September 19, 2019 4:05PM

Justice Department Responds in Steel Tariffs Case

The Justice Department today filed its brief in American Institute for International Steel v. United States before the U.S. Court of Appeals for the Federal Circuit. At issue are President Trump’s steel tariffs. Last month, the Cato Institute filed a brief in support of the appellants, who are businesses that rely on imported steel and have been harmed by the tariffs. 

The government’s response brief, alas, is excellent.

Faced with arguments that the president is unbound, the government points to putative procedural rigor behind the tariffs. In response to arguments that the Constitution empowers Congress—not the president—to regulate foreign commerce, the government stresses the president’s executive authority over foreign affairs. Quite obviously, the Justice Department's brief reflects the work of skilled lawyers.  

Notably, Cato’s brief seems to have registered with the government. On the one hand, the government dismisses Cato's input altogether. In the brief’s first footnote (page 15), the Justice Department alleges that we tried to “expand the issues of the appeal beyond those presented by the appellant in its opening brief,” and, therefore, that the court should not pay attention to our arguments. Notwithstanding this footnote, the government references the Cato Institute by name in the body of the brief and, furthermore, spends an entire subsection (III.B) addressing Cato’s arguments about judicial oversight.

Here, I'd be remiss if I failed to rebut the government's incorrect charge that Cato improperly attempted to expand the scope of the appeal before the Federal Circuit. In a nutshell, Cato's brief demonstrates that the trial court mistakenly denied itself the authority to review the president's steel tariffs. Because all federal courts always have jurisdiction to determine the bounds of their own jurisdiction, Cato's contribution falls squarely within the proper purpose of a friend-of-the-court brief. In its amicus brief, moreover, Cato argues that if judicial review is unavailable, then there can be no "intelligible principle" to limit the president's actions, which is precisely what the appellants claim. Of course, the best evidence for the appropriateness of Cato's brief is the fact that the government spent so many words engaging with Cato’s arguments. It doesn't make much sense for the government to say that we should be ignored, but then to respond to us. As always, actions speak louder than words. 

September 19, 2019 1:31PM

Bringing Drug Use Out of the Shadows Reduces Harm to the Community as Well as to Users

Many critics of marijuana legalization raise concerns that marijuana dispensaries might serve as loci for increased local criminal activity. Now there is empirical evidence that just the opposite occurs.

A new study reported in the September issue of Regional Science and Urban Economics examined local crime rate data from 2013 through 2016 in Denver, Colorado, where legal cannabis sales to adults began in 2014. The researchers reported:

The results imply that an additional dispensary in a neighborhood leads to a reduction of 17 crimes per month per 10,000 residents, which corresponds to roughly a 19 percent decline relative to the average crime rate over the sample period. Reductions in crime are highly localized, with no evidence of spillover benefits to adjacent neighborhoods.

The study found that the majority of the crimes reduced were of a nonviolent nature.There were no changes in the number of cannabis-related crimes near dispensaries, but there was a decrease in the number of crimes related to methamphetamine, cocaine, and heroin. The authors speculated that this may be in part due to the increased presence of law enforcement near dispensaries serving as a deterrent to criminal activity.

The authors stated they did “not find increases in marijuana crimes such as cultivation, possession, or sales nearby,” and no increase in crimes associated with marijuana intoxication, “since there is essentially no change in the number of crimes with marijuana as a ‘contributing factor’ near locations that gain dispensaries.”

A 2017 study in Preventive Medicine with a more limited time range looked at crime rates in South Los Angeles, examining local crime rates in neighborhoods surrounding medical marijuana dispensaries (MMDs), tobacco shops, and alcohol retailers, from January through December 2014. The researchers found no increase in crime rates related to the presence of medical marijuana dispensaries, but an increase in crime surrounding tobacco and alcohol outlets:

Results indicated that mean property and violent crime rates within 100-foot buffers of tobacco shops and alcohol outlets—but not MMDs—substantially exceeded community-wide mean crime rates and rates around grocery/convenience stores (i.e., comparison properties licensed to sell both alcohol and tobacco).

