March 23, 1999
Amendment to prevent flag desecration unwise, fundamentally mistaken
Distinguish between right to desecrate and desecration itself, Cato scholar says
"The flag is not simply the symbol of America; more deeply, it is the symbol of the principles on which this nation rests. Those who would desecrate the flag are thus guilty, at bottom, of desecrating our principles, which is why we find their acts so offensive," Cato Institute legal scholar Roger Pilon told the House Judiciary Subcommittee on the Constitution today. "Ironically," he added, "it is those very principles that protect such acts-and restrain the rest of us in the process. In a free society, individuals have a right to express themselves, even in offensive ways."
Pilon, founder and director of Cato's Center for Constitutional Studies, submitted testimony opposing a constitutional amendment that would authorize Congress to prohibit flag desecration. Pilon stressed that his "contempt for such action is equal to that of any member" of Congress and added, "I am not here to defend flag desecration but to defend the right to desecrate the flag, offensive as the exercise of that right may be to so many Americans. That position may strike some as contradictory. It is not. In fact, there is all the difference in the world between defending the right to desecrate the flag and defending flag desecration itself. It is the difference between a free and an unfree society. This amendment, as it tries to shield us from offensive behavior, gives rise to even greater offense. By offending our very principles, it undermines its essential purpose, making us all less free."
Flag desecration, which the proposed amendment would allow Congress to prohibit, is political expression, Pilon stressed, and that "is precisely what the Framers wanted most to protect when they drafted the First Amendment. . . . The protection of our rights is tested not when what we do or say is popular but when it is unpopular. Stated most starkly, a free society is tested by the way it protects the rights of its least popular members."
Many people argue that the flag is special because Americans have fought and died for it, Pilon observed, but "people give their lives for principles, not for symbols. When we dishonor those principles, to protect their symbol, we dishonor the men who died to preserve them. That is not a business this Congress should be about. We owe it to those men, men who have made the ultimate sacrifice, to resist the pressures of the moment so that we may preserve the principles of the ages."
Roger Pilon holds the B. Kenneth Simon Chair in Constitutional Studies at the Cato Institute.
March 22, 1999
Aid for market reforms in Russia and Eastern Europe "largely ineffective"
Money often goes to Western consultants whose advice is redundant or useless
Aid provided by the United States to Russia and Central and Eastern European countries since the collapse of the Soviet Union "has been largely ineffective," according to a new study from the Cato Institute. In fact, "rather than help to dissipate the legacies of communism, U.S. economic aid has in some cases instead reinforced the legacies of suspicion, central planning, and political control over economic decisions," the paper declares.
In "U.S. Assistance for Market Reforms: Foreign Aid Failures in Russia and the Former Soviet Bloc," Janine R. Wedel provides a detailed examination of the role played by U.S.-based consultants who were dispatched to help promote privatization and market reform. In Russia, she notes, much of the aid effort was directed by Harvard University's Institute for International Development (HIID), also known as the "Harvard Project," that worked through a group of self-styled Russian "reformers" known locally as the "St. Petersburg Clan," or the "Chubais Clan," after its leader, Anatoly Chubais, who was first deputy prime minister and then chief of staff to President Boris Yeltsin. But "the program that Chubais implemented led to the accumulation of property in a few hands and opened the door to widespread corruption."
"It is not surprising that, against the backdrop of Russia's Klondike capitalism, key HIID advisers exploited their intimate ties with Chubais and the Russian government and were allegedly able to conduct business activities for their own enrichment," Wedel observes. In 1997 the Agency for International Development cancelled most of the $14 million still earmarked for HIID, and two of the Harvard consultants remain under investigation by the Justice Department.
In Eastern Europe, she writes, "The majority of the consultants were 'fly-in, fly-out' advisers who visited the region for a short time, developed weak links with recipients, and knew little of the countries they were trying to help." They were often considered "redundant and even meddlesome."
Wedel concludes that in Central and Eastern Europe, "aid has generated some cushy jobs for Western consultants but, in terms of development, has added little to what private, voluntary exchange could provide on its own." Janine R. Wedel is a research professor of anthropology and a research fellow in the Institute of European, Russian, and Eurasian Studies at The George Washington University and an adjunct professor in the Graduate Public Policy Institute at Georgetown University.
