June 2, 2010 2:28PM

Feds Propose Forfeiture as Immigration Employer Sanction

As recent posts in this space indicate, advocates of individual liberty have a variety of views on the proper policy response to illegal immigration. Whatever the disagreements, I suspect there’s some degree of consensus that certain proposed remedies are entirely too Draconian. From the California Labor and Employment Law Blog:

The U.S. Attorneys Office in San Diego has recently criminally prosecuted a French bakery for allegedly engaging in an intentional pattern and practice of hiring unauthorized workers. As part of the indictment, the Government is seeking hefty monetary fines, prison time for the owner and management, and asset forfeiture of the entire business to the Government. While the Government does not have experience running a French bakery, they are getting very serious about enforcing I‑9 regulations.

More details on the French Gourmet prosecution can be found at the San Diego Union‐​Tribune and Restaurant Hospitality.


When government began pushing for asset forfeiture powers, some imagined that the formidable power would remain mostly confined to use in, say, illegal drug or money laundering prosecutions. But that’s not how it has worked. And immigration is hardly the only area in which employers should be worried about the expanding bounds of criminalization. Bills pending in Congress would criminalize “misclassification” of employees — which commonly consists of disagreeing with the government or with labor unions as to whether particular employees should count as independent contractors not covered by overtime and similar federal labor laws. Are we far from the day when prosecutors will start proposing forfeitures against employers over such infractions?

January 13, 2010 9:03AM

Another Reason Imports Get a Bad Rap

Why blame only media and politicians for the public’s confusion about imports and trade deficits? Surely economists deserve some scorn. Some of the misunderstanding can be traced to the famous National Income Identity, which expresses gross domestic product, as: Y = C + G + I + (X-M). That is, national output (Y) equals personal consumption (C) plus government spending (G) plus investment (I) plus exports (X) minus imports (M).

The expression clearly lends itself to the wrong interpretation. The minus sign preceding imports suggests a negative relationship with output. It is the reason for the oft-repeated fallacy that imports are a drag on growth. Here’s why that conclusion is wrong.

The expression is an accounting identity, which "accounts" for all of the possible channels for disposing of our national output. That output is either consumed in the private sector, consumed by government, invested by business, or exported. The identity requires subtraction of aggregate imports because consumption, government spending, business investment, and exports all contain, in various amounts, import value. Americans consume domestic and imported products and services, the aggregate of which shows up in Consumption. Likewise, Government purchases include domestic and imported products and services; businesses Invest in domestic and imported machines and inventory; and, eXports often contain some imported intermediate components. Thus, the identity would overstate national output if it didn’t make that adjustment for iMports. After all, imports are not made on U.S. soil with U.S. factors of production, so they shouldn’t be included in an expression of our national output.

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January 6, 2010 1:36PM

Credit Card Dementia and Boundary Cases

credit cards

The most interesting libertarian‐​related conversation I’ve read today comes from Rortybomb, by way of Andrew Sullivan, with commentary by Megan McArdle. Here’s a challenge to libertarians from Rortybomb, aka Mike Konczal:

I want to pitch to the credit card and financial industry a new innovative online survey. It is targeted for older, more mature long‐​time users of our services. We’ll give a $10 credit for anyone who completes it. Here is a sense of what the questions will look like:


 — 1) What is your age?
 — 2) What day of the week are you taking this survey?
 — 3) Many rewards offered are for people with more active lifestyles: vacations, flights, hotels, rental cars. Do you find that your rewards programs aren’t well suited for your lifestyle?
 — 4) What is the current season where you live? Are any seasons harder for you in getting to a branch or ATM machine?
 — 5) Would rewards that could be given as gifts to others, especially younger people, be helpful for what you’d like to do with your benefits?
 — 6) Would replacing your rewards program with a savings account redeemable for education for your grandchildren be something you’d be interested in?
 — 7) Write a sentence you’d like us to hear about anything, good or bad!
 — 8 ) How worried are you you’ll leave legal and financial problems for your next‐​of‐​kin after your passing?


Did you catch it? Questions 1,2,4,7 are taken from the ‘Mini‐​mental State Examination’ which is a quick test given by medical professionals to see if a patient is suffering from dementia. (It’s a little blunt, but we can always hire some psychologist and marketers for the final version. They’re cheap to hire.) We can use this test to subtly increase limits, and break out the best automated tricks and traps mechanisms, on those whose dementia lights up in our surveys. Anyone who flags all four can get a giant increase in balance and get their due dates moved to holidays where the Post Office is slowest! We’d have to be very subtle about it, because there are many nanny‐​staters out there who’d want to coddle citizens here…


I smell money — it’s like walking down a sidewalk and turning a corner and then there is suddenly money all over the sidewalk. One problem with hitting up sick people, single mothers, college kids who didn’t plan well and the cash‐​constrained poor with fees and traps is that they’re poor. Hitting up people with a lifetime of savings suffering from dementia is some real, serious money we can tap as a revenue source.

Clearly, only an evil person (or a libertarian!) would allow a scam like this one. Megan responds, I think rightly:

I’m not sure why this is supposed to be a hard question for libertarians. I mean, I might argue that preventing people from ripping off the marginally mentally impaired would, in practice, be too difficult. Crafting a rule that prevented companies from identifying people who are marginally impaired might well be impossible — I’m pretty sure that if I wanted to, I could devise subtler tests than “What day of the week is it?” And while the seniors lobby is probably in favor of not ripping off seniors, they’re resolutely against making it harder for seniors to do things like drive or get credit, which is the result that any sufficiently strong rule would probably have.


