The Hon. Alex Kozinski gave the annual B. Kenneth Simon lecture at Cato’s Constitution Day conference on September 15, 2011. He spoke about changing cultural expectations of privacy regarding new technologies and how judicial applications of the Fourth Amendment have changed over time to reflect these expectations. Judge Kozinski is the Chief Judge on the U.S. Court of Appeals for the Ninth Circuit.
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The President Can’t Increase Congress’s Power Simply by Signing a Treaty
A lost episode of Jerry Springer found its way into the Supreme Court’s 2010-11 term in the case of United States v. Bond. Mrs. Bond, upset by the pregnancy that resulted from an affair between her husband and her erstwhile best friend, decided to take revenge. A trained microbiologist working at a chemical manufacturer, Mrs. Bond tried to poison her husband’s mistress by dusting her door knobs, mailbox, and car handles with dangerous, possibly lethal chemicals.
Upon being caught by (federal) postal inspectors, Mrs. Bond was charged with violating the law Congress passed to implement an international chemical weapons treaty. (There are no generally applicable federal attempted murder statutes, so prosecutors had to get creative to remain in federal court.)
But if general criminal statutes are beyond Congress’s powers, as even the most ardent federal-power activist must acknowledge, how did Congress have the power to pass the law that ensnared Mrs. Bond? — who, whatever her character flaws, was not selling chemical weapons to terrorists (the treaty’s target). Mrs. Bond thus hoped to challenge her conviction by arguing that Congress did not have the power to pass the law in question.
The Third Circuit, however, ruled that she did not have standing — a legal doctrine defining who has the right to bring a claim — to challenge the law on federalism grounds. Cato filed a Supreme Court brief supporting Mrs. Bond’s position and arguing that it makes no sense to deny standing to someone challenging a law under which she is being prosecuted. The Court unanimously agreed and remanded the case back to the Third Circuit, to finally hear arguments over whether the statute is beyond congressional power.
Cato has now reentered the fray, in a brief authored by Georgetown law professor Nicholas Quinn Rosenkranz and joined by the Center for Constitutional Jurisprudence. We again support Mrs. Bond’s claim that the law under which she was charged is beyond Congress’s enumerated powers. The main obstacle to this argument is the 1920 case Missouri v. Holland, a short and not completely clear opinion by Justice Oliver Wendell Holmes that has been interpreted to mean that Congress can expand its enumerated powers via the Treaty Clause.
In other words, even though Congress does not have the power to pass, for example, general criminal statutes, if Congress ratifies a treaty calling for such statutes, its power increases beyond constitutional limits. We argue that this is an astounding manner in which to interpret a Constitution that creates a federal government of limited powers. Not only would this mean that the Executive has the ability to expand congressional power by signing a treaty, but it would mean that foreign governments could change congressional power by abrogating a previously valid treaty — thus removing the constitutional authority from certain laws. We also point out how the most influential argument supporting Missouri v. Holland is based on a clear misreading of constitutional history and that the ruling is in deep tension with other cases.
On the treaty power, we’re in a constitutional quagmire that can only be escaped by limiting or overturning Missouri v. Holland. The Third Circuit can’t itself overturn a Supreme Court decision, of course, but it follows our brief, it can at least limit its damage.
English Fluency? Correct Pronunciation? Why Would Teachers Need Those?
As Pat Kossan reports in the Arizona Republic, the state of Arizona has averted a threatened civil-rights lawsuit from Washington by agreeing to stop monitoring teachers’ English fluency and pronunciation in the classroom. “In November, federal officials told Arizona that its fluency monitoring may violate the Civil Rights Act of 1964 by discriminating against teachers who are Hispanic and others who are not native English speakers.”
Does this strike you as perhaps a bit crazy? If so, it’s craziness with quite a pedigree. It was way back in the first Bush administration that the Equal Employment Opportunity Commission (EEOC) began filing lawsuits against employers for “discriminating” against employees with difficult-to-understand or heavily accented speech, the theory being that this served as an improper proxy for discrimination based on national origin. The scope for allowable exceptions was exceedingly narrow, too narrow to cover most teaching positions, as I wrote quite a while back when the issue had just come over the horizon in a Massachusetts case. Indeed, the National Education Association (I pointed out) had been prevailed on to pass a resolution “decrying disparate treatment on the basis of ‘pronunciation’ — quite a switch from the old days when teachers used to be demons for correctness on that topic.”
