Archives: 12/2009

Vague Laws Defy the Rule of Law

Following Enron’s downfall, the federal government charged company CEO Jeffrey Skilling with “honest services fraud” connected to the alleged manipulation of Enron’s market value (and other securities irregularities).  This charge — also at issue in two other cases before the Court this term — is based on a statute which says, in its entirety: “For the purposes of this chapter, the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.”

Skilling was convicted, and his conviction was upheld by the Fifth Circuit.  The Supreme Court agreed to review the application of the “honest services fraud” statute to Skilling (as well as the issue of potential jury bias stemming from pretrial publicity in Houston).  Cato, joined by the Pacific Legal Foundation, filed an amicus brief supporting neither party, arguing simply that vague statutes such as the one at issue here offend due process.

We take no position on whether Skilling committed a crime, or even the crime at issue here (whatever that may be).  Instead, we argue that the Court should clarify that the constitutional prohibition on vague laws protects sophisticated and unsophisticated defendants alike in the realm of economic regulation, as well as in criminal law.  The due process requirements of fair warning and definiteness apply equally in the contexts of white collar business crimes, business torts, and civil regulations.

Vague laws involve three basic dangers:  First, they may harm the innocent by failing to warn of the offense.  Second, they encourage arbitrary and discriminatory enforcement because vague laws delegate enforcement and statutory interpretation to individual government officials.  Third, because citizens will take extra precautions to avoid violating the law, vague laws inhibit our individual freedom.

For more on this issue, see Tim Lynch’s posts here and here, Gene Healy’s op-ed, or the related policy forum and podcast.

More Sightings of Libertarian Voters

Michael Petrilli created a stir with his Wall Street Journal op-ed, “Whole Foods Republicans,” on Monday. He noted that the American electorate includes more college graduates every year, and in 2008 the Republican nominee for president lost the college-educated vote for the first time since the 1970s. Republicans need to stop sneering at the “arugula vote” and start appealing to educated, progressive voters:

What’s needed is a full-fledged effort to cultivate “Whole Foods Republicans”—independent-minded voters who embrace a progressive lifestyle but not progressive politics….

What makes these voters potential Republicans is that, lifestyle choices aside, they view big government with great suspicion. There’s no law that someone who enjoys organic food, rides his bike to work, or wants a diverse school for his kids must also believe that the federal government should take over the health-care system or waste money on thousands of social programs with no evidence of effectiveness….

Even more important is the party’s message on divisive social issues. When some Republicans use homophobic language, express thinly disguised contempt toward immigrants, or ridicule heartfelt concerns for the environment, they affront the values of the educated class. And they lose votes they otherwise ought to win.

These voters are part of the “libertarian vote” that David Kirby and I have been exploring. Libertarian voters tend to be more educated than average (see “The Libertarian Vote,” table 11, page 17), and they can be described as “fiscally conservative and socially liberal.” It’s good to know other people are noticing them, and we hope that soon candidates and consultants will take note. For those who are still dubious, the day after the Wall Street Journal column, the Washington Post published this letter:

When I read House Minority Leader John Boehner’s Washington Forum commentary about the GOP’s thoughts on economic policy and job creation – as compared with that of the Obama administration [“A better plan for jobs,” Dec. 11] – I wanted to cheer. I am concerned about America’s increase in debt and think that the health reform plan is interventionist and has no hope of reforming health care.

But I can’t cheer. Because I apparently can’t be a Republican – limited government, fiscal conservative – unless I am also willing to vote for “pure conservative” candidates a la the purity test being proposed to the Republican National Committee: pro-life, anti-gay marriage, draconian immigration policies [“A party both united and divided,” front page, Nov. 30]. These are policies I refuse to support.

So, whom do I vote for next year?

Kathy Rondon, Falls Church

I don’t know if Ms. Rondon shops at Whole Foods, but she’s definitely a part of the “libertarian vote.” Republicans wondering why they lost in 2006 and 2008, and Democrats worrying about slipping poll numbers during 2009, should take a look at the libertarian slice of the electorate.

Our System of Government Exists to Prevent This Kind of Thing

The Hill’s Congress Blog asks, “Will the Senate pass a health care reform bill before it adjourns for the year?”

I answer:

It’s not looking good – nor should it.

The Reid bill becomes less popular with each passing day.  (So too does President Obama’s handling of health care.)

CBS News is reporting that Reid wants to hold a vote before Christmas because he doesn’t want senators to go home and hear from their constituents.

Reid has been systematically suppressing a complete cost estimate of his bill.

Reid’s manager’s amendment will make unknown, countless, and dramatic changes to that 2,074-page bill – and Reid wants to vote on it before anyone knows what those changes are.

Even Max Baucus admits that not a single senator understands the Reid bill.

Our federalist system, the separation of powers, our bicameral national legislature, six-year terms for Senators, staggered Senate elections, and the Senate’s procedural rules all exist precisely to prevent what Reid is trying to do: ram a sweeping piece of legislation through Congress without due consideration.

Tax Hike Commission

The Senate Homeland Security and Government Affairs Committee is holding hearings today focused on Senator Kent Conrad (D-ND) and Judd Gregg’s (R-NH) idea to set up a special Task Force to draft a deficit-reduction plan. The plan would get fast-tracked through Congress for a vote and “everything would be on the table.”

For taxpayers, this idea creates the threat of large tax increases on top of all the other tax increases being discussed in Congress. While the senators supporting a Task Force express valid concerns about the government’s exploding debt, the plan could launch a drive to impose a European-style value-added tax in America.

