March 18, 2013 3:29PM

Striking Down Bloomberg’s Soda Ban: A Matter of Law, Not Activism

Much legal commentary at Slate follows a pat formula: judicial activism is a genuine menace, but not from left or liberal jurists. It's those awful judges on the conservative and libertarian side who engage in the real activism when they strike down laws and government initiatives, or as in the case of ObamaCare, come close to striking them down. To observe the formula at its most mechanical, check out Emily Bazelon's Slate article last Wednesday portraying a judge's striking down of Mayor Bloomberg's ban on big soda sizes as a venture in "conservative judicial activism."

Never mind that none of the readily available biographical information about jurist Milton A. Tingling seems to justify describing him, as Bazelon does, as a "conservative judge."  (Elected in Manhattan on the Democratic line, Judge Tingling appears to have fit his judicial career comfortably into the framework of Charles-Rangel-era Harlem politics, as David Bernstein mentions at Volokh Conspiracy. In a couple of earlier notable cases, Judge Tingling did rule against police and public-order interests, but we don't ordinarily regard that sort of civil-libertarian streak as distinctively "conservative.") 

Bazelon assails Judge Tingling for supposedly substituting his own judgment for that of Bloomberg's Department of Public Health on the merits of the drinks ban. But everyone agrees the question properly before the court was not whether the judge agreed with the ban. It was instead whether the ban could pass muster under the relevant New York precedent, a 1987 case called Boreali v. Axelrod in which New York's highest court (to quote the case summary) ruled that the state Public Health Council "overstepped the boundaries of its lawfully delegated authority when it promulgated a comprehensive code to govern tobacco smoking in areas that are open to the public." Boreali is a distinctive New York case, and creates a test for impermissible delegation that differs from what courts do when applying federal law.

Prof. Aaron Saiger, a specialist in local government law at Fordham Law School in Manhattan, had this to say the other day at Concurring Opinions about the drinks ruling: 

... Judge Tingling is right that New York State’s nondelegation doctrine – the doctrine that administrative law professors who teach only federal cases tell their students is a dead letter – prohibits the rule. The foundational case, Boreali v Axelrodis nearly on all fours with this case. Health departments, pursuant only to sweeping language giving them authority over public health, cannot in New York State limit trade in legal markets over which the legislature has given them no explicit authority. If the City is to win its promised appeal, it is going to need to argue that Boreali should be overruled or limited.

The problem with that is that Boreali is right. Nondelegation is an important constitutional principle and should not be sidelined out of existence. ... I think it’s not just reasonable, but better politics, better civics, and better constitutional law to require those shoves [i.e., paternalistic "nudges"] to come from a legislative, rather than an executive and bureaucratic, process.

Saiger's commentary is all the more pertinent because he's anything but a fan of the decision's craftsmanship. Unlike Judge Tingling, he doesn't think the ban was arbitrary or capricious; he doesn't believe the city's charter should be read to limit the Health Department's decree powers to those responding to imminent or emergency health threats; and he's not averse in principle, he says, to what the Mayor was trying to do. 

So what does Bazelon think about Boreali v. Axelrod? Does she think it should be overruled or can somehow be distinguished from the beverages case? It's hard to tell, because her article never mentions Boreali at all, though Judge Tingling had laid it out at great length as the precedent on which he was basing his decision. 

Judges shouldn't -- and Judge Tingling didn't -- breeze right by the relevant case law in the course of reaching a foreordained conclusion. If only all legal commentators were as careful.

March 18, 2013 12:50PM

Health Matrix Releases “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA”

Health Matrix: a Journal of Law-Medicine at Case Western Reserve University School of Law has released “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA,” a paper I coauthored with CWRU law professor Jonathan Adler. From the abstract:

The Patient Protection and Affordable Care Act (PPACA) provides tax credits and subsidies for the purchase of qualifying health insurance plans on state-run insurance exchanges. Contrary to expectations, many states are refusing or otherwise failing to create such exchanges. An Internal Revenue Service (IRS) rule purports to extend these tax credits and subsidies to the purchase of health insurance in federal exchanges created in states without exchanges of their own. This rule lacks statutory authority. The text, structure, and history of the Act show that tax credits and subsidies are not available in federally run exchanges. The IRS rule is contrary to congressional intent and cannot be justified on other legal grounds. Because tax credit eligibility can trigger penalties on employers and individuals, affected parties are likely to have standing to challenge the IRS rule in court. 

This paper led to one of the most important (and ongoing) legal challenges related to the PPACA. Access the full paper here.

March 18, 2013 11:57AM

Lessons from Cyprus

It doesn't create a lot of confidence in Europe that tiny little Cyprus, with a GDP less than Vermont, is now causing immense turmoil.