Don’t assume you can escape by choosing one of your local private schools. Their employment of teachers falls under the EEOC’s jurisdiction too.
Tolerance à la Mode Français
Given America’s at best mixed record on free speech, I am usually reluctant to point fingers at other countries, but Thursday’s fining of two French women for wearing a full face veil was a little over the top. Don’t get me wrong, I’m no fan of the burqa — as it leaves far too much to the imagination for my tastes — but I am a fan of tolerance and religious freedom.
I’m still trying to decide which is more absurd, that the law in question allows an exemption for clown masks (more rulings like this should take care of that need) or that in addition to a fine, the two women will be required to take lessons on “tolerance”. It seems to me the whole experience has already provided them a pretty clear lesson on French tolerance.
In much better news, Saudi Arabia announced “that the nation’s women will gain the right to vote and run as candidates in local elections to be held in 2015.” While such a change is obviously long over-due, and one can reasonable ask why wait until 2015, it is a positive change and should be celebrated.
Eight Questions for Protectionists
When asked to pick my most frustrating issue, I could list things from my policy field such as class warfare or income redistribution.
But based on all the speeches and media interviews I do, which periodically venture into other areas, I suspect protectionism vs. free trade is the biggest challenge.
So I want to ask the protectionists (though anybody is free to provide feedback) how they would answer these simple questions.
1. Do you think politicians and bureaucrats should be able to tell you what you’re allowed to buy?
As Walter Williams has explained, this is a simple matter of freedom and liberty. If you want to give the political elite the authority to tell you whether you can buy foreign-produced goods, you have opened the door to endless mischief.
2. If trade barriers between nations are good, then shouldn’t we have trade barriers between states? Or cities?
This is a very straightforward challenge. If protectionism is good, then it shouldn’t be limited to national borders.
3. Why is it bad that foreigners use the dollars they obtain to invest in the American economy instead of buying products?
Little green pieces of paper have little value to foreign companies. They only accept those dollars in exchange for products because they intend to use them, either to buy American products or to invest in the U.S. economy. Indeed, a “capital surplus” is the flip side of a “trade deficit.” This generally is a positive sign for the American economy (though I freely admit this argument is weakened if foreigners use dollars to “invest” in federal government debt).
4. Do you think protectionism would be necessary if America did pro-growth reforms such as a lower corporate tax rate, less wasteful spending, and reduced red tape?
There are thousands of hard-working Americans that have lost jobs because of foreign competition. At some level, this is natural in a dynamic economy, much as candle makers lost jobs when the light bulb was invented. But oftentimes American producers can’t meet the challenge of foreign competition because of bad policy from Washington. When I think of ordinary Americans that have lost jobs, I direct my anger at the politicians in DC, not a foreign company or foreign workers.
5. Do you think protectionism would help, in the long run, if we don’t implement pro-growth reforms?
If we travel down the path of protectionism, politicians will use that as an excuse not to implement pro-growth reforms. This condemns America to a toxic combination of two bad policies — big government and trade distortions. This will destroy far more jobs and opportunity that foreign competition.
6. Do you recognize that, by creating the ability to offer special favors to selected industries, protectionism creates enormous opportunities for corruption?
Most protectionism in America is the result of organized interest groups and powerful unions trying to prop up inefficient practices. And they only achieve their goals by getting in bed with the Washington crowd in a process that is good for the corrupt nexus of interest groups-lobbyists-politicians-bureaucrats.
7. If you don’t like taxes, why would you like taxes on imports?
A tariff is nothing but a tax that politicians impose on selected products. This presumably makes protectionism inconsistent with the principles of low taxes and limited government.
8. Can you point to nations that have prospered with protectionism, particularly when compared to similar nations with free trade?
Some people will be tempted to say that the United States was a successful economy in the 1800s when tariffs financed a significant share of the federal government. That’s largely true, but the nation’s rising prosperity surely was due to the fact that we had no income tax, a tiny federal government, and very little regulation. And I can’t resist pointing out that the 1930 Smoot-Hawley tariff didn’t exactly lead to good results.
