Archives: 10/2006

Does Big Steel Still Dominate U.S. Trade Policy?

The chart above depicts the operating performance of the industry that is most protected by U.S. antidumping and countervailing duty restraints. As that chart demonstrates, the U.S. steel industry is in robust health–well outperforming overall manufacturing (i.e., its customers) for the past few years.

Should one conclude that that performance is a reflection of the insulation from competition it has been afforded? That’s likely to be one of the steel industry’s arguments before the U.S. International Trade Commission, which is holding a hearing tomorrow concerning the question of whether 13-year old antidumping and countervailing duty restrictions against imported corrosion-resistant steel from six countries should be continued for at least five more years. (This paper explains why revocation in these so-called Sunset Reviews is rare).

But those restrictions, as well as the 160 other trade remedy restraints currently in place to protect the steel industry, date back to the 1990s and earlier, when the industry’s performance was much closer to the first four bars than the last three. If anything, longstanding trade protection delayed the day of reckoning for many inefficient mills by discouraging them from exiting the market and encouraging continued inefficient operation.

From an operating perspective, the year 2004 stands out as a clear dividing line between the steel industry of old, and the new, revitalized industry of today. But the dramatic industry renaissance that has bestowed market power, record profitability, and insulation from any significantly adverse effects of foreign competition on U.S. steel producers began in 2002, after the government assumed $9 billion in the industry’s unfunded pension and health care obligations.

By wiping those liabilities off of the books of several major bankrupt steel producers, that intervention paved the way for mergers and acquisitions and new labor agreements that have enabled the industry to retire inefficient capacity, cut its fixed costs, and consolidate production decisions. In 2003, the top three producers of flat-rolled steel (the steel used in autos, appliances, and construction) controlled 25 percent of flat-rolled steel production capacity. Today, the top three control 70 percent.

That concentration has given the domestic industry a high degree of market power, which enables it to prop up prices and weather downturns in demand by curtailing output. There’s nothing objectionable about that (with the exception of the government-assisted jumpstart) unless, of course, steel is a major component of the products you manufacture. What is objectionable, then, is buttressing this emerging oligopoly with continued trade restraints. Consumers of steel should be expected to adapt to the effects of greater concentration of steel production, but that adaptation requires having access to imported substitutes and supplements.

Taxpayers, steel-using industries, and consumers have subsidized this industry for too long.

The ITC’s decision, expected in December, will speak volumes to the question of whether that agency continues to be a rubber stamp for the steel lobby’s protectionist agenda.

Specter’s Signing Statement Bill

Whilst buried by my Cato Supreme Court Review duties, I missed an opportunity to weigh in on the summer blog debate over presidential signing statements (i.e., the president’s practice of announcing how a bill will be interpreted by the executive branch).

My general views track Marty Lederman, Walter Dellinger, et al.’s analysis in this post, which concludes that most common complaints about signing statements are overblown.

There is one problem that Lederman et al. don’t mention: the risk that courts will defer to signing statements when the law is ambiguous. Currently, the Court gives deference to agencies’ interpretation of ambiguous laws, under a narrow set of conditions set out in cases like United States v. Mead. In Mead, the Court underscored that judicial deference to the executive is controlled by Congress. Courts defer to the executive when the law is unclear based on a background assumption — a legal fiction, really — that this deference is what Congress wants when it passes an ambiguous law. 

The Court has never decided whether the president deserves the same deference as the agencies under his control. Courts certainly won’t give any deference to presidential constitutional interpretations, just as they don’t give deference to the constitutional interpretations of agencies. But it’s possible that future courts might defer to some nonconstitutional signing statements, and the explosion of signing statements in this administration suggests the president is perhaps making a bid for recognition of some such future deference. If that bid is successful, the president’s interpretation would act as a kind of “super-legislative” history, trumping competing legislative history by members of Congress when the text of a law is unclear.

Under Mead, Congress has the power to command courts not to defer to signing statements. Sen. Arlen Specter (R-Pa.) has introduced a bill to do just that and, if this were all the bill did, it would deserve the support of all who care about maintaining a balance of power between the president and Congress. Unfortunately, the bill is saddled with some additional provisions that are constitutionally problematic.

Here’s what these additional portions of the bill say:

SEC. 5. CONGRESSIONAL STANDING TO OBTAIN DECLARATORY JUDGMENT.

Any court of the United States, upon the filing of an appropriate pleading by the United States Senate, through the Office of Senate Legal Counsel, and/or the United States House of Representatives, through the Office of General Counsel for the United States House of Representatives, may declare the legality of any presidential signing statement, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.

