Topic: Regulatory Studies

A Grimm Proceeding

On Tuesday — you may have missed this because of some political developments that day — the Supreme Court heard oral arguments in Schwarzenegger v. Entertainment Merchants Association.  This case is a First Amendment challenge to a California law that prohibits selling violent video games to minors. 

Cato had filed a brief pointing out that, to paraphrase the Four Tops, it’s just the same ol’ song, but with a different meaning whenever a new form of entertainment comes along.  In other words, it is difficult to find any form of entertainment that did not once suffer the ire of parents’ groups, smoldering church bonfires, and would-be government protectors of children. From the Brothers Grimm, to “penny dreadful” novels, to comic books, to movies, to video games, each new entertainment medium was said to achieve innovative levels of mind control that corrupted children with flashing pictures, bright colors, or suggestive mental imagery.  

And it seems like the justices were listening.

Throughout a lively oral argument that primarily dealt with the vagueness of trying to define a “violent video game,” justices and counsel consistently discussed the rogues gallery of past entertainment industries that were said to corrupt our children. At one point Justice Scalia asked California’s attorney what “deviant violence” is, to which the attorney responded, “deviant would be departing from established norms.” Scalia asked incredulously, “There are established norms of violence?” The attorney began to say “Well, if we look back…” before Scalia cut him off with, “Some of the Grimm’s fairy tales are quite grim, to tell you the truth.” When California’s attorney said he would not advocate banning Grimm’s fairy tales, Justice Ginsburg came back, asking, “What’s the difference?…[I]f you are supposing a category of violent materials dangerous to children, then how do you cut it off at video games? What about films? What about comic books? Grimm’s fairy tales?”

Later in the argument, Paul Smith, attorney for the Entertainment Merchants Association, referenced Cato’s argument: “We do have a new medium here, Your Honor, but we have a history in this country of new mediums coming along and people vastly overreacting to them, thinking the sky is falling, our children are all going to be turned into criminals.”

Granted, these arguments could have been raised even without Cato’s brief, but exchanges like these demonstrate the value of amicus briefs. Along with novel legal arguments, they can supply the Court with historical, statistical, sociological, and other information that is relevant to deciding the case.

You can read the argument transcript here and the audio will be available tomorrow at this site.  Thanks to Cato legal associate Trevor Burrus for his continuing work on this case (including with this blogpost).

Ballot Initiatives Provide Underappreciated Election-Night Victories

Last week, I highlighted nine ballot initiatives that were worth watching because of their policy implications and/or their role is showing whether voters wanted more or less freedom. The results, by and large, are very encouraging. Let’s take a look at the results of those nine votes, as well as a few additional key initiatives.

1. The big spenders wanted to impose an income tax in the state of Washington, and they even had support from too-rich-to-care Bill Gates. The good news is that this initiative got slaughtered by a nearly two-to-one margin.  I was worried about this initiative since crazy  Oregon voters approved higher tax rates earlier this year. In a further bit of good news, Washington voters also approved a supermajority requirement for tax increases by a similar margin.

2. Nevada voters had a chance to vote on eminent domain abuse. This is an initiative that I mischaracterized in my original post. The language made it sound like it was designed to protect private property, but it actually was proposed by the political elite to weaken a property rights initiative that the voters previously had imposed. Fortunately, Nevada voters did not share my naiveté and the effort to weaken eminent domain protections was decisively rejected.  This is important, of course, because of the Supreme Court’s reprehensible Kelo decision.

3. California voters were predictably disappointing. They rejected the initiative to legalize marijuana, thus missing an opportunity to adopt a more sensible approach to victimless crimes. The crazy voters from the Golden State also kept in place a suicidal global warming scheme that is driving jobs out of the state. The only silver lining in California’s dark cloud is that voters did approve a supermajority requirement for certain revenue increases.

4. Nearly 90 percent of voters in Kansas approved an initiative to remove any ambiguity about whether individuals have the right to keep and bear arms. Let that be a warning to those imperialist Canadians, just in case they’re plotting an invasion.

5. Arizona voters had a chance to give their opinion on Obamacare. Not surprisingly, they were not big fans, with more than 55 percent of them supporting an initiative in favor of individual choice in health care. A similar initiative was approved by an even greater margin in Oklahoma. Shifting back to Arizona, voters also strongly rejected racial and sexual discrimination by government, but they narrowly failed to approve medical marijuana.

