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In a case called King v. Burwell, the Supreme Court will soon decide whether it agrees with two lower courts that President Obama is breaking the law by subjecting 57 million employers and individuals to illegal taxes, and spending the illegal proceeds to hide the cost of HealthCare.gov coverage from 6.5 million enrollees. Today the president delivered a speech designed to cow the Supreme Court Justices into turning a blind eye to the law. Instead, he offered what for some is the missing piece of the King v. Burwell puzzle. He displayed the very ideological fervor that leads powerful people to break the rules.

“We have an obligation to put ourselves in our neighbor’s shoes, and to see the common humanity in each other,” the president said. Yet the president of the United States has an even more important obligation to “take Care that the Laws be faithfully executed.”  It’s right there in Article II, Section 3 of the U.S. Constitution, which President Obama swore to uphold. King v. Burwell is about his failure to meet that obligation.  

“Five years in, what we’re talking about is no longer just a law,” the president said. Indeed, the ACA has become almost a blanket grant of power allowing the president to do whatever he wills to promote his conception of the public good.

President Obama delivers a speech on health care to the Catholic Health Association.

“This isn’t about the Affordable Care Act. This isn’t about Obamacare. This isn’t about myths or rumors that won’t go away. This is reality. This is health care in America,” he said. He spoke passionately about some of the people who have received subsidies. “Once you see millions of people having health care…you’d think it would be time to move on,” the president said, and that his illegal taxes and subsidies have been “woven into the fabric of America.”  Should we move on if the president achieved these things by violating the law? 

The president is correct in this respect, however. King v. Burwell is not about the Affordable Care Act. It is about the president doing an end-run around the law and the voters.

The broader health care debate is between those who believe more government will increase access to health care, and those who think the only way to expand health care access is with less government and more freedom. (It is not, as the president suggests, a debate between people who want make health care more accessible and those who don’t.) Those who favor the less-government/more-freedom approach scored a victory when, buoyed by public opposition to ObamaCare, they convinced the majority of states not to implement the ACA. That outcome that effectively forces Congress to reopen the statute. The president implemented those taxes and subsidies illegally in the 38 states that had blocked them in order to prevent (a Republican) Congress from reopening his health care law. Rather than take care that the laws be faithfully executed, he did an end-run around around the law and the people. Today’s speech merely tells us why.

The president appealed to “security,” “dignity,” and “freedom.” We will have more of all of those things if the Supreme Court holds the president to his own health care law. 

Two killers are on the loose, having escaped from a New York prison, but federal prosecutors in New York are hunting for some individuals who posted comments to a blog post over at the Reason web site.  Stay with me as I try to explain…

By way of background, Reason’s Nick Gillespie wrote a blog post about the federal prosecution of the man behind the Silk Road project, a sophisticated narcotics distribution operation. (If you’re tempted to comment on that post, please finish reading this post first. Seriously.) That man, Ross Ulbricht, was recently sentenced to life in prison, without the possibility of parole.  Like Cato, Reason has been a long time critic of the drug war.  Thus, most of Reason’s web site readers believe that nearly all criminal prosecutions for narcotics violations are misguided and unjust.  So it was no surprise to learn that the comments to Gillespie’s post had harsh things to say about the government, including the sentencing judge, in that case.  Some evidently went so far as to say the judge should be killed.   Enter the federal government with subpoenas to Reason so agents can track down those anonymous commentators for further investigation.

Ken White at Popehat broke the story and has a very good post that dismantles the government’s actions in detail here (be advised that there is some profanity).

I have not spoken to our friends at Reason on this matter, but it seems safe to say that they are likely outraged by this subpoena.  (Remember that failure to comply with a subpoena will be considered a federal crime!  Being threatened in these circumstances is outrageous!)   They are being asked (excuse me, ordered) to assist the government to track down and harass (perhaps even arrest and prosecute) some of their readers.  And for what?  Expressing opinions that are supposed to be protected by the Constitution.  Our friends can try to fight the subpoena by going to court and having it quashed, but that could entail thousands of dollars in attorneys fees – and the chances of success are not that great. 

Perhaps as the word gets around, the feds will withdraw the subpoena under pressure.  That might happen, but the downside of that is that this subpoena power will, in law, remain virtually unchecked.  When will it resurface, and against who?  Maybe a person or organization that is in an even weaker position to resist and fight back in court.  Establishing a legal precedent would be desirable here, but, again, it could be very expensive to wage a court battle.  

For Cato scholarship regarding the power of grand juries, go here.

For another example of what New York federal prosecutors think about their power vis-a-vis free speech, go here.   

 

Conservatives are fond of saying, usually in regard to homosexuality, “Everything not forbidden is compulsory.” At National Review recently, Kevin Williamson reminded readers of the provenance of that particular formulation:

One of the finest books ever written about politics is The Once and Future King, in which young Arthur, not yet king, is transformed by Merlin into various kinds of animals in order to learn about different kinds of political arrangements: Hawks live under martial law, geese are freewheeling practitioners of spontaneous order, badgers are scholarly isolationists, and ants live under totalitarianism, with T. H. White famously rendering their one-sentence constitution: “Everything not forbidden is compulsory.”

The District of Columbia can go the ants one better: It makes things simultaneously forbidden and compulsory. D.C. banned discrimination on the basis of sexual orientation in 1973, but didn’t repeal its sodomy law until 1993. So for 20 years you couldn’t be fired for being gay, but you could be arrested.

Now the District has extended its confusion to the mundane matter of taxicab regulation. WAMU reports that

Several Washington cab companies may miss a June 29 deadline to upgrade at least 6 percent of their fleets to wheelchair-accessible vehicles….Under the D.C. Taxi Act of 2012, the 27 cab companies with fleets of at least 20 taxis were supposed to convert or purchase accessible vehicles….After meeting the 6 percent ratio this month, D.C. cab companies will be faced with upgrading to 12 percent by the end of 2016 and 20 percent by Dec. 31, 2018. 

Disability-rights advocates are angrily demanding that the companies “give us the taxicabs we deserve.”

But meanwhile the District limits entry into the taxi business with a tag system, so that:

Because of the District’s freeze on the issuance of H-tags, independent drivers may not purchase and operate their own wheelchair-accessible taxis. Instead drivers have to rent the taxi, usually a minivan with a rear ramp for power wheelchairs or motorized scooters, off a company’s lot.

D.C. native Arika Woodson, 35, approached the D.C. Taxicab Commission with a proposal to operate her own taxi company exclusively for people in wheelchairs, but was turned away because of the H-tag freeze.

So the District government is requiring taxi companies to spend money to make their cabs wheelchair-accessible. At the same time, it’s also refusing to grant taxi licenses to entrepreneurs who want to put wheelchair-accessible cabs on the streets. It’s compulsory and forbidden all at the same time!

And one more point: Before the conversion mandate, “Two government-subsidized ride programs, Roll DC and Transport DC, provided 19 vehicles for people in wheelchairs, primarily to make doctors’ visits.” So wheelchair-accessible taxis are forbidden, compulsory, AND taxpayer-subsidized in the District of Columbia. It’s a trifecta of interventionism.

As President Obama gears up to deliver a major address on the supposed successes of the Affordable Care Act, a study by one of the nation’s top health economists is pouring cold water on the ACA’s main engine for expanding health-insurance coverage: its expansion of Medicaid to cover able-bodied, childless adults.

MIT’s Amy Finkelstein has won a slew of awards, including the prestigious John Bates Clark Medal, for her work in health economics. In “The Value of Medicaid: Interpreting Results from the Oregon Health Insurance Experiment,” Finkelstein, Nathaniel Hendren, and Erzo Luttmer, used various econometric methods to quantify the benefits that enrollees receive from Medicaid. They drew from the Oregon Health Insurance Experiment, on which Finkelstein was a lead investigator.

The trio found that Medicaid enrollees receive very little benefit from each dollar spent on Medicaid. The absolute minimum enrollees receive is 15 cents of benefit per dollar spent. The authors’ best guess is that enrollees receive somewhere around 20-40 cents of benefit per dollar spent. The maximum is 90 cents–that is, no matter how the authors sliced the data, Medicaid’s costs exceed the benefits to enrollees. If the government just gave enrollees the money, Medicaid is such a bad deal that enrollees would not buy Medicaid coverage with it.

Medicaid spends, non-enrollees receive about 60 cents of benefit. The authors don’t identify who Medicaid’s real beneficiaries are, but they likely include those who receive Medicaid subsidies (hospitals, insurance companies, pharmaceutical companies, doctors, device manufacturers) and people who would otherwise make charitable contributions to provide medical care to enrollees. In other words, Medicaid’s actual beneficiaries are different from its intended beneficiaries.

That’s something to keep in mind when President Obama says, “There are outcomes we can calculate” like “the number of newly insured families” and that “those numbers add up to success.”

