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.
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Congress Enhances Due Process Protections for Some Defendants; Now, It Should Take the Next Logical Step
On Monday, the House of Representatives passed the Due Process Protections Act (S. 1380) by unanimous consent after having received it from the Senate, which unanimously passed the bill in May. The legislation is now headed to the White House where it is expected to receive President Trump’s signature.
The bill reinforces an existing constitutional obligation of prosecutors to disclose so‐called Brady material – material that is favorable to the defense – and facilitates the disciplining of federal prosecutors who fail to uphold their obligation to do so.
Those who regularly follow this blog or have a fair understanding of how broken America’s criminal justice system truly is won’t find it surprising that such a legislative fix is needed. Despite the Supreme Court’s recognition of the so‐called Brady obligation in 1963, prosecutors neglect to meet their ethical and constitutional obligation to disclose materially favorable evidence to the defense far too often. A recent study by the National Registry of Exonerations reports that, among state and federal false convictions that eventually resulted in exonerations, illegally concealing exculpatory evidence occurred in at least 44% of all exonerations in the Registry. According to the authors, it is “the most common type of official misconduct that we report.”
The tragic event that focused Congress’s attention on this issue was the 2008 prosecution of the late Senator Ted Stevens (R‑AK) in which federal prosecutors destroyed the career and reputation of a longtime sitting senator by systematically cheating their way through his trial, including deliberately withholding evidence of the senator’s innocence. Though the egregious actions of the prosecutors was thoroughly documented, the presiding judge ultimately concluded that he could not pursue contempt charges under the relevant statute because he had not issued a “clear and unequivocal” order to the prosecutors requiring them to honor their ethical and constitutional obligations by producing Brady material to the defense team.
It would be wrong to assume that Senator Stevens’ experience was a once‐in‐a‐lifetime occurrence of gross misconduct within the Department of Justice. Just days ago, federal prosecutors in the Southern District of New York aroused the fury of District Court Judge Alison Nathan for hiding Brady material during the trial of an Iranian businessman whom the government accused of enriching his family by violating U.S. sanctions laws. After the misconduct was revealed, Judge Nathan criticized the prosecutors’ supervisors for failing to appropriately discipline their subordinates: “The manifold problems that have arisen throughout this prosecution – and that may well have gone undetected in countless others – cry out for a coordinated, systemic response…”. [emphasis added]
Unfortunately, there is little doubt that similar misconduct has gone undetected in countless other prosecutions. Given the flagrant abuses of power exhibited in the two cases discussed above that involved high‐profile and well‐resourced defendants, it seems inevitable that similar abuses have been, and continue to be, perpetrated against ordinary citizens in lower‐profile cases.
The Due Process Protections Act, authored by Senators Dan Sullivan (R‑AK) and Dick Durbin (D‑IL), is an attempt to ensure that federal prosecutors are no longer so easily let off the hook the way they were following the botched Stevens prosecution. Under the provisions of the bill, all federal prosecutors will be ordered by the presiding judge to comply with their Brady obligations and will also be made aware of the consequences for failing to do so.
But while the Due Process Protections Act is significant and necessary, it only applies to federal criminal cases that go to trial. This is highly problematic because only 2% of federal criminal convictions are obtained through trials while the rest – nearly 98% – are obtained through the much more expedient and often coercive process of plea negotiations.
One of the many reasons that plea negotiations are coercive in nature is the fact that there is currently no federally‐recognized obligation – constitutional or otherwise – of prosecutors to provide exculpatory evidence to the defendant during plea negotiations. Defendants are therefore routinely pressured to plead guilty in their case without knowing what evidence the prosecution has that might prove their innocence (or at least weaken the prosecution’s case against them).
Why should a prosecutor’s possession of evidence suggesting the defendant’s innocence be available to the defense only in the highly unlikely event that he or she takes her case to trial? If the principle is good at trial – an adversarial process that’s meant to protect the innocent from wrongful conviction – it should also apply during plea negotiations. Cato’s vice president for criminal justice, Clark Neily, has been making just this case.