While these studies should help alleviate concerns raised by marijuana prohibitionists about the effect that legalization may have on local crime, similar arguments are used by those who oppose the creation of Safe Injection Facilities for IV drug users. As I have written here, SIFs have been working to reduce overdoses and the spread of disease since the 1980s in more than 120 cities in Europe, Canada and Australia, and there is an “underground” SIF functioning in the US illegally since 2014. Federal law prohibits Safe Injection Facilities in this country, and the Department of Justice is stifling efforts to establish them in Philadelphia, Seattle, San Francisco, Boston, and New York City.

Among concerns raised by opponents is that they will be a magnet for IV drug users, creating a visual disturbance to neighborhood residents. The counter-argument is that SIFs will actually bring the drug users in off the streets, letting them use their drugs out of the view of young impressionable children and other nearby residents, and will reduce the presence of used needles on the streets and sidewalks.

Another concern is that SIFs may be loci for criminal activity. But, as in the case of marijuana dispensaries, those concerns, while understandable, are not borne out by the evidence. A 2017 systematic review by Canadian researchers reported in Current HIV/AIDS Reports found Supervised Injection Facilities were “associated with improvements in public order without increasing drug-related crime.”

The takeaway from all of this is that bringing drug use out of the darkness of the underground reduces harms to those who don’t engage in drug use as well as those who do.

September 19, 2019 11:12AM

It Is Time to Relinquish America’s Global Interventionist Foreign Policy

We have an article published in the latest edition of Survival critiquing America’s foreign policy of global interventionism and making the case for a grand strategy of restraint. Here are some excerpts:

The United States should reject the myths of primacy and the hyperactive foreign policy it has promoted. The United States is not the indispensable nation. Nor is it insecure. Nor is it capable of micromanaging the world’s affairs efficiently and effectively from Washington. In this light, the United States should pursue a more modest foreign-policy agenda that facilitates global trade and focuses more narrowly on the physical security of the homeland, while worrying less about trying to police the world.

…[A]lthough the American foreign-policy establishment sees US power as the linchpin of the global order and the United States as an indispensable nation, the truth is that many of the trends contributing to stability and economic growth are emergent phenomena, occasionally helped and occasionally hurt by US foreign policy, but driven by factors largely exogenous to US designs. Fortunately, many countries benefit from the relative peace and prosperity that prevails today and are therefore motivated to help preserve it. At this pivotal moment in history, America’s leaders should seek to lock in those attitudes and build a more resilient global order that is not overly dependent on a single dominant state.

…One thing Trump’s presidency proves is that even a commander-in-chief averse to the imperial responsibilities of primacy will not readily shirk them. Power does not check itself, either in the international domain or the domestic…Donald Trump’s ascendance to the highest office in the nation nearly three years ago was perhaps the most compelling illustration of the hazards of vesting the presidency with so much unbridled power. We share many of the concerns voiced by the foreign-policy establishment about what Trump has done, and might yet do, to US foreign policy, and how detrimental it could be to the stability of the international system. But any world order that depends for its survival on the whims of a single person in a single branch of government in a single country is simply untenable. Trump seems to have come along at the tail end of America’s ‘unipolar moment’, and the relative decline in US power is yet another reason to revise American grand strategy to accommodate changing conditions in an increasingly multipolar world.

We also lay out some guidelines for how to implement a more modest set of foreign policy objectives and for how to reconceptualize what qualifies as vital national interests under restraint. Do read the whole thing.

The piece is adapted from the conclusion of our forthcoming book, Fuel to the Fire: How Trump Made America’s Broken Foreign Policy Even Worse (And How We Can Recover), to be published next month.

September 18, 2019 4:14PM

Middle Class Shrinking… As Households Become Richer

The U.S. economy continues to do well, but many fear that economic expansion only benefits a few Americans, while leaving most households behind. As political analyst Juan Williams opined in The Hill earlier this year, “The rich got their Trump tax cut. GDP looks good. And the stock market is doing great for people with money to invest. But it is only the rich who get the big rewards in Trump’s economy. What about the middle class?”

