The FBI versus the Citizens

This Thursday at Cato, we’re hosting an event for a remarkable new book: Betty Medsger’s The Burglary: The Discovery of J. Edgar Hoover’s Secret FBI (RSVP here). As I explain in the Washington Examiner today, it’s a story as riveting as any heist film, and far more significant:  

Forty-three years ago last Saturday, an unlikely band of antiwar activists calling themselves “The Citizens Commission to Investigate the FBI” broke into a Bureau branch office in Media, Pennsylvania, making off with reams of classified documents. Despite a manhunt involving 200 agents at its peak, the burglars were never caught, but the files they mailed to selected journalists proved that the agency was waging a secret, unconstitutional war against American citizens.  

As a young Washington Post reporter, Medsger was the first to receive and publish selections from the files—over the protests of then-attorney general (and later Watergate felon) John Mitchell, who called the Post three times falsely claiming that publication would jeopardize national security and threaten agents’ lives. 

Four decades later, those claims echo in former NSA head Michael Hayden’s assertion that the US is “infinitely weaker” because of Snowden’s leaks. Like the apocryphal old saw suggests, if history doesn’t repeat itself, at least it rhymes.

“As if arranged by the gods of irony,” Medsger writes, the very morning Hoover learned of the break-in, then-assistant attorney general William H. Rehnquist (later Chief Justice), in testimony the FBI had helped prepare, told a Senate subcommittee that what little surveillance the government engaged in did not have a “chilling effect” on constitutional rights. Among the first documents Medsger reported weeks later, was a memo urging agents to “enhance the paranoia… get the point across there is an FBI agent behind every mailbox.”

Ironies abound. The burglars timed the heist for March 8, 1971, when the country would be distracted by the “Fight of the Century” between Muhammad Ali and Joe Frazier. Medsger notes the “poetic justice” that the much-spied upon Ali would unwittingly help provide cover for exposure of FBI spying. Oddly, it’s acting attorney general Robert Bork–survivor of the “Saturday Night Massacre” and nobody’s idea of a civil libertarian)–who orders the release of key documents on the COINTELPRO program and urged the incoming attorney general to investigate the program. There’s another vignette where President Nixon speaks to an FBI Academy graduating class about “reestablishing respect for the law”–and the next evening orders Haldeman to have someone break into the Brookings Institution and steal a purloined copy of the Pentagon Papers (a zealous Chuck Colson suggested firebombing the think tank to create a distraction).  

Washington’s Inflated Sense of Security Leadership

With the Ukrainian crisis continuing to simmer, criticism of the Obama administration’s response is growing. One common refrain is that the administration has squandered its leadership role, not only in Europe, but globally. Calls are mounting for the United States to inspire and cajole its NATO allies to support a hard-line policy toward Russia. Representative Peter King (R-NY), speaking on NBC’s Meet the Press, stated that Washington needs to make clear not only that “there will be firm sanctions,” but we “have to make sure the allies are working together.”

Such calls reflect wishful thinking rather than sober analysis. Although the European countries (especially those in Eastern Europe) are nervous and unhappy about the Kremlin’s decision to send troops into Ukraine’s Crimea region, the principal European powers (Germany, Italy, France and Britain) show few signs of wanting a confrontation with Moscow. Indeed, their criticisms of Putin’s military intervention have been slower to materialize and remain milder than those expressed by U.S. officials. That is not coincidental. The United States has scant economic ties with Russia; barely two percent of America’s foreign trade is with that country, and U.S. investment there is similarly modest. Imposing sanctions and risking Moscow’s retaliation would have little impact on America’s fortunes.

But Washington’s European allies have far more substantial—and vulnerable—ties. Germany, for example, gets nearly 40 percent of its natural gas supplies from Russia, and that country is also a significant arena for German investment. Unsurprisingly, Chancellor Angela Merkel has been relatively circumspect in her criticism of the Kremlin’s conduct in the Ukraine crisis. She is unlikely to accord calls for NATO solidarity greater importance than the need to keep German homes warm and business operating in the cold winter months.

American Society as Chessboard

One of my favorite Adam Smith passages is:

The man of system … seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it.

