Archives: 11/2015

“Underground Regulations” Violate the Constitution as Much as Headline-Grabbing Executive Actions

Small business owners aren’t typically lawyers, though they are undoubtedly familiar with the thousands of inscrutable pages of new regulations published every year in the Federal Register. Instead of devoting their energies to growing their businesses, owners must expend significant time and resources ensuring compliance with these voluminous and often vague regulations, with costly fines looming as consequences for failure to comply. “The Fourth Branch & Underground Regulations,” a new report by the National Federation of Independent Businesses (NFIB), details the processes by which administrative agencies skirt “notice-and-comment” requirements to impose new interpretations of rules that avoid the constitutional system of checks and balances. Unfortunately, operating on this shifting field disproportionately affects small businesses, as they are most poorly equipped to lobby for favorable rules.

The Administrative Procedure Act established “notice-and-comment” as a means for regulated businesses to voice concerns with or offer suggestions to improve proposed regulations. However, “non-legislative rules,” or “general statements of policy” and “interpretive rules,” are not required to undergo this process. This grants administrative agencies – the “Fourth Branch” of government – significant leeway in how “legislative rules” are interpreted and implemented, essentially giving them law making power. The recent Supreme Court ruling in Perez v. Mortgage Bankers Association allows agencies not only to interpret rules without undergoing “notice-and-comment,” but also the ability to change their interpretation at any point.(Cato filed an amicus brief in the case.)

Without a required need for transparency, agencies are thus free to issue “underground regulations” that impose serious and sudden rules on regulated businesses. NFIB examines four ways in which these “underground rules” are established: executive orders, guidance documents, amicus filings, and enforcement actions. Recognizing the potential dangers of this “underground” system of lawmaking, NFIB argues that “the regulated public should have a right to voice concerns over any newly announced rules, policy, or administrative interpretation of law that may impose affirmative regulatory burdens on individuals or businesses” and urges agencies to “allows some opportunity for notice-and-comment on all new rules imposing liabilities or other regulatory burdens – without regard to quantifiable compliance costs.”

Freed from congressional oversight and the beneficiary of considerable judicial deference, administrative agencies can pursue ideological agendas without the general public even being aware regulations are being instituted. One way this is achieved is by filing an amicus brief in a case between two private parties. An agency can offer the court its authoritative interpretation of a rule – though given the ruling in Perez, the agency can change that interpretation in a later brief in another case or court.

The Reckless Proposal to Impose a No-Fly Zone in Syria

Bad foreign policy ideas have a nasty habit of recirculating. One of the worst is the proposal to impose a no-fly zone in Syria to protect rebel forces attempting to overthrow Bashar al-Assad’s regime. President Obama has wisely resisted that scheme, but the likely Democratic presidential nominee, Hillary Clinton, has endorsed it. And in the most recent GOP debate, several candidates, especially Senator Marco Rubio and Carly Fiorina, enthusiastically signed-on to the strategy. Only Senator Rand Paul unequivocally opposed it.

Even under normal circumstances, imposing a no-fly zone in Syria would be a spectacularly bad idea. Such measures were a prelude of America’s disastrous, full-scale military intervention in Iraq, and a similar danger of escalation exists in this case. Moreover, the move would strengthen the position of the ideologically murky amalgam that opposes Assad. The reality is that even the non-ISIS rebel groups exhibit a disturbing level of radical Islamic influence. Indeed, the largest and strongest anti-Assad faction appears to be al Nusra, al Qaeda’s affiliate in Syria. It is mystifying why American hawks would want to empower such forces.

But special circumstances in Syria make the no-fly proposal even more dangerous than normal. Russia has intervened in that country and is flying numerous combat missions against rebel units. Establishing a no-fly zone over Moscow’s objections would be extremely provocative. Yet neither Clinton nor the GOP hawks gave any hint that creating the zone should be contingent on Russia’s consent. Indeed, there was an undertone in the debate comments by Rubio and Fiorina that imposing the zone would be an effective way to humiliate Vladimir Putin and make it clear that Russia would not be able to exercise influence in the Middle East.

If that is the nature of no-fly zone proposals, they are extraordinarily reckless. How would we enforce the unilateral no-fly edict?  Would we actually shoot down Russian planes if they dared continue their combat flights?  That would carry the obvious risk that Moscow might respond in kind—and that would bring two nuclear-armed powers to the brink of all-out war. Even if Russia did not directly challenge the United States with aerial combat in Syria, it has other options to retaliate against a U.S. effort to humiliate the Kremlin. Putin could, for example, redouble his military efforts in Ukraine, intensifying that messy conflict. And there is always the chance that he would move militarily against the vulnerable Baltic republics, creating a crisis of credibility for NATO.

