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Yet another U.S. nation-building venture appears to be on the brink of failure.  Earlier this month, Taliban forces overran much of the northern Afghan city of Kunduz.  Although government troops eventually retook most of the city, they were able to do so only with substantial assistance from the U.S. combat units still in the country. 

General John Campbell, the U.S. commander, then urged President Obama to delay the planned withdrawal of the remaining 9,800 American troops and to keep a permanent garrison that is much larger than the president’s original plan for 1,000 military personnel, mostly operating out of the U.S. embassy in Kabul.   The president has now unwisely complied with that request, deciding to keep at least 5,500 troops past the original 2016 deadline. As I argue in a new article in the National Interest Online, Afghanistan threatens to become an endless nation-building quagmire for Washington.

Senator Rand Paul (R-KY) has asked the question that occurs to many Americans: why are we still in Afghanistan more than 14 years after the initial invasion in response to the Taliban regime’s decision to shelter al Qaeda?  There is almost no al Qaeda presence in that country any longer, and U.S. forces killed Osama Bin Laden more than four years ago.  Yet Washington continues to cite an alleged need to prop-up the Kabul government against the Taliban.  Senator Paul is absolutely correct that it is well past time for anti-Taliban Afghans to step up and defend their own country without relying on the United States.

Unfortunately, what is happening in Afghanistan is typical of the results of U.S. foreign policy initiatives over the past half century.  U.S. administrations seem to have a knack for picking corrupt, unmotivated foreign clients who crumble in the face of determined domestic adversaries.  The Obama administration’s fiasco of trying to train a cadre of “moderate” Syrian rebels to counter both Bashar al-Assad’s regime and ISIS is only the most recent example.  Despite spending more than $400 million, the scheme produced only a handful of trainees—many of whom defected to ISIS or at least turned over many of their weapons to the terrorist group or to al Nusra, the al Qaeda affiliate in Syria. That embarrassing training debacle, now wisely abandoned by the Obama administration, may well set a new record for expensive, ineffectual government boondoggles.

The events in Syria, though, were similar to the earlier fiasco next door in Iraq.  The United States spent a decade training and equipping a new Iraqi army at great expense (more than $25 billion) to American taxpayers. Yet when ISIS launched its offensive last year to capture Mosul and other cities, Iraqi troops seemed intent on setting speed records to flee their positions and let the insurgents take over with barely a struggle.  ISIS captured vast quantities of sophisticated military hardware that Baghdad’s troops abandoned in their haste.

That episode was reminiscent of the pathetic performance of the U.S.-backed ARVN—South Vietnam’s so-called army–in early 1975.  Although the Kennedy, Johnson, and Nixon administrations had waged a bloody war against both South Vietnamese communist insurgents and North Vietnam for more than a decade, which cost over 58,000 American lives, the results were dismal.  President Nixon’s Vietnamization program—training and equipping the ARVN and gradually transferring responsibility for the war effort to the South Vietnamese government–was a total failure.  When North Vietnam launched a major offensive in early 1975, the collapse of the ARVN was shockingly rapid and complete.  Indeed, it occurred so fast that the U.S. embassy in Saigon was barely able to evacuate its diplomatic personnel before North Vietnamese troops captured the city.

These and other incidents confirm that U.S. leaders habitually choose foreign clients that are utterly inept.  They are characterized by thin domestic support, poor organization, and terrible morale.  Their domestic adversaries always seem to be better organized, more competent, and far more dedicated.  Given the extent of the failures in so many different arenas, Washington should realize that lavishing funds on preferred clients cannot make them credible political and military players in their countries.  And continuing to backstop such inept clients with U.S. troops merely wastes American lives.  Unfortunately, it appears that we are on the verge of being taught that lesson yet again—this time in Afghanistan.

The Republican congressional leadership has failed to articulate strong themes to counter the big-government policies of President Obama and the Democrats. People don’t know what the Republican Party stands for, partly because they rarely, if ever, see leaders such as John Boehner and Mitch McConnell on television presenting a coherent vision or a specific program of cuts.

Republicans have particularly dropped the ball on federalism, or the devolving of power back to the states and the people. Reviving federalism was a central theme of the Reagan administration, and it was also a focus of Republican reform efforts in the 1990s.

So I was pleased to see Ohio governor and presidential candidate John Kasich focus on federalism in his new fiscal reform plan. In the Washington Post today, he said:

Let’s start with infrastructure. The interstate system is long finished, and states already oversee their own highway design and construction. Americans don’t need a costly federal highway bureaucracy. I will return the federal gas taxes to the states, leaving only a sliver with the federal government for truly national needs. Then, I will downsize the Transportation Department and reassign it a smaller role, supporting states with research and safety standards. Federal spending would go down, resources available for highways and transit could go up, and states could work faster.

The Education Department will receive a similar approach. Washington isn’t America’s principal or its teacher. Education is a local issue, and decisions should be made by parents, our communities and our local educators. We need high standards, but they are not Washington’s business. I will bundle the department’s funds and send them back to the states with fewer strings attached. The department will be a research center and a local school booster, not a micromanager.

I’d go further than Kasich on many of his proposals, but the important thing is that he is articulating a clear approach to spending reform and reduction. But contrast, House Republicans just introduced a 543-page transportation bill that would increase federal highway and transit spending. The House GOP probably imagines they are being conservative because their spending on transportation would grow more slowly than Senate GOP spending. But the proper amount of federal spending on transit, for example, is not $9.6 billion or $10.6 billion, but zero.

Reviving federalism is a powerful idea for policy reform because it cuts across a vast swath of activities in just about every federal department. And it is a winning theme with the general public, as Emily Ekins and I discuss in this article.

Republican leaders ought to follow Kasich’s lead and explore federalism reforms. If they want to bone up on the advantages of decentralization, they can start with this essay at Downsizing Government. I’d also highly recommend A Less Perfect Union by Adam Freedman for an overview of the history, economics, and constitutional aspects of federal-state relations.