We also had internal free trade, as explained in this excellent short video on the benefits of free trade, narrated by Don Boudreaux of George Mason University and produced by the Institute for Humane Studies.
My closing argument is that people who generally favor economic freedom should ask themselves whether it’s legitimate or logical to make an exception in the case of foreign trade.
Playing Games with the 2nd B.U.S.
In case anyone wonders why I haven’t posted for a while, it’s because I’m supposed to be working on my Little Fed Book. I say “supposed to be” because it isn’t the actual writing of that book that’s kept me from posting here. It’s the writer’s block that’s had me in its grip, as it does for a while each time I’m supposed to start a big project.
This time ‘round part of the problem is that I decided to begin by writing about an episode concerning which I knew relatively little: the story of the Second Bank of the United States. Once that was out of the way, I figured, the rest would be downhill. I hadn’t reckoned on the slogging it would take to get elevated in the first place.
I knew the basics well enough from teaching them: the post-1811 state banking boom and subsequent suspensions; the calls for a new Federal bank to see to a quick resumption of specie payments and to supply a “uniform” paper currency; Jackson’s famous veto aimed at foiling its supporters’ attempt to renew the Bank’s charter; and the subsequent “Bank War” in which Jackson and Biddle traded blows aimed in the one case at assuring the Bank’s demise and in the other at undermining the Bank’s opponents by making their actions appear responsible for plunging the country into a depression. I also knew where to look for evidence concerning the Bank’s actual conduct. But the more I studied those sources, the more I realized that I needed a better framework by which to understand the Bank’s relations with state-chartered banks. In particular, I needed to better understand why its relations with Northeastern banks tended to differ from those with banks elsewhere, as well as why its conduct toward other banks changed over time.
When, while straightening up the mess in my office (my favorite writer’s‑block therapy), I happened to come across a paper I wrote in grad school called “A Game Theory Illustration of Bank Competition,” it occurred to me that game theory might be a good way to come to terms with the Second B.U.S. In the paper I represented the banking “game” as one in which a player might choose either to cooperate with a rival by accumulating or reissuing the rival’s notes, or to defect by returning those notes for redemption in specie. When the players are equally privileged, the payoffs are symmetrical. Moreover, because mixed strategies (that is, those in which one bank cooperates while the other defects) involve persistent reserve gains by the defecting bank, and persistent losses by the cooperative “sucker,” the payoffs are those of a Prisoner’s Dilemma. All-around defection is therefore the unique Nash Equilibrium:
The banks end up, in other words, taking part in the routine (say, daily) exchange and settlement of claims, including checks as well as notes, with specie alone being treated as a reserve asset. The system’s capacity for expansion will then depend solely on the available stock of specie reserves and what banks determine to be their optimal specie reserve ratios.
To appreciate the strategies employed by the second Bank, it helps to first consider the situation faced by a “pure” currency monopolist, meaning a bank that enjoys an irrevocable, exclusive privilege of issuing paper money. Because the public ordinarily finds paper more convenient than gold, the privileged bank’s monopoly causes other banks to treat its notes and other claims against it that are readily convertible into its notes as superior substitutes, in “normal” times at least, to specie. The relative payoffs to the less privileged bank or banks for cooperating versus defecting are then more or less the reverse of those for the game involving equal rivals, giving rise to a mixed-strategy Nash Equilibrium in which the less privileged banks hold and reissue the privileged bank’s notes, perhaps even lodging their specie with it, while it nevertheless continues to redeem any items it collects from them:
In what ways did the situation confronting the Second Bank of the United States differ from that faced by our “pure” currency monopolist? First of all the Bank’s charter, rather than granting it irrevocable privileges, was to lapse after two decades unless renewed by a Congressional vote. That meant that the Bank had to take into account the political consequences of its actions, including the possibility that, by making life difficult for state banks, it might discourage legislators in the affected states from voting for its renewal. Concern about renewal prospects would incline the Bank to assign lower payoffs for defection than those a pure monopolist might anticipate. This change alone might suffice to give rise to a cooperative Nash Equilibrium, that is, one in which the state and Federal banks elect to “live and let live”:
Second, the Bank’s privileges did not include an outright currency monopoly. Instead they consisted mainly of its status as a government depository, together with its ability to establish branches anywhere, which allowed its notes to command the same value everywhere, and therefore to be uniquely useful in interstate commerce. The notes of state chartered banks, in contrast, tended to be discounted as they traveled beyond their place of issue.
