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Politico Presents …. Washington Lobbyists!

David Boaz

I noticed that my paper copies of Politico have been quite thick this week. Is there a lot of news? Well, yes. But newspapers usually run all the news the advertising will support. And Politico is just chock-full of ads in this budget season. As I wrote in my favorite chapter of The Libertarian Mind, “What Big Government Is All About,” there’s been a huge boom in the business of getting taxpayers’ money in the past few years:

Every business and interest group in society has an office in Washington devoted to getting some of the $4 trillion federal budget for itself: senior citizens, farmers, veterans, teachers, social workers, oil companies, labor unions, the military-industrial complex—you name it. The massive spending increases of the Bush-Obama years have created a lot of well-off people in Washington. Consulting and contracting exploded after 9/11. New regulatory burdens, notably from Obamacare and the Dodd-Frank financial regulation bill, are generating jobs in the lobbying and regulatory compliance business.

“Walk down K Street, the heart of Washington’s lobbying industry, and look at the directories in the office buildings. They’re full of lobbyists and associations that are in Washington, for one reason: because, as Willie Sutton said about why he robbed banks, “That’s where the money is.”…

“How much would you spend to get a $200 million subsidy from the federal government? About $199 million if you had to, I’ll bet.

So what does that have to do with the page counts in Politico? Well, check out this list of the full-page ads in Tuesday’s and Wednesday’s editions:

International Council of Shopping Centers (tax the internet)
National Multifamily Housing Council/National Apartment Association
My Plate, My Planet (federal food guidelines)
CA Technologies
American Medical Association (more Medicare money for doctors)
Innovation Alliance (patent law)
Alzheimer’s Assocation (federal research money)
United Launch Alliance (NASA contracts)
Navy League (military spending)
Beer Institute (beer taxes)
Society for Human Resource Management
United Technologies
Americans for the Arts (taxpayer funding)
Better Medicare Alliance (insurance companies and others, more Medicare funding)
Natural Products Association
Oil and Natural Gas Industry
Boeing/Textron (fund the V-22)
Application Developers Alliance (patent law)
American Bankers Association
Aerospace Industries Association (fund the Ex-Im Bank)
Aircraft Carrier Industrial Base Coalition (build more carriers)
Patient Access to Pharmacists’ Care Coalition (more Medicare money)
U.S. Travel Association (increase tax on air travelers)
NextEra Energy (recipient of $2 billion in federal subsidies)
Boeing
Comcast (allow merger with TimeWarner Cable)

Some of these organizations ran full-page ads both days, or even two ads in the same edition. Some had a specific request, generally for taxpayers’ money. Others just ran image-enhancement ads, so Politico’s readers in Washington would look kindly on them.

Those with their eyes on the taxpayers’ money will know no rest by day or night.”

A century ago the Italian economist Vilfredo Pareto explained how the lobbying process works. Imagine, he said, there is a proposal to take one dollar from every citizen and give the total to 30 people. “Those who hope to gain a million a year will know no rest by day and night. They will win newspapers over to their interest by financial inducements and drum up support from all quarters. A discreet hand will warm the palms of needy legislators, even of ministers.” On the other hand, he said, those who were threatened with the loss of a dollar would likely never know of the scheme, and even if they did, wouldn’t find it worth taking the trouble to protest. Which is how you get to a $4 trillion federal budget funding everything from — well, from aircraft carriers to pharmacists.

Never underestimate the creativity of the lobbyists and their clients. I wrote recently in Reason about how General Dynamics, worried that military spending was no longer a boom area, “suddenly … managed to become the largest contractor to Medicare and Medicaid. ‘For traditional defense contractors,’ wrote Kaiser Health, ‘health care isn’t the new oil. It’s the new F-35 fighter.’” And now the Washington Post reports that Lockheed is finding “growth opportunities” in “a different threat to national security: climate change.” Those with their eyes on the taxpayers’ money will know no rest by day or night.

David Boaz is executive vice president of the Cato Institute and author of The Libertarian Mind, coming February 10 from Simon & Schuster.

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How about Spending Cuts Instead of Sanders’s War Tax?

Daniel J. Mitchell

Sen. Bernie Sanders (I) of Vermont wants a new “war tax” on the rich to help pay for U.S. overseas military operations.

The idea has a certain perverse appeal to libertarians. We don’t like nation-building and we don’t like punitive tax policy, so perhaps mixing them together would encourage Republicans to think twice (or thrice) before trying to remake the world.

But since I’m not a foreign policy expert, let’s focus solely on the fiscal aspects of the senator’s plan.

Although that’s a challenge, since there’s nothing more than a generic press release on Sanders’s website, and it doesn’t specify how the money will be generated. Does the senator want a new top tax rate? Does he want to increase the double taxation of dividends and capital gains? A more onerous death tax? Or is he planning some indirect money grab, such as disallowing certain expenses for those with “excessive” compensation?

It’s not clear what will be accomplished by the senator’s class-warfare gambit other than a defeat on the floor.”

Regardless, it’s not clear what will be accomplished by the senator’s class-warfare gambit other than a defeat on the floor, perhaps combined with some low-level embarrassment for the hawkish wing of the GOP.

