Is the NSA Above the Law?

As I report today in Ars Technica, a federal judge in California allowed continued investigations by five state regulators into allegations that AT&T has been collaborating with the National Security Agency in a massive warrantless wiretapping program.

However, the judge, Vaughn R. Walker, declined to rule on the government’s central argument, that the investigation could run afoul of the state secret privilege. On that issue, Judge Walker deferred to the Ninth Circuit, which is currently considering the case of Hepting v. AT&T, a class-action lawsuit alleging that AT&T has violated its customers’ rights by participating in the NSA program. The Electronic Frontier Foundation, which is representing the plaintiffs in the case, has secured a sworn statement from a former AT&T employee alleging that the company has allowed the NSA to build a secret facility inside its San Francisco office and diverted massive amounts of Internet and voice traffic through the room to allow the NSA to use the information as it wishes.

I’m not an expert on the legal minutia of the state secrets privilege, but the Bush administration is making what strikes me as an incredible claim: that the NSA program’s very existence (or non-existence) is a state secret, that it would be impossible to litigate such a case without revealing sensitive information about how such a program worked, and that therefore any case related to such a program must be dismissed immediately, before it reaches trial or even discovery.

It’s hard to see how this position can be reconciled with the rule of law. Americans have rights under the Fourth Amendment and the Foreign Intelligence Surveillance Act against indiscriminate domestic surveillance. But if the government can defeat all legal challenges to a program merely by designating it a state secret, it’s hard to see how those rights can ever be vindicated.

I suppose if the Bush administration can opt out of habeus corpus merely by declaring someone an enemy combatant, they can opt out of the Fourth Amendment by declaring their surveillance activities to be state secrets.

Parliament of Windbags

Let me add to Sallie’s observations on the House farm bill battle.

I watched the action on CSPAN over the pro-reform Kind/Flake amendment and was really struck by the arrogance of the anti-reform members. They repeatedly said essentially: “How dare members like Flake criticize the hard work of the Agriculture Committee — he’s not on the committee, he’s not a farmer, and so what does he know about farming!”

The anti-reform members also trotted out the ”downtrodden small farmer” rhetoric, despite the frequent reminders from the reformers that the vast share of subsidies go to the largest and wealthiest farms.

And for any voters who still think that the GOP is the party of spending restraint, note that on the vote for the Kind/Flake amendment, 32% of Democrats favored reform while only 23% of Republicans did.

It’s a New York Sunny Day

Thanks to an editorial this morning championing school choice, the New York Sun has become the first major paper in the country to simultaneously recognize that a) education markets work, and 2) education policy — including market-based reform — is a matter for the states and the people, not the federal government.

Having spent a lot of time banging away on these messages, I’ve gotta say this makes my week.

Here’s hoping that the Sun’s illumination shines on former New York mayor Rudy Giuliani and the rest of the presidential contenders.

Parliament of Whores, Indeed

Those hoping for reform of the outdated and economically damaging farm bill have cause for disappointment today, after the House defeated, by a margin of three votes to one, an amendment that represented some hope for change. (The roll call can be viewed here). That amendment, whilst by no means close to sufficient reform, included important changes to income eligibility requirements and payment limits for subsidies, and would have closed a loophole allowing producers to manipulate the marketing loan program.

Unscathed passage of the House Agriculture Committee’s bill (see my colleague Dan Griswold’s brief criticism of the House bill here) looked in doubt just a few days ago, but House majority leaders managed to sway Rep. Jim McGovern (D., MA), originally in the reform camp, to vote for the farm bill by promising about $840 million to his pet cause, overseas food aid. The Congressional Black Caucus agreed to support the farm bill after a promise to spend $1.1 million on settling racial discrimination claims from the 1990s.

As if the House proposal for the “new” farm bill wasn’t insult enough for the taxpayer and consumer, the proposal for funding some of the largesse is beyond the pale. The $4 billion increase in food stamps and nutrition programs, which could presumably be paid for by cutting the subsidies to farmers of chosen crops, will instead be financed by taxing “inshoring” companies — U.S.-based subsidiaries of foreign companies who employ American workers.

For a Congress supposedly concerned that international trade is threatening American jobs, taxing employment of American workers seems perverse — not to mention violative of tax treaties. Business groups and Treasury Secretary Henry Paulson have expressed their deep dissatisfaction with the tax increase. Some Republicans, including the ranking member on the House Agriculture Committee Robert Goodlatte (Va.), have indicated they would vote against the farm bill (up for a final vote today) because of the tax increase. I’ll believe that when I see it.