March 17, 1999
Violence Against Women Act not a constitutional exercise of federal power
Cato amicus brief to Supreme Court says Commerce Clause can't be stretched that far
The U.S. Supreme Court should find the Domestic Violence Clause of the Violence Against Women Act (VAWA) to be unconstitutional, the Cato Institute declared in an amicus brief filed with the Court today. Citing Lopez v. United States, decided in 1995, the Cato brief argues that "only commercial activities are subject to Congress's authority under the Commerce Clause" and that the Domestic Violence Clause does not regulate commercial activity.
The amicus curiae brief, submitted by Timothy Lynch, associate director of Cato's Center for Constitutional Studies, and Jarett Decker, an attorney and Cato adjunct scholar, asks the Supreme Court to overrule the Second Circuit Court of Appeals in the case of Rita Gluzman v. United States.
"If allowed to stand, the Second Circuit's ruling [upholding VAWA] will undermine the local control and accountability that the Framers intended for the dangerous powers of law enforcement, and will threaten individual rights by permitting federal authorities to circumvent the rights of citizens under their own states' laws, while also eviscerating the doctrine of enumerated powers-liberty's first line of defense against an overweening central government," the brief argues.
The central holding of the Lopez case, the brief points out, was that "Congress's power under the Commerce Clause must at least be restricted to commercial activity." Thus, in a decision written by Chief Justice Rehnquist, the Court struck down the Gun-Free School Zones Act because it was "a criminal statute that by its terms has nothing to do with 'commerce' or any sort of economic enterprise, however broadly one might define those terms." The Cato brief says Gluzman involves the same thing: a criminal statute having nothing to do with commerce.
The brief also states that passage of the Domestic Violence Clause reflects "a trend in which Congress has been duplicating state offenses in the federal criminal code, particularly on 'hot-button' issues suitable for political posturing. That expansion of federal authority into areas the Framers never intended undermines many aspects of the constitutional structure they designed, throwing the system out of balance in ways that threaten individual rights and liberty." The Commerce Clause "should not be stretched beyond its bounds-as the Second Circuit has stretched it-to swallow up traditional areas of state authority such as domestic abuse."
Full text of amicus brief
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March 17, 1999
Five million state/local government workers reap rewards outside Social Security
San Diego, Galveston plans prove viability and desirability of privatized alternative
"Today, approximately 5 million workers, who have annual salaries totaling roughly $132.5 billion, remain outside the Social Security system," offering valuable insights for those considering reform of Social Security, according to a new Cato Institute study. Some local retirement plans, including one in San Diego, are defined-contribution plans that allow workers to put their retirement money into personal accounts that offer "greater returns and individual ownership of their retirement savings."
In "State and Local Government Retirement Programs: Lessons in Alternatives to Social Security," policy analyst Carrie Lips examines local retirement plans in both San Diego and Galveston, Texas, and state plans in Louisiana, Ohio and Massachusetts. "These plans provide useful information about the benefits and hazards of some aspects of retirement programs -- information that should guide the debate about the future of Social Security," the author writes.
"Although the details of these state and local retirement programs vary, the participants in the programs generally receive greater benefits and enjoy more flexibility than do participants in Social Security," according to Lips. "State and local plans can provide superior benefits because they predominately 'prefund' future benefits, either by saving and investing the program's income or by allowing the participants to save and invest their contributions in individually owned accounts."
Lips cites San Diego's plan as an excellent example of how a system based on individual investment can be successfully administered. Employees are required to contribute 3 percent of their salaries to their private retirement accounts but may contribute as much as 7.5 percent. The city matches 100 percent of the employee's contribution, including the voluntary portion. Employees can invest in any or a combination of five funds that represent various levels of risk. The average nominal rate of return over the past 15 years has been over 8 percent.
But Lips cautions that "investment choices in defined-benefit plans are often influenced by political pressure. For the economy and society, the ability of states and localities to invest in private companies creates the potential for cronyism and manipulation of the market." Thus, instead of allowing the federal government to invest Social Security trust fund money in the stock market, policymakers "should adopt the structure of a defined-contribution plan by giving individuals the option to redirect payroll taxes to an account that they would own and invest," Lips concludes.
March 16, 1999
A limited national missile defense system should be built - but not too fast
Cato Study says both liberals and conservatives need to cool rhetoric, focus on need
"A limited National Missile Defense (NMD), which would afford the United States protection against long-range ballistic missile threats from rogue states, is feasible and probably can be deployed at a reasonable cost," according to a new report from the Cato Institute. But "the development of an NMD system should proceed at a measured pace because an excessively rapid development program could waste taxpayer dollars on an ineffective system."
