Topic: Government and Politics

Miss Manners’s Advice for President Obama

A reader writes to Miss Manners to complain that often she can’t find a seat at a bookstore coffee shop, even though she’s a paying customer and some of the people seated seem not to be buying anything. She suggests that it is obvious that this is not the way to manage a coffee shop in a bookstore and asks Miss Manners how she can politely get the seat she wants. Miss Manners responds:

If you want to manage a coffee shop, Miss Manners suggests you first talk to those who do.

She goes on to explain that bookstores may “do better selling books by being a neighborhood center than they would by checking to see that the tables are occupied only by people who are eating and drinking.” But in any case, the bookstore managers are likely to have a better sense of this than customers who have not invested in the business.

That’s good advice for the Obama administration: If you want to manage a bank, an insurance company, an automobile manufacturer, or any other company, you might try talking to people with expertise. Better yet, you might even let those with skin in the game manage their own companies. If they make mistakes and the government doesn’t bail them out, bad managers will soon enough be weeded out.

Week in Review: Bailout Bonuses, Marijuana and Eminent Domain Abuse

House Approves 90 Percent ‘Bonus Tax’

Sparked by outrage over the bonus checks paid out to AIG executives, the House approved a measure Thursday that would impose a 90 percent tax on employee bonuses for companies that receive more than $5 billion in federal bailout funds.

Chris Edwards, Cato’s director of tax policy studies, says the outrage over AIG is misplaced:

While Congress has been busy with this particular inquisition, the Federal Reserve is moving ahead with a new plan to shower the economy with a massive $1.2 trillion cash infusion — an amount 7,200 times greater than the $165 million of AIG retention bonuses.

So members of Congress should be grabbing their pitchforks and heading down to the Fed building, not lynching AIG financial managers, most of whom were not the ones behind the company’s failures.

Cato executive vice president David Boaz says this type of selective taxation is a form of tyranny:

The rule of law requires that like people be treated alike and that people know what the law is so that they can plan their lives in accord with the law. In this case, a law is being passed to impose taxes on a particular, politically unpopular group. That is a tyrannical abuse of Congress’s powers.

On a related note,  Cato senior fellow Richard W. Rahn defended the use of tax havens in a recent Wall Street Journal op-ed, saying the practice will only become more prevalent as taxes increase in the United States:

U.S. companies are being forced to move elsewhere to remain internationally competitive because we have one of the world’s highest corporate tax rates. And many economists, including Nobel Laureate Robert Lucas, have argued that the single best thing we can do to improve economic performance and job creation is to eliminate multiple taxes on capital gains, interest and dividends. Income is already taxed once, before it is invested, whether here or abroad; taxing it a second time as a capital gain only discourages investment and growth.

Obama to Stop Raids on State Marijuana Distributors

Attorney General Eric Holder announced this week that the president would end federal raids on medical marijuana dispensaries that were common under the Bush administration.

It’s about time, says Tim Lynch, director of Cato’s Project on Criminal Justice:

The Bush administration’s scorched-earth approach to the enforcement of federal marijuana laws was a grotesque misallocation of law enforcement resources. The U.S. government has a limited number of law enforcement personnel, and when a unit is assigned to conduct surveillance on a California hospice, that unit is necessarily neglecting leads in other cases that possibly involve more violent criminal elements.

The Cato Institute hosted a forum Tuesday in which panelists debated the politics and science of medical marijuana. In a Cato daily podcast, Dr. Donald Abrams explains the promise of marijuana as medicine.

Cato Links

• A new video tells the troubling story of Susette Kelo, whose legal battle with the city of New London, Conn., brought about one of the most controversial Supreme Court rulings in many years. The court ruled that Kelo’s home and the homes of her neighbors could be taken by the government and given over to a private developer based on the mere prospect that the new use for her property could generate more tax revenue or jobs. As it happens, the space where Kelo’s house and others once stood is still an empty dustbowl generating zero economic impact for the town.

• Daniel J. Ikenson, associate director of Cato’s Center for Trade Policy Studies, explains why the recent news about increasing protectionism will be short-lived.

• Writing in the Huffington Post, Cato foreign plicy analyst Malou Innocent says Americans should ignore Dick Cheney’s recent attempt to burnish the Bush administration’s tarnished legacy.

• Reserve your spot at Cato University 2009: “Economic Crisis, War, and the Rise of the State.”

Republicans Rediscover Their Big-Government Principles

Sen. Chuck Grassley, who can always be counted on to stick the federal government’s nose where it doesn’t belong, is criticizing Attorney General Eric Holder’s teeny-tiny steps toward a less oppressive enforcement of drug prohibition. Holder said on Wednesday “that federal agents will target marijuana distributors only when they violate both federal and state law. This is a departure from policy under the Bush administration, which targeted dispensaries under federal law even if they complied with the state’s law allowing sales of medical marijuana.”