And even if the world turned upside down and he was able to add another soak-the-rich provision to the tax code, it wouldn’t have much effect. Notwithstanding the numbers generated by antiquated revenue-estimating methodology at the Joint Committee on Taxation, it’s very likely that the IRS wouldn’t collect much additional money. Simply stated, upper-income taxpayers have considerable control over the timing, level and composition of their income, so many of them would adjust their economic choices to avoid the brunt of any new tax.

That’s why lawmakers would be well served to instead look on the spending side of the budget. Wouldn’t it make more sense to hold taxpayers harmless and ask Washington — if it really wants a war — to finance it with restraint elsewhere in the budget?

This may seem like a foreign concept in today’s Washington, but it actually was standard procedure at times in our history.

This chart shows that domestic spending fell sharply as a share of gross domestic product (GDP) during World War II. Much of the change in that ratio was due to rising economic output, of course, but non-defense outlays were subjected to some real fiscal restraint during those years.

image

The same thing happened during the Korean War. As defense outlays expanded, lawmakers put non-military spending on a strict diet. As illustrated by the chart, there were substantial savings for taxpayers.

image

It wasn’t until the Vietnam War that this prudent approach was abandoned. President Johnson’s guns-and-butter approach meant more spending for all parts of the budget, which explains why LBJ ranks as the biggest spender of all post-World War II presidents.

There wasn’t a war during the Reagan years, though it is worth noting that his defense buildup was accompanied by reductions in the overall burden of domestic spending.

The same can’t be said of President George W. Bush. He increased military spending after 9-11, but he also presided over LBJ-style expansions in the burden of domestic spending.

Which means we have two odd collections of bedfellows, with Presidents Franklin Roosevelt, Truman and Reagan in one camp vs. LBJ and Bush in the other camp.

Sen. Sanders probably doesn’t belong in either camp since he’s not a fan of U.S. involvement in Iraq and Afghanistan, but his focus on tax increases rather than spending restraint suggests he’s philosophically aligned with Johnson and Bush.

Which is unfortunate, since America’s biggest long-run fiscal challenge is a rising burden of government spending. And it goes without saying that politicians who want the make government even bigger presumably won’t be part of the solution.

Daniel Mitchell iis a senior fellow at the Cato Institute.

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FEMA Tells Oklahoma to Do the Impossible … Or Else

Patrick J. Michaels

Last fall, the Federal Emergency Management Agency issued a draft proposal that will require Oklahoma to do the impossible or face the loss of disaster relief funds. Specifically, state governments will be required to assess the risk of future disasters in a changing climate.

FEMA has solicited public comments and will, as per usual, ignore most if not all of them when it issues its final rulemaking later this year. So what can Oklahoma confidently expect global warming to do to its significant natural hazards?

Oklahoma’s peculiar geography makes it home to some of the most violent weather on Earth, in almost every flavor and hue. In fact, in the developed world, you’d be hard put to find a place with a combination of more tornadoes, droughts, deluges, and wild temperature swings — and these climatological facts are not going to change due to the slight changes in surface temperature that may be associated with human emissions of carbon dioxide.

State governments will be required to assess the risk of future disasters in a changing climate.”

Nonetheless, FEMA will require Oklahoma to “Provide a summary of the probability of future hazard events that includes projected changes in occurrence for each natural hazard in terms of location, extent, intensity, frequency, and/or duration. Probability must include … the effects of climate change on the identified hazards.”

Anything one can say about climate change and future hazards, such as tornados, has to be based upon some kind of forecast model, and there are a lot out there. For example, in its most recent compendium on climate change the United Nations uses 107 different versions, all of which predict slightly different futures and none of which have been correct about the climate of the past two decades.

In those last two decades, according to the global satellite-sensed temperature record environmentalists used to love, there has been no net global surface warming whatsoever. This is unfortunate because planners are often constrained to use their two scenarios for future guidance, even as evidence continues to mount that both have predicted considerably more warming than will occur this century.

Is it realistic to think we could use these same models to predict reliably how many tornados will hit Oklahoma in 2050? It simply can’t be done. Not only have these models failed to accurate predict global temperatures, but hurricanes are too small to be captured by them.

The relationship between tornadoes and global warming is also not very clear. While global warming is supposed to result in increasingly buoyant surface air (and hence, faster or bigger thunderstorm development), it also reduces the thermal contrast that powers the jet stream — which is what provides the spin required to form a destructive vortex.

Some Oklahoma tornadoes are whoppers — long-path Fujita 5 killers like the 1999 and 2013 Moore tornadoes. Moore’s experience reveals an important story; while it was plenty tragic, with 36 fatalities, If the 1999 storm had hit in an era without rapid communication and sophisticated weather technology, it would have killed many hundred, maybe even a thousand more, than it did.

The fact is people adapt to weather hazards, and not just tornadoes. Climate alarmists tell us as urban heat waves become more frequent and/or severe, many more will die. In fact, the numbers show the opposite — the more frequent they become, the fewer people die. And when they do die, as they tragically did in the 1995 Chicago heat wave disaster, the political process takes a licking and the public demands adaptive responses such as cooling centers and aggressive education campaigns. The next heatwave, three years later, killed far, far fewer people.

The adaptive responses — better technology and better communication — do orders of magnitude more good than the bad any speculative change in tornado frequency would visit upon Oklahoma.

