Archives: 11/2011

This Week at’s first week was a terrific success. If you haven’t visited yet, I encourage you to do so. The site’s an excellent place to learn about and explore the theory and history of liberty.

This week added


The Foreign Corrupt Practices Act: Clarification Is Not Enough

The Foreign Corrupt Practices Act, enacted in 1977 and the subject of a high-profile federal enforcement campaign in recent years, is a feel-good piece of overcriminalization that oversteps the proper bounds of federal lawmaking in at least four distinct ways, any of which should have prevented its passage. It is extraterritorial, purporting to punish overseas misdeeds which deprive no Americans of liberty or property and whose punishment is better left in the hands of authorities elsewhere. It is vicarious, inflicting massive liability on businesses and unknowing higher-ups over the actions of rogue local subsidiaries, salespeople and facilitators. It is punitive, menacing its targets with twenty-year prison terms and inflicting huge penalties over less-than-huge misbehavior. And finally, it is vague, leaving companies to guess at the proper line between tolerated payments (e.g., gratuities to speed up visa and license issuance in developing countries) and improper “bribes,” and even such basic questions as who counts as an “official.” In the face of a mounting outcry from the business community, the Obama administration has now finally conceded that there is some validity to this last point, and Criminal Division chief Lanny Breuer says the Department of Justice will develop guidelines to provide greater clarity as to what it believes the law does and does not forbid. Better than nothing, but why not consider the case for wider reform or even repeal?

To begin with, it’s hardly as if the law has succeeded in cleaning up the climate of official corruption that afflicts so many ill-governed countries around the globe. It does, however, confer a huge competitive advantage on companies not within the reach of the U.S. Department of Justice, above all those of China, which does not even pretend to apply similar rules to its overseas enterprises, and also including Europe, which has mostly chosen to address the problem in less adversarial ways. (See, for example, this Economist editorial on Britain’s FCPA-equivalent.)

Chicago-Kent law professor Andy Spalding has argued that the FCPA in fact amounts to a form of unintended economic sanctions against developing countries, sometimes with “tragic” and anti-humanitarian results. Guest-posting at PrawfsBlawg, Spalding offered the example of India, where a poor rural population stands in desperate need of roads:

India lacks the financial and administrative (or authoritarian?) capacity to build the needed roads, so it has aggressively solicited outside investors. Nonetheless, of all public requests for road construction proposals in India, almost half receive absolutely no bids. No one is willing to build these roads, at any price. Why aren’t more U.S. construction companies seizing this profit opportunity? Answer: corruption. The infrastructure sector is notoriously corrupt; the FCPA risks are far too high.

Query: if the criminal penalties now associated with FCPA enforcement have made the costs of building roads in developing countries prohibitive, such that roads aren’t built, farmers can’t sell, and kids can’t eat, have we done the right thing?

More on FCPA at Overlawyered and at my former website Point of Law.

Broadcast Media Deserve Better Than Second-Class First Amendment Protection

Who controls the content of TV and radio broadcasts, parents or the FCC? In the 1978 case of FCC v. Pacifica Foundation, the Supreme Court held that, because over-the-air broadcast media is like an “unwanted intruder” in the home that is uniquely accessible to children, the FCC has a role in maintaining the cleanliness of the transmissions. Because of these unique characteristics, the regulation of broadcast media was held to a lesser constitutional standard than other types of media. That ruling was largely based on the technology of the time: three channels, little cable, and no VCRs, much less Internet, DVDs, and satellite TV.

Since that time, the FCC has regulated broadcasts under that lower constitutional standard, including fining stations for so-called “fleeting expletives” uttered by celebrities on live awards shows, the infraction from which this case springs (it was Bono, then Cher, then Paris Hilton and Nicole Richie). This case is visiting the Supreme Court for the second time. In 2009, the Court ruled that an FCC rule against “fleeting expletives” was not an unlawful under administrative law, the law governing executive agencies’ power. On remand, the Second Circuit struck down the rule on First Amendment grounds, largely on the reasoning that Pacifica had been obviated by technological change.

Cato has joined forces on an amicus brief with a wide range of groups advocating freedom in technology policy – the Electronic Frontier Foundation, the Center for Democracy & Technology, Public Knowledge, and TechFreedom – to underscore for the Court just how different the world is today from 1978. While the groups joining the brief do not necessarily agree with each other all the time, we agree on this fundamental truth: broadcast media (the most prominent way we become informed) should not receive watered-down First Amendment protection. We point out how the existence of Video-On-Demand services like Netflix, DVRs, Internet sites like Hulu, as well as massive access to DVDs, has radically transformed how we consume media. Broadcast media is no longer an “unwanted intruder,” but more like an invited guest. Moreover, with the existence of parental control mechanisms like the V-Chip, parental locks included in cable and satellite boxes, and even services like “TV Guardian” – which filters live TV based on the closed-captioning signal – parents have all the tools at their disposal to ensure that children aren’t exposed to fleeting expletives or anything else unwanted. So why does the FCC need a vague and overbroad rule that could not pass heightened scrutiny and can only survive under a watered-down First Amendment standard? We live in a world that few could have imagined in 1978. It’s time for a new rule that gives broadcast media the same level of speech protection as any other kind.

The Court is expected to hear argument in FCC v. Fox Television Stations in January.