For the second year in a row, the Department of Health and Human Services (HHS) estimates that enrollment in the health insurance exchanges will come in far below earlier projections from the Congressional Budget Office (CBO).

According to the research brief released yesterday, HHS estimates that effectuated enrollment, or enrolled and paying premiums, will be in the range of 9.4 to 11.4 million at the end of 2016. In a conference call with reporters HHS Secretary Burwell said she believes “10 million is a strong and realistic goal… our target assumes something that is probably pretty challenging, which is that more than one out of every four of the eligible uninsured will select plans.” Effectuated enrollment of 10 million for 2016 would be an increase of only 900,000 over the department’s estimate for this year. The department now projects exchange enrollment to stagnate in the same year CBO estimated that average effectuated enrollment would almost double to 21 million. Part of this is due to a slower than expected shift from employer-sponsored insurance, but also due to difficulties in reaching some segments of the uninsured population.

People in the individual market could find themselves between a rock and a hard place next year. Uninsured people not covered by one of the exemptions from the individual mandate are forced to pay a penalty, and it is scheduled to increase significantly next year.

While people will face stiffer penalties for failing to buy health insurance, significant premium increases in many states mean they will likely end up paying a lot even if they do comply with the mandate. Some people may be able to minimize their increase by shopping around, but one report estimates a national weighted average premium increase around 13 percent, with some states like Minnesota seeing increases higher than 41 percent.

Stagnant enrollment could have adverse effects for premium increases and subsidy expenditures in the future. Around 87 percent of exchange enrollees receive subsidies, so far the exchanges have mostly succeeded in enrolling people who do not bear the financial burden of that enrollment because the government is subsidizing them. A recent study by Avalere found that the exchanges have had trouble attracting higher income enrollees: only 20 percent of the eligible people between 200 and 250 percent of the federal poverty level enrolled compared to 76 percent for those between 100 and 150 percent. 

Other studies have found that the earliest exchange enrollees “were older and used more medication than older enrollees.” Younger, healthier workers could be deterred from enrolling in the future, which could skew the risk pools and lead to higher premiums.

It would be surprising to see these minimal enrollment gains and only a quarter of the remaining uninsured enrolling in the exchange if the ACA was the unambiguous victory its supporters claim, but there are substantial, structural problems with the law. These flaws are part of the reason the ACA was unpopular when it was passed and remains unpopular today. One recent average of polls showed 48.4 percent of people opposed the law compared to 40.2 percent supporting it.

Exchange enrollment will be relatively flat going into next year, at the same time people will be hit by higher penalties or premiums. These factors, along with the persistent unpopularity of the law, reveal that there is still an opportunity for an alternative to the ACA, one with less emphasis on government intervention and more room for free markets.

Swedish economist Fredrik Erixon, an authority on international trade policy, who heads up the Brussels-based think tank known as ECIPE (the European Centre for International Political Economy), was a big contributor to the discussions held this week in conjunction with Cato’s TTIP conference.  Among many other trade topics, Fredrik has written extensively on TTIP, the WTO, and how the former may impact the latter.

In his conference essay, Erixon agrees with alarmed, “pure” multilateralists that the TTIP will supplant the WTO as “the organising entity of future trade policy,” but explains why that is not necessarily a bad thing.  While he dismisses fears that the United States and European Union may be turning toward an arrangement that excludes the rest of the world, and explains how they will “leverage TTIP for global trade liberalisation,”  Fredrik does worry that TTIP – if it “succeeds” in the area of regulatory harmonization – will result in the export of failed regulatory policies to the rest of the world.

His concluding remarks on that topic: 

Currently, the differences between EU and U.S. regulations and regulatory approaches are far too wide for the TTIP to be a realistic candidate for setting the global rules in this area. But TTIP will likely push trade agreements further in the direction of prescriptive regulatory conditionality, making it harder for trade agreements in the future to advance global commercial freedom through deregulation and simple, transparent rules.

Read Erixon’s essay here; see him discuss the issues during this conference session; see all the conference essays here.

Today, the ACLU’s Border Litigation Project released a damning report on the Department of Homeland Security’s Customs and Border Protection “interior operations” that should serve as a wake up call for Washington policy makers.

Titled “Record of Abuse: Lawlessness and Impunity in Border Patrol’s Interior Enforcement Operations”, the 31 page report is supplemented by hundreds of pages of documents obtained through an ongoing Freedom of Information Act lawsuit. The ACLU Arizona chapter’s summary of the report noted the following: 

Border Patrol’s records contain recurring examples of agents terrorizing motorists far into the interior of the country; detaining and searching innocent travelers after false alerts by service canines; threatening motorists with assault rifles and other weapons; destroying personal property; and interfering with attempts to video record agents. These abuse records substantially outnumber the annual complaint totals DHS oversight agencies disclosed to Congress.

Border Patrol does not record stops of motorists that do not result in arrest, or false canine alerts that lead to searches of innocent suspects.  Substantive investigations into civil rights violations are rare and almost never result in disciplinary consequences. Despite numerous reports of abuse and corruption, the records contain only one example of disciplinary action of any kind.

Border Patrol’s own data undermines the agency’s public claims that checkpoints are efficient and effective: in 2013, Tucson Sector checkpoint apprehensions accounted for only 0.67 percent of the sector’s total apprehensions. The same year, Yuma Sector checkpoint arrests of U.S. citizens exceeded those of non-citizens by a factor of nearly eight (and in 2011, by a factor of eleven).

The discrepency between the complaint totals found in this report and those actually reported to Congressional oversight committees raise fundamental questions about the integrity of the DHS oversight and compliance process, both inside DHS and on Capitol Hill.

Details on several incidents contained in the press release accompanying the report are chilling: 

A Border Patrol agent in Green Valley, Ariz., followed a store employee into a parking lot, approached the individual with a service revolver drawn, ordered him to his knees, and handcuffed him. When other employees approached, the agent yelled, “Stay away or I’ll shoot you.” After ten minutes, the agent removed the handcuffs, released the employee, and drove away.

