Archives: 12/2018

Being Green by Ending Subsidies

Government subsidies cause much avoidable damage. Politicians say they just want to “help” people. But giving people hand-outs invariably changes their behavior and often induces them to make harmful decisions. The negative side effects of subsidies ripple outwards in every direction leading to calls for more help, more regulations, and more government. The politicians never accept any blame, and their impulse is to layer more subsidy Band-Aids on top.

In environmental policy, I’ve written about how subsidies, including federal flood insurance and infrastructure spending, have induced people to live in dangerous flood zones along rivers and seacoasts. Since 1970, the number of Americans living in Special Flood Hazard Areas has increased from 10 million to more than 16 million. Government policies drew them in.

Stanford’s Jeffrey Ball writes in the Wall Street Journal that a parallel set of insurance and infrastructure subsidies has induced Californians to live in dangerous fire zones, greatly exacerbating the damage caused by recent wildfires:

The historically deadly wildfires that have roared through California this fall, and a string of similarly destructive ones over the past two years, are boosting calls to do more to slow climate change. But another underlying problem has contributed to the fires’ tragic damage: For decades, California, supposedly the greenest of states, has artificially lowered the cost of encroaching on nature by living in the woods.

Permissive building codes, low insurance rates and soaring taxpayer spending on firefighting and other services have provided an economic framework that has encouraged people to flee the state’s increasingly expensive cities for their leafy fringes. 

… For years, Cal Fire, the state wildfire-fighting agency, has been spending increasing sums to put out wildfires, as has the U.S. Forest Service. Already by 2006, according to an audit, most of the money the forest service was spending to put out large fires was “directly linked to protecting private property” in the wildland-urban interface. Meanwhile, at public cost, government has been encouraging more development by pushing infrastructure—roads, utilities, rescue services—ever farther into the forest.

… Once a house is built in California’s [wildland-urban interface areas], the state’s unusually low insurance rates have the effect of shifting much of the real cost. The average California homeowner pays about $1,000 a year in homeowner’s insurance—about half the level in Florida or Texas, two other states with markedly rising incidences of natural disasters believed linked to climate change.

That is a result of state policy, not an accident. California has an elected state insurance commissioner, one of 11 in the country who are elected, who caps the rates private insurance companies may charge.

… Other government payments further tilt the economics. Taxpayer-funded state grants commonly pay for brush-removal and other fire-prevention efforts in high-risk areas. When fires happen, taxpayers foot the bill to put them out. In 2011, the state began charging a fee to WUI homeowners to fund firefighting and prevention, causing an outcry; in 2017, it was rescinded as part of a larger piece of environmental legislation.

For more on government failure, see here.

The 1990 Bush “Tax Increase” Reduced Taxes

The late President G.H.W. Bush famously reneged on his “no new taxes” pledge and signed the “Bush tax increase” on November 5, 1990, to take effect the following January.   The new law was intended to raise more revenue from high-income households and unincorporated businesses.  It was supposed to raise revenue partly by raising the top tax rate from 28% to 31% but more importantly by phasing-out deductions and personal exemptions as income on a joint return climbed above $150,00  (the phase-outs were called the PEP and Pease provisions).  

Treasury estimates expected revenues after the 1990 budget deal to be higher by a half-percent of GDP.  What happened instead is that revenues fell from 17.8% of GDP in 1989 to 17.3% in 1991, and then to 17% in 1992 and 1993.  Instead of rising from 17.8% of GDP to 18.3% as initial estimates assumed, revenues fell to 17%.  In fact, revenues did not climb back to the 1989 level of 17.8% of GDP until 1995, despite much higher excise taxes since 1991.

Another way to gauge the 1990 and 1993 tax increase is to measure the revenue gains in real 2009 dollars, adjusted for inflation.  According to Table 1.3 of the Historical Statistics in the U.S. Budget, real revenues (in 2009 dollars) soared from $1,308.8 billion in 1980 to $1,654.6 billion in 1990 (26.4%), as the top tax rate fell from 70% to 28%.  After the Bush tax increases in 1991 and retroactive Clinton tax increases in 1993, by contrast, revenues were virtually no higher in 1993 than they had been before – $1,655.7 billion.  GDP in 1993 was a bit larger than in 1990 but revenues fell as a percent of GDP despite higher excise taxes.

A recession began in October 1990, just as the intended tax increase was being enacted.  To blame the weak revenues of 1991-93 entirely on that brief recession begs the obvious question: To what extent was a recession that began with a tax increase caused or at least worsened by that tax increase?   

