Archives: 07/2013

Battling Protectionism in the States

With much of the focus of the EU-US preferential trade agreement on regulatory matters, agricultural barriers, and other areas supposedly relating to vital product standards (as opposed to tawdry protectionism, you understand), one potentially beneficial part of the negotiations is being overlooked: the potential to tackle the overt protectionism still very much alive at the state level. While the federal government has constotutional authority over regulating trade with other nations, the states still have some leeway in certain areas, and the European Union negotiators are reportedly very interested in loosening state-level policies on public procurement contracts. From Inside U.S. Trade:

Michel Barnier, the top European Commission official on public procurement matters, yesterday (July 16) said the European Union will use trans-Atlantic trade talks to address a U.S. government contracting practice that some EU firms view as discriminatory because it locks in preferential, multi-year procurement contracts with a set list of suppliers…

The EU has complained in the past that these multi-year deals, known as task and delivery orders in the United States or “framework agreements” in the EU, can lock EU firms out of the market for extended periods. One EU source said the commission will likely press the U.S. to reduce the length of these multi-year contracts…

In addition to framework agreements, other EU priorities in the area of procurement with respect to the Transatlantic Trade and Investment Partnership (TTIP) include expanding the number of U.S. states and sub-federal entities that are covered by procurement rules barring discrimination. That is a difficult proposition for the Office of the U.S. Trade Representative, as it does not have automatic authority over sub-federal entities, and instead must convince them individually to take on new obligations.

But if the U.S. is willing to take on new commitments, it could reap rewards in the form of expanded access in the EU, Barnier said, although he did not elaborate…

Under the [World Trade Organization’s Government Procurement Agreement], the EU has opened the procurement of some entities to other GPA parties but not the U.S., as the EU does not view the U.S. as offering reciprocal market access in these areas. If the U.S. offered greater procurement access under TTIP, the EU could ostensibly extend to the U.S. this greater level of coverage that it offers to some other GPA partners…[emphasis added]

OK, ignore for a moment the usual faulty “if you stop punishing your taxpayers, we might stop punishing ours” thinking of trade negotiators, just for a second. It is true that neogtiators seem to have little time for the costs of “Buy American” policies, but here we see an excellent example of how protectionism is not dead, it’s just moved to a different jurisdiction. States still have overtly discriminatory procurement policies on their books, and they are costing their own taxpayers money (by not necessarily choosing the best value for money) and American exporters opportunities abroad. Perhaps the EU-US deal can change that, assuming the USTR can successfully “convince” sub-federal entities to do the right thing.



Obama to Congress: Only I Can Amend ObamaCare

Today the House of Representatives will vote on two bills. One would codify President Obama’s unlawful one-year repeal of the employer mandate and the related reporting requirements. The second would do the same for the individual mandate, effectively delaying its start date until 2015 as well.

I was initially skeptical that these votes would do much to build support for reopening, delaying, or repealing ObamaCare. I wrote last week that they seemed designed mainly to help partisan Republicans build their House majority by “embarrass[ing] House Democrats by forcing them either to support relief for employers but not families or to break ranks with their president on Obamacare.” Two things have changed my mind.

First, if these bills were to pass, it appears the insurance industry would join the coalition demanding that Congress delay ObamaCare. The industry appears very afraid of delaying the individual mandate. An item in today’s Politico Pulse titled, “Would Mandate Delay Mess With Exchanges?” explains:

[A]n insurance industry official makes the case that delay of the individual mandate…would also mean delay of exchanges since all of the 2014 premiums were filed assuming the mandate would be in place. “If the mandate is delayed, the rates will need to be modified to reflect the likely impact on the risk pool,” the official said. “There is not enough time for plans to re-configure their bids, submit them to regulators for approval, and have those new bids reviewed and approved by the time open enrollment begins on October 1.”

Second, these votes have forced President Obama into an untenable position. Yesterday, he threatened to veto both bills. Think about that. President Obama has threatened to veto a bill that would codify his own policy of repealing the employer mandate for one year. He supports rewriting federal law – but only if he does it. Not if Congress does it.

I’d wager lots of congressional Democrats are pretty angry at President Obama today.