One complaint described multiple stops of the Tohono O’odham Community College school bus at the Highway 86 checkpoint, including one in which passengers were forced to disembark and submit to interrogation and searches of their personal effects before being released. Other records show Border Patrol monitoring Tohono O’odham community meetings and Know Your Rights events.

A Border Patrol agent reported a supervisor at Border Patrol’s Naco Station instructed agents to “stop any vehicle on the US/Mexican border road that is open to the public.” The supervisor allegedly “didn’t care if it was the Chief of the Border Patrol and the agent conducted a high risk traffic stop … at gun point” because he “would then know they were doing their job.”

The Nogales City Attorney’s Office reported racial profiling and abuse of authority after agents at the I-19 interior checkpoint relied on a claimed canine alert to detain and search the attorney. The complaint references a Deputy City Attorney detained and searched on other occasions on the basis of claimed or false canine alerts.

Tensions between residents of Arivaca, Arizona and CBP personnel manning the area checkpoint have resulted in civil disobedience protests and calls for the checkpoint to be shut down. As I reported earlier this year, the checkpoints are just one of the forms of surveillance and harrassment currently employed by CBP against motorists. Whether the publication of this latest ACLU report will result in meaningful Congressional oversight action remains to be seen.

Cato has released a brief study on the earned income tax credit (EITC). The EITC is a huge program. In 2015 it will provide an estimated $69 billion in benefits to 28 million recipients.

The EITC is administered through the tax code, but it is mainly a spending program. The EITC is “refundable,” meaning that individuals who pay no income taxes are nonetheless eligible to receive a payment from the U.S. Treasury. Of the $69 billion in benefits this year, about 88 percent, or $60 billion, is spending.

Articles by liberal and conservative pundits regarding the EITC often make it seem as if there are few downsides to the program. But there is no free lunch with subsidies. The EITC has major costs and shortcomings.

The program has a high error and fraud rate, and for most recipients it creates a disincentive to increase earnings. Also, because the refundable part of the EITC imposes a $60 billion cost on other taxpayers, it reduces their incentives to work, invest, and pursue other productive activities.

The study concludes that the costs of the EITC are likely higher than the benefits. As such, the program should be cut, not expanded.

EITC: Small Benefits, Large Costs

In a pitch clearly aimed at Republicans, the Obama Administration has begun advertising that the Trans-Pacific Partnership includes 18,000 tax cuts.  This is welcome rhetoric—tariffs are taxes and taxes are bad.  Lowering tariffs is the core function of trade agreements, and the positive impact of the TPP will depend in large measure on how deeply and quickly it eliminates these artificial barriers to trade.  

But they’re actually praising the wrong tax cuts. 

The administration’s new “guide” to the TPP notes that the agreement “will cut over 18,000 taxes that other countries impose on American exports,” and claims this is good because it’s “18,000 ways TPP helps American workers, farmers, and businesses win.” 

There’s nothing wrong with touting the elimination of 18,000 foreign tariffs.  It will help U.S. exporters who want to sell more cherries in Vietnam, and it will help foreign consumers, who will benefit from lower prices and greater variety. 

By limiting the number to 18,000 however, the president gave up a genuine opportunity to advocate free trade, choosing instead to rely on mercantilist rhetoric about level playing fields and winning.   

In addition to cutting 18,000 foreign tariffs, the TPP will also eliminate thousands of U.S. tariffs on goods from TPP countries.  Those tariffs are taxes that the U.S. government imposes directly on American consumers and businesses who buy imported products.  The losers from American protectionism are a much larger group than the winners from increased access to foreign markets.

It’s a shame, but not surprising, that the President didn’t include U.S. tariffs in his list of TPP tax cuts.  Lauding the elimination of thousands of U.S. tariffs would require the administration to admit that American protectionism exists and that it harms the U.S. economy.  Unwilling to recognize the true benefits of free trade, the President is forced to sell the TPP to the American public by talking about how good it is for business.

Polychaetes are a class of segmented worms that live under a wide range of oceanic conditions. Often, they are the dominant organisms found living in the sea floor, but they also thrive in the open ocean. According to Ricevuto et al. (2015), although knowledge of the potential response of these organisms to ocean acidification is growing, much remains to be learned, including “how their trophic behavior might change in response to low [less basic, or more acidic] pH.” In an effort to fill this informational void, Ricevuto et al. thus set out to examine food-chain interactions of three polychaete species (Platynereis dumerilii, Polyophthalmus pictus and Syllis prolifera) and their organic matter (food) sources (macroalgae, seagrass and epiphytes) in a naturally acidified region of the Mediterranean Sea.

The location for their study was a shallow water reef area on the north-eastern coast of Ischia, an island off the coast of Italy known for volcanic features, including underwater vents that release copious quantities of CO2. The vents produce a pH gradient in the area that provides “a natural laboratory for ocean acidification studies,” which the researchers further describe as “an ideal model system to conduct experiments investigating the effect of climate changes (particularly ocean acidification) on benthic community composition and structure, as well as on functional aspects, such as tropic interactions,” which was the focus of this study. And what did the study show?

After collecting data and conducting a series of complex analyses, the three Italian researchers report “increased pCO2 did not alter the trophic interactions dramatically,” adding “there seems to be a resilience in the trophic pattern, possibly due to the tolerance of the target species to acidification and potential local acclimatization and/or adaptation (see Calosi et al., 2013).” Such “phenotypic plasticity” (the ability to alter biochemical reactions based on environmental changes such as increasing temperature or acidity) observed in the three polychaete species studied, according to Ricevuto et al., “may allow them to respond well to alterations in the environment and eventually offset near-future ocean acidification scenarios.” Thus, as the researchers ultimately conclude, “for some species, like the ones considered in this study, ocean acidification may not represent a dramatic stress.” And that’s good news worth reporting.



Calosi, P., Rastrick, S.P.S., Lombardi, C., de Guzman, H.J., Davidson, L., Jahnke, M., Giangrande, A., Hardege, J.D., Schulze, A., Spicer, J.I. and Gambi, M.C.  2013.  Adaptation and acclimatization to ocean acidification in marine ectotherms: an in situ transplant experiment with polychaetes at a shallow CO2 vent system. Philosophical Transactions of the Royal Society of London B Biological Sciences 368: 20120444.

