Archives: 11/2009

The Negative Feedback Loop Begins

I wrote on the Tech Liberation Front blog a couple of months ago about the shady practice among a few Internet retailers of handing off customers who accept a “special offer” to a company that charges people a monthly fee for some kind of credit monitoring service. And I argued hopefully that maybe technologists and the Internet community could generate a response to this problem:

Being a smart, informed, and aggressive consumer is each person’s responsibility if a free market is to operate well. The alternative is a negative feedback loop in which government authorities protect us, we rely on that protection and stop policing retailers. Thereby we abandon the field of consumer protection to government authorities, who—try as they might—can never do as good a job for us as we can for ourselves.

The Senate Commerce Committee is having a hearing today on “Aggressive Sales Tactics on the Internet and Their Impact on American Consumers.”

Government Electric

The recession has given the government an excuse for major interventions into markets, and the word “bailout” is found in business section almost daily. While there are justified concerns over government bailouts of large corporations, big businesses cashing in on the economic stimulus plan have flown below the radar.

In an essay for Cato Unbound on the issue of corporations and markets, libertarian theorist Roderick Long states: “Corporate power depends crucially on government intervention in the marketplace.” This dependency is on full display in an insightful Wall Street Journal story on General Electric’s overt efforts to hitch its future to billions of stimulus dollars.

The article is worth reading from start to finish, but here are some snippets:

The government has taken on a giant role in the U.S. economy over the past year, penetrating further into the private sector than anytime since the 1930s. Some companies are treating the government’s growing reach – and ample purse – as a giant opportunity, and are tailoring their strategies accordingly. For GE, once a symbol of boom-time capitalism, the changed landscape has left it trawling for government dollars on four continents.

‘The government has moved in next door, and it ain’t leaving,’ Mr. [GE CEO Jeffrey] Immelt said at the International Economic Forum of the Americas in Montreal in June. “You could fight it if you want, but society wants change. And government is not going away.’

A close look at GE’s campaign to harvest stimulus money shows Mr. Immelt to be its driving force… Inside GE, he pushed his managers hard to devise plans for capturing government money.

By January, Mr. Immelt had become a leading corporate voice in favor of the $787 billion stimulus bill, supporting it in op-ed pieces and speeches. Reporters who called the Obama administration for information on renewable-energy provisions in the legislation were directed to GE.

When the stimulus package was rolled out, Mr. Immelt instructed executives leading the company’s major business units “to put together swat teams to get stimulus money, and [identify] who to fire if they don’t get the money,” says a person who heard him issue the instructions.

In February, a few days after President Obama signed the stimulus plan, GE lawyers, lobbyists and executives crowded into a conference room at GE’s Washington office to figure out how to parlay billions of dollars in spending provisions into GE contracts. Staffers from coal, renewable-energy, health-care and other business units broke into small groups to figure out “how to help companies” – its customers, in particular – “get those funds,” according to one person who attended.

It speaks poorly for American capitalism when one of the nation’s biggest economic engines is assembling “swat teams” to go after taxpayer money. Instead of corporate America trying to figure out what products and services to bring to the marketplace, big business is taking its cue from politicians and bureaucrats in Washington. This isn’t socialism; it’s state corporatism and it bodes ill for long-term economic growth.

See this essay for more on the problems with special-interest spending. Also see this essay on why the excuses for government interventions in energy markets fall short.

A Rarity: Newspaper Argues Against Techno-panic, Cites Constitution

Progress & Freedom Foundation president and Cato alumnus Adam Thierer has done yeoman’s work for years pointing out, and arguing against, the phenomenon of techno-panic as it relates to children. That’s not the only area in which techno-panic can tighten its grip on the neck of common sense and the constitution, of course.

But here’s a delight I ran across this morning: the Los Angeles Times arguing against techno-panic despite the use of Web sites to research and case potential burglary victims (by the “bling ring,” soon to be the subject of a major motion picture).

The Times editorializes:

[T]hieves [did not] have to wait for the invention of Google maps to reconnoiter neighborhoods in search of easily accessible homes. That’s worth remembering if, as we fear, some legislator decides that a law should be passed to prevent Internet surfers from looking at houses they easily could scope out from the sidewalk… . . A law against photographing a home or what occurs outside it in plain sight — or disseminating the images to others — would be overreaching, not to mention unconstitutional.

What a delight—a major newspaper arguing to keep a hot issue in perspective and citing the constitution as a limit on government power! Thank you, L.A. Times.

Education Tax Credits the Choice for Independents in Virginia

My last post focused on the general results of a school choice poll in Virginia. Contra conventional wisdom, education tax credits are significantly more popular and less opposed than are charter schools.

Even more interesting is the stability of support for donation tax credits across party identification. A stunning 64 percent of Democrats support credits, with only 21 percent opposed. Independents support credits 65 percent to 22 percent.

Charters are supposed to be the poster child for policies targeting Independent voters. And yet charters draw 59 percent of support from independents and 23 percent opposition.

That’s a swing from a 43 percent margin of support for credits to a 36 percent margin for charters. And vouchers run even further behind with a 22 percent margin of support from Independent voters.

Smart politicians looking for cost-saving and effective education reform would do well to take note of these numbers.

More to come …

What’s the Most Popular Choice Reform in Virginia?

Pop Quiz: What’s the best education policy a moderate politician in Virginia can pursue?