FEMA expects Oklahoma to magically know which of these is right, and how climate change will effect the “intensity, frequency, and/or duration” of not just tornados, but only those tornados that visit their wrath upon the state, as well as monster tornadoes—or else they might withhold the tax dollars paid to them in case of emergency.

We can make one projection with confidence: as long as the most substantial barrier between the North Pole and Oklahoma City is a barbed wire fence, one thing is not going to change — the panoply of violent weather is the climate of Oklahoma.

Patrick J. Michaels is director of the Center for the Study of Science at the Cato Institute.

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The SGR Fix Will Bust the Budget

Michael F. Cannon

The House is expected to vote today on a bill to eliminate the annual cuts in Medicare payments to doctors that Congress has been postponing for more than a decade — the so-called “sustainable growth rate” (SGR) cuts. (UPDATE: The bill passed the House by a 392–37 margin.) The bill would result in $145 billion in new federal spending, above current law. It would also require wealthier seniors to pay for more of their own Medicare coverage, and would restrict the ability of seniors to buy supplemental coverage that completely shields them from the cost of the medical care they consume. (Such comprehensive “Medicare supplemental” coverage tends to increase overall Medicare spending.)

A number of people have asked me what my take on this legislation is. Basically, it is this: If you’re going to be totally fiscally irresponsible, this is the way to do it.

Congress created the SGR to limit Medicare spending on physician services. The SGR uses a formula to cut Medicare payments to physicians automatically. The formula works too well: It mandates cuts so deep that Congress decides every year it cannot stand for them. That’s why Congress has postponed those cuts some 17 times since 2003. This legislation would eliminate the cuts permanently, which of course would increase federal spending — by the $145 billion mentioned above (over the next ten years).

If you’re going to be totally fiscally irresponsible, this is the way to do it.”

As a starting point, we should recognize that the ideal amount the federal government should pay doctors is $0.00. So right off the bat, we know this bill is moving in the wrong direction. The bill compounds this error by not paying for all of that new spending by cutting spending elsewhere or increasing revenues. As a result, it increases the federal debt — which is to say, it imposes a tax burden on future generations who cannot vote or have not even been born yet. So this bill is yet another example of the dessert-first-spinach-later approach to fiscal stewardship that is business as usual in Congress.

Ryan Ellis of Americans for Tax Reform disagrees. He is the most prominent conservative supporter of this bill’s approach. Ellis argues that if we assume Congress has already spent that $145 billion, then this bill is actually a $1 billion spending cut. Well, yes, but Congress has not already spent that $145 billion. If we assume that in fiscal year 2016, Congress will spend 100 percent of U.S. GDP, then President Obama’s proposed budget will be an even bigger spending cut. (The only difference is in the degree of reasonableness of those two assumptions.) That’s not how we do these things. Current law does not provide for that spending. So if you want Congress to spend that money, it counts as a spending increase.

Ellis’s strongest arguments are that the bill increases means-testing in Medicare, prohibits Medicare supplemental plans from providing first-dollar coverage, and — c’mon, folks — this is the best deal we are going to get given current political realities.

Sure, means-testing is extremely important. It forces wealthier Medicare enrollees to pay for more of their Medicare coverage. Even more important than its fiscal impact is the fact that, because means-testing exposes some Medicare enrollees to pay more of the cost of their coverage, it fractures the broad coalition that supports the current Medicare program, and instead builds a constituency for real Medicare reform, such as converting Medicare to a Social Security–like program that just gives seniors cash. If this bill paid for all its new spending, each year, by increasing the premiums that wealthier seniors have to pay for their Medicare coverage, I would say it was a fantastic deal. But it does not.

Prohibiting first-dollar coverage in Medicare supplemental plans may seem like a restriction on contractual freedom, but in fact it is really just a condition placed on a government subsidy. If you want to enroll in Medicare, you cannot also buy supplemental coverage that completely anesthetizes you to the cost of the care you consume (and the costs you are imposing on taxpayers). I have no problem with this restriction, but it does not do much to offset this bill’s new Medicare spending.

Is this the best that Medicare reformers can do, given political realities? I wonder. For all its faults, and despite the fact that it has become (in health-policy circles, anyway) a punch line, the SGR forces Congress to confront runaway Medicare spending year after year. If this bill passes, it will be easier for Congress to ignore runaway Medicare spending — and that spending will begin to run away even faster. Reformers might be better off leaving the SGR in place and preserving the leverage it creates until political realities have changed — that is, until there is a president who will support broader Medicare reform.

This bill does not pay for its new spending in the first year, or in the first decade, or even in the second decade. But it does at least increase means-testing in Medicare, which appears to be the most durable type of Medicare cuts. So, as I said at the outset, if Congress is going to be totally fiscally irresponsible, this is probably the way to do it.

Michael F. Cannon is the director of health-policy studies at the libertarian Cato Institute.

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Ex-Im Bank Taxes Mississippi’s Manufacturers

Daniel J. Ikenson

If you count yourself among the majority of Americans fed up with the unsavory, business-as-usual, back-room dealing that continues to define Washington, take heart in the fact the charter of the scandal-prone U.S. Export-Import Bank is set to expire on June 30. If you are among the misinformed or privileged few who support the bank’s reauthorization, how do you justify the collateral damage Ex-Im inflicts on companies in Mississippi and across the country?

