Archives: 10/2014

Supreme Court Declines to Review Another Important Case

It’s not just high-profile culture-war issues like same-sex marriage and the right to bear arms that the Supreme Court is avoiding like the plague. On issues ranging from federalism to property rights to criminal law, the justices increasingly decline to hear any case they don’t absolutely have to – no matter how important the issues presented – especially if there’s a threat of an irreconcilable split. Such is the brave new world of John Roberts’s minimalism/unanimity.

The latest such example came yesterday morning, in a criminal procedure case called Jones v. United States, in which Cato filed an amicus brief that I previously blogged about. The issue here is whether, pursuant to the Sixth Amendment, a judge can base a sentence on facts that the jury did not find beyond a reasonable doubt. (The Court ruled in a 2000 case called Apprendi v. New Jersey that judges can’t enhance sentences beyond statutory maximums based on facts, other than prior convictions, not decided by the jury – but in Jones the sentences in question, while seemingly harsh and unreasonable, were still within the sentencing guidelines.)

While normally we don’t know what the justices are thinking when they deny a cert petition, or even how the vote went (four votes are needed to grant), but in the Jones denial, Justice Antonin Scalia wrote a rare dissenting opinion, joined by Justices Clarence Thomas and Ruth Bader Ginsburg. Here’s the salient bit:

The Sixth Amendment, together with the Fifth Amendment’s Due Process Clause, “requires that each element of a crime” be either admitted by the defendant, or “proved to the jury beyond a reasonable doubt.” Any fact that increases the penalty to which a defendant is exposed constitutes an element of a crime, and “must be found by a jury, not a judge.” We have held that a substantively unreasonable penalty is illegal and must be set aside. It unavoidably follows that any fact necessary to prevent a sentence from being substantively unreasonable—thereby exposing the defendant to the longer sentence—is an element that must be either admitted by the defendant or found by the jury. It may not be found by a judge. [emphasis original; internal citations omitted.]

And so the petitioners came one vote short. The three dissenters may seem like an unusual grouping, but actually these justices are often together on issues relating criminal defendants’ jury-trial rights. (It’s sort of the left/right versus the center, or the principled versus the pragmatic.) They were in the Apprendi majority, for example, as well as in the majority for the case that struck down the mandatory nature of the sentencing guidelines, United States v. Booker (2005), and recent cases involving the right to confront witnesses against you. Alas, they were joined in those cases by Justices John Paul Stevens and David Souter, who have since been replaced by Justices Sonia Sotomayor and Elena Kagan, respectively. It’s not a big surprise that Kagan seems to have joined the “prgamatic” bloc for these purposes, but Sotomayor’s vote is disappointing. Some commentators point to her background as a prosecutor to explain such deference, but Justice Sotomayor is one of the most pro-defendant votes on Fourth Amendment and habeas corpus cases.

In any event, whatever the reason for the lack of a crucial fourth vote to grant, this was another opportunity lost by the Court, another responsibility shirked. For more commentary, see here, here, here, and here.

Failing to Track Highway Spending

The problems with federal highway spending are well documented. The program distorts project incentives and distributes money inefficiently. A new report from the Government Accountability Office (GAO) adds to the list of problems, detailing improper fund management within the Federal Highway Administration (FHWA).

In 2014 the highway trust fund collected $39 billion in fuel tax revenues, but spent $53 billion, creating a $14 billion deficit. This was not an isolated event. Since 2008 Congress has provided  $50 billion of general federal revenues to prop up the highway trust fund. The Congressional Budget Office estimates that the highway trust fund will require another $157 billion of general revenues by 2024.

Funds from the highway trust fund are spent by several agencies, with the bulk allocated by FHWA. In fiscal year 2013, FHWA spent $41 billion, or 80 percent, of all highway funds. Of that, $39 billion was sent to states; the majority going to road and bridge construction and improvement.

But GAO found that FHWA is poorly tracking how this money is being spent. According to GAO,  “FHWA tracks and reports aggregate obligations for its “major projects” (projects with a total cost of $500 million or more), it does not collect and report aggregate obligations for other projects, which represented nearly 88 percent of all fiscal year 2013 spending.” GAO’s analysis states that $36 billion in federal highway funding is not being properly tracked by FHWA.

