Under the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act, the government requires groups receiving federal funding for overseas HIV/AIDS programs to adopt policies explicitly opposing prostitution. Several nonprofit organizations receiving federal funds claim that this “policy requirement” violates their First Amendment rights.

The groups don’t seek to advocate for prostitution (or its legalization), but would rather not speak on the issue at all. Successful efforts to fight AIDS often involve working cooperatively with marginalized groups, so adopting a policy statement that explicitly renounces prostitution could frustrate outreach efforts to disseminate public health information. The government, however, requires funding recipients to espouse such an anti-prostitution policy even when they spend private funds.

The district court ruled in the nonprofit groups’ favor, holding that the policy requirement violates the First Amendment. The U.S. Court of Appeals for the Second Circuit affirmed, concluding that the government may not condition the receipt of public funds on giving up First Amendment rights. Indeed, were the government’s position accepted, it would eviscerate the “unconstitutional conditions” doctrine, which the Court has long recognized to prevent the conditioning of generally available federal benefits on the waiver of fundamental rights.

This week, Cato filed an amicus brief arguing that the policy requirement significantly burdens political speech, the constitutional protection of which lies at the very heart of the First Amendment. The Supreme Court has made clear that Congress may not condition participation in federal programs on speech limitations that are outside the scope of the program being funded: the Court has never given Congress carte blanche to give federal contractors Hobson’s Choices, whether relating to the freedom of speech or other constitutional rights. It should thus continue to adhere to the principle that Congress’s power to condition funding is limited to ensuring that its funds are used to properly implement the program that Congress wishes to fund, not to compel private organizations to adopt express “policies” that don’t relate to the use of those federal funds.

The Supreme Court will hear oral argument in Agency for International Development v. Alliance for Open Society International on April 22.

Are we about to see a new kinder-and-gentler President Obama? Has the tax-and-spend president of the past four years been replaced by a fiscal moderate? That’s certainly the spin we’re getting from the White House about the president’s new budget. Let’s look at this theme, predictably regurgitated in a Washington Post report.

President Obama will release a budget next week that proposes significant cuts to Medicare and Social Security and fewer tax hikes than in the past, a conciliatory approach… [T]he document will incorporate the compromise offer Obama made to House Speaker John A. Boehner (R‑Ohio) last December in the discussions over the “fiscal cliff”—which included $1.8 trillion in deficit reduction through spending cuts and tax increases. …[U]nlike the Republican budget that passed the House last month, Obama’s budget does not balance within 10 years.

Since America’s fiscal challenge is the overall burden of government spending, I’m not overly worried about the fact that Obama’s budget doesn’t get to balance. But I am curious whether he truly is proposing a “conciliatory” budget. Are the tax hikes smaller? Are the supposed spending cuts larger? Actually, there are no genuine spending cuts, since the president’s budget is based on dishonest baseline budgeting. At best, we’re simply talking about slowing the growth of government.

But since Mitchell’s Golden Rule is based on the very modest goal of having government grow

slower than the private sector, it’s possible that the president may be proposing something worthwhile. But possible isn’t the same as probable. Indeed, it appears that the budget is predicated on a giant bait-and-switch, since it would repeal the beneficial spending restraint imposed by sequestration!

Obama’s budget proposal, however, would eliminate sequestration.

This appears almost as an afterthought in the Washington Post article, but it should be the lead story. The White House wants to get rid of a policy that genuinely limits the growth of spending. We won’t have the official numbers until the budget is released next Wednesday, but I’ll be very curious to see whether the supposed spending cuts elsewhere in his budget are greater than or less than the spending increases that will occur if sequestration is canceled—particularly since the president also is proposing lots of new spending on everything from early child education to brain mapping.

Moreover, it looks as if the Obama tax numbers are based on some dodgy math. The White House is claiming that this is a “conciliatory” budget because the president is no longer proposing $1.6 trillion in tax hikes:

The budget is more conservative than Obama’s earlier proposals, which called for $1.6 trillion in new taxes and fewer cuts to health and domestic spending programs. Obama is seeking to raise $580 billion in tax revenue by limiting deductions for the wealthy and closing loopholes for certain industries like oil and gas. Those changes are in addition to the increased tobacco taxes and more limited retirement accounts for the wealthy that are meant to pay for new spending.