State banks thus had some incentive for retaining and reissuing the Second Bank’s notes instead of redeeming them, just as in the pure monopolist case; but the strength of this incentive differed in different parts of the country. In particular, northeastern banks tended to treat B.U.S. notes as relatively poor substitutes for specie, which they were frequently called upon to supply for international transactions (and, starting in 1818, for Suffolk Bank settlements), while banks elsewhere tended to treat them as good substitutes, which (so long as they traded at par) could be readily employed to offset the (typically adverse) flow of trade with the northeast. Forbearance by the B.U.S. toward northeastern banks would therefore have made a “sucker” of it. Consequently a non-cooperative “hard money” equilibrium tended to be prevail between the Bank and northeastern state banks, while a cooperative “soft money” equilibrium tended to prevail elsewhere:
And so things went during the Bank’s first years, with its non-northeastern branches playing “live and let live” with neighboring state banks, and generously expanding their own lending, and its northeastern ones aggressively redeeming local notes, and having local banks redeem theirs just as aggressively.
Murray Rothbard offers an excellent summary of the situation in The Panic of 1819. Before the panic, Rothbard observes, the Bank on the whole served
as an expansionary, rather than as a limiting force. The expansionary attitude of the Bank was encouraged by the Treasury, which wanted the Bank to accept and use the various state bank notes in which the Treasury received its revenue, particularly its receipts from [western] public land sales… In New England, on the other hand, both the private banks and the branches of the Bank of the United States pursued a conservative policy.
The catch was that things simply couldn’t go on this way for very long. The general expansion led to rising U.S. prices, which eventually worsened the trade deficit, increasing the demand for specie, especially in the northeast. Also, because the Bank’s various branches were collectively responsible for receiving and redeeming its notes, regardless of where the notes came from, and with no arrangements for any eventual inter-branch reckoning, the Bank’s northeastern branches found themselves hemorrhaging reserves. Eventually specie was commanding a premium even relative to B.U.S. notes, reflecting the public’s doubts concerning its continuing ability to meet demands placed upon it.
At last the Bank of the United States had no choice but to take steps to stem its reserve losses, which it did by calling on its non-northeastern branches to abandon their live-and-let-live policy toward state banks while aggressively contracting their own lending. It was this inevitable reversal of the Bank’s politically-motivated policy of forbearance–a reversal that would continue under Biddle’s presidency–that triggered the Panic of 1819.
Apologists for central banks like to portray them as conservative institutions that serve to keep other (“commercial”) banks on tight leashes; and although central banking doctrine was hardly developed at the time, the same thinking played a prominent part in the decision to establish a new federal bank in 1816. But though the new B.U.S. was certainly capable of being a conservative presence that would help to rein-in reckless state banks, in practice the Bank followed the state banks’ lead, behaving conservatively only where state banks were themselves already inclined to be conservative, while fostering expansion elsewhere. The events leading to the Panic of 1819 suggest that competition among co-equal banks was both a sufficient and a necessary condition for the avoidance of excessive bank lending. The presence of a privileged federal bank, in contrast, appears to have been neither sufficient nor necessary. That presence was, on the other hand, uniquely responsible for the extent of excessive expansion that ultimately occurred. In light of such considerations the Panic of 1819 deserves to be regarded as the United States’ first central-bank inspired financial crisis.
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Cops on Camera in Fullerton, Calif.
In large part because of social media and consumer-level video technology, two Fullteron, Calif. police officers likely involved in the death of Kelly Thomas have now been charged with murder, manslaughter and excessive use of force. Reason.tv’s Paul Detrick has produced an excellent video detailing the events that led to the charges. Be warned: Some of the images presented here are quite disturbing.
Still many jurisdictions claim that they can arrest and charge individuals when they use video technology to document police engaged in their public duties, even when those people are documenting police abuse. Further, police agencies are often reluctant to use video documentation to show what happens in high-stakes police encounters like SWAT raids. Cato’s “Cops on Camera” video last year provides some context about how technology can be used by individuals and should be used by police to help document how police do their jobs.