6. Shifting to the local level, San Francisco, one of the craziest cities in America rejected a proposal to require bureaucrats to make meaningful contributions to support their bloated pension and health benefits. On the other hand, voters did approve a proposal to ban people from sleeping on sidewalks. Who knew that was a big issue?

7. Sticking with the ever-amusing Golden State, voters unfortunately eliminated the requirement for a two-thirds vote in the legislature to approve a budget, thus making it even easier for politicians to increase the burden of government spending. The state almost certainly is already on a path to bankruptcy, and this result will probably hasten its fiscal demise. Hopefully, the new GOP majority in the House of Representatives will say no when soon-to-be Governor Brown comes asking for a bailout.

8. The entire political establishment in Massachusetts was united in its opposition to an initiative to to roll back the sales tax from 6.25 percent to 3 percent, and they were sucessful. But 43 percent of voters approved, so maybe there’s some tiny sliver of hope for the Bay State.

9. Louisiana voters approved an initiative to require a two-thirds vote to approve any expansion of taxpayer-financed benefits for government employees. With 65 percent of voters saying yes to this proposal, this is a good sign that the bureaucrat gravy train may finally be slowing down.

At the risk of giving a grade, I think voters generally did a good job when asked to directly make decisions. I give them a solid B.

Bootleggers & Baptists, a Welcome Correction

In my recent “Bootleggers & Baptists, Sugary Soda Edition” post, I wrote that environmentalists and agribusiness team up to support ethanol subsidies. An alert Cato@Liberty reader writes to my colleague Jerry Taylor:

[Cannon] is no doubt right that environmentalists and agribusiness worked together to promote government subsidies to ethanol through about 2006. But by 2007 (when the ethanol mandate was doubled) the environmentalists had dropped out of the pro-ethanol coalition, to be replaced by national-security hawks! If you run into him, please tell him to stop blaming environmentalists for current biofuels policies!

If environmentalists have recently dropped their support for ethanol subsidies, they deserve credit for that. Mea culpa.

I would rather have been completely wrong about the environmentalists’ support for ethanol subsidies. But I’ll settle for being partly wrong.

‘What Can We Get Away With?’

A New York Times account, based on an open-records request, sheds light on how Mayor Michael Bloomberg’s famously nannyish health department makes up its mind how far to go in food-scare advertising. In particular, a proposed YouTube campaign to scare consumers away from sweetened sodas resulted in

a protracted dispute in the department over the scientific validity of directly linking sugar consumption to weight gain — one in which the city’s health commissioner, Dr. Thomas A. Farley, overruled three subordinates, including his chief nutritionist.

Some highlights:

  • “The scientists, she said [nutritionist Cathy Nonas], ‘will make mincemeat of us.’”
  • “’Basic premise doesn’t work,’ Dr. Michael Rosenbaum, a professor of pediatrics and clinical medicine at Columbia”
  • “’The science [i.e., efforts to be more accurate and precise in conveying the science] absolutely weakens our potential for mass distribution,’ [campaign manager Sabira] Taher wrote.”
  • “’I think this is broad enough to get away with,’ [Nonas] wrote [of the final video].”

Isn’t it comforting to think that the city administration of New York – and its federal counterpart, staffed by very similar sorts of activist officials – are also in charge of regulating private advertising of food and many other products to make sure such ads are fair and not misleading?

Misleading Headline Dept.: ‘Council Aids West Side Housing’

At his must-read blog Future of Capitalism, Ira Stoll points out (reprinted by permission) an instance in which the news-side WSJ uncritically accepts at face value the claims of New York City politicos:

“Council Aids West Side Housing” is the headline over a news article in the Wall Street Journal reporting, “A change to city zoning laws aims to preserve affordable housing for a large swath of the West Side, blocking new development in the Garment District, West Chelsea and Hudson Yards….The City Council voted on Wednesday to extend a zoning-law amendment that previously has been applied to Clinton, a midtown West area also known as Hell’s Kitchen. It now will also restricts landlords or developers from changing more than 20% of any multi-family building in the additional West Side neighborhoods. Council members say the rules will allow for building renovations but not demolitions…..About 1,500 units in 108 buildings will fall under the new amendment….The vote on Wednesday was an extension of the 1974 Clinton Special District amendment, which was passed to protect that area’s low-rise character and affordable housing.”