The individual mandate is ObamaCare’s least popular provision. Just 34 percent of Americans support it. Only 12 percent support letting it take effect while employers get a pass. When he unilaterally delayed the employer mandate, President Obama put House Democrats, and potentially Senate Democrats, in the position of having to cast their most unpopular pro-ObamaCare vote, ever. The attack ads practically write themselves. ”Congressman X voted against giving families the same breaks as big business.

On top of that, Obama’s threat to veto the bill codifying the employer-mandate delay marginalizes all of Congress, Democrats included. It also puts Democrats in an impossible situation. If Democrats vote against the president on the employer mandate – by voting for the bill codifying his policy (are you confused yet?) – then they are breaking ranks with their party’s leader. If they vote with the president – by voting against the bill codifying the president’s policy – they would be participating in their own marginalization.

All told, these votes appear to maximize the likelihood of exposing fissures among ObamaCare supporters. Maybe they will do more to wear down the opposition to reopening ObamaCare than I thought.

UPDATE: This post originally claimed that only 17 percent of Americans support the individual mandate. The actual figure in the poll cited was 34 percent, split evenly between “very favorable” and “somewhat favorable.” I regret the error, and thank Robert Dible for catching it.

Surprised by the Latest Privacy Invasion? Don’t Be

You shouldn’t be surprised by the revelation that police departments across the country are gathering data about innocent people’s movements.

Using automated scanners, law enforcement agencies across the country have amassed millions of digital records on the location and movement of every vehicle with a license plate, according to a study published Wednesday by the American Civil Liberties Union. Affixed to police cars, bridges or buildings, the scanners capture images of passing or parked vehicles and note their location, uploading that information into police databases. Departments keep the records for weeks or years, sometimes indefinitely.

The ACLU study is here.

You should be outraged that your tax dollars are going into surveillance that undercuts your privacy, but don’t be surprised. Why not? Because Cato told you so.

Here’s text from a study we published nearly nine years ago, Understanding Privacy—and the Real Threats to It:

Red-light cameras and speed cameras are another part of the rapidly growing Big Brother infrastructure. Little technical difference separates a digital camera that takes occasional snapshots from one that records continuous footage. Equipped with optical character recognition technology, traffic cameras may soon have the technical capability to read license plates and scan traffic for specific cars. Networked cameras will be able to track cars throughout a city and on the highways. And database technology will make it possible to create permanent records of the movements of all cars captured on camera.

That material is based on testimony I gave to the House Transportation and Infrastructure Committee’s Subcommittee on Highways and Transit almost a dozen years ago. In it, I addressed the constitutional status of public monitoring like this. I talked about how license plates deprive drivers of the ability to navigate streets anonymously. That’s not the worst privacy invasion, given how driving laws and traffic disputes are administered. But it’s akin to requiring people to wear nametags to walk on public sidewalks.

Because the law has deprived people of the ability to protect privacy, the better view is that there is a Fourth Amendment search when law enforcement notes the license plates on cars. This search is inherently unreasonable if they do so when they do not suspect crime. As soon as red-light cameras are used for anything other than snapping suspected speeders — and they soon will be — these cameras should be shown a red light themselves.

Courts have only just begun to grapple with these issues, including the Supreme Court in the Jones case, which last year held that the government couldn’t attach a GPS device to a car and monitor its movements, even in public, without getting a warrant. I wrote about the state of Fourth Amendment law in this area in an article cleverly (ahem) titled: “U.S. v. Jones: Fourth Amendment Law at a Crossroads.”

Concerned? Yes, you should be. Angry? If you need that outlet. But don’t be surprised to learn that police departments are tracking of every car’s movements without a warrant.

State and Local Pension Liabilities

The unsustainable path of federal entitlements has received huge attention in recent years, but the unfunded pension liabilities of state and local governments are also large.  In recent work, economists Robert Novy-Marx and Joshua Rauh, of Rochester and Stanford, respectively, estimate that this liability may approach $3 trillion.  

That figure might sound paltry compared to the unfunded federal liabilities for Social Security and Medicare; Cato scholar Jagadeesh Ghokale estimates these to be more than $66 trillion as of fiscal year 2013.

