September 2011

September 26, 2011 4:52PM

Comparison: Postal Service and Federal Government

The Institute for Research on the Economics of Taxation’s Michael Schuyler has written an interesting paper that compares the federal government’s bleak financial situation to that of the U.S. Postal Service. The entire paper is a good read, but here are a few key points:

  • Congress is helping to run the USPS into the ground (see here for example). Congress is helping to run the government’s finances into the ground. We can’t separate Congress from the federal budget, but putting more space between Congress and the USPS could – and should – be done.
  • The USPS is broke and it’s about to max out its $15 billion line of credit with the U.S. Treasury. Yet, Schuyler says that “the Postal Service is a model of financial rectitude compared to the overall federal government.” Yikes.
  • The federal government gets the bulk of its revenues from taxation, which it extracts from citizens through force. The USPS depends on revenues generated from the sale of products and services. Thus, the USPS is on a “tighter leash.” As a result, the USPS has had to make more of an effort than the federal government to cut costs. Tightening the federal government’s “leash” by imposing restrictions on its ability to spend and borrow could help.
  • The federal government’s “gaping fiscal hole” makes it harder to justify a bailout for the USPS. Schuyler says that Congress should instead allow the USPS “greater operational flexibility to lower costs in ways that would bring large savings relative to the inconvenience for mail users.”

See this Cato essay for more on the U.S. Postal Service.

September 26, 2011 4:44PM

On A Rental Solution to the Foreclosure Crisis

Dealing with the large overhang of foreclosed homes has been an issue vexing both policy‐​makers and real estate professionals, especially since both continue to resist the obvious solution of letting prices fall to their market‐​clearing levels. The latest “solution” is to increase the demand for excess housing by converting said homes to rental properties.

My first reaction to the proposal was maybe, but then are not the housing markets with excess owner units the same markets with a glut of apartments? Shifting a unit wouldn’t seem to impact the overall excess supply in a given market. Given my general willingness to subject my suspicions to empirical testing, off to the Census Bureau’s Housing Vacancy Survey I did go. 

It seems my first reaction was half‐​right. If one compares owner vacancy rates with rental vacancy rates across metro areas, you do indeed find a positive correlation, but only about .5, which leaves considerable room for variation. Interestingly enough, that correlation, while still positive, becomes considerably smaller (.26) if one looks at just housing markets with above average owner vacancy rates.

The bottom line, in some markets like Portland OR or Seattle WA, the rental market is not so glutted that it could likely absorb a significant amount of vacant homes. In other markets, like Jacksonville FL, Dayton OH Phoenix, AZ or Las Vegas, NV, there is both a surplus of owner and rental properties. This implies that such homes would not be quickly rented or would have to rent at a considerable discount. Unsurprisingly these double glut markets are where the foreclosure crisis is centered.

Of course none of this changes the fact that the best way to get the housing market moving is to have the government stop meddling and allow market fundamentals to drive prices, instead of using government to pretend the bubble never ended.

September 26, 2011 3:08PM

The Encyclopedic Unconstitutionality of the Individual Mandate

My parents got me a set of Encyclopedia Britannica when I finished middle school; I had graduated from the “young people’s” reference collections, they told me, so it was time to move to “adult” research materials. (I should point out to readers who are currently students that “encyclopedias” were “books” that presented a fairly exhaustive collection of basic knowledge about the world; I got my set a few years before the internet put such information at anyone’s fingertips for free.) And so it was with nostalgic delight that I accepted an invitation from Britannica’s modern online incarnation (to which David Boaz has contributed many short essays) to provide a short response — an op‐​ed, really — to an argument Penn law professor Kermit Roosevelt made supporting the individual mandate’s constitutionality.

Those who have followed Cato’s work on Obamacare won’t find much new here, but here’s an excerpt:

The Constitution simply does not permit the government to compel citizens into transactions to remedy what would otherwise be an economic hole in a given piece of legislation. Although the Necessary and Proper Clause allows Congress to adopt reasonable means to regulate interstate commerce, it is not a blank check permitting Congress to ignore constitutional limits by manufacturing necessities. Indeed, any law—“necessary” or otherwise—that would transform Congress’s authority into an open‐​ended power to legislate for “the general welfare” is unconstitutional.

While government lawyers emphasize the “uniqueness” of the health care market and the wisdom of the legislation at issue, “this case is not about whether the Act is wise or unwise … in fact, it is not really about our health care system at all. It is principally about our federalist system, and … the Constitutional role of the federal government.” Florida v. U.S. Dept. of Health & Human Services (Judge Roger Vinson’s decision striking down the individual mandate and with it all of Obamacare, Jan.31, 2011).

Read the whole thing.

September 26, 2011 1:01PM

Kozinski on Privacy at Constitution Day

The Hon. Alex Kozinski gave the annual B. Kenneth Simon lecture at Cato’s Constitution Day conference on September 15, 2011. He spoke about changing cultural expectations of privacy regarding new technologies and how judicial applications of the Fourth Amendment have changed over time to reflect these expectations. Judge Kozinski is the Chief Judge on the U.S. Court of Appeals for the Ninth Circuit.