Let’s try to disentangle the preceding passage. The president wants $580 billion in new tax revenue from eliminating various “deductions” and “loopholes.” But he also wants an unknown pile of revenue from new tobacco taxes and from restricting IRAs. And keep in mind that he already got $600 billion in new taxes as part of the fiscal cliff deal.

Until we get official numbers, we can’t say anything with certainty, but I’ll be checking on Wednesday to see how much revenue the president intends to grab as a result of the tobacco and IRA provisions. Suffice it to say that I won’t be surprised if the net impact of all his tax hikes is close to $1.6 trillion—especially since he’s also proposing to manipulate CPI data, a change that would generate another $100 billion in revenues.

In other words, the revenue side of his budget likely will be a bait-and-switch scam, just like the spending side is a joke once you understand that he wants to get rid of sequestration.

I hope I’m wrong, but I fear that my concerns will be validated next Wednesday and we’ll see another budget that has no real entitlement reform and more class-warfare tax hikes.

P.S.: The budget approved by the House of Representatives avoided any tax increases and restrained spending so that it will grow by an average of 3.4 percent annually. Not exactly draconian, but that approach does balance the budget in 10 years.

From today’s Politico Pulse:

OBAMACARE LAWSUIT RECRUITMENT 101: START WITH THE INTERNS - Cato Institute’s libertarian mastermind Michael Cannon appealed to former interns of the right-leaning group to join an “exciting” legal challenge to Obamacare. Cannon is among the top proponents of a legal theory that suggests the health law forbids federal subsidies to people accessing insurance through a federally run insurance exchange.

—“To see if you might qualify, have a look at this checklist,” Cannon writes in a “Dear former Cato Intern” letter. “There are income criteria, plus you must live in one of 33 states, prefer to purchase no health insurance (or low-cost catastrophic insurance), et cetera. If you believe you meet the criteria for at least one of the three categories, email me … to learn more about how you can get involved in this exciting legal challenge, and jump on this chance to make history. Feel free to forward this email to others who may be interested.” The checklist: http://​bit​.ly/​1​2​lJ8Yb.

Thanks, guys. Might as well tell everybody, now. (And “right-leaning”? Seriously?)

When I read in my local paper, the Sun Gazette (published in Washington’s Virginia suburbs), that the Arlington County Board was planning to raise property taxes, I prepared the chart below. It shows how my own property taxes have risen since I bought a house in 1997 (with my first tax bill, in 1998, set at 100).

I had the following letter published this week in the Sun Gazette: 

[Arlington] County Board members are discussing raising the real estate tax rate by 5 cents. The Sun Gazette on Feb. 28 published a chart showing that the proposed rate was actually higher in 2000 and 2001. But what you didn’t show was the soaring level of real estate assessments. Property taxes are much higher than they were a decade ago. My first Arlington tax bill was in 1998. My 2012 bill was more than double the 1998 rate–about a 127-percent increase. I think that’s true for most Arlington homeowners. It’s not easy to find past budgets on the county government’s Web site, but I would assume that the county’s revenue has gone up approximately as much. So Arlington isn’t hurting for revenue; it’s just itching to raise spending even faster than tax revenue rises. The Sun Gazette quoted County Board member Libby Garvey saying that a 5‑cent tax hike is “a very good compromise.” Not for taxpayers, it isn’t.

This pattern happens in many states and localities, of course: they spend money freely in good times, then run into trouble when the economy or the housing boom slows down. As Chris Edwards told a reporter in 2009, states during the preceding years had “repeated the same mistakes they made in the late ’90s, assuming the good times were going to last forever.” And when the money stops rolling in, they don’t want to cut back–so they decide to raise taxes to keep their revenue and spending at the high levels they reached during the boom.

With Bitcoin enjoying a spike in price against government currencies, there is lots of talk about it on the Interwebs. If you’re not familiar with it yet, here’s a good Bitcoin primer, which also counsels reading a lot more before you acquire Bitcoin, as Bitcoin may fail. If you like Bitcoin and want to buy some, don’t go all goofy. Do your homework. As if you need to be told, be careful with your money.