The current debate over Trade Promotion Authority proves, once again, that the classic description of the anti-globalization movement—as “largely the well-intentioned but ill-informed being led around by the ill-intentioned and well informed”—still holds true. Despite the tireless efforts of trade policy experts to explain why TPA and the U.S. trade agreements it’s intended to facilitate are, while imperfect, not a secret corporatist plot to usurp the U.S. Constitution and install global government, myths and half-truths continue to infect traditional and social media outlets.

Because these myths—originating with the same old anti-trade bedfellows that have been with us for decades—have duped a lot of good folks who are otherwise predisposed to support liberty and free markets (including some in Congress), and because the House of Representatives is poised to vote on TPA in the coming days, here is one last debunking of the top nine myths about TPA, the Trans-Pacific Partnership (TPP), and U.S. free-trade agreements (FTAs) more broadly.

To save some time, you can skip to your favorite myth by clicking on the links below.

Myth 1: TPA and U.S. FTAs are unconstitutional and undemocratic!

Myth 2: TPA grants the president new and unlimited powers!

Myth 3: TPA sets legally binding congressional rules for U.S. trade negotiations!

Myth 4: Once TPA is approved, Congress will be powerless to stop TPP or other FTAs!

Myth 5: TPP is being negotiated via a dangerous and unprecedented level of secrecy!

Myth 6: FTAs, completed via TPA, undermine U.S. sovereignty!

Myth 7: TPP is a secret backdoor for a parade of horribles (and TPA lets that happen)!

Myth 8: FTAs (and free trade generally) benefit large corporations at the expense of working people!

Myth 9: TPA doesn’t matter!

Myth 1: TPA and U.S. FTAs are unconstitutional and undemocratic!

Totally false. Cato’s Bill Watson and I explained this at length in The Federalist last year, but here’s former Attorney General Ed Meese to reinforce our conclusions:

The TPA legislation… is clearly constitutional because Congress retains its authority to approve or reject all future trade agreements. It might be unconstitutional if Congress tried to delegate its authority to approve the final deal–but that is not at issue. Congress may always kill any future international agreement by withholding its final approval. The only difference under TPA is that Congress consents not to kill the agreement by amendment (i.e., the ‘death by a thousand cuts’). The Constitution grants each house of Congress the authority to establish its own rules of procedure, and it makes perfect sense for Congress to limit itself to straight up-or-down votes on certain resolutions, such as base closures and its own adjournment motions.

Constitutional law professor John O. McGinnis also recently reviewed TPA and concluded that TPA “simply permits Congress under its ordinary procedures to commit to a future majority vote of Congress to vote up or down on an agreement that the President has negotiated. Representative democracy is thus served by the later vote on an agreement whose text is known.” And then there’s the U.S. Supreme Court in the 1890 case of Field v. Clark approving the constitutionality of an analogous law—the McKinley Tariff Act of 1890, which granted the president even more authority than TPA. It was no big deal.

Finally, it’s important to reiterate that, contrary to some claims, FTAs are not treaties (which are typically “self-executing,” require two-thirds approval by the Senate, and have the force of law upon ratification). They are “congressional-executive agreements” that, even after being signed by the president, have absolutely no legal force until they are converted into implementing legislation (which would amend current law), passed by Congress, and signed into law by the president. Such agreements have for decades been used by the United States for many different issues, including trade liberalization, and U.S. courts have repeatedly rejected constitutional challenges thereto.

In short, a constitutional argument against TPA requires you to reject over a century of precedent, the repeated rulings of U.S. courts, and the opinions of even the strictest of constitutional scholars.

Myth 2: TPA grants the president new and unlimited powers!

Totally false. As already noted above (and reiterated here by Cato’s Dan Ikenson and here by the Congressional Research Service), Congress under TPA retains total control over the international trade authority granted to it by Article I, Section 8 of the U.S. Constitution. Any trade agreement negotiated by the president (which he has constitutional authority to do under Article II) still must be approved by Congress.

As noted by the CRS, “TPA reflects decades of debate, cooperation, and compromise between Congress and the executive branch in finding a pragmatic accommodation to the exercise of each branch’s respective authorities over trade policy.” It represents a “gentleman’s agreement” between the legislative branch and the executive branch—with the former promising the latter “fast track” rules for the requisite congressional approval of an FTA, if, and only if, the latter (i) agrees to follow a detailed set of congressional “negotiating objectives” for the agreement’s content; and (ii) engages in a series of consultations with Congress on that content. As discussed more fully below, each branch of government retains its constitutional authority to abandon this gentleman’s agreement, but doing so will essentially kill any hope of signing and implementing new FTAs. So, with limited exceptions, Congress and the executive toe the line.

Because neither branch gets expansive new powers or short-changed, Congress has granted every U.S. president since FDR some form of trade negotiating authority (source):

Pretty boring when you think about it, huh?

Myth 3: TPA sets legally binding congressional rules for USTR and U.S. trade negotiations!

Mostly false. As already noted, TPA sets congressional negotiating objectives on a range of issues (some more palatable than others), but, contrary to the statements of TPA antagonists and even some supporters, these objectives are not legally binding on the executive branch. Instead, the president retains his authority to negotiate with foreign governments, and, as Meese notes, that’s a good thing: “under well-established constitutional rulings, it would raise serious constitutional concerns for Congress to try to mandate the President’s negotiating positions.”

The president and his U.S. trade representative thus technically have discretion to ignore these objectives, but doing so would obviously jeopardize any final congressional vote. As the CRS explains:

To take the fullest advantage of these benefits, Congress, drawing on its constitutional authority and historical precedent, defined the objectives that the President is to pursue in trade negotiations. Although the executive branch has some discretion over implementing these goals, they are definitive statements of U.S. trade policy that the Administration is expected to honor, if it expects trade agreement implementing legislation to be considered under expedited rules [i.e., ‘fast track’].

The negotiating objectives constitute one part of the gentleman’s agreement between Congress and the president: “follow our wishes when you negotiate, and we’ll limit our meddling when a final deal is struck.” If the president doesn’t follow them, then the deal is off.

Which brings us to…

Myth 4: Once TPA is approved, Congress will be powerless to stop TPP or other FTAs!

Totally false. Not only does the latest version of TPA include new language expressly stating that the House or Senate can dismantle the “fast-track” rules for various “disapproval” reasons, but—even more importantly—Congress has always retained this power because it has plenary authority over its rules of procedure, including “fast track.”

The new TPA, like previous versions before it, acknowledges this fact in Sec. 106(c), which states that the fast-track rules are enacted as “as an exercise of the rulemaking power of the House of Representatives and the Senate,” but “with the full recognition of the constitutional right of either House to change the rules (so far as relating to the procedures of that House) at any time, in the same manner, and to the same extent as any other rule of that House.” The CRS summary of TPA reiterates this fact: “Congress reserves its constitutional right to withdraw or override the expedited procedures for trade implementing bills, which can take effect with a vote by either House of Congress.”

Such power is not merely theoretical. It is precisely what then-Speaker Nancy Pelosi did to the Colombia FTA in 2008 after President Bush submitted its implementing legislation. Her move effectively dismantled the “fast track” procedures and thus delayed congressional consideration of the agreement indefinitely.

In short, Congress retains total control over the FTA implementation process under TPA and can only be bound by the “fast track” rules if it wants to be bound.

Sensing a theme here yet?

Myth 5: TPP is being negotiated via a dangerous and unprecedented level of secrecy!

Totally false. Probably the most-repeated myth right now isn’t even related to TPA but instead to the TPP, which is still being negotiated. According to the anti-TPA script, the TPP is so secret that nobody knows what’s in it, and—much like Obamacare legislation—nobody, not even Congress, will know what’s in it until the agreement is passed into law. Once again, however, nothing could be further from the truth:

  • First, Obama’s USTR and Congress have been consulting on the TPP since December 14, 2009, when then-USTR Kirk notified Congress that President Obama intended to enter into TPP negotiations. USTR then held initial consultations with Congress in 2010 and, according to a January 2015 fact-sheet, has since held almost 1,700 congressional briefings on TPP alone. USTR also previewed various TPP proposals with key congressional committees before taking them to our trading partners. (Odd that the TPP talks have been going on for six years, but the vast majority of these “secrecy” complaints have only emerged in the last few months, huh?)
  • Second, USTR has provided “access to the full negotiating texts for any Member of Congress, including for Members to view at their convenience in the Capitol, accompanied by staff members with appropriate security clearance.” This access began in 2012, and several House members and senators—both supportive of TPA (like Mike Lee) and opposed (like Sens. Jeff Sessions and Elizabeth Warren, as well as Rep. Rosa DeLauro)—have reviewed the draft negotiating texts. Moreover, the level of security surrounding these TPP texts isn’t part of some scary Obama administration plot; it’s set by Congress (which, as you’ll recall, is controlled by Republicans these days). A U.S. government official confirmed to me that “the Senate and House security offices determine the procedures for viewing classified material in the Capitol reading room where the TPP text is kept for Members—not the administration… some people claim that it’s more difficult to view military or intelligence information, but it’s all subject to the same rules that are set and enforced by Capitol security.”
  • Third, USTR has engaged the public on the TPP via published reports and “stakeholder meetings” with groups like labor unions, consumer groups, and, of course, corporations and trade associations. Some of these stakeholders have even reviewed the negotiating texts and US proposals. Admittedly, the official texts aren’t available to the general public, but this is common practice for all FTAs (as a quick Google search reveals) and for good reason: just like other high-value negotiations among private parties or governments, revealing draft proposals before a deal is struck emboldens the opposition, undermines the parties’ negotiating positions, and exposes negotiators to public scrutiny over provisions that might not even be in a final deal. Publishing draft FTA texts would make completing a deal difficult, if not impossible, and it’s thus no coincidence the most vocal advocates for “full transparency” in free trade negotiations are actually those most opposed to free trade.It’s also important to understand just how unoriginal this “secrecy” canard is:

    Today’s history lesson: Nutty ol’ Perot on NAFTA’s scary secrecy. Sound familiar? #TPP #TPA https://t.co/YLjlJfusUr pic.twitter.com/l1LGWPftzV

    — Scott Lincicome (@scottlincicome) June 5, 2015

    Yes, protectionists have been using the same “secrecy” lines for over 20 years. In fact, if you replaced “NAFTA” with “TPP” in those old Ross Perot commercials, they’d be almost indistinguishable from the ones on our TVs today.

