January 2012

CEI Weekly: CEI Blasts Unconstitutional EPA Power Grab

by Charles Huang on May 21, 2010

in Economy, Energy, Environment, Features, Personal Liberty, Regulation, Zeitgeist

CEI Weekly is a compilation of articles and blog posts from CEI’s fellows and associates sent out via e-mail every Friday. Also included in the Weekly newsletter is a brief description of CEI’s weekly podcast and a feature on a major CEI breakthrough made during the week. To sign up for CEI Weekly, go to http://cei.org/newsletters.


CEI Weekly
May 21, 2010


>>CEI Teams Up With Virginia Governor George Allen Against EPA
CEI’s Marlo Lewis teamed up with former Virginia Governor, George Allen, to write an op-ed in Forbes, as well as an On-Point, contesting the EPA’s unconstitutional power grabs.


>>Shaping the Debate
Off Target on Off-Label Drugs
Gregory Conko and Henry Miller’s op-ed in Forbes.com

New York Needs to Relax on Wine
Angela Logomasini’s op-ed in the New York Post

Short-Circuiting the Internet
Ryan Radia’s quote in the Orange County Register

Congress May Roll Dice, Legalize Net Gambling
Michelle Minton’s quote in CNET


>>Best of the Blogs
Preempting State Pension Bailouts
by Ivan Osorio

Triumph of Pigou
by Fred Smith


>>LibertyWeek Podcast
Episode 93: Tea Party Euro Trip
Richard Morrison and Jeremy Lott welcome Reason magazine Senior Editor Michael Moynihan to episode 93. We take on the high-profile congressional primaries, Chuck Schumer’s hypocritical stance on privacy, the fight for wine liberation in New York, passing the buck on debit card fees and we embark on a Tea Party Euro Trip.


>>Support CEI
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Charles Huang

Web and Media Associate

Competitive Enterprise Institute

chuang@cei.org

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“No More Crying ’Spanish Flu’,” my article in Forbes

by Michael Fumento on May 21, 2010

in Health and Illness

What’s that? Your throat feels sore? You’re sniffling and sneezing? Bit achy?

IT’S THE RETURN OF THE SPANISH FLU!

Okay, that’s satire–but not by much. Since 1990, every time some new viral pathogen comes along that grabs the media’s attention, we hear it may be the Second Coming of a pandemic that killed about 50 million worldwide and 675,000 Americans–to 175 million globally and 2 million Americans.”

First, it was SARS in 1993. It ended up killing 774 people worldwide and no Americans. Which didn’t stop the New York Times from writing 1,000 articles about it. NONE of which said, “We wuz wrong.”

Then it was avian flu. It was supposed to go pandemic and kill literally as much as half the world’s population. But nobody but me pointed out it’s been circulating since 1959, so why should it suddenly go pandemic? In any case, it didn’t and cases peaked a few years ago.

And then, of course, it was swine flu. And here’s where you see that my satire was barely off the mark. A year ago both the WHO and the UN said swine flu might become another Spanish flu because – ready? – they both started off mild. So if swine flu had started off severely then it would have been more reassuring? (The inset image, incidentally, of an overflow Spanish flu ward, was taken from an article on SWINE flu.)

But there will NEVER be another Spanish flu again, and I explain why. And you’ll be very interested. So read about it here.

The Increasing Role of Road Concessions

by Marc Scribner on May 21, 2010 · 1 comment

in Economy, Mobility

Increasing private sector involvement in transportation should be seen as a positive development. However, there are right ways to involve private firms, and then there are wrong ways. Many of the problems associated with transport public-private partnerships (P3s) have to do with concession projects—those where management and construction responsibilities, but not ownership, are held by private firms. These rights are then transferred back to the state after a fixed period of time. For the most part, the problems stem from the fact that merely transferring management fails to shift risk to the appropriate parties. Feasibility studies and traffic forecasts are often overly optimistic, and political factors—such as opposition to tolls out of principle, changing regulatory frameworks, and cronyism and a lack of competition in procurement and contracting—exacerbate the risk-sharing problems.

