Adam Chandler, a Yale Law grad who recently completed a clerkship with Judge Patrick E. Higginbotham on the U.S. Court of Appeals for the Fifth Circuit, posted a SCOTUSblog piece this afternoon entitled “Cert.-stage amicus All-Stars: Where are they now?” Guess what? Cato’s number 4 on the list, right behind the U.S. Chamber of Commerce, the National Association of Criminal Defense Lawyers, and our friends out at the Pacific Legal Foundation – with a very respectable success rate of 22.2 percent.

Five years ago, when Chandler last did these rankings, Cato wasn’t even on the chart. That’s when Ilya Shapiro joined us. Say no more. But I will. He’s done a bang-up job with Cato’s amicus program.

The importance of filing Supreme Court briefs at the cert stage cannot be overstated. That’s the time when the Court makes its up-or-down decision about whether even to take a case, and hence the time at which arguments can be made about the importance of the issues at stake and the broader implications. We at the Center for Constitutional Studies have always taken the long view, grounded in the Constitution’s First Principles, especially as they underpin the limited constitutional government the Framers envisioned.

Commenting on the ideological aspects of these developments (where “conservative” and “libertarian” are largely interchangeable), Chandler writes:

Overall, the ideological cast of the new entrants is more conservative, anti-regulatory, and pro-business than that of those they replaced. To varying degrees, all seven of the new entrants have conservative profiles, whereas several of those left off the list this year, like the Society of Professional Journalists and the National League of Cities, have no obvious ideological bent. Five years ago, I wrote that “the list of top amici is dominated by pro-business and anti-regulatory groups—such groups hold over half the slots in the top sixteen.” Now they hold over three-quarters.

And he adds: “While the conservative groups have stepped up their game, the liberals are still nowhere to be found.” Part of the reason for this trend is of course the ideological cast of the Court itself. But that’s not the whole story – after all, it takes only four votes for certiorari to be granted, and for the most part there are four reliably liberal votes on the Court. Just as important is a change in the constitutional debate. And we’ve played our part in bringing that change about. In fact, in another month or so you’ll find a symposium in the Chapman Law Review on the origins and character of the modern libertarian legal movement. Stay tuned for more on that.

Yesterday, the “National School Shield Task Force,” a 12-member study group commissioned by the National Rifle Association, released its recommendations [.pdf] for heightened school security in the aftermath of the Sandy Hook Elementary School shootings. The Washington Post’s coverage quotes the head of Children’s Defense Fund, who accuses the NRA of “prey[ing] on America’s fears” and trying to turn the nation’s schools “into armed fortresses.” 

Not long ago, I’d have been shocked to find myself agreeing with Marian Wright Edelman over Wayne LaPierre, but in this case, the lady has a point. Since last December, the NRA leader has outdone left-leaning “children’s advocates” in fomenting legislative hysteria “for the children.” As I noted in Tuesday’s Washington Examiner: 

The NRA head opposes new gun laws, but he’s otherwise been [President Obama’s] partner in panic, breathlessly demanding an “armed good guy” in every school—a federally funded expansion of “America’s police force.” 

The Post notes that the National School Shield Task Force is “ostensibly independent” of NRA direction, and for what it’s worth, the report’s tone is less hysterical, the recommendations somewhat less sweeping, than LaPierre’s. But, like LaPierre’s public statements, it lacks any intelligent assessment of relative risks, instead making the very possibility of harm to children a rallying cry for opening the checkbook and summoning the security consultants. The entire project seems designed to enhance the paramilitarization of public institutions, allowing the Homeland Security mentality of institutionalized overreaction free rein in American schools.

Five of the twelve task-force members work for “Phoenix RBT Solutions,” a security consulting firm that “offer[s] schools vulnerability assessments, innovative security solutions, and reality-based training for security personnel”–and so just might have some skin in the game. 

Among the remaining members are a former Secret Service director, a former top military security official, a Department of Homeland Security veteran, and, for good measure, a “Former Assistant Administrator of U.S. Transportation Security Administration (TSA).” Woe betide the poor parent who just wants to drop off her kid’s lunch. 

“Prior to the Sandy Hook incident,” the National School Shield Report chides, “most schools took the view that ‘it probably won’t happen here.’” “Most schools” is too broad a generalization, given that, as documented in Annette Fuentes’ excellent Lockdown High, the trend toward the TSA-ification of American schools long predated the Newtown massacre. 