There is nothing at stake in Syria that warrants the United States risking such a dangerous confrontation with Russia. Imposing a no-fly zone under the current circumstances is utterly reckless. Anyone who embraces such a scheme should be disqualified automatically from occupying the Oval Office.

Institute for Justice Publishes New Edition of Policing for Profit

Yesterday, the Institute for Justice, which has long been a leader in the fight against the abusive practice of civil asset forfeiture, released a new edition of its important 2010 study Policing for Profit.

Civil asset forfeiture has been with us for centuries, but the Drug War has kicked the government’s incentives to seize property without charge or trial into high gear.  Federal seizures alone have gone from tens of millions to billions of dollars a year over the last generation, while the vast majority of states still use a deficient and abusive process to take private property from citizens who haven’t been charged with any wrongdoing.

Thanks to the work of organizations like IJ, journalist exposés of numerous egregious abuses, and legislators committed to the rule of law, several states have reformed their forfeiture laws.  But as the new report shows, the work is far from finished, and, despite a pledge to reform, the federal government continues to undermine state reforms while seizing billions of dollars on its own.

The key findings of the report include:

  • a massive increase in civil forfeiture actions in the 21st century
  • a continued burden on property owners who have to prove themselves innocent rather than being proven guilty by the state
  • an abject lack of transparency about how much the government seizes and how the agencies are spending the proceeds of those seizures
  • the perverse incentives provided by laws that allow executive agencies to add to their own budgets by taking property and cash from individuals

 The report also includes updates to IJ’s state-by-state assessments of forfeiture laws, with 35 states and the federal government earning grades of D+ or worse.

 IJ also released an excellent video to summarize their findings:

 The full report can be found here.  How does your state stack up?

 For Cato’s explainer on the issues and abuses inherent in civil asset forfeiture, click here.

Happy Birthday, Anna

nna Schwartz, memoriam, birthday, economist, monetaryWere she still alive, Anna Schwartz, one of the last centuries’ greatest monetary economists, would have celebrated her 100th birthday today.

Alas, we must commemorate the date without her. To do so, I repost here remarks I made upon her death in 2012. In what has become a prolonged era of unconventional monetary policy, the loss of her expertise and wisdom is even more sorely felt than it might have been otherwise. Still all of us, and the economics profession especially, are much better off thanks to her straightforward and uncompromising scholarship.

Happy Birthday, Anna.


She was one of my intellectual heroes, Anna was — together with Milton and Leland, David Laidler, Sir Alan Walters, and Dick Timberlake. Old monetarists all, come to think of it. Now only three are left; and, no, they do not make them like that any more.

I met Anna at NYU. Back then the NBER occupied the 8th floor of 269 Mercer Street. NYU’s economics department was on the 7th floor. Of course I went to meet her. She turned out to be very nice, so I got the bright idea to ask her to serve as an external member of my dissertation committee. I had the impression that I was one of very few NYU Ph.D. candidates to think of doing that, which struck me as odd. But then a lot of things about NYU, and about the economics business generally, struck me (and still strike me) as odd.

Anna gave me some good advice; indeed, apart from Larry White (who was my supervisor, and who I talked to almost daily) she was my most helpful adviser at NYU. Naturally I don’t remember much about the particular advice she gave me. But I do distinctly remember her telling me that, once I got into the business, I had better write about stuff besides free banking if wanted to survive. I took Anna’s advice, and still found it rough going. Had I not listened to her I’m sure I would have had to give up.

I’m also pretty sure that it was only thanks to Anna that some of the the free banking stuff that did make it into the better journals got through: she was one of the few persons who was both greatly respected by the editors of those journals and willing to give the free bankers a hearing. Indeed, Anna was more than sympathetic: she was, or she became, one of us. I am reasonably certain that she played a very large, if not crucial, part in encouraging Milton to revise his thinking on the topic, as he did when he and Anna published their 1986 JME paper “Has Government Any Role in Money?”. That Anna’s views on the proper scope of government interference in banking became progressively more radical I have no doubt. For example, while in a 1995 Cato Journal article she and Mike Bordo took the conventional line that you couldn’t have a stable banking system without some sort of deposit insurance, when I questioned her about this stand a few years ago Anna claimed that she had since rejected that view, having come to believe instead that the moral hazard arising from deposit guarantees ultimately caused such guarantees to do more harm than good.

