October 4, 2020 12:31PM

My New Book on Supreme Court Confirmation Battles

When Justice Charles Evans Whittaker retired in March 1962 after just over five years on the Supreme Court, John F. Kennedy had his first opportunity to shape the high court. The youthful president selected a man of his own generation, Byron White. White had met JFK in England while on a Rhodes Scholarship—after having been runner‐​up for the Heisman Trophy and spending a year as the highest‐​paid player in the NFL—and the two became fast friends.

White was a vigorous 45 and serving as the deputy attorney general under Robert F. Kennedy. Kennedy formally nominated him on April 3, 1962. Eight days later, White had his confirmation hearing, a quick ninety minutes including introductions and supporting testimony from various bar association officials (during which the nominee doodled on his notepad). What questioning there was largely concerned the nominee’s storied football career; “Whizzer” White was surely the last person to play a professional sport while attending Yale Law School. The judiciary committee unanimously approved him, and later that day so did the Senate as a whole, on a voice vote.

My how times have changed. The battle to confirm Brett Kavanaugh showed that the Supreme Court is now part of the same toxic cloud that envelops all of the nation’s public discourse.

Confirmation processes weren’t always like this. The Senate didn’t even hold public hearings on Supreme Court nominations until 1916, a tumultuous year that witnessed the first Jewish nominee and the resignation of a justice to run against a sitting president. It wouldn’t be until 1938 that a nominee testified at his own hearing.

But while the confirmation process may not have always been the spectacle it is today, nominations to the highest court were often contentious political struggles. For the republic’s first century, confirmation battles, including withdrawn and postponed nominations, or those upon which the Senate failed to act—Merrick Garland was by no means unprecedented—were a fairly regular occurrence.

In the 20th century, Presidents Harding, Hoover, Eisenhower, Johnson, Nixon, and Reagan all had failed nominations. FDR never had anyone rejected, although his court‐​packing plan was rejected both in Congress and at the polls. And LBJ’s proposed elevation of Justice Abe Fortas led to the only successful filibuster of a Supreme Court nominee, a bipartisan one over ethical concerns, which wasn’t even a true filibuster because Fortas never had a majority of pledged votes. Douglas Ginsburg withdrew before President Reagan could send his name to the Senate for having smoked marijuana with his law students.

Given the battles we saw over Gorsuch and Kavanaugh, too many people now think of the justices in partisan terms. That’s too bad, but not a surprise when contrasting methods of constitutional and statutory interpretation now largely track identification with parties that are more ideologically sorted than ever.

Even if politics has always been part of the process, and even if more justices were rejected in our country’s first century than in its second, we still feel something is now different. Confirmation hearings are the only time that judges go toe‐​to‐​toe with politicians—so is it all about TV and Twitter, the 24‐​hour news cycle, and the viral video? Is it that legal issues have become more divisive? No, the nomination and confirmation process—an interplay among president, Senate, and outside stakeholders—hasn’t somehow changed beyond the Framers’ recognition, and political rhetoric was as nasty in 1820 as it is in 2020. Even the “novel” use of filibusters is anything but. All these parts of the current system that we don’t like are symptoms of a larger phenomenon: as government has grown, so have the laws that courts interpret, and their reach over ever more of our lives.

Senatorial brinksmanship is symptomatic of a larger problem that began long before Kavanaugh, Garland, Thomas, or even Bork: the courts’ self‐​corruption, aiding and abetting the expansion of federal power, then shifting that power away from the people’s legislative representatives and toward executive branch administrative agencies. And the Supreme Court is also called upon to decide, often by a one‐​vote margin, massive social controversies, ranging from abortion and affirmative action to gun rights and same‐​sex marriage. The judiciary affects public policy more than it ever did—and those decisions increasingly turn on the party of the president who nominated the judge or justice.

So as the courts play more of a role in the political process, of course the judicial nomination and confirmation processes are going to be more fraught with partisan considerations. This wasn’t as much of a problem when partisanship meant rewarding your cronies. But it’s a modern phenomenon for our parties to be both ideologically sorted and polarized, and thus for judges nominated by presidents from different parties to have markedly different constitutional visions.

