Cato Went 10-1 at Supreme Court This Term

And so another term has come and gone at the marble palace at One First Street NE. Like last year, Cato did swimmingly, compiling a 10–1 record in cases where we filed an amicus brief. Notably, we again vastly outperformed the solicitor general’s office, which went 11–9 on the year. Perhaps the government would be better served following our lead on constitutional interpretation, advocating positions that reinforce our founding document’s role in securing and protecting individual liberty.

Cato was also the only group in the country to file on the winning side of this term’s three highest-profile 5-4 cases: McCutcheon v. FEC (campaign finance), Harris v. Quinn (workers’ rights), and Burwell v. Hobby Lobby (HHS mandate). This again matches our performance last year, when we were the only ones to file on the winning side of Fisher v. UT-Austin (racial preferences), Shelby County v. Holder (voting rights), and United States v. Windsor (DOMA). There’s an obvious reason why it’s become a “best practice” among elite Supreme Court advocates to solicit an amicus brief from Cato; while our denial rate is lower than the Supreme Court’s, it’s been growing steadily given increasing requests without a commensurate growth in manpower.

For the record, here’s a record of cases in which we filed this term (in order of argument):

Winning side (10): McCutcheon v. FEC; Schuette v. Coalition to Defend Affirmative Action; Bond v. United States; Noel Canning v. NLRB; Brandt v. United States; McCullen v. Coakley; Harris v. Quinn; Burwell v. Hobby Lobby; SBA List v. Driehaus; Riley v. California

Losing side (1): Kaley v. United States

To learn more about all these cases and the views of Cato-friendly scholars and practitioners, register for our 13th Annual Constitution Day Symposium, which will be held September 17 to review the term just past and look ahead to the next one. (This year’s conference features P.J. O’Rourke, Miguel Estrada, and Judge Diane Sykes, among others.) That’s also when we’ll be releasing the latest volume of the Cato Supreme Court Review. Speaking of which, I’d better get editing…

Can Egypt Cure Its Subsidy Addiction?

Egypt’s government spends more on subsidies of consumer products—most prominently energy and food—than on health and education combined. Subsidies distort markets, lead to waste, and are largely ineffective in helping Egypt’s poor. Therefore, it should be heartening to see the government tackling the problem, as part of its effort to bring down the country’s fiscal deficit.

According to Finance Minister Hany Kadri Dimian, in the new fiscal year 2014–2015, “[T]he allocation for fuel subsidies has been cut from around EGP144bn ($20bn) last year to EGP100bn in the new budget.”

On the surface, that appears to be a bold step, slashing spending on fuel subsidies—which are by far the biggest fraction of the total subsidy bill—by almost a third. But there is a catch. According to the budget for the past fiscal year, 2013–2014, the subsidies to oil materials were already supposed to be close to EGP100bn ($14bn). Yet, the actual spending was drastically higher, perhaps by as much as an additional EGP70bn ($10bn)

And, similarly, in the preceding fiscal year, 2012–2013, the budget for fuel subsidies was to be EGP70bn, in what was seen at the time as an attempt to bring spending under control, especially relative to the previous fiscal year. But again, the actual spending on fuel subsidies during the year was drastically higher. Some of the Finance Ministry’s revised estimates were at EGP100bn, while others claimed the real numbers were even more sizeable.

In short, in recent years the government of Egypt systematically—and quite substantially—underestimated the planned spending on fuel subsidies. One can blame that on many factors, most prominently on the political turmoil, but this track record gives little guarantee that this time will be different.

Although the awareness of the problem, as well as the wider use of smart cards to allocate subsidies, are both encouraging, one needs to keep in mind that the most recent announcement is a far cry from a genuine reform plan. Even if actual spending on subsidies were exactly equal to the amount allocated in the budget, in nominal terms that would only bring Egypt back to the spending levels of fiscal 2011–2012, which were already unsustainable. As I argued in an earlier paper, what Egypt needs is a plan to phase out fuel subsidies altogether and replace them with targeted cash transfers. Alas, such a plan is nowhere in sight.

Century Old Terrorists Still Creating Wars From Iraq To Ukraine

The conflict in Iraq started a century ago. So did the civil war in Syria. And so did Russia’s dismemberment of Ukraine. 

All of those conflicts, and much more, grew out of World War I.

At the turn of the 20th century, Europe was prospering. But on June 28, 1914, 19-year-old Serb nationalist Gavrilo Princip assassinated Franz Ferdinand, heir to the Austro-Hungarian Empire, and his wife Sophie.

The following weeks were filled with ultimatums, plans, and pleas. But governments soon found that “control has been lost and the stone has begun to roll,” as German Chancellor Theobald von Bethmann-Hollweg put it.

Among the Great War’s participants, Great Britain enjoyed the best reputation because it was on the winning side and ran the war’s most brilliant public relations operation. Germany’s franchise was in fact broader, though Wilhelmine Germany’s political structure was flawed. Belgium looked to be the most innocent, but its rule killed millions of Africans in the Belgian Congo. France was a revenge-minded democracy. Austro-Hungary was less democratic, but the empire contained important checks and balances within.

A member of the Entente—the allies that included Britain, France, and ultimately the United States—was the antisemitic despotism of the Tsar. Its protégé, Serbia, backed Princip as an act of state terrorism against Austro-Hungary. The sclerotic and authoritarian Ottoman Empire and Bulgaria completed the Quadruple Alliance, while Romania, Italy, and Japan, joined the Entente.

