Archives: November, 2012

Uh… the ‘Quality Controlled’ Schools Are Worse

Sunday’s Washington Post ran a story titled “Quality controls lacking for D.C. schools accepting federal vouchers.” These are the particular failings chosen for the story’s lede:

schools that are unaccredited or are in unconventional settings, such as a family-run K-12 school operating out of a storefront, a Nation of Islam school based in a converted Deanwood residence, and a school built around the philosophy of a Bulgarian psychotherapist.

It is remarkable that more serious transgressions were omitted. Why not mention the schools in which current and former staff brawl in the parking lot, or students start vicious fights at sporting events? Why not discuss the schools spending nearly $30,000 per pupil annually and yet graduating barely half of their students on time?

The reason the WaPo didn’t mention them is that they are not voucher schools. These are District of Columbia public schools and they already have in place all the “quality controls” that the Washington Post seems to prize—on fiscal disclosure, testing, teacher certification, etc.

But though it appeared on the news pages, the WaPo story is really an opinion piece, and one whose central opinion—that government regulations can guarantee educational quality and efficiency—is demonstrably false. Modern public school districts are as heavily regulated, “quality controlled,” and overseen by government as any school system in history. And yet they have suffered a productivity collapse unparalleled in any other field of human enterprise. A complete K-through-12 public education costs nearly three times as much today as it did in 1970, adjusting for inflation, but achievement at the end of high school has stagnated or declined.

If journalists really want to improve the quality and efficiency of education available in DC and around the nation, they might start by recognizing the clear futility of their preferred solution and turn instead to the international research on what works, what doesn’t, and why. In the unlikely event that they take the trouble to do so, they will discover that direct accountability to parents and competition among schools succeed where bureaucratic red tape fails.

The Politics of Procrastination—Russian Trade Edition

The House of Representatives passed a bill today authorizing permanent normal trade relations (PNTR) status with Russia, by a vote of 365-43.  The bill repeals a cold war–era trade restriction that has prevented the United States from benefiting directly from Russia’s entry into the World Trade Organization last August (and Moldova’s entry in 2001).  It also adds a travel restriction on certain Russian officials involved in a particular incident a few years ago in which an anti-corruption activist died in a Russian jail.  There is no doubt the bill will pass the Senate in its current form.

It has been almost a year since Russia completed the negotiations necessary to be accepted into the WTO, after almost two decades of on-and-off diplomatic effort.  If PNTR with Russia could pass by a margin of 8-1, why did it take so long to get it through Congress?

The only answer I can offer is dishearteningly cynical.  The consensus among close observers is that the Republican House leadership delayed taking up the matter in a bid to pressure President Obama into more vocally supporting the bill, thereby alienating his Big Labor campaign allies—the only constituency that offered any opposition—and so they could look tougher than the president on foreign policy.  The president chose not to play that game and deflected the resulting scorn from a not-insignificant portion of the business community toward Congress.  Is it naïve of me to wish that elected officials would just vote for what they think is right instead of playing partisan games with our fortunes and freedoms?  Probably.

When Russia joined the WTO last August, I wrote that it was a good day for liberty everywhere but in the United States.  After some frustrating and needless delay, the American people are getting to join the party.  

Hа здоровье!

Hostess Bankruptcy: What Role Did Policy Play?

The demise of Hostess and Twinkies is not a national emergency, but it is certainly sad when a major business goes under and thousands of people lose their jobs.

If federal and state policymakers want to play a useful role here, they should study why Hostess couldn’t make a go of it. Were there tax or regulatory factors that stood in the way of the company earning a decent rate of return?

Unions were an important factor that pushed up the firm’s costs and reduced its operational efficiency. The policy reform here is obvious for people who appreciate market economics: repeal America’s coercive union laws. If policymakers don’t kill so-called collective bargaining, these rules will keep on killing companies.