Unfortunately, concession projects remain the most popular form of P3 in the transportation sector. Certainly, government officials are more likely to agree to a P3 project if they are able to retain ownership in the long-run without taking on the financial and construction risks. This, however, is a serious problem. If government is going to engage in concession partnerships with private industry, it must accept that transferring all associated project risk—including inflation and exchange rate risk to financing—to private firms will likely increase the total cost of the project. Likewise, if government retains too much risk (particularly in the construction phase), the resulting moral hazard significantly diminishes the project’s chances of success and greatly increases the likelihood of cost overruns and construction delays.

Concession agreements do serve an important role as first-steps toward privatization. Concessionaires are in many ways better suited to promote the long-term interests of creating and maintaining an efficient transportation system: Concession agreements offer more certainty to future toll rates than public transportation authorities, firms are more aggressive in keeping costs low and in attracting motorists, firms can take capital depreciation tax write-offs, and concessionaires can tap into private capital in ways public agencies cannot.

In the United States–which has lagged behind much of the world in developing innovative P3s–concession agreements have become fairly popular thanks to government fiscal mismanagement. While divestitures should be preferred, concessions open the door for the private sector and likely increase the odds of outright privatization in the future.

Senate Passes Financial “Reform” Bill, 59-39; Will Wipe Out Jobs and Increase Credit Card Costs

by Hans Bader on May 21, 2010 · 2 comments

in Bailout Watch, Deregulate to Stimulate, Economy, Employment, International, Legal, Politics as Usual, Precaution & Risk, Regulation, Sanctimony, Zeitgeist

The Senate has just passed a 1,500 page financial “reform” bill that deliberately leaves unreformed the corrupt mortgage giants that spawned the financial crisis–while wiping out jobs and potentially driving up fees for many credit cardholders.

In a party-line vote, Senate Democrats earlier blocked any reform of Fannie Mae and Freddie Mac, the corrupt, government-sponsored mortgage giants that even Obama administration officials admit were at the “core” of “what went wrong” in the financial crisis.

(Obama received $125,000 in contributions from these mortgage giants as a Senator, second only to the corrupt Senator Chris Dodd, who is retiring this year due to his financial scandals, yet is the chief drafter of the financial “reform” bill.)

Business groups warn that the new rules will wipe out jobs and slow the economic recovery. “If you want to drive capital out of the United States, this is your bill,” said Thomas Donohue, president and CEO of the US Chamber of Commerce.

The bill also increases banks’ costs by restricting the ability of banks to enter into contracts charging retailers for the convenience of using credit or debit cards to collect payment from customers.  When Australia did this credit card holders suffered, as banks passed on the increased costs to them by hiking annual fees and getting rid of cash-back, rebate, and rewards programs.  (Ironically, recent interest rate hikes are partly the product of a law recently passed by Congress, the CARD Act, which forces responsible people to bear the costs of irresponsible borrowers.)

In the Wall Street Journal, Professor Todd Zywicki notes that such provisions harm consumers: “This is exactly what happened when Australian regulators imposed price controls on interchange fees in 2003: Annual fees increased an average of 22% on standard credit cards and annual fees for rewards cards increased by 47%-77%. Card issuers also reduced the generosity of their reward programs.”

The so-called financial “reform” bill would also give government officials the ability to nationalize businesses that they claim are at risk of failing — and block meaningful judicial review of such seizures by shareholders alleging violations of their constitutional rights.  (That will increase the ability of presidents to shake down businesses for donations to their political allies, since a business in danger of being seized by the government will try to curry favor with government officials.)  The bill’s House architect, Barney Frank, boasts that it will create “death panels” for American companies (this is the same Barney Frank who for years blocked any reform of the corrupt mortgage giants Fannie Mae and Freddie Mac).

Mortgage giant Fannie Mae is getting another $8.4 billion in federal bailout money, after the Obama administration earlier lifted a $400 billion limit on bailouts for Fannie Mae and Freddie Mac, two mortgage giants known as the Government-Sponsored Enterprises (GSEs).  The other GSE, Freddie Mac, is getting $10.6 billion more in bailouts.  Soon, they will be receiving much more: “Late last year, the Obama administration pledged to cover unlimited losses through 2012 for Freddie and Fannie,” reports the New York Times.

