Archives: 01/2013

How Trade Agreements Stray from Free Trade

I’ve mentioned before on this blog my concern that some provisions in trade agreements have little to do with free trade. Here’s a good example, from the specialty trade publication Inside U.S. Trade

U.S. labor unions are keeping an eye on the U.S.-European efforts to deepen economic ties, and believe a potential U.S.-EU trade agreement could provide an opportunity to raise some U.S. labor standards to the level prevailing in EU member states, according to labor sources.

This source noted that the EU is a community of nations that tends to have stronger labor laws than the U.S., higher union density and better wage rates. U.S. unions do not want to see a trans-Atlantic trade agreement used as a vehicle to lower labor standards in Europe, and they also view it as an opportunity to try to “raise up” U.S. standards to the European level, this source said.

I’ve talked about the proposed U.S.-EU free trade agreement before. To repeat what I said previously, there are some benefits to these kinds of agreements (although multilateral agreements would be much better). But I would really like to see the negotiators stick to the core issue of reducing protectionism, and not get distracted by domestic regulatory issues like the appropriate level of labor standards.


Law Prof Argues Against the Rule of Law

Roger’s not the only one who found “strange” Georgetown law professor Mike Seidman’s New York Times op-ed calling for us to ditch that old, antiquated Constitution to which some of us bitterly cling. Here’s a letter to the editor that I submitted:

Louis Michael Seidman wants us to “kick our constitutional-law addiction.” Why? He proclaims our political system “dysfunctional” and our government “broken” but makes no convincing case that the Constitution is to blame for our recurring political breakdowns or that giving up on it would reduce our dysfunction. But malformed though it is, the rickety old structure has served us well over the centuries.

Mr. Seidman offers nothing to suggest how we might go about governing ourselves once liberated from the Constitution, the skeletal structure that frames a living conversation about our relationship with government, not blind worship of “a poetic piece of parchment.”

He confidently predicts that his proposal wouldn’t yield total anarchy. But he doesn’t explain how we could preserve even the “political stability” he values while treating the Constitution’s provisions as mere recommendations, to be accepted or rejected through processes whose constitution-free structure he never specifies.

He tells us that he would preserve free speech and religion, equal protection and limited government, but he never explains how he picks those values over others or how his maddeningly vague proposal would “give real freedom a chance” rather than risk tyranny.

Actually, no, I didn’t write that.  It’s a letter by Harvard law professor Laurence Tribe that ran in today’s Times. Tribe is one of the most celebrated and cited legal scholars ever, an old-line liberal lion with whom I disagree on many if not most aspects of constitutional interpretation. Nevertheless, he gets this spot on. We may disagree on what the Constitution means, but we’re in full agreement that it’s this nation’s basic law and must be central to the operation of our legal and political institutions.

A Compact for America to Rein in Government

In 1798, Thomas Jefferson wrote to a friend that the one thing missing from the newly minted Constitution was some kind of limit on federal debt:

I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing.

Now that Washington has kicked the can on our out-of-control spending yet again, isn’t it time to reconsider Jefferson’s wish?

It may be easier than previously thought, through an ingenious spin on the balanced budget amendment (BBA).  Compact for America, a Texas-based nonprofit advised by the Goldwater Institute’s Nick Dranias, is advancing an agreement among the states — called an “interstate compact” — to transform the constitutional amendment process into a “turn-key” operation.  That is, a single interstate compact can consolidate all the state action involved in the Article V process: the application to Congress for an amendment convention, delegate appointments and instructions, selection of the convention location and rules, and ultimate ratification.  It then consolidates all the corresponding congressional action, both the call for the convention and ratification referral, into a single omnibus concurrent resolution.

The secret to combining so much in just two overarching pieces of legislation is the use of contingent effective dates — also known as “conditional enactments” or “tie-barring” — to ensure that each piece of legislation only goes “live” at the right time.  The Compact for America is thus designed to cut the time and resources needed for states to originate and ratify a BBA, making it possible to achieve in the next six months, with a symbolic target date of July 4, 2013.

Give Up on the Constitution?

My good friend Mike Seidman, who’s taught constitutional law at Georgetown for nearly 40 years, who’s often been a willing foil at Cato forums, and with whom I myself sparred for an hour last April on C-SPAN’s “Washington Journal,” outdid himself last Sunday with a long and strange op-ed in the New York Times. Erroneously titled “Let’s Give Up on the Constitution,” it’s not everything in the document that troubles him: he likes the structure—two houses of Congress—and freedom of speech and religion—even “equal protection of the laws and protections against governmental deprivation of life, liberty or property.” But he’d justify those institutions and practices “on contemporary policy grounds, not abstruse constitutional doctrine.” And he’d do so because:

As the nation teeters at the edge of fiscal chaos, observers are reaching the conclusion that the American system of government is broken. But almost no one blames the culprit: our insistence on obedience to the Constitution, with all its archaic, idiosyncratic and downright evil provisions. …

Our obsession with the Constitution has saddled us with a dysfunctional political system, kept us from debating the merits of divisive issues and inflamed our public discourse. Instead of arguing about what is to be done, we argue about what James Madison might have wanted done 225 years ago.

Would that Seidman were right in that last lament. The fiscal cliff debate of the last few weeks has been about anything but what Madison might have wanted. It’s been all about “what is to be done”—as if there were no constitutional constraints whatever on “what is to be done.”

