Archives: 11/2010

Supreme Court Accepts Another Chance to Reverse Ninth Circuit, Uphold First Amendment

Today, the Supreme Court agreed to review McComish v. Bennett (consolidated with Arizona Free Enterprise v. Bennett), which challenges Arizona’s public financing of elections as an unconstitutional abridgment of speech. Because the case concerns a crucial new battleground in the fight between free speech and “fair” (read: government-controlled) elections, Cato filed an amicus brief supporting the cert petitions filed by our friends at Goldwater Institute and the Institute for Justice.

McComish centers on Arizona’s “Clean Elections” Act, which provides matching funds to publicly funded candidates if their privately funded opponent spends above certain limits. In other words, by ensuring that his speech will not go “unmatched” by his opponent, the privately funded candidate is penalized for working too hard and speaking too much. The law violates established Supreme Court precedents that have consistently held that forcing a speaker to “disseminate hostile views” as a consequence of speaking abridges the freedom of speech. Although the Ninth Circuit upheld the Arizona law, the Second Circuit recently struck down a similar Connecticut law, thus creating a circuit split that undoubtedly encouraged the Court to take the case.

In 2008 the Court decided Davis v. FEC (in which Cato also filed a brief), which overturned the “millionaires amendment” to the McCain-Feingold campaign finance “reform.” That provision gave similar assurances to candidates faced with the possibility of being outspent by their opponent. There, however, the concern was with rich, self-funded candidates: The act provided increased fundraising limits – triple the amount normally allowed – for candidates whose opponents spent too much (by the government’s judgment) of their own money on their campaign. The Davis Court held that this provision “impose[d] an unprecedented penalty on any candidate who robustly exercises [his] First Amendment right.”

The Arizona law is even worse. It doesn’t even delve into the messiness of fundraising – tripling the contribution limit does not, after all, mean that those funds will be raised – but rather guarantees that a candidate’s “robus[t] exercise[] of [his] First Amendment right” will be met with contrary speech from his opponent. And the law sweeps still broader: it applies the same matching funds provision to groups that spend independently from any campaign but are nevertheless deemed to be supporting a given candidate. Such “uncoordinated speech” by third parties – speech that, many times, the candidate does not want even if it is thought to be on his behalf – also triggers matching funds for the candidate’s opponent.

The end result, as extensive evidence shows, is that numerous speakers – from the candidate to the independent groups – will be reluctant to spend money to speak (which is, of course, required for nearly all effective campaign speech) because their opponents are guaranteed the funds needed to reply. In elections, where the freedom of speech “has its fullest and most urgent application,” such laws simply cannot fly.

Finally, it is also worth remembering what is at stake when we allow politicians to pass laws that determine the very rules by which they hold their jobs. Justice Scalia put this most poignantly in Austin v. Michigan Chamber of Commerce: “the Court today endorses the principle that too much speech is an evil that the democratic majority can proscribe. I dissent because that principle is contrary to our case law and incompatible with the absolutely central truth of the First Amendment: that government cannot be trusted to assure, through censorship, the ‘fairness’ of political debate.” As we now well know, the Court overruled Austin this past January in Citizens United, vindicating Scalia’s pro-free speech position.

It will be exciting to see how McComish unfolds. Expect another Cato amicus brief early in the new year, oral arguments in the spring, and a decision by the end of June.

Random Thoughts on WikiLeaks

I’ve fielded some questions today about the WikiLeaks story, and I’m feeling pretty conflicted.

I’m aware of the fact that the leak of classified information could pose a short-term risk to national security, but it is my sense that most of the claims of dire harm are overwrought. There is considerable evidence that much – perhaps most – classified material is improperly classified; governments oftentimes invoke claims of secrecy to shield themselves from embarrassment, not to protect national security. In that sense, some diplomats and government officials might be red in the face today, but I doubt that most Americans are feeling less secure than before the latest revelations from WikiLeaks.