Much of the commentary declares a Bitcoin bubble for one reason or another. It might be a bubble, but nobody actually knows. A way of guessing is to compare Bitcoin’s qualities as a currency and payment network to the alternatives. Like any service or good, there are many dimensions to value storage and transfer.

I may not capture them all, and they certainly don’t predict the correct price against the dollar or other currencies. That depends on the ultimate viscosity of Bitcoin. But Bitcoin certainly has value of a different kind: it may discipline fiat currencies and the states that control them.

Intrinsic Value: If you’re just starting to think about money, this is where you’ll find Bitcoin an obvious failure. These evanescent strings of code have no intrinsic value whatsoever! Anyone relying on them as a store of value is a volunteer victim. Smart people stick with U.S. dollars and other major currencies, thin sheets of cloth or plastic with special printing on them…

No major currency has intrinsic value. Indeed, there isn’t much of anything that has intrinsic value. The value of a thing depends on other people’s demand for it. This is as true of Bitcoin as it is of dollars, sandwiches, and sand. So the intrinsic value question, which seems to cut in favor of traditional currencies, is actually a wash.

Transferability: Bitcoin is good with transferability–far better than any physical currency and quite a bit better than most payment systems. Not only is it fast, with transactions “settling” fairly quickly, but it is borderless. The genius of PayPal (after it gave up on being a replacement monetary system itself) was quick transfer to most places that rich people want to send money. Bitcoin allows quick transfer anywhere the Internet goes.

Acceptance: Bitcoin bombs badly in the area of acceptance. Try buying a sandwich with Bitcoin today and you’ll go hungry because few people and businesses accept it. This is a real problem, but it’s nothing intrinsic to Bitcoin. When Hank Aaron broke Babe Ruth’s home run record, people didn’t understand that credit cards were like money. (Watch the video at the link two or three times if you need to. It’s not only a great moment in sports.) Acceptance of different form-factors for value and payments can change.

Cost: How many billions of dollars per year do we pay for storage and transfer of money? Bitcoin is free.

Inflation-Resistance: Assuming the algorithms work as advertised, the quantity of Bitcoin will rise to a pre-established level of about 21 million over the next couple of decades and will never increase after that. This compares favorably to fiat currencies, the quantity of which are amended by their managers, sometimes quite dramatically, to undercut their value. If you want to hold money, holding Bitcoin is a better deal than holding dollars. Which brings us to…

Deflation-Resistance: Without central planners around to carefully debase its value, Bitcoin might go deflationary, with people refusing to spend it while it rises against all other stores of value and goods. Arguably, that’s what’s happening in the current Bitcoin price-spike. People are buying it in anticipation of its future increase in value.

Deflation can theoretically cause an economy to seize up, with everyone refusing to buy in anticipation of their money gaining in value over the short term. There is room for discussion about whether hyper-deflation can actually occur, how long a hyper-deflation can persist, and whether the avoidance of deflation is worth the risk of having centrally managed currency. I have a hard time being concerned that excessive savings could occur. However, whatever the case with those related issues, Bitcoin is probably deflation-prone compared to dollars and other managed currencies.

Surveillance-Resistance: Where you put your money is a reflection of your values. Payment systems and governments today are definitely gawking through that window into our souls.

Bitcoin, on the other hand, allows payments to be made with very little chance of their being tracked. I say “little chance” because there is some chance of tracking payments on the network. Sophisticated efforts to mask payments will be met by sophisticated efforts to track them. Relatively speaking, though, payments through traditional payment systems like checks, credit cards, and online transfer are super-easy to track. Cash is pretty darn hard to track. So Bitcoin stacks up well against our formal payment systems, but equally or perhaps poorly to cash.

Seizure-Resistance: The digital, distributed nature of Bitcoin makes it resistant to official seizure. Are you in a country that exercises capital controls? (What a euphemism, “capital controls.” It’s seizure.) Put your money into Bitcoin and you can email it to yourself. Carve your Bitcoin code into the inner lip of your frisbee before heading out on that Black Sea vacation. Chances are they won’t catch it at the border.

Traditional currencies either exist in physical form or they’re held and transferred by institutions that are more obediant to the state than they are loyal to their customers. (If Cyprus has anything to do with the current price-spike of Bitcoin, it’s as a lesson to others. Cypriots apparently did not move into Bitcoin in significant numbers.)