Some describe the Bush tax increase of 1990 act of great political courage and bipartisan cooperation which supposedly helped shrink the budget deficit “by $492 billion … over just five years.”   But that figure too was (1) just an estimate, (2) only 30% of it was ostensibly to come from higher taxes, and (3) most of the hoped-for added revenue was not from higher income tax on couples earning over $150,000 but from higher excise taxes on gasoline, alcohol, tobacco, telephones, etc.  The gas tax went up a nickel; the beer tax was doubled.  Nearly 10% of the revenue windfall was expected from a new luxury tax on cars, yachts, airplanes, furs, and jewelry which devastated those businesses (contributing to the recession) before being repealed in less than a year.

Journalists who look back at what happened to tax revenues after tax rates were raised or lowered, such as Washington Post fact checker Glenn Kessler, commonly rely on an updated version of a 1998 working paper by Treasury economist Jerry Tempalski.  However, Tempalski only presented estimated effects on revenues, not actual effects.   “Treasury estimates a bill when it is enacted… and sometimes reestimates a bill for several subsequent January budgets,” Tempalski explained, but some of “the first post-enactment estimates proved not very accurate.”  Tax changes were often phased-in or phased-out, yet “the estimates… include no adjustment to capture the long-run, fully-phased-in effect of the tax bills.”  Early estimates looked ahead only two years, later ones covered four.

These antiquated revenue estimates tell us nothing about what actually happened after tax laws were changed.  They only tell us what notoriously erroneous revenue estimators expected.  Yet the Tempalski estimates have been repeatedly cited as evidence that lower tax rates never even come close to “paying for themselves”  by such leading journalists as Washington Post fact-checker Glenn Kessler and Lori Robertson of FactCheck.org, and even by the chief economist for Tax AnalystsMartin A. Sullivan

In the same vein, estimated revenue effects of the 1990 “tax increase” are still being cited as if they are facts rather than discredited old estimates.   When discussing tax increases (or tax cuts), journalists and economists must take care to distinguish between intended effects on revenue and actual effects.  Fact checkers can’t fact check the old estimates because they’re not facts. Estimates are just estimates.  

 

The Politics of Protecting Hate Speech

Let’s start with some counterfactual history. 

You may find it a waste of time, I think, however, it’s relevant to ask how broad and robust the protection of free speech would be in the US if it hadn’t been for civil rights organizations like the American Civil Liberties Union, and later Jewish organizations and the NAACP? 

Would a First Amendment doctrine based on viewpoint neutrality and the emergency principle have developed in the US? Or would the country have seen a development similar to Europe where hate speech – however it is defined - is criminalized and evil words to a far higher degree are seen as evil actions and therefore, cannot count on constitutional protection?   

Without holding Samuel Walker, professor emeritus of criminal justice at the University of Nebraska, responsible for my interpretation, I think it’s fair to conclude after having read his prolific and still extremely topical book Hate Speech: The History of an American Controversy (1994) that the American courts’ libertarian interpretation of the First Amendment and the widespread support for an uninhibited, robust and wide-open public space in the US would not have materialized without advocacy groups committed to free speech. 

At a time when the support for free speech is sliding and people on the left and on the right are more than willing to shut down their opponents it’s worth revisiting professor Walker’s story of why hate speech is protected in the US and why the current First Amendment doctrine has played a crucial and positive role in creating the necessary environment for tolerance and inclusion of groups that for decades if not centuries were not seen as belonging to American society. There was nothing inevitable about this development. American law and policy could have gone in a very different direction. 

A banal though fundamental point is that good ideas do not defeat bad ideas in and by themselves. They only prevail if there are groups and individuals willing to explain and defend them. That’s basically the reason why the US free speech tradition is different from the European one in spite of the commitment to democracy on both sides of the Atlantic. Ideas have no force in the world without advocates. In twentieth-century Europe there were no civil rights organizations with a position similar to the ACLU’s on free speech. 

It’s a common fallacy to think that the US from the very beginning was exceptional when it comes to the protection of free speech; that the First Amendment from the foundation of the republic meant that Americans enjoyed more or less the same legal right to freedom of expression as they do today. 

As a matter of fact, for the first 150 years the US wasn’t that different from the rest of the world. A few years after the adoption of the Bill of Rights (1791) Congress passed the Alien and Sedition Acts that among other things criminalized making false statements that were critical of the government. President Adams used the law to imprison his political adversaries. In general, the US federal and local governments introduced the same arguments and the same kind of legal instruments as other states around the world to silence challenges to the status quo, i.e. national security, blasphemy, obscenity, offensiveness, protection of the public order and morals and safeguarding the social peace. 