But it’s pretty much standard libertarian theory that you shouldn’t take advantage of people who do not have the cognitive ability to make contracts. Marginal cases are hard not because we think it’s okay, but because there is disagreement over what constitutes impairment, and the more forcefully you act to protect marginal cases, the more you start treating perfectly able‐​minded adults like children.


The elderly are a challenge precisely because there’s no obvious point at which you can say: now this previously able adult should be treated like a child. Either you let some people get ripped off, or you infringe the liberty, and the dignity, of people who are still capable of making their own decisions.

I’d add two responses of my own.


First, I can’t believe there’s all that much money to be had here. Anyone who wanders into Tiffany’s and back out again without remembering what they bought is, generally speaking, a bad credit risk. Mildly irresponsible people — those who slightly overspend, then have to make it up later — those are probably great for creditors. Lesson learned: If you’re not demented, don’t be irresponsible. (If you are demented, you’re not going to follow my advice anyway.)


Second, I am always amazed at how border cases are dragged out, again and again, as if they proved something against libertarianism. Border cases — How old before you can vote? How demented before a contract doesn’t bind? — are a problem in all political systems, because all systems start with a presumed community of citizens and/​or subjects. We always have to draw boundaries between the in‐​group and the outliers before we have a polity in the first place.


What makes the classical liberal/​libertarian approach so valuable is in fact that it draws so few boundaries. Where other systems depend on class boundaries, race boundaries, religious boundaries, and so forth — with annoying boundary issues at every stop along the way — libertarians make it as simple as I think it can be. We presume that all mentally competent adults are worthy of liberty until they prove themselves otherwise.


The boundary cases are still there, but they are fewer and more tractable. Konczal just wandered into one of them. It proves much less than he thinks.

July 29, 2009 4:42PM

Mortgage Mods: Congressman Prefers Coercion over Cooperation

The recent focus in Washington on mortgage modifications once again illustrates one of the most fundamental flaws in current political debate: the notion of using government to threaten or force the “voluntary” transfer of wealth from one group of citizens to another.


Just this week Rep. Barney Frank warned the banking industry if they don’t “voluntarily” do more to reduce foreclosures, Congress will step in and make them do so, by allowing bankruptcy judges to re‐​write mortgage contracts. This proposal is really nothing more an ex poste transfer of wealth from investors in mortgage backed assets to borrowers.


Of course, Rep. Frank and others respond that they are only trying to “bring lenders to the table” in order to keep negotiations going. In the words of many “consumer” advocates, this is just a “stick” to the motivate the lenders. I could think of few things more offensive to a free society. In a government truly constituted on the notion of the common good or general welfare, it would be no more appropriate to use the stick of the state on lenders than it would be on borrowers. Government quite simply should not take sides in purely private disputes. 


One would think that if anyone could understand the principle that government should not interfere in the private, voluntarily entered relationships of consenting adults, it should be Mr. Frank.

July 22, 2009 10:34AM

Senate Votes to End Production of F‑22 Raptor

As I have written previously, President Obama and the members of Congress who voted to kill funding for the F‑22 did the right thing.


The Washington Post reports:

The Senate voted Tuesday to kill the nation’s premier fighter‐​jet program, embracing by a 58 to 40 margin the argument of President Obama and his top military advisers that more F‑22s are not needed for the nation’s defense and would be a costly drag on the Pentagon’s budget in an era of small wars and counterinsurgency efforts.

While this vote marks a step in the right direction, the fight isn’t over. The F‑22’s supporters in the House inserted additional monies in the defense authorization bill, and the differences will need to be reconciled in conference. But the vote for the Levin‐​McCain amendment signals that Congress will take seriously President Obama and Secretary Gates’ intent to bring some measure of rationality to defense budgeting.


The Raptor’s whopping price tag— nearly $350 million per aircraft counting costs over the life of the program— and its poor air‐​to‐​ground capabilities always undermined the case for building more than the 187 already programmed.


In the past week, Congress has learned more about the F‑22’s poor maintenance record, which has driven the operating costs well above those of any comparable fighter. And, of course, the plane hasn’t seen action over either Iraq or Afghanistan, and likely never will.


Beyond the F‑22 and the Joint Strike Fighter, we need a renewed emphasis in military procurement on cost containment. This can only occur within an environment of shrinking defense budgets. Defense contractors who are best able to meet stringent cost and quality standards will win the privilege of providing our military with the necessary tools, but at far less expense to the taxpayers. And those who cannot will have to find other business.

June 30, 2009 8:48AM

Some Thinking on “Cyber”

Last week, I had the opportunity to testify before the House Science Committee's Subcommittee on Technology and Innovation on the topic of “cybersecurity.” I have been reluctant to opine on it because of its complexity, but I did issue a short piece a few months ago arguing against government-run cybersecurity. That piece was cited prominently in the White House's "Cyberspace Policy Review" and -- blamo! -- I'm a cybersecurity expert.

Not really -- but I have been forming some opinions at a high level of generality that are worth making available. They can be found in my testimony, but I'll summarize them briefly here.

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