Archives: 06/2012

Citizens United Lives for Another Day

The Supreme Court has now decided the Montana Supreme Court’s effort to overturn or to constrain Citizens United. As many expected, the Montana Court has been reversed without having a formal briefing and argument.

The five justices who decided Citizens United also decided this case. The four dissenters included Justice Stevens’ replacement, Justice Kagan. The majority found the case to be uncomplicated:

The question presented in this case is whether the holding of Citizens United applies to the Montana state law. There can be no serious doubt that it does. See U. S. Const., Art. VI, cl. 2.

They refer to the Supremacy Clause: “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”

If judges in every state are bound by the Constitution and thus, the First Amendment, didn’t the Montana judges act contrary to their constitutional obligations?

The dissenters disagree with Citizens United and would have overturned it or allowed Montana to violate the First Amendment.

The party of government has long believed in the supremacy of the Supremacy Clause. For them moral progress is measured by increases in the scope and power of those who reside inside the Beltway. The four dissenters have found an exception to such centralization. No doubt their turnaround depends on new research into the meaning of the Fourteenth Amendment.

This decision should remind everyone that if one justice in the Citizens United majority leaves the Court, and President Obama selects his replacement, Citizens United will almost immediately be overturned.

Did My Student Loan Rate Rise? I Barely Noticed

We should all be so lucky as to have our crises be like the looming interest rate change on some student loans. Yes, the rate on subsidized federal loans will double on July 1 absent congressional action, but that needs to be put into context to see that it’s a potential “crisis” – as I heard it described on a radio news report last Friday – akin to your yacht sinking. Your toy, bathtub yacht.

Starting July 1, rates on subsidized loans – a subset of federal loans in which taxpayers eat beginning interest payments as well as bearing non-repayment risk – are set to rise from 3.4 percent to 6.8 percent.

That might sound bad, but note that the rates have only been at 3.4 percent for a year. A 2007 law set them on a gradual decline from 6.8 percent to 3.4 percent over five years. So it’s not like 3.4 percent has been the norm for decades…or even two years.

Next, the rate increase will only affect loans originated after July 1. People with existing loans won’t suddenly see the rates on all their subsidized loans double.

Third, while a rate doubling sounds big, the practical effect according to the White House’s own calculations will be to add about $1,000 to an average loan over its lifetime, which is about ten years. That translates into an additional $8.33 per month – less than the cost of a DC movie ticket.

Finally, freezing the rate for another year will do almost nothing for currently suffering middle-class families, unlike what the White House intimated in President Obama’s most recent weekly address. The large majority of loans originated after July 1 won’t even begin to be repaid for at least another year-and-a-half, after rising seniors have graduated and gone through the six-month repayment grace period.

It’s well known that a crisis is extremely useful for affecting political change – just ask Chicago’s mayor – but it often translates into bad policy. And that’s exactly the kind of policy that creating artificially cheap student loans is. They help fuel skyrocketing college prices, subsidize massive college waste, and contribute to millions of people enrolling who either never complete their studies or who finish largely worthless degrees.

All those consequences are problems that Washington really should worry about. But that’s the other thing about a crisis: It’s usually only embraced when it means giving stuff away to buy lots of votes.

Eat Local, Degrade the Environment

The new book The Locavore’s Dilemma, which will be presented at Cato on Wednesday, got a good review in Saturday’s Wall Street Journal:

Pierre Desrochers and Hiroko Shimizu seem to have had the most fun among this group of authors. “The Locavore’s Dilemma” argues that the benefits of eating local have been vastly overstated by food activists and its serious detriments swept under the rug. The tone is distinctly upbeat, no doubt because being a gleeful debunker is fun but also because the two authors are resolutely cheerful about the world’s food situation.

Mr. Desrochers and Ms. Shimizu, a married couple who are both professional economists, present a counterintuitive but well-supported case that local self-sufficiency is the worst thing you can do for the environment, since it requires many crops to be grown in the wrong places, with damaging ecological consequences. American farmers, they observe, used to grow wheat locally in the Shenandoah Valley, tilling steep and rocky slopes—and unleashing a torrent of soil erosion. With the shift of grain farming to the far more productive and erosion-resistant soils of the Midwest, “more grain is now being produced on fewer acres and, overall, more habitat is available for wildlife.” Their study of the history of American agriculture is one of the strongest points of this book.

Famines were common in the past precisely because food security rested on the vagaries of local conditions rather than the resiliency of trade, they observe: “Subsistence farmers periodically starve while commercial agricultural producers who rely on monocultures for their livelihood don’t.”