As late as 1928, a man was convicted for blasphemy in Little Rock, Arkansas. He put up a poster in a shop window with the words: ”Evolution is true”, ”the Bible is a lie”, ”God is a ghost”. During World War I Socialists received long prison terms for protesting the draft. Attacks from the right on the ACLU in the 1920s denounced free speech as ”un-American” because of the organization’s defense of unions and left-wing groups. In fact, anything that might have the tendency to cause social harm could be restricted including criticism of the government during times of war, discussion of birth control, and any literature with a sexual content. Government officials were allowed to ban speakers and groups they did not like. They issued injunctions against picket lines, Communists, Socialists, union meetings, and shut down debates about strikes and unions.     

The reality of American history is that meaningful protection of free speech and other individual rights has emerged only since the 1940s. The legal climate only began to change in 1931 when the Supreme Court upheld First Amendment rights of a Communist and of the publisher of an anti-Semitic newspaper – the first cases when speech deemed dangerous and offensive by the majority received constitutional protection and a vindication of the ACLU’s line. Until the 1960s free speech was considered a radical and dangerous idea. As Walker puts it: ”What millions of Americans think of as ancients and hallowed rights are of very recent origin.” 

The hate speech issue first arose in the 1920s with political and legal debates over whether to restrict offensive racial and religious speech. The same two arguments for restricting speech were repeated over and over again: First, that a particular group like the KKK or the Nazis represent a special case and a limited exception to free speech protection should be made for it, and second, that a free and democratic society has an obligation to restrict the activities of anti-democratic groups. In most European countries these arguments carried the day. Laws restricting hate speech and anti-democratic groups were adopted. 

The ACLU refuted both arguments, and their line of defense for hate speech as free speech was adopted by the courts and today serves as the foundation of American public policy and the First Amendment doctrine. The Supreme Court’s decisions were shaped by the advocacy groups that brought cases before it. The ACLU filed briefs in all the major cases through which the Supreme Court created the body of the current First Amendment law.   

The ACLU’s arguments against hate speech provisions were summed up in the 1934 statement Shall We Defend the Nazis in America? It began by challenging the argument that the Nazis with a reference to the suppression of civil liberties in Germany after Hitler’s power grab in 1933 represented a special case and should be exempted from First Amendment protection. The ACLU insisted that the rights of everybody have to be protected and defended independent of the content of their beliefs. Once you accept exemptions to free speech you cannot be sure when they will be used against yourself. In fact, the public order act that was adopted in the UK in 1936 to target Fascists was used to imprison more anti-Fascists than Fascists. Therefore, according to the ACLU, the right of Communists and Socialists are inextricably bound up with the rights of Nazis. 

This is in essence of viewpoint neutrality, the first principle on which the modern First Amendment doctrine is built. The other, the emergency principle, implies that speech has to entail a clear and present danger if it is to be exempted from First Amendment protection. The ACLU made the case for the clear and present danger test by making the point, that nobody can say for sure what speech will lead to violence. 

The ACLU and its allies knew from experience that one has to be very careful calling for banning offensive speech. First, if you are in the business of fighting for social change then most defenders of the status quo will perceive your speech as offensive. Second, terms like offensive speech are very elastic and can easily be used to target yourself the moment your opponents will have the power to move against you. 

Finally, it’s worth pointing out that the libertarian idea of individual rights has been driving the modern First Amendment doctrine. The ACLU early on came to the conclusion that the advancement of the rights of a minority or any other group were best achieved through the expansion of individual rights. That’s the reason why civil rights groups in the US abandoned group libel litigation to defend minorities against racism. They saw it as a threat to their larger goal of achieving equal rights. 

This libertarian idea lies at the heart of the conceptual difference on free speech between the US and Europe. The same can be said of the concept of tolerance. In America, tolerance is of the individual rather than the group, and it is more radical than what is practiced in the European nation states. In the immigrant American society, as Michael Walzer notes, the state is not committed to one group over another; it’s neutral. Government is not an arbiter of taste, and citizens must learn to tolerate one another as individuals, even within the group. This concept of tolerance is the consequence of the First Amendment doctrine’s focus on individual rights. 

