Archives: 04/2014

School Choice Lawsuit Explained

Last week, the New Hampshire Supreme Court heard oral arguments in Duncan v. New Hampshire, concerning the constitutionality of the “Live Free or Die” state’s trailblazing scholarship tax credit program. The Cato Institute filed an amicus brief in support of the program. Over at the Friedman Foundation’s blog, I summarize the law’s history and the primary legal arguments on each side, including legal standing, public versus private money, and the use of public funds at religious schools. I conclude by outlining four possible outcomes:

1. The court rules that the plaintiffs lack standing. In this case, the trial court’s opinion would be overturned and scholarship students would be able to attend the school of their choice, religious or secular.

2. The court rules in favor of the program on the merits. That would mean either the court holds that tax credits are private money or that public money may be spent at a religious school so long as it reaches the schools in a manner that is indirect and incidental to the choices of parents. As in the first scenario, scholarship students would be able to attend the school of their choice, religious or secular.

3. The court upholds the trial court’s decision. In this case, the tax-credit scholarship program would continue as it has in the last year. The trial court forbid the use of scholarships at religious schools but allowed their use at secular private schools, out-of-district public schools, and homeschool environments. In this scenario, the Institute for Justice likely would challenge the decision in federal court for violating the Free Exercise clause of the First Amendment since such a decision would require legislative hostility toward religion rather than neutrality.

4. The court rules against the program and rejects the severability clause. The trial court found that the severability clause that the legislature had added was valid, therefore the program could continue for parents selecting secular schools or homeschooling. The state supreme court could reach the same conclusion on the merits, but reject the severability clause. This would be the most devastating outcome for educational choice in New Hampshire, as it would completely obliterate the tax-credit scholarship program.

Ideally, New Hampshire’s Supreme Court will follow the precedent of the U.S. Supreme Court and the Arizona Supreme Court by holding that taxpayers’ money is their own until it reaches the tax collector’s hand.

Removing the 3/10 Year Bars Is Not Amnesty

It’s no secret that the Senate’s proposed legalization for some unauthorized immigrants was a deal breaker in 2013. Detractors labelled such a legalization “amnesty” even though it is anything but that – and that label has stuck. That, at minimum, some unauthorized immigrants become legalized is economically and ethically imperative, so it’s time to consider less-than-comprehensive, keyhole solutions that will fix at least some of the problems with our immigration system.

One such solution, which even many of those opposed to immigration reform have endorsed, is a small legislative reform to the 3/10 year bars that will allow some unauthorized immigrants to depart and apply for reentry under the legal system without special treatment. This reform would avoid the so-called amnesty objection to immigration reform.

 

Removing the Bars

The 3/10 year bars require any immigrant who stays in the United States illegally for more than six months but less than one year may not leave, reenter, or apply for a green card for three years. Any immigrant who illegally stays for more than a year may not leave, reenter, or apply for a green card for 10 years. Any immigrant who violates it triggers a twenty-year ban from reentering the United States for any reason. That’s a problem because almost all applicants for a green card or visa have to visit a U.S. embassy or consulate abroad to apply which, in the case of unauthorized immigrants, requires them to leave the Untied States thus triggering the bars. The 3/10 year bars prevent any unauthorized immigrant from using the legal immigration system. 

Taming the Cyberlibertarians

New York Attorney General Eric Schneiderman made some interesting rhetorical choices in a New York Times op-ed yesterday taking after share economy leaders AirBnB and Uber. The challenge they present to outdated regulation leads him to call these businesses “cyberlibertarians” and “cybercowboys.” The latter awkward metaphor inhabits the title of the piece: “Taming the Digital Wild West.”

It’s an awkward metaphor because “Wild West” was an epithet leveled at the Internet itself in its early days. Thank heavens the forces of stasis didn’t prevent us from inhabiting this place—and here’s hoping they won’t prevent us from finding new terrain. How safe and impoverished we would be, both materially and spiritually, if we didn’t have the rollicking, wide-open Internet.

But the most interesting rhetorical choice is his effort to push community-enhancing job-creation into the “libertarian” corner of Times’ readers’ vistas. His hope, it appears, is that readers’ revulsion around the word “libertarian” (if not liberty itself) will overcome what they know about car- and room-sharing. People all over New York and the world are operating small businesses, and these small businesses bring them in close personal contact with others. They build wealth, and they build community.

