Pushing Back on an Anti-Social Network

Power Ventures, Inc. offers a service to amalgamate various social-media platforms into one system; each user gives the company his usernames and passwords, including for Facebook. Facebook objected to Power Ventures’ use of Facebook in this manner and sent a cease-and-desist letter. When Power Ventures refused to comply, Facebook sued under the Computer Fraud and Abuse Act (“CFAA”).

The CFAA was designed to prevent hackers from accessing a computer system “without authorization” and has criminal penalties of up to five years in prison. The district court found that Power Ventures had indeed accessed Facebook without authorization and the U.S. Court of Appeals for the Ninth Circuit affirmed that decision. Power Ventures has petitioned the Supreme Court to review the case; Cato has filed an amicus brief supporting that petition.

We explain that there’s a split among the circuit courts as to the legal basis for an entry to be “authorized” under the CFAA. The Fifth and Seventh Circuits use agency law (scope of employer permission), the First and Eleventh Circuits use contract law (established policies), and the Second, Fourth, and Ninth Circuits use property law (the common law of trespass). The ideal resolution would involve an analogy to physical trespass, which various members of Congress involved in drafting the CFAA used to discuss the computer crimes that the law was designed to prevent.

In applying trespass law here, the facts begin to look like a landlord-tenant dispute over a third-party guest. A landlord typically can’t prevent a tenant from inviting guests to access the tenants’ property by using the common areas of the building, without a limitation in the lease. Here, Facebook’s users own the data (information, pictures, etc.) they put on the social network, as Facebook acknowledges, and there’s no guest-access restriction in the terms of service.

Many people share social-network, email, or other passwords without considering such actions to be criminal and the common law is presumed to conform to the customs of the people unless there’s explicit statutory text to the contrary. Otherwise millions of people could unwittingly be made criminals.

This is also the reason why the “rule of lenity” applies in Power Ventures’ favor, because an (at best) ambiguous statute cannot be used to punish someone.

The final reason that the Supreme Court should take the case is its importance to the online economy. Power Ventures is trying to compete with Facebook and Facebook’s ban prevents the market from being able to determine who has the better product. Many other companies, including Google, use a method of automated access similar to that which Power Ventures uses and could be imperiled by the lower court’s ruling. Internet companies need clear legal rules so they know what they can do nationwide without the threat of civil liability or criminal prosecution.

The Supreme Court may decide whether to take Power Ventures v. Facebook before it breaks for its summer recess at the end of June, or it could hold the decision over till the start of the next term in the fall.

Legislative Malpractice: the CBO Scores the American Health Care Act

The Congressional Budget Office’s cost estimate of the American Health Care Act confirms what health-policy scholars have known for months: the AHCA is bad health policy that will come back to haunt its Republican supporters.

Premiums on the individual market have risen an average of 105 percent since ObamaCare took effect. Maryland’s largest insurer has requested rate hikes for 2018 that average 52 percent. Yet the CBO estimates the AHCA would saddle voters with two additional premium increases before the mid-term elections—a further 20 percent increase in 2018, plus another 5 percent just before Election Day. Even worse, the bill’s ham-handed modifications to ObamaCare’s most harmful regulations would accelerate the race to the bottom that ObamaCare has begun. Voters will blame Republicans for their skyrocketing premiums and lousy coverage, deepening what appear to be inevitable GOP losses in 2018.

Free-market reforms would reduce premiums by up to 90 percent, make access to care more secure for people who develop expensive medical conditions, reduce taxes and health care prices, and give states the ability and flexibility to cover preexisting conditions. It might even give the GOP’s base a reason to go to the polls in 2018.

The AHCA is not free-market reform.

Lucia and PHH: Two Cases, Two Arguments for Constitutional Principles

It’s not often an appellate court agrees to re-hear a case en banc—that is, reexamine a decided case with all active judges participating—and when it does, usually it’s because the case is of particular importance.  Today the federal appeals court in D.C. heard two such cases, and both address fundamental issues of due process and constitutional integrity.  Heavy and exciting stuff.  Cato filed amicus briefs in both cases, given their potential impact on core principles of liberty and the rule of law.