Unfortunately, the Supreme Court has not yet embraced the proposition that the obligation to disclose favorable evidence should extend to plea‐bargaining, and the Department of Justice has vigorously resisted such efforts in the past. That fact, however, does not prevent Congress from establishing a statutory right to pretrial Brady disclosures. Having now put teeth in prosecutors’ obligation to disclose favorable evidence to the defense at trial, Congress should take the next logical step and require them to do so during plea negotiations, which is the mechanism by which nearly all criminal convictions are obtained in America today.
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Is Disaster Aid Political?
In the summer issue of Regulation, Steve Horwitz and E. Frank Stephenson published an article summarizing research on the long history of political considerations in the allocation of disaster relief. Several papers document New Deal era aid being steered to swing states; a similar pattern has been found more recently for presidential disaster declarations.
Two recent articles suggest the mixing of politics and disaster aid by the Trump administration. The New York Times, reports that the Government Accountability Office found that the Trump administration has directed a disproportionate amount of farm aid to Southern states, including Georgia, the home of Agriculture Secretary Sonny Perdue. The GAO report examined $14.5 billion of payments made in 2019 to offset China’s backlash against American farm products following President Trump’s imposition of tariffs on Chinese‐produced goods. GAO found that Georgia farmers received $42,545, more than double the national average of $16,507, and suggested that part of the disparity arose from more generous payment rates for crops grown in the South relative to other parts of the country. It’s worth noting that Republicans disputed the findings and focusing aid on Southern states instead of contested states such as Iowa, Minnesota, and Ohio might not be the smartest strategy for the GOP.
The Washington Post reports on the sudden reversal of President Trump about disaster aid for Puerto Rico, which has been struggling to recover from 2017’s Hurricane Maria. President Trump, who had been parsimonious with federal aid for Puerto Rico, announced that FEMA would provide more than $11 billion of aid to rebuild schools and the electrical grid on the island. Puerto Rico has no electoral votes, but Florida is a swing state with a sizable Puerto Rican population and media reports suggest that Trump’s aid package is an attempt to curry favor with these voters.
We cannot be sure if the agricultural aid or disaster relief are motivated by politics. But if the news reports are accurate, the public should not be surprised because politicized disaster relief is politics as usual.
Federal Spending Hits $6.6 Trillion
The Congressional Budget Office has released new estimates. Federal government spending jumped from $4.5 trillion in fiscal 2019 to $6.6 trillion in fiscal 2020, as shown in the chart below. That huge increase was financed by borrowing, the costs of which will land on taxpayers down the road.
The federal government has grown from a weak shell that struggled to raise cash for the Revolutionary War to today’s powerful machine able to quickly summon an extra $2.1 trillion seemingly out of thin air. Of that, $1.8 trillion was from legislation responding to the health crisis and recession (Table A-2). That is more than $5,400 per person in the nation.
CBO projects baseline outlays in fiscal 2021 to be $5.1 trillion, which includes $307 billion still flowing through the pipes from relief bills already passed.
Policymakers are considering additional relief spending. The House passed a bill in May to spend $3.1 trillion more, but Democratic leaders now say they will accept $2 trillion. If that extra aid passed, fiscal 2021 spending could hit $7.1 trillion, as shown in the chart. However, some of the additional spending would likely slop over into later fiscal years.
Senate Republicans recently supported $300 billion more in relief, which would increase 2021 spending to $5.4 trillion. President Trump said that he favored “something like” $1.5 trillion more, which would increase 2021 spending to $6.6 trillion. If regular 2021 spending is above the CBO baseline, these spending totals would be even higher.
Sadly then, the only options on the table for federal spending are like Starbucks sizes Grande, Venti, and Trenta. If you think those pricey coffees empty your wallet, you ain’t seen nothing yet.
![s](/sites/cato.org/files/styles/pubs_2x/public/2020-09/spending%20for%202021.png?itok=UN71LIVG)
Federal Reserve Aid to State and Local Governments
I testified today to the Congressional Oversight Commission regarding federal and Federal Reserve aid to state and local governments. The commission was set up to examine a $500 billion pot of money set aside by Congress to aid businesses and the states during the crisis.
I made two general points:
First, with the economy rebounding, state and local tax revenues likely won’t fall as much as previously thought. Indeed, state and local revenue losses continue to be overestimated by most commentators. Further aid from Congress or the Fed is not needed.