Is there anything we can do to fix this dynamic, to turn down the political heat on Supreme Court vacancies? Reform proposals abound: term limits, changing the size of the Court, setting new rules for the confirmation process, and more.

To find out more about the role politics has played in Supreme Court nominations from the early days of the Republic, how differing approaches to jurisprudence affect modern judicial battles, and learn what lessons we can draw from all that, as well as potential remedies, check out my new book, Supreme Disorder: Judicial Nominations and the Politics of America’s Highest Court. Supreme Disorder was amazingly released two weeks ago, which counts as perhaps the best timing in the history of publishing.

And while you’re waiting for your copy to arrive, watch Cato’s book forum and listen to my podcasts with Matt Lewis and David French/​Sarah Isgur, respectively, as well as other media and writings on my bio page.

October 2, 2020 5:02PM

Federal Tax Changes Since 1979

The Congressional Budget Office released a report today on changes in income, benefit payments, and federal taxes by income group since 1979. The following are three tax charts from the report. The CBO included individual income taxes, corporate income taxes, payroll taxes, and excise taxes.

The first chart shows that tax rates have fallen the most at the bottom end. Average tax rates are total taxes paid by each income group divided by that group’s income as defined by CBO. CBO says, “Average federal tax rates declined most sharply among households in the lowest quintile, falling from a peak of 12.1 percent in 1984 to 1.3 percent in 2017.” The tax rate on the top 1 percent has varied, but by 2017 was roughly where it was almost 40 years earlier. Since then, the 2017 GOP tax bill cut income taxes for all groups.

a

The second chart shows that individual income taxes are highly skewed. Payroll taxes are proportional across the bottom and middle groups but drop at the top end. Note, however, that payroll taxes fund Social Security, and that program’s benefits are calculated in a progressive manner.

b

The third chart shows that the share of overall federal taxes paid by high earners has increased over time. CBO says, “The share of federal taxes paid by households in the highest quintile increased from 55 percent in 1979 to 69 percent in 2017.” The share of taxes paid by the top 1 percent increased from 14 percent in 1979 to 25 percent in 2017.

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October 2, 2020 3:32PM

Would Judge Barrett’s Confirmation Call Same‐​Sex Marriage Into Question?

Supreme Court nominee Amy Coney Barrett is likely to face Senate questioning regarding her views of Obergefell v. Hodges, the Court’s 2015 decision finding that the Constitution guarantees a right to same‐​sex marriage. Critical senators may point to a public letter Barrett signed five years ago expressing agreement with Catholic Church teachings on sexuality and the family. Barrett, for her part, has repeatedly stated in interviews and writings that a judge’s religious faith should not influence her rulings “at all.” More relevant, perhaps, than whether a Justice Barrett would have been persuaded by Justice Anthony Kennedy’s majority opinion in Obergefell itself is her approach to the doctrine of stare decisis, described by colleague Ilya Shapiro as falling somewhere between the approaches of Antonin Scalia, a “faint‐​hearted originalist” who frequently left in place precedents he deemed wrong, and Clarence Thomas, who accords less weight to such precedents. You can read Judge Barrett on stare decisis in her own words here.

Related Book Forum

Supreme Disorder: Judicial Nominations and the Politics of America’s Highest Court

The brutal confirmation battles we saw over Justices Neil Gorsuch and Brett Kavanaugh are symptoms of a larger problem with our third branch of government—one that began long before Merrick Garland, Clarence Thomas, or even Robert Bork: the Court’s own self‐​corruption, facilitating the expansion of federal authority and thereby aggregating more power to themselves. In Supreme Disorder: Judicial Nominations and the Politics of America’s Highest Court, Ilya Shapiro takes readers inside the unknown history of fiercely partisan judicial nominations and explores reforms that could return the Supreme Court to its proper constitutional role.

Watch the Forum

Two years ago I wrote this piece offering eight reasons why, in my view, Obergefell wasn’t going anywhere notwithstanding Justice Kennedy’s departure from the Court. Looking over the eight reasons, many have if anything grown stronger and more or less all have been confirmed by two more years of practical experience. In particular: reliance interests are very extensive and would be extraordinarily disruptive to uproot; public opinion has continued to move in favor of the result; conservative Justices have continued to pass up opportunities to signal that they want to revisit the basic outcome; administration has been easy to implement as a practical matter; and so forth.