Professor Walker concludes that “protection of free speech has helped to ensure the participation of different groups in American society, particularly the powerless.” He insists that free speech has promoted inclusion in contemporary society. Today, this point of view is not shared by those on college campuses who argue that hate speech must be prohibited in order to achieve the inclusion of the historical victims of discrimination. But the history of the hate speech issue, as presented in Walker’s book, supports just the opposite argument. “The inclusion of the powerless and the historical victims of discrimination has been aided (not fully achieved, of course) by the broadest content-neutral protection of offensive speech.”  

Progressive Corporate Governance Reforms

This blog post is part of a larger series on “Stock-Market Short-Termism” (see also my entry on share-buybacks). I will be assessing one proposed cure, corporate governance reforms, and will argue that it is likely to be iatrogenic.

 

I.

On August 15, 2018, Senator Elizabeth Warren formally introduced her “Accountable Capitalism Act”, that would, inter alia, require of all firms generating $1 billion or more in revenue that “no fewer than 40% of its directors are selected by the corporation’s employees.” In mandating that corporations include employees qua stakeholders in the firm’s major decisions, government would be putting its thumb on the scale in shifting the balance of power away from the corporate governance outcome that has emerged in the free-market: shareholders today exclusively determine the composition of the board of directors. Moreover, progressive politicians and academics would be putting a thumb in the eye of their long-standing bete-noir, the “shareholder value paradigm”.

Employee representation on the board is known as “co-determination”, part of a larger constellation of corporate governance institutions that comprise the “Rhenish model” of capitalism. Its primary exemplar, Germany, is trumpeted as the prepossessing poster child of this alternative to shareholder über alles “Anglo-capitalism”. In her press release, Senator Warren makes this inspiration explicit, claiming that she is “borrowing from the successful approach in Germany and other developed economies”. Germany’s co-determination is praised by its progressive proponents not just for its greater “economic justice”, but because it has “held back the forces of short-termism”. In a policy brief for the Roosevelt Institute titled “Fighting Short-Termism with Worker Power”, economist Susan Holmberg argues that co-determination will create “resilience against the pressures of short-termism”. Senator Warren penned an op-ed in the Wall St. Journal to accompany her formal press release, in which she argued that her bill would be a corrective against corporate executives being overly focused on “producing short-term share-price increases”.  

How, exactly, would greater employee influence over corporate governance combat short-termism? Proponents argue that employee representatives would prevent both exorbitant CEO pay and excessive share buybacks. Because the typical employee has a longer tenure at the firm than the typical shareholder, employees are therefore better custodians of the firm’s revenues, with an eye toward long-term viability, not the maximization of the next earnings report.

 

II.

The first of many red flags that appears as we proceed along this train of reasoning is that the Germanic model did not evolve organically as the result of firms realizing that increasing employee representation was in their own self-interest. As Holmberg herself notes, the 1976 Employee Co-Determination Act and related legislation impose this corporate governance paradigm on German firms, requiring that 50% of the supervisory board represent employees rather than shareholders. Conversely, in the United States, it remains perfectly legal for a firm to so structure its charter. The fact that few firms avail themselves of this eminently superior option should give one pause. The fact that German capitalism is so-characterized speaks less to the economic merits of co-determination and more to the political adroitness of its advocates.  

When considering the likely effects Warren’s plan would have on U.S. firms, the lessons of the U.S. experience with unions will be instructive. In fact, it’s hard not to view mandatory employee board representation as a rearguard action by a labor movement that has seen private sector union membership decline from a post-war high of 34% in 1954 to just under 7% today.[1] In many respects, employee board quotas are the functional analogue of a union granted a legal monopoly to represent the employees of a given firm. While board quotas may be more efficient than unions insofar as they avoid the bargaining costs associated with bilateral monopoly, they nonetheless serve to tilt the balance-of-power over major firm decisions toward employee interests.

The first devil lurking in the details of Warren’s plan is: who counts as an employee for the purposes of allocating director votes? All employees, including management below the C-suite? Or only non-managerial employees? However the definition is generated (and gerrymandered), an insuperable problem arises, one that similarly confronted unions. A firm’s employees do not have homogeneous preferences. More senior employees on the brink of retirement have a different time-horizon than do younger employees. Employees who intend to snag a few years of experience before moving to another firm or another industry differ from employees who are dreaming of a company watch on their 20th anniversary. These varying constituencies will have starkly different preferences as to how the firm’s free cash flow is allocated: higher wages now, more long-term capital investment that will pay off in decades, or shoring up the solvency of the employee pension plan? Similarly, skilled employees will be far less averse to R&D that leads to technology - complementary to their human capital - than will the unskilled employees with whom it competes. Thus, the category error baked into co-determination is the conceptualization of “employees” as an undifferentiated bloc. Whoever the median employee voter places on the board will inevitably take actions that result in intra­-employee redistribution.

