Archives: 06/2011

Remember When ‘Liberals’ Were Liberal?

Nick Kristof devotes his NYT column today to wishing that American society were organized like the U.S. military. The armed forces “live by an astonishingly liberal ethos,” he gushes, and closes the column by suggesting that ”as the United States armed forces try to pull Iraqi and Afghan societies into the 21st century, maybe they could do the same for America’s.”

(I swear I’m not making this up.)

Kristof looks at the military and sees the ideal United States:

The military helped lead the way in racial desegregation, and even today it does more to provide equal opportunity to working-class families — especially to blacks — than just about any social program. It has been an escalator of social mobility in American society because it invests in soldiers and gives them skills and opportunities.

The United States armed forces knit together whites, blacks, Asians and Hispanics from diverse backgrounds, invests in their education and training, provides them with excellent health care and child care. And it does all this with minimal income gaps: A senior general earns about 10 times what a private makes, while, by my calculation, C.E.O.’s at major companies earn about 300 times as much as those cleaning their offices. That’s right: the military ethos can sound pretty lefty.

…The military is innately hierarchical, yet it nurtures a camaraderie in part because the military looks after its employees. This is a rare enclave of single-payer universal health care, and it continues with a veterans’ health care system that has much lower costs than the American system as a whole.

How times change. Four decades ago, folks like Kristof were marching on the Pentagon and burning their draft cards. Today they want to enlist.

More seriously: Racial equality, social mobility, and freedom from concerns about health care and child care are laudable goals. (Among the virtues of free markets is that they move society toward such goals.) Also, the U.S. armed services have helped improve many people’s lives, giving them careers, skills, education, and other benefits.

But, granting all that and assuming Kristof’s view of the armed forces isn’t romanticized (I know, but assume), he overlooks two important points:

First, the U.S. military is an all-volunteer force, which means that service members freely choose to take on both the obligations and benefits of military life. Yet lots of people choose not to live that life, for many reasons — including that they’re displeased with the benefits. Kristof gushes about how the military treats its members (again, assume); but what’s the difference between the military offering benefits that its service members like, and the private sector offering different benefits that its workers like? (Remember the lament that public employees receive lower wages than similar private-sector workers.)

It should also be noted that, until the U.S. military became an all-volunteer force, it compensated and treated its service members more like cannon-fodder. But once the services had to compete for labor in a free market, they expanded the benefits that Kristof now hails. Private-sector employers have to compete in that same marketplace.

Second, the U.S. military is the U.S. military. That is, it is financed through taxation, directed by politicians, and operated as a rigid hierarchy. Costs and the individual preferences of its service members are not of high concern. The social changes Kristof favors can be implemented by force in such a world. But that coercion is out of place in a world where costs matter and people have freedom.

Such a world most certainly does not have “an astonishing liberal ethos.”

Good News on Cotton

We’re another step closer to putting a shameful chapter of America’s trade policy behind us, with the good news that the House today approved (by a margin of 223-197, roll call here) an amendment offered by Rep. Ron Kind (D-WI) and Rep. Jeff Flake (R-AZ) to prohibit the use of funds in the appropriations bill to provide payment to the Brazil Cotton Institute: the administration signed a deal last year with Brazil to send $147 million a year of taxpayers money to Brazil so they would look the other way while the United States continued to subsidize our cotton farmers illegally. Mr Kind and Mr Flake rightly argued that was an egregious use of taxpayer money. Some lawmakers agitated against stopping the payments in case it sparked a trade war, but the answer to that, of course, is to bring U.S. cotton policy into compliance with WTO rules (and rulings). More background here.


IBM as a Metaphor for Economic Success

International Business Machines Inc. is celebrating its 100th anniversary as a company today. In this time of economic worry and uncertainty, it’s worth taking a moment to consider a few policy lessons we might glean from its longevity.

Unlike government agencies and programs, private-sector companies competing in a free market come and go. In an essay posted on the IBM web site, company officials noted:

Of the top 25 industrial corporations in the United States in 1900, only two remained on that list at the start of the 1960s. And of the top 25 companies on the Fortune 500 in 1961, only six remain there today.