At the direction of the Obama administration, Freddie Mac ran up more than $30 billion in losses to bail out mortgage borrowers, some of whom have high incomes.  Federal regulators sought to make Freddie Mac hide the resulting losses from the SEC and the public.)  By contrast, the Republican alternative, rejected by the Senate, aimed “to wind down, and break up” the mortgage giants and “limit taxpayer exposure” to their losses.

The Obama Administration showered the mortgage giants’ executives with $42 million in compensation.

Fannie and Freddie helped spawn the mortgage crisis by acting as loan toilets, buying up risky mortgages and thus creating an artificial market for junk.  “From the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime.”  They paid their CEOs millions, and engaged in massive accounting fraud — $6.3 billion at Fannie Mae alone — to increase the size of their managers’ bonuses.  As Government-Sponsored Enterprises, they were exempt from the capital requirements that apply to private banks, so they did not have enough reserves to cover their losses when their mortgages started defaulting.

Banking expert Peter Wallison, who warned for years about the risky practices of Fannie and Freddie, said the financial “reform” bill would lead to “bailouts forever,” contrary to Obama’s claims.

Government pressure on banks to make loans in economically-depressed neighborhoods was a major cause of the mortgage crisis.  That pressure will increase under the financial “reform” legislation.  Legislators approved Obama’s proposal to create a new consumer “protection” agency.  But it may harm rather than help consumers.  Why?  “The agency would be in charge of enforcing the Community Reinvestment Act, a law that prods banks to make loans in low-income communities.”  It would do so without regard for banks’ financial safety and soundness, even though the Community Reinvestment Act was a key contributor to the financial crisis.

A Telling Headline

by Ryan Young on May 21, 2010

in Personal Liberty, Politics as Usual, Zeitgeist

From The Hill: Vulnerable Democrats defend support for campaign finance legislation

Campaign finance regulations are an incumbent’s best friend. The incumbent already has name recognition, and a deep network of fundraising contacts. Heck, Congress’ franking privilege allows incumbents to send out de facto campaign messages for free. Challengers have none of those advantages.

It takes a lot of money to buy enough ads to get a challenger’s name recognition anywhere near the incumbent’s. Campaign finance regulations make it harder to raise that money, and harder to put up a fight against established officeholders. No wonder so many incumbents from both parties favor strict campaign finance regulations! It’s good for their job security.

Happy 204th Birthday, John Stuart Mill

by Ryan Young on May 20, 2010

in Culture, Odds & Ends, Personal Liberty, Sanctimony, Zeitgeist

John Stuart Mill was born on this day in 1806. I wrote an appreciation of him last year, and told a bit of his unusual life story. This year, I’ll write a little bit on his philosophy of utilitarianism.

There are two kinds of utilitarianism: act utilitarianism, and rule utilitarianism. Act utilitarianism leads to absurd conclusions; rule utilitarianism, while more lenient, is one of the strongest philosophical underpinnings of liberalism (in the traditional European sense of the word). Many later liberals, including F.A. Hayek, were rule utilitarians.

Act utilitarians think that each individual act should be judged according to how much good it does. This leads to some problems, since most actions involve at least some small harm to others.

If I drive to work, I can save myself a lot of time. But by contributing to traffic congestion, I hurt each of my thousands of fellow drivers just a little bit. Maybe I cost them more total time than I save, so my driving causes a net loss in utility. So that’s not a good option. The subway, then? Same thing. Not only do I lose some time compared to driving, but I make the train more crowded, which causes disutility to every passenger on the train.

Better to just sit at home, then. But then I don’t get anything done. That’s bad for my career, not to mention my bank account. Act utilitarianism is a bit like Pareto optimality in economics: it leads to paralysis. It is an impossible standard.

That’s why I prefer rule utilitarianism. Instead of judging each act by its utility, put rules in place that give people incentives to act well. No law or institution is perfect. Even the best ones hurt somebody; a law against theft is bad for thieves. But good institutions beget good results, especially in the long run.

