Topic: Political Philosophy

When the Goverment Robs Peter to Pay Paul, It Violates the Constitution

The Supreme Court’s 2005 decision that the government could use its eminent domain power to transfer private property to a different private actor – which promised to use it to generate more tax revenue – touched off a firestorm of criticism and created a movement to strengthen property rights.  (For the story behind that case, Kelo v. New London, I recommend Little Pink House: A True Story of Defiance and Courage, for which Cato hosted a book forum in January.)   On Friday, Cato filed a brief urging the Supreme Court to review a decision ratifying a similar, even more blatant, government taking of private property for a non-public use.

In Empress Casino v. Giannoulias, the Illinois Supreme Court upheld a statute transferring money from private riverboat casinos – and at that only the certain politically disfavored ones located in and around Chicago – to private horseracing tracks.  The state high court found that the Fifth Amendment’s Takings Clause does not apply to exactions of money from private entities, which ruling the casinos are asking the U.S. Supreme Court to review.

Cato’s brief argues that the Court should grant certiorari for yet another reason: The Illinois statute (which coincidentally appeared in the transcript of the Blagojevich sting) is in clear violation of the Takings Clause’s “public use” requirement, impermissibly eroding protections for private property even under Kelo’s (flawed) standard. The statute does nothing more than rob Peter to pay Paul, a result that cannot be squared with the Fifth Amendment, which permits government takings only for public use, and then only if just compensation is paid. This case instead involves a naked transfer of the casinos’ revenues to the racetracks, with no meaningful restriction on how the racetracks use those funds — and does not remotely resemble any public use approved by the Supreme Court.

Permitting such a statute to stand will only encourage federal, state, and local governments to exact funds from one private actor for the exclusive benefit of another, transgressing the very property rights and economic liberties that inspired the Declaration of Independence and Constitution.

Calling All Harvard Alumni

As my colleague Dan Mitchell has noted, Harvard is about to hold a conference about how the “free market ideology has dominated  legal discourse and lawmaking the last few decades.”  That’s a dubious narrative (to say the least (pdf)).

In any event, Harvard alums who read this blog should know that Cato adjunct scholar Harvey Silverglate  is running for a position on Harvard’s Board of Overseers.  Pass the word to all the Harvard alumni you may know.  Additional background here.

Cato Scholars Address Obama’s First Speech to Congress

President Barack Obama’s first address to Congress laid out a laundry list of new spending contained within the stimulus legislation and provided hints as to what will be contained in the budget - a so-called “blueprint for America’s future” - he’ll submit to the legislature. Cato Institute scholars Chris Edwards, Jim Harper, Gene Healy, Neal McCluskey, David Rittgers, John Samples and Michael D. Tanner offer their analyses of the President’s non-State-of-the-Union Address.

Subscribe to Cato’s video podcast here and Cato’s YouTube channel here.

Is Libertarianism a Sign of Mental Illness?

I don’t know whether this belongs in the comic-relief category or the future-threats category, but the Harvard Law School is having a conference to analyze the “free market mindset.” The basic premise of the conference seems to be that people who believe in limited government are psychologically troubled.

The conference schedule features presentations such as “How Thinking Like an Economist Undermines Community” and “Addicted to Incentives: How the Ideology of Self Interest Can Be Self-Fulfilling.” The most absurd presentation, though, may be the one entitled, “Colossal Failure: The Output Bias of Market Economies.” According to the description, the author argues that the market “delivers excessive levels of consumption.” Damn those entrepreneurs for creating so much wealth!

In the good old days of Soviet dictatorship, the regime classified dissidents as being mentally ill (after all, only a nutcase would fail to see the glories of communism).

Now that leftists at Harvard want to portray laissez-faire philosophy as being somewhat akin to a mental disorder, maybe the next step will be re-education camps for Cato staff? Maybe the next “stimulus” bill could include a few earmarks for such facilities? I’m keeping my fingers crossed that I get sent some place warm.

