• What are Republicans doing to stop ObamaCare? Not much.
• Conflating the Taliban with al Qaeda isn’t helping our foreign policy dialogue.
• “Sitting in a Volt that would not start at the 2010 Detroit Auto Show, a GM engineer swore to me that the internal combustion engine in the machine only served as a generator, kicking in when the overnight-charged lithium-ion batteries began to run down.”
• The new issue of Regulation looks at price gouging, soda taxes, the Durbin Amendment, and more.
• Who should decide when we tap into strategic oil reserves: The president? Or market forces? 

Today being St. Patrick’s Day, it seems appropriate to revisit the unlikely juxtaposition of two of my favorite legal policy topics: alcohol and the Commerce Clause. (Listen to my podcast on the subject or read its transcript.) The point of all this is that alcohol is no different from any other commodity in that states cannot erect arbitrary regulations that privilege in-state interests (be they retailers, wholesalers, or producers) ahead of their out-of-state counterparts.

But St. Paddy’s Day is not the only reason the issue is topical. Last week, the Supreme Court declined to review the Fifth Circuit’s indefensible decision in Wine Country Gift Bas​kets​.com v. Steen. It did so despite the Fifth Circuit’s upholding of a Texas law designed to protect Texas’s in-state liquor retailers from out-of-state competition, a holding that disregarded recent high-court precedent.

In Granholm v. Heald (2005), decided together with the Institute for Justice’s Swedenberg v. Kelly, the Supreme Court struck down a similar protectionist law. Both cases challenged laws that permitted in-state wine producers to sell directly to consumers while prohibiting similar sales from out-of-state producers. The Court held that, notwithstanding a provision in the 21st Amendment (which repealed prohibition) that allows states to regulate their own liquor industries, the Commerce Clause prohibits states from disrupting free trade by discriminating against out-of-state businesses in favor of in-state businesses. This interpretation of the Commerce Clause grew out of the common-sense understanding that, if left unchecked, state governments have strong incentives to protect in-state businesses (who are voters) at the expense of their (non-voting) out-of-state competitors. Without constitutional checks, such laws could eviscerate Congress’s constitutionally enumerated power to “regulate [make regular] commerce … among the several States.” 

Nevertheless, the Fifth Circuit decided to limit Granholm to wine producers. As is evident by the name, however, the Wine Country Gift Bas​kets​.com case concerns a wine retailer. Yet Granholm explicitly said that states “may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses.” It is dismaying that the Supreme Court didn’t care about the Fifth Circuit’s neglect of this language.

Granholm was an important blow against the heavily protectionist and cartelized liquor industry. As was documented in a pre-Granholm article in Cato’s Regulation magazine, the prohibition on direct shipment has been used to strangle small wineries as they struggle to access larger markets without having to go through the state-controlled distribution networks. Despite an explosion of wine-drinking and ‑making in this country in the last 30 years — with consumption increasing by nearly 50% between 1991–2001 and wineries quadrupling between 1974–2002 — the small winery still fights against an old-boy network of producers and distributors. In 2003, the top 30 wine companies still provided 90% of U.S. wine although they were less than 1% of the producers.

This is, of course, exactly how the top 30 wine companies want it.

Granholm dismantled some of this network. Unfortunately, Wine Country Gift Bas​kets​.com will allow this unconstitutional infringement of the right to earn an honest living (see Timothy Sandefur’s excellent book of the same name) to persist in some states.

But Americans, like most of the world, appreciate their booze. During prohibition, Americans endured Tommy-guns, corruption, gangsters, and speakeasies just for a drink. If the government made it illegal to drink responsibly, many Americans were willing to thwart the law and drink irresponsibly.

The negative effects of prohibition were too visible to deny and, after 13 years of waging war on a non-compliant population, prohibition ended. In its wake, however, prohibition left another war, an 80-year “on-going, low-level trade war” (in the words of Granholm) between states and their three-tiered monopolies over the production, distribution, and sale of alcohol. And so, 21st Amendment or not, prohibition lives on — though the colorful characters in spats carrying Tommy-guns have been replaced by iPad-wielding lobbyists and politicians who do their bidding.

Thanks to Trevor Burrus for his help with this blog post.