  • Finally, unlike the oft-analogized Obamacare legislation, the actual text of any final TPP deal will be required by law to be publicly available (online) for months—yes, months—before Congress votes on it. As you can see from the table below (source), under TPA the president must make the entire text of any trade agreement, including TPP, available to the public for 60 days before he can even sign it.Once it’s signed, Congress will have weeks, maybe months, to scour the deal, hold “mock markups” in various committees, and suggest changes to the agreement before the president sends Congress legislation implementing the FTA for a final vote. Also, within 105 days of the FTA’s signing, the U.S. International Trade Commission must issue a report on the deal’s economic impact—again prior those bills being submitted to Congress. And once the bills finally are submitted, Congress will then have up to 90 legislative days (which is like five months in normal human days) to review the bills and hold final votes.

Bottom line: when or if TPA is passed, the general public will have months—and if the presidential elections interfere, maybe years—to review the TPP before Congress acts on it. Think that’s crazy? Well, it’s precisely what happened to U.S. FTAs with Colombia, Panama and South Korea, which were signed by President Bush but sat around (online) for years before they were submitted to, and passed by, Congress in 2011.

Myth 6: FTAs, completed via TPA, undermine U.S. sovereignty!

Totally false, as Watson and I explained last year:

FTAs embody unenforceable promises governments make to each other. Domestic governments—here, Congress—retain the sole authority to ignore those promises and violate international commitments, and they (unfortunately) do so frequently. Foreign governments cannot force their trading partners to comply with the terms of an FTA—the only extra-national consequence of a violation is that other parties to the agreement may abrogate their commitments in a commensurate amount (e.g., by raising tariffs on imports from the United States from levels that were lowered in the FTA). Moreover, every U.S. trade agreement permits the parties to act outside the agreed disciplines in the name of, among other things, national security, public health and safety, or environmental protection. Thus, the idea that TPA and FTAs violate U.S. sovereignty or regulatory autonomy is patently false.

These principles hold true for the TPP, including its dispute settlement and controversial “investor-state” provisions. Despite what Warren (and some media outlets) would like you to believe, there is nothing—absolutely nothing—that can force the United States to comply with an adverse dispute settlement ruling issued under the TPP or any other U.S. trade agreement. Period.

But, hey, if you don’t believe me, here’s Attorney General Meese again:

Future trade deals would not be unconstitutional, nor would they undermine U.S. sovereignty, if they contained an agreement to submit some disputes to an international tribunal for an initial determination. The United States will always have the ultimate say over what its domestic laws provide. No future agreement could grant an international organization the power to change U.S. laws.
A ruling by an international tribunal that calls a U.S. law into question would have no domestic effect unless Congress changes the law to comply with the ruling. If Congress rejects a ruling or fails to act, other countries might impose a trade sanction or tariff, but they are more likely to impose high tariffs now without any agreement. The fact remains that no international body or foreign government may change any American law. Moreover, Congress may override an entire agreement at any time by a simple statute. Nations also may withdraw from international agreements by executive action alone. That is one reason why such agreements do not interfere with the underlying sovereignty of each nation to chart its own course in the world. In short, the U.S. Constitution and any laws and treaties we enact in accordance thereto are the only supreme law of our land.

If that’s not clear enough for you, then I don’t know what is.

Myth 7: TPP is a secret backdoor for a parade of horribles (and TPA lets that happen)!

Totally false. Various politicians and pundits have sought to arouse suspicions by claiming, among other things, that TPA will permit President Obama to bypass Congress and use the TPP as a backdoor to, among other things, lawlessly expand immigration, curtail gun rights, or restrict Internet freedom. At this point, however, I hope you can see just how ridiculous these claims are. Regardless of the issue, the fact will always remain that nothing can be implemented via the TPP unless Congress agrees to implement it via a formal vote.

This would include things like new work visas (something that U.S. FTAs haven’t actually done for years now) or Internet regulations or gun rules or minimum wages or whatever: it all has to become law before it has any legal force, and the only people making law are Congress (and, again, according to their own procedural rules). So, if in the TPP the president committed the United States to toss every AR-15 into the Atlantic Ocean, those guns aren’t going anywhere unless Congress formally agrees, subject to all of the constitutional, procedural, and transparency rules already discussed.

And, really, do you think this Congress is going to do anything of the sort? Really? (For more specific debunking of these crazy ideas, go here, here, here and here.)

We still don’t know precisely what’s in the TPP, and final judgment—by Congress and the public—should therefore be withheld until we do. But the idea that TPP, empowered by TPA, will grant President Obama any new legal authority to ignore or change U.S. immigration or gun or whatever laws without Congress is simply ludicrous.

Myth 8: FTAs (and free trade generally) benefit large corporations at the expense of working people!

Mostly false. There is little doubt that FTAs benefit some U.S. corporations and workers, while harming others—that’s kinda free-market competition’s thing.

SHOCK: FTA predicted to reflect/amplify USA’s comparative advantages & disadvantages: http://t.co/PUgLrpL3O8 pic.twitter.com/INypfluXSk — Scott Lincicome (@scottlincicome) March 16, 2015

In general, however, the corporate winners (who tend to be in growing, innovative industries) from U.S. FTAs outnumber the losers (who tend to be in archaic, uncompetitive ones). And every legitimate economic analysis of the TPP confirms this general rule. FTAs also contain rules and exceptions for well-connected stakeholders. As I’ve repeatedly discussed, this is a big reason why FTAs are “third best” option for U.S. trade policy.

Nevertheless, there is also little doubt that (i) FTAs are pretty much the only trade liberalization game in town these days; (ii) while unpalatable, the cronyist exceptions in U.S. FTAs, are relatively minor compared to the overall liberalization; and (iii) the biggest winners from such liberalization aren’t corporations or the mega-rich, but consumers, particularly poor ones.

Hey, average American [especially low-income ones], here’s how you benefit from free trade http://t.co/0T2XnveplW pic.twitter.com/sLf8p6p62c

— Scott Lincicome (@scottlincicome) May 20, 2015

(More here.) These gains wouldn’t be possible without FTAs (as much as we free traders wish they would be).

Good oped from NRF’s Matt Shay on how US FTAs, made possible by #TPA, benefit US consumers: http://t.co/PLck4zo6dI pic.twitter.com/0IYlQwwV0L — Scott Lincicome (@scottlincicome) May 11, 2015

Thus, the idea that FTAs like the TPP, or any other reduction in global trade barriers, benefit the 1 percent at the expense of working class is just not true. Indeed, as we at the Cato Institute are constantly pointing out, the real cronyism in trade policy takes place on the anti-trade side of the ledger: corporations and unions lobbying government to shield them from free-market forces, always at consumers’ expense. It’s precisely for this reason that many of the U.S. lobbying dollars spent on TPP aren’t from pro-export mercantilists (although there are plenty of those, too) but from those anti-competitive industries (autos, steel, textiles, sugar, etc.) and unions that are seeking to scuttle the deal or secure their own special exemptions.

Myth 9: TPA doesn’t matter!

Mostly false. Look, in an ideal world, all of these trade deals would be totally unnecessary: every government in the world would lower its trade barriers, kill its subsidies, and trade freely across borders, thereby enriching us all in the process. But that’s not our world. And even though some pro-TPA rhetoric is exaggerated, the legislation still has value for at least one big reason: U.S. trading partners take it seriously and won’t sign off on a final deal with the United States until TPA’s in place.

Indeed, over the last few months, officials from Japan, Canada, and Chile (among others) have each made clear that their governments won’t finalize TPP until Congress passes TPA. And, again, it’s precisely for this reason that U.S. protectionists are spending major dollars to stop TPA: they don’t really think it’s going to destroy constitutional democracy and install a world government ruled by Emperor Obama; they just oppose free trade or the TPP. And they’re more than happy to prey on conservative insecurities to achieve their goal.