SEC. 6. CONGRESSIONAL RIGHT TO INTERVENE OR SUBMIT CLARIFYING RESOLUTION.

(a) Notice to Congress- In any action, suit, or proceeding in the Supreme Court of the United States, wherein the construction or constitutionality of any Act of Congress in which a presidential signing statement was issued, the Supreme Court shall certify such fact to the Office of Senate Legal Counsel and to the Office of General Counsel for the United States House of Representatives.

(b) Congressional Right To Intervene- In any suit referenced in subsection (a), the Supreme Court shall permit the United States Senate, through the Office of Senate Legal Counsel, and/or the United States House of Representatives, through the Office of General Counsel for the United States House of Representatives, to intervene for presentation of evidence, if evidence is otherwise admissible in the case, and for argument on the question of the Act’s construction and/or constitutionality. The United States Senate and House of Representatives shall, subject to the applicable provisions of law, have all the rights of a party and be subject to all liabilities of a party as to court costs to the extent necessary for a proper presentation of the facts and law relating to the question of constitutionality.

(c) Congressional Right To Submit Clarifying Resolution- In any suit referenced in subsection (a), the full Congress may pass a concurrent resolution declaring its view of the proper interpretation of the Act of Congress at issue, clarifying Congress’s intent, and/or clarifying Congress’s findings of fact. If Congress does pass such a concurrent resolution, the Supreme Court shall permit the United States Congress, through the Office of Senate Legal Counsel, to submit that resolution into the record of the case as a matter of right.’.

Ironically, these provisions are far more constitutionally problematic than the signing statement itself. There are three ways to read these portions of the bill:

First, Specter’s bill might be read to invite judicial deference to Congress’s post-enactment interpretations, when introduced into the record by Senate leg counsel, as the word “clarifying” may suggest.    

Second, perhaps the bill’s provisions are protective, allowing Congress to defeat executive reliance on presidential signing statements very quickly, shutting off the window of opportunity created by lengthy delays in private litigation.

Or perhaps, finally, the bill is simply designed to allow Congress a say in court, leaving courts free to treat Congress’s views as they wish, much as they can consider a law review article or amicus brief.

The first interpretation is clearly problematic under cases like INS v. Chadha and Bowsher v. Synar, which hold that Congress can’t assign itself, or its subsets, the power to issue controlling interpretations of laws it passes. Intepretation is an executive and judicial function, not a legislative one. Therefore, Congress cannot delegate to itself the power to issue authoritative interpretations of unclear laws. If it disagrees with the way a law is implemented, its recourse is to clarify its intent by passing a new law. Bowsher v. Synar, 478 U.S. 714, 733 (1986). A necessary corollary is that Congress’s clarifying resolutions deserve no judicial deference.

Perhaps it might be argued that a bicameral resolution endorsing a signing statment would meet the requirements of bicameralism and presentment outlined in Article I, Section 7 of the Constitution, in effect amending the bill. But presentment envisons an order of decisionmaking in which Congress initiates a statutory amendment, presenting it, in turn, to the president — an order of proceeding that restrains the creation of new law, since it is more difficult for Congress to act swiftly.

The second and third interpretations are less clearly problematic as a matter of first principles, but they raise separation of powers problems under current caselaw. They arguably assign an executive power — the power to represent the general legal interests of the United States in the proper enforcement of the law, as opposed to concrete interests of a house or member of Congress in legislative rights and privileges — to Article I legal counsel who are removable entirely at the discretion of Congress, something Bowsher says is a no-no. Moreover, and relatedly, after Raines v. Byrd, it’s hard to see how Congress can grant its own counsel “party” status in litigation without violating the case or controversy requirement of Article III, since Congress has no concrete stake other than its general interest, shared with the public, in the proper interpretation of the laws. 

I’m sympathetic to the Specter bill’s goal — to cut off the signing statement as a wedge for expanding executive power — but it’s on strongest ground in its simple command to courts to ignore presidential signing statements. 

If You Cut the Budget, The Terrorists Win!

Peter Beinart tells readers of this week’s New Republic that the conservative critics of President Bush need to just get over themselves. 

As Beinart writes:

To listen to Bush’s critics, you would think that discretionary, nonsecurity-related spending has exploded on his watch. [Note: Emphasis is mine — you’ll see why this is important in a minute]. But it hasn’t. As the Center on Budget and Policy Priorities has shown, when you take account of inflation and population growth, it grew a mere 2 percent between 2001 and 2006. And, as a percentage of GDP, it actually fell. What has exploded — rising 32 percent after inflation and population growth — is spending on defense, homeland security, and international affairs. And the people most responsible for those increases are conservatives themselves, who demanded an expansive war on terrorism.*

The first half of the claim boils down to this: If you strip away defense, homeland security, entitlement spending and international aid — what Beinart calls “discretionary, nonsecurity-related spending” — you discover that government hasn’t really grown all that much by historical standards. 