On a more positive note, the proposed tax increase has led the administration to issue a veto threat, albeit of the less-than-clear “his senior advisers will recommend that the president veto this bill” variety.

How Clever Is ‘Al Qaeda in Iraq’?

Anna Mulrine, US News and World Report, July 25, 2007:

As President Bush continues to stress al Qaeda as the chief threat to Iraq’s stability — a reprised effort to establish a link between al Qaeda in Iraq and the 9/11 attackers — U.S. military forces on the ground in Iraq are fighting a complex war in regions with vast networks of overlapping loyalties — and few foreign fighters. Most members of al Qaeda in Iraq, say commanders on the ground, are local Iraqi outcasts.

“I can count them [foreign fighters] as a total I have engaged, dead or alive, in the 10 months I’ve been here on one hand,” says Col. David Sutherland, the U.S. commander of coalition forces in the hotly contested area of Diyala province, an insurgent stronghold region some 35 miles northeast of Baghdad. There, Sutherland says, those involved in al Qaeda are largely dispossessed locals, not jihadists who have come from elsewhere. “The recruiting program is [that] al Qaeda may send five or eight individuals into a village. They recruit from those who have no power base, no place in society,” including, he adds, former male prostitutes and the mentally ill.

Osama bin Laden, al Qaeda, November 5, 2004:

[I]t was easy for us to provoke this administration and to drag it [after us]. It was enough for us to send two Jihad fighters to the farthest east to hoist a rag on which “Al-Qa’ida” was written — that was enough to cause generals to rush off to this place, thereby causing America human and financial and political losses, without it accomplishing anything worthy of mention, apart from giving business to [the generals’] private corporations. Besides, we gained experience in guerilla warfare and in conducting a war of attrition in our fight with the iniquitous, great power, that is, when we conducted a war of attrition against Russia with Jihad fighters for 10 years until they went bankrupt, with Allah’s grace; as a result, they were forced to withdraw in defeat, all praise and thanks to Allah. We are continuing in the same policy — to make America bleed profusely to the point of bankruptcy, Allah willing. And that is not too difficult for Allah.

Trillion Dollar Man

The recent budget update from the Bush administration shows that federal spending will be $2.918 trillion in fiscal 2008. That means that spending increases under Bush will break the $1 trillion mark when the new fiscal year begins in October. Spending was $1.863 trillion when he came to office in fiscal 2001.

Bush’s last budget year will be fiscal 2009, at which time he is projecting to spend $3.016 trillion. Thus in eight short years, with relatively low inflation, this president and spendthrift congresses will have blasted through both the $2 trillion spending mark and the the $3 trillion mark.

More Evidence for a Corporate Rate Cut

Glenn Hubbard, the former chairman of the Council of Economic Advisers, comments in a Wall Street Journal column ($) that the corporate income tax hurts workers. He cites recent research showing that a lower corporate tax rate would have a substantial Laffer Curve effect.

As explained in a recent Tax & Budget Bulletin, the rest of the world is moving toward lower tax rates. The longer U.S. policy makers wait to implement similar reforms, the larger the losses for American workers:

[T]he tax may be borne not entirely (or even principally) by owners of capital, but by workers. Globalization plays a role. In an open economy, with mobile capital, a source-based tax like the corporate tax will lead to a capital outflow, reducing investment and productivity and wages.

…In other research assuming that the world-wide capital stock is fixed, William Randolph of the Congressional Budget Office finds that labor bears about 70% of the corporate tax. …A recent paper by Kevin Hassett and Aparna Mathur of the American Enterprise Institute analyzes data across countries and over time, concluding that for countries that are part of the Organization for Economic Cooperation and Development (OECD), a 1% increase in corporate tax rates results in a 0.8% decrease in manufacturing wage rates.  …A recent survey and study by KPMG shows, for example, that competition for investment continues to drive down tax rates around the globe, with further cuts in the pipeline from China, Germany, Singapore and Britain, among others. The desire for these cuts comes in part from the significant responsiveness both of real investment and taxable income to corporate tax rates. …Recent research by Michael Devereux of the University of Warwick suggests, though, that the revenue-maximizing corporate tax rate in OECD countries is likely less than 30%. That is, higher corporate investment (and subsequent corporate profits and corporate tax revenue) and shifts in taxable income by multinational firms will substantially reduce the revenue “cost” of a corporate rate cut from the present 35% to, say, 30%.

Cutting the corporate tax rate would be positive for investment, productivity and economic growth. It would also reduce a tax burden now borne in large part (or even entirely) by labor, bolstering wages. And business responses to the tax cut will offset much of the “static” revenue cost.