Topic: Regulatory Studies

Uruguay Aims to Legalize Marijuana: The Good, The Bad and The Ugly

By
Juan Carlos Hidalgo

The good: José Mujica, Uruguay’s president, announced that he will send a bill to Congress to legalize the production and sale of marijuana. Consumption was already decriminalized in the South American nation. If the bill is approved, and it seems to have enough support in Congress to pass, Uruguay would become the first country to fully legalize marijuana.

The bad: The bill stipulates that the government will be in charge of the production and sale of marijuana. Even though having a marijuana state-owned monopoly is better than prohibition, it would be far better to have the private sector run the business under an appropriate tax and regulatory regime. Governments should not be involved in the drug business.

The ugly: Marijuana users who want to legally purchase the drug would have to register with the government. Moreover, they would be limited in the number of cigarettes they can buy per month. However, there are good reasons to believe that not many people will rush to a government agency to register as a marijuana user. And imposing a limit on the amount of joints that a person can buy legally just means that any extra consumption will by provided by illegal sources. Thus, I doubt that in practice the bill will be very effective at achieving its goals of getting rid of the black market and fighting street crime.

Topics: 
General, Regulatory Studies

Technically Correct, but not ‘Effin’ Brilliant’

By
Ilya Shapiro

While not “effin’ brilliant,” to paraphrase Bono in one of incidents at issue in the “fleeting obscenities” case, the Supreme Court’s overly narrow opinion in FCC v. Fox is correct as far as it goes. Levying millions of dollars of fines based on an after-the-fact policy change and a few ambiguous words from a 1960s regulatory statement clearly fails constitutional fair notice requirements.

Still, the Court missed a wonderful opportunity to expound on free speech over the airwaves and put broadcasters on the same level with respect to the First Amendment as cable companies, internet service providers, and other players on the telecommunications field. The Court also, as Justice Ginsburg noted in her concurrence, missed a golden opportunity to reconsider its unworkable Pacifica precedent. This ruling is not something Paris Hilton should sniff at, but Court watchers expected more.

Topics: 
Government and Politics, Law and Civil Liberties, Regulatory Studies

Major Victory for Workers’ Rights

By
Ilya Shapiro

Today’s Supreme Court decision in Knox v. SEIU is a major victory for individual liberties and workers’ right not to be coerced by government or unions. Those workers who choose not to join unions should not be forced to fund the unions’ political activities. The Court’s decision for the worker to opt-in to paycheck deductions for political activities rather than opt-out of these payments restores the proper protection for the individual’s freedom of speech and conscience. Justice Alito wrote for the majority, “Courts do not presume acquiescence in the loss of fundamental rights.”

Topics: 
Law and Civil Liberties, Regulatory Studies

Taking a Stand against Nanny Grants

By
Walter Olson

More than a few of the adventurous initiatives of today’s nanny state emerge from federal-local partnerships in which Washington ships federal tax money to selected local governments for the purpose of launching new campaigns or ordinances against things that are bad for us. Thus it has been with Michael Bloomberg’s anti-food and -drink activism, which the Obama Administration persistently subsidizes by way of grants from the Centers for Disease Control and other agencies.

As Michael Greve points out in his new book The Upside-Down Constitution, arrangements of this sort epitomize some of the most dysfunctional aspects of our system of federalism. They hide political accountability, since the favored local governments need not make a case to their own budgetary decision-makers for the expenditure as the highest and best use of scarce funds (hey, this is free federal money, why turn it down?). At the same time, the amounts involved are small enough in relation to the vast sea of overall federal spending that they generally escape close scrutiny in Congress. They allow federal incumbents to develop politically fruitful alliances with like-minded local political elites. And they often result in splashy, news-making local initiatives which go farther than Washington could politically permit itself to go: for example, given the importance of farm-state votes, the Obama administration has prudently avoided head-on vilification of the American diet, even as it funnels money to mayoral allies in farm-free Gotham and other cities to engage in just such vilification.

Fortunately, some in Congress are seeing through the charade. As The Hill reports, and Marc Scribner relates in more detail at CEI “Open Market,” some House members are determined to block a nascent grant program in which uber-Nanny Ray LaHood, Secretary of Transportation, would be empowered to send money to states to bribe them into taking steps against “distracted driving.” As we have argued in this space before, decentralized state and local rulemaking – un-distorted by a federal thumb on the scales – is the most promising way of figuring out which regulatory approaches to driver cellphone use genuinely improve safety at an acceptable cost in convenience, expense and other factors. Constitutionally and otherwise, it is simply not the role of the federal government to arm-twist states on their policies regarding driving on local streets and roads far from any Interstate.

Rep. Diane Black (R-Tenn.) is reportedly offering a motion to instruct conferees to stand fast on the House’s disapproval of the grant program, which will be argued today. This would make a good place to draw the line against the continued expansion of the centrally directed nanny state.

Topics: 
Government and Politics, Regulatory Studies

Can the Government Destroy Propety Values ‘Temporarily’ Without Compensation?

By
Ilya Shapiro and Trevor Burrus

This blogpost was co-authored by Trevor Burrus.

A seemingly complicated legal case that has caught Cato’s attention, CCA Associates v. United States, boils down to a simple constitutional question: If the government reneges on a contract and forces a property owner to rent apartments at below-market rates for longer than originally agreed, does it constitute a taking under the Fifth Amendment (which would require the government to pay just compensation)?