Still, for any particular school, “it probably won’t happen here” is an accurate assessment of the risk. One estimate, published in the journal Educational Researcher (“What Can Be Done About School Shootings?” January 2010), is that any given school in the United States can expect a school shooting every 6,000 years. 

To put “armed police officers in every school,” as LaPierre has frantically demanded that Congress do, would require hiring over 100,000 new cops. But if your goal is to prevent kids from getting murdered, the schools are about the last place you’d put new police, since 98 percent of youth homicides occur off school grounds.

[Source: “Indicators of School Crime and Safety: 2011,” National Center for Education Statistics.]

Rough estimates of what LaPierre’s proposal would cost range from $5.5 billion to $34 billion a year. How can we justify that sort of expense in what’s supposed to be an era of belt-tightening? “You justify it because it’s necessary,” says Asa Hutchinson, the former DEA chief and Homeland Security official who’s heading up the NRA’s school safety initiative. But it’s not necessary, and it’s not wise.

The National School Shield Task Force is less bullish on federal funding than is NRA’s leadership (in December LaPierre called on Congress “to act immediately, to appropriate whatever is necessary … and to do it now, to make sure that blanket of safety is in place.” Though the NSS Report calls for making federal Homeland Security grants available for school security programs, it states that “federal funding has proved unreliable as a long-term solution to the school safety and security needs of our nation” and concedes that “Local school authorities are in the best position” to determine “whether an armed security guard is necessary.”

That’s an improvement over what NRA’s leadership has recommended. Unfortunately, as I’ll discuss in a separate post, I can’t say the same for what the rest of the report has to say about school safety. 

Last year’s partial victory in the Obamacare case is already being applied to new cases reaching the Supreme Court. Recall that, in that case, the Court accepted our argument that the government cannot use the Commerce and Necessary and Proper Clauses to compel someone to purchase health insurance. The Court held that allowing Congress to compel commerce into existence would be an improper use of a great and limitless power. In United States v. Kebodeaux, the Supreme Court will once again address an assertion of power that, if upheld, could give Congress nearly limitless power.

In 1999, Anthony Kebodeaux was sentenced to three years in prison for statutory rape. He served his time, was freed from any post-release parole or probation requirements, and ended his relationship with the federal government in the matter of criminal law. Years later, when Kebodeaux moved intrastate from San Antonio, Texas to El Paso, Texas, he failed to update his change of address within the three-day period as required by the federal Sex Offender Registration and Notification Act (SORNA) of 2006. Even though Kebodeaux was unconditionally released from custody before SORNA was enacted, he was sentenced to one year in federal prison. The Fifth Circuit overturned his conviction en banc, meaning that every judge on the Fifth Circuit heard the case rather than the traditional three-judge panel. They found the registration requirement unconstitutional because Congress lacked jurisdiction over Kebodeaux after they unconditionally released him from custody.

The government’s arguments to the contrary, the court held, would permit not just “unending criminal authority” over Kebodeaux but unending authority over every American who was once in federal jurisdiction, which is, of course, every American.

In a sense, the government is now arguing for the “Hotel California” theory of jurisdiction: you can check out, but you can never leave. 

Yesterday, Cato filed an amicus brief, joined by Ilya Somin, Professor of Law at George Mason University School of Law, arguing that it would be improper under the Necessary and Proper Clause to permit Congress to have unending authority over all Americans. Congress already lacks a general power to punish criminals, much less monitor previously released criminals and impose new and onerous restrictions on them at will. Moreover, there is nothing constitutionally special about sex offenders as a class. Congress should not be allowed to designate a sub-class of people within its jurisdiction as “special” and then assert perpetual jurisdiction over them. These type of assertions of power are precisely what the “proper” element of the Necessary and Proper Clause is supposed to protect against–ones that, even if “necessary,” would give Congress unbounded power. 

Indeed, if the Court rules in favor of the government’s position, it will give Congress virtually unlimited power to regulate nearly all Americans. In essence, it would justify the gradual imposition of endless new requirements on anyone who had previously been subject to federal jurisdiction. Cumulatively, these federal impositions amount to unlimited federal authority over anyone who has ever been held in federal custody or otherwise in federal jurisdiction. This cannot be a power vested in a Congress with “few and defined” powers. As the Supreme Court held in the Obamacare case, Congress doesn’t have the power to “regulate an individual from cradle to grave.” 