In theory, such a Task Force could come up with some meaty and long-overdue cuts to the federal budget. But nine of the senators co-sponsoring the Conrad-Gregg Task Force, including Conrad, voted in favor of the massive spending bill passed by the Senate on Sunday, which increased appropriations by 10 percent in a single year.

In calling for deficit reduction, Senator Conrad says that “it is no longer enough for Congress to simply talk about reform; it is time for action and leadership.” But Senator Conrad certainly hasn’t shown reform leadership on farm subsidies. So until he and his colleagues start restraining their own spending appetites, it’s safe to assume that ”everything on the table” really just means a sneaky, under-the-table tax increase.

DC Vouchers Solved? Generous Severance for Displaced Workers

Colbert King argues that DC should continue the opportunity scholarships private school choice program on its own dime, instead of complaining that Congress is killing it off. He starts off with a refreshing dose of realpolitik: “It should come as no surprise that Democratic congressional leaders are effectively killing the program. They, and their union allies, didn’t like it in the first place.” Too true. This is what disgusts many Americans about politics, but hey, that’s the reality.

But then he seems to descend into uncharacteristic naivete with this:

If the city likes vouchers so much, why shouldn’t the District bear the cost? The answer is as clear as it may be embarrassing to voucher proponents: D.C. lawmakers don’t want to ask their constituents to shoulder the program’s expense.

That is NOT the answer. DC lawmakers are familiar with DC’s budget. DC’s FY 2009 budget, as I show in this Excel spreadsheet file, allocated $28,170 per pupil for k-12 schooling. And the average voucher amount is not $7,500, as King claims. That’s the maximum. The average is $6,620 one quarter of what the district is spending on k-12 schooling. So operating the voucher program entirely out of the District of Columbia’s own budget would not cost a dime. And if expanded, it would save DC tens of millions, if not hundreds of millions, of dollars.

So DC lawmakers are most certainly NOT afraid of asking constituents to pay for it – it would more than pay for itself. What DC lawmakers must be afraid of is that DC schools have become a massive jobs program instead of an educational program. They must fear that if the voucher program were expanded it would put many non-teaching staff out of work – including perhaps some of their own supporters.

Well how about a realpolitik solution to that problem: offer displaced workers 18 months of severance pay at something like 75% of their current salary. That would give them plenty of time to find other work, and it could be paid for from the savings of students migrating from public schools to the voucher program. This would mean that taxpayers would not see savings in the first couple of years, but after that the District would be able to offer taxpayers generous tax cuts while also offering kids significantly better learning opportunities.

Surely the details of such a deal could be hammered out by experienced politicians and negotiators. Because, really, the status quo is insane. Why keep paying $28,000 for a worse education than the voucher program is providing for $6,600? That is sheer madness.

A Civil Liberties Roundup

Here are some interesting new items on the web:

  • Cato Senior Fellow Nat Hentoff is interviewed by John W. Whitehead of the Rutherford Institute.  Nat says “Obama has little, if any, principles except to aggrandize and make himself more and more important.”  And “Obama is possibly the most dangerous and destructive president we have ever had.”  Go here for the full interview.
  • Cato adjunct scholar Harvey Silverglate is blogging this week over at the Volokh Conspiracy on his new book, Three Felonies a Day.
  •  Cato Adjunct Scholar Marie Gryphon, who is also a Senior Fellow with the Manhattan Institute, has just put out a new paper, It’s a Crime: Flaws in Federal Statutes That Punish Regular Businesspeople.
  • Cato Media Fellow Radley Balko takes a look at the pathetic machinations in the Chicago Police Department.  Reminds me of the proud boast from a patronage worker in the political machine: “Chicago ain’t ready for reform!”

Good stuff here.  For more Cato scholarship, go here.

Whip (Health Care) Inflation Now?

During the runaway inflations of 1974 and 1979, Presidents Ford and Carter suggested that inflation was caused by the profligacy of American households. President Ford’s infamous “Whip Inflation Now” speech, for example, said, “Here is what we must do, what each and every one of you can do: To help increase food and lower prices, grow more and waste less; to help save scarce fuel in the energy crisis, drive less, heat less.”

Much of the recent discussion of health care costs likewise treats this as a problem caused by a demonic private insurance industry, and therefore requiring such “reforms” as expanding Medicaid to the non-poor and Medicare to the non-old.

The facts are quite different, as shown in “The Evolution of Medical Spending Risk” by Jonathan Gruber of MIT and Helen Levy of the University of Michigan, in the latest Journal of Economic Perspectives.

Gruber and Levy calculate that real private health care spending per person (in 2007 dollars) “increased from about $700 to $3,500 between 1960 and 2007, a five-fold increase.” They note that “private out-of-pocket spending has not quite doubled.” Yet “government health spending over the same period … increased from about $250 to $3,5000, a 13-fold increase.”

In fairness, the quality of health care has been hugely improved since 1960. And prices of physician services (which are often incorrectly compared with the overall consumer price index) have risen no faster than prices of non-medical services.

In any case, President Obama’s claim that the pace of total public and private spending on health care could somehow be “contained” by greatly increasing government spending clearly flunks 3rd grade arithmetic.

Unless the hidden agenda is to impose draconian wage and price controls and political rationing on health care providers, all the rhetorical pretense about proposed health care legislation being a way to hold down overall spending on health care is like saying the solution to chronic drunkeness is more booze.