Ex-Im is a government-run export credit agency, which provides below market-rate financing and loan guarantees to facilitate sales between U.S. companies and foreign customers. In 2013 roughly 75 percent of Ex-Im’s subsidies were granted for the benefit of just 10 large companies — including Boeing, Bechtel and GE — that could easily have financed those transactions without taxpayer assistance.

It’s time for Mississippi’s business victims to speak up.”

Supporters characterize the bank as a pillar of the economy, undergirding U.S. export sales, which allegedly create more and higher-paying U.S. jobs. But a fatty sheath of willful ignorance has insulated the bank from the scrutiny it deserves. Like all Washington subsidy programs, Ex-Im gives to the few, but takes from the many.

When the government subsidizes your competitor’s sales but not yours, you are made worse off because your competitor can now offer lower prices or better sales terms than he otherwise could. Call these the “intra-industry” costs. Likewise, when the government subsidizes your suppliers’ sales to your competitor, you are made worse off because your competitor’s costs are artificially reduced, enabling him to charge lower prices or offer better sales terms than he could without the subsidy. Call these the “downstream” costs.

Ex-Im’s management and its Washington-savvy supporters have been running a shell game, dazzling Congress with the shiny new export sales it finances, while drawing policymakers’ attention away from the costs those activities impose on everyone else. Last year, Delta Airlines finally had enough and complained about Ex-Im loans to Air India, which were granted to enable the foreign carrier to purchase aircraft from Boeing. Delta officials demonstrated how those taxpayer subsidies, made for the benefit of Boeing’s bottom line, put Delta at a competitive disadvantage by reducing Air India’s capital costs, enabling it to lower fares and compete more effectively with Delta for international travelers. Why should taxpayer dollars be used to promote the interests of one U.S. company over another?

The problem isn’t limited to Delta. A recent Cato Institute study estimated the net costs imposed on firms in downstream industries on account of Ex-Im’s subsidies to firms in supplier industries to be $2.8 billion per year, and that firms in 80 percent (189 of 237) of U.S. manufacturing industries incur costs that exceed the total value of Ex-Im subsidies they may receive. In other words, the average firm in four of every five manufacturing industries is made worse off by the Export-Import Bank.

Mississippi is home to hundreds of companies in the industries that have been victimized in precisely the same manner as Delta. Mississippi’s manufacturers of aerospace products, automobile parts, computer network equipment, electrical products, machinery, semiconductors, telecommunications equipment, and more can be counted among the victims because their suppliers secured Ex-Im dollars to subsidize sales to foreign customers. Automobile parts producer, Remy Reman, in Taylorsville; Ayrshire Electronics of Mississippi, a Corinth-based semiconductor manufacturer; BR Smith Enterprises, a producer of HVAC equipment in Union; and, wood kitchen cabinets manufacturer, Kitchen Elegance of Gulfport are just a few examples of Mississippi businesses that bear the costs of Ex-Im’s subsidies. There are many more.

According to the Cato Institute study, the five broad manufacturing sectors incurring the largest downstream costs from Ex-Im’s subsidies account for 34 percent of Mississippi’s manufacturing economy. Included among the top 10 most heavily burdened manufacturing industries are Mississippi’s first, fourth, sixth and seventh most important manufacturing industries: chemicals; food, beverage, and tobacco; plastics and rubber products; and, furniture and related products, respectively.

The Export-Import Bank temporarily benefits some companies in a conspicuous manner. But it does so by quietly burdening often unwitting American companies in downstream industries. Delta and some others have cried foul. It’s time for Mississippi’s business victims to speak up as well.

Daniel J. Ikensonis director of the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies and author of the study: “The Export Import Bank and Its Victims: Which Industries and States Bear the Brunt?”

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This Phone Hacking Device Is out of Control

Adam Bates

The New York Times published a troubling article on March 16 detailing the secrecy surrounding police use of Stingray cellular site simulators.

The technological capabilities of law enforcement are getting far ahead of our mechanisms for oversight and accountability.”

Essentially, these devices, which can be mounted on vehicles or carried by hand, mimic the signals of a cellphone tower to force cellphones in a given area to connect to the device. Both data on the phone (including numbers, texts, emails and any other data stored on the phone) and the phone’s physical location can then be accessed and recorded by police.

Additionally concerning is the extensive use of non-disclosure agreements by the Harris Corporation, which sells the devices, to prevent the public (and in some cases even judges, defense attorneys and prosecutors) from finding out how these devices are being used or even whether a given department owns any.

The preference for secrecy is so powerful that prosecutors have dropped serious criminal charges simply to avoid having the police use of Stingrays subjected to examination by defense attorneys or judges.

According to the Times,

The confidentiality has elevated the stakes in a longstanding debate about the public disclosure of government practices versus law enforcement’s desire to keep its methods confidential. While companies routinely require non-disclosure agreements for technical products, legal experts say these agreements raise questions and are unusual given the privacy and even constitutional issues at stake.

The stated reason for the secrecy is the common refrain that terrorists will circumvent the technology if they know what law enforcement is up to. However, a recent American Civil Liberties Union (ACLU) report was unable to uncover a single instance of these devices being used to bring domestic terrorists to justice in any jurisdiction surveyed.