A property-rights-based system of government is an excellent example of rule utilitarianism. It will not be perfect. Laws against stealing obviously have not put end to stealing. Even within the law, people inevitably have honest disagreements about what belongs to who. Externalities such as pollution will hurt some peoples’ property. But the results are certainly better than a system without property rights. The whole of world history is proof. It’s also better than act utilitarianism, which lacks that overarching institutional-level standard.

Rule utilitarianism is one of the greatest gifts ever given to liberalism’s intellectual toolkit, and we have Mill to thank for it. Happy birthday to you, John Stuart Mill.

Weak Trade Efforts During World Trade Week

by Geoffrey Michener on May 20, 2010

in Economy, Trade

President Obama recently declared this week “World Trade Week.” His announcement was yet another hollow attempt to appear favorable towards free trade.  Unfortunately, President Obama’s actions paint a gloomier picture. There are three pending free trade agreements (Colombia, Panama, and South Korea) already negotiated, waiting for congressional action. Yet the president has not pushed these agreements through Congress. Obama’s ambitious goal of doubling our nation’s exports will be quite difficult if he keeps to the sidelines on trade policy progress.

Read an op-ed by me and Brian McGraw in the National Review about the U.S.- Colombia Free Trade Agreement.

Justice Department Lawyer Resigns Due to Politicization of Justice Department; Obama Administration Defies Civil Rights Commission

by Hans Bader on May 20, 2010 · 1 comment

in Culture, Legal, Nanny State, Personal Liberty, Politics as Usual, Sanctimony, Zeitgeist

A career Justice Department lawyer has resigned after the Obama administration defied a subpoena from the U.S. Commission on Civil Rights.  The Commission is investigating the Administration’s politically-motivated dismissal of a voter intimidation lawsuit against members of the racist, anti-semitic New Black Panther Party.  Career justice department lawyers brought and won the lawsuit, which was then dismissed by political appointees in the Justice Department, so that they could snatch defeat from the jaws of victory.

Members of the New Black Panther Party, one of whom was an Obama campaign poll watcher and local Democratic official, used nightsticks and racial epithets to drive white voters away from the polls in a Philadelphia precinct. But the Obama administration killed a successful lawsuit against them, dismissing it after career Justice Department lawyers had already obtained a default judgment against the defendants  (As a result of the dismissal, the only consequence for the defendants was a temporary injunction telling just one of the three defendants not to repeat his crimes in Philadelphia for a short period of time.)  The New Black Panther Party, which attacks what it refers to as “bloodsucking Jews,” is recognized as a racist, anti-semitic hate group even by liberal civil-rights groups like the Southern Poverty Law Center.

After the case was dismissed, the Civil Rights Commission began investigating the Obama administration’s actions.  The administration ordered the career attorneys who had worked on the lawsuit to remain silent and not comply with the Commission’s investigation (contrary to federal law, which mandates that “all Federal agencies shall cooperate fully with the Commission“), and refused either to comply with the Commission’s subpoenas, or to bring a motion to quash the subpoena (which is the appropriate step to take if a subpoena is somehow invalid).  This left the subpoena and one of the career lawyers “in limbo” and in apparent violation of the law, forcing him to run up thousands of dollars in legal bills.  (The other lawyer was transferred to the civil-service equivalent of Siberia to take him “out of reach of the subpoena power of the Civil Rights Commission.”)

Justice Department attorney J. Christian Adams, who helped bring the lawsuit, “resigned in obvious disgust” at its dismissal and the administration’s stonewalling.  The other career lawyer most responsible for bringing the voter intimidation case, former Voting Rights Section Chief Christopher Coates, has a liberal pedigree: he was formerly with the “Voting Rights Project of the American Civil Liberties Union.”  Yet both Coates and Adams have been depicted as “right-wing activists“ by “liberal media outlets“ and unnamed Obama administration officials–apparently because those officials “don’t believe the voting rights laws should ever be enforced against blacks and other minorities.”

