Archives: 06/2008

No News Is No News

The Court did not issue Heller today, which means it will do so Wednesday (or Thursday if, as expected, it does not get through its 7 remaining opinions on Wednesday).  The encouraging news from today is that Heller is the only opinion outstanding from the cases argued in March, and Justice Scalia is the only justice who has not yet written a majority opinion from that sitting.  That’s no guarantee, but the smart money is he will be the author.

The discouraging news from today is that the Court denied cert in Baylor v. United States, a federalism case in which Cato filed an amicus brief.  Briefly, we supported a pizza-shop robber who was prosecuted not in state court for, say, robbery, but in federal court for ”interfering with interstate commerce” and therefore violating the ”Hobbs Act” (a 1946 anti-racketeering law).  The Sixth Circuit held that the Commerce Clause permitted this prosecution because the pizzeria got its flour, sauce, and cheese from various states outside Ohio.  We argued that prosecuting robberies that have such an attenuated effect on interstate commerce destroys the line between the states’ power to punish violent crime and Congress’s power to regulate interstate markets.

Also not decided today were Davis v. FEC, the “millionaires’ amendment” campaign finance case in which we also filed a brief, and Exxon v. Baker, where $1.5 billion in punitive damages is at stake over a super-technical application of maritime law.

Another Entrepreneur Escapes French Tax System

One almost feels sorry for the French. Several years ago, supermodel Laetitia Casta escaped to London because of France’s onerous tax regime. This was a a particularly painful blow to French pride since she was selected in 1999 to be Marianne, a symbol of the nation. To add insult to injury, one of France’s most prominent chefs has now escaped to Monaco. The UK-based Times has the details:

France has just lost one of its greatest chefs. Alain Ducasse, the holder of 14 Michelin stars and a worlwide restaurant and hotel empire, has given up his French citizenship for the privilege of becoming a Monegasque, we hear today. Ducasse, 51, whose interests turn over about 160 million million euros a year, has gone into tax exile. He could have chosen Switzerland and kept his citizenship but Ducasse, a southerner by birth, has ties to Monaco, where he owns the three-star Louix XV. Monaco imposes no income or wealth tax on its residents – provided they are not French. …So, the wheeze for French would-be exiles is to become a Monaco citizen – a privilege accorded very sparingly. Prince Albert II has just granted this “sovereign order” to Ducasse.  There are only 8,000 Monaco citizens and there is a long waiting list for French candidates. …Because of the wealth tax plus steep income and social security taxes, many high earners and very well off people moved over the past two decades to London, Brussels and other capitals as well as the traditional haven Switzerland. They are not returning in noticeable numbers, mainly because the wealth tax remains and they do not trust their country to reverse policy at the drop of a hat. Sarko has maintained the Impôt sur la Fortune (ISF) as the 26-year-old annual tax is known (the exiles call it Incitation à Sortir de France). The tax gathers relatively little income and drives capital abroad but the public supports soaking the rich, so scrapping it is politically unacceptable.

But Americans should not be overly amused by this story. At least French taxpayers have the freedom to choose another nation’s tax system. The United States imposes an exit tax (a policy almost always associated with despicable regimes such as the Soviet Union and Nazi Germany), making it very difficult for people to dump the internal revenue code.

The Unmanageability of Managed Trade

Last week the U.S. International Trade Committee gave the green light to impose countervailing (anti-subsidy) and antidumping duties on imports of circular welded carbon steel pipe from China. The decision was noteworthy because it represents the first affirmative finding of injurious subsidization against China since the Bush administration lifted the informal 22-year old moratorium on using the CVD law against China. (The coated paper case last year was the first CVD case against China initiated post-moratorium, but ultimately the ITC did not find the domestic industry to be injured in that case, and thus no duties were imposed).

But the steel pipe case is noteworthy for another reason. It perfectly exemplifies the absurdity of our trade remedy laws. Under the antidumping and countervailing duty laws, consumers of the subject merchandise have no formal standing in the process. Under the statutes, the ITC is not permitted to consider the impact of prospective duties on these interests, nor is it required to even hear arguments from consuming interests.

Now, let’s juxtapose economic and business reality on this trade remedy law setup.

In 2001, the United States imposed antidumping duties on imports from several countries (including China) of hot-rolled carbon steel. (Despite record revenues, profits, and the unprecedented market power of U.S. steel producers, the ITC voted to continue those 2001 antidumping orders for another five years in 2007.)