Ramesh Ponnuru has wasted no time responding to my post of a couple of hours ago. At this point it’s best simply to direct the reader to the warring posts: res ipsa loquitur.

I would add only that he’s still not taken up my invitation to make clear what he means when he encourages us to consider “proposals to reduce judicial power.”

Chuck Hagel’s first major speech as secretary of defense is receiving the sort of attention that one would expect. But the real news will be made when the Obama administration’s budget hits the streets, reportedly on April 10th. As the saying goes, “show me the budget, and I’ll show you your priorities.”

For now, Hagel’s speech at the National Defense University focused on the sorts of reforms pushed by his predecessors, Robert Gates and Leon Panetta, with mixed success.

Much more hard work, difficult decisions and strategic prioritizing remains to be done. Deep political and institutional obstacles to these necessary reforms will need to be engaged and overcome. 

…the military’s modernization strategy still depends on systems that are vastly more expensive and technologically risky than what was promised or budgeted for. We need…an acquisition system that…rewards cost-effectiveness and efficiency, so that our programs do not continue to take longer, cost more, and deliver less than initially planned and promised.

Of course, Hagel is right. There is still enormous waste and inefficiency within the Pentagon. The Army’s discovery of $900 million in unnecessary parts, and Sen. Tom Coburn’s Department of Everything report, remind us that not every dollar is spent wisely. In some cases, it appears that no one knows what has been spent, or why, which is why I’m a fan of a Pentagon audit.

A more restrained foreign policy would generate savings well in excess of $1 trillion over the next decade. Calls for other countries to do more to defend themselves finds favor within the scholarly community (e.g. here, here, here, and here), and with the American people. But Gates and Panetta rejected such a strategic shift. They were, no doubt, following the lead set by the president, who declared in his 2012 State of the Union address that the United States would continue to underwrite the security of the entire world (and, left unsaid, allow every other country to free ride on the backs of U.S. troops and U.S. taxpayers).

Short of a strategic shift toward self-reliance, however, Hagel has fixed on reforms that could produce significant savings. Specifically, “fiscal realities,” he explained,

demand another hard look at personnel – how many people we have both military and civilian, how many we need, what these people do, and how we compensate them for their work, service, and loyalty with pay, benefits and health care.

Unfortunately, and I’m sure that he knows this, reducing payrolls and reforming pay and benefits also happen to be the most difficult to achieve politically.

Democrats typically oppose cuts within the civilian workforce, part of what Hagel referred to as the “world’s largest back-office.” The number of civilians on the DoD payroll is 15 percent higher than in 2001, although it has come down slightly since the high point in 2011. Spending over that same period has grown at an even faster rate, up more than 25 percent in real, inflation-adjusted dollars. If Hagel is serious about cutting costs, temporary furloughs won’t be enough; the DoD civilian workforce must shrink permanently.

He must also tackle pay and benefits for active-duty military personnel, and health care spending, especially for working-age retirees. Gates famously said that “health care costs [were] eating the Defense Department alive,” but members of Congress have repeatedly blocked even minor reforms to TriCare for Life. Meanwhile, the mere suggestion of reforms to the decades-old military retirement system elicits fierce opposition.

But I think that we may be approaching the point, perhaps soon, when a bipartisan coalition steps in to apply the brakes. At an event that we hosted last month, I asked Barry Blechman of the StimsonCenter, Jacob Stokes from the Center for a New American Security, and Steve Ellis of Taxpayers for Common Sense, if there was any realistic alternative to major reform of the military’s pay and benefits. They all said that there was not.

If a dozen other DC think tanks are willing to admit publicly what is painfully obvious to even casual observers, that might provide sufficient political cover for members of Congress to allow such reforms to go forward.

At least, I would like to believe that it could. Just as General Motors is fast becoming a pension payment company that builds cars on the side, the U.S. military is becoming a pension and health care organization that occasionally fights wars. 

In the Diary feature of this week’s The Spectator, rational optimist Matt Ridley has a collection of rather random observations from his daily life that have him thinking about (or maybe wishing for since Old Man Winter has been slow to loose his grip in the U.K. and Western Europe, much like he has across the Eastern U.S.) anthropogenic global warming.

