October 29, 1998
Cato Institute paper describes moral case for Social Security privatization
Desirable for egalitarians, communitarians, welfare theorists and classical liberals
"The most important arguments for Social Security privatization are moral, not economic," according to the author of a new policy paper from the Cato Institute. While the current national debate over the system's future revolves around such economic issues as impact on national savings, economic growth or transition costs, "privatization would not be justifiable if it were economically beneficial but morally suspect."
In The Moral Case for Social Security Privatization, Daniel Shapiro declares that "a privatized Social Security system meets moral criteria far better than does our current, bankrupt, pay-as-you-go system." This is true, he says, not only from the classical liberal or libertarian perspective, "but from virtually every perspective in political philosophy."
Shapiro notes that "a purely voluntary pension system is most compatible with the classical liberal emphasis on liberty," since "the freedom to decide what kind of retirement to have, when to cease working, how much to put aside for one's retirement" and similar decisions "go to the heart of the freedom and responsibility to shape one's life."
Egalitarians, who "value equality not merely as a means to some other end but as an independent value," should favor privatization whether they emphasize minimizing relative inequalities, or focus on making absolute improvements in the lives of the worst off. Social Security has "particularly pernicious effects among some groups that egalitarians are likely to consider among the most disadvantaged," and "egalitarians who are concerned with the absolute position of the poor should also favor a private system because it will significantly raise their retirement income."
Social Security cannot be justified under welfare rights theories because it "is not a need-based or means-tested program." Communitarians stress "a shared sense of the common good," and a "shared sense of solidarity," but Social Security produces severe intergenerational inequalities, and "no longer promotes a sense of solidarity among citizens or between generations." In contrast, "a private pension system avoids unfair intergenerational redistribution, keeps its promises and still retains some sense of shared responsibility via a minimum pension guarantee" that is part of all significant privatization proposals.
"The moral shroud that used to surround Social Security is an illusion: there is no moral argument for Social Security," he concludes. A private system is justified, Shapiro argues, "regardless of which political values one thinks most important." Daniel Shapiro is associate professor of philosophy at West Virginia University.
October 28, 1998
Economic theories underlying case against Microsoft are fundamentally flawed
QWERTY legend turns out to be "no better than a convenient myth"
In its antitrust case against Microsoft, the Justice Department has invoked a variety of "novel economic theories to justify new antitrust doctrines and to revive old ones." Those theories, which invoke such factors as "network effects," "path dependence," and "lock-in," are "fundamentally flawed," according to a new Cato Institute study by two economists who have written extensively on the subject.
In "Dismal Science Fictions: Network Effects, Microsoft, and Antitrust Speculation," authors Stan Liebowitz and Stephen E. Margolis note that "theories of path dependence and lock-in are relatively new to the economic literature." They find little support among economists because "there is a poor connection between theories of path dependence and the real-world behavior of entrepreneurs and consumers. Moreover, no connection exists between the alleged empirical support for those theories and real events."
Proponents of the new theories commonly cite things like the predominance of the QWERTY typewriter keyboard, VHS videotapes and IBM-compatible computers to support their contention that markets often settle on the "wrong" standard or failed to adopt a better system or standard. Liebowitz and Margolis debunk frequently used examples of market failure, including "the most commonly cited example in the network-externality, path-dependence literature, the prosaic typewriter keyboard."
Adherents of the path-dependence theory say that the QWERTY arrangement of the keyboard is inferior to others, including "the 'scientifically' designed Dvorak keyboard, which allegedly offered a 40 percent increase in typing speed. The story is claimed to validate path dependence: no typists learn Dvorak because too many others use QWERTY, which increases the value of QWERTY all the more." But upon investigation, the authors found that the story was "wrong in almost every detail." A carefully controlled government study in the 1950s and other modern research show little advantage to the Dvorak keyboard. A Navy study supposedly showing its superiority turns out to have been conducted by Dvorak himself and was "clearly fudged." But the continuing use of the story "illustrates both the desire of the path-dependence theorists for empirical support and their reluctance to check the facts."
In short, the authors say, "Reexamination of the empirical evidence demonstrates that the claimed examples of lock-in are not market failures," and "with regard to Microsoft, as elsewhere, neither theory nor fact supports the call for antitrust enforcement measures."
Stan Liebowitz is a professor of economics at the Management School of the University of Texas at Dallas. Stephen E. Margolis is a professor of economics at North Carolina State University.
