Policy Institutes

In Monday’s Financial Times, columnist Gideon Rachman presented a grim outlook for Greece and the European Union. He argues there are no good outcomes. There are three options. First, the EU can make concessions to Greece. Second, the EU can stand firm and allow Greece to leave the Euro. Third, the Greek government can accept the EU’s terms.

The first option represents a near-term victory for the Greek government. It also creates moral hazard within the broader EU. Governments in other countries implementing austerity measures would come under pressure. Populist parties would make further electoral gains across Europe. Consensus rule within the EU would become impossible.

It is feared the second route would put pressure on other countries, e.g., Spain and Italy, viewed as being vulnerable to the economic woes besetting the Greeks. That is an argument for “contagion.”

The third outcome may offer no long-term solution. Even were the Greek government largely to accept what the EU, the ECB and the IMF want to impose on it, that would likely not solve the Greek problem in the long run. Greece’s debt level would still likely be unsustainable. It is not clear that any government can implement the far-reaching economic reforms needed to put the Greek economy on a sustainable growth trajectory.

Richman’s analysis is cogent, if bleak.

The IMF, and its partners in the troika, first proposed its standard nostrum for a highly indebted sovereign: incur more debt. Existing debt may be restructured, and payment terms extended, but always new loans are made. The cure for drinking is more drinking, the cure for over-eating is more food, and the cure for excessive debt is more debt. It all makes sense in the Alice-in-Wonderland world of the IMF.

True, later some debt-relief was offered to Greece when the utter unsustainability of its existing debt could not be overlooked. But the relief was too little, too late. More recently, in a rare moment of humility for the organization, the IMF appears to have accepted that still more debt relief is needed.

Unsustainable debt cannot be repaid.

The unstated reason for policy intransigence in the face of reality is that much of the Greek sovereign debt was owed to important financial institutions, including major banks. Other global banks were also exposed because of interbank lending. The rational thing for individual governments to have done was to bail out their own banks and write down the Greek debt. That was politically unpalatable, however, because it would have involved acknowledging the shaky finances of European banks. Politicians would have had to acknowledge the bad practices of its banks. That would have been messy and unpleasant. Far better to offload the problem on the Greeks.

I will close by offering one possible optimistic scenario. Contrary to received wisdom, Greece may be better off out of the Euro. Left to their own devices, including the need to finance sovereign debt, the Greek people and their political leaders might be forced to make the needed economic reforms and to implement fiscal discipline. The good outcome is not guaranteed, but Grexit from the Euro may be the only feasible way of achieving it.

Alas, it is more likely that the EU and Greek government will muddle through until the next crisis. Perhaps, the next crisis will break out first in another EU country. Take your pick.

[Cross-posted from Alt-M.org]

Bobby Jindal, Governor of Louisiana, will officially announce his run for the White House this afternoon, joining the ever-growing Republican field. Jindal hopes his experience cutting state spending and shrinking the state’s workforce will help propel him to the presidency. However, like the other governors whose records we have highlighted, Jindal’s fiscal record is not without faults.

Jindal took office in January of 2008, and 2015 will be his last year in office. He has scored well on the Cato Fiscal Policy Report Card on America’s Governors earning an “A” in 2010, and a “B” in both 2012 and 2014. All three report cards commend Jindal’s resolve to cut Louisiana state spending.

Since fiscal year 2009, the first full fiscal year of Jindal’s term, state general fund spending has decreased by 7 percent. Per capita state spending has fallen from $2,089 in 2009 to $1,883 in 2015, a decrease of 10 percent. This spending restraint is quite remarkable. For comparison, per capita state spending grew nationally by 8.5 percent during the same time period.

Total state spending, which includes money from the federal government for programs like Medicaid, stayed constant while Jindal was in office. It was $28.9 billion in 2008 compared to $29.1 billion in 2014.   

One way that Jindal reduced spending was cutting the state’s workforce. State government employment has decreased 26 percent since he’s been governor, according to data from the Bureau of Labor Statistics. Additionally, he passed broad pension reforms. All state employees hired after July 2013 receive a cash-balance retirement plan, similar to a 401(k) plan, instead of a traditional defined-benefit pension.

Jindal has also cut state higher education spending. State higher education spending fell from $1.1 billion a year in 2009 to $535 million in 2015. His 2016 budget includes further cuts to the state higher education system, but the cuts were avoided in a last-minute budget deal under a complicated financing structure.

Jindal’s strong fiscal record is partly undercut by Louisiana’s generous economic development programs, i.e., corporate welfare. Jindal helped expand the state’s wasteful film tax credit program. In 2013, the state wasted $250 million on the program, which is one of the largest film giveaways in the nation. The state offsets 30 percent of the cost of film production expenses. An episode of Duck Dynasty, the popular television show, represents $330,000 in tax credits to its production company. His administration also gave $36.5 million to the New Orleans Hornets, the professional basketball franchise, to encourage them to stay in New Orleans through the 2024 season. According to research from the Commonwealth Foundation in Pennsylvania, Louisiana was fourth in state economic development spending from 2007 to 2014.

Louisiana general fund spending has fallen during Bobby Jindal’s tenure as governor. At a time when states were increasing spending, Jindal instituted reforms that cut the state workforce and lowered per capita spending. This feat makes Jindal unique among Republican contenders for the presidency.

 

A ruling for the challengers in King v. Burwell would have benefits that swamp other effects of the ruling, including:

  • More than 67 million Americans would be freed from illegal taxes in the form of ObamaCare’s employer mandate.
  • More than 11 million Americans would be freed from an illegal tax averaging $1,200 (i.e., ObamaCare’s individual mandate).
  • Affected workers could receive a pay raise of around $900 per year.
  • The ruling could create an estimated 237,000 new jobs.
  • It could add an estimated 1.3 million workers added to the labor force.
  • It could result in more hours and higher incomes for 3.3 million part-time workers.

The number of people who could benefit from a ruling for the challengers is, therefore, more than ten times the number who would lose an illegal subsidy. And, as discussed here, the pool of people who need such subsidies may be as small as one-tenth the number receiving them.

Click here for state-by-state data on the number of employers and taxpayers who would benefit from King v. Burwell.

Europe is at risk from Russia, we are told. But no one in Europe seems to care. Even the countries supposedly in Vladimir Putin’s gun sites aren’t much concerned.

Even if Russia threatens the continent, the Europeans don’t plan on defending themselves. Instead, virtually everyone expects America to save them, if necessary. Washington is being played for a sucker as usual.

Defense Secretary Ashton Carter recently announced that the United States. will contribute aircraft, weapons, and personnel to the “Very High Readiness Joint Task Force.” That’s not all. Separately, the Obama administration plans to pre-position tanks and other equipment for a combat brigade in Eastern Europe.

Carter explained that Washington was acting “because the United States is deeply committed to the defense of Europe, as we have for decades.” America is more committed to Europe than are Europeans.

The Europeans scrimp on the military while funding their generous welfare state. They promise Washington whatever it desires—and then go back to doing what they do best, depending on America.

NATO always stood for North America and the Others. During the Cold War, the allied states shamelessly took a very cheap ride on the United States.

The problem has gotten worse in recent years. The United States accounts for three-quarters of NATO outlays even though Europe has a larger GDP than America. Of 28 members, only the United States, Great Britain, and Greece typically broke the officially recommended level of two percent of GDP. Estonia has become a member of that exclusive club. After frenetically demanding that the United States do more, Poland only hit that mark this year. But several members have been cutting outlays.