Is Sports like Wall Street?

Washington Post sportswriter Sally Jenkins often has sensible things to say. And in today’s paper she makes some interesting points about hyper-competitiveness in sports and finance. But I think she was led astray by investor, college athlete, and Clinton Treasury appointee Roger Altman:

There is a strong natural connection between Wall Street and sports because “both are quite binary worlds, somebody wins and somebody loses,” according to Altman, who was a varsity lacrosse player at Georgetown.

That’s just wrong. In sports it’s true: somebody wins and somebody loses. If the Yankees beat the Red Sox, that’s a binary outcome with a winner and a loser. It’s what economists call a zero-sum game. If Michael Phelps wins the gold, then everybody else doesn’t.

But in the market both parties to a transaction expect to gain. I get a meal, the restaurant owner gets my money. I get a salary, Cato gets my production. As Murray Rothbard wrote in the Concise Encyclopedia of Economics:

The mercantilists argued that in any trade, one party can benefit only at the expense of the other—that in every transaction there is a winner and a loser, an “exploiter” and an “exploited.” We can immediately see the fallacy in this still-popular viewpoint: the willingness and even eagerness to trade means that both parties benefit. In modern game-theory jargon, trade is a win-win situation, a “positive-sum” rather than a “zero-sum” or “negative-sum” game.

No doubt businessmen do like to “win” – sometimes they say “money is a way of keeping score.” They like to make the deal and block their competitors. Sometimes their testosterone may even impel them to make deals that aren’t economically rational, and the market has a way of punishing such decisions. But the people who make the deals – both parties, all parties – all expect to benefit. And usually they’re right. We’ve all bought things that we wish we hadn’t, or made investments that didn’t pan out. Most of the time, though, both parties to a transaction are pleased to make it and remain pleased after the fact. And the process of repeated positive-sum transactions creates economic growth and development.

Sports is different. The game may be fun, for both competitors and spectators. But in the end, as Altman correctly says, in sports “somebody wins and somebody loses.”

Obama’s Shock Doctrine

At the Guardian, I argue that President Obama and Rahm Emanuel are carrying out just what Naomi Klein predicted in The Shock Doctrine. Except that, as usual, it’s not deregulation and budget cutting that governments turn to in times of crisis. It’s more money and more power:

Last year the US economy was hit with one shock after another: the Bear Stearns bail-out, the Indymac collapse, the implosion of Fannie Mae and Freddie Mac, the AIG nationalisation, the biggest stock market drop ever, the $700bn Wall Street bail-out and more — all accompanied by a steady drumbeat of apocalyptic language from political leaders.

And what happened? Did the Republican administration summon up the spirit of Milton Friedman and cut government spending? Did it deregulate and privatise?

No.

It did what governments actually do in a crisis — it seized new powers over the economy. It dramatically expanded the regulatory powers of the Federal Reserve and injected a trillion dollars of inflationary credit into the banking system. It partially nationalised the biggest banks. It appropriated $700bn with which to intervene in the economy. It made General Motors and Chrysler wards of the federal government. It wrote a bail-out bill giving the secretary of the treasury extraordinary powers that could not be reviewed by courts or other government agencies.

Now the Obama administration is continuing this drive toward centralisation and government domination of the economy. And its key players are explicitly referring to their own version of the shock doctrine. Rahm Emanuel, the White House chief of staff, said the economic crisis facing the country is “an opportunity for us”. After all, he said: “You never want a serious crisis to go to waste. And this crisis provides the opportunity for us to do things that you could not do before” such as taking control of the financial, energy, information and healthcare industries….

Occasionally, around the world, there have been instances where a crisis led to free-market reforms, such as the economic reforms in Britain and New Zealand in response to deteriorating economic conditions. Generally, though, governments seek to expand their power, and they take advantage of crises to do so. But they rarely spell their intentions out as clearly as Rahm Emanuel did.