Politics and Pricing

There are two ways to price products:

The market way, used for thousands of products for hundreds of years, and

the government way, used for certain politically favored products, such as milk, since the 1930s.

This is 2007. Don’t policymakers have enough experience yet to understand that one of these methods is simple, effective, and efficient, while the other is unfair, wasteful, and bureaucratic?

Liberals, Conservatives, and Free Speech

Libertarians sometimes say that they are “liberal on free speech but conservative on economic freedom,” or that “liberals believe in free speech and personal freedom, while conservatives believe in economic freedom.” That proposition got another test in the Supreme Court yesterday. Conservatives and liberals split sharply on two free-speech cases.

And let’s see … in two 5-4 decisions, the Court’s conservative majority struck down some of the McCain-Feingold law’s restrictions on campaign speech and upheld a high-school principal’s right to suspend a student for displaying a “Bong Hits 4 Jesus” banner. Liberals disagreed in both cases.

So the liberals strongly defend a student’s right to engage in nonsensical speech that might be perceived as pro-drug, but they approve a ban on speech criticizing political candidates in the 60 days before an election.

Now I’m for free speech in both these cases. But if you had to choose, which is more important–the right of a high-school student to display silly signs at school-sponsored events, or the right of citizen groups to criticize politicians at the time voters are paying attention? Political speech is at the core of the First Amendment, and conservatives are more inclined to protect it than are liberals. That’s a sad reflection on today’s liberals.

The liberal attitude toward speech is also on display on the front pages of our leading liberal newspapers. A banner headline in the Washington Post reads “5-4 Supreme Court Weakens Curbs on Pre-Election TV Ads/Ruling on McCain-Feingold Law Opens Door for Interest Groups in ‘o8.” This long headline mentions “TV Ads” and “Interest Groups” but never uses the words “speech” or “First Amendment.” But the sidebar on the high-school case is headed “Restrictions on Student Speech Upheld.” For that issue, a straightforward understanding that speech is involved. And the New York Times website leads with “Justices Loosen Ad Restrictions in Campaign Finance Law,” while the sidebar on the school case reads, “Vote against Banner Shows Divide on Speech in Schools.” Though I should note that the old-fashioned, tree-destroying version of the Times does have a subhead reading “Political Speech Rights.”

Maybe libertarians should try to describe their philosophy by saying “libertarians believe in the free speech that liberals used to believe in, and the economic freedom that conservatives used to believe in.”

Mauritius Accelerates Move to Flat Tax

With the world’s list of flat tax nations growing every year, the pressure to adopt good tax policy is becoming more powerful. The latest example comes from the Indian Ocean. Mauritius already had adopted a flat tax, with the new system scheduled to go into effect in 2009. But tax competition is leading the government to implement the pro-growth system even sooner. Tax-news.com reports:

Deputy Prime Minister and Minister of Finance and Economic Development Rama Sithanen has announced the introduction of a flat corporate income tax, as the government strives to create conditions for “robust, sustained and inclusive growth” whilst opening the economy, facilitating business, and accelerating the transition to global competitiveness. …Central to attaining this goal is the reduction of corporate tax to a flat rate of 15%, a measure which has been brought forward by two years to July 1, 2007. This flat rate will also apply for personal income tax. Initially, the government had planned to reduce corporate tax in stages, starting with a cut in the top rate to 22.5% last year, to 20% this year and to 15% by 2009. …the Finance Minister stated….”We…have a system that is now geared towards rewarding effort and entrepreneurship.”

The Great Writ of Habeas Corpus

A few weeks ago, when I introduced ACLU executive director Anthony Romero at a Cato Book Forum, I began by asking

which right the American Founders considered most basic, that is, indispensable to securing all the others. Is it the right to property, which Arthur Lee described as “the guardian of every other right,” because without it we are all at the mercy of whoever controls all the resources? Is it the right to keep and bear arms, without which resistance to the state is rendered toothless? Is it, as Thomas Jefferson said, the right to trial by jury that protects citizens from the arbitrary power of the state? Is it the case that, as Winston Churchill said – not an American Founder, of course, but always good for a quote – “A free press is the unsleeping guardian of every other right that free men prize”? Or could it be the writ of habeas corpus, known as the Great Writ, which in 1969 the Supreme Court called “the fundamental instrument for safeguarding individual freedom against arbitrary and lawless state action”?

