According to Paul Krugman, the government shutdown amounts to a potentially big libertarian experiment. 

With nine departments and multiple agencies closed, maybe for months, the New York Times columnist and Nobel laureate envisages a coming test of whether the country can live without the Food and Drug Administration, the Small Business Administration and farm subsidies. 

So are those of us at Cato who believe in the abolition of these programs celebrating? Not quite. 

As the vast majority of the U.S. population go about their daily lives, barely noticing that 25 percent of federal discretionary spending has been paused, it’s certainly possible many will wonder why debt is being racked up for programs that have no noticeable effect on their well-being. Who knows, many employees, businesses and farms may also reconsider the wisdom of placing their livelihoods at the whims of the political process. 

Better still, the shutdown may bring attention to these otherwise rarely-scrutinized programs. If major columnists continue identifying Cato as proponents of scrapping things such as farm subsidies and small business cronyism, linking to our research on the damaging economic, political, and social consequences of existing provisions, the shutdown could serve a useful public education role too! 

But, the truth is, most libertarians aren’t cheering current events because shutdowns appear not to change much in regards the size and scope of government in the long term, yet bring chaos, ill-feeling and uncertainty in the short. 

Markets are powerful precisely because they allow people to interact in voluntary ways to fulfil wants and needs. Necessity, as they say, is the mother of invention. 

Libertarians are indeed confident that, as in countries such as New Zealand, scrapping agricultural subsidies would deliver a more efficient industry, taxpayer savings, and a bigger economy. 

But it’s obvious, as Krugman acknowledges, that temporary suspension of promised support is not an environment conducive to farmers making long-term crop or farm ownership decisions, private companies banding to form market-based food safety certification agencies, or small businesses sourcing new finance. 

Yes, economic actors will take steps to mitigate the effects of disruption. But knowing government will eventually reopen, there is little to no incentive for the new institutions to develop or businesses and farms to undertake the structural change we would see if government absented from these roles. Instead, businesses and individuals are temporarily crippled in their forward planning and paralyzed by the uncertainty promises made to them being broken. 

The natural priority for those farms, businesses and federal employees right now is to lobby successfully for the government to reopen and their payments to start flowing again. Hence the newspaper stories we see already about their difficulties, indicating precisely the diffuse costs yet concentrated benefits associated with much government spending. 

That doesn’t mean libertarians are any less supportive of removing government from these activities. In fact, as Chris Edwards shows, a host of other areas likely to be noticeably affected by a sustained shutdown – security screening at airports, air traffic control, and the management of national parks – are better managed in other countries with more private sector involvement. If the shutdown brings attention to this, then great. 

Overall though, libertarians are fully aware that for the real policy experiments we desire, the public and/​or politicians must be convinced of the necessity or desirability for permanent policy change in a market-based direction. The best chance for success with that is in an environment where those affected can adjust in an orderly manner, and replacement private-sector institutions have time to develop. 

Krugman knows it is disingenuous to suggest that the current chaos is some libertarian policy experiment. But as some Republicans do make the case that the programs above are vital for the health of the economy, and libertarians continue to make the case for their abolition, perhaps he will finally cease lumping Republicans and libertarians together in his columns.

President Trump’s proposed border wall would cut across nearly a thousand miles of privately owned land, so to build this project, the administration would need to use eminent domain to seize the land—something that the president is eager to do. Aside from the unpleasantness of taking people’s property without their consent, federal eminent domain use comes with it a particularly obnoxious component: the government can take the land but not provide just compensation until years later. New legislation would stop this practice.

As I wrote in 2017:

Right now, when Border Patrol wants to take someone’s land, they send them a letter offering them a nominal low sum of money for their land and threatening to file condemnation proceedings against them if they don’t accept it.… [But] under the eminent domain statute, the federal government can seize property almost as soon as it files a condemnation proceeding—as soon as the legal authority for the taking is established—then they can haggle over just compensation later.

It’s called “quick take.” Quick take eminent domain creates multiple perverse incentives for the government. 1) It can quickly take land, even when it doesn’t really need it, and 2) it has no real incentive to compromise or work with the land owner on compensation. The owner’s bargaining power is significantly diminished. The federal government already possesses the property. This means that for years, people who are subject to a border wall taking go without just compensation.

An NPR analysis of fence cases found that the resolved cases took more than 3 years to resolve. In many other cases, the process took more than a decade for a court to determine just compensation, and some cases are still pending more than 12 years later. Unfortunately, the Supreme Court has determined that this “quick take” eminent domain does not violate the 5^th amendment requirement that no “private property be taken for public use, without just compensation.” The reasoning is that as long as the person will eventually get compensation, the taking is constitutional.

