Japanese FM in Washington—Who Knew?

Japanese Foreign Minister Taro Aso was in Washington for meetings on Wednesday, and he took time to speak to the media and the public at an event at the Willard Hotel.

There was considerable interest in Aso’s talk, judging from the many microphones at the podium and cameras in the back. And no wonder: if Prime Minister Junichiro Koizumi steps down later this year, as is widely expected, Aso would be a leading candidate to replace him. The security retinue of Mr. Aso is already comparable to that of a head of state, judging from the number of people with earpieces standing around the room who showed absolutely no interest in what he was saying.

And yet, Aso’s remarks didn’t merit mention on the front pages of either the Washington Post or the Washington Times. Then again, it didn’t make it into the middle pages of those papers either. The big news in the capital city of a country waging two conventional wars (and numerous smaller unconventional wars) was that the Washington Nationals baseball team had new owners. Other cities, and other papers, also seemed disinterested. After an admittedly cursory glance, I found no mention of Aso’s remarks in the New York Times or the Wall Street Journal. (By way of comparison, today’s Financial Times has two stories, a news article and an editorial, about the speech.)

The speech presumably got more coverage in East Asia, but Americans need to hear what Aso is saying. Of great concern on both sides of the Pacific is the nature and trajectory of China’s rise to power. If Sino–Japanese relations remain sour or grow worse, there will be a risk of conflict. And with over 35,000 U.S. troops in Japan and another 25,000 on the Korean peninsula, the United States would almost certainly become involved. Then there is the perennial flashpoint of Taiwan, the subject of my friend and mentor Ted Galen Carpenter’s latest book (America’s Coming War with China: Collision Course over Taiwan)

Mr. Aso went out of his way, both in his prepared remarks (delivered in English, by the way) and in his responses to questions, to stress the potential for peaceful coexistence between Japan and China. He did not dismiss questions about the past nor did he minimize or ignore China’s need for greater transparency and openness in its dealings with the outside world. But Aso tried his best to focus on the future. Trade is flourishing between the two countries. China has now passed the United States as Japan’s leading trading partner. There is now tremendous economic opportunity throughout East Asia, a region once characterized by crushing poverty.

As I stress in a Cato Policy Analysis published last month (“Two Normal Countries: Rethinking the U.S.–Japan Strategic Relationship,” PA 566, April 18, 2006), Japan’s emergence as a normal nation, one that is no longer dependent upon the United States for its defense, could play an important role in safeguarding East Asian security. While it would be unwise to dismiss lingering concerns in East Asia about Japan’s intentions, I stress that many of these concerns flow from a period of time that has long since past. It is well past time for Americans and East Asians to embrace the future.

Foreign ministers come and go in Washington almost every day. When Mr. Aso returns to Washington, which he is almost certain to do, it will be interesting to see if the media coverage will be any different. Perhaps the Redskins will replace the Nationals on the front pages of the hometown newspapers, or perhaps foreign policy concerns will remain focused on the Middle East. But I hope that a Prime Minister Aso will be afforded the attention that he, and that the U.S.–Japan relationship, deserves.

The Devil in Massachusetts

Betsy McCaughey digs into some of the details on the effects on business of Massachusetts’ brave, new health insurance experiment:

Say, for example, you open a restaurant and don’t provide health coverage. If the chef’s spouse or child is rushed to the hospital and can’t pay because they don’t have insurance, you – the employer – are responsible for up to 100% of the cost of that medical care. There is no cap on your obligation. Once the costs reach $50,000, the state will start billing you and fine you $5,000 a week for every week you are late in filling out the paperwork on your uncovered employees (Section 44). These provisions are onerous enough to motivate the owners of small businesses to limit their full-time workforce to 10 people, or even to lay employees off.

What else is surprising about this new law? Union shops are exempt (Section 32).

Of course, in states like Maryland (where I live), the possibility of killing off jobs in small businesses would hardly deter the passage of similar laws.  As far as politicians here are concerned, undermining the private economy is not a legislative bug.  It’s a feature.