How did IBM not only survive but thrive during a century that took us from horses and buggies to FaceBook and iPhones? In a word, adaptability. IBM’s management has been willing to change to meet the evolving demands of a competitive and open marketplace.

When I was researching a speech last year to retired IBM employees, I was struck by how the company has transformed itself. As I shared with the audience, IBM stands as a metaphor for the positive changes under way in our more high-tech and globalized economy:

As you all know, [IBM] has re-engineered itself from a hardware company to a provider of software and services. Today, nearly 60 percent of the company’s revenue comes from services compared to 38 percent a decade ago. Revenue from hardware has been cut in half, to 17 percent.

IBM’s gone global in a big way, too. Almost two-thirds of its revenue now comes from outside the United States. That compares to an S&P average of 47 percent. Emerging markets now account for 50 percent of its revenue growth. IBM is the biggest IT services company in India. For $100 million, it’s helping the northeast China city of Shenyang—one of its most polluted—clean up its air and reduce carbon emissions.

Politicians nostalgic for an America where the dominant companies were unionized, heavy-industry behemoths producing mostly for the domestic market should take note. As I argued at length in my 2009 book Mad about Trade (see chapters 3 and 4) and more concisely in an essay for Barron’s Weekly, America has become a globalized, middle-class service economy. As the success of IBM demonstrates, this is not something we should fear, or try to resist with trade barriers and industrial policy.

Antidumping and U.S. Competitiveness

Two excellent speakers,  J. Michael Finger and Erik Autor, have been added to the stable of expert panelists, who will be discussing the imperative of antidumping reform at a Cato Institute conference on June 28. (The posted announcement will be updated soon.)

Finger is the former lead economist and chief of the World Bank’s Trade Policy Research Group, and an author of numerous studies and books about antidumping.  Autor is vice president and international trade counsel at the National Retail Federation, and can attest to the ill effects of antidumping measures on downstream U.S. industries, including the retail sector.

Other Speakers include:

Gary Horlick, Esq., Law Offices of Gary N. Horlick, Former International Trade Counsel, U.S. Senate Finance Committee, and Former Head of Import Administration, U.S. Department of Commerce
Lewis Leibowitz, Esq., Hogan Lovells and Chairman, National Association of Foreign Trade Zones
Marguerite Trossevin, Esq., Jochum Shore & Trossevin, PC and Former Deputy Chief Counsel, Import Administration, U.S. Department of Commerce
Robert La Frankie, Esq., Hughes Hubbard & Reed LLP and Former Senior Attorney, Office of Chief Counsel, Import Administration. U.S. Department of Commerce
Matt Nicely, Esq., Thompson Hine LLP, Adjunct Professor, “The U.S. Trade Regime” American University, Washington College of Law
Peggy Clarke, Esq., Blank Rome LLP and Adjunct Professor, Trade Remedies Law, George Washington University Law School
Daniel Porter, Esq., Winston & Strawn LLP
Daniel Ikenson, Associate Director, Herbert A. Stiefel Center for Trade Policy Studies, Cato Institute.

Panel 1: An Ounce of Prevention: Limiting the Scope for Collateral Damage in the Early Stages of an Antidumping Investigation

Lax standards for initiating antidumping investigations conspire with an asymmetric injury analysis that ignores the consequences of duties on consuming industries and the economy at large to produce externalized costs. Panelists will discuss the imperative of adding rigor to case initiation standards; granting legal standing to firms in consuming industries; requiring the results of an analysis of the economic costs and benefits of any prospective antidumping measures to be considered; and more.

Panel 2: Just Because It’s Legal Doesn’t Mean It’s Right: Reining in Rough Justice at the Commerce Department

Import Administration at the Commerce Department employs calculation procedures and methods that unequivocally inflate dumping margins, hence the rates of duty imposed. Some of those procedures serve no legitimate analytical purpose. Others can be conducted in manners that are less likely to produce skewed results. Panelists will discuss some of the more egregious methodological quirks and offer some commonsense solutions.