In 1961, Congress amended the National Housing Act to create incentives for private builders to supply housing to low- and moderate-income families. Builders were given below-market mortgages backed by the federal government and, in return, the owners agreed to certain restrictions from the Department of Housing and Urban Development, the most relevant being limitations on raising rent. Owners were also given the right to pre-pay the 40-year mortgage after 20 years, however, freeing them at that time from their rent-control obligations.

In 1990, as one 20-year period came to a close, Congress took away the owners’ right to pre-pay their mortgages. In 1996, however, Congress returned the property owners’ right to pre-pay. Therefore, between 1991 (when the original 20-year period would have lapsed) and 1996, the property owners were forced to rent at below-market rates.

CCA Associates is one of many similarly situated property owners who are suing the federal government for its clear act of duplicity. CCA Associates’ case, among many others, has been bouncing back and forth between the Court of Federal Claims and the Federal Circuit for many years.

One of the key questions is how to determine the degree to which the government’s actions economically affected CCA Associates’ property. One view is that there was substantial economic impact during the five-year period between when Congress eliminated and then restored the pre-pay right – CCA Associates lost approximately 81% of the property’s possible value during those five years. Another view looks at the impact during the five-year period as fraction of the entire life of the property, not just the diminished value during the five-year period. Under this calculation, CCA Associates only lost 18% of the total value of the property.

The Federal Circuit adopted the latter formula and held that 18% is not a substantial enough economic impact to constitute a Fifth Amendment taking. Cato has joined the National Federation of Independent Business, the Center for Constitutional Jurisprudence, and Professor Steven Eagle of George Mason University Law School on an amicus brief urging the Supreme Court to take CCA Associates’ case.

We argue that adopting the Federal Circuit’s answer to the so-called “denominator question” – that is, whether the denominator in the “economic impact” fraction should be the entire life of the property or the shorter (here five-year) period during which the government temporarily took the owners’ right to rent at the market price – could preclude all possible claims that the government committed a “temporary taking.” By choosing a big-enough denominator, courts can always characterize an economic impact as being below the constitutional threshold.

We also argue that, in applying the Supreme Court’s factors in the famous 1978 Penn Central case (which set up the analytical framework for regulatory takings), the Federal Circuit incorrectly treated the factors as a magic formula and ignored other relevant factors. Finally, we point out how courts are obviously confused about the proper standards to apply in these cases, thus creating a perfect time for the Supreme Court’s guidance.

The Court will decide this fall whether to hear CCA Associates v. United States.

Topics: 
Government and Politics, Law and Civil Liberties, Regulatory Studies

Farm Subsidies and Reverse Robin Hood

By
Chris Edwards

Liberals love to complain about Republican support for supposedly ”reverse Robin Hood” fiscal policies. Here’s Alan Blinder and Rachel Maddow, for example, pointing the finger at Paul Ryan and Mitt Romney, respectively.

However, I don’t see much liberal concern about big government spending programs that really do redistribute income upwards. What do Blinder and Maddow think about Democrats and Republicans in the Senate who are eager to extend billions of dollars worth of unaffordable payments to farm businesses and landowners? Robert Samuelson recently described these corporate welfare recipients as ”immensely profitable” because of high crop prices.

Tad DeHaven and I looked at data on farm household incomes for testimony to the House last week. Here is what we found:

Farm subsidies redistribute wealth from taxpayers to often well-off farm businesses and landowners. Farm income stabilization payments have recently fluctuated between about $13 billion and $33 billion annually.  This is a welfare hand-out like food stamps, yet it goes to higher-income households. In 2010, the average income of farm households was $84,400, or 25 percent above the $67,530 average of all U.S. households. Moreover, the great bulk of farm subsidies go to the largest farms.

I’m not in favor of Robin Hood or reverse Robin Hood programs, but it would be nice to see more liberals focusing on spending programs that are unfair to the nation’s taxpayers.

Topics: 
General, Regulatory Studies, Tax and Budget Policy

Public Housing Director Paid $644,241

By
Mark A. Calabria

When you work at a non-profit, like Cato, you accept part of the deal is being paid below-market wages.  Not that I’d reject a raise, but I actually think it improves the organization.  No one is here for the money.  You’re here for the mission.  When one hears, however, of public employees, especially those in “mission-driven” organizations, being paid out-sized compensation, you can’t help but wonder what happened to the devotion to the mission.

In response to public complaints, HUD conducted a survey of public housing authority director compensation.  The average salary, not including benefits for a housing authority director, who manages over 1,250 units, was $115,615 (2010).  Certainly in excess of the median household income, but not extreme for senior public employees (who in general are over-paid).

A few “outliers” did stand out.  The Atlanta public housing director apparently received, in 2010, $644,241 in total compensation.  Now of course, that director is claiming that such a number is “misleading” as it includes bonuses and pay-outs for unused vacation.  You can find her defense here and judge for yourself.  I would certainly say from having met her on a few occasions, she is one of the more competent and hard-working housing authority directors.  But worth $644,241?

HUD’s reaction to all this?  To cap the federal contribution to $155,500.  Given that housing authorities are themselves creatures of state law and their directors usually appointed by mayors or governors, it is not clear to me why there should be any federal contribution to their compensation.  Let’s cap the federal part at zero.  If a city, county or state wants to continue to receive federal housing money, the least it can do is manage to pay the salary of its director.  While I’m no fan of federal housing programs, I’d at least like to see said funding actually go to those in need.

Topics: 
Government and Politics, Regulatory Studies

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