When considering the preferences that employees broadly do share, it is naïve to think that they will always redound to the long-term benefit of the firm. First, employees of all shapes and sizes uniformly prefer that less cash flow be allocated to share buybacks and dividends. Indeed, champions of co-determination celebrate the extent to which it will serve as a brake on such equity outlays. But, again, we must keep in mind the fallacy of composition: when all firms reduce outlays, the cost of capital for firms with profitable investment opportunities rises and these firms are then unable to grow (read: hire new workers) as quickly.

Moreover, employees won’t necessarily want to reinvest earnings into long-term investments like CAPEX and R&D. And forget returning this surplus to the consumer in the form of lower prices. Instead, they will be inclined to leverage their legislatively-conferred bargaining power to divert profits into wages and benefits in excess of the marginal product of their labor. Despite the romance and sloganeering, this is as much an instance of rent-seeking as corporate Ferraris and “excessive” stock buybacks. On top of higher compensation in the present, employee representatives will attempt to commit a greater percentage of the firm’s future cashflow into retirement and pension plans, rather than R&D projects with an uncertain future payoff that will anyhow make half of them redundant.

 

III.

Employee representatives will have an interest in other measures that similarly reduce the long-term flexibility of the firm. Other than pre-committing future cashflows to non-productive investments such as pension plans, employees will also prefer greater job security. In raising the costs of replacing an unproductive worker, they are thereby raising the ex-ante costs of hiring generally. Greater employee protections mean that the firm faces higher costs when restructuring the skillset and human capital composition of its workforce to meet the always-evolving market landscape. The relative prices of the highly heterogeneous labor pool are constantly in flux, and firms must be able to nimbly rebalance their personnel to adapt and stay competitive. Moreover, overly rigid job protection reduces a firm’s ability to temporarily downsize its workforce in response to exigent circumstances. Co-determination advocates might claim that buybacks, dividends, and executive bonuses should be jettisoned before employees when times get tough. But the fact of the matter remains: reducing the degrees of freedom by which a firm might respond to a given short-term adversity compromises its long-term viability. Employee representatives on the board are trading economic efficiency and adaptability for the sake of incumbent employees today. But who can blame them? They are merely responding to their constituency.      

These ossifying effects are not armchair speculation. Far from sagely stewarding tax revenues for the benefit of posterity, public sector unions have managed to rack up $4.4 trillion in unfunded liabilities, darkening the long-run fiscal outlook for many states and municipalities. The much-lamented decline in manufacturing employment in the U.S. is a story first of firms escaping the unionized Midwest to the South, and then the radical restructuring and downsizing of a less protected workforce to a small coterie of highly skilled employees intensively utilizing technology. This explains why U.S. manufacturing output has risen over the past several decades despite the precipitous drop-off in employment: to the immense benefit of U.S consumers. This process would have been seriously stymied if employees were dealt an artificially strong hand at the table via legislative fiat.

Building on a considerable theoretical literature that predicts greater employee bargaining power will reduce research into R&D and other productivity-enhancing investments,[2] subsequent meta-analyses of the empirical effects of unions confirm that they are associated with lower productivity growth, lower profits, and lower stock market valuations.[3] It’s worth noting that, particularly since 1980, Western European total factor productivity (TFP) growth has dramatically lagged behind that of the United States.[4] Insofar as unions do correlate with productivity increases, the mechanism appears to be via increased communication between workers and management. This is a goal that any half-competent management will attempt voluntarily, but that is impeded by Section 8(a)(2) of the National Labor Relation Act’s prohibition on employer-sponsored unions.

 


[1] Bureau of Labor Statistics, Union Members Summary

[2] Baldwin (1983); Grout (1984); Connollay, Hirsch, and Hirschey (1986)

[3] Doucouliagos and Laroche (2003, 2005)

[4] Fernandez-Villaverde and Ohanian (2018))

New Index: Human Freedom Falls in More Countries than Not

Today, on Human Rights Day, we are pleased to release the Human Freedom Index 2018. The report—copublished by the Cato Institute, the Fraser Institute in Canada, and the Liberales Institut at the Friedrich Naumann Foundation for Freedom in Germany—measures a broad array of personal, civil and economic freedoms around the world and the extent to which basic rights are protected or violated.

New Zealand and Switzerland are the two freest countries on this year’s index, while Venezuela and Syria rank last. The United States ranks 17. In 2008, it ranked 11, then fell notably until 2013, after which it rose through 2016, the latest year for which the index gathers sufficient data that is comparable globally.

My coauthor Tanja Porčnik and I unfortunately find that, compared to 2008 or to last year’s report, more countries than not have seen their level of freedom decline. Over that longer period, notable deteriorations occurred in Russia, Hungary, Argentina, and, in more recent years, Turkey. Some of the largest drops in freedom in the world occurred in Greece and Egypt, further reflecting a strengthening of populism and authoritarianism that have afflicted countries on every continent in the past decade.

Egypt

The good news is that over the long term, freedom has spread to a diversity of countries too, including numerous ex-socialist countries, Latin American nations, one sub-Saharan African country (Mauritius) and several Asian countries that all belong to the top quartile of the freest countries in the index. Many are on the rise, and some, like Taiwan, have seen notable increases in freedom in recent years.

Taiwan

See what broad areas of freedom have seen the biggest gains or declines in the world, where women are least free, the strong relationship between freedom and prosperity, and many more findings in this year’s report.

New York: Damned If You Do Insure Guns, Damned If You Don’t

With the takeover of the New York state senate by liberal-leaning Democrats, prospects are improving for such measures as S2857A, sponsored by Sen. Kevin S. Parker (D-Brooklyn), which would require owners of firearms to carry $1 million in liability insurance. There are a number of problems with that idea, one of which turns out to be distinctive to New York. 

The general problems with gun insurance mandates were aired when the idea began to circulate widely a few years ago. Perhaps the biggest is that courts would and should strike down mandates aimed at burdening or doing away with the exercise of a constitutional right. As David Rivkin and Andrew Grossman wrote in 2013:  

Insurance policies cover accidents, not intentional crimes, and criminals with illegal guns will just evade the requirement. The real purpose is to make guns less affordable for law-abiding citizens and thereby reduce private gun ownership. Identical constitutionally suspect logic explains proposals to tax the sale of bullets at excessive rates.

The courts, however, are no more likely to allow government to undermine the Second Amendment than to undermine the First. A state cannot circumvent the right to a free press by requiring that an unfriendly newspaper carry millions in libel insurance or pay a thousand-dollar tax on barrels of ink—the real motive, in either case, would be transparent and the regulation struck down. How could the result be any different for the right to keep and bear arms?

And there’s a special problem with trying to pull this kind of thing in New York, as our friend R.J. Lehmann, insurance expert at the R Street Institute, observes in a Twitter thread today: “New York now wants to require people to hold a kind of insurance that it sanctioned the NRA and an insurance broker earlier this year for selling at all.” In that case, Gov. Andrew Cuomo claimed that private companies Lockton and Chubb conspired with the National Rifle Association to insure liability “against the public interest.”  Lehmann goes on to say (Twitter breaks omitted): 

In its complaint against Lockton, [New York’s regulator] said the Carry Guard program “provided insurance coverage that may not be offered in the New York State excess line market, specifically: (a) defense coverage in a criminal proceeding that is not permitted by law; (b) liability coverage for bodily injury or property damage expected or intended from the insured’s standpoint in an insurance policy limited to use of firearms and that was beyond the use of reasonable force to protect persons or property; and (c) coverage for expenses incurred by the insured for psychological counseling support.” If such coverages are contrary to New York state law, clearly one cannot require New York citizens to purchase them. 

Section 1 of Sen. Parker’s S2857A requires a gun owner to maintain a liability insurance policy of at least a million dollars “specifically covering any damages resulting from any negligent or willful [emphasis added] acts involving the use of such firearm while it is owned by such person.” Gun control advocates commonly draft insurance mandates to cover willful rather than merely negligent acts as part of their goal to drive up the cost of insurance, in part by pinning on gun owners legal responsibility for the purposeful acts of others. 

The Law of Nations, Sovereign Power Over Immigration, and Asylum: It’s Not As Clear As It Seems

Judge Jon S. Tigar of the U.S. District Court for the Northern District of California recently struck down a Trump administration policy barring asylum for those who do not enter through a legal port of entry.  Tigar’s major point is that Trump’s order conflicts with a statute that specifically says that those who entered illegally are eligible for asylum.  Despite this temporary ruling against the administration’s asylum order, a higher court will probably approve Trump’s action by invoking I.N.A. 212(f) that, according to the Supreme Court decision in the Travel Ban case, seems to give the president nearly unlimited power to ban whomever he wants from coming here no matter what the rest of the law says.  I hope I’m wrong, but I wouldn’t bet against that outcome.

