201005

May 20, 2010 3:30PM

First, They Came for the Sex Offenders

First, they came for the sex offenders. I am not a sex offender, but I opposed the civil commitment of sex offenders by the federal government because it is not an activity within the enumerated powers of Congress. The Supreme Court decided otherwise in Comstock, with the exception of Justices Thomas and Scalia.

Next, they will come for suspected terrorists. As Dahlia Lithwick (who I rarely agree with – here is her commentary on the Heller case) points out, the Supreme Court’s decision in Comstock may have some frightening implications for domestic preventive detention of terrorism suspects in lieu of criminal prosecution.

I saw this firsthand last summer when I attended a scholars meeting with the Obama administration’s Detention Policy Task Force (the same one that Andy McCarthy publicly refused to attend). I gave my views on where detention policy should go, as did a conference room full of experts on the laws of armed conflict and criminal justice (who shall remain anonymous, as this meeting was off the record). I was dismayed to hear a law professor from a prestigious university propose a system of preventive detention as the logical solution to countering terrorism. Worse yet, to make this law less provocative, the professor further proposed that preventive detention should be applied in other criminal contexts, so that the department of pre-crime would not be seen as unfairly targeting only enemy combatants overseas. This professor had taught many of the Department of Justice staffers in the room, and I looked around to see heads nodding at the suggestion.

I responded forcefully that such a system is antithetical to American traditions of due process. Battlefield detention is necessary to incapacitate insurgents and terrorists overseas, and is often employed in lieu of killing them. Broad powers of detention without trial in the criminal context do not make Guantanamo less controversial; they bring it on to our shores and in to our courtrooms. If we have enough information to show that someone is a threat by a preponderance of the evidence in order to detain them, we probably have enough to indict them for conspiracy. One of the reasons that few people turn to political violence in the United States is that the Bill of Rights bars the government from telling the citizenry how to worship, what to think, and what they can say. Generally speaking, you have to actually be a criminal to get charged as one.

Would the votes in Comstock translate into a Supreme Court ratification of such a system? Probably not, since Kennedy and Alito stressed in their concurrences that the circumstances in Comstock are unique. And Hamdi showed us that Scalia takes habeas corpus rights seriously when it comes to citizens. Unfortunately, only Stevens shared this view and he looks to be replaced by Elena Kagan, who argued that civil commitment in Comstock was an extension of Congress’ power to create and run a prison system (not an enumerated power). But this isn’t about counting the noses currently on the Court; it’s about creating a new normal where the people in prison are detainees, not defendants.

Unfortunately, there are more than a few people in favor of such a system. Jack Goldsmith and Neal Katyal (now the acting Solicitor General) propose a terrorism court. Sens.  McCain and Lieberman want to treat all terrorism suspects as enemy combatants. Sens.  Lieberman and Brown want to strip the citizenship of terrorism suspects and try them by military commission. Sens. Graham and McCain plan to close Guantanamo by creating a preventive detention court. Take a conservative plan to deal with enemy combatants captured on the other side of the world, strap on some liberal angst over tea parties and militia groups, and you’ve got a bipartisan plan for wholesale degradation of everyone’s liberties.

And when the proposal comes, the first thing they’ll say is that this is how we already deal with sex offenders.

May 20, 2010 3:10PM

Beware of Americans Proselytizing the Chinese Economic Model

In a Cato paper released earlier this month, I argued that the glacial pace of America’s economic recovery and its growing public debt juxtaposed against China’s almost uninterrupted double-digit annual economic growth and its role as Congress’s sugar daddy have bred insecurity among U.S. opinion leaders, many of whom now advocate a more strident approach to China, or emulation of its top-down approach.

I cite, among others, Thomas Friedman of the New York Times, who is enamored of autocracy’s capacity to facilitate China’s singularity of purpose to dominate the industries of the future:

One-party autocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century. It is not an accident that China is committed to overtaking us in electric cars, solar power, energy efficiency, batteries, nuclear power, and wind power. China’s leaders understand that in a world of exploding populations and rising emerging-market middle classes, demand for clean power and energy efficiency is going to soar. Beijing wants to make sure that it owns that industry and is ordering the policies to do that, including boosting gasoline prices, from the top down.