Ricevuto, E., Vizzini, S. and Gambi, M.C. 2015. Ocean acidification effects on stable isotope signatures and trophic interactions of polychaete consumers and organic matter sources at a CO2 shallow vent system. Journal of Experimental Marine Biology and Ecology 468: 105-117.

One of the best presentations at the Cato TTIP conference on Monday was given by Michelle Egan, a professor at the American University’s School of International Service. Professor Egan managed to explain (in about 15 minutes) one of the most complex and possibly intractable subjects under negotiation in the Transatlantic trade talks: Standards-related trade barriers.

A major objective of the TTIP (as well as the TPP and other modern trade agreements) is to reduce “non-tariff barriers” (NTBs) of which so-called “technical barriers to trade” (TBTs) are an important subset. It turns out that differing product standards, which can act as TBTs, are more common than any other kind of NTB. According to Egan, “Governments, on average, impose TBTs on 30 percent of products. For firms active in international markets, different national requirements from conformity assessment measures can impede access to foreign markets.”

In her essay, Professor Egan describes the problem and offers some sensible ideas for moving forward.  She concludes:

The United States and European Union have an opportunity to improve the TBT regime through TTIP. In conjunction with trade association, government regulators, and international standards forums, negotiators should focus on how to achieve equivalency. TTIP affords the United States and Europe the opportunity to assert global leadership in setting rules for market access. This can happen only if both sides stop arguing over whose regime is better. 

If the TTIP negotiators fail, other trade and regulatory architecture, authored and agreed in other parts of the world, could emerge to fill the void, putting U.S. and EU producers on the outside looking in.

Other essays related to the conference can be found here.

Cynics, and sometimes realists too, dismiss the power of ideas. Tyrants don’t. The latest evidence comes from today’s New York Times, where we learn that a planned public display of Magna Carta at a museum at Beijing’s Renmin University has Chinese officials “running scared.” Accordingly, “the exhibit was abruptly moved to the British ambassador’s residence, with few tickets available to the public and no explanation given.”

While much of the world is celebrating the 800th anniversary of this muniment of English and American liberties—a cornerstone for constitutional government—“such a system is inimical to China’s leaders, who view ‘constitutionalism’ as a threat to Communist Party rule,” the Times reports. And that it is, as I detailed some time ago in a chapter contrasting the Chinese and American constitutions. Indeed, the very name “Magna Carta” is forbidden in China, the Times notes:

In 2013, the party issued its “seven unmentionables” — taboo topics for its members. The first unmentionable is promoting Western-style constitutional democracy. The Chinese characters for “Magna Carta” are censored in web searches on Sina Weibo, the country’s Twitter-like social media site.

A representative of the British Foreign Office said the decision to display Magna Carta at the residence was “based purely on administrative and logistical practicalities.” As we say on this side of the pond, “Yeah right.” Doubtless, that response too would get you in trouble in today’s China.

“The rich are getting richer and the poor are getting poorer.” Senator Bernie Sanders first said those words in 1974 and has been repeating them ever since. Senator Sanders is not alone in his belief. Three out of four Americans agree with the statement, “Today it’s really true that the rich just get richer while the poor get poorer.”

Senator Sanders is half right: the rich are getting richer. However, his assertion that the poor are becoming poorer is incorrect. The poor are becoming richer as well.

Economist Gary Burtless of the Brookings Institute showed that between 1979 and 2010, the real (inflation-adjusted) after-tax income of the top 1% of U.S. income-earners grew by an impressive 202%. He also showed that the real after-tax income of the bottom fifth of income-earners grew by 49%. All groups made real income gains. While the rich are making gains at a faster pace, both the rich and the poor are in fact becoming richer.

In addition to these measurable real income gains, decreases in prices have given the poor increased purchasing power, helping to raise living standards for the worst off in society. As a result of falling prices such as for groceries and material goods, along with gains in real income, Americans have more income left after basic expenses.

Technology has also become cheaper, improving our lives in unexpected ways. For example, consider the spread of cell phones. There was a time when only the wealthiest Americans could afford one. Today, over 98% of Americans have a cellular subscription, and the rise of smart phones has made these devices more useful than ever.

Unfortunately, progress has been uneven. In those areas of the economy where competition is hobbled, such as education, housing, and healthcare, prices continue to increase.

Still, the percentage of the population classified as living in relative poverty has decreased over time. Why then do three quarters of Americans, including Senator Sanders, believe that the poor are “getting poorer?”

A simple logical error underlies Sanders’ belief. If we assume that wealth is a fixed pie, then the more slices the rich get, the fewer are left over for the poor. In other words, people can only better themselves at the expense of others. In the world of the fixed pie, if we observe the rich becoming richer, then it must be because other people are becoming poorer. Fortunately, in the real world, the pie is not fixed. U.S. GDP is growing, and it’s growing faster than the population.

Poverty remains a pressing issue, but Senator Sanders is incorrect when he says that the poor are becoming poorer. In the words of advisory board member Professor Deirdre McCloskey,

The rich got richer, true. But millions more have gas heating, cars, smallpox vaccinations, indoor plumbing, cheap travel, rights for women, lower child mortality, adequate nutrition, taller bodies, doubled life expectancy, schooling for their kids, newspapers, a vote, a shot at university, and respect.

Back in August I wrote here about the Federal Reserve Bank of Kansas City’s refusal to grant a master account, and to thereby allow access to the Fed’s payment facilities, to The Fourth Corner Credit Union (TFCCU), a Colorado-based credit union intended to serve as a banker to that state’s marijuana-related businesses. In response TFCCU sued the Kansas City Fed, primarily on the grounds that its refusal was contrary to the 1980 Depository Institutions Deregulation and Monetary Control Act (DIDMCA) requirement that “All Federal Reserve bank services…shall be available to nonmember depository institutions and such services shall be priced at the same schedule applicable to member banks.”

