Archives: 10/2011

10 Years of Patriot Act

It was ten years ago that President Bush signed the Patriot legislation into law.  If you wanted to find a textbook example of how not to make law, review the history of this law.  First, toss dozens of legal proposals together into a giant “package” and resist any effort to unpack it and hold separate votes.  Second, unveil the package at the last minute so members of Congress will not have an opportunity to study it.  Third, call it the “Patriot Act” so that any person voting against it will have to consider television ads declaring his/her opposition to the Patriot law.  Fourth, have the Attorney General declare over and over that if the law is not enacted right away, the terrorists may well launch more 9-11 attacks.  When members of Congress proposed attaching sunset provisions so that the law could go into effect, but would need reauthorization a few years later, the Bush administration fought the idea.

In the years afterward, the laws defenders like to pose the question, “Where are the abuses under this law?”  Some provisions, like those pertaining to National Security Letters, made it a crime for those served with them to tell anyone else about them.  That made it almost impossible to see what the FBI was doing.  In today’s Washington Post, Nicholas Merrill, explains what it was like to be on the receiving end of a National Security Letter:

In 2004, it wasn’t at all clear whether the FBI would charge me with a crime for telling the ACLU about the letter, or for telling the court clerk about it when I filed my lawsuit as “John Doe.” I was unable to tell my family, friends, colleagues or my company’s clients, and I had to lie about where I was going when I visited my attorneys. During that time my father was battling cancer and, in 2008, he succumbed to his illness. I was never able to tell him what I was going through.

For years, the government implausibly claimed that if I were able to identify myself as the plaintiff in the case, irreparable damage to national security would result. But I did not believe then, nor do I believe now, that the FBI’s gag order was motivated by legitimate national security concerns. It was motivated by a desire to insulate the FBI from public criticism and oversight.

Read the whole thing.   Nick Merill spoke at a Cato Capitol Hill Briefing a few months ago.

Some parts of the Patriot law were sensible, others were not.  For Cato scholarship on the subject, go here and here [pdf].

Tomorrow, Cato will be hosting a double book forum featuring ACLU President Susan Herman and bestselling author David Shipler.   Patriot Act issues will come up.

Spending Reform in Rick Perry’s Plan

Texas governor Rick Perry’s “Cut, Balance, and Grow” plan is out. Dan Mitchell discussed Perry’s proposed tax reforms so I’ll offer my take on the proposed spending reforms:

  • Perry says he wants to “preserve Social Security for all generations of Americans” but state and local government employees would be allowed to opt-out of the program. Perry says that younger Americans would be able to “contribute a portion of their earnings” to a personal retirement account. I’d like to be able to completely opt-op without having to work in government. I suspect that other younger Americans who recognize that Social Security is a lousy deal will feel the same.
  • Other proposed reforms to Social Security include raising the retirement age, changing the indexing formula, and ending the practice of using excess Social Security revenues to fund general government activities. Proposing to put an end to “raiding” the Social Security trust fund might be a good sound bite for the campaign trail, but excess Social Security revenues will soon be a thing of the past anyhow. Bizarrely, Perry cites the Highway Trust Fund as “the model for how to protect funds in a pay-as-you-go system from being used for unrelated purposes.” As a Cato essay on federal highway financing explains, only about 60 percent of highway trust fund money is actually spent on highways. The rest is spent on non-highway uses like transit and bicycle paths. The bottom line is that the federal budget’s so-called “trust funds” generally belong in the same category as Santa Claus and the Toothy Fairy. Perry should just stick with calling Social Security a “Ponzi scheme.”
  • As for Medicare, Perry says reform options would include raising the retirement age, adjusting benefits, and giving Medicare recipients more control over how they spend the money they receive from current taxpayers. No surprises there.
  • I’m a little confused by Perry’s language on Medicaid reform. On one hand, he says that the 1996 welfare reform law should be used as the model. The 1996 welfare reform law block granted a fixed amount of federal funds for each state. On the other hand, Perry says “Instead of the federal government confiscating money from states, taking a cut off the top, and then sending the money back out with limited flexibility for how states can actually use it, individual states should control the program’s funding and requirements from the very beginning.” I believe that the states, and not the federal government, should be responsible for funding low-income health care programs (if they choose to offer such programs). However, I don’t think that’s what Perry is actually proposing.
  • Perry calls for a Balanced Budget Amendment to the Constitution and a cap on total federal spending equal to 18 percent of GDP. Federal spending will be about 24 percent of GDP this year. What agencies and programs would Perry cut or eliminate to reduce federal spending by 6 percent of GDP? He doesn’t really say. That leaves me to conclude that he embraces a BBA for the same reason that most Republicans embrace it: he wants to avoid getting specific about what programs he’d cut. One could argue that his entitlement reforms are sufficiently specific, but compared to Ron Paul’s plan, which calls for the elimination of five federal departments, Perry’s plan leaves too much guesswork.
  • Other spending reform proposals don’t make up for the lack of specifics on spending cuts. For example, Perry proposes to eliminate earmarks. That’s already happened. He says he’d cut non-defense discretionary spending by $100 billion, but that’s a relatively small sum and letting military spending off the hook is disappointing. Proposing to “require emergency spending to be spent only on emergencies” sounds nice but would a President Perry stick to it if Congress larded up “emergency” legislation for a natural disaster in Texas or some military adventure abroad?