If I thought that the attention on minute and often mundane details that shouldn’t be classified precipitated a closer look at overclassification, WikiLeaks might have a beneficial side effect. As it is, however, it is likely to increase the government’s obsession with secrecy, with policymakers scrambling to close down supposedly dangerous loopholes, some of which were opened up after 9/11 to facilitate information-sharing between agencies. This process of clamping down on interagency collaboration has already begun.

As to the particulars, with respect to diplomatic correspondence, there is a tension between individuals sharing their genuine opinions about another country, or that country’s leaders, and concern that their candid assessments in private conversations be revealed. People do keep secrets from one another, including their friends, spouses and family members. It is basic human nature. And it is basic human nature to clam up the next time you’re talking to a friend who recently blabbed your secrets to a third party. As such, the WikiLeaks episode might have a chilling effect on candor, but I believe that this effect will dissipate over time.

Concern that this will undermine U.S. diplomatic standing, or otherwise lead people to question the U.S. government’s capacity for conducting foreign policy, is misplaced. We don’t (or shouldn’t) question the U.S. Army’s ability to conduct military operations because of the occasional friendly fire incident. Given the volume of documents released in now several Wikileaks’ rounds, some might ask whether this is the equivalent of many thousands of unfortunate incidents, and therefore a sign of a systemic failure. I doubt it. The vast majority of individuals in possession of classified material treat this information with great care. More to the point, I am confident that this will be a minor episode in U.S. diplomatic history when compared to huge blunders such as the war in Iraq and the deepening – and open-ended – war in Afghanistan.

The WikiLeaks case also touches on the law, and of an individual’s responsibility to obey such laws, two of my least favorite subjects. Not all laws are sacrosanct, and I’ve just noted that much classified material shouldn’t be. As such, some might claim that releasing such information is a legitimate form of civil disobedience, because the laws governing release of documents are unjust.

But I don’t think that overclassification and other resorts to secrecy to shield the government from public scrutiny are on par with far more egregious violations of the basic rights and liberties of all citizens. If I could be convinced otherwise, I might change my mind.

For now, because I don’t trust individual leakers to be able to discern which material is legitimately classified, and which is not, I believe that individuals who possess classified material and knowingly release it to people not cleared for such information should be prosecuted to the full extent of the law.

Finally, as a practical matter, I am particularly leery of individuals passing judgment on when to follow the rules, and when to ignore them, in cases involving national security. We rightly condemn military officers who defy civilian authority over the conduct of war. We should be equally critical of people who choose to go their own way in the conduct of information warfare. People with access to classified material have chosen to work in the government. They therefore choose to abide by the government’s rules, and should expect to pay a penalty if they violate them.

Three Cheers for Switzerland as Voters Reject Class-Warfare Tax Hike in National Referendum

I’ve always had a soft spot for Switzerland. The nation’s decentralized structure shows the value of federalism, both as a means of limiting the size of government and as a way of promoting tranquility in a nation with several languages, religions, and ethnic groups. I also admire Switzerland’s valiant attempt to preserve financial privacy in a world dominated by greedy, high-tax governments.

I now have another reason to admire the Swiss. Voters yesterday overwhelmingly rejected a class-warfare proposal to impose higher tax rates on the income and wealth of rich residents. The Social Democrats did their best to make the hate-and-envy scheme palatable. Only the very richest taxpayers would have been affected. But Swiss voters, like voters in Washington state earlier this month, understood that giving politicians more money is never a solution for any problem.

Here’s an excerpt from Bloomberg’s report on the vote.

In a referendum today, 59 percent of voters turned down the proposal by the Social Democrats to enact minimum taxes on income and wealth. Residents would have paid taxes of at least 22 percent on annual income above 250,000 francs ($249,000), according to the proposed changes. Switzerland’s executive and parliamentary branches had rejected the proposal, saying it would interfere with the cantons’ tax-autonomy regulations. The changes would also damage the nation’s attractiveness, the government, led by President Doris Leuthard, said before the vote. The Alpine country’s reputation as a low-tax refuge has attracted bankers and entrepreneurs such as Ingvar Kamprad, the Swedish founder of Ikea AB furniture stores, and members of the Brenninkmeijer family, who owns retailer C&A Group.