Sugar apparently played a role in the demise of Hostess, as discussed in this excellent CSM article. Food manufacturers that use a lot of sugar are at a competitive disadvantage in the United States because federal import barriers on sugar substantially push up prices for that production input.

Perhaps taxes played a role as well. Income taxes may not have been a big factor if Hostess wasn’t earning profits in recent years. However, I suspect as a manufacturing firm, the company payed substantial property taxes. In this study, I discuss the anti-investment effects of state/local property taxes on U.S. businesses.

Some Democrats and Republicans may use Hostess as a political football, and some politicians will probably want to bail out the company. A more constructive response would be to find out what governments are doing that makes it so hard for some manufacturing firms to survive in this country.

Unanswered Questions About the Petraeus Case

As more details emerge about the FBI’s role in exposing the sex scandal that led to the resignation of CIA director David Petraeus, more than a few observers are finding the FBI’s broad power  to snoop through private and highly intimate e-mails more disturbing than any of the sexual misconduct those e-mails revealed. Yet despite a seemingly endless stream of FBI leaks about the investigation, a surprising number of crucial questions about this stunningly broad and intrusive inquiry remain unanswered.

For those who’ve managed to avoid the media feeding frenzy, The Atlantic has a handy timeline of what we know about the investigation so far. It appears to have begun with a complaint by Florida socialite Jill Kelley about some “harassing” e-mails she received from an anonymous source criticizing what the sender perceived as an inappropriate relationship between Kelley and some of the generals she’d befriended at a local military base. Though the e-mails contained no specific threats, and have been characterized by at least one source as more catty than menacing, Kelley reported them to a friend in the FBI. According to FBI sources, superiors became worried that the agent was “obsessed” with the case, ultimately barring him from the investigation.

Despite the relative thinness of the case—the FBI as a rule does not devote serious resources to tracking down senders of nonthreatening, catty e-mails, and only 10 cases have been prosecuted under federal cyberharassment law over the past two years—the Bureau opened a cyberstalking investigation, supposedly at least in part because they were concerned by references to the “comings and goings” of generals, and to events not on published schedules. Using subpoenas for the access logs of the anonymous e-mailer’s account, they linked it to activity on other accounts, as well as the hotels from which they had been accessed, ultimately exposing the author as Petraeus biographer Paula Broadwell.  Armed with this information, the FBI obtained legal process to compel the disclosure of the contents of her accounts, uncovering an illicit affair between Broadwell and Petraeus.

That’s what we know.  But there’s a lot that we don’t—a lot of pieces that just don’t fit. Here are some of the bigger unanswered questions:

