February 26, 2014 3:38PM

Proposed IRS Rulemaking Would Chill Public Advocacy

Tomorrow ends the comment period for a proposed IRS rule that would change the way groups from the Sierra Club to the NRA advocate on behalf of their members. By defining “candidate‐​related political activity” as the rule has, election time could compel these groups to scrub their websites and Twitter feeds of almost any mention of political candidates. On March 4, join us for an event exploring the proposed rule. And you can learn more by listening to today’s Cato Daily Podcast with Allen Dickerson, legal director of the Center for Competitive Politics.

You can always subscribe to the podcast here.

February 26, 2014 2:25PM

Is the Grand Jury System a Joke?

An excerpt from the Charlotte Observer:

During a single four‐​hour workday last week, a Mecklenburg County grand jury heard 276 cases and handed down 276 indictments.

That means the 18 jurors heard evidence, asked questions, weighed whether the charges merit a trial, then voted on the indictments – all at the average rate of one case every 52 seconds.…

“The entire system is a joke,” said Joe Cheshire, a Raleigh attorney who handles high‐​profile criminal cases across the state. “There is absolutely no living, breathing person with any kind of intellect who believes that a grand jury could consider and vote on 10 complex issues in the period of time that they use to deliberate on hundreds.”

Charlotte attorney Jim Cooney agrees. Rather than check the power of government, grand juries have become a prosecutor’s ally, he said, “that hands out indictments like they’re boxes of popcorn.”

The article notes that the one recent case where a grand jury declined to issue an indictment involved a police officer. Hmm.

For Cato scholarship on the problems with the grand jury system, go here.

February 26, 2014 2:24PM

Further Thoughts on Arizona’s “Religious Freedom” Bill

My colleague Ilya Shapiro has skillfully laid out some points often overlooked in the furor over Arizona’s SB 1062. In particular, the bill is a variation on what’s known as a “mini‐​RFRA” — that is, a state bill patterned after the federal Religious Freedom Restoration Act (RFRA) of 1993 — and can scarcely be understood outside the context of how RFRAs work, why they managed to sail almost uncontroversially through the U.S. Congress in 1993 with bipartisan support, and how they have since emerged as a serious obstacle to particular policy ambitions such as ObamaCare’s universal employer contraceptive mandate, with a resulting tendency for liberal opinion to swing against them (yet often with a curious reluctance to come right out and say that RFRA itself goes too far). 

A few points I’d add: 

* First, the various religion‐​and‐​discrimination bills moving in multiple state legislatures are very different from each other and demand separate analysis. (This Mother Jones account, while strongly opposed to all the bills, is better than most about acknowledging their differences.) The first bill to provoke a national furor was the very extreme measure passed by the Kansas lower house, which would have (among other things) introduced a new legal right for many public servants not to do their jobs and created rights to sue employers for not accommodating anti‐​gay sentiment. The Republican leadership of the Kansas Senate quite sensibly flagged these incursions on the rule of law and on the freedom of private enterprise as reasons to kill the bill

* What of the Arizona proposal? Eleven leading religion‐​and‐​law scholars, including such heavy hitters as Michael McConnell and Douglas Laycock, correct some misconceptions about the bill in this letter reproduced at Power Line. The Arizona bill pushes mini‐​RFRAs into highly disputed territory by specifying that it applies not just to “government” but to “state action” more broadly, the crucial difference being that it aims to insert a right to religious accommodation as a defense in litigation between private parties arising from state laws. (Contrary to some imaginings, the bill creates a right of attorneys’ fee recovery by prevailing religious‐​accommodation claimants only when the adverse party is a government.) To confess my biases, as a general matter I like the idea of affording wider religious‐​liberty defenses in most anti‐​discrimination statutes applying to private actors. At the same time, doing it this way — by pushing out the boundaries of RFRA to change the playing field of private litigation at one stroke, rather than pause for a debate about how best to address multiple areas and situations — strikes me as fairly sure to generate unintended consequences and unexpected results. When advocates warn Arizona Gov. Jan Brewer she will be sailing the ship of state into uncharted waters if she signs the bill, this is the provision that most makes me think they’re on to something. 

* Why not let the Arizona episode begin a debate about whether RFRAs have gone too far or not far enough? The law’s status as a bright new idea in the Clinton era doesn’t mean it should be immune from renewed scrutiny today with the perspective two decades of experience affords. At best, speaking as one not unsympathetic with its aims, it was and is at best a very blunt instrument, one that tends to privilege sincere religious belief over equally sincere belief grounded in something other than religion. It’s entirely conceivable that it and its state imitators go too far as applied to some subjects, yet perhaps not far enough as applied to others. 

Such a debate might prove more productive than the usual bitter round in the culture wars.


February 26, 2014 12:43PM

Bank Tax Is Wrong “Fix” for Too‐​Big‐​To‐​Fail

Chair of the House Ways and Means Committee Dave Camp is soon to roll out a plan for comprehensive tax reform. He is to be commended for doing so. Our tax code is an absolute mess with incentives for all sorts of bad behavior. Early reports suggest, however, that Congressman Camp will also include a “bank tax” to both raise revenue and address the “Too‐​Big‐​To‐​Fail” (TBTF) status of our nation’s largest banks. While the evidence overwhelmingly suggests to me that TBTF is real, with extremely harmful effects on our financial system, I fear Camp’s approach will actually make the problem worse, increasing the market perception that some entities will be rescued by the federal government.