More recently we’ve also seen Bostock, in which Justice Neil Gorsuch wrote, and Chief Justice John Roberts signed on to, a dramatic expansion of federal‐​level LGBT discrimination law. This raised different issues, with Bostock being one of statutory rather than constitutional interpretation, but it is hard to look at the dissent by Justice Brett Kavanaugh — to say nothing of the six‐​Justice majority opinion — and find in it an indication of any eagerness to overturn the marriage precedents.

It’s true that on a separate issue — the Court’s approach to religious liberty, and in particular its ongoing efforts to grapple with the issue of religious exemptions in discrimination law — the replacement of Ruth Bader Ginsburg with Amy Coney Barrett could indeed make a substantial difference for real‐​world outcomes. That set of issues deserves to be explored in a separate post. But it doesn’t implicate the right to marriage.

MONDAY UPDATE: In Davis v. Ermond, released this morning, the Court unanimously declined to review the claims of Kim Davis, a Kentucky county clerk who lost her job and faced civil contempt charges after declining to officiate same‐​sex marriages. As I’ve pointed out in this space, Davis was “an elected official with enforceable obligations to the public.” Other Cato colleagues have noted that the Kentuckian is “no martyr,” being an exemplar of “official disobedience” rather than civil disobedience, and had few takers for her resistance bid, which itself raised Establishment Clause implications.

Thomas, joined by Justice Samuel Alito, wrote separately this morning concurring in the denial of certiorari in Davis’s case but also strongly criticizing Obergefell and calling for the Court to revisit at least its interplay with religious liberty claims. Reason to reconsider what I wrote on Friday about the direction of this issue at 1 First St. NE? I don’t think so. As background, the Court as a whole has been giving off multiple signals that it’s likely to revisit religious liberty doctrine soon, perhaps up to and including the landmark Smith decision itself. As it does, its rulings will inevitably influence the interplay of religious liberty doctrine with many other parts of the legal landscape, marriage law being only one. (There are also cases pending on the cakeshop‐​type issues.) My own view, like Anthony Kennedy’s, is that Obergefell contains nothing at odds with religious liberty. If the Court feels a need to make sure of that, it can revisit and clarify or expand religious liberty doctrine itself. That project might appeal to Chief Justice Roberts and Justices Neil Gorsuch and Brett Kavanaugh, none of whom joined Thomas and Alito today.

October 2, 2020 10:05AM

“They Can’t Subsidize Our Farmers; Only We Can Subsidize Our Farmers”

Bloomberg today (emphasis mine):

Midwest prices for diammonium phosphate, or DAP, jumped 29% in the third quarter, the most since 2010, according to a Green Markets index. Prices for a lower concentration phosphate fertilizer also surged the most in a decade, by 34%. The two chemicals make up the primary component for many phosphate‐​based fertilizers used by American crop farmers.

Prices spiked after U.S. fertilizer firm Mosaic Co. petitioned the U.S. Department of Commerce and U.S. International Trade Commission in June, saying that fertilizer imports from Morocco and Russia were unfairly subsidized. That prompted an investigation and raised the prospect of countervailing duties. The two countries are the largest sources of the commodity for the U.S. in the most recent crop year, through June.

Politico in July:

Government payments to farmers have surged to historic levels under President Donald Trump as the Agriculture Department floods the industry with cash to stem the financial losses from Trump’s tariff fights and the coronavirus pandemic.

But as agriculture grows more reliant on unprecedented taxpayer support, farm policy experts and watchdog groups warn the subsidies are growing too big and too fast, with no strings attached and little oversight from Congress—and that Washington could have a difficult time shutting off the spigot.

US Farm subsidies hit record levels

No word yet on whether other foreign producers are on Double Secret Probation

(Chart via IFPRI’s Joe Glauber.)

October 1, 2020 5:14PM

China’s Critical Minerals, National Security, and the Meaning of Supply Chain Interdependence

Yesterday, President Trump invoked his authorities under the International Emergency Economic Powers Act (IEEPA) to deem U.S. dependence on imports of “critical minerals” from foreign adversaries a national emergency. Among those minerals are so‐​called rare earth elements, which are inputs used in the production of high technology and defense‐​related equipment and systems.