The middle class, it turns out, is shrinking. But not because they are falling into poverty, as some might have you believe. Rather, it is shrinking because more people are “moving on up,” ascending into a higher income bracket — and living the American dream.

Since 2016, the United States has had more wealthy households than middle-class households and the share of low-income households has reached a historic low.

This is hardly a new trend. As I wrote in 2016, the middle class is shrinking due to growth in rich households. When I last wrote on that topic, though, there were still more middle-class households than rich households.

According to the most recent data from the U.S. Census Bureau, in 2018, over 30 percent of U.S. households earned over $100,000 (i.e., the upper class). Fewer than 30 percent of households earned between $50,000 and $100,000 (i.e., the middle class). The share of U.S. households making at least $100,000 has more than tripled since 1967, when just 9 percent of all U.S. households earned that much (all figures are adjusted for inflation).

In 2018, the share of households earning less than $50,000 (i.e., the lower class) dropped below 40 percent for the first time since the U.S. Census data on this metric started to be collected in 1967. Back then, 54 percent of households earned less than $50,000.

So the next time you hear someone allege that the economy is leaving an increasing share of American households behind or see a pundit bemoan the “shrinking middle class,” take a closer look at the data and keep in mind that a “shrinking middle class” may actually be a sign of growing prosperity.

September 18, 2019 3:02PM

Blaine Amendments Harm Educational Opportunity and Violate Constitutional Rights

In the late 19th century, dozens of states enacted amendments banning government aid to churches, religious schools, and other “sectarian” organizations. These “Blaine Amendments,” named after Senator James G. Blaine of Maine, who failed to secure the passage of a similar amendment to the U.S. Constitution, remain in force in many parts of the country.

At the time these amendments were passed, it was widely understood that public schools followed a curriculum sympathetic to Protestantism to the exclusion of other religious traditions. “Sectarian” was a euphemism for “Catholic” and the Blaine amendments were widely recognized as an effort to bar funding to Catholic schools. While their anti-Catholic motivations are now a matter of history, Blaine amendments, such as Article X, Section 6 of the Montana Constitution, are still in effect and often serve as a pretext for discrimination against religious groups.

Kendra Espinoza is a single mother who works two jobs to afford her daughters’ private-school tuition. When her youngest daughter struggled in public school and her older daughter was bullied, Kendra decided to enroll them both in Stillwater Christian School in Kalispell, Montana, where they have since flourished. At Stillwater, Kendra feels that her faith is supported by the school’s Christian character. Kendra benefited from a Montana program that provides tax-credit incentives for donations to scholarship funds that have lessened the burden of her daughters’ tuition. When the Montana Department of Revenue issued a rule excluding Stillwater Christian from the tax-credit program, her children’s educational future was put in jeopardy.

While the Revenue Department defended its distinction between secular and parochial schools, the Montana Supreme Court ruled more broadly, holding that the tax-credit program as a whole violated the state constitution by authorizing aid to religion.

But under the First Amendment, states may not impair the free exercise of religion or pass any laws regarding the establishment of religion. This case thus raises the question: can a state strike down a neutral, generally available educational program simply because some of the program’s beneficiaries have directed their (not state) dollars to religious organizations? If the Department of Revenue prevails, states will have greater power to reduce school choice and single out religious organizations for unfair treatment.

Fortunately, the U.S. Supreme Court agreed to review the case, after Cato supported Ms. Espinoza’s petition for review. Cato has now filed a Supreme Court brief on the merits. We argue that the Free Exercise Clause does not allow Montana to exclude religious organizations from public benefits solely because of their religious association. Not only does the Establishment Clause allow these kinds of incentives, but there is no room in Supreme Court precedent to exclude religious schools from programs structured around private choice (as opposed to, say, direct taxpayer funding of devotional education). The Montana court’s decision does not change the discriminatory nature of the state’s Blaine Amendment.

The Supreme Court will hear argument in Espinoza v. Montana Department of Revenue in early 2020.