A month ago, on September 10, 2015, the Kansas City Fed filed a motion to dismiss, offering, among other grounds, the claim that the above-mentioned DIDMCA statute “pertain’s only to the ‘principles’ for setting a ‘schedule of fees’,” and that it therefore “does not mandate that FRB-KC grant any entity — let alone TFCCU — a master account.” In other words, according to the Fed’s lawyers, it is illegal for the Kansas City Fed to charge TFCCU more for its services than it charges to other applicants so long as the charge in question is finite, but it is legal for them to refuse the service altogether, that is, to make the charge for it infinite!

According to TFCCU’s own, less twisted reading of the law, as expressed in its counter motion, Congress never intended to delegate to either the Kansas City Fed or to any other Federal Reserve Bank “unbridled discretion to act as gatekeeper of the nation’s central bank,” and the Kansas City Fed is therefore duty-bound to “respect state sovereignty under the Tenth Amendment by not acting to nullify state charters.”

In drawing my attention to the FRB-KC’s motion to dismiss, Mark Mason, TFCCU’s counsel, points out that, when that motion doesn’t rest upon a contorted interpretation of Federal law, it is “hypocritical and illogical”:

It is hypocritical and illogical that FRB-KC would argue in its motion to dismiss that “other financial institutions [are] providing banking services to marijuana-related entities” using Reserve Bank master accounts, but that TFCCU cannot do so on the same terms because TFCCU proposes to do so expressly. …

FRB-KC’s argument is illogical because the only way a financial institution can legally serve an MRB [Marijuana-Related Business] is expressly, as [according to FinCEN guidelines] it has to file Marijuana Limited SARs [Suspicious Activities Reports] for every MRB account. It appears FRB-KC wants to punish TFCCU for being open and transparent about an aspect of its business plan, while at the same time allowing Reserve Bank services to be used to serve MRB’s–so long as the use is covert, not express.

Last week, TFCCU followed-up on its counter-motion by moving for a summary judgment on the claims made in its original complaint. According to that motion’s “Statement of Undisputed Facts,”

Colorado is a sovereign state. Colorado issued a credit union charter to TFCCU. TFCCU, by virtue of its charter, is a depository institution. TFCCU requested that FRB-KC issue a master account to TFCCU so it could thereby access essential Federal Reserve Bank (“FRB”) payments services. FRB payments services give a depository institution the ability to effectuate the electronic transfer of funds. FRB-KC refused to provide payments services to TFCCU. TFCCU asserts FRB-KC is mandated by a clear statutory command to provide all depository institutions with access to FRB payment services pursuant to the MCA, 12 U.S.C. §248a. This is a case of statutory construction.

In further correspondence Mason adds:

It is an important point that Fourth Corner represents a social movement grounded in state’s rights, liberty and wellness. It’s potential membership extends to supporters of the movement and to the licensed marijuana industry as federal law evolves in that aspect. In the case against FRB-KC the issue is equal access.

The main entrance to the Kansas City Fed’s recently-built Memorial Drive headquarters is flanked by twelve-foot high bronze statues representing the Spirits of Industry and Commerce. Alas, in view of what the Kansas City Fed has been up to, one can only wonder whether those great goddesses are standing out there because it has refused to let them in.

[Cross-posted from]

By all accounts (well, at least those conveyed to me), this week’s TTIP conference at the Cato Institute was a resounding success. It featured a diversity of excellent speakers from across the political, ideological, geographic, and professional spectra, and it covered a broad swath of economic, political, geopolitical, and technical issues. Though opinions varied over the numerous substantive issues discussed by the conferees, there was fairly strong agreement that TTIP (at least the TTIP envisioned at the outset of the negotiations) will require an enormous amount of effort, political will, and flexibility to deviate from script to have any chance of coming to fruition.

As if the road to success weren’t daunting enough, many observers worry that success, if not too elusive, might be too costly.  That is, as a large exclusive club, TTIP would hasten the demise of the World Trade Organization and the multilateral trading rules under its auspices, and that it would put third countries–especially developing ones–at disadvantages that reduce their economic prospects.

One of the panel discussions was devoted to consideration of the impact of TTIP on the multilateral trading system, including the impact on developing countries. Two of the speakers in that session were former WTO heavyweights: Joakim Reiter (former Swedish Ambassador to the WTO) and Harsha Singh (former Deputy Director General of the WTO), who are now, respectively, Deputy Secretary-General of the United Nations Conference on Trade and Development and Senior Associate at the International Centre for Trade and Sustainable Development. In their conference essays, each explains how a successful TTIP can be formulated to ensure that it doesn’t subvert the WTO or hurt developing countries.  

Harsha’s essay is TTIP: A Bridge or Gulf for Multilateralizing Plurilaterals.

Joakim’s essay is The Effects of TTIP on Developing Countries.

All of the essays published in conjunction with the conference can be found here.

Aside from repeated promises about “free” college education that are prohibitively expensive and would create perverse incentives, last night’s Democratic presidential debate contained very little talk of education, particularly K-12 education. That’s much to the chagrin of most education policy wonks, but it’s for the best. Constitutionally, the federal government has little to no role in K-12 education nationwide outside of civil rights. Moreover, there’s little evidence that federal involvement in the classroom has improved education. 

One area the feds do have a role in K-12 education is in Washington, D.C., where Congress recently voted to reauthorize the D.C. Opportunity Scholarship Program (OSP), which has significantly higher graduation rates and costs much less per pupil than the district schools. Sadly, though the primary beneficiaries of the school voucher program are members of the Democrats’ base, elected Democrats mostly want to do away with it. President Clinton vetoed the OSP when it was first proposed and President Obama has repeatedly left it out of his proposed budget. The Democratic presidential frontrunner, Hillary Clinton, is not likely to be any more supportive than her predecessors–there is a reason, after all, that she scooped up early endorsements from the nation’s two largest teachers unions, which vociferously oppose educational choice. Indeed, none of the Democratic candidates even want to talk about the role of choice in education, as evidenced by their unanimous refusal to participate in the Seventy Four’s education forum with Campbell Brown.