In a statement to Congress announcing his executive order, the president noted, “Though these minerals are indispensable to our country, we presently lack the capacity to produce them in processed form in the quantities we need… [Our] national security, foreign policy, and economy require a consistent supply of each of these minerals.”

The EO instructs the Secretary of the Interior (in consultation with the Departments of Treasury, Defense, and Commerce) to investigate the degree of U.S. reliance on critical mineral imports and submit a report to the president in 60 days. That report should recommend executive actions, “which may include the imposition of tariffs or quotas or other import restrictions against China and other non‐​market foreign adversaries whose economic practices threaten to undermine the health, growth, and resiliency of the United States, or other appropriate action, consistent with applicable law.”

The specter of China restricting its exports of rare earths to the United States in response to the ever‐​tightening U.S. restrictions on exports of semiconductors, semiconductor manufacturing equipment, and other high‐​tech components to China is a real possibility—one of the significant costs Huan Zhu and I warned about, when the administration was considering broadening its restrictions earlier this year (which it did). Indeed, China has already demonstrated willingness to leverage its dominance in the production of rare earths back in 2010, when it refused to export the critical minerals to Japan in response to Tokyo’s detention of a Chinese ship. Subsequently, China imposed broader export restrictions on rare earths and other minerals that lead to formal challenges at the World Trade Organization by the United States, Japan, and the European Union, resulting, ultimately, in Beijing withdrawing its offending practices.

Now that the WTO dispute settlement process is defunct—thanks to U.S. actions and inactions—and the access of Chinese companies to U.S. semiconductors and other technology has been severely hampered by U.S. export restrictions, Beijing calculations have surely changed.

Over the past few decades, U.S. manufacturers of advanced electronics, medical equipment, automotive batteries, vehicles, green energy components, and nearly every advanced weapons system, including Tomahawk missiles and F-35 fighters have grown increasingly dependent on Chinese sources for rare earths. In 2018, China accounted for 71 percent of the volume of rare earths produced globally and 74 percent of the volume of U.S. imports.

It’s not that rare earths don’t exist in the United States, but that domestic production became less viable because U.S. production costs were relatively high, and the regulatory costs of U.S. mining and refining operations were increasing. Extraction and processing of rare earths requires techniques considered especially taxing on the environment and have been subject to fairly tight regulations in the United States and in most other developed countries.

As inputs to some of our most sophisticated technology and defense systems, rare earths are vital to U.S. economic security and defense. The administration and Congress already know this, and they already know that U.S. manufacturers depend significantly on Chinese refined rare earths. Fifteen months ago, the Commerce Department released a report required by a December 2017 executive order aimed at creating a “Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals,” which found the United States to be “import‐​reliant (imports are greater than 50 percent of annual consumption) for 31 of the 35 minerals designated as critical by the Department of the Interior.”

That brings us to an obvious question: Why tariffs or other import restrictions? We already know domestic rare earths are in short supply. We already know our dependence on imports from China is significant. We already know tariffs are taxes. We already know that when you tax something, you get less of it. Well, on more than one occasion, U.S. Trade Representative Robert Lighthizer has argued that tariffs are a legitimate tonic for excessive dependence on imports. He argues that tariffs—on medical equipment, for example—will encourage domestic capacity building and production. Well, maybe after a long period of high tariffs, some intrepid investor will take note of the rents to be had and be willing to absorb the higher production and regulatory costs to build production facilities in the United States. Of course, that portends much higher costs and a reduction of national welfare, but maybe that’s a justifiable part of the price of purchasing more (or the perception of more) economic and national security.

Excessive dependence on any one source is a recipe for perpetual uncertainty and risk. The optimal response to uncertainty is diversification. Restricting imports to compel supply chain repatriation and autarky is not diversification. It’s just another form of dependence at higher cost.

Instead of import restrictions, the tools of U.S. policy should aim to remove the unnecessary impediments to producing and refining domestically, while working with other countries to do the same. When national security is legitimately and convincingly demonstrated to be exposed to the risk of supply shortages, policy should encourage domestic stockpiling and a program to oversee its efficient, non‐​market distorting operation.