In "National Missile Defense: Examining the Options," authors Charles V. Peña and Barbara Conry note that 16 years after Ronald Reagan first proposed his Strategic Defense Initiative, "missile defense remains a contentious issue, with advocates and detractors so passionate in their convictions that NMD sometimes resembles a theological, rather than a public policy, issue." They criticize both "the refusal of liberals to examine NMD on its own merits" and "the tendency of conservatives to automatically dismiss opposition to NMD as a signal of weakness on defense."
Peña and Conry observe that "perhaps the biggest obstacle to NMD is the Anti-Ballistic Missile (ABM) Treaty." But they add that "in the final analysis, U.S. leaders should not permit the ABM treaty to be an insurmountable obstacle to NMD, if such a system can be shown to be in the best interest of U.S. security and to be cost-effective." They recommend negotiating a new version of the treaty, something the Clinton administration has now proposed, to allow a limited NMD system.
An evaluation of the likely threats faced by the United States shows that while "the possibility of an unauthorized or accidental Russian launch [of missiles] still exists," the threat is remote. Thus, Peña and Conry find that developing a large, expensive and sophisticated NMD system is unnecessary. Instead, they say the main threat appears to be from relatively unsophisticated ballistic missiles launched by rogue states like North Korea. A modest "ground-based NMD system of 100-300 interceptors should provide sufficient defensive capability against threats from rogue states," at a cost that is affordable, the authors state.
Charles V. Peña is an independent consultant on missile defense and Barbara Conry is an associate policy analyst at the Cato Institute.
March 10, 1999
Administration Kosovo policy is an attempt to "micromanage a guerrilla conflict"
Clinton would involve U.S. in an undeclared war against a country that's no threat
The Clinton administration's plan to "bomb Serbia and initiate a long-term ground occupation of Kosovo is misguided in the extreme," Cato Institute senior fellow Doug Bandow told the House International Relations Committee today. "By threatening to bomb Yugoslavia if it does not agree to accept the administration's preferred settlement plan," Bandow told the panel, "the president is trivializing war, the most monstrous of human practices."
The White House is trying to "impose an artificial settlement with little chance of acceptance by either side," Bandow said. "It would attempt to micromanage a guerrilla conflict, likely spreading nationalistic flames throughout the region. It would involve America in an undeclared war against a nation that has not threatened the United States or any U.S. ally."
Bandow said that although the administration claims that its motives are humanitarian, it currently ignores many conflicts elsewhere that are much worse. "Hypocritical is perhaps the most charitable characterization of the administration's policy," he said. "At least twice as many people died in January alone in Sierra Leone than in Kosovo last year. As many people died in one three-day battle between Tamil guerrillas and the Sri Lankan government last fall as in Kosovo in all of 1998. By any normal standard, events in Kosovo are less important than those in many other nations."
Bandow told the committee that fundamental questions must be answered: "What is the standard for making war? That is, what justifies the extreme step of unleashing death and destruction on another people? Traditionally, it has been a military threat against the United States. Yet Yugoslavia has done nothing against America or any of its allies. Granted, Serbian treatment of Kosovars has been atrocious. So has the Turkish handling of Kurds. And the conduct of Indonesia in East Timor. As well as the behavior of two score other governments in a variety of conflicts around the globe. Is war the right remedy in these cases? Warmongering in the name of peace is an oxymoron."
The administration is proposing to "put U.S. troops at risk without any serious, let alone vital, American interests at stake," Bandow declared. "Washington does not have even a minor interest in preventing Europe from having to deal with the detritus in the Balkans left over from the Cold War. To call this a vital interest, as does the administration, suggests that it is incapable of setting priorities."
March 9, 1999
Administrative costs not a barrier to privatizing Social Security
As account size grows, costs will become an "insignificant percentage" of assets
Under a privatized Social Security system, "administrative and money management expenses for a system of individual accounts could amount to roughly $35-$55 per worker for the first year," a cost that is "slightly higher than that of the current government-run Social Security program," a new Cato Institute study finds. "However, in exchange for slightly greater administrative costs, workers in a privatized system would receive a greater rate of return on their investment and better and more secure retirement benefits."
In "Administration Costs and the Relative Efficiency of Public and Private Social Security Systems," Robert Genetski notes that "there are several reasons for the low costs associated with the [present] government-run system. Because the money belongs to the government instead of the individual, the Internal Revenue Service system is the collection agent. More important, there is no money management function and no administrative cost of running personal accounts," since there are no personal accounts. "In return for that 'efficiency,' the returns promised to many of today's workers are either zero or negative," Genetski observes.