The problem? Those categories account for 80 percent of the entire federal budget.

Call it the “Yeah, but” defense. Yeah, the budget has expanded massively, but if you take away the really big categories — and don’t feel compelled to clarify how you’re defining those big categories — then we come off looking really good! (Of course, as I’ve pointed out elsewhere, the GOP really doesn’t come off looking good. Let’s just assume they do for the sake of argument.) 

What’s missing from this don’t-mind-the-man-behind-the-curtain reasoning is an explanation of why stripping away all those categories yields a more useful comparison than simply looking at overall spending in the conventional and broadly-defined categories. Beinart doesn’t provide one. 

Avoiding such an explanation, however, ignores an important part of the argument he’s trying to critique. One of the more substantial complaints about the modern GOP leaders — a complaint shared not just by fiscal conservatives but also by centrist Democrats who also worry that spending has gotten out of hand — is their unwillingness to pursue offsetting spending cuts elsewhere in the federal budget to pay for the military operations in Iraq and Afghanistan, or Hurricane Katrina relief, or the various and sundry government expansions that Bush and congressional leaders have dreamed up. 

The second part of Beinart’s claim that the ”war on terrorism” is driving defense spending is also flawed. Only 16% of the combined defense budgets of the past six years went to the military operations in Iraq and Afghanistan, according to CBO estimates … and that’s assuming you include the Iraq operations as part of the war on terrorism. Why ignore the remaining 84 percent of the Pentagon budget?

The fiscal conservative critique of the GOP is in part a reaction against the presumption that all categories of spending — from unnecessary defense systems to crop subsidies — must rise or else the terrorists will “win.”  Recall, for instance, that the rhetoric around the 2002 farm bill was heavily laden with various references to national security. A “Dear Colleague” letter from Alabama Republican Terry Everett is indicative of the rhetoric used by supporters of that bill. In the letter, Everett claimed the bill would help “strengthen America’s national security” and “keep America strong.”   

Excluding all entitlement programs is also too nice to the GOP — or any party in power, for that matter. Congress has the power to moderate the growth of these programs, but they haven’t used that power more than once in the past six years and then only to very minimal effect. They could have reformed these programs, too, but they didn’t. Nor did they have to expand Medicare.       

I think government should be doing less. I have deep doubts about the war in Iraq. And I’m not a member of the doing-more-with-less school of efficient-government conservatism. But I and other Bush critics would certainly have less solid ground to stand on if overall government spending had remained tame over the past six years. Remember that under Reagan, despite a massive defense buildup, overall real annual federal budget growth was 2.6% — close to half the rate under George W. Bush so far. The rate was so low in the 1980s — lower than any president since Eisenhower — because substantial tradeoffs were being made in the budget then. Tradeoffs are not being made today.

Stripping out all sorts of different spending categories simply lets the GOP off easy. It also puts Beinart in the strange position of parroting the same defense the White House has used to fend off criticism of the president’s record.

A New Republic writer defending a Republican president’s budget record. Left-of-center analysts rallying to the defense of a GOP Congress. What’s next?  Dogs and cats living together?

* - An argument over whether these numbers are solid has already taken place at The American Scene blog run by Ross Douthat and Reihan Salam, who also use the CBPP numbers to rebut criticisms of President Bush. “War on terror” and “homeland security” expenses are both non-traditional budget categories that are not consistently delineated in the official federal data on spending. Any attempt to disaggregate the data must rely on multiple assumptions about how you classify each sort of spending program. In other words, readers need to take the CBPP estimates with more than a few grains of salt. (For more criticism of their estimates, numbers-junkies can read my Cato study from 2005 and my new book.) 

Robberies in the Capital

Today’s Washington Post has a front page story on robberies in the District of Columbia.

The District of Columbia has one of the strictest gun control laws in the United States. And the old saw about gun control is that when guns are outlawed, only outlaws will have guns. (Important loopholes: The mayor has his own armed security detail and so do other government employees.)

On this map of the city, the red dots indicate robberies where the criminal brandished a gun against the victim. Query: Is the city’s gun control policy helping the people or the criminals?

Go here for Cato material on gun control. To learn more about a constitutional challenge to DC’s gun control law, go here.

How, Again, Is This a Good Use of My Tax Dollars?

This week, Robert Cresanti, the under secretary of commerce for technology, presented the first-ever “Recognition of Excellence in Innovation” award to ODIN Technologies of Dulles, Virginia.

