Notwithstanding Reprehensible History, Germany Launches Fiscal Attack on Liechtenstein

In a remarkable display of fiscal imperialism, the German government sent spies into Liechtenstein and bribed a bank employee to provide confidential records about German account holders. Unfortunately, this sleazy act of aggression was successful, leading to a series of high-profile raids by German authorities. This has created quite a kerfuffle in Europe, and it should come as no surprise that the bureaucrats at the OECD are using the controversy to push their anti-tax competition agenda. According to a story in the Financial Times:

Pressure grew on Liechtenstein on Tuesday to ease its bank secrecy rules in the wake of a German tax ­scandal centered on the Alpine tax haven. …Angel Gurria, the secretary general of the OECD, said Liechtenstein’s secrecy rules were a “relic of a different time”. …Liechtenstein’s Crown Prince Alois on Tuesday accused Germany of mounting an “attack” on the principality. He condemned as “unacceptable” Berlin’s decision to allow its BND intelligence agency to pay more than €4m ($5.9m, £3.7m) for bank client data allegedly stolen by a former Liechtenstein bank employee. …Jeffrey Owens, the OECD’s chief tax havens expert, said the changes would only make a difference if ­Liechtenstein “were now ready to sign tax information exchange agreements with Germany and other countries.”

This story is troubling on many levels, particularly given Germany’s ugly history of oppression. In the 1930s, Germany had draconian laws to deter citizens from having money outside the country and – like today – it trampled on the sovereignty of its neighbors to get information (see here for more information). Indeed, snooping by the Nazis was the main reason that Switzerland substantially strengthened its privacy laws in the 1930s.

Today’s controversy is motivated by greed for tax revenue rather than anti-Semitism, but the issues are similar. To what extent do nations have the right to compel other jurisdictions to act as deputy enforcers? Most reasonable people understand that there are limits on cooperation between governments. European Union nations, for instance, refuse to cooperate in extradition cases where an American might face the death penalty. Likewise, most nations would never consider helping a totalitarian regime like Saudi Arabia or Iran if it tried to persecute escaped homosexuals.

The tax issue is a bit more challenging because it is easy to demagogue against wealthy people who utilize so-called tax havens (though even OECD officials get a bit squeamish when asked whether financial privacy laws should be totally abolished, since even they recognize that billions of people live in nations that practice some form of religious, political, ethnic, racial, and/or sexual discrimination – not to mention all the people who live in nations that suffer from economic mismanagement, kidnapping, and/or monetary instability).

The head of the OECD considers privacy to be a “relic of a different time.” But why should there be a one-size-fits-all policy? Is there really no room in the world for nations that treat people with dignity and respect their privacy? If politicians from high-tax nations and bureaucracies such as the OECD get to decide, the answer is no. But hopefully Liechtenstein will stand firm against Germany’s vicious bullying. After all, so long as over-burdened taxpayers have safe havens, governments face pressure to improve their tax law. And even the Financial Times was forced to acknowledge, in a schizophrenic editorial that endorsed sending spies into low-tax jurisdictions, that bad tax policy bears part of the blame:

Germany’s problem with evasion is partly the fault of its tax system. Although the abolition of wealth tax has improved matters, marginal income and inheritance tax rates for high earners approach 50 per cent. Tough enforcement will never stop evasion if taxes are punitive.

Air Force vs. Taxpayers

This week’s Air Force Times reports that the Air Force wants an extra $59 million of your tax dollars next year to pay for a campaign to win tens of billions more of your tax dollars.

You see, the Air Force’s research shows that the American public does not appreciate the Air Force as much as the Air Force thinks it should. Air Force generals worry that Americans may conclude that our current wars, which are relatively low-tech, ground power-centric affairs, are a reasonable basis for making procurement decisions. That conclusion may produce budgets that favor the ground forces, thwarting the Air Force’s plan to become the service that runs future wars. And the administration has already refused the Air Force an extra $20 billion for its annual budget.

So the defense budget submitted recently to Congress would more than double the Air Force’s advertising spending to insure that the public doesn’t figure out that platforms like the F-22 are white elephants.

