TONIGHT: Cato Scholars Live-Tweet the State of the Union

#CatoSOTU

Tonight at 9 p.m. EST, President Obama will lay out his plans for the upcoming year in his sixth annual State of the Union (SOTU) address. What will the President’s words mean for liberty? 

Find out tonight: Cato scholars will be live-tweeting their reactions to what the president says—and what he leaves out. Following the President’s address, stay tuned for commentary on the Republican and Tea Party responses. Featured scholars will include everyone from David Boaz to Mark Calabria, Walter Olson to Alex Nowrasteh….and many, many more.

This is your chance to ask the experts what to expect from the policy world in 2015—and to add your two cents to the discussion. Follow @CatoInstitute on Twitter and join the conversation using #CatoSOTU

What the Fed Should Say This Month

Information received since the Federal Open Market Committee met in December confirms that economic activity is expanding at a moderate pace. Inflation has continued to run below the Committee’s longer-run objective, primarily reflecting declines in energy prices. The decline in energy prices appears to be principally a consequence of improving technology in oil and natural gas production and is, thus, a change in relative prices that has no long-term implications for the aggregate rate of inflation.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. To support continued progress toward these goals, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate.

To minimize uncertainty over the course of policy, the Committee judges that the process of normalizing interest rates should begin in June. However, the exact timing is data dependent and might be adjusted as necessary.

The Committee also judges that it is now appropriate to begin the process of normalizing its open market portfolio. Effective immediately, the Federal Reserve will cease to reinvest interest on the portfolio and maturing principal.

This statement does away with statement bloat—the profusion of meaningless sentences and phrases that have made the FOMC statement increasingly long, obscure and difficult to interpret over the past few years. Every word in the statement ought to convey useful information to the markets.

Obama’s SOTU: Opportunity Lost

In tonight’s SOTU address, President Obama plans to push policies aimed at “helping middle-class Americans.”

Why is that a sensible goal for policy?  Where are goals like liberty or economic efficiency?

What about scaling back excessive regulation, simplifying our byzantine tax code, or slowing the growth of unsustainable entitlements?

What about the huge range of policies that might encourage economic growth?

The President’s proposals–increased taxes on the rich, more handouts for the middle class–are about redistributing the economic pie; and they will shrink rather than grow that pie by distorting economic incentives.

None of this is likely to matter, of course; the Republican Congress will presumably block most of the President’s proposals.

But it’s sad that a lame-duck president with nothing to lose will not endorse something valuable and historic, like legalizing drugs, vastly expanding legal immigration, or withdrawing all our troops from the Middle East.

Alas, the Republicans would presumably block these policies as well, since Republicans, like Democrats, worry more about pandering to their constituents than promoting freedom or economic growth.

But taking a stand for liberty is a first step; on this score the President’s approach fails miserably.

Pope Fallible on Climate Change

Most people think pretty highly of Pope Francis, and I am one of them.  His concern for the poor is exemplary.  His tilt towards gay issues has been widely lauded.  But I am afraid he has been very poorly informed on climate change.

That would be of little consequence, except he is taking the issue very seriously.  Flying to the Philippines on Wednesday, he told reporters  that he will be releasing an encyclical on ecology this coming summer.  According to the AP,

He said he wanted it out in plenty of time to be read and absorbed before the next round of climate change negotiations in Paris in November after the last round in Lima, Peru, failed to reach an agreement.

While he’s definitely right about what happened in Lima, he also is clearly trying to influence the UN process. I guess that’s well and good, after all, the Vatican is a state.  But what is troubling, very troubling, is that poorly informed views on global warming can lead to a tremendously expensive agreement that will do nothing about the climate, while taking away needed resources and exacerbating poverty around the world.

Saturday, in the Philippines, he met with survivors from 2013’s Typhoon Haiyan (also known as Yolanda in the Islands), certainly one of the most powerful storms in recent history. Haiyan reportedly killed 6,000. On the aircraft, Francis said that human activity, meaning emissions of greenhouse gases, was involved. 