I was lucky to be able to talk to Anna at length on several occasions during the last few years, thanks to Walker Todd, who arranged for her to visit the American Institute for Economic Research while I was there as a summer fellow. What I remember most about those conversations was how very candid and uncompromising they were: Anna never held a punch, and when she threw one, it landed square on target. Not that Anna wasn’t generous with praise: it’s just that, whatever she thought, she always came right out with it. She’d lived long enough, I suppose, to earn that. In any event it meant that talking to her was really a blast. (If only I could repeat all that I heard!)

Now, with all the dominoes lined-up from Greece to Brussels and beyond, and ready to start toppling at any moment, how I wish that this tough and uncompromising monetarist was still among us! No one can say just what she’d have made of it all; but whatever she made you can bet she would have served it up straight.

[Cross-posted from]

Body Camera Policies Leave a Lot to Be Desired

Police body cameras can only be as good as the policies which govern them allow. Regrettably, despite widespread calls for more police officers to wear body cameras in order to improve accountability and transparency, many police departments across the United States are governed by poor policies and practices.

The Leadership Conference on Civil and Human Rights and Upturn recently released a body camera scorecard, which grades body camera policies in 25 cities, including the 15 largest departments which currently or will soon outfit officers with body cameras.

Each department was judged on a range of issues including public access to body camera policies, restrictions on biometric technology, allowing officers to view body camera footage before making a statement, and officer discretion. The results (shown below) are not encouraging.

Of the 25 departments, only one–Baltimore–limits facial recognition technology being used in body cameras. None of the 25 departments explicitly prohibit officers from reviewing body camera footage before making an initial statement or report for any incident. The majority of the departments do not have body camera policies publicly available on their websites. Only two of the departments (Parker, Colorado and Washington, D.C.) allows people filing a police misconduct complaint to view at least some of the relevant body camera footage.

Some of the departments with disappointing policies have received funding from the Department of Justice (DOJ). The Los Angeles Police Department, for example,  was awarded $1 million for body cameras despite requiring officers involved in a fatal use-of-force incident to view body camera footage before making a statement.

Body cameras are a relatively new technology with great potential, but this potential could go unrealized if lawmakers are not careful. Amid ongoing discussions on criminal justice and police misconduct, it is not surprising that body cameras are often cited as tools which can play a role in reforms. However, as the Leadership Conference on Civil and Human Rights and Upturn scorecard demonstrates, many body camera policies do not help provide the much-needed increase in law enforcement transparency and accountability.

In my latest Cato Institute policy analysis, I propose a number of policies which would, if implemented, provide increased transparency and accountability in law enforcement. It is understandable that law enforcement agencies and lawmakers across the country are keen to deploy body cameras. But body camera policy shouldn’t be rushed. Without the right policies in place, body cameras could come to be seen not as a valuable part of criminal justice reform, but rather a secretive and confusing law enforcement tool with worrying privacy implications.

Score One for For-Profit Colleges This Veterans Day

There is nothing easier or seemingly more popular in higher education than bashing openly for-profit colleges. (I use “openly,” by the way, for a reason.) If you burrow into the demographic and funding weeds, however, you’ll see that proprietary schools are likely no worse, as a whole, than any other sector of uber-subsidized higher ed. And now Gallup has produced a little more good news for these beleaguered schools, to the extent that any news from our bloated Ivory Tower is good: For-profits seem to do a better job of serving veterans – at least from the vets’ perspective – than public colleges and, depending on how you slice the data, nonprofit private colleges as well.

As the table below shows, when veterans rank how well they feel their schools understood their needs, the percentage giving a 4 or 5 – the top scores – to for-profit schools beats any other sector, and at just the 5 level only nonprofit private institutions surpass them. Comparing for-profit and public schools, for-profits get more 4s and 5s by a 15 percentage point margin.

It’s probably not a mystery why this is. For-profits are more nimble than public colleges, and their desire for profits may actually – get ready – make them more responsive to the needs of the students who buy their services. Yes, there are bad for-profit actors – though the extent to which that is the case is unclear – but maybe on the whole they work better for students than lumbering, impersonal public institutions that get big taxpayer subsidies upfront. At the very least, that’s what this evidence suggests. Not that evidence has mattered much in this debate so far.