Calling that “cyberlibertarian” may just cause some reflexive progressives and conservatives to take a fresh look at liberty. While we’re working toward miracles, maybe people will drop the “cyber” prefix, too!

(Disclosure: I’ve used both AirBnB and Uber with generally wonderful results.)

Counting the Wrong Winners and Losers

Debates about trade liberalization often focus on identifying the winners and losers of increased openness to foreign competition.  Protectionists regale us with sad stories of closed factories, and free traders point to lower prices for consumers and the broad benefits of economic growth.  But this whole exercise is completely backwards.  We should instead be talking about the winners and losers of protectionism.

Free trade is not a trade policy.  Trade policies—such as tariffs, quotas, restrictions on foreign service providers, and protectionist regulations—exist to divert the benefits of free exchange toward politically powerful special interests.  Free trade is merely the absence of those policies. 

By demanding an explanation for increased openness, the trade debate implicitly legitimizes the protectionist status quo.  As a consequence, the news media often accept the argument that opening the U.S. market to foreign competition should be accompanied by programs that alleviate the suffering of the losers of increased trade.  But why is anyone entitled to the current arrangement?  Perhaps the winners of protectionism owe reparations to those of us who had to suffer the consequences of their rent-seeking. 

Who wins and who loses from policies that increase the price of food?  Who wins and who loses from regressive taxes on shoes and clothes?  Who wins and who loses from shipping restrictions?  Who wins and who loses from protectionist overregulation?  I could go on.

Last Sunday’s New York Times included an editorial calling on the Obama administration to “Get Global Trade Right” by adding a handful of protectionists’ pet issues to the Trans-Pacific Partnership. Threatening our trade partners with sanctions if they don’t adopt specific labor, environment, or monetary policies is not going help the United States get trade right, but it will make us a bully and reduce our ability to make real progress tearing down genuine barriers. 

After (wrongly) blaming increased economic openness for the loss of millions of manufacturing jobs and growing income inequality, the Times—without a hint of irony—says that President Obama needs “to make a strong case for why these new agreements will be good for the American economy and workers.”  Well, that is certainly true.

Let me offer some humble advice to the president then on how he might take on that task: Stop selling trade agreements as a way to grow export markets for goods produced in the United States, and start extolling the virtues of agreements as a way to fight cronyism and to tear down bad policies. Thinking about trade agreements this way will not only help you sell the agreement, it could actually make the agreements better.

Liberalizing Investment in Cuba

I’m no Cuba expert, but I have followed the events of recent years with interest. It seems that there have been tentative steps towards liberalizing the Cuban economy, as well as slightly better economic relations between the United States and Cuba. I’m hopeful the long-term trend is towards Cuba becoming a free market democracy, with normal relations with the United States.

In the short-term, though, I’m frustrated by how the “liberalization” of foreign investment is being carried out there. Here’s the Economist:

But on March 29th Cuba’s parliament approved a new foreign-investment law that for the first time allows Cubans living abroad to invest in some enterprises (provided, according to Rodrigo Malmierca, the foreign-trade minister, they are not part of the “Miami terrorist mafia”). The aim is to raise foreign investment in Cuba to about $2.5 billion a year; currently Cuban economists say the stock is $5 billion at most.

The law, which updates a faulty 1995 one, is still patchy, says Pavel Vidal, a Cuban economist living in Colombia. It offers generous tax breaks of eight years for new investments. However, it requires employers to hire workers via state employment agencies that charge (and keep) hard currency, vastly inflating the cost of labour.

Welcoming new foreign investment is great. Here’s the problem, though: In order to liberalize investment, a government really doesn’t need to do anything fancy. It can just say, “foreign investment is permitted, and will be treated like domestic investment.” Very simple. Furthermore, lower tax rates and reduced regulatory burdens can help encourage such investment. Again, very simple.

In practice, though, governments make this process difficult and less liberalizing. Here, what Cuba seems to have done is offered special tax breaks for new foreign investments, and then subjected receipt of these tax advantages to certain hiring conditions. In effect, it introduces two distortions as part of the liberalization process: favoring new foreign investors over other investors through the tax code and then subjecting the favored investors to additional regulation.

To be clear, Cuba is not the only country who does this; this is what many countries do. But there’s just no reason to approach it this way. The simpler way, with low tax rates for all investors, is the more economically beneficial way. Unfortunately, it seems as though “liberalization” is often just a catchword, and governments insist on using their power to intervene in private economic transactions, even when ostensibly moving away from interventionist policies.