Though to be more accurate, events in Cyprus aren't causing turmoil as much as they're causing people to examine both government finances and bank soundness in other nations. And that's causing anxiety because folks have taken their heads out of the sand and looked at the reality of poor balance sheets.

Looking closer at the specific mess in Cyprus, an insolvent financial sector is the cause of the current crisis, though the problem is exacerbated by the fact that the government has dramatically increased the burden of government spending in recent years and therefore isn't in a position to finance a bailout.

But that then raises the question of why Cyprus is bailing out its banks? Why not just let the banks fail?

Well, here's where things get messy, particularly since we don't have a lot of details. There are basically three options for dealing with financial sector insolvency.

  1. In a free market, it's easy to understand what happens when a financial institution becomes insolvent. It goes into bankruptcy, wiping out shareholders. The institution is then liquidated and the recovered money is used to partially pay of depositors, bondholders, and other creditors based on the underlying contracts and laws.
  2. In a system with government-imposed deposit insurance, taxpayers are on the hook to compensate depositors when the liquidation occurs. This is what is called the "FDIC resolution" approach in the United States.
  3. And in a system of cronyism, the government gives taxpayer money directly to the banks, which protects depositors but also bails out the shareholders and bondholders and allows the institutions to continue operating.

As far as I can determine, Cyprus wants to pick the third option, sort of akin to the corrupt TARP regime in the United States. But that approach can only work if the government has the ability to come up with the cash when banks go under.

I'm assuming, based on less-than-thorough news reports, that this is the real issue for Cyprus. It needs taxpayers elsewhere to pick up the tab so it can bail out not only depositors, but also to keep zombie banks operating and thus give some degree of aid to shareholders and bondholders as well.

But other taxpayers don't want to give Cyprus a blank check, so they're insisting that depositors have to take a haircut. In other words, the traditional government-imposed deposit insurance regime is being modified in an ad hoc fashion.

Cyprus Bank Bailour

And this is why events in tiny Cyprus are echoing all over Europe. Folks in other nations with dodgy banks and unsound finances are realizing that their bank accounts might be vulnerable to haircuts as well.

So what should be done?

I definitely think the insolvent institution should be liquidated. The big-money people should suffer when they mismanage a bank. Shareholders should lose all their money. Then bondholders should lose their money.

Then, if a bailout is necessary, it should go only to depositors (though I'm not against the concept of giving them a "haircut" to save money for taxpayers).

But Cyprus apparently can't afford even that option. And the same is probably true of other European nations. 

In other words, there isn't a good solution. The only potential silver lining to this dark cloud is that people are sobering up and acknowledging that the problem is widespread.

Whether that recognition leads to good policies to address the long-run imbalances – such as reductions in the burden of government spending and the implementation of pro-market reforms – remains to be seen.

March 18, 2013 11:32AM

Beware the Data, II

A couple of months ago I warned about the dangers of having government gather and publish growing reams of information in the name of making education better. Sure, it sounds great – help people get as informed as possible! – but the dangers are legion. You can read about several such pitfalls in that old post. You can also get a sense of the great wealth of data already out there in this op-ed. What I haven’t discussed – and what might concern many Americans more than anything else – is the threat that massive data collection poses to our privacy.

Articles over the last week or so have started to draw significant attention to the growing education-information complex and its connection to long-standing efforts – especially federal – to accumulate information on Americans from birth to boardroom. Gaining particular traction has been a story about how student data collected in New York could be sold to companies or other entities outside of school districts. Even more concerning is a story by Joy Pullmann in the Orange County Register about lots of data collection and mining that is either already happening or under consideration nationwide.

What’s especially troubling to some people, including Pullmann, is that not only is there ever-growing centralization of curricula such as the federally backed Common Core, as well as centralized testing of knowledge, but there are also moves to assess students’ "affect" that could include wiring them to "facial expression" cameras and "skin conductance sensors." Contemplating such things, it’s hard not to conjure up images of A Clockwork Orange.

When you read the federal report that proposes using "affective computing methods" such as skin sensors, it doesn’t appear that the authors have nefarious, big-brother intentions. The object of the report is to examine how students’ "grit" and perseverance can be improved, and that is a reasonable goal. Similarly, furnishing information about the academic status of incoming freshmen at a college, the amount they learn while in school, and how well they fare after graduation, is driven by good intentions.

But we must never feel content with good intentions. We must care primarily about the effects of the policies stemming from our golden goals, and as I’ve written previously, there are likely big, negative, immediate effects that would go with empowering more government data collection. There are also potentially even worse long-term consequences, including that government would begin to try to adjust students’ feelings and attitudes if doing so might produce better test scores or some other, politically determined, outcome. Indeed, such affect-engineering arguably already takes place with huge increases in ADD and ADHD diagnoses that lead to personality-altering drug-taking.

