Today marks the 15th anniversary of the Cato Daily Podcast. To mark the occasion, we are giving listeners a small token of our appreciation. It’s an honor to serve as your host and, as always, thank you for listening.

As we approach the one-year anniversary of George Floyd’s murder by Minneapolis police, Congress stands at a crossroads: It can deliver the real reform it has repeatedly promised by overhauling qualified immunity, or it can settle for a package of largely meaningless window dressing that leaves untouched our indefensible policy of near-zero accountability for police. From a purely policy standpoint, the choice is a no-brainer. As explained below, it’s good politics as well.

To briefly recap, there is bipartisan agreement that American policing stands in desperate need of reform, particularly with respect to excessive force, racial disparities, and accountability. Acknowledging the ongoing crisis of public confidence in police, Congress has spent the past year working to identify key problems and assessing proposed solutions. In the course of those discussions, a single issue has come to predominate: qualified immunity.

Qualified immunity is a judge-made defense that enables police and other government officials to escape liability for violating people’s rights unless there happens to be a preexisting case with nearly identical facts in the relevant jurisdiction such that the misconduct at issue was “clearly established.” This has enabled cops to escape liability for everything from stealing property while executing a search warrant to savaging an unresisting suspect with a police dog. And while the Supreme Court could in theory fix the mess it made with its unwarranted foray into judicial policymaking, that seems increasingly unlikely. Thus, it is up to Congress to decide whether to fulfill the promise of our nation’s preeminent civil rights law, colloquially referred to as “Section 1983,” which provides that state actors “shall be liable to the person injured” for the deprivation of any right—not merely those the judiciary deems “clearly established.”

To their immense credit, a diverse array of legislators have recognized the pathology of qualified immunity and have remained laser-focused on the need to repeal or substantially reform it in order to ensure proper police accountability. Not surprisingly, some members of law enforcement recoil at the prospect of real accountability and have deployed a number of strategies to defeat the push to overhaul qualified immunity. Essentially, those strategies involve a proposal to offer up an attractive basket of largely meaningless window dressing in exchange for kicking the qualified-immunity can down the road and leaving untouched our current policy of near-zero accountability for law enforcement. Policymakers should reject that offer and the baseless propaganda with which it has been promoted.

Perhaps the single greatest sticking point right now is the perception that the law-enforcement community is united in its opposition to qualified immunity reform. Not so. Indeed, just last week, the Major Cities Chiefs Association—an organization of 79 police chiefs, commissioners, and sheriffs representing the largest cities in the United States and Canada—released a statement that embraces a major overhaul to qualified immunity that would result in the elimination of the “clearly established law” standard and effectively gut the doctrine as a defense for rights-violating police. Adding the MCCA’s support for qualified-immunity reform to that of other police organizations, including the Law Enforcement Action Partnership and the National Organization of Black Law Enforcement Executives, means that it is no longer possible to say that the law enforcement community is unanimous in its opposition. By contrast, civil rights organizations across the ideological spectrum—from the ACLU and NAACP Legal Defense Fund to the Second Amendment Foundation and Alliance Defending Freedom are united in seeking to ensure real accountability by repealing or substantially reforming qualified immunity. That confluence of support from civil-rights and law enforcement organizations ought to translate into 60 votes in the Senate.

Notably, some Members have expressed concern about the impending anniversary of George Floyd’s death on May 25 and a desire to have a piece of legislation that Congress can send to the Biden White House for review and comment. But the best way to honor George Floyd’s memory is not to meet some arbitrary deadline but instead to ensure the sort of genuine accountability that might have seen his killer, Derek Chauvin, removed from the police force before he murdered anyone. 

As noted, the window dressing being proposed by members of the law-enforcement lobby in exchange for caving on qualified immunity may look pretty, but it will have little real-world impact and certainly won’t address the most significant sources of public disillusionment with police. And the reason for that is simple. If, as they have proposed, police agree to dial back chokeholds and no-knock raids but then simply disregard those new policies—as former NYPD officer Daniel Panteleo did when he killed Eric Garner with a forbidden chokehold—how are they going to be held accountable? Even the proposal to hold departments, rather than rights-violating police themselves, liable for misconduct falls short because it destroys individual incentives to respect people’s rights and prevents victims from seeking redress from the person who harmed them. That is simply not the way to revive public confidence in police and assure people that police will be held to (at least) the same standard of accountability as the rest of us.