Tracking this information would allow FHWA to provide greater oversight on projects, and to provide Congress and the public greater detail about spending projects and priorities. The agency could track cost growth on projects and perhaps stop cost overruns, which are common on transportation projects.

FWHA already has the technology to make these improvements. GAO notes that FHWA’s computer system already has the capability to track this data, but the agency does not feel inclined to use this capability.

Congress’ current short-term patch to the highway trust fund expires in May. FHWA’s adoption of GAO’s recommendations would allow both Congress and the agency to better control spending and lower the imbalance between spending and revenues.

Department of Homeland Security: Who Needs It?

The Secret Service is scandal prone. It spends excessively on foreign presidential trips, and it has agents who get in trouble with prostitutes and liquor bottles. The recent White House fence-jumping incident was a stunning failure. Despite the Service spending $1.9 billion a year, a guy with a knife jumped the fence, sprinted across the lawn, pushed open the front door, galloped through the Entrance Hall, danced across the East Room, and almost had time to sit down for a cup of tea in the Green Room.

In the wake of the incident, the head of the Secret Service resigned. But the Service is an agency within the Department of Homeland Security (DHS), and the head of DHS, Jeh Johnson, did not resign. Indeed, he said very little about it, presumably to evade responsibility. So what is the purpose of having the DHS bureaucratic superstructure on top of agencies such as the Secret Service? If DHS does not correct problems at agencies when they fester for years, and if DHS leaders do not take responsibility for agency failures, why do we need it?

A new survey of 40,000 DHS employees reported in the Washington Post finds that the department has severe management problems:

The government’s 2014 Federal Employee Viewpoint Survey portrays a Department of Homeland Security still facing debilitating morale problems that have plagued it for years but worsened during the Obama administration — and which have grown more serious since Johnson took over in December.

While the survey shows that the vast majority of DHS employees are hard-working and dedicated to their mission to protect the homeland, many say the department discourages innovation, treats employees in an arbitrary fashion and fails to recruit skilled personnel.

At the DHS Science and Technology Directorate, for example, only 21 percent of employees in this year’s survey held positive views of their leadership’s ability to “generate high levels of motivation and commitment in the workforce,’’ according to results for that division.

Since its inception, the department has been plagued by poor morale and a work environment widely seen as dysfunctional, which has contributed to an exodus of top-level officials in recent years, many of whom have been lured by private security companies.

Only 41.6 percent of DHS employees said they were satisfied with the department, down from 44.4 percent a year earlier.

In 2013, only 29.9 percent of employees department-wide had a positive view of their leaders’ ability to “generate high levels of motivation and commitment in the workforce.’’ That number plunged to 24.9 percent this year.

That’s all pretty pathetic. But this is the most stunning result from the survey: “Asked if their leaders ‘maintain high standards of honesty and integrity,’ just 39.1 percent of employees responded positively.”

The 2002 creation of DHS was a mistake. Congress should revisit its handiwork, and begin unbundling the department and closing it down. Some DHS agencies, such as the Secret Service, should be stand-alone organizations that report directly to the president. Some DHS agencies should be moved to existing departments. And some DHS agencies, including TSA, ought to be abolished.

How The Supreme Court Can Stop Consumers From Getting Ripped Off

Today, the Supreme Court hears a case about whether dentists and other professions should be allowed to use state licensing boards to engage in anti-competitive behavior that would be illegal if not done under the auspices of state governments. The case is North Carolina State Board of Dental Examiners v. FTC, and involves actions taken by that state’s dental board to prevent non-dentists from providing teeth-whitening services.

In the University of Pennsylvania Law Review, Cato Institute adjunct scholars David Hyman and Shirley Svorny explain:

A majority of the courts of appeals gives state licensing boards and similar entities considerable latitude to engage in anticompetitive conduct, even when that conduct would be clearly unlawful were it undertaken individually by the licensed providers that typically dominate these licensing boards…

[T]he North Carolina Board of Dental Examiners (N.C. Board) became concerned that non-dentists were providing teeth whitening services. In North Carolina, teeth-whitening was available from dentists, either in-office or in take-home form; as an over-the-counter product; and from non-dentists in salons, malls, and other locations. The version provided by dentists was more powerful and required fewer treatments, but was significantly more expensive and less convenient. In response to complaints by dentists that non-dentists were providing lower-cost teeth-whitening services, the N.C. Board sent dozens of stern letters to non-dentists, asserting that the recipients were engaged in the unlicensed practice of dentistry, ordering them to cease and desist, and, in some of the letters, raising the prospect of criminal sanctions if they did not do so. The N.C. Board also sent letters to mall owners and operators, urging them not to lease space to non-dentist providers of teeth whitening services.