Back from the Former USSR

I’ve just returned from a fascinating week in Russia and Ukraine. I was in Moscow last week to deliver some lectures regarding my book on globalization, Against the Dead Hand, which was recently translated into Russian. From there I traveled down to Kiev to improve Cato’s contacts with liberal (in the everywhere-but-America sense of that word) organizations there. 

My overwhelming impression from the visit: what a difference an oil boom makes! Now in the fifteenth year since the collapse of the Soviet Union, neither Russia nor Ukraine has had much success in making the transition from communism to a viable market economy (according to the latest Economic Freedom of the World report, Ukraine ranks 103rd in the world, with Russia trailing just behind at 115th). Despite this and many other similarities, there is one critical difference between the two countries: Russia has oil and gas, and Ukraine doesn’t.

As a result, Moscow fairly reeks of money these days – luxury retail outlets everywhere, the roads choked with Mercedes sedans, non-stop construction projects. On a plane flight I met an American whose job seems to be schmoozing the new Russian nomenklatura on behalf of American investors. Boy, did he have some stories to tell – like one about a group of bigwigs who recently paid a big-name Hollywood actor a half-million bucks just to fly to Russia and hang out with them for a few days. While I can’t vouch for the accuracy of that story (and therefore won’t give the actor’s name), the fact that it seemed entirely plausible tells you something about the amount of money sloshing around that town these days.

Kiev, meanwhile, is a charming, beautiful city – but poor. Just off Kreshchatik Street, the city’s main boulevard, are lovely old buildings in dismal, Soviet-era disrepair. And the only Western retail establishments I saw were McDonald’s, Reebok, and Benetton – not exactly catering to the glitterati.

For precisely this reason, I am much more optimistic about Ukraine’s propects for reform than I am about Russia’s. Seduced by all the easy money, Russia under Putin has decided for the time being that Jed Clampett beats Adam Smith as an economic role model. And with the abandonment of economic reform has come a nasty crackdown on political freedom. Ukraine, on the other hand, has no easy way out. And so, perhaps, its improving political climate (whatever one makes of the results of the recent parliamentary elections, at least they were free and fair) will create the space within which durable economic improvements can eventually be achieved.

D.C. Circuit 1, WaPo 0

Substantive due process cases make normally careful commentators sloppy. As many readers know, the D.C. Circuit ruled on Tuesday that “a terminally ill, mentally competent adult patient’s informed access to potentially life-saving … new drugs … warrants protection under the Due Process Clause.” Comes the Washington Post editorial board with a slapdash discussion of the case. The Post argues that the decision pulls a new constitutional right “out of thin air”—one that could “create a right to LSD or marijuana.”

Golly. Is that right? Now, there’s no denying the Court’s substantive due process line of cases is controversial. But this decision didn’t pop out of thin air and its not going to legalize marijuana. [Warning: lengthy legal discussion follows.]

The D.C. Circuit is a lower court, obligated to follow superior court precedent. The Supreme Court over the last three decades has dipped again and again into the substantive due process well. Let’s put Roe v. Wade, the most controversial example, to the side. The most restrictive framework for assessing substantive due process follows the framework set out in Justice Scalia’s plurality opinion Michael H v. Gerald D (joined by Chief Justice Rehnquist). Scalia’s opinion in Michael H makes three points:

1. Constitutionally protected liberty interests must be rooted in a “fundamental principle of the common law.”

2. The Court must select “the most specific level at which a relevant tradition protecting, or denying protection to, the asserted right can be identified.”

3. The liberty interest cannot be rooted in abstractions or generalizations. It must be rooted in a concrete description of actual case law.

The Court has since disagreed, sharply, about how to apply these principles. But, as Michael H underscores, even the most conservative members of the Court agree that the “liberty interests” protected by the due process clause include more than just freedom from restraint.

The Abigail decision does a level job of following the framework laid out in Michael H. It is at its strongest in its reliance on the common law tort rule creating a duty to refrain from “intentionally prevent[ing] a third person from giving to another aid necessary to his bodily security,” which, under Michael H, provides the most specific common law support for the liberty interest recognized.

