In one of the least surprising election results in Taiwanese history, Tsai Ing-wen has won the presidency in a landslide. Even more dramatically, the Democratic Progressive Party will take control of the legislature for the first time. Tsai’s victory is a devastating judgment on the presidency of Ma Ying-jeou.

With the imminent triumph of the Chinese Communist Party, Chiang Kai-shek moved his government to the island in 1949. For a quarter century Washington backed Chiang. Finally, Richard Nixon opened a dialogue with the mainland and Jimmy Carter switched official recognition to Beijing. Nevertheless, the U.S. maintained semi-official ties with Taiwan.

As China began to reform economically it also developed a commercial relationship with Taipei. While the ruling Kuomintang agrees with the mainland that there is but one China, the DPP remains formally committed to independence.

Beijing realizes that Tsai’s victory is not just a rejection of Ma but of China. Support even for economic cooperation has dropped significantly over the last decade.

Thus, China’s strategy toward Taiwan is in ruins. In desperation in November Chinese President Xi Jinping met Ma in Singapore, the first summit between the two Chinese leaders. Beijing may have hoped to promote the KMT campaign or set a model for the incoming DPP to follow.

Read more at http://www.cato.org/blog/will-china-accept-taiwans-political-revolution

Cato: Will Voters Commit Regicide against King Ethanol in Iowa?

Until now, conventional wisdom held that candidates of both major parties had to back ethanol welfare to win the Iowa caucuses. Like cotton was in the antebellum South, corn–in the form of ethanol–is king in Iowa.

Most of today’s candidates have fallen into line. However, Sen. Ted Cruz has broken ranks to criticize farmers’ welfare. He holds a narrow polling lead over Donald Trump leading up to the upcoming caucuses. (Sen. Rand Paul also rejects the conventional wisdom, but he remains far back in the race.)

Cruz’s political strength has dismayed ethanol makers. The group America’s Renewable Future, whose state director is the governor’s son, is deploying 22 staffers in the presidential campaign. The lobby doesn’t want to look like a paper tiger.

Ethanol subsidies once included a high tariff and generous tax credits, both of which expired at the end of 2011. However, the Renewable Fuel Standard, which requires blending ethanol with gasoline, operates as a huge industry subsidy. Robert Bryce of the Manhattan Institute figured the requirement cost drivers more than $10 billion since 2007.

Ethanol is a political creation. Three decades ago, the Agriculture Department admitted that ethanol could not survive “without massive new government assistance,” which “cannot be justified on economic grounds.” What other reason could there be for an ethanol dole?

Petroleum is the most cost-effective energy source available for transportation, in particular. Ethanol has only about two-thirds of the energy content of gasoline. Given the energy necessary to produce ethanol—fuel tractors, make fertilizer, and distill alcohol, for instance—ethanol actually may consume more in fossil fuels than the energy it yields.

The ethanol lobby claims using this inferior fuel nevertheless promotes “energy independence.” However, ending imports wouldn’t insulate the United States from the impact of disruptions in a global market. Moreover, the price of this energy “insurance” is wildly excessive.

Read more at http://www.cato.org/blog/will-voters-commit-regicide-against-king-ethanol-iowa

Cato: The Syrian Civil War Just Became Even More Complex

Just when you thought the Syrian civil war couldn’t get any messier, developments last week proved that it could.  For the first time in the armed conflict that has raged for nearly five years, militia fighters from the Assyrian Christian community in northern Iraq clashed with Kurdish troops. What made that incident especially puzzling is that both the Assyrians and the Kurds are vehement adversaries of ISIS—which is also a major player in that region of Syria.  Logically, they should be allies who cooperate regarding military moves against the terrorist organization.

But in Syria, very little is simple or straightforward.   Unfortunately, that is a point completely lost on the Western (especially American) news media.  From the beginning, Western journalists have portrayed the Syrian conflict as a simplistic melodrama, with dictator Bashar al-Assad playing the role of designated villain and the insurgents playing the role of plucky proponents of liberty.  Even a cursory examination of the situation should have discredited that narrative, but it continues largely intact to this day.

Read more at http://www.cato.org/blog/syrian-civil-war-just-became-even-more-complex