Grassley says that marijuana is a “gateway” drug to the use of harder drugs and that Holder “is not doing health care reform any good.”

As Tim Lynch and I wrote in the Cato Handbook for Policymakers:

President Bush … has spoken of the importance of the constitutional principle of federalism. Shortly after his inauguration, Bush said, “I’m going to make respect for federalism a priority in this administration.” Unfortunately, the president’s actions have not matched his words. Federal police agents and prosecutors continue to raid medical marijuana clubs in California and Arizona.

And as Justice Clarence Thomas wrote in dissenting from the Supreme Court’s decision to uphold the power of the federal government to regulate medical marijuana:

If Congress can regulate this under the Commerce Clause, then it can regulate virtually anything — and the Federal Government is no longer one of limited and enumerated powers.

That’s the principle that Chuck Grassley defends. Republicans claim to be the small-government party — and President Obama’s policies on taxes, spending, and regulation certainly justify a view that the GOP is, if not a small-government party, at least the smaller-government party — but they forget those principles when it comes to imposing their social values through federal force.

Selective Taxation Is Tyranny

The House of Representatives has passed a 90 percent tax on the bonuses paid to AIG employees, seemingly forgetting President Obama’s admonition “that in a time of crisis, we cannot afford to govern out of anger, or yield to the politics of the moment.”

Everybody’s angry. But anger doesn’t make good law. And there are real questions about both the wisdom and the legality of such legislation. Bloggers like Conor Clarke, Megan McArdle, and Eugene Volokh have asked if the bonus tax is legal or constitutional. And thank goodness for bloggers who ask the questions that members of Congress and print journalists seem to ignore!

The bloggers wonder if after-the-fact taxes on specific people violate the constitutional ban on bills of attainder and ex post facto laws. (Ex post facto = after the fact.) Good questions indeed. But they should go further and ask, Are laws like this tyrannical? Ex post facto legislation isn’t just bad because it’s unconstitutional. It’s unconstitutional because it’s bad. (Nate Silver did raise these broader questions, arguing that the bonus tax bill was like the congressional intervention into the Terri Schiavo case: quite possibly legal and constitutional, but “it represented a gross overreach of the chamber’s authority, and ultimately undermined, at least a little bit, the rule of law.”)

Harvard law professor Laurence Tribe tells Conor Clarke, “It would not be terribly difficult to structure a tax, even one that approached a rate of 100%, levied on some or all of the bonuses already handed out (or to be handed out in the future) by AIG and other recipients of federal bailout funds so that the tax would survive bill of attainder clause challenge. …The fact that the individuals subject to the tax in its retroactive application would in principle be readily identifiable would not suffice to doom the tax either from a bill of attainder perspective or from a due process perspective.”

Which led liberal blogger Kevin Drum to this conclusion:

it looks like the answer here is simple: even though the purpose of this tax would pretty clearly be punitive with extreme prejudice, we need to carefully pretend that it’s not.  And we need to make sure the legislative history shows that it’s not (it should be “manifestly regulatory and fiscal” Tribe says).

Considering that the rage of the anti-bonus army is being egged on by New York Post headlines such as “Not So Fast You Greedy Bastards” and “Tax the Damn Bonuses to Hell,” it might be tough to persuade a judge that this was “regulatory and fiscal,” not punitive, legislation.

The rule of law requires that like people be treated alike and that people know what the law is so that they can plan their lives in accord with the law. In this case, a law is being passed to impose taxes on a particular, politically unpopular group. That is a tyrannical abuse of Congress’s powers. And in addition, it is retroactive legislation, changing the law upon which AIG and its employees had relied. As James Madison wrote in Federalist 62, “It will be of little avail to the people, that the laws are made by men of their own choice, if the laws … undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow.”

Selective taxation is tyranny. Ex post facto legislation violates the spirit of the liberal order, even if a particular piece of legislation can be “structured” to pass constitutional muster.

New Era of Unlimited Federal Power

The House has passed a measure imposing a special punitive tax of 90% on certain employee compensation in response to the AIG scandal. As others have noted, this raises serious constitutional issues. Article I, Section 9, Clause 3 says simply and directly: “No Bill of Attainder or ex post facto Law shall be passed.” The congressional bill being considered in response to the AIG bonuses seems to violate both those prohibitions at least in spirit.

The Constitution’s Framers apparently considered (page 154) this clause to be very important in guarding against legislative tyranny, and James Madison noted in Federalist 44:

Bills of attainder, ex post facto laws, and laws impairing the obligation of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation.

Aside from the dangers to liberty from overzealous members of Congress, there are issues of priorities here. While Congress has been busy with this particular inquisition, the Federal Reserve is moving ahead with a new plan to shower the economy with a massive $1.2 trillion cash infusion–an amount 7,200 times greater than the $165 million of AIG retention bonuses.