Of the five largest European defense budgets, only France’s will increase. Those of Canada, Germany, Great Britain, and Italy will continue to decline. None of these countries will hit the recommended two percent of GDP level in 2015. Cooperation is poor even among those most at risk.

Never mind the events of the last year. “It is much more business as usual,” said British defense analyst Ian Kearns. As of 2013, the Europeans devoted just 3.6 percent of their governments’ budgets to the military, compared to a fifth of U.S. government spending. America’s per capita military outlays are five times that of the alliance’s Cold War members and eight times that of those states which joined later.

The issue is more than just money.

“Make no mistake: we will defend our allies,” declared Carter. But will the Europeans defend anyone, even themselves? A new poll suggests not.

The Pew Foundation recently surveyed eight leading NATO countries: If Russia got into a conflict with another member of NATO, should your country use military force in the victim’s defense? A majority of French, Germans, and Italians said no. Only pluralities said yes in Poland, Spain, and the United Kingdom. (Yet Poland is insisting that everyone else defend it!) Only in America, naturally, and Canada did a majority say yes.

Yet why should the Europeans take action as long as they believe they can count on Washington to save them? According to Pew, two-thirds of Europeans were convinced the Americans would come rushing over to do what they would not do for themselves.

It’s time to change that. The Cold War is over. Moscow is an unpleasant actor, not a global threat.

Europe has a much larger GDP and population than Russia and even with its current anemic level of military outlays devotes more to defense. The U.S. government is essentially bankrupt, with far greater unfunded liabilities than the Europeans, despite Greece’s travails.

As I argue in Forbes: “Instead of pouring more resources into NATO, Washington should disengage militarily, turning leadership of the alliance and responsibility for defending the continent over to Europe. Americans shouldn’t protect their rich cousins even if the latter were devoted to protecting each other. That the Europeans expect the U.S. to do their job is yet another reason for Americans to say no more.”

Over the last couple weeks, the Thomas B. Fordham Institute has been holding its second annual Wonk-a-thon. In the wake of Nevada enacting a groundbreaking, nearly universal education savings account (ESA) law, Fordham asked practitioners, scholars, and policy analysts what Nevada must “get right in order to provide positive outcomes for kids and taxpayers.”

Readers can vote for the wonk who offered the wisest analysis here. For a summary of the various recommendations, see here.

ESAs have the potential to radically remake the education landscape. Rather than choose just a single school, parents can use ESA funds for a variety of educational goods and services. Students may spend part of a day in a classroom, part on a computer, and part with personal tutors. Someday, students may even learn in “education malls” where they will choose from among numerous education providers for each subject, each with a different approach or focus. Or perhaps there will be explosive growth in full or partial homeschooling or blended learning. Frankly, we cannot predict with any certainty how education will change over the next few decades in a robust market.

In another sense, though, ESAs aren’t radical at all. They only appear so because the K-12 education system is so radically at odds with the rest of American life—a fact that escapes notice only because we are so accustomed to the status quo. No other good or service in American life is so widely subsidized by the government and assigned to citizens based on the location of their homes. The very presence of publicly subsidized schools crowds out the vast majority of providers who would exist in a market system, leaving only niches like religious schools or schools for the elite. ESAs would merely create space for the market that the government has crowded out.

But what should the government’s role be in that market? As I detail at Jay P. Greene’s blog, the Wonk-a-thon participants differ considerably on this question.

Some (myself included) argue the state government should ensure that the taxpayer money is being spent only for eligible expenses, but should refrain from trying to assess the quality of different education providers. There is a legitimate difference of opinion about what should be taught and how it should be taught, so assessing educational quality should be left to private organizations.

Others have argued the state should take a more active role in assessing and even mandating quality. One wonk went so far as to recommend that the state “set a high bar for the quality of services offered by providers” and “eliminate providers who consistently fail to meet the mark.” Another claimed that “no one but the purest Friedmanites think that the magic hand of the market will automatically lead to better outcomes.” Of course, there’s nothing “magic” about the “invisible hand” of the market – it’s just a metaphor Adam Smith used to describe the process of spontaneous order, by which the voluntary actions of disparate individuals organically form a system that is the result of human action, but not human design.

So how does the market “magically” provide quality? Imagine you’re looking for a new dishwasher. As an average consumer, you know nothing about the mechanics involved in making a dishwasher, so the dishwasher manufacturers and retailers have a great advantage over you. Fortunately for you, without any government mandate, numerous organizations took it upon themselves to help you overcome this information asymmetry and ensure product quality. Some, like Underwriters Laboratories, provide private certification for dishwashers that meet their standards. Others, like Consumer Reports, provide expert reviews of hundreds of dishwashers and rate them on five criteria. And still others, like Amazon, offer a platform for consumers to rate and provide feedback about dishwashers based on their personal experience.

In these ways, the market spontaneously channels expert knowledge and user experience to provide would-be consumers with needed information. It’s a messy process but, as scholars from the Mercatus Center at George Mason University show in a recent paper, it works better than having a Ministry of Dishwasher Quality define what makes a “quality” dishwasher and force all manufacturers into compliance: 

Regulatory measures such as food labels or product safety warnings may seem like fail-safe mechanisms to correct information-based uncertainty. Regulations, however, are not as effective as market solutions, and may harm consumers instead of helping them. Regulators can be influenced by regulated industries, erecting barriers to keep out new competition, stifling innovation, and imposing higher prices and reduced quality on consumers. By making it more difficult to do business, regulations can have the unintended consequence of entrenching already-established businesses while closing the market to entrepreneurs with innovative ideas.

Still, one might object that just because the market can overcome the information asymmetry problem doesn’t mean it will. Why should we have any confidence that these solutions will emerge? In short, as economist Steve Horwitz explains, overcoming the information asymmetry barrier is in the interest of both buyers and sellers:

Consumers want a way of knowing that they are getting products that won’t explode, mechanics who know their stuff, and scuba instructors who won’t get them killed (not to mention gear that won’t leak). Sellers want to be able to signal to potential buyers that their products and services are of high quality. Solving this problem requires an independent intermediary such as these certification organizations, and sellers are glad to pay to acquire the signal of certification. The certifiers are happy to provide it, and most (though not all) are run as private nonprofits to alleviate any concern about conflicts of interest.

What is also important here is that there is genuine competition via freedom of entry into the certification business. Certification organizations cannot afford to make mistakes since there’s nothing preventing either an existing competitor or new entrant from offering a higher quality alternative. Even if there is no actual competitor at any given time, the threat of competition via new entrants, and consumers’ and sellers’ option to “exit” and use that new firm, keep established certifiers on their toes.

Parents want a way of knowing that their children will receive a high-quality education. Likewise, schools and other education providers want to be able to signal to parents that they are offering a high-quality education. What has been missing until now is robust competition because the fully subsidized government schools have crowded out most would-be competitors. Education savings accounts have the potential to rectify that, if bureaucrats stay out of the way.

This cheerfully drawn comic from the Daily Signal does an excellent job highlighting the insanity of civil asset forfeiture.  It begins with a quintessentially American premise: a young person setting out on his own, all wordly possessions in hand, to start a new life as an adult.  Far be it from me to spoil the rest:

 

 

If such stories seem unbelievable (it is a cartoon after all), be sure and check out the recent all-too-real stories of Joseph Rivers and Charles Clarke, for whom this cartoon surely hits too close to home.  Even they are only the tip of the iceberg.