The ACLU report estimates that Stingrays are in wide and rapidly increasing use in law enforcement agencies across America. However, there appears to be very little oversight structure for police departments, legislatures or courts governing the use of these devices. In some instances, it seems that courts have even been unwittingly authorizing their use without the judge’s full understanding.

For instance, a sampling of applications for court orders from Florida law enforcement agencies informs the judge that the order is for cellphone records but doesn’t mention anything about how they’re to be obtained. Police claim such vague orders authorize Stingray deployment, but some judges have been less than enthused upon finding out.

The problem is that the technological capabilities of law enforcement are getting far ahead of our mechanisms for oversight and accountability. From Edward Snowden’s National Security Agency revelations, to the Drug Enforcement Administration’s questionable use of automated license plate readers, to the use of automated social media trawlers to award citizens “threat scores,” to the use of cell site simulators that can access your phone without your permission, the government is plainly capable of mapping your every move and insinuating its eyes and ears into nearly every human interaction.

In the absence of Supreme Court involvement or robust 4th Amendment restoration efforts from legislatures, the burden falls on the public to demand increased transparency and accountability from local officials. Such efforts have met with success in the past, and must continue to do so if any sphere of American life is going to be spared the tentacles of the surveillance state.

Update: On March 17 a Supreme Court judge in New York ruled that the Erie County Sheriff’s Office’s use of Stingray technology is subject to disclosure under New York’s Freedom of Information Law (FOIL). The New York Civil Liberties Union sued to obtain records of Stingray use; Erie County refused the request, citing exemptions to FOIL as well as the non-disclosure agreement with the FBI.

The judge ruled that the non-disclosure agreement does not trump New York’s Freedom of Information Law, and additionally that the contents of the non-disclosure agreement itself are subject to disclosure. This is a big win for government transparency.

The ruling can be found here, and the NYCLU’s press release can be foundhere.

Adam Bates is a policy analyst with the Cato Institute’s Project on Criminal Justice.

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Why Offensive Speech Is Valuable

Trevor Burrus

In the wake of a University of Oklahoma fraternity caught on camera singing an abhorrent song about African Americans, a predictable assortment of critics of free speech have argued that the First Amendment should not protect offensive and racist speech. They are wrong. Offensive speech should not only be protected by the First Amendment, it should be seen as a valuable part of a free society.

In the Atlantic, Boston College law professor Kent Greenfield offered a typical argument against protecting offensive speech: “If the First Amendment has become so bloated, so ham-fisted, that it cannot distinguish between such filth and earnest public debate about race, then it is time we rethink what it means.”

Greenfield disagrees with what he considers the main argument for protecting offensive speech: the problem of demarcation and the slippery slope. That is, “we cannot trust the government to make choices about content on our behalf,” and thus prohibiting offensive speech will lead “down the slippery slope to tyranny.”

That’s one argument against giving government the power to censor, but it is not the only one. It is difficult to define offensive speech, true, but this argument seems to imply that if such a line could be drawn then banning offensive speech would be okay.

Even if offensive speech could be easily defined, it should not be prohibited. In an ideal world, offensive speech would roam freely.

Coincidentally, today the Supreme Court is hearing oral arguments in a case about whether the government can prohibit speech on the theory that it “might be offensive to any member of the public.” That case concerns an application for a personalized license plate by the Texas Sons of Confederate Veterans. The proposed plate design would have included a Confederate flag. The Texas Department of Motor Vehicles Board voted not to issue the plate.

Just like drug laws, driving hate speech underground will do little to eliminate the habit, and could make the situation worse.”

The Court will first have to decide whether a license plate is government or private speech. In an amicus brief I co-authored in support of the Texas Sons of Confederate Veterans—joined by humorist P.J. O’Rourke, Martin Garbus (one of comedian Lenny Bruce’s lawyers), the Comic Book Legal Defense Fund, and prominent First Amendment scholars—we argue that, if a license plate is private speech, then the government should not be allowed to prohibit a design based on the belief that it “might be offensive to any member of the public.”

Offensive speech contributes to the marketplace of ideas by expanding its borders. If the marketplace of ideas is the area where “acceptable” ideas are freely exchanged, then outside is the “black” marketplace of ideas. There, people talk about things that are not allowed in the “official” marketplace. That sometimes includes conspiracy theories, racial hatemongering, and other pure lunacy, but it also includes things desperately needing a public airing.

For years, if not centuries, the field of sex research was hindered by taboo and puritanical censorship. Bigotry and prejudice towards homosexuality, divergent sexual desires of any sort, women’s sexual health, and sexual dysfunction caused researchers to be relegated to the black marketplace of ideas. In order to get out of the black market, they needed to offend.

By being offensive, comedians, authors, and artists helped bring sex research out of the darkness. By saying forbidden words in jokes and skits, by looking censors in the eyes and saying “cocksucker”—one of the words that famed comic Lenny Bruce was arrested for in 1961 in a San Francisco nightclub—the crass and the boorish opened up avenues of thought and discussion that were previously forbidden. Bruce said, “you break it down by talking about it.” Slowly, conversations about sex were freed from puritanical oversight, sex researchers illuminated a crucial part of human existence, and couples had more fun.

Those comics from the 60s who were “edgy” now seem quaint to our modern sensibilities. But there are always new innovators in the world of offensive speech, and no amount of government regulation will stop that.