It’s Constitutional for Voters to Stop Their Government from Discriminating Based on Race

Today the Supreme Court finally ruled on Schuette v. Coalition to Defend Affirmative Action, in which Cato filed a brief last summer. This is the case involving a challenge to a voter-approved Michigan state constitutional amendment that bans racial discrimination (including racial preferences) in higher education. The U.S. Court of Appeals for the Sixth Circuit had somehow manage to conclude that such a law violates the Fourteenth Amendment’s Equal Protection Clause, which … requires that state governments treat everyone equally, regardless of race. The ruling was fractured – six justices voted to reverse the lower court, but for three separate reasons, plus a separate concurrence from Chief Justice John Roberts to respond to the two-justice dissent – but ultimately achieved the correct result: Michigan’s Proposal 2 stands.

But really Schuette is a much easier case than the above description might indicate. Indeed, it’s no surprise that six justices found that a state constitutional provision prohibiting racial discrimination complies with the federal constitutional provision that prohibits state racial discrimination. To hold otherwise would be to torture the English language to the point where constitutional text is absolutely meaningless. The only surprise – or, rather, the lamentable pity – is that Justices Sonia Sotomayor and Ruth Bader Ginsburg somehow agreed with the lower court’s confused determination that the Constitution requires what it barely tolerates (racial preferences in university admissions).

To quote the conclusion of Justice Antonin Scalia’s concurring opinion, for himself and Justice Clarence Thomas:

As Justice Harlan observed nearly a century ago, “[o]ur Constitution is color-blind, and neither knows nor tolerates classes among citizens.” Plessy v. Ferguson, 163 U. S. 537, 559 (1896) (dissenting opinion). The people of Michigan wish the same for their governing charter. It would be shameful for us to stand in their way.

This case was so easy precisely because it didn’t involve the fraught question of whether states can pursue race-conscious measures in order to achieve (some mythical) diversity. Instead, it was about the democratic process and whether voters can rein in the powers of their state government. The answer to that question, like the answer to the question of whether the Equal Protection Clause mandates racial preferences, is self-evident. 

Here’s the full decision, which begins with a plurality opinion by Justice Anthony Kennedy, for himself, the chief justice, and Justice Samuel Alito.

Justice Scalia on Anonymous 911 Tipsters

Today, the Supreme Court decided Prado Navarette v. California, a Fourth Amendment search case.  The Fourth Amendment limits the government’s power to stop and search people and the question in this case was whether the police overstepped their authority.

Highway patrol pulled over a pick-up truck and the police smelled, and then found, marijuana.  The men arrested later challenged the legality of the stop in court.  If the stop was illegal, the marijuana would not be admitted into evidence, and the men would probably go free.

The police said the stop was proper.  They received an anonymous 911 call from a woman who said a pickup had almost run her off the road.  The dispatcher took her information and the description of the truck.  The police found a pickup that matched the description, and then followed it for five minutes, and finally pulled it over.  Marijuana discovered, men arrested, case starts moving its way thru the courts. 

By a 5-4 vote, the Supreme Court upheld the legality of the stop.  Interestingly, the case scrambled the usual right-left split among the justices.  Justice Breyer joined Thomas, Kennedy, Roberts and Alito for the majority.  Justice Scalia joined Ginsburg, Kagan, and Sotomayor in dissent.

Here is an excerpt from Scalia’s dissenting opinion:

The Court’s opinion serves up a freedom-destroying cocktail consisting of two parts patent falsity: (1) that anonymous 911 reports of traffic violations are reliable so long as they correctly identify a car and its location, and

(2) that a single instance of careless or reckless driving necessarily supports a reasonable suspicion of drunkenness. All the malevolent 911 caller need do is assert a traffic violation, and the targeted car will be stopped, forcibly if necessary, by the police. If the driver turns out not to be drunk (which will almost always be the case), the caller need fear no consequences, even if 911 knows his identity. After all, he never alleged drunkenness, but merely called in a traffic violation—and on that point his word is as good as his victim’s.

Drunken driving is a serious matter, but so is the loss of our freedom to come and go as we please without police interference. To prevent and detect murder we do not allow searches without probable cause or targeted Terry stops without reasonable suspicion. We should not do so for drunken driving either. After today’s opinion all of us on the road, and not just drug dealers, are at risk of having our freedom of movement curtailed on suspicion of drunkenness, based upon a phone tip, true or false, of a single instance of careless driving.