Bloomberg reports the plan would raise “would raise $86.4 billion for the U.S. government over the next decade…would likely affect JPMorgan Chase & Co, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley.” The proposal would do so by assessing a 3.5 basis‐​point tax on assets exceeding $500 billion.

While standard Pigouvian welfare analysis would recommend a tax to internalize any negatives externalities, TBTF is not like pollution, it isn’t something large banks create. It is something the government creates by coming to their rescue. I don’t see TBTF as a switch, but rather a dial between 100 percent chance of a rescue and zero. By turning the banks into a revenue stream for the federal government, we would likely move that dial closer to 100 percent – and that is in the wrong direction. For the same reason, I have opposed efforts to tax Fannie Mae and Freddie Mac in the past. The solution is not to bind large financial institutions and the government closer together, as a bank tax would, but to further separate government and the financial sector. Just over a year ago, I laid out a path for doing so in National Review. Were we to truly end bailouts, limiting government is the only way to get that dial close to zero. 

If we want to use the tax code to reduce the harm of financial crises, then we should focus on reducing the preferences for debt over equity, which drive so much of the leverage in our financial system. I’ve suggest such here in more detail. There are also early reports that Camp’s plan will reduce some of these debt preferences. Let’s hope those remain in the plan.

February 26, 2014 11:29AM

Folly of Federal Flood Insurance

Subsidized flood insurance is one of the many federal programs that is counter to both sound economic policy and sound environmental policy. Congress created the National Flood Insurance Program (NFIP) in 1968 to help homeowners in flood‐​prone areas purchase insurance. The FEMA‐​run program covers floods from river surges and storms on the seacoasts.

In recent years, the NFIP has gone hugely into debt and it may be bailed‐​out by taxpayers at some point. The program has encouraged people to build homes in areas that are too hazardous to safely occupy. It has encouraged towns to expand development in flood‐​prone areas. And the program undermines constitutional federalism by prompting the federal government to reach its regulatory tentacles into local zoning issues.

The NFIP subsidizes wealthy people with multiple payouts after their homes on the seacoasts are repeatedly destroyed. The program is very bad policy — a seemingly good idea to policymakers in the 1960s that has ended up creating growing distortions.

When I started reading about the NFIP recently, I was surprised to learn that Congress made sensible reforms to it in 2012 under the Biggert‐​Waters Act. The best reform would be a complete repeal of the NFIP, but in the meantime the 2012 law was a good start at reducing the program’s costs and distortions.

Alas, the prospect of Congress staying on a pro‐​market, pro‐​environment reform path was apparently too good to be true. No sooner had the ink dried on the 2012 law than members of Congress began trying to reverse the reforms.

This week, Congress will be voting on a bill that backtracks on the 2012 reforms. I have not studied the details of the new bill, but Diane Katz at the Heritage Foundation has penned a nice overview.

February 26, 2014 10:30AM

Political Poster Week Continues: “I Need Smokes”

U.S. World War I Poster, "I Need Smokes"

As I noted in my book The Rule of Lawyers, it’s not by happenstance that the sharpest increases in Americans’ smoking rates have come in wartime. Nicotine staves off the boredom, fear, and loneliness of life on the front lines, and the smoking habit encourages socialization among troops. Years later, the federal government was at pains to downplay its vigorous promotion of tobacco use as part of both the WWI and WWII war effort. (It had a sideline in promoting some other important forms of substance abuse as well, notably amphetamine‐​munching.)

This poster, of World War I vintage, would have made a good illustration for the article I wrote in Reason a while back on government contributions to product‐​related risk. For some other tobacco‐​related war poster themes, check the Hoover Institution political poster database

February 26, 2014 8:53AM

For Marriage Equality, Religious Liberty, and the Freedom of Association

Even though I'm for marriage equality -- next week I'll be filing a brief supporting the challenge to the marriage laws of Oklahoma and Utah in the U.S. Court of Appeals for the Tenth Circuit -- I have no problem with Arizona's SB 1062.

SB 1062 does nothing more than align state law with the federal Religious Freedom Restoration Act (which passed the House unanimously, the Senate 97-3, and was signed by President Clinton in 1993). That is, no government action can "substantially burden" religious exercise unless the government uses "the least restrictive means" to further a "compelling interest." This doesn't mean that people can "do whatever they want" -- laws against murder would still trump religious human sacrifice -- but it would prevent the government from forcing people to violate their religion if that can at all be avoided. Moreover, there's no mention of sexual orientation (or any other class or category).

The prototypical scenario that SB 1062 is meant to prevent is the case of the New Mexico wedding photographer who was fined for declining to work a same-sex commitment ceremony. This photographer doesn't refuse to provide services to gay clients, but felt that she couldn't participate in the celebration of a gay wedding. There's also the Oregon bakery that closed rather than having to provide wedding cakes for same-sex ceremonies. Why should these people be forced to engage in activity that violates their religious beliefs?

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