It’s easy – and almost always innocent – to say that we need more information so that we can make things work better. But with that comes very big potential dangers we must never ignore.

Cross-posted at seethruedu.com

March 18, 2013 10:46AM

Who Failed to Stop the Iraq War?

With thanks to Mark Thompson at Time's Battleland for calling this to my attention, the discussion yesterday on CNN’s “Reliable Sources” concerning the decision to invade Iraq was more interesting than the others that I’ve seen or read. 

Host Howard Kurtz noted that editors at the New York Times had admitted to having “printed too many credulous claims about Saddam and Iraq.” Kurtz explained that Len Downie, then the editor of the Washington Post, had admitted “he had made a mistake of not putting more skeptical stories on the front page. Even the people who ran the news organizations seem to acknowledge that they had fallen short.” Given all this, Kurtz asked the panelists, “Didn't most of the media…get rolled by the Bush administration during this run-up to war?”

The panel, which included Thompson, and Fred Francis, formerly with NBC, explained why the press got the story wrong: Saddam fooled a lot of people, including his own people and his neighbors. He fooled many people in the U.S. government, too.

But the Washington Post's Rajiv Chandrasekaran properly looked past the distractions of phony Iraqi connections to 9/11 and Iraq's nonexistent nuclear weapons. Chandrasekaran agreed with Kurtz that “there was far more that we all could have done. You could go to Iraq. I was in Iraq for the bulk of the six months leading up to the war. What you couldn't really do is get an independent assessment of what Saddam really had.”

But, he continued:

it wasn’t just the issue of weapons of mass destruction. It was the broader questions. What is the political transition plan? Truth squadding the White House’s claims that Iraq could pay for it, the reconstruction of its country, the questions of the long simmering tensions between the principal religious and ethnic groups in the country. These were questions that were all easily reportable. They should have had more coverage. We didn't do enough in really aggressively looking at all of that.

Chandrasekaran (who will be speaking at Cato in a few weeks) is right. The greatest argument against launching a war to overthrow Saddam Hussein was what would come after him. The advocates for the war hyped the threat of Saddam’s weapons, and what he would do with them, to build a case for the benefits that would obtain from the war. We now know that they exaggerated these benefits because Saddam didn’t have nuclear weapons. But the claim that Saddam would use the weapons, or give them to terrorists, was also dubious, and was noted as such at the time (and well before) by some of the leading opponents of the war.

But the war hawks also downplayed the costs of invading Iraq by claiming that there would be no need for a long-term U.S. troop presence, and certainly not as large as Army leaders had estimated. They dismissed the overwhelming evidence that Iraq was beset by ethnic and sectarian divisions. Bill Kristol famously dismissed the notion that “somehow the Shia can’t get along with the Sunni” as so much “pop sociology.” I suspect that they were aware of these divisions, because it would have been far harder to convince the American people to support a conflict if they knew that it was going to be long and costly, instead of the “cakewalk” that the war’s supporters claimed.

I cannot prove the war hawks knew the truth about Iraq and concealed it. I’m certain that they should have known. But they weren’t trying to stop a war; they were trying to start one.

And that is why those who should have known better and did not speak up, or who lent their credibility as experts to the side making the case for war, deserve special scorn on the 10-year anniversary of the start of the Iraq war. They failed to stop the war. The news media’s coverage was inadequate and lazy. In retrospect they should have paid more attention to the vocal few who raised serious objections. But reporters cannot be blamed for not finding experts who did not speak publicly. Or at all.

That is where Colin Powell comes in. He is likely to be remembered for his crucial role in making the case for war at the United Nations on February 5, 2003. But Powell should also be remembered for his words of caution six months earlier, in August 2002.

It is known today as the Pottery Barn principle--“If you break it, you own it.” But what Powell actually said reflects a deep appreciation for the folly of regime change and preventive war: “You are going to be the proud owner of twenty-five million people,” Powell warned the president. “You will own all their hopes, aspirations, problems. . . . It’s going to suck the oxygen out of everything.”

We know about this exchange from Bob Woodward, and Powell was probably the veteran reporter’s source, so the words could be dismissed as self-serving, or simply invented after the fact. But they shouldn’t be. Because what Powell allegedly said to Bush then could just as easily have been said by Condoleezza Rice in 2007 with respect to war with Iran, or by Hillary Clinton in 2011 regarding Bashar al-Assad in Syria, or by John Kerry in response to North Korea’s latest antics today. And even if Powell never said them, the sentiment is spot on. I only wish he had said them in public.

Whenever reporters, scholars, academics--or anyone in the public at large, for that matter--hears someone making the case for preventive war, the Pottery Barn principle, Powell’s unspoken warning from a war that never should have happened, should be burned in their brain. I think that it is. And that explains why Bill Kristol’s modern-day Project for a New American Century has proved far less effective than its predecessor.