Make no mistake—this is a time of crisis for American policing and for our criminal justice system writ large. To perform their vital functions properly, those institutions must have the confidence and support of the public. But they do not, nor, according to record numbers of Americans, have they earned it. This is not a time for half-measures, window dressing, or rearranging the chairs on the deck of the ship. Americans have made clear that they demand real reform and real accountability from police. Fortunately, the path to real accountability is short and simple—simply repeal the illegitimate, judge-made doctrine of qualified immunity and embrace the ineluctably clear text of Section 1983, which provides a federal remedy for the deprivation of any right. 

The oddest defense of S.1/H.R. 1 I’ve seen lately is that the courts would ultimately uphold parts of it as constitutional. As several backers told the New York Times in a roundup article last week on expected legal challenges, “not all of the anticipated challenges to [the omnibus election bill] would succeed.” Many parts would be left standing.

I’ve got a new piece at National Review pointing out that a standard of “partly constitutional, partly not” shouldn’t be seen as good enough. “Members of Congress take an oath that requires them to ‘support and defend’ the Constitution.” That means satisfying themselves that there’s a sound constitutional basis for the entirety of a bill they approve, not just some of its parts. That doesn’t always mean they need to back off every provision they foresee will face an uphill fight in court. After thinking things through, they might decide on reflection that current precedent is wrong and deserves to be challenged. What they cannot do, at least not without tension to their oath, is to just breeze by questions of constitutionality, as someone else’s job to worry about.

And this bill gives them a lot to confront. “There are free-speech violations, about which ACLU officials have expressed alarm. There are separation-of-powers problems. There’s plenty of federalism-mangling. For those who prefer the more arcane, there are likely Electors Clause and Qualifications Clause violations.” Unfortunately, I write, most members of Congress “don’t try to think through the constitutionality of what they’re doing at all. They treat it instead as a game: Their team gets to take as many shots at the adversary as it can, and the courts as goalies then block what shots they can.”

To make things worse, there are signs that the bill’s drafters are not averse to weakening judicial review. Writing in the Wall Street Journal, Alan Gura spots a sleeper provision that would enfeeble protection of constitutional rights by specifying that First Amendment and other challenges to the bill be heard only by the D.C. federal courts, not those around the country as now. Currently, with federal courts all around the country open to such complaints, it’s usually possible to get quick judicial review of a speech-hostile enactment. With cases bottlenecked into the D.C. federal courts only, who knows? Delay in getting an unconstitutional provision struck down, to name one hazard, would loom larger. 

More on the problems with H.R. 1/S. 1 here (speech‐​hostile, bossy in areas long left to the sound discretion of the states, in several instances likely unconstitutional), here (places impossible burdens on local election administrators), here (experienced Democrats have doubts about consequences and practicality), here (bill would gut bipartisan structure of Federal Elections Commission, facilitating one-party control), and here (extending list of likely-unconstitutional provisions).

In 1996, Cato held its 14th Annual Monetary Conference, “The Future of Money in the Information Age.” The proceedings, along with additional essays, appeared in a book with the same title in 1997. In that volume, Alan Greenspan wrote, “To develop new forms of payment, the private sector will need the flexibility to experiment, without broad interference by the government” (Greenspan 1997: 48).

Since that time, financial innovation (in particular, blockchain) and the Bitcoin Revolution have spawned hundreds of cryptocurrencies, although only a dozen have achieved notable success (see coin​mar​ket​cap​.com). Moreover, there is a search for stable-valued digital currencies that can act as a superior means of payment, medium of exchange, and store of value. Several central banks, including the People’s Bank of China, are experimenting with their own digital currencies—and the Federal Reserve is likely to follow suit.

Because of the importance of these developments for the future of money, civil liberties, and monetary policy, Cato’s 38th Annual Monetary Conference, held virtually on November 19, 2020, was devoted to an in-depth discussion of “Digital Currencies: Risk or Promise?” The articles in this issue of the Cato Journal stem from that event.

By considering potential benefits as well as possible risks of private and central bank digital currencies, the contributors to this volume will improve our understanding of digital alternatives. In particular, a common thread throughout the journal is that one must be cognizant of the danger of centralizing digital currency in the hands of the state—especially the risks to monetary and financial stability, privacy, and freedom.

Although the focus of this issue is digital currency, the lead article by Jeb Hensarling, Phil Gramm, and John B. Taylor provides an overview of the long-run implications of the Federal Reserve’s response to Covid-19, the impact on Fed independence, and opportunities for positive legislative action—including a move toward a rules-based monetary regime. In a similar vein, John A. Allison closes with “Lessons for the Fed from the Pandemic.”