New Mexico has taken the initiative to end this inherently abusive practice once and for all, and there are active reform efforts underway in California, Michigan, Montana, Oklahoma, Maryland, and others. But until every other state and the federal government join in, these incredible tales of legalized theft and policing for profit will continue.

FreedomWorks recently released a handy map accompanying their report on state forfeiture laws. How does your state stack up?  

 

 

The Dodd-Frank Act creates the Financial Stability Oversight Council (FSOC).  One of the primary responsibilities of the FSOC is to designate non-banks as “systemically important” and hence requiring of additional oversight by the Federal Reserve.  Setting aside the Fed’s at best mixed record on prudential regulation, the intention is that additional scrutiny will minimize any adverse impacts on the economy from the failure of a large non-bank.  The requirements and procedures of FSOC have been relatively vague.  We have, however, gained some insight into the process since MetLife has chosen to contest FSOC’s designation of MetLife as systemically important.

One of the benefits of MetLife’s resistance has been to shed additional light on some of the rationales used by FSOC.  While FSOC pretty much throws everything in the kitchen sink at MetLife, one of the more interesting (and bizarre) claims is that MetLife is a risk to financial stability because of the potential behavior of state insurance regulators.  After raising the specter of a run by policy-holders (yes, the old bank-run spin), FSOC then worries that state insurance regulators might actually use their authorities to “impose stays on policyholder withdrawals and surrenders.”  You’d think this would be a good thing, but no FSOC worries that “Surrenders and policy loan rates could increase if MetLife’s policyholders feared that stays were likely to be imposed either by MetLife’s insurance company subsidiaries or by their state insurance regulators.”  So yes, FSOC is serious here.  The ability of state regulators to stop “runs” could be the very cause of those runs, and hence MetLife must be regulated by the Federal Reserve.

Such an argument would be bad enough on its face, but it also ignores that the “orderly liquidation authority” of Dodd-Frank allows the FDIC, when resolving a non-bank, to also impose stays.  The FDIC can also void payments made up to 90 days before the beginning of a receivership.  So under FSOC’s logic, the fact that (federal or state) governments can reduce the confidence of counter-parties in a company is grounds for additional regulation of said company.  This kind of spin basically allows FSOC, and by extension the Fed, to pretty much regulate anyone they want, if the government is the very source of the potential instability. 

Pope Francis’ new encyclical, Laudato Si, advocates a new “ecological spirituality.” Yet this challenging call is diminished by the document’s tendency to devolve into leftish policy positions. The encyclical underestimates the power of market forces to promote environmental ends.

There are serious environmental problems but Laudato Si presumes rather than proves crisis is the norm. Moreover, nothing in Scripture or nature tells us how much to spend to clean up the air.

Drawing environmental lines requires balancing such interests as ecology, liberty, and prosperity. One cannot merely assume that the correct outcome in every case is more of the first.

Indeed, the Pontiff’s own goals conflict. He speaks movingly of the dignity of work and its importance for the poor. But the more expensive and extensive the government controls, the fewer and less remunerative the jobs.

Perhaps most disappointing is how the Pope seemingly views capitalism, and especially property rights, as enemies of a better, cleaner world. Yet most environmental problems reflect the absence of markets and property rights, the “externalities,” in economist-speak, which impact others.

The best solution is to either create or mimic markets and property rights. For instance, public control rarely ends well.

Garrett Hardin famously wrote about the “tragedy of the commons,” in which land open to everyone typically is misused by everyone. Federal range and forest land is badly managed, not because government officials are malign, but because the incentives they face are perverse.

In contrast, a private owner bears both costs and benefits, and suffers when he misuses a resource. The owner may make a mistake, but his power to do harm is sharply limited.

Pollution taxes and tradeable permits attempt to apply market forces to the great common areas, such as air and water. Yet Laudato Si launches a perplexing attack on the use of emission credits to limit pollution. Properly designed they create an incentive for those who can control emissions at the least cost to control them the most.

Although the Pope acknowledges “that honest debate must be encouraged among experts, while respecting divergent views,” Laudato Si ignores the most sophisticated critiques of climate alarmists. For instance, many critics dispute the likelihood of catastrophic change and the best means to deal with the likely impact of any temperature increases.

For years models failed to match climatic behavior. Peer-reviewed research increasingly suggests that warming will be modest. Moreover, any prediction today as to conditions decades in the future is a wild guess.

These argue in favor of addressing specific problems rather than imposing arbitrary, draconian, and costly cuts in energy consumption. Economic analysis confirms that adaptation can achieve similar environmental ends at less expense.

Laudato Si criticizes wasteful, unnecessary consumption and worries about “the depletion of natural resources.” The Pope rightly asks, how should we use the resources entrusted to us by God?

However, the encyclical offers no evidence for its sharp attack on consumption in developed countries, which of course produce more than they use. In fact, unowned or underpriced resources are vulnerable to abuse in any society.

Where markets operate, resource depletion is largely a myth because prices signal consumers and producers to adapt. There now is more recoverable oil than ever.

Markets typically are better than governments in protecting “future generations.” An individual landowner who misuses his property loses its value. The typical political time horizon is until the next election.

As I point out for the Acton Institute: “Economic progress eases the impact of environmental problems on the poor. It also provides resources to enhance the environment, efficiencies to produce more using less, and technologies to better preserve ecological values.”

Of course, markets are not perfect or enough. Perhaps the encyclical’s most important message is that “the emptier a person’s heart is, the more he or she needs things to buy, own and consume.” That is something no government program can fill.

Trade Promotion Authority—legislation that sets out negotiating objectives and ensures an up-or-down vote on future trade agreements—survived a Senate cloture vote today 60-37 and will likely become law.  The Senate already passed TPA last month as part of a different trade package by a vote of 62-37.  One of the Senators that switched his vote was Ted Cruz (R-TX).

The switch was a pretty big surprise considering that Cruz had been a prominent and vocal defender of TPA just a few weeks ago.  He co-authored an op-ed in the Wall Street Journal in May praising the bill and noting how important it was to furthering free trade.  He went on record explaining at length how TPA was not only constitutional but represented an appropriate Congressional check on the power of the President.

Here’s what he says to explain his decision to vote against it now:

Since the Senate first voted on TPA, there have been two material changes.

First, WikiLeaks subsequently revealed new troubling information regarding the Trade in Services Agreement, or TiSA, one of the trade deals being negotiated by Obama.

Despite the administration’s public assurances that it was not negotiating on immigration, several chapters of the TiSA draft posted online explicitly contained potential changes in federal immigration law. TPA would cover TiSA, and therefore these changes would presumably be subject to fast-track.

Second, TPA’s progress through the House and Senate appears to have been made possible by secret deals between Republican Leadership and the Democrats.

When TPA first came up for a vote in the Senate, it was blocked by a group of senators, led by Sen. Maria Cantwell (D-WA) and Sen. Lindsey Graham (R-SC), both of whom were conditioning their support on the unrelated objective of reauthorizing the Export-Import Bank.

The Ex-Im Bank is a classic example of corporate welfare. It is cronyism at its worst, with U.S. taxpayers guaranteeing billions of dollars in loans for sketchy buyers in foreign nations. Ex-Im is scheduled to wind down on June 30. But powerful lobbyists in Washington want to keep the money flowing.

Enough is enough. I cannot vote for TPA unless McConnell and Boehner both commit publicly to allow the Ex-Im Bank to expire—and stay expired. And, Congress must also pass the Cruz-Sessions amendments to TPA to ensure that no trade agreement can try to back-door changes to our immigration laws. Otherwise, I will have no choice but to vote no.