Second, the Fed’s program of direct lending to state and local governments undermines market discipline and risks politicizing the Fed. There is no market failure here that needs federal intervention. State and local governments can and should borrow from regular credit markets.
My testimony starts at about 1:30 on the video. My views and analysis were in sharp contrast to the other four panelists, so I appreciate Senator Toomey for the invite and his openness to hearing a contrasting perspective.
![s](/sites/cato.org/files/styles/pubs_2x/public/2020-09/edwards%20coc%20hearings.png?itok=gPyURlAO)
Another President, Another Unfortunate Innovation in Executive Power
A couple weeks ago, I blogged about “an unfortunate innovation in executive power” during the Obama administration, which I called “leverage policymaking.” In a nutshell, “leverage policymaking” entails regulatory agencies using individual transactions with large corporations—such as enforcement or licensing actions—to achieve broad policy results.
Last week, Cato published a Legal Policy Bulletin about another unfortunate innovation in executive power, but this one was pioneered by the Trump administration. I call it the “ad hoc administrative state”; below, I’ve excerpted the short paper’s executive summary:
A hallmark of the Trump administration has been its creation of significant administrative programs on the fly, based on ambiguous or implied textual authorities, and without any public input. This paper discusses four such initiatives involving almost $40 billion in benefits and dispensations from more than $400 billion in tariffs. The programs discussed in this paper were launched after summary notices amounting to a total of 28 pages in the Federal Register. Rarely, if ever, has so much administrative policy been rendered in so few words. Far from reflecting the mere execution of the law, these programs instead take on the attributes of core congressional prerogatives—namely, the power to spend public funds and regulate international commerce. To date, Congress has acquiesced to these developments. If lawmakers remain passive, future presidents will build on Trump’s template, which reflects an unfortunate innovation in executive power.
Read the whole thing here.
Senate Is Right to Resist State Aid
Another week, another news story about supposedly imploding state‐local government budgets. A New York Times headline warns, “With Washington Deadlocked on Aid, States Face Dire Fiscal Crises.”
The story leads with, “Alaska chopped resources for public broadcasting. New York City gutted a nascent composting program that could have kept tons of food waste out of landfills. New Jersey postponed property‐tax relief payments.” The piece is built around such anecdotes, which do not seem dire to me.
Senate Republicans are right to resist the additional state bailouts pushed by House Democrats because the states can and should handle their own budget challenges going forward.
The NYT discussion conflates the situations of state and local governments. While state income and sales tax revenues have dipped, local governments raise 72 percent of their tax dollars from property taxes, which are rising. Property tax revenues were up one percent in the second quarter of 2020 from the first quarter.
The estimate of overall state budget gaps mentioned by the NYT is from Moody’s, but that is a high‐end number. Tax Foundation summarizes three lower estimates here.
The CBO released new federal revenue projections last week, which may be suggestive of possible state revenue reductions. Just considering the effects of the recession, CBO projects that fiscal 2020 tax revenues will fall a modest 6.4 percent from 2019. GDP is expected to fall just 2.7 percent in fiscal 2020 before starting to rise again. (CBO separately calculates the revenue losses from tax cuts in recent relief bills).
If state tax revenues dropped the same 6.4 percent in calendar 2020, that would be a modest $70 billion reduction from calendar 2019 state tax revenues of $1.09 trillion. Local tax revenues nationwide may not fall at all, as they did not fall in the last recession.
Regular federal aid pays for more than one‐quarter of overall state revenues, so a 6.4 percent drop in state tax revenues translates into a smaller percentage drop in overall state revenues. And that is true before recent federal relief bills, which have showered more aid on the states than they have lost in tax revenues. The chart below (based on Table 3.3) shows the small dip in state‐local tax revenues in the second quarter of 2020 compared to the large increase in federal aid.
The states face budget challenges, but the situation in most places is not “dire.” State officials can solve budget gaps without further federal aid by tapping rainy day funds, freezing hiring and wages, and improving program efficiencies.
More on this topic here, here, here, and here.
![a](/sites/cato.org/files/styles/pubs_2x/public/2020-09/state%20revs%20sec%20quarter.png?itok=clFIwWKu)
Note: In the chart, I’ve included “capital transfer receipts” in the aid‐to‐states total.