Archives: December, 2012

Blanket Federal Discipline Mandates Reportedly Not on the Table

I spoke today with Sen. Durbin’s office regarding my concerns over the legislative direction that his “school-to-prison” hearings might take, and was assured that federal mandates such as I feared are not in fact under consideration. Perhaps the recent introduction of other sweeping federal mandates has colored my perception.

At any rate, this is a good sign, and I hope that the Senator and his colleagues come away from their hearings recognizing that thoughtful administration of school discipline cannot be secured via mandates but rather must be achieved by giving educators the freedoms and incentives to serve the interests of children. When teachers’ and administrators’ professional futures depend on their success at keeping kids in school, helping them to realize their individual potentials, and preparing them for the challenges of adulthood, they will constantly search for new and better ways of achieving those ends. And they will find them. That is why parent-driven education markets outperform other types of school systems.

And the best thing the federal government can do to make such education markets universally accessible is to draw attention to state-level programs such as Florida’s and Pennsylvania’s education tax credits that are in the forefront of advancing them. Sometimes federal legislation just isn’t the right tool for the job.

Sen. Casey Finds Political Opportunity in NHL Lockout

The Small Business Administration was created in the 1950s to make it appear as though federal politicians cared about the plight of the “little fellow.” A more helpful expression of concern would have been a rollback of the federal government’s increasingly heavy hand in the post-New Deal economy. Instead, they went with the more politically alluring option of using the heavy hand to deliver handouts.

As Veronique De Rugy and I discuss in an essay on the Small Business Administration, it didn’t take long for the politicians to turn the new agency into a favor dispenser:

Once the SBA seed was planted, it grew. SBA lending quadrupled between 1954 and 1960, and its staff jumped from 550 to 2,200 employees. In 1958, Eisenhower’s Budget Bureau warned that the SBA was “an uncontrollable program,” but both parties wanted to signal that they supported the “little fellow.” Also, members of Congress enjoyed using the SBA to distribute money and favors to their constituents. Members sometimes leaned on the agency to declare a particular business “small” or to have a constituent’s competitor declared “not small.”

Decades later, the SBA is still being used by politicians to show that they care.

For those who don’t follow hockey, almost half of the National Hockey League’s season has been lost because owners and players have yet to agree on a new labor deal. That’s obviously bad news for restaurants, bars, and other small businesses located near hockey arenas. But owning and operating a business comes with risks and an unexpected drop in walk-in traffic is one of them.

According to Sen. Bob Casey (D-PA), however, it’s the federal government’s job to mitigate such risks by placing it on taxpayers instead. On Wednesday, Casey sent a letter to the head of the SBA asking her to – wink, wink, nod, nod – keep in mind the needs of small businesses located near the homes of the Pittsburgh Penguins and Philadelphia Flyers:

Small businesses are the backbone of our economy and their success is vital to our continued recovery. I appreciate your willingness to offer free counseling to businesses that rely heavily on NHL crowds for business. I also urge you to continue to monitor the situation and to make yourself available in case these businesses should require additional resources and guidance. I stand ready to assist you with this. If you have any questions, please feel free to reach out to me directly.

And with that, Sen. Casey shows that he cares. I would argue, however, that if he really cared about making life easier on small business owners, he would be leading an effort in the Senate to rein in taxes and government red tape. After all, those two categories combined represent the “single most important” problem facing small businesses according to the latest survey from the National Federation of Independent Business. But, like most politicians, it’s simply a lot easier –and more politically rewarding – to hand out other people’s money.

Note: While I appreciate the argument that Pittsburgh businesses deserve SBA assistance but not Philly businesses because the former support a franchise that recently won its third Stanley Cup while the latter hasn’t hoisted it since 1975, I still don’t think the federal government should be picking winners and losers in the marketplace – or in that case, picking a winner over a loser.

Fannie Mae Employees Keep Fat PayChecks at Taxpayers’ Expense

Earlier this week the Inspector General (IG) of the Federal Housing Finance Agency released a report documenting the current pay levels of mid-level executives at Fannie Mae and Freddie Mac, those mortgage giants which contributed to the financial crisis and have so far cost the taxpayer over $180 billion.   Despite the bail-outs, it seems the GSEs are still a comfortable place to work, all at the taxpayers’ expense.