(The idea that the civil rights laws do not protect whites or apply to minorities was rejected by a unanimous Supreme Court ruling in 1976, in an opinion authored by the black justice and civil-rights icon Thurgood Marshall.  See McDonald v. Santa Fe Trail Transportation Co. There are limited to exceptions to bans on race discrimination for affirmative action, but they do not apply to voting, as the Supreme Court made clear in its 7-to-2 ruling in Rice v. Cayetano (2000).  In his 2008 campaign, Obama promised “change,” and apparently that change includes a departure from basic legal norms that even liberal judges like Thurgood Marshall, and liberal lawyers like Christian Adams and Christopher Coates took for granted.  If you want to work in the Obama Justice Department, you had better disagree with the Supreme Court.)

“Career lawyers pursued the case for months, including obtaining an affidavit from a prominent 1960s civil rights activist who witnessed the confrontation and described it as ‘the most blatant form of voter intimidation’ that he had seen, even during the voting rights crisis in Mississippi a half-century ago.” But Obama’s political appointees at the Justice Department overruled them, dropping the case after victory was already assured because “the court had already entered a default judgment against the” Black Panthers. Thanks to that outrageous decision, the only result of the case was a meaningless injunction telling one of the three defendants not to commit such crimes again (and telling him not to commit such crimes only until 2012, and not barring him from committing such crimes in his home city, but rather barring such crimes only in Philadelphia).

As the Washington Times notes,

The Voting Rights Act is very clear. It prohibits any ‘attempt to intimidate, threaten or coerce’ any voter or those aiding voters. The explanation for moving to dismiss the case is shocking. According to the Department of Justice: ‘These same Defendants have made no appearance and have filed no pleadings with the Court. Nor have they otherwise raised any other defenses to this action. Therefore, the United States has the right … to dismiss voluntarily this action against the Defendants.’ In other words, because the defendants haven’t tried to defend themselves, the Justice Department won’t punish them. By that logic, if a murderer doesn’t respond to the charges, he should be let free. That’s crazy. The Obama Justice Department did take one action against one of the four defendants: It forbade him from again ‘displaying a weapon within 100 feet of any open polling location’ in Philadelphia. Given that it already was illegal to display a weapon at a polling place and that he was not even enjoined from carrying a weapon at polling places outside of Philadelphia, it is hard to see what this order accomplished. We asked the Justice Department if it was unable to provide any explanation for dropping the case. Justice press aide Alejandro Miyar merely said: ‘That is correct.’ Multiple times we asked both the department and the White House to comment on charges that the dismissals represented political bias. We received no substantive response. Hans Von Spakovsky, a legal scholar at the Heritage Foundation and a former commissioner at the Federal Election Commission, tells us, ‘In my experience, I have never heard of the department refusing to take a default judgment… . If a Republican administration had done this, it would be front-page news and every civil rights group in the country would be screaming about it.’ Consider that the behavior of the defendants was so bad that witness Bartle Bull, a former Robert F. Kennedy organizer who did extensive legal work on behalf of black voters in Mississippi, testified it was “the most blatant form of voter discrimination I have encountered in my life.’ Eric Eversole, a former litigation attorney with the Voting Section of the Civil Rights Division of the Justice Department, told us: ‘It is truly unprecedented for the Voting Section to voluntarily dismiss a case of such blatant intimidation. The video speaks for itself.’ We couldn’t agree more. After the 2000 Presidential election, Democrats complained about voter intimidation in Florida by pointing to a police car that had been two miles away from a polling place. The police didn’t do anything to anyone, but their presence was deemed sufficient to vaguely intimidate people en route to the polls. In this case, the New Black Panther Party actually blocked access to a poll. Unlike the Florida incident, this case involving the New Black Panthers screams out for tough justice. Instead, the Obama administration looks the other way. This all but invites racial violence at future elections.