Afterward, my smarter colleague said, “It’s habeas.”

So that’s why it’s good that the ACLU has declared today a “Day of Action to Restore Law and Justice.”  ACLU members and others are rallying on Capitol Hill and visiting congressional offices asking Congress to restore the right of habeas corpus.

One of the most frightening elements of the powers asserted by the Bush administration in the war on terror is the power it claims to arrest American citizens and hold them without access to a lawyer or a judge. The conservatives of the American Freedom Agenda have joined the ACLU in calling for repeal of the Military Commissions Act and restoration of the right of habeas corpus. Cato adjunct scholar Richard Epstein petitioned Congress not to curtail habeas corpus as it considered the Military Commissions Act last fall, to no avail. This issue will provide a good test of the proposition that divided government is a good thing. Will the Democratic Congress do the right thing and restore our constitutional rights?

Justice Department’s Unethical Tax Evasion Case against KPMG Is Falling Apart

Thanks in large part to a punitive corporate tax rate and mind-numbing complexity in the tax code, a lot of accountants and lawyers get rich by figuring out ways to protect shareholder money. This irritates politicians and bureaucrats, who constantly tinker with the law in an attempt to grab more tax revenue (though this effort is offset by politicians looking for campaign cash, which leads to the endless creation of new loopholes). This is business-as-usual in Washington, but the Justice Department added a bizarre twist to the game by launching a legal attack on some partners from an accounting firm, even though the tax shelters they were peddling were not illegal. The Justice Department’s actions were reprehensible, rather akin to the totalitarian tactics of the tax authorities in Russia. If tax lawyers at the Department of Justice think that some people are taking advantage of tax loopholes, they certainly have every right to inform lawmakers and to ask them to change the law. In an ideal world, they would even recommend lower tax rates to remove the incentive to seek out new shelters. But they should never have the right or the ability to arbitrarily declare – by bureaucratic fiat – that tax planning is a criminal act. The Wall Street Journal condemns the Justice Department for its unethical behavior:

The Justice Department’s case against 16 former KPMG partners for tax evasion continues to unravel, with prosecutors themselves conceding late last week that federal Judge Lewis Kaplan has little choice but to dismiss the charges against most of the defendants. Judge Kaplan ruled last year that Justice had violated the defendants’ Constitutional rights by pressuring KPMG not to pay their legal fees. He is now considering a defense motion to dismiss. Prosecutors continue to protest the judge’s ruling but on Friday they admitted in a court filing that dismissal is the only remedy for the rights violations. The more honorable route would have been for prosecutors to acknowledge their mistakes and dismiss the charges themselves. The truth is that this tax shelter case should never have been brought. Both KPMG and its partners believed the shelters they marketed were legal, and no tax court had ruled against the shelters before Justice brought its criminal charges. Then prosecutors used the threat of criminal indictment against all of KPMG to extort an admission of guilt from the firm and force it to stop paying the legal bills of individual partners.

Enough is Enough

Three years ago the U.S. Supreme Court handed down McConnell v. FEC, a decision that upheld McCain-Feingold’s restrictions on political speech. The future seemed bleak for any limits on government regulation of speech and association.

But things are looking up. Today the Supreme Court handed down its decision in Federal Election Commission v. Wisconsin Right to Life.