The Air Force defends the funds in this, surprisingly forthright, way (from page 652 of their budget estimate for FY 2009):

Without the funding the ability to educate the American public about Air Force roles and mission will be limited and [sic] ultimately creating a gap between the public and the Air Force that will influence public opinion and the Air Force’s ability to maintain its stature amongst the other Services. Other recruiting programs aided in meeting accession goals but did little to illustrate the Air Force story. This funding purchases capabilities to illustrate the Air Force’s vital role in national defense today and in the future, hi-light the unique capabilities delivered by no other service, depict the most complex and challenging assignments, and show case the USAF.

According to the Air Force Times:

Air Force officials believe Congress and the public are focused on the wars in Iraq and Afghanistan, where the Army and Marine Corps do most of the fighting. Therefore, efforts to expand the Air Force’s high-tech fleet of aircraft and the service’s cyber mission are taking a backseat to the immediate needs of the wars.

If that is what the public thinks, I commend our common sense. Silly op-eds and press releases asserting how essential airpower is to counter-insurgency apparently failed to do the trick.

All the services spend big bucks on recruiting. That’s the point of the $53 million the Air Force spent on advertising last year. And that’s low, relatively speaking. In 2005 (the latest set of complete figures I could find), the Army spent $290 million on recruiting-related advertising, the Marine Corps $67, the Navy $100 million, and the Air Force $57 million. The ground services, which need more manpower and take far more casualties, naturally spend more to woo recruits (not to mention a whole lot more on bonuses).

But the extra money the Air Force wants is not going to recruit new airmen; it is for TV, web, and print advertising meant to win public support and funds. It is, in other words, for propaganda.

True, $60 million isn’t much in a defense budget that will cost nearly three quarters of a trillion dollars. But spending our money to convince us to spend more of our money just grates.

The Air Force already has the Thunderbirds, a traveling air-show, to promote itself. (The similar Blue Angels promote the Navy. The Army employs a Parachute Team, the Golden Knights for PR). It was a $50 million promotional contract for the Thunderbirds that recently landed the top brass of the Air Force in the middle of an FBI investigation – one that, as far as I can determine, is ongoing.

Beyond public funds, the Air Force Association, a non-profit organization, exists to sing airpower’s praises (the Navy and Marines have the Navy League). And of course there are the contractors who lobby on behalf of the Air Force contracts that pay their way.

The Air Force has enough ways to sell itself, and then some, without this new request. Congress should say no.

ACLU Provides Inadvertent Civics Lesson

Tuesday the Supreme Court declined to review the ACLU’s challenge to the Terrorist Surveillance Program (TSP), the NSA’s post-9/11 foreign intelligence-gathering initiative whose critics labeled “domestic spying.”

This case shows the interplay of the foundational legal doctrine of “standing” with one of the privileges courts recognize as being more important than allowing full discovery of information during the litigation process – and it also shows the proper relationship between the political and judicial branches in our constitutional system. To maintain a legal claim a plaintiff must show that he was injured in a unique and concrete way. Here, a motley crew of plaintiffs – who also included the Council on American-Islamic Relations (CAIR), journalist Christopher Hitchens, various lawyers, and others – cannot demonstrate that they have been harmed in any but a generalized, speculative way by the TSP. They simply have no idea whether their international communications had been monitored.

While the plaintiffs previously argued that they were denied the opportunity even to find out about possible violations of their civil liberties because the relevant evidence is classified, the lower court correctly ruled that the government’s “state secrets privilege” prevented the dissemination of this information that, if disclosed, could compromise national security. Further, the state secrets at issue here relate to foreign intelligence, involving the monitoring of cross-border communications of people suspected of affiliation with a foreign enemy. As Justice Robert Jackson (commonly cited by those who would curtail executive authority over intelligence gathering) wrote in 1948:

The President, both as Commander-in-Chief and as the Nation’s organ for foreign affairs, has available intelligence services whose reports neither are nor ought to be published to the world. It would be intolerable that courts, without the relevant information, should review and perhaps nullify actions of the Executive taken on information properly held secret. Nor can courts sit in camera in order to be taken into executive confidences. But even if courts could require full disclosure, the very nature of executive decisions as to foreign policy is political, not judicial. Such decisions are wholly confided by our Constitution to the political departments of the government, Executive and Legislative. They are delicate, complex, and involve large elements of prophecy. They are and should be undertaken only by those directly responsible to the people whose welfare they advance or imperil. They are decisions of a kind for which the Judiciary has neither aptitude, facilities nor responsibility and have long been held to belong in the domain of political power not subject to judicial intrusion or inquiry.