Educational choice has few champions on the left today, but it was not always so. Ron Matus of redefinED Online has been chronicling the history and status of “the Voucher Left” recently. Civil rights leaders and Berkeley college professor professors, liberal lions like Daniel Patrick Moynihan and leftist radicals like Ivan Illich alike once proudly supported choice policies they believed would empower the powerless, expand access to opportunity, and foster diversity. The 1968 “Proposal for a Poor Children’s Bill of Rights,” coauthored by Harvard Graduate School of Education dean Ted Sizer, was a left-wing, school-choice manifesto. It opened by “condemning America for failing to provide equal opportunity in education” and “ends with a knock on the war in Vietnam”:

Ours is a simple proposal: to use education – vastly improved and powerful education – as the principal vehicle for upward mobility. While a complex of strategies must be designed to accomplish this, we wish here to stress one: a program to give money directly to poor children (through their parents) to assist in paying for their education. By doing so we might both create significant competition among schools serving the poor (and thus improve the schools) and meet in an equitable way the extra costs of teaching the children of the poor.

I have qualms with some of their proposals. Sizer’s proposal called for a federal voucher program but school choice is best left to the states. The proto-education savings accounts that Jack Coons and Stephen Sugarman proposed would have forced participating private schools to “to take all students who applied, unless excess demand required a lottery,” eliminating their freedom to choose their own admissions criteria. Democrats for Education Reform (DFER) support school choice, but they also push for mandatory testing and other regulations that would restrict or even undermine choice. That said, while important, these are merely disagreements over the details. These liberals and leftists agreed with Milton Friedman’s key insights that choice and competition would benefit the poor the most and foster diversity and pluralism

One longs for the day when coalitional politics no longer prevent elected Democrats from embracing greater choice in education.

The first debate among Democratic presidential contenders was more than half over before moderator Anderson Cooper of CNN got around to asking a question about the biggest intelligence scandal in more than 40 years. You can read the full transcript here but the exchanges between Cooper and the candidates on Edward Snowden (via Ars Technica) is what’s worth the read:

COOPER: Governor Chafee, Edward Snowden, is he a traitor or a hero?

CHAFEE: No, I would bring him home. The courts have ruled that what he did—what he did was say the American…


COOPER: Bring him home, no jail time?

CHAFEE: … the American government was acting illegally. That’s what the federal courts have said; what Snowden did showed that the American government was acting illegally for the Fourth Amendment. So I would bring him home.

COOPER: Secretary Clinton, hero or traitor?

CLINTON: He broke the laws of the United States. He could have been a whistleblower. He could have gotten all of the protections of being a whistleblower. He could have raised all the issues that he has raised. And I think there would have been a positive response to that.

COOPER: Should he do jail time?

ClINTON: In addition—in addition, he stole very important information that has unfortunately fallen into a lot of the wrong hands. So I don’t think he should be brought home without facing the music.

COOPER: Governor [Martin] O’Malley, Snowden?


O’MALLEY: Anderson, Snowden put a lot of Americans’ lives at risk. Snowden broke the law. Whistleblowers do not run to Russia and try to get protection from Putin. If he really believes that, he should be back here.

COOPER: Senator Sanders, Edward Snowden?

SANDERS: I think Snowden played a very important role in educating the American people to the degree in which our civil liberties and our constitutional rights are being undermined.

COOPER: Is he a hero?

SANDERS: He did—he did break the law, and I think there should be a penalty to that. But I think what he did in educating us should be taken into consideration before he is (inaudible).

COOPER: Senator [Jim] Webb, Edward Snowden?

WEBB: I—well, I—I would leave his ultimate judgment to the legal system. Here’s what I do believe. We have a serious problem in terms of the collection of personal information in this country. And one of the things that I did during the FISA bill in 2007, the Foreign Intelligence Surveillance Act, was introduce with Russ Feingold two amendments basically saying, “We understand the realities of how you have to collect this broad information in the Internet age, but after a certain period of time, you need to destroy the personal information that you have if people have not been brought—if criminal justice proceedings have not been brought against them.”

We’ve got a vast data bank of information that is ripe for people with bad intentions to be able to use. And they need to be destroyed.

Clinton and O’Malley were wrong that Snowden could have safely reported his concerns. As the Government Accountability Project noted last year:

Moreover, at the behest of the House Intelligence Committee, strengthened whistleblower protections for national security workers were stripped from major pieces of legislation such as the Whistleblower Protection Enhancement Act (for federal employees) and the National Defense Authorization Act of 2013 (for federal contractors). If those protections existed today, Snowden’s disclosures would have stood a greater chance of being addressed effectively from within the organization. 

So in reality, then-House Intelligence Committee Chairman Mike Rogers (R-MI), by opposing whistleblower protections for intelligence community contractors, actually shut down a channel for receiving classified whistleblower complaints from Snowden and those like him.

Lincoln Chafee of Rhode Island showed political courage not simply in defending Snowden, but in pointing out that Snowden exposed mass surveillance that several non-FISA court judges believe violated the Constitution. Chafee could also have pointed out that none of those officials–including former President George W. Bush, his Attorney General, and his NSA director–have been investigated by either an independent counsel or even the Congressional committees of jurisdiction for their actions. The tutorial on recent surveillance scandal history would have been  even more powerful if Chafee or another candidate had noted that the federal government wants to charge Snowden under the Espionage Act (normally used to prosecute actual spies who pass classified information to foreign governments) even though it gave former CIA Director David Petraeus an incredibly lenient plea deal after Petraeus passed documents containing Top Secret/Sensitive Compartmented Information (TS/SCI) to his then-mistress, Paula Broadwell. The contrast in treatment between the two is telling.

Another important exchange between Cooper and Clinton involved her vote on the 2001 PATRIOT Act:

COOPER: Secretary Clinton, do you regret your vote on the Patriot Act?

CLINTON: No, I don’t. I think that it was necessary to make sure that we were able after 9/11 to put in place the security that we needed. And it is true that it did require that there be a process. What happened, however, is that the Bush administration began to chip away at that process. And I began to speak out about their use of warrantless surveillance and the other behavior that they engaged in.