Why on earth a federal bureaucrat should run around giving awards to local firms is beyond me. Perhaps Technology Under Secretary Cresanti could have taken the day off. Or maybe just retired, if no actual work is pressing for his time. 

Let’s make the “Recognition of Excellence in Innovation” award a really special honor by discontinuing it. (Tell ODIN that nobody could ever reach the standard they’ve set.) 

I mean, really. Mad as hell and not gonna take it any more. Happy Friday.

School Vouchers on the Way in India?

According to an article in The Hindu, an education planning commission in India has recommended the creation of pilot voucher programs in its final “Approach Paper.”

I have no doubt that the impetus for this recommendation comes at least in part from James Tooley’s work in India and Africa over the past decade, including his most recent study showing the effectiveness and efficiency of private schools serving the poor in the city of Hyderabad.

A particularly interesting aspect of the article is the extent to which the Union Human Resource Development Ministry (in charge of education) misrepresented the facts in its statements to the reporter, Anita Joshua. I just fired off an e-mail to Ms. Joshua, setting the record straight. Some highlights below the fold…

Most notably, the Ministry claims that “the average cost of schooling in private unaided schools [in India] is much higher than in government schools.” The converse is true. I summarize the evidence from a variety of public/private sector comparisons of Indian schools in pages 6–10 of a book chapter that is available online here: http://www.schoolchoices.org/roo/How_Markets_Affect_Quality.pdf

In one of those studies (of Uttar Pradesh), for example, Oxford University professor Geeta Gandhi Kingdon found that unaided schools spend roughly half of what is spent by government schools, per pupil. (Geeta Gandhi Kingdon, “The Quality and Efficiency of Private and Public Education: A Case-Study of Urban India,” Oxford Bulletin of Economics and Statistics, Vol. 58, No. 1 (1996), pp. 55–80.) Interestingly, the same is largely true in the United states, where the average private school tuition fee is about half the total public school per-pupil expenditure. 

Also, a recent study published by the Cato Institute, conducted by University of Newcastle professors James Tooley and Pauline Dixon, found that personnel costs in Hyderabad’s unaided slum schools were a small fraction of those in nearby government schools — and personnel costs represent the lion’s share of school expenditures. Furthermore, Tooley and Dixon found that students in the private slum schools significantly outperform their peers in the more expensive public schools. 

Nor is there any validity to the Ministry’s claim that private schools are unavailable in rural areas. An extensive 1999 report found private schools in many rural areas across northern India, and also reported that they were providing better facilities and more actual teaching than their public counterparts. (Anuradha De, Jean Drèze, Shiva Kumar, Claire Noronha, Pushpendra, Anita Rampal, Meera Samsom, and Amarjeet Sinha, Public Report on Basic Education in India. New Delhi: Oxford University Press, 1999.)

Let’s hope Ms. Joshua brings this ammunition to her next interview with the Ministry.

University Lockdown Costs You Plenty

Gallaudet University, the only university in the world focused specifically on deaf and hard-of-hearing students, is locked down. Some students — though it’s never clear how many or what percentage of the overall student body — have barred the entrance to the school to protest the pending installation of a new president, Jane K. Fernandes.

The complaints against Fernandes are myriad, ranging from displeasure with her purported top-down management style to accusations that the presidential search process was not racially inclusive. No one issue, though, appears to be an overriding concern, nor do the reported issues, together, seem to justify students taking the school over Taps style, with football players providing muscle at the gates and even Gallaudet’s elementary and high schools shut down.

As overblown as all this seems, though, it shouldn’t be of much concern outside the university, right? After all, isn’t Gallaudet a private college, meaning that whether or not students shut it down should ultimately be a matter between the students, the school, and maybe a few parents who’d like to know what their tuition payments are going for?

If only.

For one thing, almost all American institutions of higher education receive substantial funds from taxpayers, whether it’s state money going directly to public colleges or federal dollars going to research grants, student aid, or just plain pork at public and private schools. As a result, almost any college shutdown not only costs students and schools time and money, but taxpayers as well.

The Gallaudet situation, however, is even worse. Two universities in the nation receive huge, direct appropriations from the federal government every year, and Gallaudet is one of them. (Howard University is the other.) For FY 2006, Gallaudet received a direct federal appropriation of more than $104 million, plus another $3 million in government grants and contracts. That same year, the school’s total revenues were slightly less than $149 million, meaning that 71 percent of Gallaudet’s money came directly from federal taxpayers. That makes Gallaudet, for all intents and purposes, a federal university.

Who knew? 

Unfortunately, now you know, and what seemed to be just Gallaudet’s problem, it turns out, is yours as well.