A free-market-oriented economist with some common sense might point out that restricting new high-rise development may preserve “affordable housing” for the lucky few occupants of the 1,500 units now locked into place. But this free-market-oriented economist with some common sense might also point out that by restricting the supply of new housing units, the change in the law won’t “Aid Housing,” as the headline claims, but it will actually hurt housing by making it illegal to build much more of it. People living outside these neighborhoods who would like to move in will have a harder time doing so now that the government has artificially restricted the housing supply. The Journal article doesn’t get into this.

A commenter further points out that the land-use freeze will cut into the property tax base on which the city can draw, meaning that the city will raise funds by taxing someone else – another reason to expect that life for city newcomers will be less affordable in coming years, not more.

Bootleggers & Baptists, Sugary Soda Edition

Here’s a poor, unsuccessful letter that impressed the relevant New York Times reporters, but not their editorial overlords:

It may seem counter-intuitive that bleeding-heart anti-hunger groups and “Big Food and Big Beverage” would ally to oppose Mayor Bloomberg’s request to prevent New Yorkers from using food stamps to purchase sugary sodas [“Unlikely Allies in Food Stamp Debate,” October 16].  Yet the “bootleggers and Baptists” theory of regulation explains that this “strange bedfellows” phenomenon is actually the norm, rather than the exception.

Most laws have two types of supporters: the true believers and those who benefit financially.  Baptists don’t want you drinking on the Lord ’s Day, for example, while bootleggers profit from the above-market prices that Blue Laws enable them to charge on Sundays.  Consequently, both groups support politicians who support Blue Laws.

Baptists-and-bootleggers coalitions underlie almost all government activities. Defense spending: (neo)conservatives and defense contractors.  President Obama’s new health care law: the political left and the health care and insurance industries. Ethanol subsidies: environmentalists and agribusiness. Education: egalitarians and teachers’ unions. The list goes on.

It’s easier to illustrate the theory (and sexier) when the bootleggers are non-believers who cynically manipulate government solely for their own gain.  Yet one can be both a Baptist and a bootlegger. The Coca-Cola Company may sincerely believe that society benefits when the government subsidizes sugary sodas for poor people.  Even so, a bootlegger-cum-Baptist can still rip off taxpayers.

This morning, NPR reported on another bootleggers-and-Baptists coalition: anti-immigration zealots and the prison industry.

It Ain’t So, Joe

Vice President Joe Biden is an affable fellow, which sometimes makes his tendency to exaggerate the truth somewhat amusing. However, Biden’s latest tall tale is as unamusing as it is wrong.

From the New York Daily News:

“Every single great idea that has marked the 21st century, the 20th century and the 19th century has required government vision and government incentive,” he said. “In the middle of the Civil War you had a guy named Lincoln paying people $16,000 for every 40 miles of track they laid across the continental United States. … No private enterprise would have done that for another 35 years.”

I’ll go straight to the 19th century railroads issue by referencing the work of two Cato scholars who probably know a little bit more about the topic than Joe Biden.

First, Randal O’Toole discusses railroads and land grants in his book Gridlock: Why We’re Stuck in Traffic and What to Do About It:

Early American railroads were built almost entirely with private funds. These railroads provided such superior transportation that by 1850 they had put most toll roads and canals out of business. Individual states still competed with one another for business—and may have offered various favors to the railroads serving those states…. For the most part, however, no federal and few state subsidies went to railroads in the eastern United States.

The Pacific Railway Act provided land grants and low-interest loans to the companies completing the railroad from Council Bluffs, Iowa to California. Later laws provided land grants (but no low-interest loans) for railroads from St. Paul to the Puget Sound, Los Angeles to New Orleans, Los Angeles to St. Louis, and Portland to San Francisco. In total, about 170 million acres were granted to the railroads, but Congress eventually took back about 45 million acres for nonperformance, leaving the railroads a maximum of about 125 million acres.