What has his attention is that global warming just doesn’t seem to be going according to plan. And for those who have bought into that plan, their plan-driven actions are starting to make them look foolish.

But it’s not as if we haven’t “told you so”—a fact that Ridley draws attention to in the closing segment of his article.

David Rose of the Mail on Sunday was vilified for saying that there’s been no global warming for about 16 years, but even the head of the Intergovernmental Panel on Climate Change [IPCC] now admits he’s right. Rose is also excoriated for drawing attention to papers which find that climate sensitivity to carbon dioxide is much lower than thought — as was I when I made the same point in the Wall Street Journal. Yet even the Economist has now conceded this. Tip your hat to Patrick Michaels, then of the University of Virginia, who together with three colleagues published a carefully argued estimate of climate sensitivity in 2002. For having the temerity to say they thought ‘21st-century warming will be modest’, Michaels was ostracised. A campaign began behind the scenes to fire the editor of the journal that published the paper, Chris de Freitas. Yet Michaels’s central estimate of climate sensitivity agrees well with recent studies. Scientists can behave remarkably like priests at times.

What we determined in our 2002 study was that the amount of global warming projected by the end of this century was most likely being overestimated. When we adjusted the climate model projections to take into account and better match the actual observations, our best estimate of the amount of warming we expected from 1990 to 2100 was about 1.8°C (3.2°F), which was in the lower end of the IPCC projected range, and which Ridley correctly noted, we termed as “modest.”

Further, we anticipated the slowdown in the warming rate. Quoting from our 2002 paper titled “Revised 21^st century temperature projections” (Michaels et al., 2002):

The ‘worst case’ warming now appears to be merely linear, subject to the modifications described in this paper. Furthermore, both Table 1 and Fig. 3 indicate that any exponential rise in atmospheric CO2 concentrations is weak at best. Consequently, the current linear warming may in fact be the adjustment to the exponential growth in CO2 that took place prior to 1975. Levitus et al. (2000) documented a warming of 0.06°C in the top 3 km of a large-area ocean sample over the course of 40 yr. A lag correlation between that deep-water record and the sea-surface temperature record from Quayle et al. (1999) is very suggestive that oceanic thermal lag maximizes around 35 yr (Michaels et al. 2001). Thus, the truly exponential phase of concentration growth in the atmosphere, which ended about 25 yr ago, should induce a linear warming for the next decade or two before it could actually begin to damp.

Now, more than 10 years later, more and more evidence is piling in that we were right, including several recent papers that apply a technique not all that dissimilar in theory than our own (e.g. Gillett et al., 2012; Stott et al., 2013).

So even though we still are largely ostracized, at least we rest assured that we were pretty much on target—and some people are starting to take notice.

References:

Gillett N. P., V. K. Arora, G. M. Flato, J. F. Scinocca, and K. von Salzen, 2012. Improved constraints on 21st-century warming derived using 160 years of temperature observations. Geophysical Research Letters, 39, L01704.

Michaels, P. J., P. C. Knappenberger, O. W. Frauenfeld, and R. E. Davis, 2002. Revised 21^st century temperature projections. Climate Research, 23, 1–9.

Stott, P., P. Good, G. Jones, N. Gillett, and E. Hawkins, 2013. The upper end of climate model temperature projections is inconsistent with past warming. Environmental Research Letters, 8, 014024, doi:10.1088/1748–9326/8/1/014024.

I’m normally reluctant to write about “depreciation” because I imagine eyes glazing around the world. After all, not many people care about the tax treatment of business investment expenses.

But I was surprised by the positive response I received after writing a post about Obama’s demagoguery against “tax loopholes” for corporate jets. So with considerable trepidation let’s take another look at the issue.

First, a bit of background. Every economic theory agrees that investment is a key for long-run growth and higher living standards. Even Marxist and socialist theory agrees with this insight (though they foolishly think government somehow is competent to be in charge of investments).

Let’s look at two remarkable charts, starting with one that shows the very powerful link between total investment and wages for workers.

As you can see, if we want people to earn more money, it definitely helps for there to be more investment. More “capital” means that workers have higher productivity, and that’s the primary determinant of wages and salary.

Our second chart shows how the internal revenue code treats income that is consumed compared to how it penalizes income that is saved and invested. Simply stated, the current system is very biased against capital formation because of the combined impact of capital gains taxes, corporate income taxes, double taxes on dividends, and death taxes.