Sign up for Wednesday’s Book Forum here.

 

 

The Benefits of Foreign Investment: D.C. Gets It

Of course, when I say D.C., I don’t mean the federal government.  I mean D.C. Mayor Vincent Gray.  The Washington Post explains:

D.C. Mayor Vincent C. Gray leaves Saturday for a week-long trip to China to try to secure billions of dollars for investment in city development projects, including potential financing of the proposed 37-mile streetcar network.

In his first overseas trip as mayor, Gray (D) is looking to build on what he sees as China’s growing interest in the nation’s capital, as that country’s wealthy investors look to park large amounts of money in U.S. real estate.

When asked about a potential for congressional or public backlash about so much Chinese investment in the District, Gray said, “They are already heavily invested in America.”

“They are not heavily invested in the District of Columbia,” he said. “We are expanding our own horizons here and maybe moving some projects along more quickly.”

Judge Green-Lights ADA Captioning Suit against Netflix

A federal judge has declined to dismiss a lawsuit against Netflix arguing that its Watch Instantly streaming viewing service violates the rights of deaf persons under the Americans with Disabilities Act because many of the movies it offers lack closed captioning. In the Boston Globe, Hiawatha Bray quotes me on the case:

…the high cost of adding accessibility features to all online entertainment services could pose an undue burden on Internet companies and lead to reduced choices for consumers, said Walter Olson, senior fellow at the Cato Institute, a libertarian think tank in Washington.

“This forces Netflix to serve markets that it currently doesn’t find profitable to serve,” said Olson, and could prompt online video companies to refrain from stocking obscure and unusual films, to avoid the expense of adding subtitles to movies that few customers will want to see.

The Caption Center at Boston public television station WGBH has subtitled thousands of films and TV shows, according to Larry Goldberg, WGBH’s director of media access. Goldberg said it costs $400 to $800 to add captions to a movie from scratch.

And captioning for the deaf is just the start if the law’s goal is to be what one advocate quoted in the Globe piece calls “100% equality.” Some in the blind community believe all films should be accompanied by “descriptive video” supplemental soundtracks that describe action on screen (“Jenny walks over to the desk and takes a revolver out of the drawer. She points it silently at the intruder.”) That could add substantial additional cost to the distribution of, say, small-circulation independent documentaries, vintage public-domain features and other low-revenue fare. While the current suit is against Netflix, the precedents it sets would also apply to much smaller providers of online streaming. Much more on the push for “web accessibility,” and its implications for almost everyone who communicates over the Web, here.

Free Trade in Marijuana?

Juan Carlos Hidalgo posted recently about Uruguay’s proposed law legalizing the production and sale of marijuana. He points out that production will come only from a state-owned monopoly. As a trade policy person, what I took from this is: No imports, and someday maybe a trade dispute. Of course, as of today, no one else has legalized production, so there won’t be any (legal) trade. But imagine that, say, the Netherlands legalizes marijuana production in the coming years, and is less restrictive about who can produce it. If their producers decide they would like to export to Uruguay, they may lobby for a trade complaint against the ban on imports. Now, there are various defenses that Uruguay can invoke, and success on the complaint is far from certain. Nevertheless, the GATT and WTO have a long history of complaints about “sin” products, such as tobacco and alcohol, and perhaps marijuana will join that distinguished list someday.

The IRS’s Illegal Employer Tax

With all eyes on the Supreme Court, whose ruling on ObamaCare’s individual mandate could come as early as today, almost no one noticed that last month the IRS imposed an illegal tax on employers of up to $3,000 per worker.

Jonathan Adler and I explain in today’s USA Today that this illegal tax is the indirect but very real result of the IRS offering ObamaCare’s tax credits and subsidies in health insurance “exchanges” created by the federal government, even though ObamaCare restricts those entitlements – explicitly, laboriously, and unambiguously – to Exchanges established by states.

That illegal action has the effect of imposing ObamaCare’s $2,000-$3,000 per worker tax (i.e., the “employer mandate”) on employers who otherwise would be exempt (i.e., employers in states that do not create an Exchange). Perhaps President Obama thought “taxation without representation” would be a winning campaign slogan.

If the Supreme Court fails to strike down ObamaCare’s employer mandate, Exchanges, and health insurance tax credits and subsidies, this thoroughly unconstitutional IRS rule will begin illegally taxing employers in 2014.

Reps. Scott DesJarlais (R-TN) and Phil Roe (R-TN) have introduced a resolution under the Congressional Review Act that would block the rule. Barring that, expect more angry employers to haul ObamaCare into federal court.

Adler discusses the IRS rule here: