201706

June 30, 2017 2:25PM

Government Businesses Can’t Simply Take Over Property They’ve Been Unable to Buy

For many years, Violet Dock Port had owned and operated a docking facility that stretched along a mile of the Mississippi River in St. Bernard Parish, Louisiana. As a private business, Violet was in economic competition with the local Port Authority, which also owns and operates riverfront property.

In 2007, the Port Authority took an interest in Violet’s land and tried to negotiate a purchase, but those negotiations failed. If this had been a normal negotiation between two private market participants, the Port Authority would have had only two options at that point: improve its offer or walk away. But instead it decided to appeal to its status as a public agency and claim that it required Violet’s land for “public use.” Invoking Louisiana’s eminent domain power to complete the deal by force, the Port Authority took over Violet’s business and eliminated its competition.

Violet has challenged this taking in state court, and the case has now reached the Louisiana Supreme Court. Cato has joined the National Federation of Independent Business Small Business Legal Center, Southeastern Legal Foundation, and Louisiana Association of Business and Industry on an amicus brief urging the state supreme court to strike down this taking under both the federal and Louisiana constitutions.

Under both constitutions, private property can only be taken by eminent domain if it is for a true public use. But a taking that is solely for the purpose of eliminating private competition is not a legitimate “public use.” There is nothing public-minded about destroying a private-sector business for the benefit of a public enterprise, and no reason to believe that such an agglomeration will help consumers or the economy. Indeed, the state’s economic arguments are dangerously broad because they could apply just as much to a private company that wished to eliminate competition.

Allowing this taking to stand would incentivize politically powerful corporate interests to lobby for the forcible transfer of property from smaller firms—solely for the purpose of eliminating competition.

Beyond the issue of “public use,” the Louisiana Constitution also specifically speaks to exactly what happened here. It declares that “no business enterprise or any of its assets shall be taken for the purpose of operating that enterprise or halting competition with a government enterprise.” The lower court implausibly interpreted this clause to not apply to the Port Authority because of a separate clause granting general eminent domain power to public ports. But as we point out in our brief, that ignores the core interpretive principle that the specific takes precedence over the general.

The lower court’s reasoning could effectively write an important property protection out of the state constitution entirely, by subordinating it to every general grant of government authority. For each of these reasons, the Louisiana Supreme Court should reverse the lower court in St. Bernard Port & Terminal District v. Violet Dock Port, Inc. and reject this taking.

If the port authority wants to make a deal with its competitors, it should do so the old fashioned way: by making them an offer they can refuse.

June 30, 2017 1:22PM

The Great Immigrant Threat

The situation is grim. Dangerous foreigners are streaming into the United States, killing and abducting innocent Americans. They depress the wages of American workers and hurt American businesses. Something must be done about these invaders!

Is this another warning from Donald Trump? Another column by Sean Hannity? The conclusion of another paper from the Center for Immigration Studies?

Nope, it's a paraphrase of warnings from politicians, unions, and major newspapers from a century ago, about the dangers of Chinese immigrants and other "Asiatics," as well as the businesses they opened, especially "chop suey houses." These warnings would be comical if they weren't so abhorrent.

Consider this, from the Chicago Tribune:

More than 300 Chicago white girls have sacrificed themselves to the influence of the chop suey “joints” during the last year, according to police statistics. … Vanity and the desire for showy clothes led to their downfall, it is declared. It was accomplished only after they smoked and drank in the chop suey restaurants and permitted themselves to be hypnotized by the dreamy, seductive music that is always on tap.

Or this, from the Mixer and Server, a publication of the Cooks' and Waiters' Union, an ancestor of today's UNITE HERE:

View this matter from every angle, without heat or racial prejudice, and the fact stares us in the face that there is a conflict between the American wage-earner and the workers or employers from the Orient. Our Government has been compelled to close its doors to Asiatics in recognition of this fact.

Or this resolution from one of the forerunners of the AFL-CIO:

WHEREAS the evils arising from the employment of white women and girls in establishments owned or controlled by Chinese and Japanese constitute, both morally and economically, a serious menace to society; therefore be it

RESOLVED, That the American Federation of Labor be requested to pledge its best endeavors to secure the passage of a law prohibiting the employment of white women or girls in all such establishments.

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Those quotations are from "The 'War' Against Chinese Restaurants," a paper by UC-Davis law professor Gabriel J. "Jack" Chin and attorney John Ormonde that is the cover story of the summer issue of Cato's Regulation. (A longer version of the paper is forthcoming in the Duke Law Journal.) The article is filled with other shocking warnings, as well as inspiring responses from that era's defenders of mobility and economic freedom.

The Chinese Restaurant War was driven by nationalism and bigotry. That war echoes today, of course, as Chin and Ormonde note in their conclusion:

Back in 2015, Steve Bannon, now a top White House official, had a special guest on his radio program: Donald J. Trump. Trump spoke of his concern about immigration but added, “You know, we have to keep our talented people in this country.” Bannon disagreed, saying: “When two-thirds or three-quarters of the CEOs in Silicon Valley are from South Asia or from Asia, I think. . . . A country is more than an economy. We’re a civic society.” In saying this, Bannon wildly overestimated the percentage of Silicon Valley professionals of Asian descent. More importantly, he repeated an old belief: that only white citizens should be a part of this nation’s civic society.

June 29, 2017 3:08PM

Czech Parliament Aims to Shoot Down European Gun Control

As a wave of Islamist terror attacks sweep across Europe, London police urge people to “run, hide, tell”. The Czech Republic’s response? Fight back.

The Czech parliament is working to liberalize the country’s gun laws, allowing people to better defend themselves. The reason for this new policy is safety, as well as practicality; in light of recent attacks in neighboring countries, the Czech government recognizes that disarming people puts them in danger, and that broad European gun control policies are ineffective. The Interior Minister said it best when he asked parliament to “show [him] a single terrorist attack in Europe perpetrated using a legally-owned weapon”.

In contrast, the European Union’s answer to terror is as counterintuitive as it is feckless. France has spearheaded efforts to ban all "military-style" rifles -- AR and AK-style rifles, not to be confused with those capable of automatic fire, commonly referred to as "machine guns" -- from Europe. As my colleague Dan Mitchell has noted, the EU is violating its own commitment to state sovereignty in favor of radical, unsuccessful gun prohibition.

Despite strict gun control in France, Islamic radicals were still able to obtain rifles and kill 17 people in the Charlie Hebdo attack of 2015. More recently, in places like Nice and London, terrorists have worked around gun restrictions by using trucks and other vehicles to kill civilians.

The Czech Republic, which already boasts 800,000 registered firearms and 300,000 licensed gun owners, is taking proactive steps to avoid their citizens becoming victims without a means of defending themselves. The new measure is a protest against the self-destructive dogma of European gun control and in favor of civil liberties and self-empowerment.  

If the rest of Europe followed the Czech Republic’s example, civilians would be able to defend themselves -- whether against terrorism or "normal" crime -- instead of depending on police and other government agents, which typically arrive far too late if at all.

June 29, 2017 12:17PM

Lucia v. SEC: The D.C. Circuit Divided Against Itself

Earlier this week, the D.C. Circuit court issued a surprising decision in Lucia v. SEC. The case addresses whether administrative law judges (ALJs) are “inferior officers” and are therefore subject to the appointments clause. But the heart of the case is far less wonky than it seems. The question is really this: what makes a judge a judge? If a person has the power to ruin a company, bankrupt a person, force the person to give up a lifelong profession, and bar the individual from interacting with friends and former colleagues, and if the person does this wearing a black robe and sitting amidst the trappings of court of law, is that person an officer? Because ALJs do all of this and more. Their decisions about whether evidence is admissible and their determinations about whether a witness is lying have a profound effect not only on the hearings over which they preside, but over any subsequent appeal. If this much authority and discretion are not enough, what on earth is?

It seems the judges, who sat en banc to hear the case (a rare occurrence, signaling a case of particular import), could not agree. They split right down the middle and deadlocked. The earlier decision will stand...for now. The case is almost assuredly bound for the Supreme Court. But until the High Court takes it up (and while it seems this is the sort of case they would take, there are no guarantees on that front), the D.C. Circuit’s earlier ruling, finding that ALJs are not inferior officers but “mere employees” will stand.

Aside from the absurdity of stating that individuals with so much authority are “mere employees,” the earlier ruling is problematic for the simple reason that it relies on a poorly reasoned ruling in an earlier case by the same court. In Landry v. FDIC, the D.C. Circuit considered the role of ALJs at the FDIC and found they were simply employees because their decisions were not final; they were final only when issued by the FDIC itself. Similarly, ALJs at the SEC issue “initial,” not “final” decisions. 

It seems odd that an individual could perform almost all the same tasks a federal judge does, and yet because there is the possibility that the full commission could review and overturn the “initial” decision, that individual lacks the discretion of even an inferior officer. It also seems I am not alone in my opinion. The D.C. Circuit expressly stated its interest in revisiting Landry when it agreed to hear Lucia en banc. Unfortunately, my opinion seems to be shared with only an even half of the sitting judges in this Circuit. We will simply have to wait to see what the Justices up the way make of it. 

June 29, 2017 12:02PM

The Right to Record and Police Accountability

The New York Police Department’s Civilian Complaint Review Board (CCRB) reported that over a three-year period, NYPD officers threatened, blocked, and otherwise tried to prevent individuals from recording them in public in the performance of their duties. Almost 100 of the 346 allegations made between 2014 and 2016 were substantiated by the board, not counting the many cases that may not have been reported.

To be fair, there are many thousands of contacts between police and individuals that happen in New York City. Although there is no way to know how many of those interactions are recorded, it’s fair to assume that many of them have been as cell-phone recording capabilities have become ubiquitous. However, there is clearly a segment of officers—perhaps very small, but nevertheless real—who feel that they may violate the First Amendment rights of people who record them. To alleviate this, the CCRB suggested that a new entry should be included in the Patrol Manual to reassert the public’s right to record police interactions. That insertion is fine, but more could and should be done because it is extremely unlikely that every officer who disrupted lawful, public recording was ignorant of the right to do so. Any officer who already knew the law was committing misconduct.

Police officers should be held accountable for their actions. Unfortunately, New York State law prohibits the Department or the CCRB from releasing the names of officers who have complaints lodged against them, whether or not they are sustained, or what the outcomes of any disciplinary actions taken were short of termination. As I testified before the U.S. Commission on Civil Rights in 2015:

According to an investigation of New York City’s Civilian Complaint Review Board records, about 40 percent of the 35,000 NYPD officers have never received a civilian complaint, but roughly 1,000 officers have more than 10 complaints on file. One officer has over 50 complaints but retains his position.

Institutionally, the NYPD knows these 1,000 officers are repeat offenders several times over. Multiple complaints against a single officer over a period of months or years implies the officer must, at times, operate too close to the line of impropriety. Those 1,000 officers represent fewer than three percent of NYPD officers but can damage the reputation of the rest of the department. Clearly, some portion of these 1,000 officers are abusing their authority, and the NYPD is unwilling or unable to remove these officers from duty. And because the public can’t know their names and records, we cannot measure how effectively the NYPD addressed these incidents with any given officer. (internal citations omitted)

The lack of transparency is not limited to New York, by any means, but the NYPD’s institutional dedication to data collection at least gives us a glimpse of what is going on. Getting the right to record in the Patrol Manual is a good start, but the State of New York should repeal the anonymity granted to misbehaving officers. Such laws punish the best officers by making them indistinguishable from those who intentionally—and sometimes repeatedly—violate the rights of the people they are supposed to serve.

For a robust First Amendment analysis of the right to record, read this opinion by 2014 B. Kenneth Simon Lecturer Judge Diane Sykes. You can read my 2015 USCCR testimony on police transparency and the use of force here. Finally, you can check out the 2014 panel we hosted on recording the police here.

 

June 29, 2017 9:30AM

A Response to Jeff Sessions

In a recent Washington Post op-ed, U.S. Attorney General Jeff Sessions makes numerous misleading claims about the U.S. War on Drugs and the appropriate role of the federal government in combatting drug crime. The premise of his argument is that drug trafficking is an intrinsically violent and crime-inducing activity, so the only way to make our communities safe is by adopting a tougher, heavy-handed approach to drug crime.

However, many of the facts and statistics that the Attorney General uses to support his arguments are distorted, misguided, or flat out incorrect. Sessions paints a false narrative of drug trafficking in America, and he mistakenly assumes that weak drug law enforcement has spurred violent crime. Let’s analyze his statements one by one. 

  •  “Drug trafficking is an inherently violent business. If you want to collect a drug debt, you can’t, and don’t, file a lawsuit in court. You collect it by the barrel of a gun.” Correct. But only because drugs are illegal! Prohibition forces drug production and distribution underground, so standard dispute resolution uses violence rather than courts. The solution is trivial: legalize drugs. 
  • “For the approximately 52,000 Americans who died of a drug overdose in 2015, drug trafficking was a deadly business.”  Drug overdoses indeed claimed 52,000 lives in 2015, according to the CDC, but most of these involved non-prohibited drugs, such as prescription painkillers.. In addition, Sessions confuses drug overdoses with drug trafficking. The majority of the 52,000 overdose deaths had nothing to do with drug smuggling or drug crime; rather, they were instances in which someone accidentally consumed too much of an opioid. That occurs far more under prohibition, when information about purity and quality are scarce, than in a legal market. 
  • “Yet in 2013, subject to limited exceptions, the Justice Department ordered federal prosecutors not to include in charging documents the amount of drugs being dealt when the actual amount was large enough to trigger a mandatory minimum sentence. Prosecutors were required to leave out objective facts in order to achieve sentences lighter than required by law. This was billed as an effort to curb mass incarceration of low-level offenders, but in reality it covered offenders apprehended with large quantities of dangerous drugs. The result was that federal drug prosecutions went down dramatically — from 2011 to 2016, federal prosecutions fell by 23 percent.” Sessions states that total federal prosecutions fell dramatically between 2011 and 2016, but he fails to mention that federal drug prosecutions actually remained constant (32%) as a share of all prosecutions during that time period. The natural interpretation is therefore that federal prosecution became less aggressively generally; not that attention to drug enforcement declined disproportionately. 
  • “Meanwhile, the average sentence length for a convicted federal drug offender decreased 18 percent from 2009 to 2016.” The correct number is closer to 15 percent. 
  • “Before that policy change, the violent crime rate in the United States had fallen steadily for two decades, reaching half of what it was in 1991. Within one year after the Justice Department softened its approach to drug offenders, the trend of decreasing violent crime reversed.” National violent crime has fallen precipitously since peaking in the early 1990s, and violent crime indeed ticked up in 2015. But Sessions conveniently forgets that in 2012—right before the policy change supposedly went into place—violent crime rates actually increased. Violent crime rates then fell steadily in 2013 and 2014, the two years immediately after the Justice Department’s policy change. In 2015, violent crime edged up by 3.9 percent, but it’s too early to tell if this represents a reversing trend or just one of the numerous ups-and-downs observed since 1990. 
  • “In 2015, the United States suffered the largest single-year increase in the overall violent crime rate since 1991. And while defenders of the 2013 policy change point out that crime rates remain low compared with where they were 30 years ago, they neglect to recognize a disturbing trend that could reverse decades of progress: Violent crime is rising across the country. According to data from the FBI, there were more than 15,000 murders in the United States in 2015, representing a single-year increase of nearly 11 percent across the country. That was the largest increase since 1971.” These facts are all correct. But again, one year of data is not even remotely enough to demonstrate a change in trend. Ups and downs in the crime rate happen regularly. And even if crime rates were slightly on the rise, where is the evidence that this is connected to fewer drug convictions? Many other factors are plausibly at play. 
  • “Defenders of the status quo perpetuate the false story that federal prisons are filled with low-level, nonviolent drug offenders. The truth is less than 3 percent of federal offenders sentenced to imprisonment in 2016 were convicted of simple possession.”  Sessions conflates “low-level, nonviolent drug offenders” with those “convicted of simple possession.”  Nearly half of the nation’s roughly 200,000 federal inmates are imprisoned on drug-related charges.  Sessions is right that hardly any of these charges are for mere possession.  But drug trafficking encompasses activities as benign as selling a few grams of marijuana on the street corner. 35% of drug offenders sentenced in federal prison had no or minimal criminal history beforehand, according to a recent report by the Bureau of Justice Statistics. And 76% of drug offenders serving time did not use a weapon in their most recent offense. 
  • “The truth is that while the federal government softened its approach to drug enforcement, drug abuse and violent crime surged. The availability of dangerous drugs is up, the price has dropped and the purity is at dangerously high levels.” Rising drug availability, declines in prices, and rising purity levels have been trends since long before the Obama policy changes. For example, the cost of heroin has fallen by over 70 percent since the early 1990s. The same pattern is true for other drugs. There is no evidence that the federal government’s change in policy had any discernable impact on drug prices, availability, or purity. 
  • “Overdose deaths from opioids have nearly tripled since 2002. Overdose deaths involving synthetic opioids rose an astonishing 73 percent in 2015.” It is true that opioid overdose deaths have risen nearly threefold since 2002 – which demonstrates that rising drug availability and potency are trends that far predate Obama-era policy changes! 
June 28, 2017 4:31PM

Stadium Boondoggles Spread to the Minor Leagues

In Prince William County, Virginia, just south of Washington, the board of supervisors is about to decide whether to issue $35 million in bonds to build a new baseball stadium for the Potomac Nationals, a Class A affiliate of the Washington Nationals. The board just rejected a proposal to let the taxpayers vote on the issue.

Art Silber, the retired banker who put up $300,000 to buy the team in 1990, estimates that it's now worth $15 to $25 million. But

“Right now, we have the worst ballpark in the league and one that probably ranks in the bottom 10 of organized baseball’s 160,” he said. “At the new ballpark, the visibility will be extraordinary. Naming rights alone will pay for a lot of the stadium.”

He can only imagine what the team will be worth.

Seems like an excellent profit opportunity for a business worth tens of millions of dollars. But he has a better plan: If the county doesn't pony up, he will sell the team, and new owners will move it.

The county found a consulting firm to produce, as it has done for many governments, an optimistic economic analysis: It suggests that a new stadium would generate 288 jobs, $175 million in economic impact, and $4.9 million in tax revenue over a 30-year lease. Similar studies have proven wildly optimistic in the past. In 2008 the Washington Post reported that Washington Nationals attendance had fallen far short of what a 2005 study predicted. As Dennis Coates and Brad Humphreys wrote in a 2004 Cato study criticizing the proposed Nationals stadium subsidy, “The wonder is that anyone finds such figures credible.”

Academic studies have consistently found few if any economic benefits of subsidies for stadiums, arenas, convention centers, and the like.     

Several Cato studies over the years have looked at the absurd economic claims of stadium advocates. In “Sports Pork: The Costly Relationship between Major League Sports and Government,” Raymond Keating finds:

The lone beneficiaries of sports subsidies are team owners and players. The existence of what economists call the “substitution effect” (in terms of the stadium game, leisure dollars will be spent one way or another whether a stadium exists or not), the dubiousness of the Keynesian multiplier, the offsetting impact of a negative multiplier, the inefficiency of government, and the negatives of higher taxes all argue against government sports subsidies. Indeed, the results of studies on changes in the economy resulting from the presence of stadiums, arenas, and sports teams show no positive economic impact from professional sports – or a possible negative effect.

In Regulation magazine (.pdf), Dennis Coates and Brad Humphreys found that the economic literature on stadium subsidies comes to consistent conclusions:

The evidence suggests that attracting a professional sports franchise to a city and building that franchise a new stadium or arena will have no effect on the growth rate of real per capita income and may reduce the level of real per capita income in that city.

And in “Caught Stealing: Debunking the Economic Case for D.C. Baseball,” Coates and Humphreys looked specifically at the economics of the new baseball stadium in Washington, D.C., and found similar results:

Our conclusion, and that of nearly all academic economists studying this issue, is that professional sports generally have little, if any, positive effect on a city’s economy. The net economic impact of professional sports in Washington, D.C., and the 36 other cities that hosted professional sports teams over nearly 30 years, was a reduction in real per capita income over the entire metropolitan area.

In an updated study from the Mercatus Center at George Mason University, Humphreys finds similar results:

  • Professional sports can have some impact on the economy. Looking at all the sports variables, including presence of franchises, arrival and departure of clubs in a metropolitan area, and stadium and arena construction, the study finds that the presence of a franchise is a statistically significant factor in explaining personal income per capita, wage and salary disbursements, and wages per job.
  • But this impact tends to be negative. Individual coefficients, such as stadium or arena construction, sometimes have no impact, but frequently indicate harmful effects of sports on per capita income, wage and salary disbursements, and wages per job.

Another Mercatus study by Michael Farren offers a detailed analysis of stadium upgrades and attendance in minor league baseball.

Silber and the board of supervisors want the taxpayers to know that this time is different; their $35 million bond issue isn't a government giveaway:

In Prince William, the board of supervisors is considering a proposal in which it would use bond money to build the stadium. The team would then reimburse the county the entire cost over the course of a 30-year lease.

“We’ve all read about certain professional sports teams threatening to leave if a local government doesn’t buy them a new stadium. The exact opposite is happening here,” said Tom Sebastian, a senior vice president with JBG. “The Potomac Nationals have agreed to pay 100 percent of the cost to construct a new stadium so that they can stay in Prince William County.”

I will gladly pay you Tuesday, 30 years from now, for a hamburger today.

Americans for Prosperity has been fighting this proposal, and its Northern Virginia director, Tyler Muench, addressed that claim in a Washington Post column:

Professional sports teams have been relocating to new cities when they fail to acquire public funding for stadiums. Last year, the Rams stuck St. Louis with a $144 million bill after the team decided to move to Los Angeles. And earlier this year, San Diego taxpayers were left with a $50 million tab after the Chargers joined the Rams in L.A.

This time around is no different. The Oakland Raiders’ move to Las Vegas will leave Oakland taxpayers stuck with a $163 million bill. Teams constantly ask taxpayers for handouts despite generating vast revenues. Billionaire owners get publicly financed stadiums and the working-class citizens pick up the tab — corporate welfare at its worst.

We've heard a lot of denunciations of corporate welfare and crony capitalism from Republicans lately. The Prince William board of supervisors has 6 Republicans and 2 Democrats. Board chair Corey Stewart, who just narrowly lost a primary for governor in which he aligned himself closely with President Trump, has supported the stadium deal. Here's a chance for Republicans in Virginia to show that they stand for fiscal conservatism and free markets, not taxpayer handouts to the wealthy. Who wants to bet that they will? 

For one last bit of piling on, this report by Don Bauder in the San Diego Reader is worth quoting at length:

Would you take advice from a gaggle of consultants whose forecasts in the past two decades have been off by 50 percent?

Of course you wouldn’t. But all around the U.S., politicians, civic planners, and particularly business executives have been following the advice of self-professed experts who invariably tell clients to build a convention center or expand an existing one.

A remarkable new book, Convention Center Follies: Politics, Power, and Public Investment in American Cities, published by the University of Pennsylvania Press, tells the amazing story of how one American city after another builds into a massive glut of convention-center space, even though the industry itself warns its centers that the resultant price-slashing will worsen current woes.

The author is Heywood Sanders, the nation’s ranking expert on convention centers, who warned of the billowing glut in a seminal study for the Brookings Institution back in 2005. In this new, heavily footnoted, 514-page book, Sanders, a professor of public administration at the University of Texas/San Antonio, exhaustively examines consultants’ forecasts in more than 50 cities.

Nashville was told its new center would result in 466,950 hotel room nights; it’s getting around 267,000 — “a little better than half [what was projected],” says Sanders in an interview. Philadelphia isn’t garnering even half the business that was promised.

“Getting half the business [that was projected] is about the norm,” says Sanders. “The actual performance is a fraction of what it is supposed to be.”

Yet, in city after city — including San Diego — self-appointed civic leaders listen to and act on these faulty forecasts. In almost all cases, mainstream media and politicians swallow the predictions whole without checking the consultants’ miserable track records….

How can convention centers get away with such legerdemain? Those in the know shut up, and the press, politicians, and public have neither the time nor the expertise to follow the prestidigitation.

How do the consultants get away with being 50 percent wrong most of the time? In my opinion — not Sanders’s — consultants in many fields are paid to provide answers that the people paying the consultants’ bills want to hear. And the people paying those bills are the business community — using taxpayers’ money, of course.

The worst news: “These expansions will keep happening,” as long as “you have a mayor who says it is free,” says Sanders.

More, much more, in the Reader and of course in the book.