Some commentators are outraged by the court order blocking president Trump’s change to asylum because they think it violates the national sovereignty of the U.S. government to determine who can enter without limitation.  Outside of the fringes, debates about national sovereignty are rare in the context of immigration policy because the Supreme Court has frequently affirmed Congress’s plenary (read unlimited) power to pass any immigration law it wants because of inherent power vested in the national sovereignty of the United States.  Despite some arguments that seek to limit that power or that it was invented almost a century after the Constitution was enacted, this inherent power is not seriously challenged and almost nobody would consider it illegitimate.

Those Supreme Court cases cited foundational scholars in the field of international law to support the majority’s opinion that Congress had plenary power over immigration.  In this context, international law refers to the customs, behaviors, and evolving rules that regulated the intercourse between governments and foreign individuals.  The two most cited international law scholars in the above Supreme Court decisions, supporting Congress’s unlimited power to restrict the movement of people across borders, are Emer de Vattel and Samuel von Pufendorf.  A recent article in the European Journal of International Law by Vincent Chetail shows just how selectively the Supreme Court cited those two scholars.

Before summarizing Chetail’s research on Vattel and Pufendorf, one must understand that they inherited and altered an international legal tradition that preceded them by centuries. 

Chetail’s paper begins with the work of Francisco de Vitoria (1480-1546), who is frequently portrayed as the founder of international law (also known as the law of nations).  He argued that the free movement of persons is a cardinal feature of international law through the right of communication, meaning that the right of humans to communicate with each other implies that they also have the right to move in order to communicate.  He used this to argue that when the Spaniards sailed to the Americas, they had no right of conquest or to occupy the Americas.  However, he went on to argue that Spaniards did “have the right to travel and dwell in those countries so long as they do no harm to the barbarians.”  This right supposedly comes from the law of nations, which derives from natural law and is not abridged by the division of the world into nations.  Vitoria argued that the right of free movement is mandatory so long as it does not cause harm to the host society, meaning crime.  He even argued, quite radically, that nations that refuse admission to non-criminals are committing an act of war.  Vitoria applied his argument to Europeans, arguing that “[I]t would not be lawful for the French to prohibit Spaniards from traveling or even living in France, or vice versa, so long as it caused no sort of harm to themselves; therefore it is not lawful for the barbarians either.”  Vitoria argued that these principles also support universal free trade, free navigation, and birthright citizenship. 

Chetail then moves on to discuss the work of Hugo Grotius (1583-1645), who endorsed Vitoria’s description of international law and refined it further by arguing that individuals have a right to leave their own country and to enter and remain in another.  In essence, Grotius argued that in order for there to be a right to emigrate, there must also be a right to immigrate.  He even argued, like Vitoria, that the right of movement can be taken by force if it is unjustly denied by the government.  Those who are criminals, would harm society, or skirt essential duties like repaying loans can be barred from immigrating or emigrating under Grotius’s theory.  He applies the same limitations on emigrating as he does on immigrating. 

Next, Chetail looks at the work of Samuel von Pufendorf (1632-1694).  He was the first international law scholar who argued that state sovereignty and the state’s power to choose whom to admit dominated any natural right of movement.  Pufendorf argued that individuals have the right to emigrate, but not to immigrate.  He did not elaborate on why his opinion differed from that of Grotius and Vitoria on this matter.  However, Pufendorf did write about two exceptions: shipwrecked sailors and some asylum seekers.  He wrote:

[I]t is left in the power of all states, to take such measures about the admission of strangers, as they think convenient; those being ever excepted, who are driven on the coasts by necessity, or by any cause that deserves pity and compassion. Not but that it is barbarous to treat, in the same cruel manner, those who visit us as friends, and those who assault us as enemies [emphasis added].

Those exceptions aren’t as broad as they first seem.  Although he argued that states should accept foreigners because “we see many states to have risen to a great and flourishing height, chiefly by granting license to foreigners to come and settle amongst them; whereas others have been reduced to a low condition, by refusing this method of improvement,” Pufendorf ultimately argued that those humanitarian concerns of admitting asylum-seekers should only occur when the host state decides to so do. 

Pufendorf reversed the reasoning of Grotius and Vitoria.  They argued that free movement was the general rule with some specific exceptions, but Pufendorf argued that no movement was the general rule with some specific general exceptions and total state control otherwise. 