Obama Demonstrates Why ‘Government Efficiency’ Is a Joke

By the time I stopped working for Sen. Tom Coburn (R-OK), I had concluded that the pursuance of so-called “government efficiency” was largely a misguided waste of time for a politician who was interested in achieving smaller government. (I’ve been pleased to see my old boss spend more time trying to cut and eliminate programs since my departure.)

By the time I stopped working for Gov. Mitch Daniels, I had concluded that most politicians probably just pursue “government efficiency” for cheap p.r. purposes: take care of the special interests first, buy votes, and tell the suckers taxpayers that you care deeply about how their money is being spent. And as I’ve discussed in the past, to the degree that the governor’s office was really interested in saving money, it was because they wanted to free up funds to spend on Mitch’s “priorities.”

Put President Obama in the Daniels category. From the New York Times:

Cutting wasteful government spending is one of those exercises that even the most ardent political opponents agree is a good thing. But what one does with those savings is quite another matter.

On Wednesday, President Obama signed an executive order cutting federal spending on things like promotional plaques and mugs, cellphones and iPads, official travel, and chauffeured cars for senior officials.

‘It doesn’t replace the importance of the work that Congress needs to do in coming up with a balanced, bold plan to reduce our deficit,’ Mr. Obama said in a ceremony in the Oval Office, ‘but it indicates once again that there are things we can do right now that will actually deliver better government more efficiently.’

In fact, the administration said, only a small portion of the $4 billion in annual savings will go toward reducing the deficit. Rather, the money will be spent on other programs, like helping veterans re-enter the work force or improving the nation’s infrastructure, which the White House contends are more worthwhile.

As Forrest Gump might have put it, “Republicans and Democrats goes together like peas and carrots.”

Is This What PA Taxpayers Shelled out $279 Million For?

Though I could probably pull something out of the Penn State scandal to illustrate the excesses of college sports, that’s not the real story as far as I can tell. This strikes me as first and foremost a sad legal matter, not a higher education policy story, so I haven’t had anything to say about it. Until last night.

As you probably know by now, following the announcement of Joe Paterno’s firing throngs of Penn State students took to the streets, either in anger or just to go out and be rowdy. Parts of the coeducational mob ripped down street signs, toppled over  a TV news van, and hurled rocks and fireworks at police.

Now, this was absolutely not the Arab Spring, with decades of brutal dictatorship finally overthrown. This was over the firing of a football coach who, while no doubt beloved, did not ensure that the proper authorities were notified when children were victimized by one of his staff members. Yes, he passed the information up channels so he did the minimum, but it’s not like he is being fired for protecting the children. One might disagree with the PSU trustees’ actions, but they certainly didn’t do anything outrageous.

But students all too often don’t need anything even close to grave injustice to fuel rampaging and property destruction. Usually all they require is a sports win or loss. At the University of Maryland they take to the streets and burn things over big basketball games, win or lose. At West Virginia University, they seemingly have couch conflagrations at the drop of a hat. And they are not alone.

Is this what taxpayers are shelling out hundreds of billions of dollars for every year? (Pennsylvania taxpayers handed $279 million to PSU this year.) Is this what higher education is supposed to be?

Of course not, but rioting is just the most glaring part of the unstudious college  iceberg. The mass of  it includes infamous partying that has largely replaced  tedious stuff like studying. Indeed, Richard Arum and Josipa Roksa report that the average time per week spent studying for a full-time student has gone from twenty-five hours in 1961, to twenty in 1981, to an anemic thirteen in 2003. Then there are the atrocious college completion rates – from what federal data show, maybe 60 percent of all students finish their programs – and the numerous majors of highly dubious value. In other words, as taxpayers have poured more and more money into the ivory tower, it seems to have just added more bars, jacuzzis, and hangouts.

Taxpayers have to subsidize higher education, we’re told, because doing so promotes the “public good.” Well, as you watch Happy Valley turn decidedly unhappy, contemplate all the rot and waste that runs throughout the ivory tower.  Then tell those people who talk up the public good that, clearly, it would be best served by letting taxpayers keep their higher ed bucks.

U.S. Still ‘On Track’ to Double Exports by 2014

In his State of the Union address in January 2010, President Obama launched his National Export Initiative with the explicit goal of doubling U.S. exports by 2014. The Commerce Department’s monthly trade report released this morning confirms that U.S. exporters remain “on track” to meet that goal—to my pleasant surprise. (See the chart below.)

I went on record earlier this year with skepticism that the goal was realistic. And to my defense, we are still less than two years into the journey. Doubling exports in five years requires an annual growth rate of almost 15 percent, about double the average rate of export growth during the past 30 years. The current annualized growth of 16.3 percent since 2009 will be increasingly difficult to sustain as the rebound from the previous global recession wears off and storm clouds gather over the Eurozone.

We’ve long argued at the Herbert A. Stiefel Center for Trade Policy Studies that exports are only part of the trade equation. American producers and consumers benefit from competitively priced imports as well as foreign investment in the United States. But the NEI has served a useful political function of providing a framework for the administration to pursue trade liberalization.

In the name of promoting exports, the Obama administration managed to work with Republicans in Congress last month to pass trade agreements with South Korea, Colombia, and Panama. It has also resolved the cross-border trucking dispute with Mexico satisfactorily enough to remove Mexican sanctions against another $2.4 billion in U.S. exports. And it will soon be working with Congress to establish permanent normal trade relations with Russia, ushering the world’s 11th largest economy into the World Trade Organization and opening its market further to U.S. exports.

Even if U.S. exports fall short of doubling by 2014, expanding our freedom to trade is always a goal worth pursuing.