The Supreme Court will decide whether the North Carolina dental board should be able to claim a “state action” exemption to federal laws against anti-competitive conduct. Hyman and Svorny argue they should not, noting that doctors, lawyers, and other professions have used government licensing to stamp out competition, to the detriment of consumers:

Other occupations provide no shortage of similar examples, whether it is states requiring hair braiders to obtain cosmetology licenses (even though the requisite training has absolutely nothing to do with hair braiding), laws prohibiting anyone other than licensed funeral directors from selling coffins, states prohibiting anyone other than veterinarians from “floating” horse teeth, or ethics rules prohibiting client poaching by music teachers. 

“Antitrust has historically focused on private restraints on competition, but publicly imposed limitations can pose greater peril,” they write, “since they are likely to be both more effective and more durable.”

Hyman and Svorny make three further recommendations for the courts:

First, in reviewing the decisions of licensing boards, courts should presume that states were not actively supervising the boards, absent compelling evidence to the contrary. Second, defendant–licensing boards should be required to present persuasive evidence of actual harm that their proposed licensing restrictions or restraints will prevent and should be required to show that private market and non-regulatory forces (including brand names, private certification, credentialing, and liability) are insufficient to ensure that occupations maintain a requisite level of quality. Finally, we argue that legislators should take steps to roll back existing licensing regimes.

Hyman signed onto an amicus brief filed by antitrust scholars. (Here are two more amicus briefs filed by public-choice economists and the Cato Institute.) Svorny argues for the complete repeal of government licensing of medical professionals, and illustrates how the market for medical-malpractice liability insurance does more to promote health care quality than licensing

(Cross-posted at Darwin’s Fool.)

Greg Abbott Tells Fifth Circuit Court That Gay Marriage Won’t Stop Heterosexual Irresponsibility

In a brief filed to the Fifth Circuit Court of Appeals on Friday, Texas attorney general Greg Abbott says that the state’s gay marriage ban may help to reduce out-of-wedlock births:

Texas’s marriage laws are rationally related to the State’s interest in reducing unplanned out-of-wedlock births. By channeling procreative heterosexual intercourse into marriage, Texas’s marriage laws reduce unplanned out-of-wedlock births and the costs that those births impose on society. Recognizing same-sex marriage does not advance this interest because same-sex unions do not result in pregnancy.

As I’ve written before, this is a remarkably confused argument. There are costs to out-of-wedlock births. Too many children grow up without two parents and are less likely to graduate from high school, less likely to find stable jobs, and more likely to engage in crime and welfare dependency. All real problems. Which have nothing to do with bans on same-sex marriage. One thing gay couples are not doing is filling the world with fatherless children. Indeed, it’s hard to imagine that allowing more people to make the emotional and financial commitments of marriage could cause family breakdown or welfare spending.

The brief repeatedly says that “same-sex marriage fails to advance the State’s interest in reducing unplanned out-of-wedlock births.” Well, that may be true. But lots of state policies fail to advance that particular interest, from hunting licenses to corporate welfare. Presumably Abbott doesn’t oppose them because they don’t serve that particular purpose.

The brief does note that same-sex marriage may very well produce other societal benefits, such as increasing household wealth or providing a stable environment for children raised by same-sex couples [or] increasing adoptions.” But the attorney general wants to hang the state’s ten-gallon hat on the point that it won’t reduce out-of-wedlock births by opposite-sex couples.

In a previous case, Judge Richard Posner declared that the states of Indiana and Wisconsin had not produced any rational basis for banning gay marriage. Attorney General Abbott seems determined to prove him right.