I wrote a long post for the National Interest yesterday arguing against US participation in a no-fly zone over Libya. Here are highlights:

Given the spectrum of ways that the United States can help Libya’s rebels, it’s odd that debate here centers on a no-fly zone, a form of military intervention that shows support for rebels without much helping them. No-fly zones commit us to winning wars but demonstrate our limited will to win them. That is why they are bad public policy.

No-fly zones are best suited to helping ground forces that can defend themselves against an opponent once we suppress its airpower. Northern Iraq in the 1990s is arguably a successful example. But they do little to overthrow entrenched leaders or help lightly-armed rebels defeat heavier forces. They do even less to protect civilians against armies or militias.

…

If we care enough for the fate of the Libyan revolution to kill for it, we should take decisive action in its favor, such as using airpower to attack pro-Qaddafi forces. If we are rooting for the rebels to win but do not care enough to kill Libyans directly or risk our pilots’ lives, we should limit ourselves to providing them with intelligence (intercepts and surveillance primarily), advice, and maybe arms while sanctioning the regime and jamming its communications. If other nations want to intervene, we should offer them like support, including transport to the fight. If we limit ourselves to those actions, we should do so in recognition of two risks. First, we may simply prolong a war and increase civilian suffering (the same goes for no-fly zones, as Doug Bandow wrote yesterday). Second, our efforts are likely to fail. We may soon be dealing with a regime we tried to overthrow, one that may return to its outlaw habits. If we are unwilling chance that, we should sit on our hands and admit that politics requires tough choices. I lean toward the second course.

…

What we should most avoid is confusing security and philanthropy. When leaders talk as if our intervention is protecting Americans but execute it as if they are doing charity work that merits little risk, they sow harmful confusion. Our potential allies may expect more than we are willing to give and take chances that they otherwise would not. The American public may come to support another dubious war based on threat exaggeration.

The U.S. Postal Service is in financial trouble. Undermined by advances in electronic communication, weighed down by excessive labor costs and operationally straitjacketed by Congress, the government’s mail monopoly is running on fumes and faces large unfunded liabilities. Socialism apparently has its limits.

While the Europeans continue to shift away from government-run postal monopolies toward market liberalization, policymakers in the United States still have their heads stuck in the twentieth century. That means looking for an easy way out, which in Washington usually means a bailout.

Self-interested parties – including the postal unions, mailers, and postal management – have coalesced around the notion that the U.S. Treasury owes the USPS somewhere around $50-$75 billion. (Of course, “U.S. Treasury” is just another word for “taxpayers.”) Policymakers with responsibility for overseeing the USPS have introduced legislation that would require the Treasury to credit it with the money.

Explaining the background and validity of this claim is very complicated. Fortunately, Michael Schuyler, a seasoned expert on the USPS for the Institute for Research on the Economics of Taxation, has produced such a paper.

At issue is whether the USPS “unfairly” overpaid on pension obligations for particular employees under the long defunct Civil Service Retirement System. The USPS’s inspector-general has concluded that the USPS is owed the money. The Office of Personnel Management, which administers the pensions of federal government employees, and its inspector-general have concluded otherwise. Again, it’s complicated and Schuyler’s paper should be read to understand the ins and outs.

Therefore, I’ll simply conclude with Schuyler’s take on what the transfer would mean for taxpayers:

Given the frighteningly large federal deficit and the mushrooming federal debt, a $50-$75 billion credit to the Postal Service and debit to the U.S. Treasury will be a difficult sell, politically and economically. Although some advocates of a $50-$70 billion transfer assert it would be “an internal transfer of surplus pension funds” that would allow the Postal Service to fund promised retiree health benefits “at no cost to taxpayers,” the reality is that the transfer would shift more obligations to Treasury, which would increase the already heavy burden on taxpayers, who ultimately pay Treasury’s bills. (The Congressional Budget Office (CBO) prepares the official cost estimates for bills before Congress. Judging by how it has scored some earlier postal bills, CBO would undoubtedly report that the transfer would increase the federal budget deficit.) For those attempting to reduce the federal deficit, the transfer would be a $50-$70 billion setback.

Sounds like a bailout to me.

See this Cato essay for more on the U.S. Postal Service and why policymakers should be moving toward privatization.