October 28, 1998
Study of congressional voting confirms public belief about need for term limits
Longer-serving Republicans are reason for GOP's failure to honor campaign promises
"One of the most significant reasons for the GOP's failure to tame the budget is that senior Republicans have not lived up to the party's campaign promises," according to a new Cato Institute study that examined voting behavior of members of Congress on 31 of the most significant budget, tax and regulatory issues since 1995. The findings "suggest that if the public wants Congress to reduce the size and scope of government, term limits may be imperative."
In "Term Limits and the Republican Congress: The Case Strengthens," author Aaron Steelman notes that in nearly every one of the 31 votes, "junior Republicans (members who had served 6 years or less in the House and 12 years or less in the Senate) favored fiscal discipline in far greater numbers than did senior Republicans. Indeed, in some cases junior Republicans were more than twice as likely to vote for spending or tax cuts as were senior Republicans."
Steelman notes that "many people on the right of the political spectrum who are skeptical about term limits have argued that, with Republicans in control of Congress, term limits are no longer necessary." But, he adds, "all lawmakers - Republicans, Democrats and Independents - are subject to the same pressures." And so it is not surprising that "the federal government, by almost every measure, is bigger today than it was on election day in 1994."
Over time, Steelman points out, "lawmakers become more susceptible to the pro-spending arguments they are constantly exposed to and thus become more sympathetic to governmental activism. Typically, this shift in a pro-tax-and-spend direction is more dramatic for Republicans than for Democrats." Thus, "term limits may have a more profound impact on legislative outcomes when the GOP controls Congress."
"Term limits are no panacea," the author concludes. "There always will be big spenders in Congress. But if Congress were term limited, there probably would be fewer big spenders - particularly big-spending Republicans."
October 22, 1998
"Dark side" of antitrust policy: harming consumers, thwarting competition
Microsoft case one of many examples of "domestic protectionism"
"Antitrust is thought by some to be the bulwark of free enterprise," a new study from the Cato Institute notes. But in practice, "antitrust laws have become a weapon of convenience for special pleaders of all stripes who are apparently willing to go to almost any length to protect their own selfish interests by stopping mergers." The result is that "antitrust authorities all too often succeed, not in keeping prices from rising, but in keeping them from falling."
In "The Government's War on Mergers: The Fatal Conceit of Antitrust Policy," William F. Shughart II argues that "antitrust has a dark side" and that "it has been deformed in its application into a kind of domestic equivalent of trade protectionism, operating mostly to the benefit of less efficient firms that, unable or unwilling to struggle to win the competitive race in the rough-and-tumble of an unforgiving market, have turned to Washington for succor."
Shughart argues that "the politicization of antitrust is not just a matter of historical curiosity. Politics stalks many of the high-profile cases brought by President Clinton's trustbusters, including Primestar's planned purchase of a key satellite slot as well as the mergers proposed between Staples and Office Depot, WorldCom and MCI and Lockheed Martin and Northrop Grumman."
Shughart, the Frederick A. P. Barnard Distinguished Professor of Economics and holder of the Robert M. Hearin Chair in Business Administration at the University of Mississippi, notes that "the textbook concept of 'monopoly'-a single business entity producing a product having no close substitutes-seems to have passed quietly into antitrust history." Instead, "antitrust authorities worry about 'unilateral competitive effects' and a host of other exotic-sounding sources of consumer injury."
A close look at recent merger cases brought by the government shows that "federal trustbusters frequently have trouble distinguishing competition from monopolizing. As a result, the antitrust laws have far too often been brought to bear in attacking innovative, risk-taking firms that have succeeded in developing previously unknown products and in establishing wholly new industries," Shughart contends.
"Antitrust law was wrong-headed at its conception," and "one hundred years of antitrust enforcement in the United States has produced precious little evidence that the laws have achieved their stated objectives." Shughart says that "the time for modest reform of antitrust policy processes has passed. Root-and-branch repeal of what Federal Reserve chairman Alan Greenspan a generation ago referred to as a 'jumble of economic irrationality and ignorance'-and what modern scholarship has shown over and over again to be a playground of special pleaders-is called for."