Panel 3: Containing the Spill: Meta-Reforms to Mitigate the Externalized Costs of AD Measures

Recognizing that antidumping measures saddle other domestic interests with higher costs, stymie commerce by virtue of the uncertainty created about final duty liability, and make it more difficult for downstream U.S. producers to compete at home and abroad, this panel of experts will discuss various reforms that could reduce some of the purely punitive aspects of the current system.

I hope you can join us for this important and long-overdue discussion on June 28 from 3:00 to 6:30pm.


Report of New Voucher Bill in PA Raises Regulatory Red Flags

There is an ongoing, nasty battle over vouchers in Pennsylvania that has split Republican legislators, the Senate from the House, and Tea Party groups across the state. The Senate is determined to pass SB1, an expansive voucher bill, while the House has already existing education tax credit program and doesn’t want to consider the voucher.

Beyond simple opposition to private school choice, concerns about the fiscal impact and a desire for benefits to be expanded to the middle class have led many Republicans and local Tea Party groups to oppose the voucher program.

In the meantime, the House passed a huge expansion of the long-running and successful education tax credit program by a massive margin …  and when I say “massive,” I mean 96 percent in favor to 4 percent opposed.

But the Senate refuses to expand the credit program unless the House passes the voucher program.

Today, there are reports of a voucher bill to be introduced in the House. It looks likely to be worse than the Senate version, especially on the regulatory front, which in my mind is much more important than the limited nature of eligibility.

Based on the brief description of the voucher policy, it appears to hand expansive control over participating private schools to the state Dept of Ed and an appointed board. This would make participating schools de facto government schools. It reads, “The legislation will charge the Department of Education with promulgating regulations according to guidelines that will be specifically enumerated in the bill within 120 days of the effective date. The regulations will be subject to approval of the Education Opportunity Board, established in the legislation initially as a three-member board appointed by the Governor to serve four year terms”

The abdication of regulatory responsibility is what gave us out-of-control federal agencies like the EPA. It is very dangerous for lawmakers to provide mere “guidelines” to regulatory agencies. A lot will depend on how specific and limiting the bill is in this regard, but the language used here is worrisome. For instance, instead of tasking the DOE with “developing procedures to implement,” which is bad enough, the bill will have the DOE “promulgating regulations.” That sounds to me like they will establish general guidelines for the purpose of the regulations, such as measurement of achievement, which will then be translated into actual regulatory mandates by the DOE.

I wrote recently about why Indiana’s new voucher law is a loss for educational freedom , along with a detailed accounting of the regulations. The arguments apply here, but even more so … . This potentially hands the state DOE a blank check of regulatory authority, which will begin badly and won’t be difficult for the unions to co-opt over time.

And by compelling every taxpayer to fund every type of private school, the voucher is likely to generate social conflict that the state’s tax credit program entirely avoids.

For once the popular, politically smart, most principled, and most effective thing to do are all the same; drop the voucher drama and expand the education tax credit program.

Of Course Defendants Can Challenge the Constitutionality of Laws Under Which They’re Prosecuted

Hard cases make bad law, the saying goes.  Well, a bizarre case that the Supreme Court decided unanimously today has set a good precedent for the enforcement of residual Tenth Amendment powers. 

As I described in December when Cato filed a brief in Bond v. United States:

Carol Anne Bond learned that her best friend was having an affair with her husband, so she spread toxic chemicals on the woman’s car and mailbox. Postal inspectors discovered this plot after they caught Bond on film stealing from the woman’s mailbox. Rather than leave this caper to local law enforcement authorities to resolve, however, a federal prosecutor charged Bond with violating a statute that implements U.S. treaty obligations under the 1993 Chemical Weapons Convention.

Bond pled guilty and was sentenced but now appeals her conviction on the ground that the statute at issue violates the Tenth Amendment – in that her offense was local in nature and not properly subject to federal prosecution. The Third Circuit declined to reach the constitutional question, holding that Bond did not have standing to raise a Tenth Amendment challenge and that, following Supreme Court precedent, a state actor must be a party to the suit in order to challenge the federal government for impinging on state sovereignty. Bond now seeks Supreme Court review on the ground that the statute, as applied to her, is beyond the federal government’s enumerated powers.