Senator Cruz is just wrong about TiSA, and he would know that if he asked any trade policy expert.  There is approximately zero chance the TiSA will do anything to liberalize America’s byzantine and protectionist immigration laws.  That’s because even though temporary immigration is a common component of global services negotiations for other countries, the United States never makes any commitments on immigration—for the obvious reason that it is politically toxic to do so. 

On the other hand, there is approximately a 100% chance that TiSA will reduce barriers to trade in services in the United States and around the world.  So, even if you only support free trade as long as no one is allowed to move across national boundaries, you should support TiSA.

More importantly, Ted Cruz himself already rebutted his own concern over secret changes to immigration law.  As he explained in his Wall Street Journal piece in May:

Before anything becomes law, Congress gets the final say. The Constitution vests all legislative power in Congress. So TPA makes it clear that Congress—and only Congress—can change U.S. law. If the administration meets all the requirements, Congress will give the agreement an up-or-down vote. But if the administration fails, Congress can hit the brakes, cancel the vote and stop the agreement.

Trade-promotion authority will hold the administration accountable both to Congress and to the American people.  Under TPA, any member of Congress will be able to read the negotiating text. Any member will be able to get a briefing from the U.S. trade representative’s office on the status of the negotiations—at any time. Any member will get to be a part of negotiating rounds. And most important, TPA will require the administration to post the full text of the agreement at least 60 days before completing the deal, so the American people can read it themselves.

Cruz was right.  TPA means there will be no secrecy; no shenanigans.  Support for TPA is not about whether you trust President Obama.  Did Senator Cruz just forget this?

On the second issue, I sympathize with Cruz’s concern that GOP leadership may be overly willing to make a deal to extend the charter of the Export-Import Bank.  But I can’t understand how that could at all justify voting no on a clean TPA bill.  It seems that Cruz is opposing a policy he supports just to send a message to leadership that he’s upset with their lack of principles.

It’s worth noting that Cruz made his latest announcement in an “Exclusive” op-ed at Breitbart.com the morning of the vote.  He manages to fit his decision into two narratives familiar to Breitbart’s readers: GOP leadership can’t be trusted, and Obama wants to secretly open the borders.  Neither of these issues is actually relevant to TPA.

Unfortunately, the debate over TPA has aptly demonstrated the willingness of some Republicans, particularly those running for President, to awkwardly twist trade policy into familiar partisan tropes at the expense of genuine policy debate and progress

Cruz’s new rhetoric may be an indicator that even with TPA in place, the Trans-Pacific Partnership will face a fierce and frustrating debate if it ever comes before Congress.  Will election year politics push “free traders” like Rand Paul and Ted Cruz to find excuses to oppose the TPP as well?

Two years ago tomorrow, the Transportation Security Administration stopped accepting comments on its proposal to use “Advanced Imaging Technology” for primary screening at airports. The end of the comment period on nude body scanning would ordinarily promise the issuance of a final rule that incorporates knowledge gained by hearing from the public. But this is no ordinary rulemaking. This is an agency that does not follow the law.

It was almost four years ago that the U.S. Court of Appeals for the D.C. Circuit ordered TSA to do a notice-and-comment rulemaking on its nude body scanning policy. Few rules “impose [as] directly and significantly upon so many members of the public,” the court said in ordering the agency to “promptly” publish its policy, take comments, and consider them in formalizing its rules.

Over the next 20 months, the TSA produced a short, vague paragraph that did nothing to detail the rights of the public and what travelers can expect when they go to the airport. At the time, I called the proposed rule “contemptuous,” because the agency flouted the spirit of the court’s order. In our comment, Cato senior fellow John Mueller, Mark G. Stewart from the University of Newcastle in Australia, and I took the TSA to task a number of ways.

Having grudgingly issued a hopelessly insufficient proposed rule, the TSA is now stalling further by failing to finalize its rule. This is in part because final rules are subject to legal challenge. The TSA can be shown in court to have utterly failed to follow the law, much less to have produced a policy that addresses genuine threats in a cost-effective way. The TSA is gaming the regulatory process and skirting the law so that it can continue to act arbitrarily and capriciously toward air travelers and their safety.

Time heals all wounds, so perhaps the D.C. Circuit accepts that the TSA has de facto power to overrule its decisions. The offense to American travelers is renewed every day, though, when we are subjected to a transportation security system that is both highly invasive and that failed 95% of the time in recent tests.

After yesterday’s colorful opinion day – involving raisins, motels, and Spiderman – the Supreme Court announced that it would be handing down more rulings on Thursday and Friday, with Monday also currently indicated as a decision day. So what’s left to decide? (Not to be confused with “why are Court decisions moving left? – a remarkably premature assessment given the cases remaining, not to mention coding issues regarding liberal/conservative.)

There are seven cases outstanding and none of them are duds. Cato has filed in five of them and the other two involve the hot topics of redistricting and the death penalty, so strap yourselves in for the next week. Here’s my best guess at what will happen and when, sorted arbitrarily by rough order of (my) curiosity and with links to case background and Cato’s brief: 

  • King v. Burwell: This is the Obamacare case regarding the illegal IRS rule that provides tax credits (and attendant mandates/penalties) in states that didn’t set up exchanges. There are clearly four votes for the government and three for the plaintiffs, with Chief Justice Roberts and Justice Kennedy as the swing votes – and based on oral argument, they’re complete toss-ups. This case will come on Friday or Monday and the only outcome I feel confident predicting is that Roberts or Kennedy will write the opinion and it’ll be 5-4.
  • Obergefell v. Hodges: This is the marriage case. The conventional wisdom is that it’ll come on the last day of term and that it’ll be a 5-4 ruling striking down the state laws that don’t extend marriage license to same-sex couples. I agree with the conventional wisdom, though wonder whether the chief justice will at least vote that states have to recognize out-of-state same-sex marriages without necessarily issuing marriage licenses to same-sex couples themselves. Also, if King comes down the same day and the government loses there, it’ll be fun watching both the media and politicos scrambling to both praise and condemn the Court at the same time.
  • Texas Dept. of Housing v. Inclusive Communities Project: You may have forgotten about this case because it was argued much earlier than the others, but it very likely will be the third-most-noted case from this term. At issue is the application of “disparate impact” claims under the Fair Housing Act. That sounds like a snooze until you realize that what’s at stake is suing mortgage brokers for racial discrimination simply because they deny loans (or offer higher interest rates) more to members of one racial group than another – regardless of credit scores or other completely race-neutral considerations. Justice Kennedy is likely writing this opinion because he’s the only one who hasn’t authored a January case, which is a good sign for the opponents of disparate-impact theory because it seemed at oral argument that Justice Scalia was actually the swing vote. One other possibility, based on Scalia’s expressed concern, is that the Court will set this case for re-argument on the question of whether disparate-impact claims, regardless of statutory basis, are constitutional. 
  • Michigan v. EPA: This is a hard case to understand but it boils down another example of an executive agency’s ignoring the law it purports to enforce. In technical terms, the issue is whether the EPA “unreasonably refused to consider costs in determining whether it is appropriate to regulate hazardous air pollutants emitted by electric utilities.” This decision will have a huge impact on electricity costs, stock prices, and energy development. It will also, in conjunction with King, speak volumes about the power of administrative agencies. The smart bet is that Justice Scalia is writing the opinion here, against the government, but these complicated administrative-law cases often end up with multiple concurring opinions – particularly regarding remedy – and no clear winner. We could see this opinion on Thursday, but it could also be the “undercard” to gay-marriage day.
  • Johnson v. United States: The Supreme Court will probably strike down part of a federal law here, the one enhancing the criminal penalties for “career criminals” convicted of a firearms offense. What could possibly be the problem with that? Well, the “residual clause” applies its sentencing enhancements to crimes that “otherwise involve conduct that presents a serious potential risk of physical injury to another.” The justices have previously thrown up their hands at what that could possibly mean – plus this case was argued twice this term – and now they’ll hold the residual clause unconstitutionally vague.