October 20, 1998
Cato Institute publishes mass-market paperback on Social Security reform
Got an hour? Here's an easy-to-read discussion of what privatization means for you
The Cato Institute today published a short, easy-to-read mass-audience book titled Common Cents, Common Dreams: A Layman's Guide to Social Security Privatization by Peter J. Ferrara and Michael D. Tanner. The 50-page paperback is illustrated throughout and is written in language that's easily understood. It is a companion book to A New Deal for Social Security, a longer and more detailed volume by the same authors, published in September and aimed at those in the public policy community looking for in-depth discussion of the issues surrounding Social Security reform.
"We call this book Common Cents, Common Dreams because it is about how working men and women across this country can be freed to achieve the common dream of financial independence and security," Ferrara and Tanner declare. "Average and even low-income workers earn enough money to achieve substantial wealth by retirement. If they took the money that they currently pay in Social Security taxes and invested those funds in standard diversified portfolios of stocks and bonds, average-income families could expect to retire with accumulated savings of nearly $1 million or more. This book explains why and how that can be done."
The book focuses on the difficulty faced by low- and moderate-income Americans today as they try to set aside retirement savings. Payroll taxes leave them with little or no disposable income to invest in a retirement savings plan, and thus leave them entirely dependent on a meager Social Security check. In a series of examples in the book, average wage earners learn how small their Social Security income will be, compared with the returns from even a modest private retirement savings account.
The book is filled with pictures, graphs, and short features that explain why Social Security is often called a Ponzi scheme, show how high Social Security taxes will have to go to keep it afloat, describe the 1960 Supreme Court decision holding that people have no Constitutional "right" to their Social Security benefits, show why the Social Security Trust Fund isn't an asset at all but a liability, and explain how a privatized system would provide significantly higher retirement benefits.
Copies may be purchased ($4.95 paper) by calling 800-767-1241 or
through the Cato Online Store.
October 14, 1998
The welfare state "rests on a false moral foundation," new book declares
Welfare reform legislation was a right first step, if a small one
"Welfare rights are radically different from, and incompatible with, the classical rights to life, liberty, and property," philosopher David Kelley writes in a new book published today by the Cato Institute. As states work through the implementation of the Welfare Reform Act of 1996, Kelley supplies the philosophical context in which crucial policy choices should be made.
In A Life of One's Own: Individual Rights and the Welfare State, Kelley says that the key is understanding just what a "right" is. "The Declaration of Independence maintained that individuals possess certain rights, that those rights are part of a higher law to which government must submit, and that the purpose of government is to preserve and protect those rights." Classical rights, as defined in the declaration, are rights to freedom of action. Welfare rights, on the other hand, are "entitlements to have certain goods, not merely to pursue them," which is "a more expansive view of the role of government than anything envisioned by the classical liberals of the Enlightenment."
The thinkers and activists who built the welfare state "insisted that the social provision of goods be treated as a right possessed by all people as citizens, rather than as an act of charity," Kelley says. "Do we have a right to be taken care of by others, or do we not?" Kelley's answer is clearly no. "Welfare rights as a category conflict with liberty rights. The conflict is inevitable because any welfare right imposes on others unchosen positive obligations that, when enforced, deprive those others of their liberty and property."
He argues that "the welfare reform measures of 1996 were the right first step, though a small one. Cash benefits at least, though not other benefits, were denied entitlement status, and the states were given authority to try different approaches to relieving poverty." But for reasons Kelley discusses at length, "no government programs can achieve the same degree of diversity and flexibility as private ones."
"The welfare state rests on a false moral foundation," Kelley says. The notion of welfare rights "cannot be justified by appeal to freedom, to benevolence, or to community. They do not expand but curtail freedom-that of program clients as well as of taxpayers. They make charity compulsory, undermining any genuine benevolence donors might have toward the poor. They replace the voluntary bonds of a society of contract with the coercive power of the state, undermining genuine community."
David Kelley taught philosophy at Vassar College and Brandeis University and is the author of a widely used college textbook on logic, The Art of Reasoning, as well as other works in philosophy. He is currently executive director of the Institute for Objectivist Studies.
A Life of One's Own: Individual Rights and the Welfare State
October 14, 1998
Hanke: Russia needs a currency board, but "the devil is in the details"
Board must be ultraorthodox and protected from political control
"The devaluation of the Russian ruble this year was predictable, especially considering Russia's poor monetary history," a new study from the Cato Institute observes. The solution is "a competitive, parallel currency system" and the creation of a currency board system (CBS). But "to work in Russia, a CBS must be ultraorthodox," so that it can "command the respect and confidence of the justifiably skeptical Russian people."