Since the 1940s, the United States, whether governed by Democrats or Republicans, has been the world’s leader on global trade policy. This leadership, due in part to President Obama’s mismanagement and disinterest, has waned in recent years. A defeat for TPA—and any resulting death of the TPP—would accelerate this decline.

There are legitimate (although not horrifying!) concerns about the contents of the final TPP deal, but it’s certainly not a harbinger of an economic or constitutional apocalypse. The American public should scrutinize the final agreement closely, but that won’t happen until TPA becomes law. For supporters of free markets, there’s no legitimate reason why it shouldn’t.

The federal Supplemental Security Income (SSI) program provides income to low-income, disabled individuals, including children. In 2014, SSI paid benefits totaling $56 billion to 8 million people. A new Government Accountability Office (GAO) report suggests that a substantial share of that money was spent improperly.

GAO reports that in 2014, SSI wasted $5.1 billion, or almost 10 percent of SSI spending, on improper payments. GAO says that much of the problem is due to SSI’s “management challenges that constrain its ability to ensure program integrity.” SSI is not conducting proper reviews of current beneficiaries in a number of ways.

First, SSI is failing to review files to ensure that beneficiaries continue to be eligible for benefits based on their health. When a person’s health improves, they are supposed to exit the program. According to GAO, SSI’s review backlog totaled 1.3 million files as of January 2014.  Eliminating this backlog would save SSI billions of dollars as ineligible persons would be removed from the program. For instance, children comprise 15 percent of SSI beneficiaries. In 2012 SSI had 435,000 children cases waiting to be reviewed. Many of those cases had been pending for review for six years. Seventy percent of those pending for six years involved cases where the child was projected to improve within three years. Likely, thousands of children received benefits for years past their eligibility due to SSI’s inability to conduct to reviews. GAO estimated that eliminating the backlog of reviews for children would save $1.3 billion over five years. Eliminating SSI’s entire backlog would save millions more.

Second, SSI is also failing to conduct appropriate reviews of beneficiaries’ financial information. SSI beneficiaries must earn less than $721 in monthly income ($1,082 if married) and have less than $2,000 in assets. SSI is supposed to review financial information on an ongoing basis to ensure that beneficiaries continue to be eligible, but that isn’t happening according to GAO.  Inappropriate financial reviews compose a large share of SSI’s overpayments.  It represented 37 percent in fiscal year 2011.

When SSI does find that an individual received too much in benefits, it rarely makes an individual repay the overage. In 2011, SSI approved 76 percent of overpayment waivers, meaning the individuals got to keep their excess payments.

These problems mirror those within the Social Security Disability Insurance program (SSDI) which operates in tandem with SSI. A report from last year highlighted that over 630,000 individuals were waiting to apply for benefits with hundreds of thousands waiting on appeals. SSDI’s trust fund will also be exhausted in late 2016.

Both SSI and SSDI need large-scale reform. Congress should use the opportunity of SSDI’s trust fund bankruptcy to reform these two programs. The issues within the programs are well documented.

Citing the work of David Burton and Richard Rahn, I warned last July about the dangerous consequences of allowing governments to create a global tax cartel based on the collection and sharing of sensitive personal financial information.

I was focused on the danger to individuals, but it’s also risky to let governments obtain more data from businesses.

Remarkably, even the World Bank acknowledges the downside of giving more information to governments.

Here are some blurbs from the abstract of a new study looking at what happens when companies divulge more data.

Relying on a data set of more than 70,000 firms in 121 countries, the analysis finds that disclosure can be a double-edged sword. …The findings reveal the dark side of voluntary information disclosure: exposing firms to government expropriation.

And here are some additional details from the full report.

…disclosure has important costs in allowing exposure to government expropriation… We show that accounting information disclosure can be detrimental to firm development… Such disclosure allows corrupt bureaucrats to gain access to firm-level information and use it for endogenous harassment. …once firm information is disclosed, the threat of government expropriation is widespread. Information disclosure thus allows rent-seeking bureaucrats to gain access to the disclosed information and use it to extract bribes. …Our paper offers a vivid illustration that an important hindrance to institutional development—here in the form of adopting information disclosure—is government expropriation. …The results are thus supportive of Acemoglu and Johnson (2005) on the overwhelming importance of constraining government expropriation in facilitating economic development.

Yet this doesn’t seem to bother advocates of bigger government.

Indeed, they’re using a Paris-based international bureaucracy to push a “base erosion and profit shifting” initiative designed to produce global rules that would give governments far greater access to business data.

Their goal is to extract more money openly with tax policy rather than surreptitiously with bribes, but the net effect will be just as bad for the global economy.

A new study from the Center for Freedom and Prosperity has the disturbing details.

Under direction of the G20, the Organization for Economic Cooperation and Development (OECD) began two years ago a major initiative on “base erosion and profit shifting” (BEPS). …Through the BEPS project, the OECD is continuing its war against tax competition.

For all intents and purposes, politicians from high-tax nations are using the G20 and OECD to undermine the liberalizing force of tax competition.

They want to rewrite international tax policy to prop up nations with uncompetitive tax systems.

[BEPS] would…lead to an overall higher tax environment as politicians freed from the pressures of global tax competition inevitably raise rates to levels last seen in the early 1980s, when reforms by Reagan and Thatcher sparked a global reduction in corporate tax rates that has continued to this day. Through tax competition, the average corporate tax rate of OECD nations declined from almost 50% in 1981 to 25% in 2015. …The [BEPS] Action Plan…considers the benefits of tax competition to be the real problem, explaining that “there is a reduction of the overall tax paid by all parties involved as a whole.” The prospect of there being less money to be spent by politicians is perceived as a problem to be solved.

Even though there’s no evidence of a problem, even from the perspective of revenue-hungry politicians.

Particularly since the OECD’s own data shows that corporate tax revenue keeps increasing, as noted in the CF&P study.

The OECD’s BEPS Report itself undercuts the argument that there is a pressing need for a global response when it acknowledges that “revenues from corporate income taxes as a share of GDP have increased over time.” Likewise, the Action Plan admits when discussing hybrid mismatch that “it may be difficult to determine which country has in fact lost tax revenue.”

So BEPS isn’t a response to the nonexistent problem of falling revenue. Instead, the real goal is to make it easier to impose higher tax rates and change other rules to raise additional revenue.

Even if the required policies have very troubling implications. As part of this new campaign against tax competition, here’s some of what the OECD is seeking.

Proposed recommendations for transfer-pricing documentation and country-by-country reporting, for instance, feature broad reporting requirements that go far beyond what is required for purposes of tax collection. …Information contained in the local and master files are particularly vulnerable, since it would take a breach in only a single jurisdiction for it to be exposed. The OECD makes assurances for the confidentiality of these reports, but they are empty promises. Such government assurances of privacy protection are contradicted by experience and the long history of leaks of taxpayer information. In the United States alone tax data has frequently been exposed thanks to inadequate safeguards, or even released by officials to attack political opponents. …Even without malicious intent, governments are ill equipped to protect sensitive information from outside access. …As poor as the United States has proven at protecting privacy, there are likely to be nations even more vulnerable. Through the master file and other reporting mechanisms, BEPS will demand of corporations propriety information and other sensitive data that they have every right to keep private.

Requiring more information is just one part of BEPS.

There are many other elements, all of which are designed to facilitate higher tax burdens. Indeed, the Wall Street Journal warned that, “this is an attempt to limit corporate global tax competition and take more cash out of the private economy.”

But as bad as BEPS is now, the study from the Center for Freedom and Prosperity explains it will get worse over time.

Of particular relevance for understanding the BEPS initiative is the pattern demonstrated by the OECD during the course of this campaign. After each recommendation was widely adopted – typically under duress in the case of low-tax jurisdictions – the OECD immediately pushed a new requirement that was more radical and invasive than the last. First was a call to adopt a certain number of Tax Information Exchange Agreements and a standard of information exchange upon request, then a peer-review process whereby tax policies are judged according to the standards of high-tax welfare states. Then, after years of meetings and costly compliance efforts, the old standard for information exchange upon request was replaced with a call for global automatic exchange.

The OECD’s strategy of moving the goalposts is worth noting because the BEPS project almost certainly will evolve in ways that enable ever-higher tax burdens.

I predicted back in 2013 that the end result will be “global formula apportionment,” a system that would enable dramatically higher tax burdens on the business community.

And I’m sticking with that prediction, in part because that’s what would be in the interests of politicians from high-tax nations. If national governments were able to tax on the basis of what companies sold inside their borders, regardless of how much income actually was being earned, there would be very little competitive pressure to keep tax rates reasonable.

Politicians could push corporate tax rates back up to 50 percent, or even higher.

The folks on the left certainly would like that kind of system. Here are some excerpts from a CNN story.