A Pope who wants to be as influential as Francis lends great credence to the belief that tropical cyclones (like Haiyan) are being made worse by global warming. These storms are as iconic as polar bears (whose populations are growing) when it comes to generating the political will for a new treaty in Paris. 

It is very easy to see whether global warming is strengthening tropical cyclones.  Dr. Ryan Maue, of Weatherbell Analytics, has examined every storm back to the beginning of global satellite coverage,  for their winds and their duration, which together yield the energy associated with them.  Here’s his result, updated through December 2014:

 

Figure 1. Accumulated Tropical Cyclone Energy, 1972-2014, by Dr. Ryan Maue.  There is simply no relationship between storm activity and global temperature.

The  only way major emissions reductions—of the kind ultimately envisioned by Pope Frances—can be accomplished is to make carbon dioxide-emitting energy so expensive that people will use less, much less.  There’s really no viable energy-dense alternative out there that doesn’t emit CO2. Nuclear fission, which would qualify, is anathema to the same people who want big emissions cuts. His policies will therefore keep the underdeveloped world poor, precisely what he wants to change.

Wealthy societies are much less affected by bad weather than poorer ones. Very strong typhoons regularly strike affluent Hong Kong, with few, if any fatalities.  By making energy unaffordable, the policies Francis wants will impede economic development, so that, decades from now, when a repeat of Haiyan barrels through the Islands, many more will die.

Judges Shouldn’t Tell Businesses Which Products to Make and Market

New York State is standing athwart medical progress yelling “STOP!” In a move straight from the pages of Atlas Shrugged, the state sued Forest Laboratories, the subsidiary of pharmaceutical giant Actavis that makes the Alzheimer’s drug Namenda IR, to force the company to continue making the drug, which was being phased out in favor of the new Namenda XR (which, among other improvements, need only be taken once a day rather than twice—a not insignificant plus when dealing with Alzheimer’s patients!).

Why would New York’s attorney general want to interfere with medical progress and the development of a better drug that would improve the lives of potentially millions of Americans? Perhaps to reduce state drug costs—maybe the state feels that the marginal benefit from switching to XR isn’t worth the marginal cost—or to provide a competitive advantage to the generic pharmaceutical industry (under New York law, when a patent expires—as IR’s will in a few months—the remaining prescriptions automatically switch to generics).

The state’s claim relies on some very dubious antitrust law and seeks to force Forest Labs to keep producing and offering IR under the same “terms and conditions” as before XR came out. Not only would this keep patients using an older, inferior drug, it would effectively compel Forest to support its competitors’ business strategy. The generics were already set to benefit from the hundreds of millions of R&D dollars Forest Labs spent developing IR, but now they get free advertising too.

Maybe the state doesn’t like the incentives created by the interplay of patent and antitrust law and FDA regulations—drug companies constantly develop and promote new drugs that monetize new patents—but no possible legal reason justifies the injunction that the state sought, which a federal district court recently granted! Even worse, the injunction is breathtakingly vague; in responding to Forest Labs’ motion for clarification, the judge acknowledged the vagueness but didn’t change his order, wishing the company “good luck”!

Setting aside the policy and ethical considerations underlying New York’s maneuver, the injunction order is a legal travesty. Cato has thus filed a brief supporting Forest Labs before the U.S. Court of Appeals for the Second Circuit. We argue that the order is impermissibly vague, that the doctrine of constitutional avoidance requires interpreting the order as not actually compelling Forest Labs to engage in speech that is protected by the First Amendment, and that to construe the order as actually imposing speech obligations would render the order unconstitutional.

The First Amendment does more than just limit the government’s power to prevent people from speaking, after all: it also prohibits the government from telling people—including companies—what they must say. That is especially the case when, as here, the speech being compelled goes against the speaker’s self-interest and sincerely held beliefs on how best to treat Alzheimer’s. If the district court below actually believes the injunction passes jurisprudential muster, well, “good luck.”