In "The Case for a Russian Currency Board System," economist and Cato Institute adjunct scholar Steve H. Hanke notes that "state-manipulated money has been a Russian hallmark since the time of Peter the Great and shows that the country's money problems are endemic and do not depend on who controls the central bank." After a 1991 currency "reform" imposed by the Gorbachev government, "the Russian people began to dollarize the economy, and they have continued to do so with a vengeance." Today, despite the fact that the Yeltsin government officially de-dollarized Russia in 1997, Russians hold about $40 billion in dollars, which "dwarfs the supply of rubles in circulation."
Hanke says that "instead of worrying about dollar mattress money and threatening to confiscate it, the Yeltsin government should be jumping for joy" and "grant the dollar legal currency status immediately, so that the dollar can circulate and be used on an equal basis with the ruble." Then, "to put the ruble on a sound competitive footing, the Russian government should enact a currency board system law immediately and announce that it will be implemented as soon as possible."
The "ultraorthodox" CBS that Hanke recommends would have its legal seat in Switzerland and be governed by a board of five directors, two appointed by the government of Russia and three (non-Russian citizens) appointed by the Bank for International Settlements in Basel. It would tie the ruble to a reserve currency (initially, the U.S. dollar) at a one-to-one fixed exchange rate and maintain foreign reserves equal to at least 100 percent of the notes and coins in circulation. It would not be allowed to serve as a "lender of last resort," regulate commercial banks, create inflation or create credit.
"The devil is always in the details, particularly in Russia," Hanke says. "Anything less than an ultraorthodox CBS will not command the confidence of the Russian people and will therefore doom a Russian CBS." Steve H. Hanke is a professor of applied economics at Johns Hopkins University in Baltimore, and coauthor of Russian Currency and Finance: A Currency Board Approach to Reform (Routledge, 1993).
Foreign Policy Briefing no. 49
October 13, 1998
Transition costs? Shift to market-based retirement could mean big savings
Unfunded liabilities make cost of staying with present system higher than cost of transition
"Regardless of the transition financing mechanism, moving to a market-based Social Security system will ultimately be less costly than trying to prop up the current program," according to a new study issued today by the Cato Institute. Author William Shipman says that critics of moving to a market-based system, who argue against privatization because of transition costs, "ignore the enormous unfunded liabilities of the current Social Security system. Any valid discussion of the costs of moving to a market-based Social Security system must compare those costs with the costs of maintaining the current system, including the costs of meeting those unfunded liabilities."
In "Facts and Fantasies about Transition Costs," Shipman notes that to deal with the current system's $3 trillion in unfunded liabilities, taxes will have to be raised, or benefits cut, or some combination of the two. For workers born in 1976, benefit cuts would exceed 25 percent by the year 2030 if that course is taken; taxes "would have to increase 43 percent from the current level just to finance benefits that would have to be paid under today's law." Moreover, those "increased taxes do not buy increased benefits. The poor return that already exists on today's lower taxes would gradually worsen and would never reverse course."
Moving to a market-based retirement system provides dramatically different results, since the "significant advantage of a privatized system is the greater retirement income earned from investing in markets." Shipman compares the current system with a market-based alternative and shows that "although in both systems the payroll deduction and the unfunded liability are the same, the market-based system produces a far superior long-term result. In the 75th year, the pay-as-you-go system will have a cash flow deficit of about 1.7 percent of gross domestic product while the market-based alternative will have a surplus of about 3.5 percent of GDP."
Shipman assumes a government-guaranteed floor benefit equal to the present Social Security replacement rate of 42 percent of a worker's salary at retirement. "When a worker achieves 42 percent from saving and investing, the government's obligation to that worker ends. Over time, as more workers reach this point, the government's benefit payments fall and eventually reach zero. But because of the bridge financing incurred during the transition, the employer tax continues until all of the debt is retired."
"Transforming Social Security to a market-based system of individual accounts does require a transition period, a cost, and a change in the timing of cash flows. However, any cost is reasonably less than staying with the present law," Shipman concludes.
William Shipman is a principal with State Street Global Advisors and co-chairman of the Cato Institute's Project on Social Security Privatization.