September 18, 2019 2:31PM

Capital Gains Taxes: Already Too High

Democrats are proposing to raise capital gains taxes. Ranking member on the Senate Finance Committee, Ron Wyden, wants to tax capital gains on an annual basis, not the current realization basis. He also wants to hike the top capital gains tax rate for high earners to match the top rate on ordinary income. CNBC reports “Almost every major Democratic presidential candidate supports taxing capital gains as ordinary income . . .Sen. Elizabeth Warren on Thursday outlined an even more aggressive planthat would impose a new 14.8 percent tax on investment income to help finance Social Security.”

These are radical and misguided ideas. This 2012 study discusses why capital gains taxes should be low or even zero. The study found that the United States already has high tax rates compared to other countries. The U.S. federal-state rate on individual long-term gains of 28 percent compared at the time to an average across 34 OECD countries of just 16 percent.

A 2018 study by OECD economists provides newer data for 33 countries. One finding is that “all countries tax capital gains on realization,” that is, when assets such corporate shares are sold. Not one of the 33 countries taxes gains on an annual or accrual basis, as Wyden proposes.

The OECD study calculates the combined federal-state capital gains tax rates on investments in corporations in 2016, which are shown in the chart below. The calculation includes the corporate-level income tax and the tax on individual long-term gains.

The study found that the United States had the highest capital gains tax rate of all 33 countries at 56.2 percent. That rate is the combo of a 38.9 percent federal-state corporate tax and an individual federal-state capital gains tax of 28.3 percent (which is applied to the after-tax corporate income).

Numerous countries in the OECD study do not tax individual long-term capital gains at all, including Belgium, Chile, Costa Rica, Czech Republic, Hungary, Luxembourg, New Zealand, Singapore, Slovenia, Switzerland, Turkey. The individual capital gains tax rate on long-term investments in those countries is zero.

Since the study, the U.S. has dropped its federal corporate tax rate from 35 percent to 21 percent, so I’ve added a bar in the chart to show the U.S. rate in 2019. The new lower U.S. rate of 46.2 percent is still the 8th highest among the 33 countries.

The Democrats would repeal most or all of the GOP corporate tax cut and push the individual capital gains tax rate higher. What they are proposing is extreme. Other advanced economies have low capital gains taxes for sound reasons, as discussed here. Raising the federal corporate and individual capital gains tax rates would be a lose-lose-lose proposition of harming businesses and start-ups, undermining worker opportunities, and likely reducing government revenues.

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September 18, 2019 11:09AM

New York Bill Would Enable Visitation Demands On Adoptive Families

Thank you to Naomi Riley for including me in her Wall Street Journal piece earlier this month on a New York scheme to empower birthparents whose parental rights have been terminated to petition nonetheless for court-ordered visitation. The quotes from me:

In many cases adoptive parents do arrange with birthparents for some kind of contact after an adoption is completed. “Some adoptive parents are glad to agree to those conditions, and that’s fine for them. Where they have not, it is a very bad idea to adopt a presumption of enforcing such a long-term obligation on unwilling adopters,” notes Walter Olson, an adoptive parent and a senior fellow at the Cato Institute.

The legislation presents serious logistical concerns as well. What if an adoptive family wants to move across the country? Would the courts be able to prevent them? “Adoptive families are real families and deserve the full rights of other such families unless they have agreed to some other arrangement,” says Mr. Olson.

And more:

In a letter to Gov. Cuomo opposing the bill, the group New York Attorneys for Adoption and Family Formation explained that the law may also violate the due-process rights of adoptive parents. In 2000, they point out, the U.S. Supreme Court struck down a similar Washington state law.

Both houses of the New York legislature have now passed the bill, which is supported by legal services groups like the Legal Aid Society of New York City but opposed by the Adoptive and Foster Family Coalition of New York (AFFCNY), the Council of Family and Child Caring Agencies (COFCCA), “which represents nonprofit foster care agencies statewide, and the New York Public Welfare Association (NYPWA), which represents county government child welfare directors,” as Michael Fitzgerald notes at the Chronicle of Social Change. AFFCNY has more on its opposition here, and notes: “Adoptive families would have no choice but to hire and pay for legal representation for themselves.”

[cross-posted from Overlawyered]