People define themselves by being offensive. They express themselves through their willingness to stomp on prevailing sensitivities and, yes, even other’s feelings. Fostering self-expression and self-development is another important reason we have a strong and uncompromising First Amendment. As homosexuals who have “come out” know all too well, expressing something publicly is crucial to defining oneself.

Does this apply to those who hate other races, religions, and ethnicities? Yes. They have as much right to define themselves through speech as anyone. And those who abhor the hateful have a right to shun them, expose them, and call them out. Government prohibitions on hate speech drive the hateful underground, where they can proliferate freely and without pushback from those who dare not enter. Sunlight, not government, is the best disinfectant. I, for one, would like racists and bigots to speak freely. I want to know who not to invite to my parties.

Government is not as effective as civil society in properly squelching and shaming hateful speech. If the government defines the parameters of acceptable speech, then many people will break those boundaries just because the government told them not to do it. They will explore the hidden, underground world of hate speech just because it is a forbidden fruit. There they will find whole new ways to offend people because offensive people, like water, will always find a way.

In fact, there is no correlation between the strength of a country’s hate speech laws and the eradication of hateful views. Greece, for example, has passed laws that try to combat “certain forms and expressions of racism and xenophobia by means of criminal law.” Yet according to the Anti-Defamation League, 69 percent of Greeks hold anti-semitic views, compared to just 9 percent of Americans. Just like drug laws, driving hate speech underground will do little to eliminate the habit, and could make the situation worse.

So go forth and offend and be offended. Do it for Lenny Bruce.

Trevor Burrus is a Research Fellow in the Cato Institute’s Center for Constitutional Studies.

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Hawks are Winning the Military Budget Wars

Benjamin H. Friedman

Running the congressional budget process for the first time since 2005, Republicans must navigate their divisions on military spending. The outcome thus far is militarism badly disguised as fiscal restraint.

On one side are the military hawks. Emblematic is Senator Lindsey Graham (R-SC). Graham is running for president and claims that his first act in that office would “literally” be to use the military to force Congress to give it more money (To be fair, he’s not especially serious about either). Graham recently denied the existence of tension between his fiscal prudence and advocacy of global U.S. military domination by arguing against “the idea that defense spending has anything at all to do with [debt].” This wing, especially its senatorial variety, is prone to work with hawkish Democrats to raise military spending, which, in practice means raising other domestic spending and taxes.

On the other side are budget hawks, who believe that military spending is spending. They are not anti-war, so much as anti-spending or anti-taxes, even when it comes to war. Sizeable portions of the budget committee members, especially in the House, fall in this group.

The fight kicked off when the House and Senate Budget Committees this week released budget resolutions, which set spending levels for appropriators. The House version would provide up to $94 billion for “Overseas Contingency Operations” (OCO), and non-war Pentagon spending of $499 billion for fiscal year 2016, which starts October 1. Another $24 billion of “defense” spending, most of it for nuclear weapons, falls outside the Pentagon. The Senate resolution provides the same amount for the base. After an amendment from Senators Graham and Kelly Ayotte (R-N.H.), it too provides $94 billion for OCO.

War is becoming the Pentagon’s budgetary salvation…”

In analyzing the budget resolutions, keep two facts in mind. First, they’re binding just next year. Their spending plans for subsequent years occur in a dreamy future where the opposition is weaker and hard choices easier. Those wishes shouldn’t distract us from the real choices proposed for 2016. Second, the resolutions cannot change laws, like the 2011 Budget Control Act, which caps next year’s defense spending at $523 billion (the Pentagon’s share of that is about $499 billion).

With both resolutions, budget hawks failed to hold the line against military hawks. For starters, both resolutions comply with that cap, defying hawks, including the chairmen of the Armed Services committees. Budgets under the cap avoid sequestration. Remember, with the exception of 2013, when the law required sequestration because Congress could not negotiate commensurate deficit reduction, those across-the-board, meat-axe reductions occur only if budgets exceed spending caps. Congress avoided sequestration the last two years by staying under caps, albeit after raising them, by about $20 billion in 2014 and slightly this year, via the Bipartisan Budget Act of 2013.

Both resolutions prepare for the possibility of a similar deal this year by creating “reserve funds.” These allow higher spending if offsets (cuts elsewhere or revenue equaling the increase) keep the result deficit-neutral. These only matter if legislation raises the caps.

The budget committees also tried to restrain OCO spending. Price, according to aides, hoped to create an enforceable definition for what can count as OCO, but was effectively blocked from doing so by leadership and Armed Services Committee Chair Mac Thornberry (R-Tex). The result was that OCO became the way around the defense cap.

The resolution essentially takes the difference between what the White House requested for the base ($534 billion) and what the cap allows, and puts it in OCO. So the appropriators get $94 billion for OCO instead of the $58 billion that the White House requested ($51 billion of it for the Defense Department), let alone the actual annual cost of the wars in Syria, Iraq, and Afghanistan. The original Senate resolution only provided what the White House requested for OCO. But the Graham-Ayotte amendment, which all Republican committee members backed, changed that.

There is nothing new about expanding the definition of what counts as war spending to escape caps. That has occurred annually since the BCA took effect. Already about half of the OCO budget belongs in the base. What’s different is the scale and brazenness of the shift.