This chart, reproduced from the IG report, illustrates that the GSEs’ over 300 Vice Presidents actually got paid more in 2011 than 2010, with a median compensation of $388,000.  Those poor directors, of which there are over 1,650, had to make due on a median compensation of only $205,300.  For running two companies into the ground, these executives seems pretty well paid to me.

One of the arguments against cutting pay at Fannie and Freddie is that all the good employees will leave, ultimately costing the taxpayer even more.  First I question whether we want the same people running these companies that ran them into the ground.  Shouldn’t we be cleaning house at Fannie and Freddie?  Secondly, voluntary employee attrition rates since the GSEs have been taken over aren’t all that much higher than before their bail-outs.  If anything these rates are too low.  Again given their role in the companies’ failures, we should encouraging long-time Fannie/Freddie employees to leave, not stay.

I have long proposed that since the taxpayer now outright owns Fannie and Freddie, their employees should be paid like federal government employees (who are already over-paid).   To continue to allow the same people who stuck the taxpayer with a $180 billion bill to be paid lavishly, is to add insult to injury.

Obama, Barbara Walters, and Marijuana Users

In an interview with Barbara Walters, President Obama was finally asked about the dramatic legal changes underway in Colorado and Washington–the legalization of marijuana for adults under state law.  The President said that the federal government has “higher priorities” than arresting marijuana users.   At first glance, that may seem like a good answer for those supportive of drug policy reform, but it is not.

Here’s why: Arresting marijuana users has never been a high priority of federal law enforcement.  There are about 800,000 marijuana arrests in the U.S. every year.  The feds are responsible for about 1% of those.  The feds rely on state and local police to conduct domestic drug investigations–especially users with small amounts.  The feds want to focus their resources on the big international cartels operating outside the country.  Of course, the DEA also gets involved with the larger smuggling operations inside the U.S.  In California, where marijuana is quasi-legal for users (in a de facto sense) federal prosecutors focus on the supply side–raiding, harassing, arresting.  The feds bypass  juries by using civil asset forfeiture laws against persons opening dispensaries.

Against that background, listen again to Obama: My administration has higher priorities than going after marijuana users.  Hmm.  That’s just another way of saying “nothing has changed as far as I’m concerned.”    I expect Attorney General Eric Holder to announce a legal challenge to the Colorado and Washington initiatives sometime soon.  And federal raids will begin soon also.

Cato hosted an event this week on some of the issues related to such a federal legal challenge.  Speakers included, former DEA chief, Asa Huthinson and Robert Mikos, Vanderbilt law professor and author of a new Cato study about the interplay between federal and state law with respect to marijuana.

Bloomberg: ObamaCare Doubling Premiums for Individuals & Firms Spurs Talk of Delaying Rollout

Bloomberg reports:

Health insurance premiums may as much as double for some small businesses and individual buyers in the U.S. when the Affordable Care Act’s major provisions start in 2014, Aetna Inc. (AET)’s chief executive officer said.

While subsidies in the law will shield some people, other consumers who make too much for assistance are in for “premium rate shock,” Mark Bertolini, who runs the third-biggest U.S. health-insurance company, told analysts yesterday at a conference in New York. The prospect has spurred discussion of having Congress delay or phase in parts of the law, he said.

“We’ve shared it all with the people in Washington and I think it’s a big concern,” the CEO said. “We’re going to see some markets go up as much as as 100 percent.”…

Premiums are likely to increase 25 percent to 50 percent on average in the small-group and individual markets, he said, citing projections by his Hartford, Connecticut-based company.

Industry analyst Robert Laszewski comments:

[F]or the vast majority of states there will be rate shock.

I can also tell you that, so far, I have detected no serious effort on the part of Democrats to delay anything. Frankly, I think hard core supporters of the new health law and the administration are in denial about what is coming.

I expect more health insurers to be echoing the Aetna comments in coming weeks.