Friedman’s theme—but less googoo eyed and more all-hands-on-deck!—is echoed in an op-ed by China-expert James McGregor, which ran in yesterday’s Washington Post.  McGregor conveys what he describes as an emerging sentiment within the U.S. business community in China.  That is: the Chinese government is hell bent on creating national economic champions; is using its increasing leverage (as global financier and fastest-growing market) to impose its own interpretations of the global rules of economic engagement in support of its comprehensive industrial policy, and, ultimately; the United States must wake up and rise to the challenge by crafting some top-down industrial policy of its own.

I don’t dispute some of McGregor’s premises.  China’s long process of market liberalization has slowed down, halted, and even reversed in some areas.  Policies are proliferating that favor local companies (particularly state-owned enterprises), hamper the operations of foreign-owned firms, and impede market access for imports.  Indeed, many of these policies are likely the product of industrial planning. 

But McGregor’s conclusion is extreme:

The time has come for a White House-led, public-private, comprehensive examination of American competitiveness against a clear-eyed view of China’s very smart and comprehensive industrial development policies and plans…What technology do we protect? What do we share? What are our commercial strategic imperatives as a nation? How do we retool the U.S. government’s inadequate and outdated trade bureaucracy to provide thoughtful strategic focus and interagency coordination? How do we overcome the fundamental disconnect between our system of scattered bureaucratic responsibilities and almost no national economic planning vs. China’s top-down, disciplined and aggressive national economic development planning machine?

Central planning may be more en vogue in Washington than usual nowadays, but to even come close to reaching his conclusion requires disregarding many facts, which is how McGregor gets there sans tongue in cheek.

First, in an effort to preempt any suggestion that China’s protectionism is nothing exceptional and can be remedied through the World Trade Organization and other channels, McGregor offers this blanket statement: “Chinese policymakers are masters of creative initiatives that slide through the loopholes of WTO and other international trade rules.”  I realize that op-ed writing forces one to economize on words, but that statement, which serves as McGregor’s springboard to socialism, cannot suffice for an analysis of the facts.  One of those facts is that the United States has been successful in compelling changes in China’s protectionist practices in all of the formal WTO disputes it has lodged that have been resolved thus far (6 of 8 formal cases have been resolved).  If China violates the agreed rules of trade, and its actions impair benefits or impose costs on U.S. interests that are too large to ignore, pursuing a WTO case is a legitimate and proven channel of resolution. Chinese protectionism can be addressed without the radical changes McGregor counsels. 

But I think McGregor—sharing the tactics of other in the media and politics—exploits public angst over a rising China to promote his idea as the obvious and only solution to what he sells as a rapidly-metastasizing problem.  McGregor argues that China is aiming to create national champions through subsidies and other preferential policies, while charging foreign companies admission to its market in the form of technology transfer, joint-venturing requirements, and local content rules.  McGregor claims, that this appropriation of foreign technology will be used to “create Chinese ‘indigenous innovations’ that will come back at us globally.”  Ultimately, McGregor fears that “American technology companies could be coerced to plant the seeds of their destruction in the fertile China market.”

It is telling that McGregor doesn’t consider U.S. government expropriation of those companies’ technology assets as planting the seeds of their own destruction.  Indeed, it is nothing short of expropriation when technology that is owned by individual companies in the private sector, making unique decisions to improve their own bottom-lines on behalf of their own shareholders is suddenly subject to the questions McGregor wants answered: What technology do we protect? What do we share? What are our commercial strategic imperatives as a nation?  Those questions, let alone the answers, imply that the U.S. government should have at least de facto ownership and control over these privately-held technology assets.

What is wrong with allowing each of these companies to decide for themselves whether they want to license or transfer some of their technology to Chinese companies, as the price of doing business in China?  Some will, some won’t, but the presupposition that those who do are selling the golden goose is not based on fact.  Let companies decide for themselves how to use their resources, and don’t treat industry as a monolith, as in “What are our commercial strategic imperatives as a nation?” 