The Second Circuit will hear argument in New York v. Actavis later this month.

Cato legal associate Julio Colomba contributed to this blogpost.

Did Supreme Court Telegraph Its Ultimate Ruling on Gay Marriage?

That’s the question I pose in my latest Forbes piece. Here’s a taste:

As any good lawyer knows, framing the question you ask a court is just as important — often more important — than providing a well-argued answer that helps your client. Well, when the Supreme Court, as expected, decided to take up gay marriage, it unexpectedly reframed the “questions presented” in the four cases it took up and consolidated for argument. Instead of accepting any of the formulations presented in the four petitions for review, it asked the parties to brief these two questions:

  1. Does the Fourteenth Amendment require a state to license a marriage between two people of the same sex?
  2. Does the Fourteenth Amendment require a state to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-state?

This was unusual; typically the justices simply decide whether to take a case based on the petitioners’ articulation. That’s why first-year legal-writing classes spend so much time working on those “questions presented.”

So what does this mean? UC-Irvine law professor Rick Hasen found the first question “odd” because it focused on state powers and obligations rather than individual rights, which ”perhaps keeps the court from getting into questions about heightened scrutiny for sexual orientation discrimination.” Harvard law professor Larry Tribe suggested that the reframed questions “technically leave open a middle path along which the court would prevent states from discriminating against same-sex couples lawfully married in their home states without requiring any state to take the affirmative step of issuing its own marriage licenses to same-sex couples.” (In my initial reaction to the cert grant, I speculated on the same compromise possibility but ultimately concluded that this was less likely than a clean win for the challengers on both questions.)

Read the whole thing. And I also recorded a podcast reacting to the Court’s decision to take up these cases.

Dividing the Loot in Maryland

Anticipating the inauguration of a rare Republican governor in Maryland, the state’s big Democratic jurisdictions are getting worried about their access to the state treasury:

Montgomery and Prince George’s officials are trying to make sure their counties are not forgotten by Gov.-elect Larry Hogan.

The Anne Arundel County Republican, who will be sworn in Wednesday, has pledged to pay more attention to rural Maryland, which he says was neglected during the administration of outgoing Gov. Martin O’Malley (D). Those rural counties also voted for Hogan by overwhelming margins….

“The uncertainty of the new administration creates more of an impetus . . . for larger jurisdictions to come together,” said Prince George’s County Council Chair Mel Franklin (D-Upper Marlboro), who wants to form a “large-county caucus” to lobby in Annapolis.

They have nothing to worry about, right? Surely a governor wouldn’t direct taxpayer dollars on the basis of political favoritism? As it happens, I’ve been watching Maryland politics for many years, and this story reminded of one that appeared in the Washington Post 20 years ago this week, when Parris Glendening became governor:

In his first major act as Maryland governor, Parris N. Glendening unveiled a no-new-taxes budget today that unabashedly steers the biggest share of spending to the three areas that voted most strongly for him: Montgomery and Prince George’s counties and Baltimore.

Glendening proposed cuts in welfare and other state programs so he can build more schools, fight crime and create jobs, particularly in those three urban areas, the only ones where Glendening (D) won a majority of votes Nov. 8.

I thought that was such a perfect encapsulation of politics at its finest that I’ve quoted it numerous times, including in my forthcoming book The Libertarian Mind. I also like to quote this charming and honest description of politics in a letter written by Lord Bolingbroke, an English Tory leader in the eighteenth century:

I am afraid that we came to Court in the same dispositions as all parties have done; that the principal spring of our actions was to have the government of the state in our hands; that our principal views were the conservation of this power, great employments to ourselves, and great opportunities of rewarding those who had helped to raise us and of hurting those who stood in opposition to us.

I recall reading that Charlie Peters, the legendary editor of the Washington Monthly, used to say that state legislatures are just committees for dividing up the loot, though I can’t find it online. If he didn’t, he should have.