We always have to keep the balance of civil liberties, privacy and security. It’s not easy in a democracy, but we have to keep it in mind.

In fact, by the time the PATRIOT Act was up for renewal in 2006, two national investigations–one by the Congressional Joint Inquiry, the other by the 9/11 Commission–found that it was not a lack of intelligence collection that led to the success of the 9/11 attacks, but a failure of the FBI, NSA, and CIA to share among each other the information they had on the terrorists. And as the New York Times’ Charlie Savage has found in his research, an Intelligence Community Inspector General investigation into the STELLAR WIND warrantless surveillance program initiated after 9/11 found that it prevented no attacks on the United States. The same is true of the PATRIOT Act Sec. 215 telephone metadata program

The only candidate who seemed to have learned the correct lesson from this history was Sanders:

COOPER: … and the reauthorization votes. Let me ask you, if elected, would you shut down the NSA surveillance program?

SANDERS: I’m sorry?

COOPER: Would you shut down the NSA surveillance program?

SANDERS: Absolutely. Of course.

COOPER: You would, point blank.

SANDERS: Well, I would shut down - make - I’d shut down what exists right now is that virtually every telephone call in this country ends up in a file at the NSA. That is unacceptable to me. But it’s not just government surveillance. I think the government is involved in our e-mails; is involved in our websites. Corporate America is doing it as well.

If we are a free country, we have the right to be free. Yes, we have to defend ourselves against terrorism, but there are ways to do that without impinging on our constitutional rights and our privacy rights.


Yesterday, in a case called Hassan v. The City of New York, the Third Circuit Court of Appeals reinstated a lawsuit accusing New York City of violating the 1st and 14th Amendment rights of Muslim-Americans in New Jersey under a sprawling and ineffective NYPD surveillance dragnet.

The ruling overturns a decision by the United States District Court for the District of New Jersey dismissing the suit for lack of standing and for failing to state a claim.

In layman’s terms: the district court, without a trial or the presentation of evidence, ruled that the plaintiffs weren’t harmed unjustifiably, that they hadn’t alleged sufficient wrongdoing by the police, and that they had no right to sue.  The Third Circuit ruling rejects those determinations and the case will now move forward at the district court.

An Associated Press investigation uncovered the NYPD program in 2011 and detailed the immense breadth of the NYPD’s surveillance efforts against the Muslim community in several states.  Police officers and informants infiltrated dozens of mosques. Police installed surveillance cameras so that Muslim-owned businesses, places of worship, and residences in New Jersey could be surveilled remotely. The NYPD even sent undercover officers to infiltrate Muslim student organizations at out-of-state universities such as Yale and the University of Pennsylvania, including one field trip to go whitewater rafting.  Those agents recorded the names of the students, how often they prayed, and what they talked about.  The NYPD is alleged to have “generated reports on every mosque within 100 miles of New York City.”

Despite the cost and the seemingly boundless geographic and jurisdictional scope of the spying program, there is little evidence of success.  In fact, the now-defunct “Demographics Unit,” a central component of the program, generated no convictions or, according to one agent deposition, even any tangible leads in more than a decade of operation.

In reinstating the suit, the court offered some rather stirring commentary on the need to adhere to the Constitution most dearly when it comes to serious issues such as national security, invoking Franklin Roosevelt’s internment of Japanese-Americans and the Supreme Court’s (now widely considered odius) endorsement of it in Korematsu:

No matter how tempting it might be to do otherwise, we must apply the same rigorous standards even where national security is at stake. We have learned from experience that it is often where the asserted interest appears most compelling that we must be most vigilant in protecting constitutional rights. “[H]istory teaches that grave threats to liberty often come in times of urgency, when constitutional rights seem too extravagant to endure.”


Today it is acknowledged, for instance, that the F.D.R. Administration and military authorities infringed the constitutional rights of Japanese-Americans during World War II by placing them under curfew and removing them from their West Coast homes and into internment camps. Yet when these citizens pleaded with the courts to uphold their constitutional rights, we passively accepted the Government’s representations that the use of such classifications was necessary to the national interest. […] In doing so, we failed to recognize that the discriminatory treatment of approximately 120,000 persons of Japanese ancestry was fueled not by military necessity but unfounded fears.

The court also strongly defended the principle that the fundamental unit in our system is the individual, rather than the collective:

We “can apply only law, and must abide by the Constitution, or [we] cease to be civil courts and become instruments of [police] policy.” Korematsu, 323 U.S. at 247 (Jackson, J., dissenting).

 We believe that statement of Justice Jackson to be on the right side of history, and for a majority of us in quiet times it remains so … until the next time there is the fear of a few who cannot be sorted out easily from the many. Even when we narrow the many to a class or group, that narrowing—here to those affiliated with a major worldwide religion—is not near enough under our Constitution. “[T]o infer that examples of individual disloyalty prove group disloyalty and justify discriminatory action against the entire group is to deny that under our system of law individual guilt is the sole basis for deprivation of rights.” Id. at 240 (Murphy, J., dissenting).

Lastly, the court admonished the legal system for often only recognizing government misconduct in retrospect rather than stopping it in action:

What occurs here in one guise is not new. We have been down similar roads before. Jewish-Americans during the Red Scare, African-Americans during the Civil Rights Movement, and Japanese-Americans during World War II are examples that readily spring to mind. We are left to wonder why we cannot see with foresight what we see so clearly with hindsight – that “[l]oyalty is a matter of the heart and mind[,] not race, creed or color.”

It’s important to remember that this ruling only reinstates the lawsuit by finding that the plaintiffs have standing and have stated a cognizable claim.  The case now returns to the district court for a determination of the merits.

Even so, the admonitions from the court toward the NYPD and the court’s overt appeal to regard people as individuals rather than as part of some demonized collective are heartening. The post-9/11 security and police states only rarely suffer courtroom losses regarding even the most expansive aspects of their policies.