October 9, 1998
It's time for a free market in legal services, Cato study says
Prohibition of "unauthorized practice of law" serves no legitimate public purpose
Even though every state except Arizona prohibits "the unauthorized practice of law" (UPL), those prohibitions "serve no legitimate public purpose," and "by imposing a costly barrier to entry, they distort the market for legal services," according to a new study from the Cato Institute. The study recommends that "UPL prohibitions should be repealed or struck down by the courts as unconstitutional."
In "The Case for a Free Market in Legal Services," George C. Leef, an adjunct professor of law and economics at Northwood University, cites the case of a Florida woman named Rosemary Furman. "Her crime was to have helped, by preparing and filing the necessary legal papers, people who wanted a divorce." Previously, she had been a legal secretary "doing exactly the same paperwork but under the 'supervision' of an attorney," who then charged clients a fee that she thought unconscionable. She went into business for herself, charging only $50 for divorce filings, and worked primarily with battered women who couldn't afford more. For providing this service, she was prosecuted by the state of Florida, convicted, and sentenced to 120 days in jail.
Licensure requirements do little to ensure adequate skills, Leef says. But the market, reinforced by remedies for fraud, breach of contract and negligence, establishes powerful incentives for competence, fair dealing and efficiency. Moreover, voluntary certification programs could help consumers identify attorneys who have demonstrated proficiency at prescribed tasks. "At the same time," he observes, "certification does not restrict contracting options or deprive people of occupational freedom."
October 8, 1998
Impending intervention in Kosovo transforms NATO into "on-call police service"
Cato Institute study traces history of complex and intractable conflict
NATO military intervention in Kosovo, the subject of a diplomatic flurry of activity this week, "would complete the process of transforming NATO from a defensive alliance into an on-call police service," according to a new study published today by the Cato Institute. Sending NATO forces into Kosovo "will set an entirely new precedent: that NATO can conduct 'out-of-area' operations even if the government of the country in question objects to it," analyst Gary Dempsey warns. He notes that the western alliance's involvement in Bosnia, the first NATO operation outside the territory of its member states, took place with the approval of the national government there, but that is not the case in Kosovo.
In "Washington's Kosovo Policy: Consequences and Contradictions," Dempsey calls the impending NATO move into Kosovo a "dangerous enlargement of NATO's purview [that] exposes the United States to possible involvement in conflicts all around the world. Indeed, if NATO can intervene in Kosovo, it can theoretically intervene anywhere." He points out that Secretary of State Madeleine Albright expressed just such an intention when she said earlier this year that NATO should extend its geographic reach beyond the European continent and evolve into "a force for peace from the Middle East to Central Africa."
Dempsey traces the history of the region and describes the various stages of the ethnic conflict that has plagued Kosovo during this century. Although more than 75 percent of all Serbian cultural and national monuments are located in Kosovo, Serbs constitute only 10 to 15 percent of the population. The rest are ethnic Albanians who have been subjected to second-class status since Slobodan Milosevic became president of Serbia in 1989.
"The conflict in Kosovo," Dempsey says, "is not simply a matter of Kosovar Albanians suffering under a brutal and repressive regime-which they are-but a complex clash of mutually exclusive political claims which are aggravated by conflicting historical grievances-real and imagined."
He notes that "military intervention in Kosovo will encounter fervent and incompatible ethnic interests that are unlikely to be dislodged by a Western presence." And as in the case of Bosnia, where a promised one-year mission has become open-ended, Dempsey says that involvement in Kosovo would unlikely unfold in much the same way, "with no end in sight."
October 8, 1998
Hundreds of top economists back move toward privatized Social Security
Only a system of savings and investment can provide safe and secure retirement
A petition signed by 327 of the nation's top business and academic economists today called for "giving workers the option of shifting all or part of their Social Security taxes into individually owned, privately invested accounts, similar to individual retirement accounts or 401(k) plans." The signers declared, "We believe that only a system based on savings and investment can provide a safe and secure retirement without burying future generations under a mountain of new taxes."
The petition was featured in a full page ad in Roll Call, a newspaper widely read by members of Congress and their staffs. Among those signing the ad are Nobel laureates Milton Friedman and James Buchanan; former Treasury Secretary William Simon; and Murray Weidenbaum and William Niskanen, former members of the Council of Economic Advisers.