And here are the two cases that’ll get plenty of media attention even though you won’t find my name on a relevant brief: 

  • Arizona State Legislature v. Arizona Independent Redistricting Commission: Both sides plausibly pitched me on this one, which means both that it’s a close call as a matter of law and there’s no clear libertarian or originalist position. The case involves redistricting via independent commission rather than legislature – a commission put in place by a popular initiative – and whether such a process violates Article I’s Elections Clause. California is only other state that would be directly affected by the opinion here, which will probably be written by either Roberts or Kennedy (whichever doesn’t write King) in favor of the AZ legislature.
  • Glossip v. Gross: This is a death-penalty case, but one that hasn’t garnered the high passions that such cases typically do. The issue isn’t the constitutionality of capital punishment or whether some class of defendant should be eligible for it, but whether a specific type of lethal injection – a three-drug cocktail that may or may not mitigate pain during the execution – violates the Eighth Amendment’s proscription of “cruel and unusual punishment.” I imagine that there are five votes here to turn back the “death penalty resistance” and ok the procedure.

In sum, all the remaining cases are big and all except Johnson are likely to be 5-4. And if the Court strikes down both the IRS-Obamacare rule and hetero-only marriage laws, Cato will be the only group to have filed on both winning sides.

The United States’ immigration system favors family reunification – even in the so-called employment-based categories.  The family members of immigrant workers must use employment based green cards to enter the United States.  Instead of a separate green card category for spouses and children, they get a green card that would otherwise go to a worker. 

In 2013, 53 percent of all supposed employment-based green cards went to the family members of workers.  The other 47 percent went to the workers themselves.  Some of those family members are workers, but they should have a separate green card category or be exempted from the employment green card quota altogether. 

Source: 2013 Yearbook of Immigration Statistics, Author’s Calculations

If family members were exempted from the quota or there was a separate green card category for them, an additional 85,232 highly skilled immigrant workers could have entered in 2013 without increasing the quota.

139,757 green card beneficiaries, 87 percent of those who gained an employment-based green card in 2013, were already legally living in the United States.  They were able to adjust their immigration status from another type of visa, like an H-1B or F visa, to an employment-based green card. 

Source: 2013 Yearbook of Immigration Statistics, Author’s Calculations

 

Exempting some or all of the adjustments of status from the green card cap would almost double the number of highly skilled workers who could enter.  Here are some other exemption options:

  • Workers could be exempted from the cap if they have a higher level of education, like a graduate degree or a PhD.
  • A certain number of workers who adjust their status could be exempted in the way the H-1B visa exempts 20,000 graduates of American universities from the cap.
  • Workers could be exempted if they show five or more years of legal employment in the United States prior to obtaining their green card.
  • Workers could be exempted based on the occupation they intend to enter.  This is a problem because in involves the government choosing which occupations are deserving, but so long as it leads to a general increase in the potential numbers of skilled immigrant workers without decreasing them elsewhere, the benefits will outweigh the harms.

 

2013 Employment Based   Green Cards

  EB 1 EB 2 EB 3^ EB 4^ EB 5~   All EB Percent Workers`

16,225

31,130

20,034

4,673

3,102

 

75,164

46.86%

Workers Adjusted`

15,616

30,484

17,318

4,247

592

 

68,257

  Workers New Arrivals`

609

646

2,716

426

2,510

 

6,907

  Family

22,753

31,896

22,931

2,246

5,406

 

85,232

53.14%

Family Adjusted

21,667

30,472

17,403

1,349

609

 

71,500

  Family New Arrival

1,086

1,424

5,528

897

4,797

 

13,732

  Adjustment of Status

37,283

60,956

34,721

5,596

1,201

 

139,757

87.13%

New Arrival

1,695

2,070

8,244

1,323

7,307

 

20,639

12.87%

                  Total

38,978

63,026

42,965

6,919

8,508

 

160,396

                      EB 1 EB 2 EB 3^ EB 4^ EB 5~       Workers Adjusted

96.25%

97.92%

86.44%

90.88%

19.08%

      Worker New Arrivals

3.75%

2.08%

13.56%

9.12%

80.92%

                        Family Adjusted

95.23%

95.54%

75.89%

60.06%

11.27%

      Family New Arival

4.77%

4.46%

24.11%

39.94%

88.73%

      *Some data on spouses and children withheld.           ^Some data on spouses, children, and workers withheld.         `Investors for the EB-5.               ~Some data on spouses, children, and investors withheld.         Source: 2013 Yearbook of Immigration Statistics                  

 

 

Last week I happened to be contemplating a post having to do with driverless cars when, wouldn’t you know it, I received word that the Bank of England had just started a new blog called Bank Underground, the first substantive post on which had to do with — you guessed it — driverless cars.

As it turned out, I needn’t have worried that Bank Underground had stolen my fire. The post, you see, was written by some employees in the Bank of England’s General Insurance Supervision Division, whose concern was that driverless cars might be bad news for the insurance industry. The problem, as the Bank of England’s experts see it, is that cars like the ones that Google plans to introduce in 2020 are much better drivers than we humans happen to be — so much better, according to research cited in the post, that “the entire basis of motor insurance, which mainly exists because people crash, could … be upended.” Driverless cars therefore threaten to “wipe out traditional motor insurance.”

It is of course a great relief to know that the Bank of England’s experts are keeping a sharp eye out for such threats to the insurance industry. (I suppose they must be working as we speak on some plan for addressing the dire possibility — let us hope it never comes to this — that cancer and other diseases will eventually be eradicated.) But my own interest in driverless cars is rather different. So far as I’m concerned, the advent of such cars should have us all wondering, not about the future of the insurance industry, but about the future of…the Bank of England, or rather of it and all other central banks. If driverless cars can upend “the entire basis of motor insurance,” then surely, I should think, an automatic or “driverless” monetary system ought to be capable of upending “the entire basis of monetary policy” as such policy is presently conducted.

And that, so far as I’m concerned, would be a jolly good thing.

Am I drifting into science fiction? Let’s put matters in perspective. Although experiments involving driverless or “autonomous” cars have been going on for decades, until as recently as one decade ago the suggestion that such cars would soon be, not only safe enough to replace conventional ones, but far safer, would have struck many people as fantastic. Consider for a moment the vast array of contingencies such a vehicle must be capable of taking into account in order to avoid accidents and get passengers to some desired destination. Besides having to determine correct routes, follow their many twists and turns, obey traffic signals, and parallel park, they have to be capable of evading all sorts of unpredictable hazards, including other errant vehicles, not to mention jaywalkers and such. The relevant variables are, in fact, innumerable. Yet using a combination of devices tech wizards have managed to overcome almost every hurdle, and will soon have overcome the few that remain.

All of this would be impressive enough even if human beings were excellent drivers. In fact they are often very poor drivers indeed, which means that driverless cars are capable, not only of being just as good, but of being far better–90 percent better, to be precise, since that’s the percentage of all car accidents attributable to human error.