This is a big week for private property rights. Two epic eminent domain struggles are playing out on opposite sides of the country. 

First, National City, California, is ground zero for eminent domain abuse. City officials declared several hundred properties blighted even before conducting a blight study that was riddled with problems. The city wants to seize and bulldoze a youth community center (CYAC) that has transformed the lives of hundreds of low-income kids, so a wealthy developer can build high-rise luxury condos:

CYAC has numerous volunteers, including local law enforcement officers, providing free mentoring in boxing as well as academics. The gym is famous for getting kids off the street and back into school. As Rick Reilly explained in a feature in Sports Illustrated (boy, how I miss his inside-back-page column):

You know what, Mayor? National City doesn’t need more luxury condos. It needs good men like the Barragans teaching kids respect for neighbors and property, manners you could use a little of yourself.

And if you kick the Barragans out so some slick in Armani can buy a bigger yacht, I hope your car stereo gets jacked—weekly—by a kid who would’ve otherwise been lovingly coached on their jabs and their math and their lives.

Question: Can you declare politicians blighted?

This week, the gym’s battle is in trial before the Superior Court of California. Represented by the Institute for Justice (who else?), a victory will help protect private property far beyond National City and clarify the use and misuse of blight designations.

Second, moving to the other side of the country, we go to Mount Holly, New Jersey:

Mount Holly is another classic case of “Robin Hood-in-Reverse.” Officials have been dismantling a close-knit community known as the Gardens for the last decade so a Philadelphia developer can bulldoze the area and build more expensive residential properties.

Homeowners in the Gardens are primarily minorities and the elderly. The row-style houses are being torn down while still attached to occupied homes, and officials refuse to offer the remaining homeowners replacement housing in the new redevelopment. Further, owners are being offered less than half the amount it would cost to buy a similar home blocks away.

Here, IJ just launched a billboard campaign and did a study that concludes the eminent domain abuse project may result in a loss of a million taxpayer dollars a year, or one-tenth of the Township’s budget.

I previously wrote about eminent domain shenanigans here and you can read more from Cato on property rights here.

The New Jersey Office of Legislative Services, which estimates the budgetary impact of proposed laws, has just released its analysis of a private school choice bill called the “Opportunity Scholarship Act.” The most remarkable thing about its report is the amount of money it assumes that districts would save for each student they no longer have to teach: $0.

On that assumption, if every student were to leave for the private sector tomorrow, districts would keep right on spending exactly the same amount they spend today. Inefficient though it is, not even state-run monopoly schooling is that bad.

The OLS report does not explain why it assumes that the per pupil savings for students leaving public schools (the “marginal cost”) would be $0. It states that this figure is “indeterminate,” but by not counting it at all is effectively treating it as zero.

In fact, the marginal cost of public schooling is not “indeterminate” at all. Economists “determine” it all the time, and it’s quite easy to do. You simply observe how district spending actually rises and falls with enrollment, using a time-series regression, as I did in 2009 to calculate the marginal cost of public schooling in Nevada (see Appendix A).

Even if the NJ OLS does not conduct a marginal cost estimate specific to New Jersey, they could have done–and should still do–the next best thing: take the marginal cost estimates for other states as a rough guide and estimate the NJ district savings from them. I estimated that Nevada district spending falls by 85% of average per-pupil spending when a student leaves, and Grecu and Lindsay, a couple of years earlier, estimated the figure at 80% for South Carolina.

If they want to be conservative, the NJ OLS could use the lower of these figures, and perhaps also run the numbers for estimates 10% higher and 10% lower.

Any of the above options is preferable to the logical impossibility of their current analysis, which effectively treats the marginal cost of public schooling as $0.

• “If financial institutions are indeed better than consumers at managing interest risk, then those companies should be able to offer consumers attractive terms for doing so — without the moral hazard of an enormous taxpayer backstop.”
• We should be thankful that the president is spending time on his golf game.
• After all, he recently reinstated military tribunals at Guantanamo Bay and has continued the use of extra-constitutional prisons in the U.S. after the Bush era.
• “It’s odd that debate here centers on a no-fly zone, a form of military intervention that shows support for rebels without much helping them.”
• Does Haley Barbour really want to cut defense spending? Or is he just really politically astute?