Hot-rolled steel is a commodity product from which many different kinds of steel products are made, including circular welded carbon steel pipe. Before the 2001 order was imposed, Chinese producers could sell hot-rolled steel to Chinese and American producers of downstream steel products. After the antidumping order was imposed in 2001, the supply of hot-rolled steel for Chinese producers of downstream products – like circular welded carbon steel pipe – increased, and the price declined. Meanwhile, the supply of hot-rolled available to U.S. pipe producers, declined, and the price increased. What to make of all this?

Well for one thing, it’s not only plausible, but probable, that the reason U.S. pipe producers may be struggling is that access to their most important material input is stunted relative to their Chinese competitors’. The price of hot-rolled steel in the United States has been at record highs over the past couple years. And the antidumping order against hot-rolled is a tax on U.S. pipe producers and a subsidy to Chinese pipe producers.

If the antidumping law included a consumer interest provision (see “Mandate a Public Interest Test” on page 33), where the impact of prospective antidumping measures on downstream users and, indeed, on the economy as a whole was considered, there would be less demand for protectionist measures to compensate for the effects of protectionist measures.

An Irrelevant Europe - Best for the World?

In a recent op-ed Robert Kagan laments that (Western) Europe is sliding into irrelevance. But that might be the best thing for the rest of the world.

Don’t get me wrong, the world owes plenty to Europe. It’s given the world great art, architecture, literature, and music. It’s also given the world the ideas of universal education, the scientific method, research institutions, property rights, rule of law, democracy, religious freedom, and freedom of thought and expression, among other things. These ideas and institutions coalesced to power the engine of progress that drives the economic and technological development that have improved human well-being — not only in Europe but elsewhere — to levels far beyond what our ancestors could have imagined. Consequently, today we live longer, healthier, more educated, freer, and wealthier than ever before. But for the past century, Europe seems determined to undo all the good it’s ever done.

Europe gave the world the ideologies of Fascism and Marxism, which were responsible — or provided rationalizations — for 100–150 million deaths worldwide, including many outside Europe, most notably in China, Cambodia and North Korea. Then in a few short decades, despite having risen Phoenix-like from the ashes of destruction of World War II, instead of brimming with optimism, Europe has taken a decidedly pessimistic turn.

It no longer believes in progress. Its birth rate has dropped below replacement rates, yet, despite its protestations of equality, fraternity, secularism, and respect for human rights, it’s unwilling or unable to welcome or integrate immigrants of different colors or religious backgrounds into its societies. And one by one it’s abandoning the great ideas that brought it, and the rest of the world, progress, and advanced human well-being.

Its political leadership, although democratically elected, has abandoned democracy in its pursuit of a united Europe. The more the idea of the EU fails in democratic tests — most recently in Ireland — the more devious its politicians’ machinations to bypass popular approval.

It has abandoned scientific inquiry, relying instead on mantras such as the “science is settled.” Having abandoned science, it now relies on superstition, manifested in the notion of a global-warming-triggered apocalypse of Biblical proportions if average temperatures exceeds 2 degrees Centigrade above pre-industrial levels — an apocalypse complete with death, disease, pestilence, droughts, famines and floods. Not only is there no evidence for this, this superstition persists despite the current reality that more Europeans die in winter than in summer, Europe’s long history of misery and want during cold periods and plenty during warm eras, and that even as media coverage of extreme weather events becomes more compelling and ubiquitous, globally the deaths and death rates from such events are in long term decline. If Europe had spent a fraction of the resources in adapting to climate change as it did on complying with the futile, but politically-correct Kyoto Protocol, it might have reduced by thousands the death toll of its 2003 heat wave.

Europe is now on the verge of abandoning the quest for technological progress, preferring instead to be ruled by the so-called precautionary principle which, as applied by Europe, actually increases human misery and death. It does this by discouraging, if not vetoing, new and safer technologies that could displace older and less safe technologies on the grounds that “safer” is not good enough — it has to be absolutely safe.

The precautionary principle was used to justify relinquishing its use of DDT, which was easy, because Europe had already conquered malaria. It is also used against genetically modified crops. The misapplication of the precautionary principle, coupled with its abandonment of scientific inquiry evident in the torching and destruction of experimental trials on genetically modified crops and its reliance on superstition, has resulted in a de facto ban on such crops in most of Europe. But giving up such crops isn’t hard either. Western Europe is well fed — in fact today it worries more about obesity than hunger — and its farmers’ excessive productivity is actually a drag on its taxpayers. Some Europeans would also give up nuclear and coal, but that would actually be giving something up, so protestations to the contrary, that will come about only after renewable energies mature and are better able to pay for themselves without subsidies.

But worst of all, Europe is once again exporting dangerous, misanthropic ideas, which unfortunately are echoed even in the US where many are in thrall of European ideas, no matter how ill-conceived. These ideas are couched in doublespeak, such as the European version of the precautionary principle, which could kill as many people as the failed ideologies of Fascism and Marxism.