Human beings are bad drivers for all sorts of reasons. They have to perform other tasks that take their mind off the road; their vision is sometimes impaired; they misjudge their own driving capabilities or the workings of their machines; some are sometimes inclined to show off, while others are dangerously timid. Occasionally, instead of relying on their wits, they drive “under the influence.”

Central bankers, being human, suffer from similar human foibles. They are distracted by the back-seat ululations of commercial bankers, exporters, finance ministers, and union leaders, among others. Their vision is at the same time both cloudy and subject to myopia. Finally, few if any are able to escape altogether the disorienting influence of politics. The history of central banking is, by and large, a history of accidents, if not of tragic accidents, stemming from these and other sorts of human error.

It should not be so difficult, then, to imagine that a “driverless” monetary system might spare humanity such accidents, by guiding monetary policy more responsibly than human beings are capable of doing. How complicated a challenge is this? Is it really more complicated than that involved in, say, driving from San Francisco to New York? Central bankers themselves like to think so, of course — just as most of us still like to believe that we are better drivers than any computer. But let’s be reasonable. At bottom central bankers, in their monetary policy deliberations, have to make a decision concerning one thing, and one thing only: should they acquire or sell assets, and how many, or should they do neither? Unlike a car, which has numerous controls — a steering wheel, signal lights, brakes, and an accelerator — a central bank has basically one, consisting of the instrument with which it adjusts the rate at which assets flow into or out of its balance sheet. Pretty simple.

And the flow itself? Here, to be sure, things get more complicated. What “target” should the central bank have in mind in determining the flow? Should it consist of a single variable, like the inflation rate, or of two or more variables, like inflation and unemployment? But the apparent complexity is, IMHO, a result of confusion on monetary economists’ part, rather than of any genuine trade-offs central bankers face. As Scott Sumner has been indefatigably arguing for some years now (and as I myself have long maintained), sound monetary policy isn’t a matter of having either a constant rate of inflation or any particular level of either employment or real output. It’s a matter of securing a stable flow of spending, or Nominal GNP, while leaving it to the marketplace to determine how that flow breaks down into separate real output and inflation-rate components. Scott would have NGDP grow at an annual rate of 4-5 percent; I would be more comfortable with a rate of 2-3 percent. But this number is far less important to the achievement of macroeconomic stability than a commitment to keeping the rate — whatever it happens to be — stable and, therefore, predictable.

So: one goal, and one control. That’s much simpler than driving from San Francisco to New York. Heck, it’s simpler than managing the twists and turns of San Franscisco’s Lombard Street.

And the technology? In principle one could program a computer to manage the necessary asset purchases or sales. That idea itself is an old one, Milton Friedman having contemplated it almost forty years ago, when computers were still relatively rare. What Friedman could not have imagined then was a protocol like the one that controls the supply of bitcoins, which has the distinct advantage of being, not only automatic, but tamper-proof: once set going, no-one can easily alter it. The advantage of a bitcoin-style driverless monetary system is that it is, not only capable of steering itself, but incapable of being hijacked.

The bitcoin protocol itself allows the stock of bitcoins to grow at a predetermined and ever-diminishing rate, so that the stock of bitcoins will cease to grow as it approaches a limit of 21 million coins. But all sorts of protocols may be possible, including ones that would adjust a currency’s supply growth according to its velocity — that is, the rate at which the currency is being spent — so as to maintain a steady flow of spending, à la Sumner. The growth rate could even be made to depend on market-based indicators of the likely future value of NGDP.

This isn’t to say that there aren’t any challenges yet to be overcome in designing a reliable “driverless money.” For one thing, the monetary system as a whole has to be functioning properly: just as a driverless car won’t work if the steering linkage is broken, a driverless monetary system won’t work if it’s so badly tuned that banks end up just sitting on any fresh reserves that come their way. My point is rather that there’s no good reason for supposing that such challenges are any more insuperable than those against which the designers of driverless cars have prevailed. If driverless car technology has managed to take on San Francisco’s Lombard Street, I see no reason why driverless money technology couldn’t eventually tackle London’s.

What’s more, there is every reason to believe that driverless money would, if given a chance, prove to be far more beneficial to mankind than driverless cars ever will. For although bad drivers cause plenty of accidents, none has yet managed to wreck an entire economy, as reckless central bankers have sometimes done. If driverless monetary systems merely served to avoid the worst macroeconomic pileups, that alone would be reason enough to favor them.

But they can surely do much better than that. Who knows: perhaps the day will come when, thanks to improvements in driverless monetary technology, central bankers will find themselves with nothing better to do than worry about the future of the hedge fund industry.

[Cross-posted from Alt-M.org]

Further to Ilya’s overview of today’s Supreme Court decision in Horne v. Dept. of Agriculture, it should be noted that it’s taken Marvin and Laura Horne over a decade to vindicate their rights in the raisins the government sought to take “for their benefit,” under one of the many economically foolish New Deal and later agricultural marketing schemes Congress has seen fit to enact. But in this lengthy process, the Hornes have helped the Court to settle a fundamental principle, namely, that the Fifth Amendment’s Takings Clause prohibits the government from taking both real and personal property for public use without just compensation.

At the same time, the Court is still confused in its effort to distinguish and adjudicate what have come to be called “physical” and “regulatory” takings. In Horne, the Court held, the government sought to “physically” take 47 percent of the Hornes’ raisins, much as ten years ago to the day, in its infamous Kelo decision, the Court upheld the City of New London, Connecticut’s “physical” taking of Suzette’s Kelo’s little pink house. In other words, the government sought to take title to the Hornes’ property in their raisins.

By contrast, in a regulatory taking, the government, through regulation, takes certain otherwise legitimate uses an owner has in his property. The owner retains the title; but it’s usually a much devalued title. For almost a century, the Court has struggled to fit these regulatory takings under the Takings Clause—ever since Justice Holmes in 1922 wrote that a regulatory restriction that goes “too far” amounts to a taking requiring compensation. The three-part test the Court set forth in 1978 in its Penn Central decision only muddied those waters. In fact, we see that here when Chief Justice Roberts tries to drive home the point that in Horne we have a physical taking. In response to a point made by the dissent he writes that in such cases “‘we do not ask … whether [the taking] deprives the owner of all economically valuable use’ of the item taken”—citing one of the three Penn Central criteria.

Roberts is right: we don’t ask that when title is taken, as here. But in labeling Horne a “physical” taking, and distinguishing it from a taking that “‘deprives the owner of all economically valuable use’ of the item taken,” Roberts opens up a question: Just what does “the item” refer to? Clearly, Roberts means to refer to “the property” in the sense of the whole parcel or the underlying fee. But that is not “the item” that is taken in a regulatory taking. The owner still owns the fee. What is usually taken is certain “economically valuable uses”—but not all such uses. Indeed, in many regulatory cases the owner is entitled to compensation only when all the uses are taken. That was the case in the Court’s 1992 Lucas decision, where the regulatory restrictions left the owner with an effectively worthless title.

The nub of the matter here is really quite simple, and it was stated by James Madison in his famous 1792 essay, Property: “In a word, as a man is said to have a right to his property, he may be equally said to have a property in his rights.” In other words, it’s not simply the underlying fee that is our property. All the legitimate uses that go with it are our property as well. Thus, a taking occurs and compensation is due not simply when that last use is taken, which is what the Lucas Court effectively held, but when the first use is taken and the title is accordingly devalued. Those uses—those “items”—are our property too. Perhaps the Court will one day give us an integrated theory of property of a kind that Madison understood—before the rise of the modern regulatory state.

