Chairman Ryan’s Budget: A Mixed Bag of Reforms

House Budget Committee Chairman Paul Ryan released his budget proposal yesterday, his last as committee chairman. This budget differs greatly from the budget request submitted by President Obama last month. Ryan would “cut” federal spending by $5.1 trillion over the next 10 years and calls upon Congress to pass pro-growth tax reform. However, Ryan’s budget is still a mixed bag from a small-government perspective.

Positive Reforms in Ryan’s budget:

  • Medicaid Block Grants: Ryan suggests block granting Medicaid to institute some fiscal sanity to this ever-growing program. This reform would reduce state government incentives to overspend and would allow them greater flexibility to innovate and cut costs. Federal spending would be reduced by $732 billion compared to baseline by this simple reform.
  • SNAP Block Grants: The Supplemental Nutrition Assistance Program (“food stamps”) would also be block granted, saving $125 billion over 10 years compared to baseline. SNAP and Medicaid block grant reforms would copy the successful approach of welfare reforms in the 1990s.
  • Medicare Premium Support: Repeating a proposal from his last several budgets, Ryan suggests changing Medicare to a premium-support model. Rather than federal spending going to health care providers, it would be directed toward health care consumers. That would hopefully generate incentives to reduce costs and improve quality. It would also allow seniors to pick the health plan that most closely matches their needs.
  • Repeals ObamaCare Spending: Ryan’s budget repeals ObamaCare’s spending components. This is his largest reduction, which would save taxpayers $2 trillion over the next ten years.

Downsides to Ryan’s budget:

  • Social Security Reform: Ryan’s budget does not tackle Social Security reform, leaving almost one quarter of the federal budget unchanged. He calls on the president and Congress to submit recommendations to reform the program, but does not submit any suggestions of his own.
  • Higher Revenue Baseline: Chairman Ryan calls for pro-growth tax reform within his budget; however, he adopts the Congressional Budget Office’s current revenue baseline. This would keep the extra revenues generated from the numerous tax hikes enacted over the last several years.
  • Delayed Reforms: Perhaps due to political concerns, many of Ryan’s reforms would not start for several years. His SNAP block grant would not begin for five years, and his Medicare premium support model would not start until 2024.
  • Keeps Higher Spending: In December, Ryan and Senate Budget Chairman Patty Murray agreed to increase discretionary spending levels for fiscal year 2014 and fiscal year 2015. This partly gutted the bipartisan Budget Control Act from 2011. Ryan’s budget retains the higher spending levels.

In sum, Ryan’s budget would not solve the government’s overspending problem. But it would be a good first step to reforming the federal behemoth.

Another Campaign Restriction Falls Because First Amendment Strongly Protects Political Speech

Despite the 5-4 split among the justices, McCutcheon is an easy case if you apply well-settled law: Restrictions on the total amount an individual may donate to candidates and party committees—as opposed to how much he can donate to any one candidate—violate the First Amendment because they do not prevent quid pro quo corruption or the appearance thereof. That corruption-prevention rationale is the only government interest that the Supreme Court accepts as a valid one for restricting political-campaign activities. As Chief Justice Roberts wrote for the majority (and it is a majority because Justice Thomas concurs in the judgment): “Money in politics may at times seem repugnant to some, but so too does much of what the First Amendment vigorously protects. If the First Amendment protects flag burning, funeral protests, and Nazi parades—despite the profound offense such spectacles cause—it surely protects political campaign speech despite popular opposition.”

With Justice Thomas, however, I would go beyond that simple point and overrule Buckley v. Valeo (1976) altogether because “[c]ontributions and expenditures are simply ‘two sides of the same First Amendment coin’” and the Court’s “efforts to distinguish the two have produced mere ‘word games’ rather than any cognizable principle of constitutional law” (quoting Chief Justice Burger’s partial dissent in Buckley). Buckley rewrote the speech-restrictive post-Watergate campaign-finance law into something no Congress would’ve passed, also inventing legal standards such that one type of political speech has greater First Amendment protection than another. Nearly 20 years later, the Supreme Court rewrote another congressional attempt (McCain-Feingold) to “reform” the rules by which people run for office, shying away from striking down Buckley and producing a convoluted mish-mash opinion that serves nobody’s interest. Enough! The drip-drip of campaign-finance rulings over the last decade has shown, existing campaign-finance law is as unworkable as it is unconstitutional.

As Cato argued in its amicus brief, in a truly free society, people should be able to give whatever they want to whomever they choose, including candidates for public office. The Supreme Court today correctly struck down the biennial campaign contribution limits and gave those who contribute money to candidates and parties as much freedom as those who spend independently to promote campaigns and causes. But it should have gone further.