Another attempt at restraint is the House resolution’s use of a deficit-neutral reserve fund for OCO, which kicks in at $73.5 billion. Appropriators can spend up to that amount in OCO on anything, but if they want to spend more (up to $94 billion) they need to cut something to pay for it. The rationale is to put fiscal skin in the game and spark debate.

This offset requirement was the major point of contention in the budget committee vote. Fiscal hawks refused to abandon it, despite leadership pressure. But Speaker Boehner seems to have achieved an end-run around them by promising to strip it in Paul Ryan’s (R-Wis) Rules Committee.

Thus far then, hawks are winning the GOP budget fight. Still, two caveats are in order. One is that resolutions remain far from being law. They still have to pass the full chambers. And while the resolutions do not require presidential approval, the budgets they shape will. Things may yet fall apart.

Second, both resolutions would provide the Pentagon in total with about $613 billion for FY2016, which is just about what it’s getting in FY 2015. A bicameral GOP push for holding defense spending flat is arguably a minor accomplishment for the budget hawks, given what the neoconservative wing wants.

Still the status quo is dangerous. The compromise the GOP can, maybe, stomach is a giant off-book, debt-funded war boost for the Pentagon. The problem with that isn’t just that military spending is too high. It is also that this method of paying creates perverse incentives. If OCO becomes an auxiliary Pentagon fund that exists to escape caps, war becomes the Pentagon’s budgetary salvation. Historically, the elements of defense establishment benefit from a public sense of insecurity, but not necessarily war. This new set-up could change that.

Benjamin H. Friedman is a Research Fellow in Defense and Homeland Security Studies at the Cato Institute.

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Three Reasons King v. Burwell Doesn’t Constitute ‘Coercion’ Under Existing Precedent

Michael F. Cannon and Jonathan H. Adler

During this month’s oral arguments in King v. Burwell, Supreme Court Justice Anthony Kennedy asked whether the Affordable Care Act effectively coerces states into implementing the law’s health-insurance Exchanges. Insofar as such coercion is unconstitutional, the Court’s decision — and Obamacare’s survival — could hinge on whether it exists in the ACA.

Understanding Kennedy’s concerns requires understanding the ACA’s insurance regulations.

In the small share (less than 10 percent) of the insurance market where carriers sell directly to consumers, the ACA imposes so-called “community-rating” price controls, which reduce premiums for the old and sick by dramatically increasing premiums for the young and healthy.

If young and healthy consumers respond by refusing to buy insurance, what results is a market with few carriers and even higher premiums. In some cases, community-rating price controls can cause insurance markets to collapse.

Insofar as such coercion is unconstitutional, the Court’s decision — and Obamacare’s survival — could hinge on whether it exists in the ACA.”

To mitigate these potential harms, the ACA mandates that everyone purchase coverage, and, in that small corner of the market, subsidizes premiums for moderate-income consumers.

The ACA authorizes such subsidies “through an Exchange established by the State.” Yet the IRS is dispensing subsidies in all states — including the 38 states that failed to establish Exchanges. Those states’ Exchanges were established by the federal government.

The King challengers argue that because those Exchanges were not “established by the State,” it is illegal for the IRS to issue subsidies in those states.

Which brings us back to Justice Kennedy. He expressed concern that if the challengers are correct, then withholding subsidies in uncooperative states would make the costs of the ACA’s community-rating price controls transparent to consumers, and those costs might have the effect of coercing states into implementing Exchanges.

But would that really amount to coercion? Consider three factors.

1. The ACA’s Exchange provisions don’t penalize states. They let states make tradeoffs between taxes, jobs, and insurance coverage.

If a state fails to establish an Exchange, the ACA withholds subsidies from a state’s residents, not the state. In New York v. United States, the Court held that imposing burdens on state residents does not coerce states: “The affected States are not compelled by Congress to regulate” when the “burden caused by a State’s refusal to regulate will fall on [private actors], rather than on the State as a sovereign.”

Moreover, forgoing the subsidies would also confer benefits on state residents. It would free many individual residents from the ACA’s individual mandate, and all in-state employers from the law’s employer mandate. As a result, residents would then see lower taxes, more jobs, more hours, higher incomes, and more flexible health benefits.

2. Roughly half of states appear to consider those costs tolerable.

Prior to 2014, eight states voluntarily imposed this supposedly coercive penalty on themselves. Iowa, Minnesota, New Jersey, and Washington adopted community-rating price controls similar to the ACA’s, while Maine, Massachusetts, New York, and Vermont adopted price controls even harsher than the ACA’s.

Another eight states (Alabama, Georgia, Indiana, Nebraska, Oklahoma, South Carolina, and West Virginia) filed briefs and/or their own legal challenges asking the courts to enforce this supposedly coercive condition on them.

Thirteen states appear to prefer this penalty to complicity with the ACA’s mandates. Alabama, Arizona, Georgia, Idaho, Indiana, Kansas, Louisiana, Missouri, Montana, Tennessee, and Virginia have enacted statutes to prohibit state officials from assisting in the implementation of the individual or employer mandates — a key function of the Exchanges. Alabama, Arizona, Ohio, and Oklahoma adopted such prohibitions via constitutional amendment. Ohio and Oklahoma voters approved their amendments by a 2-to-1 margin.