The challenge for the case is twofold: First, the tort duty against interference with self-help and rescue is, as the court recognizes, ancient but infrequently invoked. It’s arguable that the frequency in which a widely recognized tort is invoked should not factor into whether it rises to the level of a liberty interest, since this sort of empirical judgment isn’t something courts do well. Rather, the legal question is whether the right is ancient and widely accepted as a formal principal of tort law today. (The principal problem for this argument is Lawrence v. Texas, which held state sodomy laws applied to consensual adult homosexual conduct violate the Due Process Clause, based in part on the way in which sodomy laws have been historically prosecuted. But, as the D.C. Circuit notes, some lower courts have viewed Lawrence as “not, properly speacking, a substantive due process decision.”)

Second, the pervasiveness of drug restrictions will lend credence to an argument that common law rule has been limited with respect to certain kinds of administrative regulations and can no longer be described as part of our legal traditions. The D.C. Circuit’s basic argument is that federal prohibitions on marketing of new drugs are too spotty to have displaced the basic common law rule. This is surely the most problematic part of the opinion, because the Michael H framework suggests that the presence of a countervailing regulatory tradition can refute the existence of a liberty interest. Hence the relevance of the dissent’s discussion of a history of drug regulation in colonial and nineteenth century state drug laws.

Here, there are perhaps two arguments for the D.C. Circuit. First, perhaps the evidence of a fundamental right should differ depending on whether the regulation is state or federal: perhaps a history of federal regulation is relevant to the scope of due process limits on federal law. (Michael H and most other substantive due process cases, such as Cruzan and Glucksberg, involve state laws.)

Second, and more interestingly, the D.C. Circuit argues that the challenge involves a challenge to an administrative regulation, not to a federal statute. The logic of the D.C. Circuit (see footnote 9 of the opinion for this point) appears to be that administrative regulations promulgated under a legislative delegation of rulemaking authority come with a lesser presumption of constitutionality for purposes of fundamental rights analysis. The point is fuzzy, but appears to assume that, in such challenges, plaintiffs bear a lesser burden of proving a liberty interest than they do when confronting a duly enacted federal statute. This argument is perhaps the most intriguing—and, to my mind, the most fertile for defenders of the D.C. Circuit’s decision.

If I read the case right, the latter point adds additional fuel for explaining why this decision says nothing about marijuana and LSD: both drugs are labeled Schedule I drugs (no accepted medical use) by Congress. The decision can only have implications for Schedule I drugs if the FDA uses its delegated authority to reschedule either drug.  Not likely any time soon, I’m afraid.

The point is, even under the most restrictive approach to substantive due process, the D.C. Circuit has a fairly reasonable argument based on precedent. And the D.C. Circuit must follow the Supreme Court’s precedents as it understands them. The decision is surely open to challenge, as even its staunchest defenders must admit. But only a sloppy lawyer can say this decision popped out of thin air.

Why Can’t Suri Laugh?

Tom Cruise and Katie Holmes (AKA TomKat) had a baby last month, Suri Holmes.  Apropos, this week the Medicare program’s public trustees reported that even though only 7 percent of TomKat’s federal income taxes now go toward Medicare, when Suri turns 15 years old, 25 percent of the federal income taxes levied on her modeling earnings will go straight to Medicare.  By the time Suri turns 25 years old, 40 percent of the federal income taxes levied on her book deal will help finance Medicare benefits for her dear old dad, who will then be 68 years old.

No Guardrails?

As Tim Lynch and I detail in our new study Power Surge: The Constitutional Record of George W. Bush, the Bush administration has advanced an extraordinarily broad theory of presidential power during the war on terrorism. The claim that shows up again and again—in the torture memos, in the enemy combatant cases, in the wiretapping controversy—is that the president’s “inherent executive authority” and powers as commander in chief allow him to override validly enacted statutes that proscribe tactics he wants to pursue in the war on terror.

But surely there are limits to this theory, boundaries that even a wartime president cannot cross, right? Well, if there are, administration officials have been pretty cagey about identifying them. At a Senate Judiciary Committee hearing in February, Attorney General Alberto Gonzales stonewalled like a Supreme Court nominee when asked about limits to the president’s power. To questions like “Can the president suspend the application of the Posse Comitatus Act legally?” he’d offer only, “Those are very, very difficult questions. And for me to answer those questions, sort of, off the cuff, I think would not be responsible.”