Europe talks endlessly of helping developing countries and offering token amounts of aid but then refuses to reform its agricultural policies which would do a lot more for helping the latter help themselves. At the same time it bemoans the new prosperity of long-suffering Asia that has lifted over a billion out of a poverty that Europe has not known since even before the French Revolution because it’s enabled by and rides on greater energy use. And for that, some Europeans threaten punishment through carbon tariffs.

But energy use and economic development are inextricably linked not only in China and India but in Europe and elsewhere. Even as energy use fueled economic development, it freed human beings from back-breaking physical labor, allowed women to escape the drudgery of household work, equalized economic opportunities for women, reduced the need for child labor, liberated animals from being our beasts of burden, and enabled brains to displace brawn, laying the foundation for a less energy-intensive economy.

Europe campaigned actively, but fortunately unsuccessfully, to ban DDT. Despite this, African nations, deferring to European “expertise” on matters technological while fearing a European boycott of their agricultural exports if even trace amounts of DDT are found on them, have been slow to adopt DDT to combat malaria — fears that Europe did nothing to dispel and may, in fact, have actively encouraged. For the same reasons, Africans have been reluctant to turn to genetically modified crops to reduce hunger and malnutrition. And once again, Europe is standing silently by if not actively discouraging the use of genetically modified crops.

For context, consider that over 6 million people die each year from malaria, hunger and malnutrition, a toll that annually rivals that of the entire Holocaust. Yet Europe has done little to help or reassure Africa in this regard, thereby abandoning one of the Holocaust’s most important lessons, namely, inaction can be no less culpable than active participation.

Europe may be able to walk away from further economic and technological development, but the rest of the world can’t afford to, not if it values human and environmental well-being.

An irrelevant Europe could save innumerable lives in the developing world. And that might be best for this world.

TV Is Great

Books? Newspapers? Who needs ‘em!

Take a look at this clip from the Colbert Report, which lampoons the overwrought reaction several politicians had to the recent Boumediene decision. (Tim Lynch wrote about it here, here, and here.) Fear-mongerers are increasingly looking like buffoons, thanks in part to the native common sense of comedy writers. And thus Colbert introduces Neal Katyal for a quick primer on the U.S. Constitution and the genius of its design.

Comedy Central doesn’t meet your standard? Not effete enough? TV has something for you too.

Here (in RealAudio and MP3 format) is a segment from Friday’s Newshour with Jim Lehrer on PBS in which something unique and exciting happens: A victim of the flooding in the midwest exhibits personal responsibility and does not ask for government help. Here’s the key couple of sentences:

Narrator Elizabeth Brackett: Despite the devastation, [flood victim Barb] Boyer, like many who farm in these floodplains, says she does not expect much government help.

Barb Boyer: We’ve always lived our life that we’re responsible for our own choices, our own destiny. And we chose not to carry the flood insurance. That was our responsibility. There’s a lot of people that - of course, we are going to need help, but do I expect it? No. We’ll start over. That’s all I know right now.

It’s stirring and inspiring to see people in dire straits who haven’t abandoned their values, the values that make this country great.

And it’s all brought to you by TV!

Jim Webb, Drug War Peacenik?

I’ve just posted a piece at the Guardian on Sen. James Webb’s Scots-Irish ethnic populism. But he’s got his good side, too. A Virginia newspaper reports today:

Virginia Sen. Jim Webb began building a public case Thursday to change the nation’s drug laws to stress treatment over incarceration for nonviolent offenders.

The freshman Democrat held a hearing of the Joint Economic Committee to solicit testimony from prosecutors and scholars who argued that the decades-long emphasis on incarceration has been costly and ineffective.

Perp Walk for Former Bear Stearns Employees

Today many newspapers ran a front-page photograph of ex–Bear Stearns fund managers walking in handcuffs. It’s called a “perp walk.” Instead of arresting people quietly, the police parade them in handcuffs before the media. The walk refers to when the whole spectacle is orchestrated in advance (i.e. “Are the TV cameras out there?  Okay, let’s park the van 3 blocks away and walk slowly over to the courthouse.”)

Federal Appellate Judge David Sentelle, who was a former prosecutor himself, had a terrific article condemning this pernicious practice.  Here’s an excerpt:

Why does the prosecutor subject the accused to that walk of shame in handcuffs before the media?  It still appears to me to be no more nor less than an attempt improperly to sway the thinking of potential jurors or subject to the punishment of shame an accused who has not yet been convicted of anything…. The real shame, I think, is that of the prosecution more than the defendant. 

Unfortunately, the full article is not available online. 

For related Cato work, go here.