The first case, Lucia v. SEC, considers the role of the Administrative Law Judge (ALJ).  While the case was nominally about whether ALJs are inferior officers, and therefore subject to certain constitutional appointment and removal proceedings, at its heart is the question: what makes a judge a judge?

Most Americans expect that if the government is going to haul them in for alleged wrongdoing, they’ll at least have their case heard by an impartial judge, with all the usual legal protections.  And this is what Americans should expect.  Unfortunately, some federal agencies operate differently, using their own internal administrative proceedings, with their own ALJs, to determine if someone has broken the rules, and to impose a fine or other punishment.

The vast majority of ALJs work for the Social Security Administration, determining whether individuals are eligible for benefits.  As Lucia’s lawyer pointed out in argument today, there is a big difference between ALJs determining whether someone will receive something from the government, as the Social Security Administration’s ALJs do, and determining whether the government will take something from someone.

Trump’s Missing Buildup

The biggest news about the Trump administration’s release yesterday of its $603 billion 2018 defense budget proposal is that there isn’t much. The anticlimax comes partly because most of the details were already out, thanks to the “skinny budget” plan for discretionary spending released in March and a recent leak. Moreover, the most newsworthy aspects of the proposal—its big cuts and chicaneries—came in non-defense areas and through 10-year projections that are little more than symbolic wish lists.

There’s a bigger reasons that Trump’s budget is historically unimportant: Congress is going to ignore it. Even the 2018 plan seems more statement than realistic attempt to guide appropriations. The breadth of the non-defense cuts used to fund the $54 billion defense increase makes it easy for even vulnerable Democrats to oppose it. That, along with Trump’s declining public support, even among conservatives, is why Republican backers won’t stick up for his plan.

Even if the budget were less impolitic overall, its military spending increase would face long odds thanks to the cap on defense spending, which is $54 billion less than Trump wants. Under the Budget Control Act, if an annual defense appropriation exceeds its cap, the Treasury must “sequester” the excess, pulling proportionally from all accounts in that category. Contrary to much reporting, sequestration hasn’t occurred since 2013, when it resulted automatically from the failure of the congressional supercommittee to come up with a deficit reduction plan.

Instead, Congress has cut a series of deals that raised the annual cap. Democrats made sure that the cap on non-defense discretionary spending went up by equal measure. The increases were paid for, in theory, by dubious future savings. Further Pentagon relief comes through abuse of the Overseas Contingency Operations (OCO) budget, which is uncapped out of deference to the pretention that it is “emergency” spending for wars. The OCO budget is annually stuffed with non-war funding—now at least $30 billion of it.

An Electrifyingly Bad Decision

Transportation Secretary Elaine Chao’s decision to give $647 million to California to electrify a San Francisco commuter rail line tells states and cities across the nation that they should plan the most expensive and wasteful infrastructure projects they can and the Trump administration will support them. The Caltrains electrification project had no political, economic, social, or environmental justification, so Chao’s support for the project despite its lack of virtues does not bode well for those who hoped that the Trump administration would take a fiscally conservative stance on infrastructure and transportation.

The California project had already been funded by the Obama administration, but it was a last-minute approval by an acting administrator who immediately then took a high-paying job with one of Caltrains’ contractors. When Chao took office, every single Republican in the California congressional delegation asked her to overturn the decision, and she agreed to review it. Even some Democrats opposed the project, meaning there was far less political pressure to fund it than many other equally wasteful programs.

Caltrains carries just 4 percent of transit riders in the San Francisco Bay Area, and based on the dubious claim that electric trains would go a little faster than Diesel-electric trains, the environmental assessment for the project predicted that electrification would boost ridership by less than 10 percent. It would save no energy and have a trivial effect on air pollution. 

Instead, the main purpose of the Caltrains project was to wire the way for California’s bloated high-speed trains, which at least initially would use the same electric power to get to San Francisco. Normally, high-speed trains would not use the same track as ordinary commuter trains, but the costs of the high-speed rail project have risen so much that the state’s rail authority is cutting corners wherever it can. One result is that the project, if it is ever completed, won’t really run trains at high speeds for much of its route.