An Important Victory for the Right to Keep and Bear Arms

On Tuesday, the Chicago-based 7th Circuit Court of Appeals struck down Illinois’s ban on carrying ready-to-use firearms. Moore v. Madigan is written by Judge Richard Posner, possibly the most famous non-Supreme Court judge in the country, and is an important extension of the Second Amendment right to keep and bear arms. Judge Posner’s decision makes it very clear that the right to self-defense entails more than just allowing people to keep guns in the home.

In the landmark case of United States v. Heller, a case in which Cato was intimately involved, the Supreme Court struck down the District of Columbia’s near total-ban on having guns in the home. Two years later, in McDonald v. Chicago, the Court expanded this protection to the states, striking down Chicago’s equally draconian gun ban.

Ever since those two cases established and expanded the right to keep and bear arms, lawyers have been testing the waters to see how far the Supreme Court’s ruling goes. Heller held that the protection of the home with a reasonable firearm (i.e. a handgun, not a rocket launcher) is the core of the Second Amendment. While that right cannot be totally eliminated by states and municipalities, it is still subject to reasonable regulation. Yet this holding only addressed the Second Amendment right to keep arms, not to bear them. Both words are in the Amendment and both words clearly mean different things.

Up until Tuesday, Illinois was the last state to flatly ban all carrying of ready-to-use guns outside the home. Since the mid-1980s there has been a remarkable proliferation of states that offer concealed-carry permits. As you can see from this nifty animation, in 1986 only 34 states allowed their citizens to carry guns. Moreover, most of those states had “may-issue” permitting, meaning that local officials are given broad discretion in choosing who gets a permit. “May-issue” statutes often contain discretionary language such as, “if the sheriff determines the applicant to be of good moral character and of having proper cause for wanting a permit then he may issue a permit.” While “may-issue” laws are better than “no-issue” laws, they imbue local officials with far too much discretion over whether a citizen is of sufficient “moral character” and has “proper cause” to be allowed to exercise her fundamental right to self-defense. In a decision that Judge Posner criticizes in Moore, the Second Circuit recently upheld New York’s “proper cause” provision.

As you can tell by the animation, the growth in “shall-issue” states is astounding. Today, unless you live in Illinois, you may be surrounded by many legally gun-toting citizens, and while you may not have noticed this, trust me, the criminals have. And despite this massive increase in the legal carrying of weapons, crime is still going down and we are not living in a modern recreation of the Wild West. Instead, as Clayton Cramer and David Burnett documented in the recent Cato study, Tough Targets, those carrying weapons are increasingly using them to protect themselves and to save lives.

In his decision, Judge Posner discusses the evidence on both sides of the debate over the relationship between guns and crime. He also decides that the evidence is more or less irrelevant to the question of whether the Illinois ban can survive:

In sum, the empirical literature on the effects of allowing the carriage of guns in public fails to establish a pragmatic defense of the Illinois law. Anyway the Supreme Court made clear in Heller that it wasn’t going to make the right to bear arms depend on casualty counts. If the mere possibility that allowing guns to be carried in public would increase the crime or death rates sufficed to justify a ban, Heller would have been decided the other way, for that possibility was as great in the District of Columbia as it is in Illinois.

Posner then finds the Illinois ban squarely proscribed by the plain language in Heller and McDonald:

A woman who is being stalked or has obtained a protective order against a violent ex-husband is more vulnerable to being attacked while walking to or from her home than when inside. She has a stronger self-defense claim to be allowed to carry a gun in public than the resident of a fancy apartment building (complete with doorman) has a claim to  sleep with a loaded gun under her mattress. But Illinois wants to deny the former claim, while compelled by McDonald to honor the latter. That creates an arbitrary difference. To confine the right to be armed to the home is to divorce the Second Amendment from the right of self-defense described in Heller and McDonald.

The decision is certainly an important victory for the right to self-defense. We will now wait to see if Illinois appeals the decision. While Judge Posner struck the ban down, he delayed his mandate for 180 days in order to “allow the Illinois legislature to craft a new gun law that will impose reasonable limitations, consistent with the public safety and the Second Amendment as interpreted in this opinion, on the carrying of guns in public.”

My prediction is that, rather than risk the Supreme Court affirming the ruling, Illinois will impose a severely limited permitting system. Either way, this is certainly the most important case decided under the Second Amendment since McDonald.