In the statement, the signers declared that "Social Security is facing a financial crisis," and opposed raising taxes to shore up the system. "Payroll taxes are already so high that three-quarters of all Americans pay more in payroll taxes than in federal income tax. Their return on those taxes will be far less than the return they could expect from investing in private capital markets."
The economists warned against using the Social Security trust fund balance as a guide to the system's health. "The trust fund is not a store of wealth. It is simply an accounting of how much one department of the government owes another. It measures a liability, not an asset."
The fundamental flaw in the Social Security system, the economists say, is its pay-as-you-go structure. "When today's workers retire, they must count on another generation of workers to pay taxes to support their benefits. Demographics have made this system unsustainable."
Full text of petition and list of signers
October 7, 1998
Market reforms and social development in China: 21st century superpower?
Future of market economy and civil society focus of new Cato Institute book
Will China emerge as an economic "superpower" in the 21st Century? Or will institutional rigidities and the clash between markets and socialism derail China's economic miracle? What institutional reforms must still be made for China to develop a true market economy? Will China follow the path of Hong Kong and increase economic freedom and adopt the rule of law? Or will China corrupt Hong Kong? Those are some of the key questions addressed in a new book from the Cato Institute, China in the New Millennium: Market Reforms and Social Development.
"China's economic reforms and opening to the outside world have advanced both material progress and civil society," writes Mao Yushi, chairman of the Unirule Institute of Economics in Beijing. "Economic freedom and social development are inextricably linked in China. This book shows why with depth and vision."
The new book is edited by James A. Dorn, vice president for academic affairs at the Cato Institute. Contributors, including Justin Yifu Lin, Kate Xiao Zhou, Minxin Pei, Nicholas Lardy, Charles Wolf Jr., Fan Gang, William J. McGurn and José Piñera, address a wide range of issues that affect China's economic and social development: the reform/privatization of state-owned enterprises; financial liberalization; China's accession to the World Trade Organization; pension reform; and the constitutional, fiscal and regulatory changes needed to keep China on the road to a freer and more prosperous future.
One of the key features of the book is its emphasis on the relationship between the free market and personal autonomy. Most people realize that a market economy fosters wealth creation, but they often fail to perceive how the spontaneous market process promotes freedom.
"The reality," writes Dorn, "is that unless China can insulate economic life from the state, future economic and social development will be on shaky grounds. Indeed, if China is to escape the crippling effects of crony capitalism, now evident in much of East Asia, the institutional clash between markets and socialism in China needs to be resolved in favor of greater economic freedom."
China in the New Millennium: Market Reforms and Social Development
October 6, 1998
Appeals court brief: let senior citizens buy the medical services they want
Cato Institute, other policy groups endorse challenge to Medicare rule
"The suggestion that free people can be limited by the government in deciding how much of their own money they should spend on protecting their health and extending their lives is repugnant to the democratic principles upon which our country was founded," according to an amicus brief filed with the U.S. Court of Appeals for the D.C. Circuit today.
The brief addresses issues in the case of United Seniors Association v. Shalala and was filed by the Cato Institute, Citizens Against Government Waste, The American Civil Liberties Union of the National Capital Area, and other policy groups. It asks the appeals court to declare Section 4507 of the 1997 Balanced Budget Act unconstitutional, thereby reversing a lower court ruling. That provision says that Medicare recipients can contract with a doctor of their choice for any medical service, but only if the doctor agrees not to participate in the Medicare program for 2 years. Because nearly all doctors receive a substantial part of their income from Medicare, Section 4507 effectively stops any private contracting between Medicare beneficiaries and doctors. Patients who are denied services by Medicare cannot use their own money to buy those services.
By pressuring physicians not to serve senior citizens outside of the Medicare framework, federal officials not only harm consumers, but violate one of our most basic constitutional rights. "The right of personal autonomy involved in this case -- the right of a competent individual, in consultation with a licensed physician, to obtain desired medical services at his or her own expense -- is fundamental. . . . The government's position is an affront to our nation's democratic principles."
One bizarre effect of Section 4507 is that it "bars senior citizens from purchasing extra medical services in those categories that are generally approved by Medicare while imposing no restrictions whatsoever on those medical services, like cosmetic surgery, that are not even covered by Medicare." The brief says that there is no justification for different treatment, since "senior citizens are smart consumers [who] spend hundreds of billions of dollars per year of their own money as they see fit, free of government rules."
Oral argument in the case is scheduled for October 23, 1998.