Yet $3 trillion is hardly chicken feed.  Novy-Marx and Rauh estimate that to fund these pensions fully within 30 years, states would need to raise taxes by $1,385 per household, per year, over that period. 

This calculation highlights the enormity of the unfunded federal liabilities. Assuming the necessary tax increases would be proportional to the difference between state and federal liabilities, it would take an extra $30,470 in taxes per household, per year, for 30 years, to fund the federal liabilities.

Rauh and Novy-Marx go on to examine options for reducing the state unfunded liabilities. One approach is a “soft freeze” that enrolls new hires in defined contribution rather than defined benefit plans; this reduces the required tax increases from $1,385 to $1,210 per year.  Another approach is a hard freeze that stops benefit accruals for employees already in the defined benefits plans; this reduces the tax increases to $700-$800 per year.

An approach that Novy-Marx and Rauh do not consider is shrinking state and local government, which makes sense in many instances even if pensions are fully funded.  Legalizing drugs, for example, would mean reduced employment of police, prosecutors, and prison guards; this not only saves pension costs but also wages, salaries, and health costs, while eliminating a government activity that never made sense in the first place.

Hot Enough For You?

Global Science Report is a weekly feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

Is it hot enough for you?

You don’t know, and neither do global warming policy wonks.

Climatologically speaking, temperatures peak in the second half of July, especially here in the East. Thanks to this, global warming horror stories also max out, followed by the usual pleadings for this or that regulation of dreaded carbon dioxide. The latest greatest rage in a direct tax on carbon dioxide emissions, which will no doubt be trotted out in this week’s eastern heat.

But how hot is it? We know what the thermometer reads, but how does that compare to past thermometer readings?

It turns out there are several factors that confound temperature histories—some obvious, some subtle, and no doubt an unknown number of things that are simply missed.

An obvious one is that bricks, buildings and pavement increasingly “urbanize” the climate, retaining the heat built up during the day and impeding cross ventilation from the local wind regime. To compensate, most long-term temperature histories adjust urban temperatures in comparison to neighboring stations.

A more subtle one is that a systematic change in the time of day in which the high and low temperatures are read (and reset) is also important. As an example, consider a station in which the observer records the previous 24-hour high and low temperatures at 5pm, local time. That’s near the time of day, in the summer, when temperatures are around their daily high. If the day is really hot, say, 100° or so, the temperature at 5:01 is likely to be the same, meaning there are two very hot days recorded when there may have only been one if temperatures were reset at midnight.

There are plenty of other adjustments made to local temperature histories such as accounting for movement of weather stations, changes to the local environment, and adjustments for technological changes, such as switching from mercury-in-glass to electronic thermometers.

And there are some factors that are completely ignored and unaccounted for, having to do with economic factors. Near-neighbor comparisons aren’t going to do a bit of good if an entire country (say, Chad) is too poor to spend anything maintaining weather stations. The fact is that as they “weather,” unattended stations get darker, which means that the temperature gets hotter.

Federal Contractors Shouldn’t Lose First Amendment Rights

From the Boston Tea Party of 1773 to today’s Tea Party movement, from suffragettes to Occupiers, freedom of political association has always been this country’s hallmark. Importantly, this First Amendment freedom extends to campaign contributions. As the Supreme Court affirmed in the 1976 case Buckley v. Valeo,“the right of association is a basic constitutional freedom that is closely allied to freedom of speech and a right which, like free speech, lies at the foundation of a free society.”

The Buckley ruling has since survived many assaults—including, most notably, Citizens United v. FEC—though Citizens United exposed certain instabilities in Buckley’s frameworkIn any event, challenges continue to arise at the intersection of campaign finance law, political association rights, and the freedom of speech.

An important one comes from three individuals who have business contracts with the federal government. Under the Federal Election Campaign Act’s section 441c(a), “any person who is negotiating for, or performing under, a contract with the federal government is banned from making a contribution to a political party, committee, or candidate for federal officer.” Accordingly, the three plaintiffs are prohibited from making their intended campaign contributions and thus from an important form of political participation. This rule applies even to someone like name plaintiff Professor Wendy E. Wagner, who derives only a fraction of her income from the federal contract.