The Case for Calling them Losers

President Trump made headlines with his impromptu remarks after he learned of the tragic attack in Manchester earlier this week.

President Donald Trump put the latest incident in perspective: “So many young beautiful innocent people living and enjoying their lives murdered by evil losers in life. I won’t call them monsters because they would like that term. They would think that’s a great name. I will call them from now on losers because that’s what they are.

“They’re losers, and we’ll have more of them, but they’re losers, just remember that,” he added.

He spoke from the heart, but there is wisdom in the President’s words, as I explain at The National Interest’s The Skeptics

I note that “loser” is the same word that Ruslan Tsarni used to describe his nephews, Tamerlan and Dzhokhar Tsarnaev, the two Boston Marathon bombers.

When asked what provoked the bombing suspects, the uncle stated: “Being losers, hatred to those who were able to settle themselves—these are the only reasons I can imagine.

“Anything else, anything else to do with religion, with Islam, is a fraud, is a fake,” Tsarni added.

Other words include nitwits and idiots. My colleague John Mueller, who has assembled a catalog of all the post-9/11 terrorism cases in the United States—92 as of January 2017—characterizes most of these plots as bone-headed. These words describe mostly instances in which the would-be terrorists managed to kill and injure no one, not even themselves. But we should be equally dismissive of the losers that manage to detonate their bombs, or fire their weapons. Trump got it right.

I explain:

The word “loser” works because it doesn’t imply that there is anything particularly special about the individuals who perpetrate these heinous acts. They might wish to make a statement by indiscriminately killing and injuring helpless victims. They might fashion themselves as heroic, or uniquely evil, or superhuman. They are none of these things.

And I conclude:

I refuse to reward these losers. I refuse even to mention their names. Though we should never forget their victims, we shouldn’t allow [killers] to change the way that we live. They were sad and angry, and they lived unhappy lives. They wanted us all to be unhappy, too.

I’m not having it. I just cranked an Ariana Grande shuffle on my iPhone.

You can read the whole thing here.

The Wall Street Journal Declares “Creditor Emptor”

Last week the Wall Street Journal’s editorial page criticized the investors who lent money to Puerto Rico as being naive about political risks and suggested that they more or less deserve the massive haircuts currently being proposed.  However, this is a puzzling perspective that misconstrues the legal issue at hand—and bodes poorly for the next government that gets in such a mess.

Disregarding the Commonwealth’s constitutional requirement to prioritize general obligation debt above other obligations is not a regrettable necessity, as the Journal seems to suggest, but a violation of the law. Such a step is not only unnecessary but also portends long-run ramifications that would be to the detriment of the island’s residents.

The Journal mistakenly places its faith in the island’s recently announced fiscal plan, which bases its sparse debt repayments on the island’s supposedly ongoing economic contraction. In fact, Puerto Rico’s nominal GDP is at an all-time high (as are tax revenues), having grown 20% over the last decade. While the Journal praises the fiscal plan’s ostensible parsimony, spending actually grows by 12% over the next decade—it’s the 80% reduction in debt payments that makes it appear as if Puerto Rico’s government has restrained anything. To essentially forego any serious spending reforms when there is a fiscal oversight commission in place to take the political heat is mystifying—as is the Wall Street Journal’s facile praise of this approach. It’s also worth remembering that Puerto Rico’s government employs a much greater proportion of its workforce than any state in the union, so this notion that there’s nothing to cut in their budget doesn’t hold water.

If Puerto Rico does succeed in escaping its obligations to secured creditors, look for a stampede in the bond markets, as lenders come to realize there is no such thing as a safe government bond or an ironclad legal protection. What happens in Puerto Rico is going to be perceived by the bond markets as the model for Illinois—and Kentucky and California before too long.

What Puerto Rico threatens to establish is that regardless of any contractual agreements or constitutional pledges, all bets are off when a government not covered by Chapter 9 bankruptcy can’t pay its debts.