Had we tried to answer and implement the answer to that question in the face the Japanese “threat” two decade ago, we’d be bereft of some of the most ingenious technological breakthroughs and the hundreds of industries and thousands of products that “our system of almost no national economic planning” has yielded.

When we peel away the chicken-little rhetoric, when we dispense with neo-Rahm Emanualism (“Never manufacture a good crisis and then let it go to waste”), when cooler heads and analytical minds prevail, the economic question boils down to this: What has been more successful at creating growth, central planning or decentralized dynamism?  For both China and the United States, it has been the latter. 

My bet is that China’s re-embrace of greater central planning will be brief, as it wastes resources, yields few -if any- national champions, and limits innovation.  For similar reasons, U.S. opinion leaders will eschew central planning, as well.

May 20, 2010 2:46PM

Law Professor Confesses ‘I’m a Criminal’

Law Professor Michelle Alexander:

Lately, I've been telling people that I'm a criminal. This shocks most people, since I don't "look like" one. I'm a fairly clean-cut, light-skinned black woman with fancy degrees from Vanderbilt University and Stanford Law School. I'm a law professor and I once clerked for a U.S. Supreme Court Justice -- not the sort of thing you'd expect a criminal to do.

What'd you get convicted of? people ask. Nothing, I say. Well, then why do you say you're a criminal? Because I am a criminal, I say, just like you.

Read the whole thing. (H/T Sentencing Law and Policy).  Judge Alex Kozinski and Misha Tseytlin make a similar point in an essay in my book entitled, "You're (Probably) a Federal Criminal."

More here and here.

May 20, 2010 11:33AM

George Will on Rand Paul

George Will, whose speech at the Milton Friedman Prize for Advancing Liberty Dinner can be heard here, writes today about Rand Paul's victory in Kentucky:

Democrats and, not amazingly, many commentators say Republicans are the ones with the worries because they are nominating strange and extreme candidates. Their Exhibit A is Rand Paul, winner of Kentucky's Republican primary for the U.S. Senate.

Well. It may seem strange for a Republican to have opposed, as Paul did, the invasion of Iraq. But in the eighth year of that war, many Kentuckians may think he was strangely prescient. To some it may seem extreme to say, as Paul does, that although the invasion of Afghanistan was proper, our current mission there is "murky." But many Kentuckians may think this is an extreme understatement.

These critical commentators range from David Frum and Commentary to the Huffington Post -- the entire spectrum of the welfare-warfare state. But as Will says, Paul's opposition to the Iraq war is shared by 60 percent of Americans. And plenty of mud was thrown at Paul by his Republican opponents, and Republican voters had this reply:

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(H/T: DailyPaul.com)

Will also notes the surprising support for Rep. Ron Paul's book End the Fed from Arlo Guthrie, whose anti-bailout song "I'm Changing My Name to Fannie Mae, was celebrated here.

May 20, 2010 10:55AM

Federal Aid: 45 Years of Failure

Yesterday, the Washington Post reviewed the life of Phyllis McClure, who was an advocate for federal education spending in low-income neighborhoods.

Once an aspiring journalist, Ms. McClure joined the NAACP Legal Defense and Education Fund in 1969. She immediately used her penchant for muckraking to illuminate the widespread misuse of federal funds meant to boost educational opportunities for the country's neediest students.

The money was part of the new Title I program, created under the Elementary and Secondary Education Act of 1965. The slim volume that Ms. McClure wrote in 1969 with Ruby Martin -- 'Title I of ESEA: Is It Helping Poor Children?' -- showed how millions of dollars across the country were being used by school districts to make purchases -- such as a Baptist church building in Detroit and 18 portable swimming pools in Memphis -- that had little to do with helping impoverished students.

The authors charged that money meant for poor children was being used illegally by school districts as a welcome infusion of extra cash to meet overhead expenses, raise teacher pay and other such general aid. In addition, they wrote, districts were using Title I funds to continue racial segregation by offering black children free food, medical care, shoes and clothes as long as they remained in predominantly black schools.