Together with the Center for Competitive Politics, Cato last week filed an amicus brief with the U.S. Court of Appeals for the D.C. Circuit, arguing that the plaintiffs should be able to exercise their right to political association and speech by contributing to political campaigns. Specifically, we argue that section 441(c) is unique in that it entirely bans contributions by a class of individual citizens. 

In McConnell v. FEC,the only case where the Supreme Court addressed an outright ban on contributions by a class of individuals—the ban on campaign contributions by minors originally in the McCain-Feingold campaign finance “reform,” which McConnell otherwise substantially upheld—the Court struck it down as overly broad and because the government didn’t give sufficient justification. What’s clear from that ruling is that for a ban on political speech and association to be constitutional, the government must show that its targeted class of people is somehow too dangerous to be allowed to participate in the political process, and also that the ban applies only to that set of uniquely dangerous people. Section 441(c) doesn’t meet this test.

If the government wants to ban her from this important form of political participation, then it must give more than bare assertions of the specter of potential corruption.

The D.C. Circuit will hear argument in Wagner v. FEC on September 30.

Will Changing of the (Political) Guard Bring Reform to Qatar?

The U.S. is the colossus which bestrides the globe, but Qatar is the pipsqueak which dominates the Middle East.  That’s a slight overstatement, but the tiny kingdom of Qatar has been destabilizing other nations.  There’s a new emir who would best concentrate on freeing his own people.

Qatar is barely 40 years old.  For the last 18 years it was ruled by Hamad bin Khalifi al-Thani, who ousted his father in a palace coup. 

Sheikh Hamad created the television channel, Al Jazeera, and annually hosted the annual Doha Forum.  I attended the internationally renowned gabfest in May, which afforded world-class networking possibilities for anyone in business, politics, and journalism.

Most dramatic has been Doha’s attempt to implement a big power foreign policy.  It gained a reputation for attempting to mediate regional disputes.  Along the way Qatar became a major U.S. ally, hosting bases for American troops.

More dramatically, Sheikh Hamad directly challenged the governments of Moammar Qaddafi and Bashar al-Assad.  In Syria Doha is supplying cash and weapons to Syrian rebels.  Ironically, the emir had once been close to Syria’s al-Assad.  In contrast, Qatar has worked to prevent change closer to home, especially in Bahrain. 

As I noted in my new article on National Interest online:

This aggressive policy carries obvious risks.  “Qatar’s recent moves to ‘take sides’ during the Arab Spring revolutions,” warned [Sultan] Barakat, “could threaten the reputation of impartial broker which Qatari policy makers have so carefully crafted over recent years.”  Worse, if the policy leaves friends turned enemies in place (Syria) or generates mounting instability (Libya), Doha ultimately might pay a high price for its role.

Of particular worry in Washington is Qatar’s penchant for supporting Islamic radicals.  For instance, [Christopher] Blanchard noted international concerns over “selective Qatari support for militias and political forces, particularly Islamist groups affiliated with the Libyan Islamic Movement for Change.”  Doha is doing much the same in Syria, with extremists taking an ever more dominant opposition role.  Doha’s “support for Islamist groups in the Arab world,” noted the Financial Times, caused concern among its more cautious Gulf neighbors. 

The emir may be a modernizer, but he is no liberal.  Anthony Shadid in the New York Times reported on observers who believed Sheikh Hamad “has an affinity for Islamist figures who echo the conservative Gulf States far more than ostensibly secular figures like Syria’s president.”

This activist foreign policy rests on a docile population at home which, ironically, enjoys few of the liberties which the regime promotes abroad.  The U.S. State Department reported that “The principal human rights problems were the inability of citizens to change their government peacefully, restriction of fundamental civil liberties, and pervasive denial of expatriate workers’ rights.”  Other than that, everything is fine in Qatar.

Sheikh Hamad recently abdicated in favor of his fourth son, 33-year-old Tamim bin Hamad bin Khalifa al-Thani.  The latter faces unique challenges and opportunities.  Qatar has gained influence but risks blowback from its increasingly violent intervention abroad.  The new emir might well decide to concentrate on reform at home.