  • Was this strictly a cyberstalking investigation, or did it become a national security or counterintelligence investigation at some point? If so, when, and with what predication?
  • Kelley, a “volunteer social planner” with no apparent security clearance, was attending many of the same events referenced in these e-mails, which suggests that they were not exactly top secret, and must have been known to many people in Kelley’s social circles. Why would anyone make the leap from knowledge of events shared by the Real Housewives of Tampa Bay to a potential leak of actual classified information? Wouldn’t any mystery surrounding this be resolved once the e-mailer was revealed as Petraeus’ biographer?
  • Reuters reports that investigators used “administrative subpoenas” to obtain Broadwell’s e-mail access logs. But the FBI has statutory subpoena authority only in a fairly limited class of criminal investigations: narcotics, child abuse, health fraud, telemarketing fraud. Under what authority did they issue such subpoenas in a cyberstalking investigation?
  • Alternatively, were National Security Letters used on the theory that there was enough evidence to justify pursuing the case as a counterintelligence investigation (despite multiple reports that it was a harassment case)? The NSL statute permits them to be used for”counterintelligence activities,” but “intelligence activities” are defined as being conducted on behalf of a foreign power. Was there any evidence whatsoever of such a foreign link?
  • Having identified Broadwell as the author of the e-mails, why was access to her accounts sought? If it was only to confirm that the e-mails shown to the FBI by Kelley had truly originated there, why wasn’t the request limited to those e-mails? Why not issue a preservation order to the e-mail provider, to prevent deletion of evidence, and confront Broadwell before resorting to such an intrusive measure?
  • Most reports indicate that the legal process used to obtain access to those accounts was a search warrant based on “probable cause.” Who issued it, and on what basis? “Probable cause” means “probable cause to believe evidence of a crime will be discovered.” What was the crime? What evidence was sought? Justice Department attorneys now appear to have concluded that Broadwell’s e-mails were not criminal after all. Was a different determination made at this stage of the investigation? By whom? What changed?
  • Broadwell is arguably a journalist—or at any rate, has been described as such by members of Congress. Investigations touching on such “sensitive” subjects are supposed to be personally approved by the attorney general because of potential First Amendment implications. Was Eric Holder informed of the FBI’s investigation of Broadwell before her e-mail accounts were accessed? Did he authorize the search personally?
  • Search warrants are supposed to “particularly describe” the evidence to be “seized.” Police searching for a stolen car are not supposed to rifle a suspect’s underwear drawer. Agents wiretapping a mob boss are not supposed to keep listening when the target’s wife calls her doctor on the same line. In cases involving digital evidence, this often means a two-step process where a cursory review of the account contents is conducted to determine which particular messages are within the scope of the warrant. Alternatively, providers may be given a time window or list of correspondents relevant to the investigation.  What was the scope of the warrant issued here? How did investigators end up reading “thousands” of e-mails between  Broadwell and Petraeus in the course of a search for evidence in a stalking investigation?
  • Some reports suggest that investigators became concerned the CIA director’s personal e-mail might have been hacked. Why would the CIA not be informed of such a serious potential breach immediately?
  • How did thousands of pages of e-mails between Kelley and Gen. John Allen come to be exposed in an investigation where Kelley was the putative victim? If they were not evidence of any crime, why were they shared, leading to their existence eventually becoming public knowledge?

There are, incredibly, quite a few more unanswered questions, but these seem like a good start. At every stage of this investigation—including the very fact of its existence—there are things that just don’t make much sense. If Justice Department officials don’t start answering them for reporters soon, they should be made to provide those answers to Congress—under oath.

Farm Subsidies Are Not A Partisan Issue, Episode 2153

Further evidence of the nonpartisan nature of support for agriculture subsidies emerged yesterday, when Bloomberg’s Alan Bjerga published a story showing that of the 10 biggest subsidy-receiving counties, 9 of them voted for Mitt Romney (friend of subsidized agriculture himself, it should be noted):

“Farmers vote Republican but they like Democratic programs,” said former Representative Charles Stenholm of Texas, who served as the top Democrat on the House Agriculture Committee while in office and is now a lobbyist. “They consider themselves to be conservative, and if something is important to them, then they don’t consider that liberal.”

…Farmers “tend to be more conservative” in general than other voters, supporting less regulation while still wanting to maintain a safety net for food and livestock producers, said Robert Stallman, president of the American Farm Bureau Federation, the biggest U.S. farmer group. Still, the farm vote shouldn’t be dismissed by the White House, he said. “That doesn’t mean there aren’t large numbers who supported” the president, he said.

Mr Stallman clearly knows which side his bread is buttered on, doesn’t he? No need to alienate the most powerful man in the free world just because of a few pesky votes!

This is not the first time Republicans have exhibited hypocrisy on farm subsidies. In the aftermath of the 2010 congressional elections, a few “tea party” Republicans voiced support for farm subsidies, even though they are a terrific (in both senses of the word) example of all that is wrong with the bloated federal government. But now we have evidence based on voting records that—as I guess is supposed to be the case in a democracy—our congressional “leaders” are really just giving the voters what they want.

And giving it to them good and hard.

