Archives: January, 2012

“You could use it at a specific event. You could use it at a shooting-prone location…”

That’s NYPD Commissioner Ray Kelly touting a new technology called “terahertz imaging detection” to a local news outlet.

Terahertz radiation is electromagnetic waves at the high end of the infrared band, just below the microwave band. The waves can penetrate a wide variety of non-conducting materials, such as clothing, paper, cardboard, wood, masonry, plastic, and ceramics, but they can’t penetrate metal or water. Thus, directing terahertz radiation at a person and capturing the waves that bounce off them can reveal what is under their clothes without the discomfort and danger of going “hands-on” in a search for weapons. Many materials have unique spectral “fingerprints” in the terahertz range, so terahertz imaging can be tuned to reveal only certain materials. (In case you’re wondering, I got this information off the top of my head…)

Will the machines be tuned to display only particular materials? Or will they display images of breasts, buttocks, and crotches? The TSA’s “strip-search machines” got the moniker they have because they did the latter—until the agency tardily re-configured them.

Then there’s the flip-side of not going “hands-on.” Terahertz imaging detection doesn’t natively reveal to the person being searched that law enforcement has picked him or her out for scrutiny. A pat-down certainly lets the individual know he or she is being searched, positioning one to observe and challenge one’s treatment as a suspect. Terahertz imaging lacks this natural—if insufficient—check on abuse.

So terahertz imaging is not just a “hi-tech pat-down.” Its potential takes what would be a pat-down and makes it into a secret, but intimate, visual examination—a surreptitious strip-search. Pat-downs and secret strip-searches are very different things, and it is not necessarily reasonable, where a pat-down might be called for, to use terahertz imaging.

And that brings us to the fundamental problem with Commissioner Kelly’s proffer to use this technology at a “specific event” or at a “shooting-prone location.” These contexts do not create the individualized suspicion that Fourth Amendment law demands when government agents are going to examine intimate details of a person’s body and concealed possessions.

It is certainly possible to devise a terahertz imaging device and a set of use protocols that are constitutional and appropriate for routine, domestic law enforcement, but Commissioner Kelly hasn’t thought of one, and I can’t either.

Consider the dollar costs and potential health effects of terahertz imaging detection, it might just be that the pat-downs pass muster far better than the high-tech gadgetry.

Oh.

From today’s Politico Pulse:

House Minority Leader Nancy Pelosi did her part Wednesday to drum up support to use war savings to pay for the ‘doc fix,’ saying both parties have embraced the savings in the past. ‘It is not a gimmick,’ she told reporters during her weekly Capitol Hill press conference. ‘It’s what the Republicans used in the Ryan budget.’

‘Will the Feds Be Ready With the Fallback Insurance Exchanges by October 2013?’

That’s the title of Robert Laszewski’s latest blog post:

The White House just released a report saying that good progress is being made [toward creating health insurance Exchanges] in 28 states. That begs the question, what about the other 22?

Writing in Kaiser Health News, Julie Appleby recently reported that that HHS has let just two contracts toward building the federal fallback exchanges. One is for $69 million to build the data hub so that federal agencies can share data with the exchanges–the IRS for example. The other contract is more directly related to building federal fallback exchanges, a $94 million contract.

But in their progress report today, the administration said that they have already advanced $729 million to the states for exchange construction––17 of those states receiving $1 million, or less. So, more than $700 million has gone to 33 states–and that is just federal money to date.

If the feds are going to be ready to launch 10 or 20 federal fallback exchanges these numbers just don’t compute. It is going to take a lot more than the $94 million HHS has contracted for to launch that many federal exchanges in the states that refuse to do so.

HHS says they will be ready. But they have been awfully secret over just how they are going to have lots of exchanges ready to go in 20 months. It is hard to see how that $94 million contract is more than just a down payment…

Right now, the numbers don’t compute–the number of states that could well not be ready, the federal money being spent by states that say they will offer exchanges, and the much less money HHS admits to be spending for those that will not be ready.

Where’s the plan?

The administration’s claim that 28 states are taking “strong steps” toward creating Exchanges is questionable. For one thing, the administration should update their “good progress” count to reflect the fact that Wisconsin Gov. Scott Walker (R) just returned a $37 million ObamaCare grant and refused to create an Exchange. In that light, the administration’s announcement is reminiscent of a scene from Animal House:

The question of whether states create ObamaCare Exchanges is, of course, central to the survival of the law.

 

The Panel Makers’ Petition

One of the most famous documents in the history of free-trade literature is Bastiat’s famous “Candlemakers’ Petition.” In that parody, the French economist and parliamentarian imagined the makers of candles and street lamps petitioning the French Chamber of Deputies for protection from a most dastardly foreign competitor:

You are on the right track. You reject abstract theories and have little regard for abundance and low prices. You concern yourselves mainly with the fate of the producer. You wish to free him from foreign competition, that is, to reserve the domestic market for domestic industry.

We come to offer you a wonderful opportunity… .

We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival …  is none other than the sun.

For after all, Bastiat’s petitioners noted, how can the makers of candles and lanterns compete with a light source that is totally free?

Thank goodness we wouldn’t fall for such nonsense today. Or would we?

We may be about to find out. Makers of solar panels have petitioned the U.S. Department of Commerce and the International Trade Commission to slap tariffs on imported Chinese panels. Christopher Joyce of NPR reports that Gordon Brinser, CEO of Solar World, complains that U.S. manufacturers can’t compete with cheaper Chinese imports. The Chinese panels aren’t free; but just as Bastiat’s candlemakers complained, the competition is hard to counter.

Perhaps the comparison is unfair. After all, the Coalition for American Solar Manufacturing isn’t asking for protection from the sun, only from Chinese panel producers who are allegedly “dumping” panels into the American market “at artificially low prices.”

What’s the difference, though? Any source that supplies solar panels to American consumers and businesses is a competitor of the American industry. And any source that can deliver any product cheaper than American companies is a tough competitor. Domestic producers will no doubt gain by imposing a tariff on their Chinese competitors. But companies that install solar power will lose, by having to pay higher prices for panels.

Businesses would always prefer a world without competitors. If they can’t outcompete their rivals in the marketplace, they may be tempted to ask the government for protection. And our “antidumping” laws actually invite such complaints. But economists agree that consumers, and the businesses that use imported products, lose more on net than producers gain. Protectionism is a bad deal for the American economy. Let’s hope the uncompetitive solar panel manufacturers get told to go build a better mousetrap.

More on “antidumping” laws here.

Courts, FCPA, and Runaway Federal Prosecutors

As I’ve noted previously in this space, the Justice Department has been strenuously ramping up prosecutions under the Foreign Corrupt Practices Act, the law that criminalizes many of the sorts of official payments that alas typify the business climate across much of the globe. Per Shannon Green at Corporate Counsel, “2011 Was a Banner Year for FCPA Enforcements and Trials.” Unfortunately, as I argued in that earlier post, the law is so vague, uncertain and unpredictable in its reach that many businesspersons risk prosecution even though it is far from clear that their actions actually did violate the law.

Don’t just take my word for it: ask federal judges. Over the past two months alone they’ve thrown out three high-profile FCPA prosecutions in whole or part after finding the Department hadn’t proved its case.

On Monday U.S. District Judge Lynn Hughes in Houston, after hearing the prosecution case, dismissed the jury and summarily tossed out DoJ’s 12-count FCPA indictment against John O’Shea, an executive with the Swiss engineering company ABB Ltd., over allegedly improper payments in Mexico. Judge Hughes “said O’Shea’s conduct was reasonably explained by lawful motives,” to quote FCPA Blog. He also dismissed a conspiracy count. C. M. Matthews at the WSJ’s Corruption Currents Blog has more on the case. (O’Shea continues to face some other counts, in particular under the federal “money laundering” statute, itself a case study in rampant overcriminalization.)

Last month district judge Richard Leon in Washington, D.C. dismissed conspiracy charges against six defendants caught in an African arms-trade “sting” operation, which resulted in the outright acquittal of one of the defendants, Stephen G. Giordanella, who unlike the others faced no substantive FCPA charges. Earlier, Judge Leon criticized federal prosecutors for “sharp” tactics in handling evidence of interest to the defense.

And DoJ’s most stinging embarrassment of all came last month as well, when federal judge Howard Matz in Los Angeles – quoting the WSJ again – “threw out the landmark FCPA conviction of Lindsey Manufacturing Co., the first company convicted under the law, and offered a scathing assessment of the Justice Department’s handling of the case.” Specifically,

it is with deep regret that this Court is compelled to find that the Government team allowed a key FBI agent to testify untruthfully before the grand jury, inserted material falsehoods into affidavits submitted to magistrate judges in support of applications for search warrants and seizure warrants, improperly reviewed e-mail communications between one Defendant and her lawyer, recklessly failed to comply with its discovery obligations, posed questions to certain witnesses in violation of the Court’s rulings, engaged in questionable behavior during closing argument and even made misrepresentations to the Court.