Full text of Amicus Brief (Citizens Against Government Waste)
October 6, 1998
Federal and state plans for deregulation of electric power industry miss target
Best approach: eliminate state-granted monopolies, no bailout for "stranded costs"
"Policymakers have decided to restructure rather than eliminate the monopoly-franchise state-regulated system that gave us our currently inefficient electric power system," but that approach cannot work, according to a new study from the Cato Institute.
In "The Deregulation of the Electricity Industry: A Primer," Peter M. VanDoren notes that both federal and state legislators have focused primarily on promoting electricity generation, rather than transmission and distribution. "The usually correct belief that choice is good has led policymakers to believe that generators and consumers should meet in a stock-exchange-like setting and buy and sell power using the existing grid as the equivalent of United Parcel Service to ship the product between generator and consumer."
The problem with that approach, VanDoren says, is that "the proper mixture of generation and transmission is an economic, not an engineering, question." Deregulating generation without deregulating transmission leads to a situation in which efficient transmission prices cannot be set, and thus "appropriate choices between transmission and generation will not be made."
Moreover, "the focus on generation has precluded thoughtful consideration of the useful role played by vertical integration, in which generation and transmission services are jointly owned." VanDoren, assistant director of environmental studies at the Cato Institute, argues that vertical integration in the electricity industry "is an effective solution to the externalities that independent generators impose on a transmission system. Before we take apart vertically integrated utilities, we should consider simple deregulation, the elimination of state-granted franchise monopolies. We should let vertically integrated utilities compete without state-provided protection from competition."
VanDoren says that customers and taxpayers should not be saddled with paying the so-called stranded costs of nuclear power plants and expensive long-term contracts with producers and producers of power from renewable sources. Those costs have diminished the value of utility stocks, but the market price of those stocks already takes that into account, and "shareholders of utilities have already been compensated for the risk created by changes in regulation."
October 1, 1998
Push to abolish the exclusionary rule is "fundamentally misguided"
Cato study says rule is clearly justified under separation-of-powers doctrine
"Abolishing the exclusionary rule has been a high priority for conservatives for more than 30 years," but the effort is "fundamentally misguided on constitutional grounds," according to a new study from the Cato Institute. Author Timothy Lynch finds that the exclusionary rule "can and should be justified on separation-of-powers principles, which conservatives generally support."
The exclusionary rule generally prohibits the admission of evidence in a criminal trial if it was obtained in an unconstitutional police search. The Fourth Amendment prohibits "unreasonable searches and seizures" and provides that the issuance of search warrants must be based "upon probable cause, supported by Oath or affirmation." The judicial branch of government has responsibility for issuing such warrants, after making an independent determination that the executive branch (a police officer) has shown that "probable cause" exists.
Lynch, associate director of Cato's Center for Constitutional Studies, says that "the exclusionary rule is the only effective tool the judiciary has for preserving the integrity of its warrant-issuing process." He notes that "over the course of American history, many attempts have been made by the legislative and executive branches to wrest the search warrant process from the judicial branch." In 1971, for example, the Supreme Court struck down a New Hampshire practice by which police officers were also named justices of the peace and issued search warrants to themselves.
"The Fourth Amendment was designed to shield the citizenry from unbridled police power" and was drafted by the Framers of the American Constitution in the wake of their bitter experience with the British in the years leading up to the Revolutionary War. Parliament had swept aside common-law principles - which the Americans admired - in order to issue general warrants aimed at the colonists. The Framers "were determined to devise a better way to secure their hard-won liberties," and thus the Fourth Amendment "constitutionalized" the common-law principles of search and seizure "so that they would be beyond the reach of the legislature."
Lynch notes that a section of the crime bill offered in 1995 by Senate Judiciary Committee chairman Orrin Hatch (R-Utah) "sought to completely eliminate the exclusionary rule in federal criminal prosecutions." Although the language never made it into law, Lynch says it was clearly "a back-door assault on the judiciary's warrant-issuing prerogative." And he tells conservatives still pursuing such legislation: "Make no mistake, abolishing the exclusionary rule would give executive branch agents a license to bypass the warrant application process and to disregard the terms of search warrants. Since many opponents of the exclusionary rule take the Constitution's text, structure, and history seriously, they would be well advised to step back and rethink misguided initiatives in light of separation-of-powers principles," he concludes.
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