In sum, there’s some okay stuff here, but I don’t think it’s anything those who desire a truly limited federal government can get excited about. That said, Perry could have done a lot worse.

Random Thoughts on Obama’s New Mortgage Plan

In case you missed it, President Obama gave a big speech out in Las Vegas about both his “jobs” plan and a new plan to help underwater borrowers re-finance their mortgage. First, let’s recognize that it is not really “his” plan. The proposal is being issued by the Federal Housing Finance Agency (FHFA), an independent regulator that the President is supposed to have no control over. Frankly, I find it troubling for a president to be so involved with an independent agency. If a president was out giving speeches when the Federal Reserve changed interest rates, we would all call that bizarre. It is no different here. As someone involved in drafting the law that created FHFA, I can say Congress considered, and rejected, the option of having this agency accountable to the president.

On to the substance. Perhaps most striking is that this plan does nothing for the housing market. Does it increase demand for housing? No. Does it reduce the supply of excess homes or help move the massive shadow inventory? Again, No. Does it even help those most in need? No. It is available only to those who have already had a mortgage for over two years, are current on their mortgage, and have missed no more than one payment per year. Basically helping only those that do not need any help.

The logic of the plan is that by reducing mortgage rates, you reduce monthly payments, which would increase consumer spending. The flaw in that logic is that while a mortgage is one person’s liability, it is another person’s asset. So you are simply making one party wealthier while making another poorer. It is not clear that the impact on aggregate spending should be anything other than zero.

Most troubling about the the plan, is that the program it is based upon, HARP, is likely illegal. Both the Fannie and Freddie charters require that if a loan is above 80 percent loan-to-value, it must have mortgage insurance. Yet the heart of HARP is a waiver of this requirement. Apparently FHFA claims these are not “new” loans, but just modifications. In that case why in the world would you modify a loan that is current and does not appear in any danger of default. Sadly one of the many things lost in the financial crisis is a basic respect for the rule of law. Our financial regulators have too often embraced a culture of lawlessness in name of saving our financial system (with little to show for it).

Clifford Winston on Lawyer Licensure

Brookings senior fellow Clifford Winston is in today’s New York Times arguing the position (as does his new book with Robert Crandall) that state licensing rules governing who can enter the legal profession are “barriers to entry” that should simply be “done away with.” As I observed last month as part of a symposium on the idea at Truth on the Market, I wish Winston had done more to develop the distinction between lawyers’ everyday role in, say, drafting wills and closing real estate transactions (for which the de-licensing approach he favors might indeed hold out hope of wider choice and reduced cost for consumers) and lawyers’ powers to pursue litigation, subpoenas, and other compulsory process against unwilling opponents and third parties. The latter is a type of coercive, indeed quasi-governmental, weaponry and it is by no means obvious that it should be delegated to all comers. As I argued last month:

The coercive powers wielded by private lawyers [when they wear their litigators’ hats] are more akin to the powers wielded by prosecutors and other government officials than to the powers wielded by, say, optometrists or dentists….

The way forward might be to split the tasks of a lawyer in two, moving to deregulate the advisory and document-preparation functions (which could indeed be a way of saving consumers large sums) while continuing to apply appropriate scrutiny to those in the profession who presume to wield coercive litigation powers. Although the British separation of highly regulated barristers from less highly regulated solicitors does not precisely track this distinction, it is worth keeping in mind as a possible model for a division between an “outer” legal profession whose operation might be entrusted to general business principles and an “inner” group of professionals of whom more is expected, as we expect more ethically and legally from judges themselves, public prosecutors, and others cloaked in public authority.