‘Going Big’ on Trade

Reuters reports that Congressman Kevin Brady (R-TX), chairman of a key trade subcommittee in the House of Representatives, wants to see big things on trade in President Obama’s second term:

“We need to go big. We need to go smart. But above all we need to go on trade,” Brady said at an event organized by the Global Business Dialogue and the Washington law firm of McDermott Will & Emery.

Sounds great!  So what does he have in mind?

Brady outlined an agenda that includes many initiatives already being pursued by the Obama administration, including a regional free trade agreement in the Asia Pacific and possible free trade talks with the European Union.

Beyond that, he said, “America needs to lead again on trade” through projects such as a bilateral investment treaty with China and “an honest assessment” of ways to boost trade with two other major developing countries, Brazil and India.

He urged the Obama administration, in consultation with Congress, to weigh free trade talks with additional countries such as Egypt, Turkey and Georgia.

The United States should also consider bringing additional Latin America countries into the Trans-Pacific Partnership (TPP) agreement currently being negotiated with Mexico, Peru, Chile, Canada, Australia, New Zealand, Singapore, Vietnam, Malaysia and
Brunei, he said.

Well, all right, I guess that is something.  I’m not sure it actually counts as “free trade,” of course, because it involves preferential trade with certain countries, not free trade with all.  But it is something.

What would be better, in my view, is this:  Propose some new unilateral trade liberalization, to demonstrate to the world that the United States actually believes in free trade.  Here’s one suggestion for a place to start:  Cut farm subsidies!

States Shouldn’t Discriminate Against Out-of-State Retailers

The National Association of Optometrists & Opticians represents eyewear manufacturers and distributors in California, where state officials have been myopic with respect to business regulation.

Under California’s Business and Professions Code, state-licensed optometrists and ophthalmologists are allowed to conduct eye exams and sell glasses at their place of business, while commercial retailers—such as the national eyewear chains represented by the NAOO—are barred from furnishing onsite optometry services. Since consumers have a strong preference for “one stop shopping”—buying their glasses at the same place where they have their eye exams—California’s law gives instate retailers a crucial competitive advantage. Businesses that cannot co-locate their services have quickly vanished from the market.

The NAOO thus sued California officials for discriminating against out-of-state retailers in violation of the “dormant” Commerce Clause, which prohibits states from imposing unjustifiable burdens on interstate commerce. The district court ruled in the group’s favor, concluding that the relevant statutes have a widespread and unjustified discriminatory effect that can’t be reconciled with Supreme Court precedent. The U.S. Court of Appeals for the Ninth Circuit reversed, however, holding that state-licensed optometrists and out-of-state retailers aren’t similarly situated competitors—even though they compete for the same customers in the same market.

On the case’s second round in the Ninth Circuit, the court scrutinized the California law under a more lenient balancing test and again upheld the ban on co-location by out-of-staters. Cato now joins the Opticians Association of America and five individual optometrists on an amicus brief urging the Supreme Court to take the case (supporting a petition for review filed by former solicitor general Paul Clement).

We argue that California’s laws are unconstitutional because their true purpose—as revealed through legislative history and the scheme’s hollow public health rationale—was merely to protect in-state business interests. California’s protectionist regime also has an adverse impact on poor and minority consumers, who confront increased costs and diminished access to eye care while also being disproportionately afflicted with visual impairments.

Not only does the Ninth Circuit’s ruling stifle competition, restrict consumer choice, and increase prices, it also encourages state and local governments to evade scrutiny of discriminatory regulations by relying on superficial distinctions between in- and out-of-state businesses that warp the meaning of “similarly situated competitors.”  The Supreme Court should intervene to prevent any further erosion of its dormant Commerce Clause jurisprudence and uphold the anti-protectionism principles envisioned by the Founders when they abandoned the Articles of Confederation in favor of the Constitution.

The Court will decide whether to take up National Association of Optometrists & Opticians v. Harris later this year or in early 2013.