Today, the men and women of system in the nation’s capital have a high regard for their ability to arrange the chess pieces of American society. There are 318 million individuals, 28 million businesses, 50 state governments, 89,000 local governments, and countless churches, charities, and other organizations in this great nation. Congress passes laws to intervene in the affairs of all of these people and groups, trying to impress its design.

But federal policymakers usually ignore, or fail to understand, the principles of motion in society. They impose minimum wages and health laws, and businesses cut hiring. They subsidize water, which exacerbates droughts. They subsidize flood insurance, which increases the damage from floods. They impose the world’s highest corporate tax rate, and they are shocked when corporations shift their profits abroad.

Federal attempts to arrange state government policies bring surprises as well. Federal policymakers offer matching grants for Medicaid, and are surprised that it prompts rapid state spending growth and dubious schemes to boost payments. Federal policymakers provide state aid for schools, but states probably just substitute added federal funding for their own.

The latest lesson on society’s principles of motion regards food stamp aid. From the Washington Post:

Congress last month passed a revamp of agriculture and food policy that was supposed to save the U.S. government $8.6 billion in food-stamp costs over a decade. That may not happen, though, now that some states are finding a way to avoid the cuts.

New York, Connecticut and Pennsylvania are triggering extra nutrition spending by adding money to a home-heating subsidy tied to increased food-stamp aid. The move feeds needy families while thwarting spending-reduction goals … If more follow, the federal government would have to spend much of the $8.6 billion it planned to save, as states reduce spending on other programs to meet the new mandate.

“These federal cuts have made it harder for our state’s most vulnerable residents to put food on the table. The state has intervened on behalf of these low-income New Yorkers,” Gov. Andrew M. Cuomo (D) said in a statement Feb 25. “New York is stepping up to help families in need.”

Europeans See Ukraine and Fear Russia? Time for Them to Take over Europe’s Defense

Had the U.S. been so foolish as to bring Ukraine into NATO, Washington would have a treaty responsibility to start World War III.  Today’s game of geopolitical chicken might have a nuclear end.

Still, the West cannot easily ignore Russia’s Crimean takeover.  It was an act of aggression against Kiev, yet a majority of Crimean residents may welcome the move.  Although secessionist sentiment has been largely dormant of late, the Western-supported putsch/street revolution against President Viktor Yanukovich inflamed pro-Russian passions in eastern Ukraine. 

Of course, Moscow intervened for its own ends.  And Putin is wrong, dangerously wrong, to use force.  But how to punish Moscow?  America’s direct stake in the controversy is essentially nil. 

E-Verify Does Not “Turn Off” Job Magnet

One of the main claims of E-Verify’ ssupporters is that it will turn off the job magnet that incentivizes unauthorized immigration.  A recent Working Paper by economists Pia M. Orrenius and Madeline Zavodny casts doubt on that.

They find that E-Verify mandates in the states have decreased wages of likely Mexican unauthorized immigrant men by about 7.8 percent and unauthorized immigrant Mexican women by 1.2 percent.  The likelihood of men being employed is not much affected by E-Verify but it does increase female employment and labor force participation – which makes sense in the context of making migration and employment decisions on the family level.  Clearly, E-Verify has diminished the anticipated wage gains from illegally immigrating to the United States.

However, E-Verify has not turned off the job magnet.  Assuming that unauthorized immigrant men and women earn the same wages, the estimated gains to coming here for the marginal Mexican immigrant is only slightly lowered.  Based on gender data from Pew and comparing the wages of identical workers in Mexico and the United States, here are some back of the envelope calculations showing how E-Verify has affected wages for unauthorized Mexican immigrants:

Unauthorized Immigrant Workers 

 

Female

Male

All

Gender

39.4%

60.6%

100.0%

Monthly Wages in U.S. (Pre-E-Verify)

 $  1,470.80

 $  1,470.80

 $  1,470.80

Monthly Wages in Mexico

      $580.90

     $580.90

     $580.90

Wages Multiple from Working in U.S.