Another Blow to Campaign Finance Regulation

A quick heads-up: The Supreme Court has just handed down its decision in the much-anticipated campaign finance case of McCutcheon v. Federal Election Commission, and free speech won. See Cato’s brief here. Ilya will write more fully about the decision as soon as he’s had a chance to digest it. In the meantime, here’s the opening paragraph from the syllabus:

The right to participate in democracy through political contributions is protected by the First Amendment, but that right is not absolute. Congress may regulate campaign contributions to protect against corruption or the appearance of corruption. See, e.g., Buckley v. Valeo, 424 U.S. 1, 26-27. It may not, however, regulate contributions simply to reduce the amount of money in politics, or to restrict political participation of some in order to enhance the relative influence of others. See, e.g., Arizona Free Enterprise Club’s Freedom Club PAC v. Bennett, 564 U.S. ___, ___.

In a word, Buckley was not overruled, as we had hoped, although Justice Thomas would have done so (in his concurring opinion). And the usual dissenters dissented. But chalk this up as one more blow against the campaign finance regulators, from whom we will soon hear that the sky is falling, again.

Under the Hood of the House Intel Committee’s NSA Reform Bill

This post was originally published on March 31, 2014 on Just Security

While details on the president’s proposal to end NSA bulk collection of telephony records remain sparse, we do now have an actual piece of legislation to look at from the House Permanent Select Committee on Intelligence—one that tracks the broad outlines of the White House plan even as it differs in several critical details. I’ve already done a quick take in broad brushstrokes over at The Daily Beast; here I want to get into the weeds a bit.

The HPSCI bill actually covers quite a bit more than just NSA bulk collection—there are a few transparency measures and a provision for the FISA Court to appoint amici curiae, which mostly seems like an attempt to preempt legislation creating a more robust FISC “advocate”—but in this post I want to focus on the meat: The prohibition (or so it seems) on bulk collection, and the new authority in §503 designed to replace the current bulk telephony program.

(A) The Bulk Prohibition

The first thing to note is that the (apparent) prohibition on bulk collection is structured somewhat oddly, even taking into account the framers apparent desire to limit that prohibition to certain subcategories of records. The USA Freedom Act, for instance, does this by means of a fairly straightforward modification: It limits the scope of §215 (as well as FISA pen/trap orders and National Security letters) to records that are both relevant to an investigation and pertain to a suspected foreign agent or their direct contacts, using language the Senate had unanimously approved back in 2005. The HPSCI bill is rather bit more convoluted.

First, Section 2 of the bill completely excludes “call detail records” from the scope of §215—and only from §215. The bill defines “call detail records” as “communications routing information,” which sounds awfully general, but both the description as “call detail records” and the series of enumerated telephony-specific data types that follow strongly suggest it’s really limited to telephonic communications routing information. There’s some wiggle room here since the general term precedes the more specific enumeration, but especially in light of the subsequent separate prohibition on acquisition of “electronic communications” records, defined to exclude telephonic communications, I’d be surprised if the FISC didn’t read this narrowly. Though the “including” that precedes the enumerated data types indicates that it’s not exhaustive, the omission of location-associated terms like “cell site and sector” is conspicuous. HPSCI staff are apparently assuring reporters that location data is implicitly included, but we do know that law enforcement routinely obtain bulk location data in the form of “tower dumps,” or records of all the phones registered with a specific cell tower at a particular time. Since phones routinely do this even when they’re not placing a call—which is to say, when no particular “communication” is being “routed”—it’s at least an open question whether this provision forbids bulk collection of tower location data.

Chairman Ryan’s Supposed Budget Slashing

Chairman Paul Ryan’s budget released today “cuts spending by $5.1 trillion over the next ten years,” the document claims. Similarly, the headline from the Washington Post says that Ryan’s budget “would slash $5 trillion over next decade.”

Yet looking at the details of Ryan’s proposal, the federal government will spend $1.5 trillion more in 2024 than it is expected to spend in 2014.

How can spending both be “slashed” and increased by $1.5 trillion? It’s because of the bizarre way that Washington discusses spending, which is known as baseline budgeting.

Here is a graph of Ryan’s proposed federal outlays.

 

The graph shows that under Ryan’s budget, federal spending increases every year.

But here is another graph showing Ryan’s spending compared to the Congressional Budget Office (CBO) baseline projection of spending made in February.

Notice the gap? That’s the $5 trillion that is “slashed” from the federal budget.