September 26, 2011 8:40AM

The President Can’t Increase Congress’s Power Simply by Signing a Treaty

A lost episode of Jerry Springer found its way into the Supreme Court’s 2010-11 term in the case of United States v. Bond. Mrs. Bond, upset by the pregnancy that resulted from an affair between her husband and her erstwhile best friend, decided to take revenge. A trained microbiologist working at a chemical manufacturer, Mrs. Bond tried to poison her husband’s mistress by dusting her door knobs, mailbox, and car handles with dangerous, possibly lethal chemicals.

Upon being caught by (federal) postal inspectors, Mrs. Bond was charged with violating the law Congress passed to implement an international chemical weapons treaty. (There are no generally applicable federal attempted murder statutes, so prosecutors had to get creative to remain in federal court.)

But if general criminal statutes are beyond Congress’s powers, as even the most ardent federal‐​power activist must acknowledge, how did Congress have the power to pass the law that ensnared Mrs. Bond? — who, whatever her character flaws, was not selling chemical weapons to terrorists (the treaty’s target). Mrs. Bond thus hoped to challenge her conviction by arguing that Congress did not have the power to pass the law in question.

The Third Circuit, however, ruled that she did not have standing — a legal doctrine defining who has the right to bring a claim — to challenge the law on federalism grounds. Cato filed a Supreme Court brief supporting Mrs. Bond’s position and arguing that it makes no sense to deny standing to someone challenging a law under which she is being prosecuted. The Court unanimously agreed and remanded the case back to the Third Circuit, to finally hear arguments over whether the statute is beyond congressional power.

Cato has now reentered the fray, in a brief authored by Georgetown law professor Nicholas Quinn Rosenkranz and joined by the Center for Constitutional Jurisprudence. We again support Mrs. Bond’s claim that the law under which she was charged is beyond Congress’s enumerated powers. The main obstacle to this argument is the 1920 case Missouri v. Holland, a short and not completely clear opinion by Justice Oliver Wendell Holmes that has been interpreted to mean that Congress can expand its enumerated powers via the Treaty Clause.

In other words, even though Congress does not have the power to pass, for example, general criminal statutes, if Congress ratifies a treaty calling for such statutes, its power increases beyond constitutional limits. We argue that this is an astounding manner in which to interpret a Constitution that creates a federal government of limited powers. Not only would this mean that the Executive has the ability to expand congressional power by signing a treaty, but it would mean that foreign governments could change congressional power by abrogating a previously valid treaty — thus removing the constitutional authority from certain laws. We also point out how the most influential argument supporting Missouri v. Holland is based on a clear misreading of constitutional history and that the ruling is in deep tension with other cases.

On the treaty power, we’re in a constitutional quagmire that can only be escaped by limiting or overturning Missouri v. Holland. The Third Circuit can’t itself overturn a Supreme Court decision, of course, but it follows our brief, it can at least limit its damage.

September 26, 2011 8:39AM

English Fluency? Correct Pronunciation? Why Would Teachers Need Those?

As Pat Kossan reports in the Arizona Republic, the state of Arizona has averted a threatened civil‐​rights lawsuit from Washington by agreeing to stop monitoring teachers’ English fluency and pronunciation in the classroom. “In November, federal officials told Arizona that its fluency monitoring may violate the Civil Rights Act of 1964 by discriminating against teachers who are Hispanic and others who are not native English speakers.”

Does this strike you as perhaps a bit crazy? If so, it’s craziness with quite a pedigree. It was way back in the first Bush administration that the Equal Employment Opportunity Commission (EEOC) began filing lawsuits against employers for “discriminating” against employees with difficult‐​to‐​understand or heavily accented speech, the theory being that this served as an improper proxy for discrimination based on national origin. The scope for allowable exceptions was exceedingly narrow, too narrow to cover most teaching positions, as I wrote quite a while back when the issue had just come over the horizon in a Massachusetts case. Indeed, the National Education Association (I pointed out) had been prevailed on to pass a resolution “decrying disparate treatment on the basis of ‘pronunciation’ — quite a switch from the old days when teachers used to be demons for correctness on that topic.”

Don’t assume you can escape by choosing one of your local private schools. Their employment of teachers falls under the EEOC’s jurisdiction too.

September 26, 2011 8:39AM

Tolerance à la Mode Français

Given America’s at best mixed record on free speech, I am usually reluctant to point fingers at other countries, but Thursday’s fining of two French women for wearing a full face veil was a little over the top. Don’t get me wrong, I’m no fan of the burqa — as it leaves far too much to the imagination for my tastes — but I am a fan of tolerance and religious freedom.

I’m still trying to decide which is more absurd, that the law in question allows an exemption for clown masks (more rulings like this should take care of that need) or that in addition to a fine, the two women will be required to take lessons on “tolerance”. It seems to me the whole experience has already provided them a pretty clear lesson on French tolerance.

In much better news, Saudi Arabia announced “that the nation’s women will gain the right to vote and run as candidates in local elections to be held in 2015.” While such a change is obviously long over‐​due, and one can reasonable ask why wait until 2015, it is a positive change and should be celebrated.