The awful component of this process is that, in order to challenge the taking, the property owner must not accept the offered payment. But the border wall will go up on their land just the same. Meanwhile, they have to fight in court without getting the compensation that they deserve. Many people cannot even afford to challenge the taking for this reason alone.

Today, Rep. Justin Amash (R‑MI) introduced the Eminent Domain Just Compensation Act to deal with just this issue. “It is unjust for the government to seize someone’s property with a lowball offer and then put the burden on them to fight for what they’re still owed,” Rep. Amash said in a statement. “My bill will stop this practice by requiring that a property’s fair value be finalized before DHS takes ownership.”

It makes this reform by amending Section 103 of the Immigration and Nationality Act (8 U.S.C. 1103), which details the powers of the Secretary of Homeland Security. Current law provides that:

The [Secretary of Homeland Security] may contract for or buy any interest in land, including temporary use rights, adjacent to or in the vicinity of an international land border when the [Secretary] deems the land essential to control and guard the boundaries and borders of the United States against any violation… When the [Secretary] and the lawful owner of an interest identified pursuant to paragraph (1) are unable to agree upon a reasonable price, the [Secretary] may commence condemnation proceedings pursuant to section 3113 of title 40.

The Eminent Domain Just Compensation Act would amend this provision by adding that: “the Government may not take any land prior to the issuance of a final judgment pursuant to the proceedings under section 3113 of such title.” This language forecloses the opportunity for the Trump administration to seize land quickly for the president’s unnecessary, ineffective, and costly border wall without first fully compensating the owners. 

divThe Wall Street Journal reports that Facebook has consulted with conservative individuals and groups about its content moderation. Recently I suggested that social media managers would be inclined to give stakeholders a voice (though not a veto) on content moderation policies. Some on the left were well ahead in this game, proposing that the tech companies essentially turn over content moderation of “hate speech” to them. Giving voice to the right represents a kind of rebalancing of the play of political forces. 
divI argued earlier that looking to stakeholders had a flaw. These groups would be highly organized representatives of their members but not of most users of a platform. The infamous “special interests” of regular politics would thus come to dominate social media content moderation which in turn would have trouble generating legitimacy with users and the larger world outside of the internet. 
divBut another possibility exists which might be called “pluralism.” Both left and right are organized and thus are stakeholders. Social media managers recognize and seek advice from both sides about content moderation. But the managers retain the right of deciding the “content” part of content moderation. The groups are not happy, but we settle into a stable equilibrium that over time becomes a de facto speech regime for social media. 
divA successful pluralism is possible. A lot will depend on the managers rapidly developing the political skills necessary to the task. They may be honing such skills. Facebook’s efforts with conservatives are far from hiring the usual suspects to get out of a jam. Twitter apparently followed conservative advice and verified a pro-gun Parkland survivor, an issue of considerable importance to conservative web pundits, given the extent of institutional support for the March for Our Lives movement. Note I am not saying the Right will win out but rather the companies may be able to manage a balanced system of oversight. 
divBut there will be challenges for this model. 
divSpending decisions by Congress are often seen as a case of pluralist bargaining. Better organized or more skillful groups get more from the appropriations process; those who lose out can be placated with “side payments” to make legislation possible. Overall you get spending bills that no one completely likes, but everyone can live with until the next appropriations cycle. (I know that libertarians reject this sort of pluralism, but I not discussing what should be but rather what is as a way of understanding private content moderation). 

divTransparency will not help matters. The Journal article mentioned earlier states: 

divMurkiness has its value! In this case, it allows candid discussions between the tech companies and various representatives of the left and the right. Those conversations might build trust between the companies and the groups from the left and the right and maybe even, among the groups. The left might stop thinking democracy is threatened online, and the right might conclude they are not eventually going to be pushed off the platforms. We might end up with rules for online speech that no one completely likes and yet are better than all realistic alternatives. 

div 

Welcome to the Defense Download! This new round-up is intended to highlight what we at the Cato Institute are keeping tabs on in the world of defense politics every week. The three-to-five trending stories will vary depending on the news cycle, what policymakers are talking about, and will pull from all sides of the political spectrum. If you would like to recieve more frequent updates on what I’m reading, writing, and listening to—you can follow me on Twitter via @CDDorminey. 