Our brief argued that a defendant clearly has standing to challenge the constitutionality of the statute under which she was convicted, but also that lower courts are wrong in assuming that both the president’s power to make treaties and Congress’s power to make laws executing those treaties are unconstrained by the Constitution.  That is, many judges seem to erroneously think that treaties can give the federal government powers it doesn’t otherwise have under the Constitution.

The Court’s ruling today, in a tight opinion by Justice Kennedy, makes clear that individuals can indeed raise Tenth Amendment claims that the federal government has overstepped its enumerated powers.  The Court took no position on the merits of Bond’s constitutional argument – relating to the expansion of federal criminal law via the Treaty Power into areas that should be handled at the state and local levels – but this non-decision is in itself a positive development because it signals that the underlying issue is in dispute.

The Third Circuit is now charged with determining in the first instance whether the law implementing the chemical weapons treaty is “necessary and proper for carrying into execution” the Treaty Power, including whether it’s overbroad if it snares people like Bond.

Even if Bond loses on the merits in the Third Circuit and/or the Supreme Court, however, her case has confirmed the idea that someone directly and particularly harmed by a federal law can challenge that law’s constitutionality.  As Justice Ginsburg said in her concurrence,

a court has no “prudential” license todecline to consider whether the statute under which the defendant has been charged lacks constitutional application to her conduct. And that is so even where the constitutional provision that would render the conviction void is directed at protecting a party not before the Court. ….

In short, a law “beyond the power of Congress,” for any reason, is “no law at all.” Nigro v. United States, 276 U. S. 332, 341 (1928). The validity of Bond’s conviction depends upon whether the Constitution permits Congress to enact §229.  Her claim that it does not must be considered and decided on the merits.

For more on the proper scope of the Treaty Power, I recommend Georgetown law professor Nicholas Quinn Rosenkranz’s “Executing the Treaty Power.”


Josh Blackman parses Justice Kennedy’s opinion and shows how it tracks the approach that Randy Barnett and Cato have been taking in our Obamacare briefs.

Washington Post Grows Nostalgic for Big-Government Bush

E.  J. Dionne Jr. has suddenly discovered the big-government George W. Bush, 12 years late, and he’s feeling nostalgic:

Perhaps I should thank the current crop of Republican presidential candidates for providing me with an experience I never, ever expected: During this week’s debate in New Hampshire, I had a moment of nostalgia for George W. Bush….

Unlike this crowd of Republicans, Bush acknowledged that the federal government can ease injustices and get useful things done.

Say what you will about his No Child Left Behind education-reform program. It accepted, correctly, that the federal government has to play an important part in reforming our public schools and held them accountable to a set of standards….

And while there are many problems with the way Bush chose to provide prescription drugs under Medicare, he was quite right to believe it had to be done….

Oh, yes, and I really do miss some of Bush’s early rhetoric. I cannot imagine a Republican today giving Bush’s 1999 speech in Indianapolis titled — shades of Barack Obama? — “The Duty of Hope.”

Bush criticized the view “that if government would only get out of our way, all our problems would be solved” as a “destructive mind-set.” He scorned this as an approach having “no higher goal, no nobler purpose, than ‘Leave us alone.’ ”

Stick with us, E. J. We could have told you this in 2007, when Michael Tanner published Leviathan on the Right; or in 2003, when I complained in the Washington Post about Bush’s spending, education program, and entitlement expansion;  or in, ahem, 1999, when Ed Crane wrote in the New York Times:

Bill Clinton’s impact on the American polity was never more evident than in the major address that the Republican Presidential aspirant George W. Bush gave in Indianapolis last week. The speech was, well, Clintonesque [in its] assumption that virtually any problem confronting the American people is an excuse for action by the Federal Government.

E. J. likes that view better than we do, but at least readers of the Washington Post will now realize that Obama’s out-of-control spending, nationalizations, and health care interventions are an extension, not a reversal, of Bush’s policies.