I sincerely wish that we didn’t have to suffer the loss of blood and treasure, the thousands of American dead, and tens of thousands wounded, to learn these lessons. But I especially hope that we’re not already forgetting them.

March 18, 2013 8:57AM

Guns and the Commerce Clause: On the Way to the Supreme Court?

Nearly two years ago, I wrote about an intriguing Commerce Clause case involving the Montana Firearms Freedom Act.  To wit, Montana enacted a regulatory regime to cover guns manufactured and kept wholly within state lines that was less restrictive than federal law.  The Montana Shooting Sports Association filed a claim for declaratory judgment to ensure that Montanans could enjoy the benefits of this state legislation without threat of federal prosecution.  The federal district court ruled against the MSSA.

On appeal to the Ninth Circuit, Cato joined the Goldwater Institute on an amicus brief, arguing that federal law doesn't preempt Montana’s ability to exercise its sovereign police powers to facilitate the exercise of individual rights protected by the Second and Ninth Amendments. More specifically, for federal law to trump the MFFA, the government must claim that the Commerce and Necessary and Proper Clauses give it the power to regulate wholly intrastate manufacture, sale, and possession of guns, which is a state-specific market distinct from any related national one.

The lawsuit’s importance is not limited to Montana; a majority of states have either passed or introduced such legislation. The goal here is to reinforce state regulatory authority over commerce that is by definition intrastate, to take back some of the ground occupied by modern Commerce Clause jurisprudence.

Well, after much delay -- in part due to the Ninth Circuit's waiting for Supreme Court instruction on the Commerce Clause in the Obamacare litigation -- MSSA v. Holder finally saw oral argument two weeks ago.  The Goldwater Institute's Nick Dranias, who was the principal author of our joint brief, was able to get 10 minutes of argument time and sent me this report afterwards, which I reprint with his permission:

Read the rest of this post »
March 18, 2013 8:56AM

Deadline Extended for Legal Studies Institute’s Summer Program

The Fund for American Studies has long done excellent work educating students on the principles of individual liberty and free-market public policy.  Many Cato scholars and interns have been involved with its programming over the years, including Roger Pilon and Randy Barnett in the legal field.  I now have the privilege of serving on the Board of Visitors of TFAS's Legal Studies Institute (along with Randy and others who are familiar to those who follow Cato's work), and heartily recommend its summer program for law students looking for a DC experience that includes an internship, class credit, mentoring, high-level briefings and panels, and career development.  The application deadline has now been extended to April 3.  Here are the details:

LEGAL STUDIES INSTITUTE                                     

May 23 – August 2, 2013                                                                                             

Washington, D.C.                                                                             


  • Legal Internship: Participants will be placed in a 9-week summer legal internship where they will work full-time and gain substantive experience in the legal profession. Internship sites include law firms, courts, public interest organizations and the legal departments of trade associations, corporations and government agencies.
  • Briefings and Activities: Participants will attend private briefings at institutions of the judicial, legislative and executive branches and will meet with prominent judges, lawyers and judicial scholars. Previous guest speakers have included; Supreme Court Justice Antonin Scalia, Former Attorney General Michael Mukasey, U.S. Court of Appeals, Ninth Circuit Chief Judge Alex Kozinski and D.C. Federal Court of Appeals Judge Douglas Ginsburg among others.
  • Career Development Activities: Workshops will be held to help prepare participants for success in their law careers, and planned networking events will facilitate professional interaction. 
  • Attorney Mentor Program: Each participant will be matched with an experienced lawyer who will serve as a professional mentor during and after the program. 
  • Constitutional Law Course for Credit: You will be enrolled in a constitutional law course titled “Originalism and the Federalist Papers.” Classes will be held at Georgetown University Law Center. Students will receive credit from Ohio Northern University Pettit School of Law, or for an additional fee from Georgetown University Law Center. The course will be taught by Federalist Society lecturers, Professor John Baker, visiting fellow at Oriel College, University of Oxford and Visiting Professor at Georgetown University. Professor Randy Barnett, the Camack Waterhouse Professor of Legal Theory at Georgetown University Law Center and Professor Roger Pilon of the Cato Institute will also lecture. 
  • Housing: Students will live in fully-furnished apartments in downtown Washington, DC and are matched with other Institute participants. The apartments provide easy access to the DC metro transportation system. 
  • Scholarships: 75% of students receive scholarship awards based on financial need and merit.


Applications will be accepted until the extended deadline of April 3, but applicants are encouraged to apply as early as possible.  Visit www.DCinternships.org/LSI for more details and to begin an application. Questions may be directed to Jennifer Fantin, LSI recruitment and admissions assistant at admissions@tfas.org  or 202.986.0384.