In fact, he argues, "To say that the government-run system is relatively efficient based on administrative costs is similar to saying that a Trabant (a cheap East German car that never worked) is less expensive than a Taurus or a Mercedes. While true, the comparison is hardly appropriate. Most people prefer to pay more for a car that works than to pay less for one that is unlikely to get them to their destination."
Genetski, senior managing director of Chicago Capital, Inc., and former chief economist at Chicago's Harris Bank, says that while costs might be as much as $25-$45 higher under a privatized system than under Social Security during the first year, "over time, as the average account size increased, administrative costs would become an insignificant percentage of total assets." Industry officials have suggested they "might be willing to lose money on the accounts in the initial years in return for the opportunity to earn large profits as the accounts grew."
Genetski cautions that administrative costs are influenced significantly by the way the new system is set up. To minimize those costs, he says, Congress should avoid limiting the size of accounts by moving to partial rather than full privatization, and not pile on extensive new reporting requirements or other rules that would push up costs. Making the right choices, he argues, will result in "a system of personalized retirement accounts that will enable the lowest paid worker to purchase a Mercedes for the cost of a Trabant."
March 9, 1999
IMF "reforms" have not addressed fundamental problems of agency
Bailouts continue to encourage risky behavior around the world
"There is little reason to believe that the International Monetary Fund today does not continue to suffer from the flaws that plagued it before Congress attempted to make the fund more effective," the director of the Cato Institute's Project on Global Economic Liberty told the Subcommittee on International Trade and Finance of the Senate Banking Committee today. Ian Vásquez told the panel that "the IMF continues to make matters worse in Asia and elsewhere by perpetuating moral hazard, hindering rapid and widespread reforms, and undercutting superior, less expensive market solutions."
"A major and widely recognized problem with IMF intervention-that it establishes moral hazard-has not been resolved or adequately addressed by the new legislation," Vásquez declared. "As long as the IMF bails out countries, nations will continue to slip into crises in the future because the bailouts encourage risky behavior on the part of governments and investors who fully expect that if anything goes wrong, the IMF will come to their rescue."
The failed bailout of Brazil, which occurred after the U.S. Congress took steps to improve IMF effectiveness, shows once again that the fund has an institutional incentive to lend that undermines its credibility and serves as "a sort of financial morphine for the Brazilian political system, allowing it to continue postponing reforms."
"Economic liberalization will help promote prosperity and stability in the global economy. Such reforms can be unilaterally introduced by developing nations-IMF intervention is not necessary. Reforms at the IMF, which promise little, are thus a distraction from the important tasks developing countries are more likely to undertake without IMF money and advice," Vásquez concluded.
The International Monetary Fund: Has Congressional Conditionality Made It More Effective?
March 8, 1999
Attempts to ban Internet gambling are both futile and poor public policy
Borderless nature of the Net will simply shift gambling businesses to other countries
"The architecture of the Internet makes prohibition of on-line gambling easy to evade and impossible to enforce," a new Cato Institute study observes, and "attempts to outlaw Internet gambling will inevitably fail." Instead, the study says legalization of Internet gambling should be welcomed with open arms by policy makers, who'll soon discover that it will produce enormous consumer benefits such as development of network capacity and commerce.
In "Internet Gambling: Popular, Inexorable, and (Eventually) Legal," Tom W. Bell argues that "having already embraced traditional games of chance, Americans will almost certainly extend a warm welcome to Internet gambling, legal or not." In fact, at least 56 percent of Americans gambled in 1995, wagering some $600 billion, of which $100 billion was on illegal sports betting, "evidence that Americans already pay little heed to anti-gambling laws." Access to the Internet in general is cheap and doesn't require travel to Las Vegas, and there are already 100 gambling sites on the Net, with revenues estimated at $1 billion. Should the government attempt to cut off access to those sites, the borderless nature of the medium would simply prompt gambling businesses to move to countries that have already legalized Internet gambling, such as Australia and New Zealand, Bell says.
"For better or for worse, the Internet offers new ways of satisfying age-old desires," Bell writes. George Washington, Thomas Jefferson, Benjamin Franklin and John Hancock all gambled, and lotteries helped to pay for the first building to house the U.S. Congress. "As the Founders recognized, our rights to peaceably dispose of our property include the right to gamble, on-line or off."