It’s time for a complete overhaul of the global tax system to ensure each company pays their fair share, says Nobel laureate Joseph Stiglitz. …”Multinational corporations act and therefore should be taxed as single and unified firms. It is time for our [political] leaders to be bold,” Stiglitz said. …Stiglitz said that creating a new worldwide tax system is realistic, but all nations would have to work together to agree rules and close loopholes. The group of economists said in a statement that it was critical to “curb tax competition to prevent a race to the bottom.” Developed nations should take the first step by agreeing on a minimum rate of corporate tax, possibly under the auspices of the Organisation for Economic Cooperation and Development. …The economists also suggest establishing an intergovernmental tax body within the United Nations that would combat abusive tax practices.

The bottom line is that politicians and statist interest groups both want to extract more money from the productive sector of the economy.

And OECD bureaucrats have been assigned the task of crafting rules to undermine tax competition so that companies can’t escape those higher burdens.

Developing new rules is actually the easy part. The hard part is when the bureaucrats try to rationalize how higher tax rates and bigger government are somehow good for the global economy.

Particularly since economists who work at the OECD have written that lower tax rates and tax competition result in better economic performance.

P.S. To add insult to injury, American taxpayers provide the biggest share of the OECD’s budget. This means that our tax dollars are being used to generate policies that will result in higher tax burdens. Which is why I’ve argued, on a per-dollar-spent basis, that subsidies to the OECD are the most destructively wasteful part of the federal budget.

P.P.S. And to add insult upon insult, OECD bureaucrats get tax-free salaries, so they are insulated from the negative effects of policies they’re trying to impose on the rest of the world.

There is an old lawyers’ adage: “When the facts are on your side, argue the facts. When the law is on your side, argue the law. When neither are on your side, pound the table.” President Obama will deliver a speech today in which he pounds the table with the supposed successes of the Affordable Care Act. The address is part effort to influence the Supreme Court’s upcoming decision in King v. Burwell, part effort to spin a potential loss in that case.

The problem is, those supposed successes are not due to the ACA. They are the product, two federal courts have found, of billions of dollars of illegal taxes, borrowing, and spending imposed by the IRS at the behest of the president’s political appointees.

The president can pound the table all he wants about his theories of what Congress intended, or how, in his opinion, those illegal taxes have benefited America. No speech can change the fact that he signed into law a health care bill that makes it unmistakably clear that those taxes and subsidies are only available “through an Exchange established by the State.” If he didn’t like that part of the bill, he shouldn’t have signed it.

The president thinks it is “a contorted reading of the statute” to insist on the unmistakably clear distinction Congress drew between Exchanges established by “States” versus the federal government. The Congressional Research Service disagrees. So do the D.C. Circuit, and even the Fourth Circuit. Even Harvard law professor Noah Feldman says the president’s theories “seem forced.”

Two federal courts have found the law is clear, and the president is on the wrong side of it. The president would rather that you not focus on that small detail. But the Supreme Court’s job is to hold the president to the law he enacted. Let’s hope they do. Because if the Court instead allows the IRS to tax and spend without congressional authorization, the disruption will be much greater than any caused by ObamaCare.

Last week the Environmental Protection Agency released a study that concluded that hydraulic fracturing, so-called “fracking” of oil and natural gas wells, does not contaminate drinking water, except in extremely unusual cases involving improper drilling techniques. The study should reduce the concerns of some of the technique’s vocal critics whose fears have led to restrictions on its use.

The EPA study reviewed the results from thousands of wells and found few faults with the drilling technique. When problems occurred, they stemmed from improperly sealed wells, which can affect any oil or gas well and not just those that utilize hydraulic fracturing.

More evidence about the costs and benefits of fracking appears in the forthcoming summer issue of Regulation. The Barnett shale area splits the Dallas–Forth Worth area in half; all of the wells are in the western part of the metro area. Because many other factors are constant within the metro area, this geological accident allows researchers to determine whether shale development produces net benefits and thus increases housing values. Read the full study here.

In Texas the value of oil and gas rights is part of the local property tax base. Thus localities receive tax revenues from oil and gas development and can finance local public amenities without increasing property taxes. Over the entire 1997–2013 period, houses in the shale ZIP codes in the Dallas–Fort Worth area appreciated 5 to 6 percentage points more than houses in non-shale ZIP codes. These results suggest that improved local finances have more than offset whatever disamenities result from shale development for the typical homeowner. “Fracking” is just another drilling technique, and needs to not be regulated in any special way beyond that of normal oil and gas drilling.

Environmentalists often assume that free markets work against their goals. But the market is the best friend of the natural world because it generates constant pressure to innovate, to cut costs, and to use resources efficiently. The price system prompts consumers and businesses to minimize consumption of dwindling resources. To ease California’s water problems, for example, we need markets not regulatory controls.

The Wall Street Journal today has a pair of stories on scrap metal recycling:

Waste has long been a major U.S. export, providing material to be melted in foreign steel mills or made into new paper products. But the strength of the dollar has made American waste pricier abroad, cutting demand…

… That has been hard on the network of waste dealers and scrap gatherers who are the backbone of the industry. Bob Hooper, who goes by Hoop, finds discarded metal on curbs and in dumpsters around Pittsburgh and carries it to scrapyards in a rusting Chevy pickup with a bungee cord to keep the driver’s door shut.

… On a recent day, he hauled in more than 1,000 pounds of scrap, including two discarded refrigerators, a water heater and a broken microwave buried in egg shells and other moist trash. After gasoline expenses, he netted about $80.

From a related story in today’s Journal:

Wherever he goes in his Chevy pickup, Bob “Hoop” Hooper scans for discarded metal—a mangled bike, a broken microwave, even a beer can. “That’s like the No. 1 rule of scrapping,” Mr. Hooper, 48 years old, explained recently. “Don’t pass up metal.”

Scrapping—gathering metal and selling it to scrap dealers—is a tough job, involving excavations inside dumpsters, forays into dangerous neighborhoods and, lately, falling metal prices.

… Most mornings he hits the road around 9 a.m., and by late afternoon has filled the back of his pickup and earned anywhere from $40 to several hundred dollars at scrapyards. In the evening, he dismantles appliances and sorts valuable metals like copper and brass into plastic buckets. “It gives me something to do while I’m watching TV,” he said.

One regular stop is a housing complex with 31 dumpsters. On a recent morning, he found an umbrella and a mop in one. “It don’t seem like much, but as long as you’re getting something from every stop, it piles up,” he said.

Green groups often confer awards on politicians who press for more control over markets. But they should instead champion people like Bob Hooper. He is devoting his career to recycling, which is helping to reduce landfill waste. His work also boosts the economy, which we know because he is earning a net return in the marketplace.

Bob Hooper has a dirty job, but he is creating a cleaner environment the market-based way.

If I had more time I’d write at greater length about this already infamous New York Times op-ed on student loans – which conspicuously fails to mention that the writer apparently got all of his degrees from pricey Columbia University – but the piece largely condemns itself. What I think is worth contemplating is how far out of mainstream thinking its sentiments are. Alas, maybe not that far.

No doubt most of the public wouldn’t support people not repaying their student loans just because they don’t like them, but the idea that freely chosen debt should be forgiven or curtailed is getting lots of play, from President Obama’s push for programs that would lead to forgiveness for big borrowers, to Senator Elizabeth Warren’s private debt buy-up proposal. And calls for free college are roughly the equivalent of calls for loan forgiveness. No, they aren’t saying that borrowers should renege on commitments they’ve already made, but they are saying that the college cost burden should be dropped even more squarely on the shoulder of taxpayers going forward.

Of course the ultimate problem, beyond the immediate, crushing cost, is that the more you have other people pay for students’ decisions, the more wasteful those decisions will tend to be. And even at current subsidy levels, those decisions are very, very wasteful. But that’s what happens when politicians decide taxpayers should never get in the way of a student’s bliss.

Over at Cato’s Police Misconduct Reporting Project, we have identified the worst case for the month of May.  It was was the death of Matthew Ajibade.

Ajibade’s girlfriend called the police because he was having a bipolar episode.  Georgia deputies arrested Ajibade but then took him to the jail instead of a hospital.  At the jail, he was placed in a restraint chair.  Deputies reportedly fired stun guns at him while he was restrained in the chair and then left him unattended in an isolation cell.  Ajibade, 22, died and the coroner now says it was homicide

Nine deputies were fired over the incident and a criminal investigation is on-going.

Last Friday a group of teenagers attended an end-of-year party at a community swimming pool in McKinney, Texas. According to some of the teens at the pool police were called to the scene after adults made racist remarks and a fight between adults and the teens began. A McKinney Police Department Facebook post states that officers responded to reports of “a disturbance involving multiple juveniles” who did not have permission to be at the pool.

One of the teens, 15-year-old Brandon Brooks, filmed the encounter between the youths and police officers. The video, which can be viewed below, shows officer Eric Casebolt handcuffing two teens before throwing a 14-year-old girl to the ground, using his knees to pin her, and pulling a gun on unarmed bystanders - something he is caught on camera denying. The girl was later released without charge.