Because Bitcoin transactions are relatively hard to track, many can be conducted–how to put this?–independent of one’s tax obligations. In relation to the weight of the tax burden, Bitcoin may grow underground economies. Indeed, it flourishes where transactions (in drugs, for example) are outright illegal. Bitcoin probably moves the Laffer curve to the left.

Security: The tough one for Bitcoin is security. Most people don’t know how to store computer code reliably and how to prevent others from accessing it. Individuals have lost Bitcoin because of hard-drive crashes. (This will cause small losses in the total quantity of Bitcoin over time.) Bitcoin exchanges have collapsed because hackers broke in. And there’s a genuine risk that viruses might camp on your computer, waiting for you to open your (otherwise encrypted) wallet file. They’ll send your Bitcoin to heaven-knows-where the moment you do.

When a Bitcoin transaction has happened, it is final. Like a cash expenditure or loss, there is no reversability and nobody to complain to if you don’t have access to the person on the other side of the transaction. The downside of a currency that costs nothing to transfer is the lack of a 1–800 number to call.

So Bitcoin lags traditional currencies along the security dimension. But this is not intrinsic to Bitcoin. Security will get better as people learn and technology advances. (How ’bout a mega-firewall that requires approval of all outbound Internet traffic while the wallet is open?)

There may be Bitcoin-based payment services, banks, and lenders that provide reversibility, security, that pay interest, and all the other goodies associated with dollars today. To the extent they can stay clear of the regulatory morass, they may be less expensive, more innovative, and, in the early going, more risky.

So what’s the right price for Bitcoin? Only a fool can say. (No offense, all of you declaring a Bitcoin bubble.) I think it depends on the ultimate “viscosity” of Bitcoin.

Let’s say Bitcoin’s exclusive use becomes a momentary medium of exchange: Every buyer converts currency to Bitcoin for transfer, and every seller immediately converts it to her local currency. There’s not much need to hold Bitcoin, so there’s not that much demand for Bitcoin. Its equilibrium price ends up pretty low.

On the other hand, say everybody in the world keeps a little Bitcoin on hand for quick, costless transactions once there’s a handy, reliable, and secure Bitcoin payment system downloadable to our phones. If lots of people hold Bitcoin just because, that highly viscous environment suggests a high price for Bitcoin relative to other currencies and things.

Whatever the case, people are now buying Bitcoin because they think others are going to buy it in the future. Whether they’re “speculators” trying to buy in ahead of other speculators, or if they’re buying Bitcoin as a hedge against the varied weaknesses of fiat currencies and state-controlled payment systems, it doesn’t matter.

What does matter, I think, is having this outlet. The availability of Bitcoin is a small, but growing and important security against fiat currencies and state-controlled payments. It is a competitor to state money.

Bitcoin’s existence makes central bankers slightly less free to inflate the money they control, states will have slightly less success with seizing money, and surveillance of traditional payment systems will be decreasingly useful for law enforcement, taxation, and control.

I don’t think Bitcoin delivers us to libertarian “Shangri-la” or anarcho-capitalism, but it’s a technology that fetters government some. It’s a protection for people, their hard-earned wealth, and their privacy. That’s the value of Bitcoin, in my mind, no matter its current price.

While the enactment of Gov. Martin O’Malley’s sweeping gun control package has gotten more coverage, the Maryland House and Senate have also just passed a bill directed at banning “cyberbullying” [Capital Gazette, WJZ] The bill would, among other things, prohibit the use of electronic means (including cellphones, Facebook, and online forums) to intentionally “harass, or inflict serious emotional distress” on a minor. Violations could be punished by up to a year’s imprisonment.

In effect, the new law attempts to criminalize a good portion of the tort of intentional infliction of emotional distress, at least when undertaken in part or whole through newer technology.

Unfortunately, the new law is a serious affront to First Amendment liberties. It criminalizes a substantial swath of speech without clearly laying out notice of which speech it prohibits. It also prohibits much speech that, while in many cases reprehensible and harmful, is not well remedied by the harshness of criminal sanction.