Ultimately – and wherever you put the dividing line between executive and legislative authority – this case is just such a disagreement over policy that should be handled in the political branches, rather than as unnecessary litigation in the courts. Much like disputes over high tax rates, immigration enforcement, earmarks, and a host of other issues now being debated by the presidential candidates, the TSP presents a classical political (not legal) question. The plaintiffs were not more affected by the policy than other Americans, so their recourse, as ACLU legal director Steven Shapiro (no relation to me) correctly noted, is to petition Congress (and the executive). Ironically, this is exactly what the ACLU and its allies already did successfully, contributing to the political pressure that led the Bush administration to shut down the program in January 2007. For good or ill, this is the way our democracy is supposed to function.

Lilla on Heilbrunn on the Neocons

Mark Lilla has a hot-and-cold review of Jacob Heilbrunn’s book They Knew They Were Right in the New Republic. Lilla, a former editor of The Public Interest, hilariously describes his view that Commentary was “the great simplifier–everything always came down to holding the line and proving your manliness. The articles made sense only if you imagined the authors screaming at the top of their lungs.” But he has some scathing remarks for the unrepentant neocons of today:

Poor Iraq! And poor America! The dénouement we all know, but Heilbrunn’s book, for all its superficiality, still shows how depressingly predictable it all was. By leaving the reality-based community and creating their own Team-B approach to every issue–and stocking that team with reliable soldiers who happened not to know what the hell they were talking about (trivia question: who was Laurie Mylroie?)–the neoconservatives had become the very last people you’d want leading you to war. They knew how everything connected but not how anything worked–the Army, the United Nations, the Sunni-Shiite quarrel, the balance of power, human culture in the face of occupation and humiliation. And what they used to know about the unintended consequences of political action they seem to have willfully forgotten. Reactionaries are like that–because in the end, contrary to Heilbrunn’s title, they really don’t care whether they are right. What they care most about is reconfirming their picture of the world.

Whole thing’s worth a read.

FISA Non Sequiturs

Julian Sanchez notes this absurd post at The Corner about the Supreme Court’s refusal to review a decision of the Sixth Circuit ruling that the ACLU lacked standing to sue the NSA over the president’s warrantless wiretapping program. Andy McCarthy thinks that…

This underscores that the President had constitutional authority to order warrantless surveillance; that the cooperating telecoms were not only being patriotic but exercising sound judgment when they complied with requests for assistance; and that the House Democrats are acting reprehensibly by refusing to consider the intelligence reform bill passed overwhelmingly in the Senate.

Julian is right to call this an insane non sequitur. The amazing thing is the number of levels on which it’s nonsensical. Let me see if I can count them.

In the first place, the Supreme Court gets thousands of appeals every year, and only accepts a few dozen of them. So the Supreme Court declining to hear a case, in and of itself, tells us absolutely nothing about the merits of the case. It simply suggests that the justices had other cases they were more interested in hearing.

Second, the Sixth Circuit decision the Supreme Court allowed to stand didn’t address the merits of the ACLU’s lawsuit—i.e. the legality of the so-called Terrorist Surveillance Program—either. Rather, the Sixth Circuit held that because the plaintiffs couldn’t prove that they personally had been spied upon, they lacked standing to bring the lawsuit. This has absolutely nothing to do with whether the program is legal or constitutional.

Third, the telecoms were not a party to this lawsuit at all, so I’m baffled as to how it could have any implications for whether what they did was legal. The legality of the program and the legality of the telecoms’ participation in it are distinct questions. One could perfectly well argue that the program was legal but the telecoms’ participation in it was not, or vice versa. So the fact that a lawsuit against the government failed tells us nothing about whether the lawsuits against the telecoms will succeed.

Fourth, the lawsuits that have been filed against the telecoms are different in important respects from this decision. The EFF suit against AT&T, for example, is based on specific evidence that AT&T is diverting traffic from its fiber-optic network into a secret room controlled by the NSA. This is the kind of concrete evidence that was missing from the ACLU v. NSA case.