My full symposium contribution is here.

Government, Education, and Freedom

I did the above interview recently with ChoiceMedia.tv on the subject of education tax credits and vouchers, in which I argued that credits are a better way of ensuring universal access to the education marketplace. Credits can either directly reduce the taxes owed by families who pay for their own children’s education (as in Illinois and Iowa), or they can offset donations taxpayers make to non-profit k-12 scholarship programs that provide tuition assistance to the poor (as in Pennsylvania, Arizona, Florida, and several other states).

The interview elicited an important question from a commenter: If financial assistance for the poor comes from scholarship programs, isn’t there a risk that those programs will impose restrictions on how the scholarships can be used, thereby curtailing poor families’ educational options?

Minimizing that problem is actually one of the many reasons to prefer education tax credits over vouchers. Any time someone other than the parents is footing the bill for a child’s education, there is the risk that this third party is going to limit parents’ choices. The worst case, historically, has been when that third party is the government. When governments pay for schooling, there is a single set of regulations on what choices parents can make, and there is no way to avoid those regulations short of rejecting the financial assistance altogether—which the poorest families have difficulty doing. Vouchers bring with them this single set of government rules (and it is often an extensive one as I discovered in this study).

By contrast, scholarship tax credit programs, like the one in Pennsylvania, give rise to a multitude of different organizations that provide tuition assistance to poor families. If any one of those organizations decides to impose a particular set of restrictions on the use of its scholarships, it has no effect on any of the other organizations. Parents looking for financial assistance are thus free to seek it from a scholarship organization that aligns with their needs and values. The multiplicity of different sources of funding is instrumental—in fact it is essential—in ensuring that poor parents’ choices are not curtailed.

I’ve made this argument in a variety of places, most recently in a U.S. Supreme Court brief in the Arizona tax credit case ACSTO v. Winn.

As You’ll See, Student Loans Hurt Us All

Suddenly, student loans are nearing the top of the nation’s public policy debate. Indeed, President Obama is expected to make a big speech about them on Wednesday. Why the sudden ascendance? Probably because the burden of student loans is one of the few things OWSers are clearly angry about, and that has raised questions ranging from whether such loans should be dischargable in bankruptcy, to whether they help fuel the Saturn V rocket of college price inflation. And last Sunday GOP presidential contender Ron Paul jumped into the fray, suggesting we eliminate the federal student loan program entirely.

Paul is right about phasing out federal student loans. Unfortunately, that’s likely the last thing President Obama will propose.

The first reaction to hearing such a proposal is that it’s Grinch-level heartlessness, stealing a better future from low-income kids. That is almost certainly what the president would say, and such a reaction would likely poll well. That’s why he’s expected to propose lowering interest rates, easing repayment, and other borrower-friendly measures. But as I lay out in a Cato Policy Analysis to be released imminently, by most indications federal student aid and other taxpayer-fueled subsidies aren’t good for anyone. (Well, anyone not employed by a college or university, the ultimate receiving end of all the forced largesse). By artificially—and hugely—boosting consumption, they ultimately lead to massive tuition inflation, encourage millions of unprepared people to take on studies they never finish, and pour H2O into already watered-down degrees. In other words, student aid—including federal lending—is likely a net loss to both students and society.

But I’ve already said too much. If you want to get a lot more on this—and more on the many unintended evils of federal college policies—stand by for the release of my study. And if you’re in DC, come to Capitol Hill Thursday for a briefing on the subject with me and Rep. Virginia Foxx (R-NC). It should give OWSers, libertarians, conservatives, liberals, and anyone else lots to think about.

Everything You Need to Know About Public School Spending in Less Than 2½ Minutes

Neal McCluskey gutted the President’s new “Save the Teachers” American Jobs Act sales pitch a good while back, as did Andrew Coulson here. Thankfully, it seems a lot of senators agree it’s a bad idea.

Last week, a $35 Billion piece of the president’s new “stimulus” plan, which included $30 Billion to bail out government schools—againwent down in the Senate:

Our public education problem is huge; we’re spending far too much and getting way too little. But most people don’t know the basic details. They still think we need to spend more on education.

So, for all of you who want to get the details but don’t have much time, or have family and friends who need to be introduced to reality, I present to you … Everything you need to know about public school spending in less than 2½ minutes.

Watch it, “like” it, post it on Facebook, email it around, comment, and generally get the word out … because we really do need to get the word out.