McCain-Feingold made it a federal crime for any corporation to broadcast, 30 to 60 days before an election, any communication that mentions a federal candidate for elected office and is aimed relevant voters.  Wisconsin Right to Life (WRTL) is an ideological corporation that accepted funding from other corporations. Its members wanted to run ads in 2004 urging citizens of their state to contact its two senators and urge them to oppose a filibuster of judicial nominees. Sen. Russ Feingold, one of the senators and a co-author of the law in question, was running for re-election. Wisconsin Right to Life’s advertising plans thus constituted a federal crime. At least, they were a crime if the relevant part of McCain-Feingold was constitutional as applied to WRTL. In fact, McCain-Feingold was constitutionally invalid in this case and probably many others.

To understand why requires a quick summary of campaign finance law. Congress long ago prohibited contributions to candidates from the general treasuries of corporations and labor unions. But corporations could fund ads commenting on the issues of the day. However, if those ads directly advocated the election or defeat of a candidate, they became an attempt to circumvent the ban on corporate contributions and thus a federal crime. In Buckley v. Valeo, the Court said such “express advocacy” contained words like “elect” and “defeat.” If an ad did not use the words, it was not express advocacy and hence, not subject to campaign finance regulation.

In the 1990s some businesses and labor unions started funding advertising that met the legal standards for issue advocacy. The ads were legal and often highly critical of vulnerable members of Congress in the run up to an election. McCain-Feingold made such speech illegal. It said corporations could not fund ads that mentioned a candidate for federal office with 30 to 60 days of an election. The McConnell Court went along arguing that the ads in question were the “functional equivalent of express advocacy.” In the WRTL decision, the author of the majority opinion, Justice Roberts, has contracted rather than expanded the scope of government regulation. He has done so by redefining the meaning of express advocacy: “a court should find that an ad is the functional equivalent of express advocacy only if the ad is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate.” The WRTL ad seemed to a reasonable person to be attempt at grassroots organizing. Hence, WRTL wins.

But this standard implicates more than this case. Many of the ads in the 1990s that were the target of McCain-Feingold might have been free of regulation under this standard. Reasonable people could have believed that the ads were attempts to persuade voters to contact their representatives. The political space free of government regulation seems to have expanded. Indeed, it seems possible that many fewer ads will be judged the “functional equivalent of express advocacy” in the future.

So, the good guys won one at last. “Enough is enough,” as Justice Roberts writes in considering efforts to further expand government control of politics.

But still there is reason to worry. The majority did not declare the relevant part of McCain-Feingold unconstitutional. Justice Alito did suggest a willingness to hear constitutional challenges to the McConnell decision (and hence, to McCain-Feingold). Justice Roberts also set out some criteria for the “express advocacy” that are fairly broad. An ad that mentions “an election, candidacy, political party, or challenger; or [that takes] a position on a candidate’s character, qualifications, or fitness for office” could become express advocacy depending on future judgments by the Court and perhaps, by the Federal Election Commission.

An important battle has been won. The war continues.

Americans Are Far More Generous than Europeans

USA Today reports on a new study showing that charitable contributions are at an all-time high in America. Most interesting, the report also revealed that Americans are far more generous than supposedly compassionate Europeans. Indeed, no nation gives even half as much (as a share of income) as the United States. The French are among the worst misers, giving less than one-twelfth of what Americans donate, though it is unclear whether this is because they are taxed so much that there is no money left in their wallets or whether they assume that it is now the role of government to solve every social problem:

Americans gave nearly $300 billion to charitable causes last year, setting a record and besting the 2005 total that had been boosted by a surge in aid to victims of hurricanes Katrina, Rita and Wilma and the Asian tsunami. …Individuals gave a combined 75.6% of the total. With bequests, that rises to 83.4%. …the willingness of Americans to give cuts across income levels, and their investments go to developing ideas, inventions and people to the benefit of the overall economy. Gaudiani said Americans give twice as much as the next most charitable country, according to a November 2006 comparison done by the Charities Aid Foundation. In philanthropic giving as a percentage of gross domestic product, the U.S. ranked first at 1.7%. No. 2 Britain gave 0.73%, while France, with a 0.14% rate, trailed such countries as South Africa, Singapore, Turkey and Germany.