The United States had nothing at stake in this quarrel. Unfortunately, America’s president, the haughty, sanctimonious, and egotistical Woodrow Wilson, imagined himself as being annointed by God to bring peace to the earth.

With Germany facing defeat, an armistice was reached in November 1918. The vainglorious Wilson enunciated high-minded principles for peace, but was out-maneuvered at the Versailles Peace Conference the following year.

The allies plundered the defeated while dictating a vengeful peace. Like the journey from Princip to World War I, the path from Versailles to Adolf Hitler was long but clear.

Exporting Ex-Im Bank Skepticism

One of the points supporters of the Ex-Im Bank like to make is that other countries have their own versions of the bank to help finance purchases of those countries’ exports, and the United States should not “unilaterally disarm.” Here’s the NY Times:

[M]ost governments around the world support exports in similar ways, and if the United States dismantled the bank unilaterally, as some lawmakers are advocating, American companies could lose billions of dollars in overseas orders and decide to move their operations to other countries that provide generous export financing.

It’s true that other countries provide similar export subsidies, but I see this as an opportunity, not a hurdle to getting rid of Ex-Im. Liberalization through international trade negotiations has been struggling in recent years. Getting rid of Ex-Im could give it a boost. If we could end Ex-Im, and then call on our trading partners to follow our lead, it could give trade talks an important and meaningful purpose. In these negotiations, governments often seem reluctant to give up any protectionism until others agree to do so as well. That has not served us well recently; not much liberalization has occurred. It may be time to try something new, and lead the way with a unilateral liberalization proposal, to show the world we actually believe in free trade (they have good reason to doubt this), and encourage others to move in that direction as well.

Uber and Lyft Told To Halt Operations in Pittsburgh

Yesterday ride-sharing app operators Uber and Lyft were issued cease and desist orders in Pittsburgh. The orders were granted by two judges, who were reportedly convinced by the Pennsylvania Public Utility Commission’s Bureau of Investigation and Enforcement that the two companies are a threat to public safety. The orders state that Uber and Lyft cannot operate in Pittsburgh without the Pennsylvania Public Utility Commission’s approval.

The orders come less than a month after the Virginia Department of Motor Vehicles issued Uber and Lyft cease and desist orders, saying that the companies are violating state law. Uber and Lyft have both continued to operate in Virginia despite the orders.

The Pennsylvania Public Utility Commission’s three major concerns regarding Uber and Lyft relate to background checks for drivers who use the app, vehicle inspections, and insurance. However, both companies already carry out strict background checks, have means by which to drop drivers with unsatisfactory vehicles, and have insurance schemes in place.

Drivers who want to use the Uber and Lyft apps to rideshare must pass background checksUber will not allow drivers to use its service if there are any DUI or drug offenses in the driver applicant’s record in the last seven years (although California requires no DUIs in the last 10 years). Lyft will not let any driver use its service if the applicant has any DUI or drug offenses at all. The background checks used by Uber and Lyft also screen for violent and sexual offenses.

Lyft carries out an in-person inspection of vehicles before drivers can use their service. Uber’s vehicle inspection is less rigorous. According to reporting from earlier this year on San Francisco drivers using UberX (Uber’s ridesharing service), Uber does not do in-person inspections of vehicles and only requires drivers to send in photos of their cars. Under legislation passed last month in Colorado, which were praised by Uber and Lyft, rideshare vehicles must be inspected.

NASA, Global Warming, and Free Enterprise

Yesterday, NASA aborted a third attempt to launch a probe that would measure the level of atmospheric carbon dioxide, where it comes from, and where it is stored. The agency may try again today, as the probe’s findings, we are told, will be “crucial to understanding how much human activity affects the planet’s climate.”

While we eagerly await NASA’s findings, it is well-known that carbon dioxide emissions are on the rise worldwide. We also know that developed countries emit less, or increase emissions at a slower pace, than in the past. Crucially, developed countries also show falling emissions per dollar of output and per person.

According to HumanProgress.org and the World Bank, developed countries’ growth in carbon dioxide emissions has slowed or reversed over time.

Federal Highway Spending

The federal Highway Trust Fund (HTF) is running out of money. Congress will likely pass a short-term fix for the program in coming weeks. Over the longer term, many policymakers favor raising taxes to close the $14 billion annual gap between HTF spending and revenues.

Tax-hike advocates say the gap is caused by insufficient gas tax revenues. It is true that the value of the federal gas tax rate has been eroded by inflation since it was last raised two decades ago. But the gas tax rate was more than quadrupled between 1982 and 1994 from 4 cents per gallon to 18.4 cents. So if you look at the whole period since 1982, gas tax revenues have risen at a robust annual average rate of 6.1 percent (see data here).

In recent years, gas tax revenues have flat-lined. But the source of the HTF gap was highway and transit spending getting ahead of revenues, and then staying at elevated levels.

The chart below (from DownsizingGovernment.org/charts) shows real federal highway and transit spending since 1970. Real highway spending (red line) has almost doubled over the last two decades, from $29.1 billion in 1994 to $56.2 billion in 2014. Real transit spending (green line) has also risen since the mid-1990s. (If you visit the /charts page, you can see the dollar values by hovering the mouse over the lines.)

For more, see my congressional testimony and also recent items by Emily Goff.