So members of Congress should be grabbing their pitchforks and heading down to the Fed building, not lynching AIG financial managers, most of whom were not the ones behind the company’s failures.

Obama’s First Signing Statement

obama-signs-billPresident Obama issued his first signing statement last week. While approving the $410 billion omnibus appropriations bill, he reserved the right to reinterpret, evade, or ignore a number of the bill’s provisions. To some conservatives, that smelled like vindication; and some liberals found it fishy. Who’s right? Both, to some extent.

During the Bush years, “signing statements” came to stand for a much broader set of issues than the practice itself. After President Bush used one to basically announce that, veto-proof majority or no, he didn’t have to follow the McCain Detainee Treatment Act, “signing statements” in the public mind became shorthand for the Bush theory that the president is sole constitutional “decider” on all matters related to national security—in much the same way that the PATRIOT Act became shorthand for overzealousness in homeland security. The obnoxiousness of each—open defiance in the signing statement case, the dopey Orwellianism of the acronym with PATRIOT—made them symbols, even though neither represented the worst abuses in the fight against terrorism.

But what really matters is the underlying constitutional theory, not the particular quasi-legislative device it’s reflected in. Which is worse: openly announcing that you’re not going to obey new congressional restrictions on torture—as Bush did with the 2006 McCain Amendment—or secretly violating the old ones for years? The latter, clearly. At least a signing statement puts you on notice.

On the campaign trail in 2008, Obama, unlike McCain, never promised to end the practice of signing statements entirely. Obama’s position was more nuanced. When it comes to signing statements, some nuance is appropriate. I don’t agree with the ABA’s blanket condemnation of the practice. As the Congressional Research Service has pointed out, despite the Supreme Court’s 1983 repudiation of the legislative veto, Congress continues to smuggle legislative vetoes into omnibus spending bills. One could argue that the president’s only recourse is to veto the bill–and more vetoes of spending bills would surely be welcome. But it seems to me that in such cases, issuing a signing statement is a venial sin at worst. There’s a vast difference between that sort of signing statement and one that asserts that the president cannot be bound by a law barring torture.

Most of the objections Obama lodged in his signing statement fall well short of the Bush-Cheney end of the spectrum. But there’s at least one that looks particularly dodgy:

United Nations Peacekeeping Missions. Section 7050 in Division H prohibits the use of certain funds for the use of the Armed Forces in United Nations peacekeeping missions under the command or operational control of a foreign national unless my military advisers have recommended to me that such involvement is in the national interests of the United States. This provision raises constitutional concerns by constraining my choice of particular persons to perform specific command functions in military missions, by conditioning the exercise of my authority as Commander in Chief on the recommendations of subordinates within the military chain of command, and by constraining my diplomatic negotiating authority. Accordingly, I will apply this provision consistent with my constitutional authority and responsibilities.

Here Obama echoes Bushian claims about the extent of the president’s authority under the commander-in-chief clause. But given the context, perhaps the better parallel is with Bill Clinton. President Clinton also asserted the power to ignore congressional restrictions on his ability to place U.S. troops under foreign command. That sort of executive unilateralism in the service of multilateralism was distinctly troubling. As one commentator noted in 2000:

Responding to congressional efforts to stop the new policy, the Clinton administration has claimed a broad constitutional power in the president to delegate military command authority to any person. According to the administration, the president’s commander in chief power allows him to select whomever he believes necessary for military success…. That position has serious constitutional and policy defects. First, the administration’s legal justification for its recent multilateral command policy fails to account for the Constitution’s limitation on the delegation of federal power outside of the national government….

You know who wrote that? John Yoo. My head hurts.

The Incredible Expanding Stimulus Programs

Get on a media list, and you get lots of emailed press releases. Like this one today:

APPLIANCE AND RETAIL INDUSTRY URGE QUICK ACTION ON CONSUMER REBATE PROGRAM FOR APPLIANCES

In case you’re wondering, it’s from the Association of Home Appliance Measures (AHAM). And it won’t surprise you to hear that “The Association of Home Appliance Manufacturers (AHAM) and the Retail Industry Leaders Association (RILA) urge the U.S. Department of Energy (DOE) to quickly disburse funding to state energy offices for the Energy Efficient Appliance Rebate Programs so that consumer rebates will be available for the summer months to purchase ENERGY STAR appliances.” Yes, indeed, that’s the way to get the economy moving again: get people out there buying new appliances.

You know what I think would really stimulate the economy? Federal tax credits for contributions to free-market think tanks. Nonprofits are facing diminished revenues and layoffs during these tough times. A tax credit would “create or save up to 4 million jobs.” OK, maybe not quite 4 million, but some number “up to” that. And by focusing the credit on free-market think tanks, you’d help to encourage sound long-term economic policy. It’s a win-win idea. I should get out a press release.