2.53

2.53

2.53

Monthly Wages (Post E-Verify)

$1,453.15

$1,356.08

$1,394.32

Wages Multiple from Working in U.S. Under E-Verify

2.50

2.33

2.40

Sources: Center for Global Development, Pew Hispanic Center, and Dallas Fed Working Paper

E-Verify lowers the wage gain for all Mexican unauthorized workers from 2.53 times as great as in Mexico to 2.4 times as great – a whopping 5 percent decrease.  That’s not much to brag about considering E-Verify is supposed to be the lynchpin of future immigration enforcement.  It’s hard to see how E-Verify proponents can look at this small wage effect and conclude that E-Verify is worth it, given the enormous array of problems and burdens caused by it.  In practice, E-Verify does not turn off the job magnet that attracts unauthorized immigrants to our shores and will not if it is ever mandated.   

How Much Tax Revenue from Legalized Marijuana?

Some marijuana legalizers push the argument that legalization will generate additional tax revenue. Opinions differ widely, however, on exactly how much revenue.

In mid-February, Colorado Governor John Hickenlooper predicted that the taxes, licenses, and fees on medical-plus-recreational marijuana would generate $134 million for the fiscal year starting in July.

In my 2010 Cato White Paper, I predicted that full legalization (federal and state) would generate roughly $55-60 million per year for Colorado.

Now just released data from Colorado for January, the first month of fully legal marijuana sales, show about $2 million from recreational marijuana and about $3.5 million for medical-plus-recreational marijuana.  The latter figure implies annual revenues of about $42 million.

This January figure may turn out to be misleading.  On one hand, the industry could grow over time, boosting revenues. On the other hand, initial hoopla over legalization may have inflated January sales.  And, longer term, sales in Colorado could decline if other states legalize or medicalize.

If the lower revenue numbers persist, does that weaken the case for legalization?

No: Increased tax revenue was never the main reason for legalization. Instead, the crucial goals of legalization are greater freedom for marijuana users and elimination of prohibition’s unintended consequences (crime, corruption, poor quality control, diminished civil liberties, restrictions on medical uses, and expenditure on enforcement).

Collecting revenue on legalized marijuana is perfectly sensible; it allows lower tax rates on everything else. But this appears to be a small effect, and it is not the main benefit of legalization in any case.

We’re from the Government and We’re Here to Help: School Lunch Edition

How much does a “free” school lunch cost?

In the last few years, First Lady Michelle Obama has worked with the U.S. Department of Agriculture to make school lunches healthier. In 2011, Neal McCluskey argued that, though well-intentioned, the changes would result in more wasted food, higher costs, and major implementation challenges. The General Accounting Office has now issued a report that confirms these concerns:

According to the GAO report, local and state authorities told researchers the new standards have resulted in more waste, higher food costs, challenges with menu planning and difficulties in sourcing products that meet the federal portion and calorie requirements.

When such decisions are made at the local level, schools can solicit and respond to feedback from parents and students. However, when the proverbial faceless bureaucrat in some distant Washington office decides, the rules tend to be uniform and inflexible, leading to all sorts of unintended consequences:

The federal government’s changes to school lunch menus have been disastrous, causing problems for cafeterias trying to comply with the rules and leaving the menu so expensive or unpalatable that more than 1 million students have stopped buying lunch, according to a government audit…

One school district told federal investigators that it had to add unhealthy pudding and potato chips to its menu to meet the government’s minimum calorie requirements. Other school districts removed peanut butter and jelly sandwiches from their elementary school menus.

Five of the eight school districts surveyed by the Government Accountability Office, the official watchdog for Congress, said they believed students were going hungry because of smaller entree portions demanded by the rules.

In other words, the so-called “Healthy, Hunger-Free Kids Act” actually resulted in some kids being served less healthy food while other kids went hungry.

Two-thirds of states reported on the GAO survey that implementation in 2012-13 was a “very great challenge” or an “extreme challenge.” The report noted that much of the difficulty was related to the sheer volume of regulations. In just 18 months, the USDA issued 1,800 pages of “guidance” for following the new rules. Moreover, the “guidance” was “provided too late in the 2012-2013 school year to be helpful” because schools “had already planned menus and trained food service staff” on what they thought the new rules required. However, some guidance memos “either substantively changed or contradicted aspects of previously issued memos.” When state officials contacted the USDA’s regional offices for guidance on understanding the “guidance,” the USDA staff were “sometimes unable to answer state questions on the guidance.” 

Let’s hope this serves as a cautionary tale for those who want the federal government to play a larger role in education policy in general.