Bell warns that on-line legal gambling threatens some very powerful lobbies: it "presents something even more shocking than sex: the threat that entrenched gambling monopolies, nurtured and sometimes even run by government officials, might face new competition." States and municipalities collected $3 billion in taxes on casinos and sold $43 billion worth of lottery tickets in 1996 alone. Private gambling establishments see Internet gambling as a major threat, and they contributed $7 million to candidates in the 1995-96 election cycle to protect their interests.
A hands-off policy on Internet gambling will advance "vital public policy goals," Bell concludes. "It will reaffirm the values, so dear to the Founders, of individual liberty, property rights, and the pursuit of happiness. And it will establish the Internet as the bona fide technology of freedom." Bell is an assistant professor at the Chapman University School of Law and a Cato Institute adjunct scholar.
March 4, 1999
Everyone sees risk through a "cultural filter"
New Cato study provides fascinating insights into the perception of risk
"We all, routinely, monitor our environments for signs of safety or danger and modify our behavior in response," a new Cato Institute study on risk observes. "We need more information and understanding, of the sort that only science can provide about the probable consequences of 'balancing behavior.'" We also must "devise ways of proceeding in the absence of scientific certainty . . . and in so doing we must acknowledge the scientific elusiveness of risk."
In "Cars, Cholera, and Cows: The Management of Risk and Uncertainty," British scientist John Adams describes three kinds of risk: · "directly perceptible risks, such as climbing a tree, riding a bicycle, and driving a car; · "risks perceptible with the help of science, such as cholera and other infectious diseases; and · "virtual risks, about which scientists do not or cannot agree, e.g., the connection between mad cow disease and Creutzfeldt-Jakob disease in humans; global warming; and numerous suspected carcinogens."
Adams, one of the world's leading experts in risk assessment, examines the cultural filters through which people view virtual risks and describes some of the long-standing debates about virtual risks that arise because of those filters. "Understanding our ignorance of the risks and filters," he argues, "is a precondition for civilized debate about virtual risks."
Virtual risks, about which scientists don't know or cannot agree, "are cultural constructs," Adams says. "They may or may not be real-science cannot settle the issue-but they have real consequences." In the absence of firm scientific knowledge, "scientists, by combining uncertainty with potentially dire consequences, can frighten large numbers of people." He cites the scare in Britain over mad cow disease, during which one researcher said that the disease "could become an epidemic of biblical proportions." No epidemic of any proportion appeared, but beef sales plummeted and other European countries banned British beef.
The probabilities that scientists ascribe to events and outcomes are "confident-sounding expressions of certainty," Adams points out. For example, "accident statistics, the most commonly used measure of risk, are statements about the past. To the extent that the information conveyed by accident statistics is acted upon, the future will be different from the past. The act of measurement alters that which is being measured."
March 4, 1999
On privacy, Clinton administration words and deeds don't match
Proposed "know your customer" rule has no place in a free society, expert tells panel
"The Federal Deposit Insurance Corporation's proposed 'Know Your Customer' rule forces banks to become agents of the police, spying and reporting on their own customers-without ever obtaining a warrant," Cato Institute director of information studies Solveig Singleton told the House Judiciary Committee's Subcommittee on Commercial and Administrative Law today.
The proposed "Know Your Customer" rule would require banks to monitor their customers' transactions and create profiles of "normal" banking patterns. The banks would then provide the information to government regulators, who, Singleton reminded the panel, "possess powers of arrest and the power to bring citizens to trial or to seize assets in forfeiture proceedings-powers the private sector lacks."
"It's an end run around our constitutional rights of privacy," she pointed out. "Unless and until the police have probable cause to suspect someone of a crime, where he gets his money is none of the government's business. Under this rule the government would sacrifice the rights of all to catch a tiny number of alleged wrongdoers."
Singleton also pointed out that the "Know Your Customer" proposal is entirely inconsistent with previous administration privacy policy. When Vice President Al Gore proposed an Electronic Bill of Rights in 1998, he declared, "You should have the right to choose whether your personal information is disclosed; you should have the right to know how, when, and how much of that information is being used; and you should have the right to see it yourself, to know if it's accurate." In contrast, the FDIC's proposal "would give customers no escape from surveillance."
"It's an intrusive program of regulation that requires the government to force the private sector to help by reporting on everybody, everywhere. This is a sure sign that the government is on the wrong track," Singleton concluded.
"Know Your Customer" as Incoherent Privacy Policy
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