Christian von Wolff (1679-1754) is the next philosopher of international law in the tradition of total state control over migration.  Wolff’s main contribution was to argue that the sovereign owns the nation, and he exercises this power as an individual property holder does regarding entry of people onto his land.  

Wolff does grant several exceptions to this general state power.  Foreigners have a right to enter a country if they do not harm the state.  This right of harmless use means that foreigners can travel through a nation’s territory on their way elsewhere, that asylum seekers or refugees have the right to enter and remain, and that “foreigners must be allowed to stay with us for the purpose of recovering health, … study, … [or] for the sake of commerce.”  Wolff went on to write that “permanent residence in [a nation’s] territory cannot be denied to exiles by a nation, unless special reasons stand in the way [emphasis added].”         

Those exceptions seem like strong limitations on the power of states to deny entry, but Wolff pulls a lawyer’s trick to argue that foreigners have the right to enter if those above conditions are met but also that there is no enforcement mechanism.  Thus, Wolff argues that states have total control over entry and no private actor can commit violence to enforce the right of admission.  Foreigners have a right to ask for admission under Wolff’s system and the state is morally bound to accept many of them, but the state is legally free to refuse them. 

The last international law scholar that Chetail writes about is Swiss author Emer de Vattel (1714-1767), who is also the most important, as he is cited extensively in the Supreme Court cases discussed above.  Vattel synthesized the work by the earlier scholars.  He argued that there is a qualified power of state sovereignty to control immigration with the two substantial caveats of innocent passage and necessity.  Innocent passage and necessity can only be denied using excellent reasons regarding the security of the admitting state.  He wrote:

[T]he introduction of property cannot be supposed to have deprived nations of the general right of traversing the earth for the purposes of mutual intercourse, of carrying on commerce with each other, and for other just reasons. It is only on particular occasions when the owner of a country thinks it would be prejudicial or dangerous to allow a passage through it, that he ought to refuse permission to pass. He is therefore bound to grant a passage for lawful purposes, whenever he can do it without inconvenience to himself. And he cannot lawfully annex burdensome conditions to a permission which he is obliged to grant, and which he cannot refuse if he wishes to discharge his duty, and not abuse his right of property [emphasis added].

The fact that Vattel argues for exceptions is important because the Supreme Court didn’t recognize these exceptions when it quoted him in the 1892 case Nishimura Ekiu v. United States:

It is an accepted maxim of international law, that every sovereign nation has the power, as inherent in sovereignty, and essential to its self-preservation, to forbid the entrance of foreigners within its dominions, or to admit them only in such cases and upon such conditions as it may see fit to prescribe. Vattel, lib. 2, §§ 94, 100.

Chetail doesn’t pull any punches when criticizing the judges who wrote the Nishimura Ekiu decision:

At the time of this judgment, the authority of Vattel proved to be instrumental in justifying a radical breakdown from the time-honoured tradition of free movement … the famous dictum of the US Supreme Court was based on a biased and selective reading of Vattel. In fact, the two earlier-quoted passages from the Swiss author were taken out of their context, with the overall result of providing a partial account of his views on the admission of foreigners. This misreading of Vattel has prevailed until now among US judges.

Most relevant to the ongoing chaotic situation on the Mexican border where many migrants stormed it and were repelled by tear gas, is that Vattel seems to endorse a right to illegal entry if legitimate entry is unjustly blocked by the government.  Recall that asylum-seekers, which includes those fleeing dire poverty under Vattel’s definition, fall under the necessity exception:

When a real necessity obliges you to enter into the territory of others – for instance, if you cannot otherwise escape from imminent danger, or if you have no other passage for procuring the means of subsistence, or those of satisfying some other indispensable obligation – you may force a passage when it is unjustly refused.

Vattel, one of the two intellectual heavyweights whom the Supreme Court cites to justify Congress’s plenary power over immigration, argued that the government cannot bar asylum-seekers and many other migrants from entering the United States and that those unjustly refused entry can do so illegally – a very radical position.  According to Vattel, that right is not restricted and can be enforced against the will of any sovereign so long as illegal entry is the only way to safeguard an essential interest of the foreigner.        

This post is not an argument for one or another of the views held by the above-mentioned writers, but instead a summary of fascinating recent work by a professor of international law on an important subject.  The most shocking thing is how selectively the Supreme Court cited Vattel over a century ago to grant Congress a vast and unrestricted power that Vattel did not recognize.