Finally, and most obviously, none of this has anything to do with the merits of the competing House and Senate FISA reform bills, or with any ulterior motives Democrats might have. And indeed, if McCarthy is right that all of the lawsuits are groundless, then it’s a little bit of a mystery why he’s so anxious for telecom immunity. If the telecoms didn’t break the law, or if the law they broke was unconstitutional, then they should be able to make that argument in court. It’s only if their arguments aren’t likely to stand up in court that immunity becomes important.

Right-Wing Glasnost on Foreign Policy?

Ryan Lizza, in a profile of John McCain in the New Yorker, describes the dispute between factions on the Right, with Newt Gingrich and Co. arguing that in order to win, conservatives must jettison conservative economic principles, and Grover Norquist’s faction arguing that conservative economic principles are the core of conservatism. Here’s Lizza describing Norquist’s view:

In a forthcoming book, “Leave Us Alone,” he describes the Republican Party as little more than a collection of interest groups—such as anti-tax activists, gun-rights advocates, and homeschoolers—that, if they are carefully tended, will grow into a “supermajority.” The merits of his argument aside, Norquist’s description of the conservative coalition is notable for what it leaves out—voters whose overriding concern is national security. That exclusion seems to be a trend on the small-government right. Not long ago, I spoke with Mallory Factor, a Republican fund-raiser and the co-organizer of a monthly meeting for conservative thinkers and activists in New York. When I mentioned that McCain’s aides plan to use the Iraq war to unite the right, he said, “That’s not the glue that keeps conservatives together. There is an enormous amount of frustration over the war on a number of grounds, from the cost, to the way the war has been fought, to what the outcome is. One of the things that I’ve talked about in our group is that we’re using the finest military in the world as an N.G.O. I mean, we’re talking about nation-building, not fighting a war. Is that the proper use of our military?”

Factor has reason to be concerned. In a recent Foreign Affairs article, McCain called for the kind of costly nation-building capacity that makes libertarians shudder, arguing that the United States should “energize and expand our postconflict reconstruction capabilities” and create a “deployable police force” that would prop up collapsing states. Echoing Norquist’s book, Factor insisted that the war in Iraq is not a unifying issue for the right. He told me, “The bottom line is that to the base of the Party the war isn’t Communism—to the Republican Party under Ronald Reagan, Communism was a rallying point. This is not like that.

Lizza goes on to describe how all of the non-Norquist factions of conservatism have essentially made their peace with the welfare-warfare state:

Gingrich, Gerson, and Frum all reject the anti-government ethos that has come to define conservatism. Gingrich calls for managerial competence in government. Gerson asks for expanded programs to fight poverty at home and to combat AIDS abroad. Frum recommends making peace with the realities of the welfare state.

For whatever it’s worth, down here in the policy trenches, it doesn’t feel too much like Mallory Factor’s description of a conservative reunion with reality on foreign policy is accurate. But here’s hoping it is.

Towards a Cuba Libre

Today an important step has been taken towards a democratic transition in Cuba. The decision of the dictator Fidel Castro to retreat from aspiring to a new presidential period in the island indicates that his poor health has worsen to a point where probably Castro won’t make it to end of this year.

Soon he will become another page in history; a very sad one, characterized by repression, tortures, political prisoners, massive impoverishment, hunger, scarcity, and murders.

His statement of giving an opportunity to the new generations is nothing less than a bad joke, after almost 50 years in power. Even worse, he delegates power to his brother Raul, who at 76 years old can hardly be considered fresh blood.

Nevertheless, as long as Castro remains alive, we can’t expect dramatic changes in Cuba. His presence behind the scenes will be intimidating for any successor, who will think twice before proposing reforms that could anger the declining tyrant. Even so, in the last months, some timid but positive signs of political openness, or at least certain degree of tolerance towards the opposition, have been perceived.

We libertarians in Latin America must be prepared for what is about to come. Probably the transition will last for years, but it is important that the people who will lead a democratic Cuba are firm believers of classical liberal ideals. Because that is exactly what Cuba needs, not only democracy, but also liberty.