Warning: This video contains profanity

“Super Trooper” Cops Crash Pool Party And Target Black Kids in McKinney, TX (Dallas)

Casebolt, who has been placed on administrative leave following the incident, was named Patrolman of the Year in 2008 and is reportedly a vice president of the McKinney police union. He was also once an instructor at Executive Self-Defense and Fitness, and was described on that company’s website as someone with “experience in the use of all levels of force” and “a strong working knowledge of human behavior.”

It is hard to imagine the incident earning as much attention as it has without Brooks’ footage, which serves as another reminder of how important it is that citizens film the police. In the forthcoming investigation into the incident Casebolt will not be able to plausibly claim that he felt threatened by a 14-year-old girl and that his use of force against her was justified. Nor will he be able to claim that he did not unholster his weapon and point it at unarmed teens.

Citizen footage of police officers can be instrumental in investigations into allegations of police misconduct. Today a grand jury indicted former North Charleston, South Carolina police officer Michael Slager for the killing of Walter Scott, whose death was caught on camera by an onlooker. Scott was shot multiple times in the back while running away from Slager. I wrote about Walter Scott’s death in April, noting how footage of the killing contradicted what was included in police reports.

The Cato Institute released a video on citizens filming police officers in 2010. It can be viewed below.

Cops on Camera

On ABC News’ This Week yesterday, Gov. Scott Walker defended his proposal to spend $250 million of taxpayers’ money to build a new arena for the Milwaukee Bucks:

“All across the nation when they do projects like this,” Walker said. “It’s a good deal.”

The Bucks franchise, valued at $600 million, is owned by a group of billionaire financiers in New York. But no matter what it’s worth, Walker’s statement is at wide variance with the findings of independent economists.

Economic projections for subsidized stadiums are always vastly overstated. As Dennis Coates and Brad Humphreys wrote in a 2004 Cato study criticizing the proposed D.C. stadium subsidy, “The wonder is that anyone finds such figures credible.”

And indeed the Washington Examiner reported in 2008:

Attendance at Nationals Park has fallen more than a quarter short of a consultant’s projections for the stadium’s inaugural year, cutting into the revenue needed to pay the ballpark bonds and spurring a D.C. Council member to demand the city’s money back.

Several Cato studies over the years have looked at the absurd economic claims of stadium advocates. In “Sports Pork: The Costly Relationship between Major League Sports and Government,” Raymond Keating finds:

The lone beneficiaries of sports subsidies are team owners and players. The existence of what economists call the “substitution effect” (in terms of the stadium game, leisure dollars will be spent one way or another whether a stadium exists or not), the dubiousness of the Keynesian multiplier, the offsetting impact of a negative multiplier, the inefficiency of government, and the negatives of higher taxes all argue against government sports subsidies. Indeed, the results of studies on changes in the economy resulting from the presence of stadiums, arenas, and sports teams show no positive economic impact from professional sports — or a possible negative effect.

In Regulation magazine, (.pdf) Dennis Coates and Brad Humphreys found that the economic literature on stadium subsidies comes to consistent conclusions:

The evidence suggests that attracting a professional sports franchise to a city and building that franchise a new stadium or arena will have no effect on the growth rate of real per capita income and may reduce the level of real per capita income in that city.

And in “Caught Stealing: Debunking the Economic Case for D.C. Baseball,” Coates and Humphreys looked specifically at the economics of the new baseball stadium in Washington, D.C., and found similar results:

Our conclusion, and that of nearly all academic economists studying this issue, is that professional sports generally have little, if any, positive effect on a city’s economy. The net economic impact of professional sports in Washington, D.C., and the 36 other cities that hosted professional sports teams over nearly 30 years, was a reduction in real per capita income over the entire metropolitan area.

Stadiums, arenas, convention centers, arts centers, the story is the same. In 2011 the Washington Post reported that the financial projections for a government-funded arts center, Artisphere, in Arlington, Virginia, didn’t seem to have panned out.

A 2014 report by Don Bauder in the San Diego Reader is worth quoting at length:

Would you take advice from a gaggle of consultants whose forecasts in the past two decades have been off by 50 percent?

Of course you wouldn’t. But all around the U.S., politicians, civic planners, and particularly business executives have been following the advice of self-professed experts who invariably tell clients to build a convention center or expand an existing one.

A remarkable new book, Convention Center Follies: Politics, Power, and Public Investment in American Cities, published by the University of Pennsylvania Press, tells the amazing story of how one American city after another builds into a massive glut of convention-center space, even though the industry itself warns its centers that the resultant price-slashing will worsen current woes.

The author is Heywood Sanders, the nation’s ranking expert on convention centers, who warned of the billowing glut in a seminal study for the Brookings Institution back in 2005. In this new, heavily footnoted, 514-page book, Sanders, a professor of public administration at the University of Texas/San Antonio, exhaustively examines consultants’ forecasts in more than 50 cities….

The worst news: “These expansions will keep happening,” as long as “you have a mayor who says it is free,” says Sanders.

Or a governor:

“We would lose $419 million over the next 20 years if we did nothing, if we said, go on, move somewhere else, which the NBA said they would do,” Walker continued. “In this case, we don’t raise any taxes. There are no new taxes, only existing taxes. And we get a three to one return.”

The project will be funded by existing taxes on hotel rooms and rental cars, though the Wisconsin Center Board has the authority to raise the rate, he said.

“In this case, we take the tax, the revenues on hotels and rental cars that are currently paid for the convention center and allow those to continue to be paid for a new arena,” Walker said. “It’s not a new tax.”

This wasn’t the worst thing Scott Walker said to Jonathan Karl on ABC. He also said he wouldn’t rule out re-invading Iraq. But any presidential candidate who believes that “All across the nation when [politicians spend taxpayers’ money] on stadiums, it’s a good deal,” shouldn’t be anywhere near the federal Treasury.

The Trans-Pacific Partnership is a still-evolving trade agreement that would reduce tariffs and other barriers to goods and services trade between the United States and 11 other countries. It also would likely include provisions designed to protect certain U.S. industries from the full effects of competition.  A TPP agreement, then, would likely increase our economic freedoms in some realms and reduce them in others.  How these pros and cons would be manifest is unclear at the moment, given the fact that the deal is not done.  But it would a mistake to forego the opportunity to evaluate a completed trade deal that could deliver significant benefits. 

It is broadly understood that the TPP negotiations cannot be concluded without the Congress passing, and the president signing, Trade Promotion Authority legislation.  Without TPA, the president could not be sure that any trade deal brought home reflected the official wishes of Congress, and the likelihood that foreign negotiators would put their best and final offers on the table—knowing that Congress could unravel the deal’s terms—is close to zero.

The Senate passed TPA legislation (along with language reauthorizing the Trade Adjustment Assistance program) on May 22.  The House is likely to take up the bill this week.  At the moment, the president is in lockstep with a large majority of congressional Republicans, who support trade liberalization and see TPA as essential to the process.  But some Republicans (mostly from the conservative wing), who are wary of giving this president any more power, have joined ranks with the vast majority of congressional Democrats in opposition to TPA.  Meanwhile, Democratic presidential frontrunner Hillary Clinton—an architect of the TPP as Secretary of State and a potential heir to the trade agenda—has refused to take a position on TPA.

The spotlight on trade policy has generated much more heat than light.  Misinformation abounds.  Rationalizations masquerade as rationales.

This new Cato Free Trade Bulletin is intended to dispel some of the nonsense that has been circulating and to present a brief, objective assessment of what has transpired and what lies ahead for TPA and TPP.

Every so often, I’ll assert that some statists are so consumed by envy and spite that they favor high tax rates on the “rich” even if the net effect (because of diminished economic output) is less revenue for government.

In other words, they deliberately and openly want to be on the right side (which is definitely the wrong side) of the Laffer Curve.

Just in case you think I’m exaggerating in order to make my opponents look foolish, check out this poll of left-wing voters who strongly favored soak-the-rich tax hikes even if there was no extra tax collected.

But now I have an even better example.

Writing for Vox, Matthew Yglesias openly argues that we should be on the downward-sloping portion of the Laffer Curve. Just in case you think I’m exaggerating, “the case for confiscatory taxation” is part of the title for his article.

Here’s some of what he wrote.

Maybe at least some taxes should be really high. Maybe even really really high. So high as to useless for revenue-raising purposes — but powerful for achieving other ends. We already accept this principle for tobacco taxes. If all we wanted to do was raise revenue, we might want to slightly cut cigarette taxes. …But we don’t do that because we care about public health. We tax tobacco not to make money but to discourage smoking.

The tobacco tax analogy is very appropriate.

Indeed, one of my favorite arguments is to point out that we have high taxes on cigarettes precisely because politicians want to discourage smoking.

As a good libertarian, I then point out that government shouldn’t be trying to control our private lives, but my bigger point is that the economic arguments about taxes and smoking are the same as those involving taxes on work, saving, investment.