In 2008, Obama disingenuously complained about the supposed “politicization” of the Justice Department under Bush. But Obama has politicized the Justice Department far more than Bush was accused of doing. Obama’s Justice Department has given a green light to unconstitutional bills pushed by liberal congressmen that even liberal Justice Department attorneys have conceded are unconstitutional. It has been deafeningly silent about blatant voter fraud and voter intimidation committed by black officials, chronicled in a ruling by the United States Court of Appeals for the Fifth Circuit. And it did little to prevent violations of the voting rights of overseas soldiers and sailors that may have tipped election results in the Minnesota Senate race (which provided the deciding vote in the Senate for passage of the costly new health care law) and the New York special Congressional election.

Solving America’s Problems

by Ryan Young on May 20, 2010

in Economy, Politics as Usual, Zeitgeist

The days of trillion-dollar deficits, multiple land wars in Asia, and other catastrophes may soon be coming to an end. Congress continues to work long and hard to solve America’s most important problems. Take a look at some of the legislation that passed on May 18:

-H. Res. 1256: congratulating Phil Mickelson on winning the 2010 Masters golf tournament

-H. Res. 792: honoring Robert Kelly Slater for his outstanding and unprecedented achievements in the world of surfing and for being an ambassador of the sport and excellent role model

-H. Res. 1297: supporting the goals and ideals of American Craft Beer Week.

-H.R. 4491: to authorize the Secretary of the Interior to conduct a study of alternatives for commemorating and interpreting the role of the Buffalo Soldiers in the early years of the National Parks, and for other purposes

I applaud each and every one of these bills, frivolous though they are. Each one took a good deal of time to write and to put through committee. Each one was given 40 minutes of floor debate, though less than that was typically used. All of that time and effort was not spent further destroying the economy with more substantive legislation.

Most states get by with part-time legislatures. Congress would do well to follow suit. In the meantime, as long as Congress is full-time, it should devote as much time as possible to trivial bills like the ones listed above.

Kagan Shirked Duty to Defend Federal Laws Protecting Crime Victims

by Hans Bader on May 19, 2010

in Culture, International, Legal, Nanny State, Personal Liberty, Politics as Usual, Precaution & Risk, Regulation, Sanctimony, Zeitgeist

Federal law authorizes life sentences without parole for particularly heinous violent crimes committed by 16 and 17-year olds.  But Solicitor General Elena Kagan was nowhere to be found when life imprisonment without parole was challenged in the U.S. Supreme Court last fall.  That’s true despite the fact that as solicitor general, “Kagan has an obligation to defend federal laws against constitutional challenges.”

In a 5-to-4 ruling Monday, the Supreme Court struck down such sentences, relying partly on their alleged conflict with international legal norms and “international opinion.”

(Since international norms are hostile both to civil liberties and to life imprisonment even for adult murderers, the Supreme Court’s reliance on them set a dangerous precedent).

Despite Kagan’s dereliction of duty, she was nominated to the serve on the Supreme Court by President Obama.

As Solicitor General, she zealously defended the most censorious aspects of the McCain-Feingold law, which violated the First Amendment, and her office argued that the federal government could even ban books advocating the defeat of a politician using it.

As dean of Harvard Law School, she banned the military from Harvard, challenging a federal law that granted equal access to military recruiters.  She claimed the law, which applied to recipients of federal funds, was unconstitutional — a position unanimously rejected by the Supreme Court.

Too bad she didn’t have similar zeal for protecting crime victims in Monday’s Graham v. Florida case, which may well result in dangerous criminals being released who will go on to commit more acts of violence. (Solicitors General have broad authority to intervene in Supreme Court cases, which they have exercised even in cases not involving the federal government.  But Kagan, who is literally a limousine liberal, could not even be bothered to defend federal laws protecting crime victims).

Curiously, as dean of Harvard Law, Kagan pushed through changes in the curriculum that included dropping constitutional law as a requirement and adding international law as a requirement. (This was a misguided change. I attended Harvard Law before these changes, and not taking an international law class did not in any way hamper my subsequent ability to practice international trade law. My constitutional law class did, however, leave me better equipped to bring lawsuits against government agencies.)

Other Obama judicial nominees have also attracted controversy over their views on the death penalty and criminal sentencing, like the radical law professor Goodwin Liu, and a Connecticut judge who tried to block the execution of the Roadside Strangler, arguing that his “sexual sadism” was a mitigating factor.

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