The remainder of the articles fall into four categories: (1) Digital Currency: State v. Market, with articles by Tobias Adrian and Tommaso Mancini-Griffoli, Neha Narula, Lawrence H. White, and Eswar Prasad; (2) Digital Currency and Civil Liberties, with articles by Jill Carlson, Alex Gladstein, and Martin Chorzempa; (3) Digital Currency, Competition, and Monetary Policy, with articles by Caitlin Long, Jesús Fernández-Villaverde, George Selgin, David Andolfatto, and Dong He; and (4) Digital Currency and Financial Inclusion, with articles by Michael J. Casey, Charles W. Calomiris, and Diego Zuluaga.

I thank the authors for their contributions and hope their work will encourage further research to find innovative ways to improve monetary and financial stability while preserving a free society. Finally, I acknowledge the generous support of the George Edward Durell Foundation in making Cato’s Annual Monetary Conference possible.

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Reference

Greenspan, A. (1997) “Fostering Financial Innovation: The Role of Government.” In J. A. Dorn (ed.), The Future of Money in the Information Age, 45–50. Washington: Cato Institute.

Some lawmakers seem to suffer from long-term memory loss. This can be worrisome—both for them and for the country. It seems like only yesterday (it was March 2020) when New York Governor Andrew Cuomo complained about the cumbersome Food and Drug Administration approval process for COVID-19 tests, pleading with federal regulators to permit the state’s Wadsworth Laboratory and private labs to perform laboratory developed tests (LDTs) without waiting for a green light from the FDA. At the time the U.S. lagged embarrassingly behind South Korea and other Asian and European countries in testing its population, as case numbers soared and hospitals were overwhelmed in the New York metropolitan area.

Fortunately, by mid-March 2020 the FDA finally relented and allowed New York’s Department of Health to process tests by contracting with private labs whose tests had not yet received FDA approval. In fact, the FDA made regulatory changes permitting all states to use tests developed by laboratories within their borders. While late to the game, the FDA finally adopted an approach used so successfully in South Korea.

South Korea enacted a reform after its disastrous experience with the MERS pandemic. Rather than get caught flat-footed when the next pandemic inevitably arrives, South Korea reformed regulations to allow for the rapid deployment of tests developed in private labs in a partnership in which the labs kept the regulatory agencies apprised of test safety and efficacy in real time.

In August of 2020 the Department of HHS took the FDA emergency action a step further by announcing it will no longer require FDA pre-market approval of LDTs. A report in the National Law Review stated:

The notice clarifies that clinical laboratories that develop and offer LDTs may voluntarily seek approval, clearance, or an Emergency Use Authorization (EUA) from FDA, but that such laboratories are not required to do so. However, laboratories that chose to run LDTs for SARS-CoV‑2 (COVID-19) without FDA premarket review or authorization will not be eligible for liability protections under the Public Readiness and Emergency Preparedness Act (PREP Act).

Yet now that case rates in the U.S. are gradually coming down and it appears the worst is behind us, lawmakers seem to have forgotten the lesson of the 2020 COVID test debacle. On May 11, 2021, majority leaders of the House Energy and Commerce Committee, its Subcommittee on Health, and the House Oversight Committee wrote Secretary of Health and Human Services Xavier Becerra asking him to rescind the August 2020 HHS policy change and return the regulatory regime to the status quo ante.

Last Spring a consensus was emerging that a rigid and inflexible regulatory regime caused unnecessary delays in getting tests, drugs, and devices, and health care practitioners to a public in need during a national health emergency. The slow and poorly coordinated response to the crisis at all levels of government provided an opportunity to comprehensively reassess the myriad laws and regulations that blocked a nimble response. Alas, it appears long-term memory loss might leave too few lawmakers up to the task.

In the wake of the Colonial Pipeline outage that has produced mounting fuel shortages along the East Coast, the Department of Transportation has announced that it is taking initial steps to determine if a Jones Act waiver is warranted. It’s not hard to see why. Transporting a massive 100 million gallons of fuel per day, the Colonial Pipeline accounts for 45 percent of the fuel used on the East Coast. That’s a huge supply gap to fill and, as the Energy Information Administration points out, waterborne transport can play a key role:

Markets along the Atlantic Coast with access to deepwater ports, such as Savannah, Georgia; Charleston, South Carolina; Wilmington, North Carolina; and Norfolk, Virginia, can receive limited imports from the global market and from marine shipments via coastwise compliant shipping originating from the U.S. Gulf Coast.

Unfortunately, only a relatively small number of tanker ships ideally suited to transport refined petroleum products are deemed coastwise compliant, meaning they meet the Jones Act’s requirements of being U.S.-flagged, U.S.-built and mostly U.S.-crewed and owned. Waiving the Jones Act would allow far more numerous—and significantly cheaper—vessels not compliant with the law to quickly move fuel from the Gulf Coast to where it’s needed.