It’s true that the law as passed drops some of the worst features of an earlier version, such as a ban on posting “private information” about minors. It also shifts the focus to a “course of conduct,” so that an individual cruel comment standing alone might not support prosecution. But the wider dangers remain. While electronic annoyance of an adult becomes criminal only if it continues after a request to stop, no such triggering provision is included for behavior that may annoy a minor. (And as I read it, there is no requirement that the defendant know that the person being subjected to intentional emotional distress is a minor—engaging in a vigorous “flame war” with a Maryland resident might turn out to be criminal if the username “ParentInLinthicum” turns out to conceal a teenage user.) Exceptions are made for speech that is intended to express political views or convey information, a curious pair of exemptions in that it has long been assumed that our First Amendment protects many types of seriously annoying speech other than those two.

We are supposed to support this law—and some lawmakers I admire did support it—to show that we care about children. Once on the books, however, this law will assuredly ruin the lives and futures of other kids who will be the subject of investigations and prosecutions, and not all those kids are monsters whose ruin we should accept with equanimity. Some further background here.

Tech news site CNET has an interesting, but I suspect somewhat misleading, story today suggesting that text messages sent via Apple’s iMessage service—an Internet-based alternative to traditional cell phone SMS text messages—are “impossible to intercept” by law enforcement. Yet that is not quite what the document on which the story is based—an “intelligence note” distributed to law enforcement by the Drug Enfrocement Administration—actually says.

The DEA memo simply observes that, because iMessages are encrypted and sent via the Internet through Apple’s servers, a conventional wiretap installed at the cellular carrier’s facility isn’t going to catch those iMessages along with conventional text messages. Which shouldn’t exactly be surprising: A search of your postal mail isn’t going to capture your phone calls either; they’re just different communications channels. But the CNET article strongly implies that this means encrypted iMessages cannot be accessed by law enforcement at all. That is almost certainly false.

As cryptographer and computer scientist Matthew Green observes, there is a simple and intuitive way to test whether Apple (or any cloud storage provider) has the capability to access a user’s encrypted content stored in the cloud—as Apple’s iMessages are: The “mud puddle test.” If you slip in a mud puddle, destroying your iPhone (along with any locally stored encryption keys) and forgetting your passwords as a result of the bump on the head, can you still recover your data? Can you, for instance, log in from a Web browser, reset your password, and then restore your content to a new device? If you can—and with Apple’s iCloud services, you can—then the cloud provider must itself hold the keys to unlock that data. So iMessages may not be interceptable from a suspect’s cell carrier, but Apple has to be capable of handing them over when the authorities come knocking with a warrant. In fact, all Apple has to do is provide the cops with an appropriate authentication token and they should, in principle, be able to turn an ordinary iPhone into a de facto clone of the suspect’s own device—so that iMessages show up on the police phone in realtime just as the suspect receives or sends them.

In fact, there’s another big way in which iMessages should be much more convenient and useful to police than conventional text messages. As law enforcement has long complained, most cell carriers store ordinary SMS messages for a few days after they’re sent at most—and some don’t retain message content at all. That means police aren’t able to read through a suspect’s historical messages even if they obtain a search warrant—only new ones. Apple’s iMessages, however, are stored indefinitely—which is a lot more useful if you’re trying to investigate a crime that’s already occurred. That means cops should be absolutely overjoyed if drug dealers or other criminals start using iMessage instead of SMS.

Which brings us to the question of why, exactly, this sensitive law enforcement document leaked to a news outlet in the first place. It would be very strange, after all, for a cop to deliberately pass along information that could help drug dealers shield their communications from police. One reason might be to create support for the Justice Department’s longstanding campaign for legislation to require Interent providers to create backdoors ensuring police can read encrypted communications—even though in this case, the backdoor would appear to already exist.

The CNET article itself discusses this so-called “Going Dark” initiative. But another possible motive is to spread the very false impression that the article creates: That iMessages are somehow more difficult, if not impossible, for law enforcement to intercept. Criminals might then switch to using the iMessage service, which is no more immune to interception in reality, and actually provides police with far more useful data than traditional text messages can. If that’s what happened here, you have to admire the leaker’s ingenuity—but I’m inclined to think people are entitled to accurate information about the real level of security their communication enjoy.