Congress expected that the railroads would sell the land to help pay for construction. In many instances, there was no immediate market for the land. Much of it was not farmable, and the United States had a surplus of wood so there was little market for timberland. In the latter half of the 20th century, the energy and timber resources on lands granted to the Northern Pacific, Southern Pacific, Sante Fe, and Union Pacific railroads proved very profitable. But this did not help them build the railroads in the first place.

In January 1893, the Great Northern Railway completed its route from St. Paul to Seattle without any land grants (except a small grant to a predecessor railroad) or other federal or state subsidies. The railway competed directly with the Northern Pacific, and to some extent with the Union Pacific, which served some of the same territory. The Great Northern’s builder, James J. Hill, knew that the other railroads had been built primarily for the subsidies, and as a result, they were poorly engineered and often followed circuitous routes. Hill built the Great Northern along the most direct route his engineers could find, so his operating costs were far lower than competitors’.

When the economic crash of 1893 took place a few months later, the Northern Pacific, Union Pacific, and almost all other western railroads went into receivership…Many people predicted that the Great Northern would not be able to compete and would follow the others into bankruptcy. But Hill managed to stay out of receivership, and the Great Northern remained the only transcontinental built in North America without government subsidies that never went bankrupt.

By 1930, American railroad mileage peaked at about 260,000 miles…only 18,700 of these miles were built with land grants or other federal subsidies.

Second, Jim Powell writes about government corruption and 19th century railroad subsidies in his book on Teddy Roosevelt, Bully Boy: The Truth About Theodore Roosevelt’s Legacy:

Whenever politicians interfered in the railroad business, however, corruption and inefficiency inevitably occurred. The most dramatic case involved construction of the first intercontinental railroad. Railroad lawyer Abraham Lincoln supported the project, and he made it a priority after he became president in 1861…

Stephen Ambrose and other historians have faulted private markets for lacking the capital or the imagination to build the transcontinental railroad. Certainly it was true that private entrepreneurs and financiers did not see the point or risking huge sums to build a railroad across a vast, empty, and sometimes mountainous terrain. Private entrepreneurs and financiers added value by developing the rail network bit by bit, supporting the expanding freight business. The process was gradual. Grandiose schemes like the transcontinental railroad drained resources from some regions to benefit special interests.

There was no money to be made from operating a railroad through a desolate wasteland, yet the federal government rewarded railroad contractors with big subsidies: a thirty-year loan at below market interest rates; twenty sections (12,800 acres) of government-owned land for every mile of track; and an additional subsidy of $48,000 for every mile of track laid in mountainous regions.

Thomas Durant, Oakes Ames, and other officers of the Union Pacific Railroad, which went a thousand miles west from Council Bluffs, Iowa, started the Credit Mobilier company in 1867 and retained it to do the construction. Credit Mobilier distributed to shareholders profits estimated at between $7 million and $23 million, depleting the Union Pacific’s resources. In an effort to stop congressional investigations, the officers bribed Speaker of the House James G. Blaine and other congressmen with Credit Mobilier stock. Seldom modest about their thievery, congressmen voted themselves a 50 percent pay raise. The Union Pacific Railroad fell deep into debt, without enough revenue from passengers or shippers, and went bankrupt in 1893.

It is not surprising that Joe Biden, an individual who has spent his entire career in government, possesses a child-like devotion to the federal government’s capabilities. Biden is a major proponent behind the Obama administration’s misbegotten plan to build a national system of high-speed rail. That Biden stands to achieve historic notoriety for helping facilitate this latest government boondoggle is only fitting.

See Cato essays on federal transportation subsidies and the Department of Transportation timeline, which notes the Credit Mobilier scandal:

1872: The New York Sun exposes the Credit Mobilier scandal, perhaps the largest business subsidy scandal of the 19th century. Credit Mobilier is a construction company financially controlled by the leaders of the Union Pacific Railroad that makes huge profits at taxpayer expense. Congressman Oakes Ames (R-MA), who is an agent of Credit Mobilier and part-owner, distributes shares of the firm’s stock to members of Congress at a discounted value. In return, those members treat Credit Mobilier favorably in a variety of ways, such as by voting to appropriate funds for the firm. The scandal illustrates the corruption that usually results when the government intervenes in the economy and subsidizes businesses.