The transportation system requires maximum flexibility in an emergency or crisis, and a Jones Act waiver would help provide it.

There is ample precedence for such a move. In the wake of Hurricanes Harvey and Irma in 2017, along with Hurricane Sandy in 2011, a lack of fuel supplies was deemed to be a threat to national security, thus clearing the way for the issuance of Jones Act waivers. If it was a good enough reason to justify a waiver then it should be a good enough reason now.

But waivers should only be a prelude to more significant changes to the Jones Act.

The law isn’t just a problem in times of pressing need, but also in everyday life. By limiting domestic waterborne transport to ships that are the world’s most expensive to build and operate, the Jones Act interferes with the efficient flow of goods within the United States. That’s particularly true of petroleum products where the law’s distortions are in abundance. For example:

• Refined products produced in the Gulf Coast are sent to Latin America instead of the East Coast.
• Refineries on both the East Coast and West Coast can find it more attractive to import oil from abroad than other parts of the United States.
• California can source gasoline more cheaply from distant Singapore than the Gulf Coast.

At its worst, the Jones Act can even make domestic transportation outright impossible. While the United States is the world’s leading exporter of propane, Hawaii must buy it from as far away as Africa owing to a complete lack of Jones Act-compliant ships capable of transporting it from the U.S. mainland. A similar absence of appropriate ships, meanwhile, means that Puerto Rico has no choice but to meet its bulk liquefied natural gas needs from foreign sources.

These inefficiencies are not just a hit to the country’s economic pocketbook, but a threat to its security. Reduced transportation options or over-reliance on a single method of transport can lead to significant problems when things go awry, as we are painfully finding out. Redundancy and flexibility are key to overcoming systemic breakdowns, and the Jones Act means less of both.

So, what should be done?

At a minimum this situation illustrates the need for a waiver system based on commercial considerations. Currently, waivers can only be issued by the Department of Homeland Security if they are deemed in the “interest of national defense” or by the Secretary of Defense in order to address an “immediate adverse effect on military operations.” That’s a high bar to clear, which helps explain why such waivers are rarely issued.

Instead, Congress should create a new type of waiver allowing the use of non-Jones Act ships if no vessel meeting the law’s requirements is available—no “national defense” justification required. Canada already has such a system. Other measures that should be on the table include a scrapping of the law’s U.S.-built requirement and permanent exemptions for parts of the United States that are uniquely dependent on maritime transportation such as Alaska, Guam, Hawaii, and Puerto Rico.

A Jones Act waiver could help ameliorate some of the Jones Act’s worst effects, but what’s urgently needed is the significant reform—if not outright repeal—of this failed and costly law.

According to various news reports, Congress is preparing a package of legislative updates to U.S. trade and economic policy in order to address China’s growing economic and geopolitical influence. The resulting “China Package” will, like the Strategic Competition Act of 2021, be a bipartisan effort that includes a mix of diplomatic and strategic policies seeking to bolster U.S. companies’ competitiveness and rein in perceived Chinese abuse. One area ripe for reform – yet unfortunately missing thus far from congressional discussions – is Section 232 of the Trade Expansion Act of 1962, which authorizes the president to impose tariffs on “national security” grounds. As we explained in a recent paper, President Donald Trump routinely abused Section 232 to impose tariffs on steel and aluminum, and threatened them on several other products – abuse that the vague and poorly-conceived law makes all too easy and that has harmed the U.S. economy, including vis a vis China.

Indeed, we count at least five reasons why Section 232 reform should be part of any China Package that Congress will ultimately consider:

The Geopolitics. One of the major lessons from the Trump administration’s use of Section 232 was that unilateralism rarely works. A primary goal of the steel and aluminum tariffs, for example, was to counter overcapacity, particularly in the Chinese steel industry, caused by government policies that untether domestic production from market fundamentals. Both Congress and the Biden administration share this goal, which U.S. Trade Representative Katherine Tai recently acknowledged in congressional testimony. However, Tai also claimed that tariffs imposed under Section 232 had been effective in curtailing steel overcapacity – a claim that, as we’ve noted, is belied by data showing both global and Chinese steel production continued to expand after the tariffs were imposed.

In fact, the tariffs have actually hurt U.S. efforts to rein in China’s behavior by offending close allies who were also subject to the measures, yet are necessary for any global solution to the global overcapacity problem. The European Union, for example, retaliated against U.S. exports after being hit with the metals tariffs, and is set to increase that retaliation on June 1^st – even as Commerce Secretary Gina Raimondo recently acknowledged that “Europe of course is not a threat to American national security.” As long as these tensions (and others) persist, multilateral levers that have in the past altered Chinese policy will be less effective than they’d be without the tariffs (which Biden could eliminate with the stroke of a pen).