1. “Trump, Heading to the Border, Suggests He Will Declare and Emergency to Fund Wall,” Michael Tackett. The most pressing story of this week is undoubtedly the continued government shutdown, and President Trump’s threat to declare a state of emergency. This would allow the president to bypass Congress and the process of authorization and appropriation to instead use military funds to begin construction on a southern border wall. The money would draw from accounts that have already been earmarked for other urgent needs, like military construction. 
2. “A Shut Down Government Actually Costs More Than an Open One,” Jim Tankersley. Every day that this government shut down continues, it costs taxpayers more money in the long run. A government shut down is not like when a household goes on a self-imposed temporary spending ban. The government still needs to pay contractors and furloughed workers once they return to work—in some instances with the accrual of interest or fees on outstanding payments.
3. “Shutdown’s economic damage: $1.2 billion a week,” Victoria Guida. The government shut down is also a drag on the economy because 800,000 federal workers don’t get paid, they restrict individual spending that would otherwise be contributing to the economy. President Trump’s Chief Economist estimates the cost to be as much as $1.2 billion every week that the government remains closed and workers remain furloughed. Private contractors that won’t recieve payment on contract work and other lost business contributes to this figure. 
4. Depending on how long it lasts, this shut down could also impact those on food stamps, leave new parents in the lurch, and have an outsized impact on veterans who make up to 25 percent of the workforce in some government agencies. 

After a successful inaugural offering in 2018, the Center for Monetary and Financial Alternatives at the Cato Institute is pleased to announce that Alternative Money University – our 3-day academic workshop for students interested in monetary economics – is coming back in July 2019.

As followers of Alt-M know well, now is an exciting time to study topics of monetary economics and policy. After years of unconventional monetary policy, the Federal Reserve and other central banks are continuing policy normalization agendas, including the reduction of historic balance sheets, while concurrently managing a moderation in economic growth. Moreover, real-time experiments in monetary economics are playing out in the form of cryptocurrencies such as Bitcoin, stablecoins, and more. Such developments mean that a grasp on monetary history, the theory and practice of monetary policy, and the workings of alternative monetary arrangements is more important than ever.

Alternative Money University will help 30 qualified students to develop such an understanding by participating in a series of seminars taught by leading scholars in the field. Along with a special keynote address by John Taylor, Mary and Robert Raymond Professor of Economics at Stanford University and the George P. Shultz Senior Fellow in Economics at the Hoover Institution, this year's seminars will include:

• “The Evolution of Money and Banks,” taught by George Selgin, Director of Cato’s Center for Monetary and Financial Alternatives and Professor Emeritus of Economics at the University of Georgia.
• “Private Currencies: Past, Present, and Future,” taught by Lawrence H. White, Professor of Economics at George Mason University and Senior Fellow at the Cato Institute.
• “Theoretical Underpinnings of Market Monetarism,” taught by David Beckworth, Director of the Monetary Policy Program at the Mercatus Center at George Mason University and host of the Macro Musings podcast.
• “The Place of Monetary Institutions in Monetary Theory,” taught by Randall Wright, Ray B. Zemon Professor of Liquid Assets at the University of Wisconsin School of Business.
• “Monetary Policy in a Post-Crisis World,” taught by Scott Sumner, Ralph G. Hawtrey Chair of Monetary Policy at the Mercatus Center at George Mason University and Professor Emeritus at Bentley University.

By the end of the 3-day workshop, students will be better equipped to evaluate current monetary policy events as they unfold, to think critically about existing monetary arrangements, and, ultimately, to contribute themselves to the field of monetary economics.

Students in or entering their last year of undergraduate or beginning years of graduate studies are invited to apply. Successful applicants will be chosen on the basis of their academic records and demonstrated interest in monetary economics. Those chosen to take part will attend free of charge with hotel and travel expenses covered by the Cato Institute.

If you wish to apply, or to learn more about the program, visit www.cato.org/amu.  Applications are open until January 31, 2019.

Each year thousands of small and large businesses, non-profits, and organizations are hit with drive-by ADA claims, typically batch-produced affairs in which a complainant out of the blue claims to have found something not fully accessible to disabled users about the target’s operations and goes on to negotiate a settlement that includes ample attorneys’ fees. Because ADA requirements are both obscure and voluminous and even compliance experts do not agree among themselves how much accommodation counts as enough, potential violations can be found at most businesses. While the ADA is a national law, much of the mass filing of accessibility complaints goes on under state laws that piggyback or expand on the federal version, often with added features enhancing damages or attorney’s fee entitlements. 

It has been hard to get state-level relief from the depredations of the filing mills, since lawyers and disabled-rights activists can make for a formidable lobbying combination. But a piece of legislation just signed by Gov. John Kasich in Ohio, and an unrelated ruling in the California state courts, at least offer tiny rays of hope. 