That all sounds rather familiar--state and local governments misusing federal aid dollars. As I've written about at length, there was an explosion in federal aid for the states in the 1960s, with hundreds of new programs established. But huge problems developed almost immediately--excessive bureaucracy and paperwork, one-size-fits-all federal regulations stifling local innovation, and the inability of federal aid to actually solve any local problems. 

I live in Fairfax County, Virginia. The county receives about $15 million a year in federal "Title I" aid for disadvantaged schools--the program Ms. McClure was worried about. But Fairfax is the highest-income county in the nation! Why are hard-working middle-income taxpayers in, say, Ohio, paying for local schools in ultra-wealthy Fairfax?

Aside from the misallocation problem, academic evidence suggests that state and local governments mainly offset federal spending for poor schools by reducing their own spending on poor schools. Poor schools end up being no further ahead.

The federal aid system is crazy. Even if federal aid is a good idea in theory--and it isn't--the central planners haven't been able to make it work as they envisioned in more than four decades. The federal aid system has simply been a giant make-work project for the millions of well-paid federal/state/local administrators who handle all the paperwork and regulations.  

Even if federal aid was constitutional or it made any economic sense, it will never work efficiently. Aid will always be a more wasteful way of funding local activities than if local governments funded activities by themselves. Aid will always be politically misallocated by Congress. Aid will always involve top-down regulations from Washington that reduce local flexibility and innnovation. And aid will always undermine federalism and the American system of limited government.

It's time to blow up the whole system.  Title 1 and all 800 other state aid programs should be repealed.

May 20, 2010 9:52AM

Is the War in Afghanistan Winnable?

The Economist is featuring an online debate this week around the proposition "This house believes that the war in Afghanistan is winnable." John Nagl of the Center for a New American Security agrees. Peter Galbraith takes the opposing view.

The organizers of the event invited me to contribute my two cents. Excerpts of my essay ("Featured Guest," on the right side of the page) are posted below:

The appropriate question is not whether the war is winnable. If we define victory narrowly, if we are willing to apply the resources necessary to have a reasonable chance of success, and if we have capable and credible partners, then of course the war is winnable. Any war is winnable under these conditions.

None of these conditions exist in Afghanistan, however. Our mission is too broadly construed. Our resources are constrained. The patience of the American people has worn thin. And our Afghan partners are unreliable and unpopular with their own people.

Given this, the better question is whether the resources that we have already ploughed into Afghanistan, and those that would be required in the medium to long term, could be better spent elsewhere. They most certainly could be.

[...]

America and its allies must narrow their focus in Afghanistan. Rather than asking if the war is winnable, we should ask instead if the war is worth winning. And we should look for alternative approaches that do not require us to transform what is a deeply divided, poverty stricken, tribal-based society into a self-sufficient, cohesive and stable electoral democracy.

If we start from the proposition that victory is all that matters, we are setting ourselves up for ruin. We can expect an endless series of calls to plough still more resources—more troops, more civilian experts and more money, much more money—into Afghanistan. Such demands demonstrate a profound misunderstanding of the public's tolerance for an open-ended mission with ill-defined goals.

More importantly, a disdain for a focused strategy that balances ends, ways and means betrays an inability to think strategically about the range of challenges facing America today. After having already spent more than eight and a half years in Afghanistan, pursuing a win-at-all-costs strategy only weakens our ability to deal with other security challenges elsewhere in the world.

The other guest contributor is Bruce Riedel from Brookings. He had a hand in shaping the Obama administration's strategy, and therefore is a reliable "yes" vote for continuing the war.

Sentiment so far has been running nearly three to one against the proposition. Most of the comments reject the premise, and a few doubt U.S./NATO's intentions. Nagl has at least one more bite at the apple to turn things around, but the prospects don't look good. The key weaknesses in the pro-war position are the lack of credible local partners in Afghanistan, and the uncooperative (and, often, counterproductive) role played by Pakistan. Nagl focuses chiefly on the former, and Riedel on the latter; they ultimately fail, however, to offer credible solutions to either problem.