Indeed, one of the reasons why the right kind of tax reform will generate more prosperity is that double taxation of saving and investment is eliminated. With either a flat tax or national sales tax, economic activity is taxed only one time. No death tax, no capital gains tax, no double tax on dividends in either plan.

All of this background information helps underscore why it is especially foolish for the tax code to specifically penalize business investment. And this happens because companies have to “depreciate” rather than “expense” their investments.

Here’s how I described depreciation in my post on corporate jets.

If a company purchases a jet for $20 million, they should be able to deduct – or expense – that $20 million when calculating that year’s taxable income… A sensible tax system defines profit as total revenue minus total costs – including purchases of private jets. But today’s screwy tax code forces them to wait five years before fully deducting the cost of the jet (a process known as depreciation). Given that money today has more value than money in the future, this is a penalty that creates a tax bias against investment (the tax code also requires depreciation for purchases of machines, structures, and other forms of investment).

And I also addressed the issue when writing about the economic illiteracy in one of the Obama-Romney debates.

Now let’s see what some experts on the topic have to say.

Here’s some very sage analysis from Alan Viard of the American Enterprise Institute.

…a deal that cuts the corporate rate could end up doing more harm than good. The problem is that Congress and the Obama administration are thinking of pairing the rate cut with a slow-down of companies’ depreciation deductions. That’s a bad combination. A key goal of corporate tax reform should be to reduce the tax penalty on business investment. Investments in equipment, factories, and other forms of capital help power the long-run economic growth that boosts wages and living standards for American workers. …If depreciation is slowed down enough to offset the full revenue loss from the rate cut, then there’s no reduction in the investment penalty, on balance. The depreciation changes take back with the left hand everything that the rate cut gives with the right hand. …In fact, the policy makes the tax penalty on new investments bigger. …Why is this bad combination being considered? Maybe because the rate cut is easy to understand and the harm of slower depreciation is easy to overlook. …Yes, let’s cut the corporate tax rate. But, let’s not slow down depreciation to pay for it.

Amen. Proposals to lower America’s destructively high corporate tax rate are needed, but I don’t want politicians “paying for” the change with other policies that are similarly harmful to growth and competitiveness.

Margo Thorning of the American Council for Capital Formation adds some wisdom with her column in today’s Wall Street Journal.

…proposals that would increase the tax burden on capital-intensive industries—which are contributing to U.S. economic growth and employment—should be viewed with caution. …stretching out depreciation allowances reduces a company’s annual cash flow and raises the “hurdle rate” that new investments would have to meet before they are approved. For capital-intensive firms in sectors such as energy, manufacturing, utilities and transportation, the trade-off between delayed cash flow and lower corporate income-tax rates may result in cutbacks in capital spending. …Each additional $1 billion in investment is associated with 23,000 new jobs, according to data from the Department of Commerce and the Bureau of Labor Statistics. …Rather than drawing out depreciation schedules, a better, pro-growth approach to corporate tax reform would be to allow all investment to be expensed—in other words, deducted from income in the first year.

I share Margo’s concerns, which is why I’m very suspicious when the President says he wants to lower the corporate tax rate and “reform” the system.

Last but not least, Matt Mitchell (no relation) of the Mercatus Center recently added his two cents to the discussion.

The idea that “accelerated” depreciation is a loophole can be traced back to Stanley Surrey, the Harvard law professor whose work in the 1950s, 60s, and 70s influenced many…, including Senator Bill Bradley. …immediate expensing would mean abandoning “the attempt to tax business income.” That’s because it would essentially turn the corporate income tax into a corporate consumption tax. And that may be a good thing. Capital taxation is notoriously inefficient. This is one reason why Robert Hall and Alvin Rabushka permitted immediate 100 percent expensing in their famous flat consumption tax.

You should realize, by the way, that the distorted view of what’s a loophole doesn’t just apply to depreciation. The Joint Committee on Taxation (the same folks who basically assume that the revenue-maximizing tax rate is 100 percent) also tells lawmakers that it’s a loophole if you don’t double-tax capital gains, or if you allow people to avoid double taxation by utilizing IRAs.

With advice like that, no wonder the tax code is a mess.

Anyhow, congratulations are in order. If you’ve made it this far, you almost surely know more about depreciation than every single politician in Washington. Though, to be sure, that’s not exactly a big achievement.