Seidman, however, would dispense with the law of the Constitution and reduce nearly everything to politics. In fact, he offers several historical examples of the “constitutional disobedience” he’s urging—Congress and the Alien and Sedition Acts in our first decade, Jefferson and the Louisiana Purchase, Lincoln and the Emancipation Proclamation—conspicuously ignoring the countless times the Constitution has saved us from political lawlessness. Indeed, in a passage that gives the game away, Seidman writes:

In his Constitution Day speech in 1937, Franklin D. Roosevelt professed devotion to the document, but as a statement of aspirations rather than obligations. This reading no doubt contributed to his willingness to extend federal power beyond anything the framers imagined, and to threaten the Supreme Court when it stood in the way of his New Deal legislation.

Just so. And that treatment of the Constitution as “advisory only” is what has brought us to the fiscal chaos we’re enjoying today. A Progressive to the core, Seidman lays out the view that has dominated modern “constitutional law” for a century, enabling the rise of the modern, unsustainable welfare state the Founders sought expressly to avoid. And in the process, he illuminates the central flaw in that view.

Rum Subsidies Included in Fiscal Cliff Pork

Among the various provisions in the recent fiscal cliff deal was a two-year extension of the rum cover-over program that sends federal revenue from rum excises to the governments of Puerto Rico and the U.S. Virgin Islands.  The program was originally designed to provide development aid to these U.S. territories, but in recent years it has become a tool of industrial policy and corporate welfare. 

I wrote about the program back in May last year: 

As it does with all distilled spirits, the federal government charges an excise tax of $13.50 per proof gallon of rum sold in the United States. This equates to roughly $2 per bottle. Under the cover-over program, almost all of that money is directly granted to the U.S. Virgin Islands and the Commonwealth of Puerto Rico using a complex formula so that each receives a share of the money based on how much rum it produces relative to the other. The tax is collected from sales of all rum imported to the mainland, even from other countries.

In 2009 the U.S. Virgin Islands figured out how to increase its haul under the program by luring Captain Morgan maker Diageo to relocate its production facility there from Puerto Rico with a promise to share the loot.  Diageo now has a 30 year deal to produce rum in the Virgin Islands backed by subsidies that cover almost the entire cost of production. 

The use of the funds this way and the program’s extension have two major consequences.

First, the ensuing rum war between U.S. Virgin Islands and Puerto Rico to secure a larger portion of the cover over funds has crippled the ability of producers in other Caribbean island nations to compete in the global rum market.  The potential for an embarrassing WTO challenge grows greater now that the program has been extended.

Second, Diageo now has a strong incentive to lobby Congress to keep the program in place.  As the invaluable Tim Carney reports today in the Washington Examiner, Diageo hired ex-senators Trent Lott and John Breaux to lobby their former colleagues on the issue.  The recent extension is merely a sign of more to come.

The program is worth about $450 million per year to the governments of these Caribbean territories.  Giving a slice of that to rum producers brings in the lobbying power to keep the program in place, even as it drastically distorts the rum market at the expense of everyone else.

Six-Year Old Suspended from School; “Threatening” Behavior

A Montgomery County public school suspended a first-grader for pointing his finger like a gun – and on top of that, the troublemaker said “pow!”

The boy’s parents are worried that this action will now be a part of his educational record.  If the lad gets into a fight a few years hence, will the government mark him down as a “problem student”?

Read this if you think this is some odd item from the news.

Education: A Spending Litmus Test

So the country avoided the fiscal cliff, at least one level of it. We supposedly have the tax situation settled (unless the administration demands more increases) while spending remains essentially untouched. The latter will be dealt with in the next couple of months, we’re told.

I don’t believe that any real cutting will be done. So much spending sounds so worthy it’s nearly impossible to get a majority of politicians to ever call for meaningful reductions. Who doesn’t want to help the young, the old, the middle class, the lower class, businesses, farmers, etc.? That so much of the largesse enriches bureaucrats and Beltway bandits, and that the side effects are often worse than the “cure,” simply don’t matter.

But maybe this time all those people in Washington we supposedly elect to act on policy reality will be serious and responsible. Maybe that we spend far too much on programs that are way too ineffective – and are largely unconstitutional – will at last be acknowledged and acted upon by Congress and the White House.

Good luck. But if you want to know if the astronomically improbable is somehow happening, look no further than education. It is perfect ground for feel-good spending – it’s about helping people help themselves! – but has an absolutely dreadful record of producing net good.

Head Start – the flagship federal pre-school program – has repeatedly been shown to produce almost no lasting benefits. At the K-12 level, decades of humongous spending increases haven’t goosed achievement for 17-year-olds, our schools’ “final products.” And higher education spending? Its main accomplishment has been to fuel breathtaking price inflation, the kind of moonshot in which no federal employee should ever take pride.

Unfortunately, if the fiscal cliff tax deal is any indication – and it almost certainly is – expect no spending seriousness. Included in the deal was an extension of the American Opportunity Tax Credit, which, of course, gives every American great opportunities. Actually, its politically spun moniker notwithstanding, the thing is such a stinker it garners boos from across the ideological spectrum. Left-leaners dislike it because it skews support toward the wealthy – families making up to $160,000 a year – while libertarians and conservatives oppose it as yet another government inducement to overspend on over-priced, opulent ivory towers. Oh, and it is unconstitutional. But because it sounds so nice, it sails on.

As we careen toward Fiscal Cliff II, keep your eyes on education. If real cuts don’t head that way, you can be pretty sure nothing serious will be done – that politicians still aren’t putting policy reality above peachy-sounding politics.

Cross-posted from