Falling Oil Prices Put Producers Between a Rock and a Hard Place

Over the last few months, the price of Brent crude oil lost over 20% of its value, dropping below $90 just yesterday and hitting its lowest level in over two years. In consequence, oil producers will no longer be able to rely on oil revenues to pay their bills. The fiscal break-even price – a metric that determines the price per barrel of oil required for a nation to balance its budget at current levels of production – puts the problem into perspective.

Using data from Bloomberg and Deutsche Bank, I prepared a chart showing the break-even prices for the world’s major oil producers and the price on Brent crude. Over the past six months, Brent crude fell far below the break-even price for eleven of the top oil producers in the world; Iran, Venezuela, Nigeria, and even Saudi Arabia can no longer finance their governments’ largess through oil revenues.

The combination of oil markets flying into a perfect storm and excessive government spending puts most of the world’s oil producers between a rock and a hard place, where they will stay for some time.

Newsweek: Back in Print, Confused as Ever

Dumb arguments against libertarianism are increasing, as guardians of the expansive state begin to worry that the country might actually be trending in a libertarian direction. This may not be the dumbest, but as Nick Gillespie said of a different argument two weeks ago, it’s the most recent:

‘You Ready to Step Up?’

The deadly drug war in Long Island’s Hempstead ghetto is a harrowing example of free-market, laissez-faire capitalism, with a heavy dose of TEC-9s
To be fair, author Kevin Deutsch never uses the terms “laissez-faire” or “free-market” in his detailed article, so we should probably direct our disdain at Newsweek’s headline writers. Deutsch does portray the second-ranking guy in the Hempstead Crips as a businessman seeking to “recruit talent, maximize profits and expand their customer base.” But even the drug dealer gets the difference between selling prohibited substances and doing business in a free market:
“We’re looking to market, sell and profit off drugs the way any business would handle their product,” Tony says. “Only our product is illegal, so more precautions need to be taken. It’s all systematic and planned, all the positions and responsibilities and assignments. All of that’s part of our business strategy. It’s usually real smooth and quiet, because that’s the best environment for us to make bank. But now, we at war, man. Ain’t nothing quiet these days.”
Deutsch describes the competition between the local Crips and Bloods in terms not usually seen in articles about, say, Apple and Microsoft or Ford and Toyota:
As for strategies, they seem to have settled on a war of attrition, aiming to kill or maim as many of their enemies as possible….
 
They’re far better armed and willing to use violence than the smaller neighborhood cliques scattered throughout Nassau County….
 
They’re also able to keep out other competitors through use of brute force….
 
It’s one of hundreds of similar conflicts being fought by Bloods and Crips sets throughout the country. These battles breed shootings, stabbings and robberies in gang-plagued, low-income neighborhoods each day. 
These are, of course, just the sorts of consequences that libertarians and economists expect from prohibition. As Tim Lynch and I wrote in the Cato Handbook on Policy a decade ago,

drug prohibition creates high levels of crime. Addicts commit crimes to pay for a habit that would be easily affordable if it were legal. Police sources have estimated that as much as half the property crime in some major cities is committed by drug users. More dramatic, because drugs are illegal, participants in the drug trade cannot go to court to settle disputes, whether between buyer and seller or between rival sellers. When black-market contracts are breached, the result is often some form of violent sanction, which usually leads to retaliation and then open warfare in the streets.

Jeffrey Miron of Harvard’s economics department and Cato made similar points in his book Drug War Crimes, as have such economists as Milton Friedman and Gary Becker. Miron also noted that prohibition drives up the prices of illegal drugs, making the trade attractive to people with a high tolerance for risk. And so in that sense, it’s true that some people will usually enter the prohibited trade – in alcohol, gambling, prostitution, crack, or whatever – and will employ some techniques that are also used in normal business enterprises. As Tyler Cowen says, there are markets in everything. Given our natural propensity to truck, barter, and exchange in order to improve our own situation, we can expect people to step into any trade, prohibited or not. Better that such trade should take place legally, within the rule of law, than underground, where violence may be the only recourse in disputes.

When the government bans the use and sale of a substance, and imprisons hundreds of thousands of people in an attempt to enforce that prohibition, that’s not “laissez-faire, free-market capitalism.” Duh.