The Senate leadership is working hard to find the votes needed to support the trade agenda. Key to progress is passage of trade promotion authority (TPA), also known as “fast track”, which would commit Congress to vote up or down on a trade agreement rather than offering amendments. Opposition to trade liberalization has been a comfortable policy stance for senators beholden to organized labor and to the anti-growth left. Opponents on the right profess concern about the possible loss of national sovereignty and generally are reluctant to give President Obama greater authority of any kind.

Political realities sometimes require offering sweeteners to make a difficult vote more palatable. Trade adjustment assistance (TAA) has been legislated in the past to help workers and firms that are having difficulty dealing with competition from imports. Even though the economic and equity arguments in favor of trade-related unemployment benefits are relatively weak (Why treat people who are unemployed due to international competition differently than those who lose their jobs due to changes in technology, for instance?), the political rationale for TAA at times has been compelling. It’s not surprising that both the House and Senate have been searching for a way to pass both TPA and TAA. The president has expressed his preference to sign them at the same time.

With the outcome of the Senate vote on TPA not yet clear, it’s not surprising that there has been a search for additional sweeteners. The steel industry has pushed to include Sen. Sherrod Brown’s (D-OH) poorly named “Leveling the Playing Field Act” as part of the TAA package.  (My op-ed on the Act is available here.) Given the need to woo as many votes as possible, the Senate leadership has agreed to this request.

It’s not my intention to criticize pro-trade senators who are doing their best to pass TPA. Life can be complex, and political life all the more so. However, it may be worthwhile for free-trade proponents to think carefully about the implications of adding Sen. Brown’s measure as part of this effort to provide the president with negotiating authority.

Here’s the rub: the protectionist provisions of the “Leveling the Playing Field Act” would take effect as soon as the president signs the TAA legislation, but potential trade liberalization (if any ever gets enacted) would not be realized until sometime well in the future. The Trans-Pacific Partnership (TPP) – the first agreement that might be concluded once the president has negotiating authority – would not begin to be implemented until 2017 at the earliest, perhaps much later. Although details of the agreement are not yet public, restrictions on politically sensitive imports are likely to be phased in over perhaps as many as 20 years. Thus, the United States would be making its antidumping/countervailing (AD/CVD) regime more protectionist immediately in exchange for future liberalization that may or may not ever occur.

If possible, Senate leaders should remove the Leveling the Playing Field Act from TAA and let adjustment assistance be considered on its own merits. If that isn’t feasible, the effective date of Sen. Brown’s legislation should be changed so that it does not become operational until the eventual implementing legislation for TPP also becomes effective. That way there will at least be some growth-promoting liberalization to help offset the reduced economic welfare caused by the Leveling the Playing Field Act.

Making short work of the idea that facial challenges aren’t available under the Fourth Amendment, the Supreme Court ruled today in Los Angeles v. Patel that a city may not require its hotels to turn over their business records without some opportunity for review of the government’s demands. It’s the right result, but the Court was too quiet about its treatment of Fourth Amendment doctrine, and it did not take the opportunity to fully address situations like the case presented, in which the government dragoons private businesses into surveillance on its behalf.

Justice Sotomayor, writing for a 5-4 majority, held: “the provision of the Los Angeles Municipal Code that requires hotel operators to make their registries available to the police on demand is facially unconstitutional because it penalizes them for declining to turn over their records without affording them any opportunity for pre-compliance review.” Justice Scalia lead one bloc of dissenters believing it was reasonable to institute this kind of regulation on business owners suspected of no substantive crime because their facilities are sometimes used for crime. Justice Alito dissented as well, arguing that there should be no facial challenge to the statute because constitutional applications of it exist.

Had the stars lined up, the Court might have used the Patel case to address simmering issues around current Fourth Amendment doctrine, as the Cato Institute’s brief for the Court suggested. The Court indeed eschewed the backward “reasonable expectation of privacy” test, which finds that Fourth Amendment interest exists when people reasonably feel that it does. It instead examined whether the government’s scheme was reasonable, which is where the language of the Fourth Amendment focuses courts’ attention. But the Court did not broadcast the inapplicability of “reasonable expectation” doctrine, so most lawyers and lower courts will probably not realize that another in a growing line of cases is applying the Fourth Amendment in a new and better way, by hewing more closely to the text.

Part of the reason the Court didn’t take all the constitutional bait was the unusually narrow challenge the hoteliers brought. They attacked the collection of information by the government, granting for the sake of argument in this case that the government has the power to require them to collect information about their customers for the government’s later use. Had the Court considered the totality of what we called “the warrantless search scheme,” it would have had to assess whether it is reasonable in our constitutional system for private businesses to be dragooned into wholesale, comprehensive surveillance on behalf of the government. That scope might have brought the Court’s conservatives off the sidelines and into defending the degree of privacy against government that existed when the Fourth Amendment was adopted. (Surely, the government couldn’t have conscripted businesses into mass surveillance of the public at the time of the framing.)

Folks who are paying attention will recognize that the “reasonable expectation of privacy” test continues to recede in importance. We will continue to wait, though, for the case that clearly and articulately applies the right against unreasonable seizures and searches to information as such. While Patel is a technical win, some later case or cases will have to truly address how the Fourth Amendment is to be administered in the modern era.

In 2010 I blogged about which states have the strongest libertarian constituencies, using some data from political scientist Jason Sorens, founder of the Free State Project, and also 1980 Libertarian Party results from Bill Westmiller. That column can be found here, complete with graphics.

Now Sorens has updated his results with 2012 data added to 2004 and 2008. As he notes, the results are fairly similar. You still find the most libertarians in the rugged individualist states of the mountain West plus New Hampshire. The mountain states were also best for Ed Clark, the Libertarian nominee back in 1980. As I noted previously, New Hampshire was in the bottom 10 for Clark, but near the top in Sorens’s ranking in 2010 and a bit higher this time. I’m not really sure what caused the change. 

Sorens notes that “Vermont, Maine, Kentucky, and Texas have gained, while Michigan, Idaho, Indiana, and Georgia have fallen” in the later calculations. I pointed out previously that Kentucky, my home state, was dead last for the Libertarian candidate in 1980. And it didn’t do very well in Sorens’s 2010 ranking either. Since June 2010, of course, Kentucky has elected the most libertarian member of the Senate, Rand Paul, and one of the most libertarian House members, Thomas Massie. So it’s about time the state’s voters started moving up the libertarian rankings, albeit only slightly. 

Here’s Sorens’s latest ranking:

state libertarians
Montana 5.504036
New Hampshire 4.163368
Alaska 3.586032
New Mexico 3.319092
Idaho 2.842685
Nevada 2.477748
Texas 1.632528
Washington 1.568113
Oregon 1.180586
Arizona 1.0411
North Dakota 0.7316829
Indiana 0.6056806
California 0.5187439
Vermont 0.4731389
Utah 0.2056809
Colorado 0.1532149
Kansas 0.107657
South Dakota 0.0328709
Maine -0.0850015
Pennsylvania -0.2063729
Iowa -0.3226413
Georgia -0.3296589
Virginia -0.3893113
Maryland -0.4288172
Rhode Island -0.470931
Tennessee -0.4882021
Missouri -0.4912609
Arkansas -0.5384682
Louisiana -0.5897537
Nebraska -0.6350928
Minnesota -0.7662109
Michigan -0.7671053
North Carolina -0.811959
South Carolina -0.8196676
Illinois -0.9103957
Ohio -0.9599612
Delaware -1.057948
Florida -1.072601
District of Columbia -1.091851
New York -1.225912
Kentucky -1.330388
Massachusetts -1.342607
Wisconsin -1.410286
New Jersey -1.431843
Connecticut -1.606663
Alabama -1.863769
Oklahoma -1.93511
West Virginia -2.244921
Mississippi -2.519249

Lots of technical background can be found at Sorens’s post on the Pileus blog. More on the broader libertarian vote here and especially in this ebook.