We all hope that things turn around in Afghanistan, and soon. But, as Galbraith points out, hope is not a strategy. I'm among those actively searching for an alternative definition of "winning" that does not envision tens of thousands of U.S. troops being in Afghanistan for another eight (or 80) years.

May 20, 2010 8:44AM

Will ‘Hauser’s Law’ Protect Us from Revenue‐​Hungry Politicians?

David Ranson had a good column earlier this week in the Wall Street Journal explaining that federal tax revenues historically have hovered around 19 percent of gross domestic product, regardless whether tax rates are high or low. One reason for this relationship, as he explains, is that the Laffer Curve is a real-world constraint on class warfare tax policy. When politicians boost tax rates, that motivates taxpayers to earn and/or report less income to the IRS:

The feds assume a relationship between the economy and tax revenue that is divorced from reality. Six decades of history have established one far-reaching fact that needs to be built into fiscal calculations: Increases in federal tax rates, particularly if targeted at the higher brackets, produce no additional revenue. For politicians this is truly an inconvenient truth. ...tax revenue has grown over the past eight decades along with the size of the economy. It illustrates the empirical relationship first introduced on this page 20 years ago by the Hoover Institution's W. Kurt Hauser—a close proportionality between revenue and GDP since World War II, despite big changes in marginal tax rates in both directions. "Hauser's Law," as I call this formula, reveals a kind of capacity ceiling for federal tax receipts at about 19% of GDP. ...he tax base is not something that the government can kick around at will. It represents a living economic system that makes its own collective choices. In a tax code of 70,000 pages there are innumerable ways for high-income earners to seek out and use ambiguities and loopholes. The more they are incentivized to make an effort to game the system, the less the federal government will get to collect.

Several people have asked my opinion about the piece. I like the column, of course, but I'm not nearly so optimistic that 19 percent of GDP represents some sort of limit on the federal government's taxing power. There are many nations in Europe with tax burdens closer to 50 percent, for instance, so governments obviously have figured how to extract much higher shares of national output. Part of the difference is because America has a federal system, and state and local governments collect taxes of about 10 percent of GDP. That still leaves a significant gap in total tax collections, though, so the real question is why American politicians are not as proficient as their European cousins at confiscating money from the private sector?

One reason is that European countries have value-added taxes, which are a disturbingly efficient way of generating more revenue. So does this mean that "Hauser's Law" will protect us if politicians are too scared to impose a nationwide sales tax? That's certainly a necessary condition for restraining government, but probably not a sufficient condition. If you look at the table, which is excerpted from the OECD's annual Revenue Statistics publication, you can see that nations such as New Zealand and Denmark have figured out how to extract huge amounts of money using the personal and corporate income tax.

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In some cases, tax rates are higher in other nations, but the main factor seems to be that the top tax rates in other nations are imposed at much lower levels of income. Americans don't get hit with the maximum tax rate until our incomes are nine times the national average. In other nations, by contrast, the top tax rates take effect much faster, in some cases when taxpayers have just average incomes. In other words, European nations collect a lot more money because they impose much higher tax rates on ordinary people. Here's a chart I put together a few years ago for a paper I wrote for Heritage (you can find updated numbers in Table 1.7 of this OECD website, but the chart will still look the same).

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Europeans also sometimes impose high tax rates on rich people, but this is not the reason that tax receipts consume nearly 50 percent of GDP in some nations. Rich people in Europe, like their counterparts in America, have much greater ability to control the amount of taxable income that is earned and/or reported. These "Laffer Curve" responses limit the degree to which politicians can finance big government on the backs of a small minority.

But class-warfare tax rates on the rich do serve a very important political goal. Politicians understand that ordinary people will be less likely to resist oppressive tax rates if they think that those with larger incomes are being treated even worse. Simply stated, higher tax rates on the rich are a necessary precondition for higher tax rates on average taxpayers.

For "Hauser's Law" to be effective, this means proponents of limited government need to fight two battles. First, they need to stop a VAT. Second, they need to block higher tax rates on the so-called rich in order to prevent higher tax rates on the middle class.