Needless to say, I want people to understand that high tax rates are a penalty, and it’s particularly foolish to impose penalties on productive behavior.

But not according to Matt. He specifically argues for ultra-high tax rates as a “deterrence” to high levels of income.

If we take seriously the idea that endlessly growing inequality can have a cancerous effect on our democracy, we should consider it for top incomes as well. …apply the same principle of taxation-as-deterrence to very high levels of income. …Imagine a world in which we…imposed a 90 percent marginal tax rate on salaries above $10 million. This seems unlikely to raise substantial amounts of revenue.

I suppose we should give him credit for admitting that high tax rates won’t generate revenue. Which means he’s more honest than some of his fellow statists who want us to believe confiscatory tax rates will produce more money.

But honesty isn’t the same as wisdom.

Let’s look at the economic consequences. Yglesias does admit that there might be some behavioral effects because upper-income taxpayers will be discouraged from earning and reporting income.

Maybe…we really would see a reduction of effort, or at least a relaxation of the intensity with which the performers pursue money. But would that be so bad? Imagine the very best hedge fund managers and law firm partners became inclined to quit the field a bit sooner and devote their time to hobbies. What would we lose, as a society? …some would presumably just move to Switzerland or the Cayman Islands to avoid taxes. That would be a real hit to local economies, but hardly a disaster. …Very high taxation of labor income would mean fewer huge compensation packages, not more revenue. Precisely as Laffer pointed out decades ago, imposing a 90 percent tax rate on something is not really a way to tax it at all — it’s a way to make sure it doesn’t happen.

While I suppose it’s good that Yglesias admits that high tax rates change incentives, he clearly underestimates the damaging impact of such a policy.

He presumably doesn’t understand that rich people earn very large shares of their income from business and investment sources. As such, they have considerable ability to alter the timing, level, and composition of their earnings.

But my biggest problem with Yglesias’ proposals is that he seems to believe in the fixed-pie fallacy that public policy doesn’t have any meaningful impact of economic performance. This leads him to conclude that it’s okay to pillage the “rich” since that will simply mean more income and wealth is available for the rest of us.

That’s utter nonsense. The economy is not a fixed pie and there is overwhelming evidence that nations with better policy grow faster and create more prosperity.

In other words, confiscatory taxation will have a negative effect on everyone, not just upper-income taxpayers.

There will be less saving and investment, which translates into lower wages and salaries for ordinary workers.

And as we saw in France, high tax rates drive out highly productive people, and we have good evidence that “super-entrepreneurs” and inventors are quite sensitive to tax policy.

To be fair, I imagine that Yglesias would try to argue that these negative effects are somehow offset by benefits that somehow materialize when there’s more equality of income.

But the only study I’ve seen that tries to make a connection between growth and equality was from the OECD and that report was justly ridiculed for horrible methodology (not to mention that it’s hard to take serious a study that lists France, Spain, and Ireland as success stories).

P.S. This is my favorite bit of real-world evidence showing why there should be low tax rates on the rich (in addition, of course, to low tax rates on the rest of us).

P.P.S. And don’t forget that leftists generally view higher taxes on the rich as a precursor to higher taxes on the rest of the population.

P.P.P.S. In the interests of full disclosure, Yglesias says I’m insane and irrational.

As I noted last week, the GOP’s 2016 contenders didn’t do themselves much credit as they ducked, covered, cringed, and pratfell through a series of interview questions about the Iraq War. Still, Jeb Bush had a point when he noted that, at the time, “almost everybody” in political Washington was for the war. True enough: as policy disasters go, the Iraq War was as bipartisan as the subprime loan crisis

On the war’s tenth anniversary a couple of years back, the New Republic’s John Judis recalled “what it was like to oppose the Iraq War in 2003.” His memory jibes with mine: it was pretty damned lonely. Well before “Shock and Awe,” hawkish arguments had achieved near full-spectrum dominance over the minds of Beltway policy elites, and the invasion and occupation of Iraq was shaping up as a horrific idea whose time had come. 

But it rankled a bit when Judis wrote that “except for Jessica Mathews at the Carnegie Endowment for International Peace, Washington’s thinktank honchos were also lined up behind the war.” Not to take anything away from Ms. Mathews, but the late, great Bill Niskanen had to count as a “think tank honcho” if anyone did, and he opposed the war vigorously, early, and often.

In a December 2001 public debate with former CIA director James Woolsey, Niskanen, then Cato’s chairman, offered the first prominent public statement by a DC think-tank leader against that looming debacle: “An Unnecessary War Is an Unjust War,” Bill argued. In the run-up to the invasion, other Cato scholars argued, among other things, that:

At the time, opposition to the Iraq War was controversial even within the building—and outside of 1000 Massachusetts Ave., Cato’s Iraq War skeptics had very little company among the Beltway cognoscenti. 

For example, both inside and outside the Bush administration, American Enterprise Institute scholars played a key role in making the case for war.  As Bob Woodward reported in his 2006 book State of Denial, in late 2001, Paul Wolfowitz approached then-AEI president Chris DeMuth to put together a secret task force of top thinkers to generate “the kinds of ideas and strategy needed to deal with a crisis of the magnitude of 9/11.” They called themselves “Bletchley II,” after the British cryptographers who cracked Axis communication codes during WWII.  

Bletchley II participants included Fareed Zakaria (who should have known better), James Q. Wilson, Reuel Marc Gehrecht, Fouad Ajami, Robert Kaplan, and Bernard Lewis. The team generated “a seven-page, single-spaced document, called ‘Delta of Terrorism.’ ‘Delta’ was used in the sense of the mouth of a river from which everything flowed.” Rumsfeld adviser Steven Herbits summed up the memo’s message: “We’re facing a two-generation war. And start with Iraq.” (Boy, I’d love to see that memo.) 

Over on the center-left, Brookings scholars proved instrumental as well—Kenneth Pollack’s The Threatening Storm: The Case for Invading Iraq played a key role in getting center-left opinion leaders behind the war, convincing, among many others, the New Yorker’s David Remnick that “a return to a hollow pursuit of containment will be the most dangerous option of all.” 

It’s supposed to be conservatives’ job to stand athwart history, yelling “stop!” and liberals’ role to resist the rush to war. For the most part, DC’s think tanks left that job to the libertarians, with predictable results. In 2004, after the die was cast, Cato was the first major DC think tank to offer an extended argument for Exiting Iraq, in Chris Preble’s book of that name.  

I wouldn’t call Cato’s Iraq skeptics “prescient,” nor would I claim that everything we wrote holds up well a decade and a half later; for example, like several of my colleagues, I engaged in a little WMD fearmongering of my own in the early days of the war, warning that “components for a ‘dirty bomb’ may already be in the wrong hands” thanks to the invasion. (Cato’s Alan Reynolds, who decried the WMD “hype,” had the better view). But it would be nice if, when a major daily prints one of those “what to do in Iraq?” symposia, they occasionally think to call somebody, like Ted Carpenter or Chris Preble—who got it right in the first place. 

It would be even better if the GOP’s 2016 contenders weren’t still, 12 years later, so eager to seek foreign policy advice from people who got the Iraq War Question spectacularly wrong.

The Washington Post reports that Scott Walker’s “crash course” in foreign policy is led by tutors like “[Elliot] Abrams, Bush’s deputy national security adviser, and [AEI’s] Marc A. Thiessen, a Post columnist and former Bush speechwriter known for his staunch defense of waterboarding and other interrogation tactics barred by President Obama. Walker selected Thiessen to co-write his 2013 book, Unintimidated, and the two men became confidants during hours of Skype conversations each weekend.” Marco Rubio’s team includes a kettle of Iraq hawks like Abrams, Eric Edelman, and Brookings’ Robert Kagan. There’s no word yet on who’s advising Rick Perry, but last time around he sought out Iraq War architect Doug Feith, now with the Hudson Institute. It was a bit unfair for then-CentCom commander Gen. Tommy Franks to call Feith “the dumbest [expletive deleted] guy on the planet,” given Earth’s seven billion-plus people, but Feith’s hardly the first person you’d want to turn to if you wanted to avoid the costly foreign policy blunders of the past decade. 

For his part, Jeb Bush has sought out a number of key figures “present at the creation” of the Iraq debacle, like Paul Wolfowitz, who, as US forces drove toward Baghdad, in March 2003, promised Congress icing on the cakewalk: “There is a lot of money to pay for this that doesn’t have to be U.S. taxpayer money…. We are talking about a country that can really finance its own reconstruction and relatively soon.”

Given that background, you might suspect that there’s just no accountability for GOP foreign policy advisers; but that isn’t so. The Wall Street Journal recently reported that “Elbridge Colby, a fellow at the Center for a New American Security, was being seriously considered for a job as foreign policy director in Mr. Bush’s expanding organization, [but] according to a person familiar with the campaign’s internal deliberations, Mr. Bush’s political operation raised concerns about Mr. Colby’s published views on Iran. Mr. Colby has prominently advocated against a military strike on Iran and has called for the Republican Party to move closer to its roots of pragmatism and containment.” So he’s out. You can’t expect to retain your political and professional credibility after a screw-up like that.