Under the King challengers’ interpretation of the ACA, the number of people who would be freed from the individual and employer mandates would exceed 57 million. That’s roughly 10 times the number who would lose subsidies. States may judge those benefits to be worth the cost of having their health insurance market look like Minnesota’s.

3. This “deal” is comparable to what the Court allowed in NFIB v. Sebelius.

In NFIB, the Court allowed states collectively to turn down Medicaid subsidies for as many as 16 million poor people. The Exchange provisions permit states to do the same for 16 million higher-income residents.

As Chief Justice John Roberts wrote in NFIB:

“In the typical case we look to the States to defend their prerogatives by adopting ‘the simple expedient of not yielding’ to federal blandishments when they do not want to embrace the federal policies as their own…The states are separate and independent sovereigns. Sometimes they have to act like it.”

Judging by the behavior of states and the Court’s existing standard for demonstrating coercion, this seems like the typical case where states will do just that.

I have no objection to the Court lowering the bar for demonstrating that cooperative federalism programs coerce states. But the Court will have to lower the bar quite a bit to find the ACA’s Exchange provisions coercive.

Michael F. Cannon is director of health policy studies at the Cato Institute, and co-author (with Jonathan H. Adler) of Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA (Health Matrix, 2013), which laid the groundwork for King v. Burwell.

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In Defense of Confederate License Plates

Ilya Shapiro

The racist fraternity chant in Oklahoma has unified people of all political stripes around a very American response: condemning the speech while recognizing that it’s protected by the First Amendment. Unlike in most countries, our Constitution prohibits the government—including a state college—from punishing people for the content of their expression.

Coincidentally, on March 23, the Supreme Court will hear a case that raises just this issue. This case, out of neighboring Texas, involves a group whose design for a specialty license plate was denied because it included a Confederate flag.

Although the Lone Star State recognizes April as Confederate History Month and spends January 19 celebrating Confederate Heroes Day, it would spare its citizens in this one context the sight of a flag it otherwise venerates: Texas has empowered its Department of Motor Vehicles to prevent people from being offended.

Yet even if the DMV knows better than anyone exactly what it takes to offend, it pursues its mission—the righteous task of ensuring that no motorist has to endure a half-second of micro-aggression—in a half-hearted way. Just consider the plate designs it has let slip by its censorious filter.

The “Boy Scouts” plate undoubtedly ruffles the feathers of those who consider that group to be an anti-gay menace. The “Choose Life” plate similarly unnerves those who think that its message slanders women who choose abortion. What about “Come and Take It” (with a picture of a cannon) or “Fight Terrorism”? These messages would insult pacifists and those who disagree with U.S. foreign policy even if “Turn the Other Cheek” or “Come Home America” tags were also available. “Mighty Fine Burger” and “Dr Pepper” surely offend Michael Bloomberg’s acolytes. Many Apache, Comanche, or Kiowa would take offense at a good ol’ boy driving around with a “Native Texan” plate. And wouldn’t a PETA supporter have a (soy) beef with the “Texas Trophy Hunters Association” plate? Finally, any true Texan would find the University of Oklahoma plate to be beyond the pale even before this month’s scandal.

Allowing the Confederate flag on Texas license plates would offend a lot of people, but Texas’s decision to nix the Stars and Bars tramples the First Amendment.”

Such is the problem with trying to eradicate offensive speech: Everything offends someone. As the Supreme Court said in the 1989 flag-burning case, also out of Texas: “If there is a bedrock principle underlying the First Amendment, it is that the government may not prohibit the expression of an idea simply because society finds the idea itself offensive or disagreeable.”

Yet Texas’s law isn’t just unconstitutional, it’s unwise. Offensive speech shouldn’t merely be tolerated, but celebrated as evidence of democratic health—however odorous the products of a free society may be. Offensive speech should be considered inherently valuable, both to warn us of unpleasant truths and to push the societal envelope in ultimately liberating ways.

Offensive speech contributes to the marketplace of ideas by establishing the parameters for public discourse and thus expanding what can be acceptably discussed. The right to speak in a way that offends prevailing mores is an essential aspect of personal autonomy, a process that has also contributed to the expansion of civil rights.

Yet 54 years after Lenny Bruce—the comedian perhaps best known for pushing the envelope of propriety—was arrested onstage, offensive speech still needs protection. A case concerning a specialty license plate that is admittedly odious to some is the perfect vehicle, as it were, to use in its defense.

The law challenged here imbues the DMV with stunning discretion and exemplifies how our increasing cultural timidity is turning into a frightening movement to suppress and eliminate “offensive” speech. We particularly see this skittishness on college campuses, where the reigning belief is that if someone is offended, someone else must be punished. We also see it in European speech laws that criminalize everything from racist tweets to asking a police officer, “Is your horse gay?”

This Confederate flag case will likely turn on legalistic analysis of whether a license plate is government or private speech, or some hybrid. But regardless of who’s speaking, there’s something wrong with the Texas DMV’s mission to eradicate speech that “might be offensive to any member of the public.”

In short, one man’s offensive speech is another’s exercise of social commentary or personal expression. It would offend the First Amendment to allow Texas to tell us what’s offensive.

Ilya Shapiro is a senior fellow in constitutional studies at the Cato Institute. He filed a brief on behalf of Cato, P.J. O’Rourke, Lenny Bruce’s lawyer, and several other First Amendment defenders in Walker v. Sons of Confederate Veterans.