Efforts to reform the substance of FCPA are picking up steam in Congress, and that’s all to the good. But equally or more vital to the public liberty is countering the danger of out-of-control federal prosecution, which we’ve seen lately in fields ranging from environmental enforcement to dubious obstruction-of-justice charges. Isn’t it time for Congress to use its oversight powers more vigorously?

Wisconsin Stiff-Arms ObamaCare

For the better part of a year, I have been urging states to refuse to implement ObamaCare, and to send any ObamaCare grants back to Washington, D.C.. In October, I was pleased to see the Heritage Foundation’s Ed Haislmaier call on states to do the same.

Late yesterday, Wisconsin Gov. Scott Walker (R) became the latest governor to heed that advice. Walker announced Wisconsin will return the $37 million “Early Innovator Grant” it received from the Obama administration under the health care law.

Wisconsin never should have accepted that money. Its purpose was to rope state officials into implementing a law that Walker himself described as “unprecedented,” “unconstitutional,” and jeopardizing “the foundational principle, enshrined in our Constitution, that the federal government is one of limited and enumerated powers.” Yet Walker accepted the Early Innovator Grant after Wisconsin joined the Florida v. HHS lawsuit, and after a federal district court declared the entire law unconstitutional and void.

Nevertheless, Walker did the right thing by joining the other two GOP governors who received Early Innovator Grants—Kansas Gov. Sam Brownback and Oklahoma Gov. Mary Fallin—in sending the money back. Walker’s move probably took no small amount of political courage, given how hard the health insurance industry and other ObamaCare profiteers—including prominent Republicans—have been lobbying states like Wisconsin to create an Exchange.

Kudos.

David Brunori Comes Out as a Libertarian

My friend David Brunori announced this week that he is no longer a “liberal” but a libertarian, although he says of the “bleeding heart” variety.

This is interesting because David has long been one of the nation’s top state fiscal experts. He is currently an editor of the Tax Notes family of periodicals (which are subscription only).

What made David see the light about government?

I’ve been calling myself a liberal in the pages of State Tax Notes since I began this column in 1996. I’ve been introduced at conferences and bars as a liberal tax pundit, a liberal professor, and a card-carrying liberal. In my line of business, it was expected that one would either be liberal or, if you were a pawn of the 1 percent, a conservative. Decent tax policy folks weren’t libertarians. Libertarians had no tax policy. But I’m too old to hide my feelings.

I came to realize my true identity by taking a survey on the Libertarian Party website. I scored a perfect 100 percent on the personal freedom meter, but only an 80 percent on the economic freedom meter. Still, those scores make me a libertarian. Some of my liberal friends will hate me for coming out. But I’ll remind them that hate is not a tax policy value. Besides, by definition, I still care for the poor and dispossessed. I’m no anarchist. I’m no isolationist. I still believe that government has a positive role to play in society. I want good roads and teachers and appreciate that someone will answer the phone when I dial 911. But I think we should look at government more skeptically.

I’m weary of corporate welfare. I’m weary of tax incentives. I’m weary of government economic policy that’s largely intended to enrich politicians’ cronies. For example, California Gov. Jerry Brown (D) has been hellbent on spending $93 billion on a train that apparently no one wants and few will ride. But a small number of connected men would make a fortune building it.

I’m weary of the incessant arrogance of the nanny state. The Boston Public Health Commission recently voted to ban electronic cigarettes from the workplace. Memo to those in Boston: Electronic cigarettes are fake. They blow a harmless vapor of mist. Real cigarettes are banned from public places purportedly because of the dangers of secondhand smoke. Personally, I think the marketplace can handle smoking issues just fine, but let’s assume people are too stupid to make decisions about working at or patronizing places that allow smoking. What gives political elites in Boston the right to ban a product that has no secondary harm? Nothing. They do it because they don’t like people who smoke (even ersatz smokers). But more importantly, they do it because they have the power. I’d go blow real smoke rings in their faces if it weren’t so obviously immature.

David also provides a useful essay in Tax Notes this week: “A Practical Approach to Libertarian Tax Policy.” He proposes seven principles to guide tax policy from a limited-government perspective:

  1. Pay for Government—With Taxes [not debt]
  2. Reject Tax Expenditures
  3. Make Taxes Visible
  4. Reject Excise Taxes
  5. Reject Inefficient Taxes
  6. Oppose the VAT
  7. Embrace Federalism and the Property Tax

It’s a pretty good list. David and I particularly have a mind meld on the importance of fiscal federalism. David is an excellent analyst and concise writer, so I’m glad he’s now on the team.

For more on libertarian tax policy, readers can look at my “Options for Tax Reform.” I propose three broad principles to guide tax reform: simplification, efficiency, and limited government.