In April, before the House Judiciary Committee, Gonzales suggested that the president has inherent authority to wiretap Americans’ domestic communications–calls and emails where both parties are in the United States–without a warrant. That day, the Justice Department issued a “nonclarification clarification” of the AG’s remarks: “The attorney general’s comments today should not be interpreted to suggest the existence or nonexistence of a domestic program or whether any such program would be lawful under the existing legal analysis.” Anyone looking for a straight answer on limits to “inherent executive authority” would be well-advised to look elsewhere.

A few months back, CBS’s Bob Schieffer decided to ask the president himself: “Do you believe that there is anything that a president cannot do, if he considers it necessary, in an emergency like this?” Here’s the president’s response:

PRESIDENT BUSH: That’s a–that’s a great question. You know, one of the–yeah, I don’t think a president can tort–get–can order torture, for example. I don’t think a president can order the assassination of a leader of another country with which we’re not at war. Yes, there are clear red lines, and–it–you–you–you just asked a very interesting constitutional question. The extent to which a president, during war, can exercise authorities in order to protect the American people, and that’s really what the debate is about.

It’s a very interesting answer, because, as Jacob Sullum pointed out recently, neither example represents a case in which the president considers himself bound by law or by anything other than his own sense of self-restraint. Assassination is barred by an executive order that the president himself could change. As for torture, the administration has never repudiated the theory of uncheckable executive power outlined in the Justice Department’s torture memos. And recently, when President Bush signed the McCain Amendment reaffirming the ban on torture, the president suggested in the signing statement that he could interpret it out of existence if he thought it necessary.

Given all that, Schieffer’s question still stands: in the administration’s constitutional theory, is there anything that a president cannot do, if he considers it necessary? It would be good–or at least clarifying–to have an answer, even if that answer turns out to be “no.”

The Social Security Side-Step

In describing the contents of the Social Security Trustees’ latest annual report, most reporters have described the changes as “minor.” That impression rests, however, on a comparison of a large number with a gigantic number—the present value of Social Security’s financial shortfall over 75 years to the present value of total payrolls, also projected over the next 75 years.

Note that according to the report, an additional 2 percentage points must be added to payroll tax rates immediately and must be kept in place permanently. That’s unlikely, and precisely because we are describing the shortfall as “no big deal.”

Problem is, the cost escalates the longer we wait. How long would we wait? When it becomes as large as four percentage points? Six? No, if it becomes that large, chances are taxpayers would revolt and the system would have to face benefit cuts.

Benefit cuts? At a time when beneficiaries are more numerous and politically powerful? Unlikely. Then what?

Buried inside the report are other, larger estimates of the system’s shortfall—the “actuarial deficit” calculated without a time limit is reported to be $13.3 trillion. Including the outstanding Treasury liabilities to Social Security that must be paid for out of higher income or other non-payroll taxes, the total financial shortfall compared to benefits is a whopping $15.2 trillion. And compared to total future payrolls, this amount equals 3.7 percentage points.

Most reports attached some variant of “let’s not panic, these numbers are very uncertain” to the perpetuity estimates of Social Security’s shortfall.

Not panic? OK. But ignore? That’s effectively the message. If we don’t like the outlook, we should just ignore it. It’s not going to affect us. We’ll collect our benefits well before then, so why bother?

That’s not the advice financial planners would give to an individual or family facing uncertainty in personal finances. Rather, they would recommend purchasing insurance or hedging their portfolios by diversifying assets.

But prudence with personal assets and profligacy with public ones imply a collision course—one that’s unlikely to deliver “social security.”

Someone recently asked: Even if God told us these numbers were correct, what can we do today? After all, we can only distribute future outputs to meet future needs. This reminded me of Jacob and the Pharaohs. In that story, Jacob suggested filling the granaries well before the famines arrived—in other words, saving and investing more today.

Existing institutions—Social Security Trust Funds and such—haven’t worked in that regard. Indeed, the evidence points to the exact opposite outcome: Today’s entitlement programs are inducing us to spend more, work less, and retire earlier than ever before.
Rather than give up on a structural reform of Social Security, our efforts need redoubling.