It’s never wise to draw too many conclusions from one vote, but it certainly seems that voters usually reject higher taxes when they get a chance to cast votes. Even tax increases targeting a tiny minority of the population generally get rejected. The only exception that comes to mind is the unfortunate decision by Oregon voters earlier this year to raise tax rates.

O’Grady on the US-Colombia FTA

Mary Anastasia O’Grady has an excellent article in today’s Wall Street Journal on the Obama administration’s failure to push the U.S.-Colombia preferential trade agreement.  She rightly points out that the terms of the agreement should be especially favorable to mercantalists, since the agreement would see no reductions in the tariffs the United States places on Colombian goods – most of which already enter duty-free under the terms of the Andean Trade Preference Act – but will oblige Colombia to open its markets to those U.S. exports the administration is always banging on about.

More on the Colombia FTA from Cato analysts here and here.

Obama Adopts Cato Pay Proposal

The Obama administration is supporting a two-year freeze on federal pay. I haven’t seen the details yet, but this appears to be a good start at getting excessive government pay under control.

I’ve been calling for a pay freeze since an op-ed in the Washington Post in 2006. Since then, average federal pay has continued to soar far above average private pay, which has finally prompted policymakers to take note. 

The Obama proposal would apparently save $28 billion over five years. Hopefully, that will be the first of many budget savings that the administration and Republicans in Congress can work on together in coming months. I’ve described other ways to tackle the government’s overspending problem here.

The next step to reform federal worker compensation should be to pare back overly generous benefit packages – for example, by eliminating defined-benefit pension plans, which come on top of the defined-contribution pensions that federal workers enjoy.

Another step would be to call in an outside human resources firm to audit the federal pay methodology, particularly the mysterious formula used to calculate the federal “pay gap,” which purports to show that federal workers are grossly underpaid.

See this essay on overpaid federal workers for details on reforming federal pay.

Diane Ravitch Is Right on Republicans and NCLB

Writing in yesterday’s WSJ, education historian Diane Ravitch laments that Republicans have abandoned their earlier defense of federalism and limited government in education, embracing vast and expanding powers for Washington over the nation’s schools. In particular, she faults the No Child Left Behind act for demanding public school improvements that have not been forthcoming and for imposing “corrective” measures that will not correct the problem.

Though I depart from Ravitch on most education policy matters – and not just on conclusions but also methodology – she is right in both of the above observations. Over the past decade, many Republicans have championed new federal powers in education that have no basis in the U.S. Constitution, no plausible empirical justification, and no evidence of success. NCLB demands higher achievement without creating the market freedoms and incentives that would actually allow it – asking, in other words, for the impossible.

With the current resurgence of public interest in limited government, Republicans have an excellent opportunity to rekindle their commitment to the limited federal role in education laid out by the U.S. Constitution. Phasing out NCLB would be a good place to start.

The Consumer Spending Fallacy behind Keynesian Economics

I’m understandably fond of my video exposing the flaws of Keynesian stimulus theory, but I think my former intern has an excellent contribution to the debate with this new 5-minute mini-documentary.

The main insight of the mini-documentary is that Gross Domestic Product (GDP) only measures how national output is allocated between consumption, investment, and government. That’s useful information in many ways, but if we want more output, we should focus on Gross Domestic Income (GDI), which measures how national income is earned.

Focusing on GDI hopefully would lead lawmakers to consider ways of boosting employee compensation, corporate profits, small business income, and other components of national income. Focusing on GDP, by contrast, is misguided since any effort to boost consumption generally leads to less investment. This is why Keynesian policies only redistribute national income, but don’t boost overall output.

You may recognize Hiwa. She narrated a very popular video earlier this year on the nightmare of income-tax complexity.