  1. Vouchers
  2. Charter Schools
  3. Education Tax Credits

Conventional wisdom says go with charter schools, because they are a bipartisan, moderate compromise reform that will get you the largest number of Independents and the least opposition. Vouchers are too hot to touch. And what’s an education tax credit … oh, right, they’re too controversial as well

Conventional wisdom is WRONG.

The Friedman Foundation has released another in their invaluable series of state education polls, this time for once-purple Virginia. Their findings are consistent with other polls, and the pattern is worth highlighting.

Charter schools draw 59 percent in support and 26 percent in opposition. Vouchers find 57 percent in support and 35 percent in opposition. Personal-use credits get the support of 59 percent and are opposed by 32 percent.

Donation tax credits are supported by 65 percent of voters and opposed by 23 percent.

Charters, vouchers, and personal-use credits, in other words, are equally popular, with credits and vouchers drawing a bit more fire.  And donation credits are wildly popular with only a rump of opposition.

Heller Counsel Argues for an Originalist Revolution

Alan Gura, who successfully defended the individual right to keep and bear arms under Second Amendment in District of Columbia v. Heller has now filed his brief in the case that seeks to apply that right to the states, McDonald v. City of Chicago.  (Cato earlier filed a brief supporting Alan’s cert petition, the background to which you can read about here.)

The question presented in this case is: Whether the Second Amendment right to keep and bear arms is incorporated as against the States by the Fourteenth Amendment’s Privileges or Immunities or Due Process Clauses.  Remarkably, only 7 of the brief’s 73 pages are devoted to the Due Process Clause, which is the constitutional provision by which almost all the the Bill of Rights has been “incorporated” against the states.  Indeed, the brief argues that the Due Process Clause “has incorporated virtually all other enumerated rights” and so there is no reason to make the Second Amendment an exception.

The rest of the brief is far more interesting, arguing for overturning the ill-fated Slaughter-House Cases, which eviscerated the Priviliges or Immunities Clause in 1873.  Slaughter-House forced the Court to start protecting natural rights and fundamental liberties under the oddly named “substantive due process” doctrine – and it remains a bugaboo for legal scholars of all ideological stripes.  Overturning it would potentially open the door to challenges against legislation that violates a host of unenumerated rights, such as the right to enter into contract or to earn an honest living. 

Understandably, libertarians are excited at the prospect of Privileges or Immunities’ revival.  But so too are liberals, at the thought of potentially filling an empty constitutional vessel with positive rights (to health care, education, pensions, etc.).  I believe this to be an overstated threat from the perspective of constitutional interpretation – as opposed to legislation – and have an article coming out with Josh Blackman in the Georgetown Journal of Law and Public Policy in January making this point.  (The article, titled “Opening Pandora’s Box? Privileges or Immunities, The Constitution in 2020, and Properly Incorporating the Second Amendment,” will shortly be up on SSRN, but for now you can read the abstract/introduction here.)

In any event, P or I (as it’s known) is a vastly superior way of giving people in the states the right to keep and bear arms for self-defense. But it’s ambitious to argue this way rather than settle for the traditional jurisprudence.  As Orin Kerr says at the Volokh Conspiracy, “It’s certainly an attention-getting way to brief the case. It’s not just arguing for a win: It’s arguing for a revolution.”

For further discussion of Alan’s McDonald brief – which Cato will be supporting with an amicus brief next week – see Lyle Deniston’s write-up at SCOTUSblog.

The Constitutionality of the Individual Mandate

Ezra Klein defends an individual healthcare mandate against charges that it’s unconstitutional, and what’s striking to me is that the argument seems awfully wobbly even if you’re on board with a lot of the post–New Deal jurisprudence about the scope of federal power.  Sez Ez:

The summary is that you can look at the individual mandate as a tax, which is constitutional, or as a regulation forcing private actors to engage in a certain transaction, much like the minimum wage, which is also constitutional. I’ve also heard scholars mention auto insurance, which is an obvious analogue, and the Americans With Disabilities Act, which proved that the government can order businesses to install ramps, despite the fact that the constitution doesn’t explicitly give the federal government jurisdiction over entryways.

This doesn’t seem like the right level of analysis. Some taxes and regulations are within the ambit of federal powers; that doesn’t mean anything capable of being so described is. Some things not explicitly and specifically mentioned in Article I are nevertheless necessarily implicit in the enumerated powers; that doesn’t mean anything is. Auto insurance seems like a poor analogue because it’s a condition of access to government-maintained roadways. Ezra also mentions Massachusetts’ individual mandate, which seems rather beside the point in a discussion of the scope of Congress’ Article I powers. But bracket that. Even if you think the federal commerce power legitimately extends to legislation like the ADA, there’s intuitively a world of difference between saying that a commercial enterprise providing services to the public must provide them in such-and-such a fashion and insisting that private persons have to engage in a specified type of transaction just by dint of being alive. I don’t think the best reading of the Commerce Clause encompasses either, but it’s not that hard to conceive a reading that extends to the former but not the latter. I stress this just because I don’t think you have to be a libertarian or have a very restrictive view of the legitimate scope of federal power to believe there’s a genuine question here. The real form of the argument here looks an awful lot like: “Look, we’ve stretched commerce…between the several states so absurdly already, why are we even pretending it might be found to exclude anything?”