The Economics. Various studies and numerous current news reports show that the 232 tariffs hurt the U.S. manufacturing sector, making these companies less competitive globally (and versus Chinese competitors). As we’ve noted in a recent policy analysis:

[T]he tariffs caused higher steel prices that in turn hurt other U.S. manufacturers in terms of higher input costs, lower exports, and lost competitiveness at home and abroad; created an opaque, costly, and uncertain “exclusion” bureaucracy, under which more than 100,000 requests have been filed by U.S. manufacturers seeking relief; resulted in approximately 75,000 fewer manufacturing jobs than would have otherwise existed in the absence of the tariffs; depressed global demand for steel (thereby dampening prices); bred global market uncertainty, which hurt investment in manufacturing; and caused numerous U.S. trading partners to retaliate against American exporters.

In fact, existing 232 tariffs on steel and aluminum continue to threaten U.S. manufacturing recovery even as the situation with the pandemic has improved. Dozens of companies have told the Department of Commerce that this would happen through the exclusion process, so it is not like we had no idea that this would occur.

Data also show that the tariffs have not created a lean and thriving domestic industry— something the Trump administration itself admitted when it acted to expand the tariffs to steel and aluminum derivatives due to the industry’s failure to consistently meet the administration’s capacity utilization targets. As we explained, “the tariffs lead to price increases in steel and aluminum imports (as one would expect when you tax something), and this prompted industrial consumers to purchase ‘derivative’ products from abroad, which ended up hurting domestic derivative products producers and depressing domestic demand for the tariffed metals.”

By raising input costs, the Section 232 tariffs also have deterred domestic investment – another entirely predictable outcome. (If producing something in the United States becomes more expensive, investors will be less likely to invest in that industry.) The Section 232 actions and the president’s repeated threats to impose “national security” tariffs thereunder – threats that couldn’t be ruled out due to the law’s broad delegation of tariff power and its procedural ambiguity, as well as courts’ unwillingness to check Trump’s actions – also injected uncertainty into the market, further depressing investment. Few companies will be eager to invest billions of dollars in the United States if their supply chains are under constant threat of unchecked executive action – a chilling effect that academic research has since confirmed.

The Environment. President Biden has outlined ambitious goals on tackling climate change. But if the United States wants to become, as Democrats and Biden seem to argue, a global leader in wind towers, solar panels, electrical vehicles, and other products (to “beat China”!), manufacturers and potential investors will need both unrestricted access to key raw materials – particularly steel and aluminum – and certainty regarding their global supply chains. Reforming Section 232 would accomplish both goals. As the Environmental Technologies Trade Advisory Committee stated in a letter to former Commerce Secretary Wilbur Ross in 2019, “the U.S. environmental products and services industry relies on global supply chains and, most importantly, access to global markets. The Section 232 tariffs drive up our input costs and make the industries’ products less competitive globally.”

If congressional Democrats and President Biden are truly committed to boosting U.S. production and consumption of “green goods,” and countering China’s growing influence in these industries, then Section 232 reform is the obvious place to start.

The Alternatives. Even though good ol’ fashioned market discipline would be the best way to make U.S. steel companies leaner and more environmentally-friendly, reforming Section 232 would not amount to, as is often alleged, “unilateral disarmament” against China or other alleged trade scofflaws, because U.S. law contains numerous other ways to police Chinese imports. This includes, “trade remedy” (antidumping, countervailing duty, and safeguard) actions to restrict injurious imports, almost half of which already target iron and steel products (see Figure 1 below); sanctions and export controls; preferential trade agreements like the Comprehensive and Progressive Trans-Pacific Partnership (which was originally intended to counterbalance China in the Asia-Pacific Region); and World Trade Organization disputes and negotiations, which have proven somewhat effective in disciplining Chinese trade malfeasance.

Thus, to the extent that market discipline is unable to meet Congress’ China objectives, there are several other ways to address these issues – ways that, given Section 232’s inefficacy and abuse, would almost certainly produce better results.

The Politics. Finally, Section 232 reform makes some political sense for President Biden, who has faced criticism for abandoning his campaign promises to reverse Trump’s trade abuses, fix our alliances, and govern in a modest, bipartisan, and ethical way. By supporting Section 232 reform, Biden can neuter one of Trump’s favorite policies, join a bipartisan chorus of reformers (see, e.g., these two recent bills), and limit his own executive power, boosting the U.S. economy and healing relationships with close allies in the process.

Given these considerations, Section 232 reform should be part of any China Package that’s serious. It’s now up to Congress to show that it is.