Ohio’s HB 271 provides that in order to collect automatic attorneys’ fees under state accessibility law, a complainant must notify the business concerned, which then has 15 business days to respond and 60 days to remedy the violation.” The law, which goes into effect in March, is itself a bit of a compromise: it excludes housing discrimination claims, and provides that even a complaint filed without notice or opportunity to correct can still collect fees if a judge finds such payment appropriate. A similar bill on a national scale passed the U.S. House of Representatives last February but went nowhere in the U.S. Senate, and is likely to muster less support in the new House. 

In California, meanwhile, a state court has ruled that the distinctively harsh Unruh Act, which awards automatic damages in the thousands of dollars each to prevailing civil rights complainants whether or not they can prove any injury to themselves, does not apply as a matter of law to complaints against websites. Because of ongoing uncertainty about whether the ADA applies to websites, defendants across the country have been deluged with web accessibility lawsuits in recent years; if the ruling sticks, they will at least be spared the extra-high damages of the California version. 

Earlier today, Cato sued the Securities and Exchange Commission in federal court challenging the SEC’s policy of imposing perpetual gag orders on settling defendants in civil enforcement actions. The clear point of that policy is to prevent people with the best understanding of how the SEC uses its vast enforcement powers from sharing that knowledge with others. But silencing potential critics is not an appropriate use of government power and, as explained in Cato’s complaint, it plainly violates the First Amendment’s protections of free speech and a free press.

The case began when a well-known law professor introduced us to a former businessman who wanted to publish a memoir he had written about his experience being sued by the SEC and prosecuted by DOJ in connection with a business he created and ran for several years before the 2008 financial crisis. The memoir explains in compelling detail how both agencies fundamentally misconceived the author’s business model—absurdly accusing him of operating a Ponzi scheme and sticking with that theory even after it fell to pieces as the investigation unfolded—and ultimately coerced him into settling the SEC’s meritless civil suit and pleading guilty in DOJ’s baseless criminal prosecution after being threatened with life in prison if he refused.

The author now wants to tell his side of the story, and Cato wants to publish it as a book—but both are prevented from doing so by a provision in the SEC settlement agreement that forbids the author from “mak[ing] any public statement denying, directly or indirectly, any allegation in the [SEC’s] complaint or creating the impression that the complaint is without factual basis.” This provision appears to be standard not only in SEC settlements, but with the CFTC, the CFPB, and possibly other regulatory agencies as well. Thus, when the federal government unleashes its immense financial regulatory power in a civil enforcement action, the price of settling—as the vast majority of cases do—is a perpetual gag order that prohibits the defendant from ever telling his or her side of the story.

This is a wildly inappropriate use of government power, and it is directly contrary to the spirit of accountability and transparency that permeates our founding documents. Indeed, the Sixth Amendment guarantees the right to a speedy and public trial precisely to ensure that when the government accuses people of wrongdoing it must place its cards faceup on the table for all to see. Today, however, 97 percent of federal criminal convictions are obtained through plea bargains, and a similar percentage of SEC civil enforcement actions are settled instead of adjudicated. This means that, contrary to the constitutional prescription for a public airing of the government’s case, most enforcement actions—both civil and criminal—unfold behind closed doors and under the radar. And it is increasingly clear that the process by which the government extracts confessions, plea deals, and settlement agreements from defendants in those cases can be incredibly (and even unconstitutionally) coercive. It is at this coercive dynamic that a significant portion of Cato’s criminal justice work takes aim, in order to restore the system envisioned by the founders and enshrined in the Constitution.

Thus, the more adamant the government is about preventing us from knowing what tools and techniques are being brought to bear against those whom it accuses of misconduct, the more important it is for us to find out. Perpetual gag orders like the ones routinely imposed by the SEC, CFTC, and CFPB as a condition of settlement are utterly antithetical to principles of good government and, not coincidentally, to the First Amendment’s protections of free speech and a free press as well.

Accordingly, we at Cato have teamed up with our friends at the Institute for Justice, which represents Cato in its challenge to the SEC’s unconstitutional policy of demanding perpetual gag orders as a condition of settlement in civil enforcement actions. Together, we aim to strike down not only the specific gag order at issue in this case, but all perpetual gag orders in all existing civil settlements with federal agencies—and to terminate the government’s policy of silencing those whom it accuses of wrongdoing.

It is often said that sunlight is the best disinfectant. The SEC and its cohorts are about to get a healthy dose of each.