It’s hard not to feel satisfaction at the indictment of soccer officials for apparently corrupting the globe’s Beautiful Game—soccer in America but football to most of the world. Yet emotional satisfaction is a bad basis for government policy. While the U.S. is not the only nation to assert extraterritorial jurisdiction, it does so more often and more broadly than anyone else.

Moreover, punishing foreigners creates future risks. Someday Americans might get indicted by other nations for “crimes” committed in the U.S.

How did Washington become the world’s policeman and prosecutor in the case of soccer? The sport remains a modest phenomenon in America. Most of the alleged crimes involve foreigners acting overseas.

The impact in the U.S. is less than that on almost every other nation on earth, since virtually everywhere the sport commands greater loyalty from a larger percentage of the population. Nevertheless, some of the criminal acts took place in America and the corruption affected interstate (and foreign) commerce, the boilerplate justification used by Uncle Sam for regulating most everything.

As American power has grown, so has Washington’s willingness to apply its laws to the rest of the world. Washington has routinely abducted foreigners overseas for drug offenses. Perhaps the most extreme example was the 1989 invasion of Panama, after which ousted dictator Manuel Noriega was transported to America and convicted of violating U.S. drug laws.

Even more problematic has been the Justice Department crusade to turn foreign banks into arms of the IRS. The U.S. has gone after Swiss banks with the greatest enthusiasm, paying informants, filing criminal prosecutions, and imposing multi-billion dollar fines for accepting deposits from Americans. Yet citizens of Switzerland and the rest of the world have no moral obligation to help fill Uncle Sam’s coffers to finance more waste and wars.

Congress also passed the Foreign Account Tax Compliance Act (FATCA) requiring all non-American financial institutions to report any accounts held by Americans. As a result, foreign banks face substantial costs in dealing with U.S. citizens, even those fully compliant with American tax laws. Many foreign banks now refuse to serve Americans.

Perhaps the most expansive form of extraterritoriality is sanctions. By one count Washington imposed 61 different economic penalties between 1993 and 1998, Washington’s dictates are amplified not only by the size of the American market, but through Swift, the Brussels-based organization which manages international financial transfers.

Traditionally sanctions applied to companies formed in the U.S. and their branches, and firms located in America. However, through both legislation and regulation Washington has constantly expanded the extraterritorial reach of U.S. penalties.

Over time Washington began targeting U.S. subsidiaries and licensees. Later sanctions also applied to resale of U.S.-origin goods, transactions with foreign firms, and foreign banks financing prohibited transactions. European companies, in particular, have found themselves fined for activities which are legal under national as well as European Union law.

Explained attorneys Ronald Meltzer and David Ross of WilmerHale, “U.S. law has undergone a significant shift: it effectively creates an expanding regime of secondary sanctions that are triggered by transactions that do not require a nexus to the United States.” Sometimes other governments have enacted “blocking” statutes which prohibit their nationals from complying with foreign, i.e., American, restrictions deemed harmful to their national interest.

As I point out on Forbes online: “The moral fervor behind many of Washington’s many fevered crusades often is laudable. But a desire to do good does not warrant America attempting to play dictatress to the world.”

So it is with the U.S. indictments against corrupt soccer officials, and even more so with Washington’s determination to make foreign banks agents of the IRS and foreign individuals and companies tools of U.S. foreign policy. Such overreach inevitably breeds abuse.

It also invites retaliation in the future, when America no longer so dominates the globe. If Americans eventually find themselves in a foreign court for legal conduct in the U.S., they will have today’s lawmakers and officials to thank.

My new piece at Reason begins:

We’ve seen it happen again and again: libertarians are derided over some supposedly crazy or esoteric position, years pass, and eventually others start to see why our position made sense. It’s happened with asset forfeiture, with occupational licensure, with the Drug War, and soon, perhaps, with libertarians’ once-lonely critique of school truancy laws.

In his 1980 book Free To Choose, economist Milton Friedman argued that compulsory school attendance laws do more harm than good, a prescient view considering what’s come since: both Democratic and Republican lawmakers around the country, prodded by the education lobby, have toughened truancy laws with serious civil and even criminal penalties for both students and parents. Now the horror stories pile up: the mom arrested and shackled because her honor-roll son had a few unexcused sick days too many, the teenagers managing chaotic home lives who are threatened with juvenile detention for their pains, the mother who died in jail after being imprisoned for truancy fines. It’s been called carceral liberalism: we’re jailing you, your child, or both, but don’t worry because it’s for your own good. Not getting enough classroom time could really ruin a kid’s life.

My article also mentions that a bill to reform Texas’s super-punitive truancy laws has reached Gov. Greg Abbott’s desk, following the reported success of an experiment in San Antonio and pressure from a Marshall Project report. Finally, truancy-law reform is looking to become an issue across the political spectrum — but libertarians were there first.

Today marks the second anniversary of The Guardian’s first blockbuster story derived from files provided by former NSA contractor Edward Snowden—launching what would become an unprecedented deluge of disclosures about the scope and scale of communications surveillance by American intelligence agencies. So it seems appropriate that this week saw not only the passage of the USA Freedom Act, but also the approval in the House of several privacy-protective appropriations amendments, about which more momentarily.  Snowden himself takes a quick victory lap in a New York Times editorial reflecting on the consequences of his disclosures, (very much in line with his remarks during our interview at the inaugural Cato Surveillance Conference):

Privately, there were moments when I worried that we might have put our privileged lives at risk for nothing — that the public would react with indifference, or practiced cynicism, to the revelations.

Never have I been so grateful to have been so wrong.

Two years on, the difference is profound. In a single month, the N.S.A.’s invasive call-tracking program was declared unlawful by the courts and disowned by Congress. After a White House-appointed oversight board investigation found that this program had not stopped a single terrorist attack, even the president who once defended its propriety and criticized its disclosure has now ordered it terminated.

He’s referring here to last month’s appellate court ruling against the notorious telephone records dragnet, followed this week by passage of the USA Freedom Act.  That law should bar bulk collection not only under §215 of the Patriot Act, the basis of the phone program, but also under §214—the “pen register” provision previously used to vacuum up international Internet metadata—and National Security Letters, which can be issued by senior FBI officials without judicial approval.  Since the latter two authorities are permanent, they would not have been affected by what quite a few lazy reporters described as “the expiration of the Patriot Act,” though in fact only about 2 percent of the law’s provisions were actually due to sunset.  While the law is far from ideal, incidentally, I think it does constitute more robust reform than many libertarians fear, for reasons I lay out in this piece at Motherboard and this blog post at Just Security.  It will, of course, be necessary to vigilantly watch for efforts to water down the law’s protection—something the public is finally at least somewhat empowered to do by a transparency provision requiring significant legal interpretations by the secret Foreign Intelligence Surveillance Court to be published in unclassfied form.

Perhaps as significant as the law’s substantive reforms, however, is its symbolic importance.  Since the terror attacks of 9/11, we have relentlessly racheted up government’s spying powers, assured that only by trading away ever more privacy could we guarantee safety.  Whenever a surveillance authority was due to lapse—as, unfortunately, only a few were designed to—leadership in Congress invariably waited until the eleventh hour to schedule the relevant statutes for consideration, then used the manufactured “emergency” of looming expiration to steamroll over legislators who hoped to seriously debate reforms or added safeguards, or whether the expanded powers were necessary at all.  Senate Majority Leader Mitch McConnell sought to repeat the strategy that had worked so well in the past this time—only to discover that Americans were no longer so easily cowed. 

That was demonstrated again just days after the Freedom Act’s passage, when a series of amendments to an approrpiations bill aimed at limiting government surveillance passed the House by enormous margins.  The first, offered by Rep. Jared Polis, seeks to prohibit the Drug Enforcement Agency from engaging in bulk collection of Americans’ data under its own supoena authorities, following revelations that it had for decades maintained its own more limited phone records dragnet. The second, from Reps. Ted Poe and Zoe Lofgren, bars the FBI or Justice Department from using government funds to seek to insert backdoors into secure online communications systems. The third, offered by Rep. Thomas Massie, seeks to block the National Security Agency from abusing its role as a consultant to a national standards-setting body to dilute rather than strengthen encryption protocols.

These are, to be sure, heartening developments, but plenty of work remains. We still know precious little about the massive surveillance being conducted under the aegis of Executive Order 12333, which governs intelligence gathering that takes place outside the United States, yet sweeps in large amounts of Americans’ data as it travels around the globe.  Nor do the reforms passed this week  touch §702 of the FISA Amendments Act, an authority that blesses the very general warrants abhorred by the framers of our Constitution, enabling large scale collection of Americans’ communications with foreign persons and websites.  That authority is set to expire at the end of 2017, and after a brief pause to toast the small progress made this week, is the next battle to which privacy advocates will be turning their efforts.

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