The government has a legitimate interest in providing security, but not at the cost of collective punishment or overt discrimination against people based solely on their race or religion. 

This is a case to watch as it moves forward.

In a recent commentary published on the World Post, Niall Ferguson criticizes President Obama for “Playing Patience While Syria Burns.”  In his view, the Obama administration has chosen to kick the can down the road because the president “naturally prefers the path of least resistance.” 

The problem with Ferguson’s argument (and many similar articles) is that it criticizes Obama for dithering over Syria without elaborating a viable alternative policy.  Ferguson quite rightly points out that the choice is not simply between doing nothing and plunging into another Iraq—“there are many degrees of intervention in a war like the one raging in Syria.”  Yet he never explains what type of intervention would actually help resolve the conflict in Syria. He seems to imply that Obama should have armed the Syrian rebels,but he fails to explain how that would end the conflict.  Could the rebels have toppled Assad if they had American arms (and maybe air support like in Libya)?  Is such an approach still viable following Russia’s intervention?  And even if the rebels were to succeed in toppling Assad, then what?  There are more than forty different rebel groups operating in Syria.  Are they all going to cooperate in forming a national unity government?  Or will they simply start carving out their own little fiefdoms, and perhaps begin fighting each other?  These are the types of questions that need to be addressed before the United States intervenes—and they’re surely questions that the Obama administration has been wrestling with. 

Ultimately, Ferguson’s article demonstrates that it’s a lot easier to criticize President Obama for doing too little than to devise a positive strategy that would accomplish much in Syria.  The fact that the situation in Syria is currently so abysmal does not necessarily mean that a more proactive approach would improve the situation.  U.S. intervention could easily make a bad situation worse.  Since the Syrian conflict is such a complex problem, as Ferguson acknowledges, we should remain wary of calls for the United States to do more until the proponents of greater intervention are able to explicate a clear, detailed strategy—a strategy that explains specific actions the United States can implement, and, more importantly, how those actions will actually facilitate a resolution of the conflict.

How Bernie Sanders and Ron Paul are alike:

    1. Both ran for president in their 70s, without any encouragement from pundits, politicians, or political operatives.
    2. Both were far more interested in talking about ideas and policies than in criticizing their opponents. (Though I don’t recall Paul taking valuable debate time to defend his chief opponent on her most vulnerable point. Sanders not only drew applause for saying there was no point in talking about Hillary Clinton’s private email server, he raised more than a million dollars during the debate by sending out an email with video of his grant of absolution.)
    3. Both Ron Paul and Bernie Sanders exploded on the internet during an early debate. Google searches for Ron Paul shot up when he and Rudy Giuliani had a heated confrontation over the causes of the 9/11 attacks in the May 15, 2007, Republican debate. Sanders gained three times as many Twitter followers as Clinton during last night’s debate.
    4. Each was the most noninterventionist and least prohibitionist candidate on their respective stages – though that’s a low bar. Sanders sounded pretty noninterventionist, but then continued: “When our country is threatened, or when our allies are threatened, I believe that we need coalitions to come together to address the major crises of this country. I do not support the United States getting involved in unilateral action.” The United States has alliances across the world, so that’s a fairly open-ended commitment. And imprudent intervention is not made much more prudent by having a coalition.

How Bernie Sanders and Ron Paul are different:

    1. Capitalism vs. socialism.

It came up again at last night’s Democratic debate, so it’s worth repeating: Bernie Sanders and more than 60 other Democrats in Congress were right to support the 2005 Protection of Lawful Commerce in Arms Act (PLCAA), and Hillary Clinton was wrong to oppose it.

Congress had both good practical reason and Constitutional authority to enact PLCAA. Its purpose and effect was to call a halt to the campaign (backed by the administration of Bill Clinton, Hillary’s husband) to launch financially ruinous litigation against firearms makers and dealers – most of them thinly capitalized firms unable to withstand massive legal bills – and apply the resulting leverage to extract promises of gun control without the bother of seeking approval for those measures from a then-skeptical U.S. Congress. It was a campaign rightly decried as undemocratic even by such figures of the Left as former cabinet secretary Robert Reich. It was also a travesty of legal ethics, employing litigation as a pure weapon; thus then-HUD secretary Andrew Cuomo warned gunmakers that unless they cooperated they’d suffer “death by a thousand cuts”, while then-New York Attorney General Eliot Spitzer reportedly warned Glock: “If you do not sign, your bankruptcy lawyers will be knocking at your door.”

It is not the place of the U.S. Congress to rectify every ill of litigation that may arise in state courts, but the Constitution specifically contemplates that federal lawmakers will oversee the doings of state courts when those courts assert power over transactions and residents of other states. Thus Article IV, Section 1 grants Congress the power “by general Laws [to] prescribe the …Effect” of state law in other states. These powers are peculiarly relevant when employed to safeguard a Constitutionally specified right that is (purposely) put in jeopardy by tactical abuse of interstate lawsuits. 

Despite the claims of some opponents, Congress’s formula for resolving litigation amounted in essence to restoring, not overturning, the traditional common-law bounds of gun liability. It left open a few exceptions for instances where liability might have been found with some warrant in the older common law, as when a gun explodes or is knowingly sold to a person intent on harm. Otherwise, it codifies the same common-law rule that Cuomo, Clinton et al were hoping to get the courts to abandon: if an otherwise lawful firearm has performed as it was designed and intended to do, its maker and seller are not liable for its misuse.

I’ve written more about PLCAA and its critics here, here, and here

For those of you who did not watch the Democratic Party presidential debate last night, Senator Bernie Sanders says he wants America to be more like Denmark. In some ways, that is an excellent idea. Denmark, it turns out, has freer trade and better business environment than the United States. Its overall economic freedom is almost identical to that of the United States, as is its well-being index. But, don’t take my word for it. Look at the United Nations and World Bank data brought to you courtesy of 

The one area where the United States might not want to copy Denmark is the size of government, which is a proxy measure of taxation and redistribution. 


1. Free trade

2. Business environment

3. Overall economic freedom

4. Human development index

5. Size of government