The AP reports some good news out of Texas over the weekend: 

A long-standing Texas law that has sent about 100,000 students a year to criminal court - and some to jail - for missing school is off the books, though a Justice Department investigation into one county’s truancy courts continues.

Gov. Greg Abbott has signed into law a measure to decriminalize unexcused absences and require school districts to implement preventive measures. It will take effect Sept. 1.

Reform advocates say the threat of a heavy fine - up to $500 plus court costs - and a criminal record wasn’t keeping children in school and was sending those who couldn’t pay into a criminal justice system spiral. Under the old law, students as young as 12 could be ordered to court for three unexcused absences in four weeks. Schools were required to file a misdemeanor failure to attend school charge against students with more than 10 unexcused absences in six months. And unpaid fines landed some students behind bars when they turned 17.

Unsurprisingly, the truancy law had negatively impacted low-income and minority students the most. 

In the wake of the arrest of a Georgia mother whose honor role student accumulated three unexcused absences more than the law allowed, Walter Olson noted that several states still have compulsory school attendance laws that carry criminal penalties:

Texas not only criminalized truancy but has provided for young offenders to be tried in adult courts, leading to extraordinarily harsh results especially for poorer families.  But truancy-law horror stories now come in regularly from all over the country, from Virginia to California. In Pennsylvania a woman died in jail after failing to pay truancy fines; “More than 1,600 people have been jailed in Berks County alone—where Reading is the county seat—over truancy fines since 2000.”)

The criminal penalties, combined with the serious consequences that can follow non-payment of civil penalties, are now an important component of what has been called carceral liberalism: we’re finding ever more ways to menace you with imprisonment, but don’t worry, it’s for your own good. Yet jailing parents hardly seems a promising way to stabilize the lives of wavering students. And as Colorado state Sen. Chris Holbert, sponsor of a decriminalization billhas said, “Sending kids to jail—juvenile detention—for nothing more than truancy just didn’t make sense. When a student is referred to juvenile detention, he or she is co-mingling with criminals—juveniles who’ve committed theft or assault or drug dealing.”

It’s encouraging to see movement away from criminalized truancy, but it’s not enough. As Neal McCluskey has noted, compulsory government schooling is as American as Bavarian cream pie. We shouldn’t be surprised when the one-size-fits-some district schools don’t work out for some of the students assigned to them. Instead, states should empower parents to choose the education that meets their child’s individual needs.

Yesterday was the first day of Summer, and you know what that means? Sun, sand, the great outdoors…and a new issue of Regulation magazine. This issue contains a number of interesting articles that will be discussed in the coming months.

The cover articles provide perspective on the FCC decision to impose traditional public utility regulation on the internet. “What Hath the FCC Wrought”, by University of Pennsylvania professor and former FCC chief economist Gerald Faulhaber, argues that service quality will suffer to the extent that service providers can’t charge more for streams that require greater provider resources. Kansas State professor Dennis Weisman argues that internet regulation will likely protect competitors from competition rather than serve consumer interests just like the old telephone regulatory scheme.

A pair of articles discuss healthcare policy. West Texas A&M’s Neil Meredith and Heritage Foundation scholar Robert Moffit examine provisions of the Affordable Care Act encouraging the development of multi-state health plans (MSPs) intended to provide larger insurance pools while overcoming some of the regulatory burdens of state-regulated plans. They argue that eliminating questionable requirements would give consumers more opportunities to use MSP insurance.  University of Arizona professors Christopher Robertson and Keith Joiner propose two changes to health insurance to improve efficiency.  The first would set the stop-loss limit as a constant percent of wages rather than a fixed dollar amount.  The second would pay patients directly a portion of the cost of high-cost low-evidence-of-benefit procedures regardless of whether they obtained the procedure.  This would induce patients to think more carefully about the benefits of expensive uncertain-benefit procedures.

This issue continues Regulation’s long history of examining housing policy. Some Federal housing programs subsidize developers through tax credits to build affordable rental housing while other programs provide assistance directly to tenants in the form of vouchers. Edgar Olsen of the University of Virginia makes the case for moving to an all-voucher housing assistance program.

The Social Security Disability Insurance (SSDI) fund will run out of money in 2016. Consultants A. Bentley Hankins and Jeffrey Joy propose five reforms that would update the program to reflect increased life expectancy and the changing skill requirements of jobs.

For many decades, articles in Regulation have referenced work of the late Gordon Tullock to explain the political economy of regulatory policy. Zachary Gochenour examines Tullock’s legacy, and speculates about future trends in the field of public choice economics that he helped build.

For these articles and many more, read the full issue of Regulation here.

The near-unanimous Supreme Court decided today in favor of the farmers whose raisins the federal government wanted to take as part of a cockamamie New Deal-era regulatory scheme. The Court ruled 8-1 in support of Cato’s position that taking personal property is a compensable action, regardless of whether the government purports to act on the property owner’s behalf, and 5-4 on the question of compensation for that taking. (This is two years after the Court ruled 9-0 that the Marvin and Laura Horne could have their day in court and raise their constitutional challenge, rather than being stuck in some byzantine administrative purgatory.)

Of course, it should be rather obvious that when the government takes your property, its actions are subject to the Fifth Amendment’s Takings Clause, which requires that such taking be (a) for a “public use” and (b) subject to the owner receiving “just compensation.” And it should be equally obvious that the Constitution doesn’t distinguish between real property (your house) and personal property (your car). Yet the government insisted here that, at least in the context of agricultural-marketing/price-setting programs, it can take your crops and do whatever it likes with them so long as it’s all hypothetically for your own benefit.

Chief Justice Roberts swatted away that contention. Here are the key paragraphs (pages 4-5 of the slip opinion):

There is no dispute that the “classic taking [is one] in which the government directly appropriates private prop­erty for its own use.” Nor is there any dispute that, in the case of real property, such an appropriation is a per se taking that requires just compensation.

Nothing in the text or history of the Takings Clause, or our precedents, suggests that the rule is any different when it comes to appropriation of personal property. The Government has a categorical duty to pay just compensa­tion when it takes your car, just as when it takes your home. (citations omitted)

There are some other nuggets in the opinion, including a riff on the government’s contention that raisin farmers, to avoid the Raisin Administrative Committee’s attentions, could simply sell wine: “ ‘Let them sell wine’ is probably not much more comfortable to the raisin growers than similar retorts have been to others throughout history.” Moreover, “[r]aisins are not like oysters: they are private property – the fruit of the growers’ labor – not “public things subject to the absolute control of the state.”

In any event, thus the Hornes’ multi-year fight against the U.S. Department of Agriculture ends in a definitive ruling that the USDA cannot assess them nearly half a million dollars for the value of the raisins they refused to relinquish (nor a $200,000 civil penalty that added insult to injury). Let’s not forget that this epochal battle involved two trips to the Supreme Court, where the government only got one of a possible 18 votes.

For more background on the case, see Trevor Burrus’s commentary when we filed our brief. For early reaction to the ruling, see Ilya Somin’s post at the Volokh Conspiracy.

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