In Washington, all spending proposals are compared to the CBO’s baseline projections. The CBO releases these projections a couple times a year, which are based on their estimates of current federal law. Every proposal is then compared to this baseline. Inside-Washington discussions of spending cuts or increases are relative to CBO’s figures.

But this is a very different way of thinking about budgeting than used by families, who don’t assume that their income will go up automatically every year. Families prioritize, and they cut back when they need to make the books balance. Sadly, few proposals in Congress make tough trade-offs and cut actual levels of spending.

Chairman Ryan’s budget would spend $42.6 trillion over the next ten years. Opponents will say that Ryan’s budget slashes federal spending, while supporters will say that it includes large budgetary savings. The reality is that Ryan’s budget would increase spending at an annual average rate of 3.5 percent, or from $3.54 trillion in 2014 to $5.0 trillion in 2024. Only in Washington would that be considered substantial restraint, let alone slashing.

Does Strong IP Protection Create Innovation and Jobs?

The story that many people tell is that intellectual property protection creates innovation, and here in the U.S. our IP-based industries lead to many high-paying, export-oriented jobs. So, we need strong IP protection, and so does the rest of the world, and thus we push other countries to sign on to strong IP protection through trade negotiations.

But is this story true? Does strong IP protection really create innovation and jobs?

First up, jobs.  Here’s the U.S. Chamber of Commerce:

IP is a clear indicator of the ingenuity of a country’s economy and the U.S. depends heavily on our IP for economic success; and IP accounts for 40 million U.S. jobs, 2/3 of all exports and $5.06 trillion in value.

The implication of this statement seems to be that, without our current level of IP protection, the U.S. would have 40 million fewer jobs, and only 1/3 as many exports.  But that can’t be right, can it?  If we had some lower level of IP protection, say, shorter copyright terms, perhaps fewer people would work in copyright-related industries.  But they wouldn’t just starve.  They would find something else to do.  If government policy didn’t skew the incentives in a way that moves people into copyright-related jobs, they would find something just as productive, if not more so, to do.  So, it may be true that 40 million people work in IP-related jobs.  But IP doesn’t create the jobs; government policy pushes people towards these jobs, away from other jobs.

But what about innovation?  Would there be any innovation at all without our existing levels of IP protection?  Here’s Rebecca Strauss of CFR:

no one has a good grasp of whether the U.S. patent system is doing what it was intended to do—promote innovation.

… in practice, economists have not yet come to any empirically robust conclusions about whether this theory pans out or how well the U.S. patent system is performing.

Even the most elemental components of patents have no clear economic analysis backing them up, including how long patent rights should last or whether the patent right should be granted to whoever files the application first versus whoever invents it first. 

In the absence of definitive economic analysis, the trend in U.S. patent reform over the past thirty years has been to strengthen the status quo system, with powerful corporate lobbies driving the policy discussion.

This means that the deal has generally gotten sweeter for patent holders. Congress has extended the lifeterm of patents, and most drastically for copyright, which lasts nearly four times longer today than in 1800. Curiously, whenever Disney’s Mickey Mouse copyright is due to expire, the official copyright lifeterm is lengthened. 

Does strong IP protection lead to more innovation?  The answer seems to be: We don’t know!

And I don’t know either.  My point is not that we should adopt policy X or policy Y with regard to IP protection.  Rather, what I think needs to happen is that we have an internal debate over appropriate levels of IP protection.  U.S. government folks say they want a debate.  But I don’t see it happening.  What I see is the U.S. pushing our existing policies on others through trade agreements, even though it’s not at all clear that these policies are good ones.

Chamber of Commerce and Business Roundtable: Borg Enablers

Remember the Borg? You know, the Star Trek cyborgs who would encounter a ship, tell its occupants “resistance is futile,” then turn them all into Borg? Of course the Enterprise always resisted, and always survived. But what if Captain Picard had instead ordered, “Surrender. Then they’ll leave us alone.”

The crew response to that would certainly have been, “ol’ Jean-Luc is losing it!” At least, it would have been for the few seconds before everyone was converted into mindless drones. Yet that is just the sort of order a group calling itself the “Higher State Standards Partnership” is trying to issue to conservatives and libertarians when it comes to the Common Core. Yesterday, the Partnership – a front for the U.S. Chamber of Commerce and Business Roundtable – wrote in the Daily Caller that opponents of the Core should stop resisting if they want to keep schools from being assimilated by the federal government.

You read that right: After blaming the Obama administration for using the Race to the Top to meddle “in a clearly state-led, locally controlled education initiative,” the Partnership counseled Core opponents to end their resistance. Defeating the Core, they wrote, “would only bolster the hand of the Administration and invite federal control into our schools.”