This recent Bloomberg piece written by former Defense Secretary James Mattis and others offers some good ideas and provides more background and a lot of important facts about the production, refinement, and consumption of rare earth minerals.

October 1, 2020 11:28AM

Postal Banking: An Idea Whose Time Has Returned?

On September 17th, Senators Kirsten Gillibrand (D-NY) and Bernie Sanders (D-VT) went on Facebook Live to announce their introduction of the Postal Banking Act, a bill that would have the US Postal Service provide a "public option" in some retail banking services. Postal banking has been proposed many times in recent years as a progressive reform. The Joe Biden–Bernie Sanders "Unity Task Force Recommendations" document (p. 74) endorsed the idea in August as a way of "ensuring equitable access to banking and financial services." Senator Gillibrand introduced a similar bill two years ago, and an organization called The Campaign for Postal Banking has been promoting the idea since 2014.

Read the rest of this post »
September 30, 2020 3:13PM

Big Government, Big Business, Big Protectionism

It is commonly assumed on the left and (increasingly) the right that free markets boost—and that government regulation checks—the growth and market power of large corporations. Liberalized international trade and investment policies, in particular, are often criticized by market skeptics as a tool that Big Business uses to entrench its dominant position to the detriment of workers and potential competitors. Libertarians and other free market advocates, of course, believe much the opposite: that free market competition fuels “creative destruction”—i.e., the economically‐​valuable displacement of old, large companies by new competitors, as first described by economist Joseph Schumpeter—and thus serves as a powerful check on Big Business, which often lobbies for and benefits from trade restrictions and other government regulations that discourage new market entrants.

A new paper from economists Mara Faccio and John McConnell of Purdue University provides strong new support for the “libertarian” view. Examining data for 75 countries (including the United States) since 1910, they find—

  • Consistent with Schumpeter’s proposition, the displacement of old, large firms is the norm in each of the time periods considered, but exceptions to the creative destruction rule do exist. In fact, 13.6 percent of the 20 largest firms in each country remained in the top 20 a hundred years later; 25 percent of the largest firms in 1980 remained dominant in 2018; and 43.8 percent of the top 20 remained from 2000 to 2018.
  • The most important predictor of a firm being an exception to the creative destruction norm is political connections (as measured by the presence of government officials, or people connected to officials, in senior management). In particular, the authors find that “[h]aving a political connection increases the probability that one of the 20 largest firms in 1910 remains among the 20 largest firms in 2018 by 11.5 percentage points” – a “very sizable” effect that is “both economically and statistically significant.” This relationship remains strong in the other, more recent period examined (2000–2018).
  • Regulatory barriers to market entry enable politically‐​connected firms to remain dominant over the long term. In particular, the authors find a strong and statistically significant relationship between restrictions on cross‐​border trade and investment and the likelihood that politically‐​connected large firms are just as powerful decades later. By contrast, trade and investment openness checks Big Business: “[P]olitical connections facilitate the ability of big companies to remain or become big only when their home country is closed to both trade and capital flows. The presence of regulatory barriers to entry appear to be a necessary condition for politically connected firms to remain or become dominant.”

Based on these findings, the authors conclude (emphasis mine)—

[P]olitical connections enable big businesses to remain large, particularly when regulatory barriers to cross‐​border entry and cross‐​border capital flows are in place. The implication is that in an unimpeded market the Schumpeterian process of creative destruction of large firms is likely to prevail. To the extent that it does not, the data suggest that it is because the political process impedes entry.

When skeptics criticize “free markets,” the markets at issue are usually not very free at all. Indeed, the conclusions above are utterly unsurprising to free traders who have for years watched large, well‐​connected corporations capture the administrative state and use regulation to restrict foreign competition and maintain power. If the markets were free (or, at least, freer), and large companies were forced to compete without the government’s thumb on the scale, Big Business’ market power could be significantly checked. You’d think such a result would be welcomed by the populist right and left, but progress (especially these days) is often thwarted by emotional antipathy to markets and “globalism” more broadly. As a result, un-free markets proliferate, and corporate power increases—ironically fueling populist calls for the very government action that increased it in the first place.