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OpenMarket: April 2014

  • A Victory for Taxpayers and Equal Protection: Supreme Court Upholds Michigan's Proposal 2

    April 25, 2014 1:08 PM

    Taxpayers of all races pay more when government contracts are doled out based on race, rather than awarded to the lowest bidder. That's one reason why it's great news that the Supreme Court reversed a ridiculous lower court decision claiming that it violates the Constitution for voters to ban racial preferences in state government. In its 6-to-2 decision Tuesday in Schuette v. Coalition to Defend Affirmative Action (BAMN), the Supreme Court overturned a contentious, 8-to-7 ruling by the Sixth Circuit Court of Appeals striking down a provision of the Michigan state constitution that rightly banned racial preferences in government contracts and employment, and in state college admissions.

    That provision (Article I, §26) was added to the state constitution by a 2006 ballot initiative, known as Proposal 2 or the Michigan Civil Rights Initiative, which passed easily with 58 percent of the vote. The Supreme Court's moderate and conservative justices, along with one of the court's four liberals (Justice Stephen Breyer), voted to uphold that provision. Justice Sotomayor, who was appointed by President Obama, dissented, joined by liberal Justice Ruth Bader Ginsburg.

    The Sixth Circuit's ruling, which claimed it violated the Constitution's equal protection clause to mandate that people be treated equally without regard to their race, defied common sense: It is nonsensical to argue that the Equal Protection Clause requires that people be treated unequally. The Sixth Circuit's ruling also conflicted with rulings the California Supreme Court and the Ninth Circuit Court of Appeals upholding a materially-indistinguishable provision added to California's state constitution, known as the California Civil Rights Initiative or Proposition 209. That provision, approved by California voters in 1996, was upheld in 1997 by the Ninth Circuit, and later upheld by the California Supreme Court in 2010 in a 6-to-1 vote.

    The Sixth Circuit’s strange ruling that voters cannot limit racial preferences through ballot initiatives risked harming taxpayers by increasing the cost of government contracts. Even fairly mild government affirmative action programs that do not impose racial quotas nevertheless impose substantial costs on taxpayers. For example, in the Domar Electric case, Los Angeles accepted a bid for almost $4 million to complete a contract rather than the lowest bid of approximately $3.3 million, at a cost to taxpayers of more than $650,000. The lowest bidder was rejected solely because it failed to engage in affirmative action in subcontracting. California’s Proposition 209 later limited this sort of racial favoritism by banning racial preferences, voiding a number of state affirmative-action programs, and thus saving taxpayers millions of dollars.

    Justice Sotomayor's dissent purported to rely on the controversial “political restructuring” doctrine, which holds that shifting a decision on a public policy issue from one level or branch of government to another is sometimes unconstitutional if it disadvantages minorities. (The Cato Institute's Walter Olson discusses the incoherent nature of this doctrine at this link.)

    As Justice Sonia Sotomayor put it in her dissenting opinion, the doctrine applies in cases where the state “reconfigur[es] the existing political process… in a manner that burdened racial minorities." But as law professor Ilya Somin notes, this begs the question, since racial preferences harm racial minorities, such as Asian-American college and magnet-school applicants (who often must meet even higher standards than white applicants to be admitted). Thus, Michigan's ban on racial preferences helped, rather than "burdened," many members of racial-minority groups. Like the Asian American Legal Foundation, which filed briefs in support of Michigan's Proposal 2, I look forward to the day when my Asian niece and nephew are judged by the content of their character, not the shape of their eyes or the color of their skin.

  • CEI Sues National Park Service and Interior Department under FOIA over Government Shutdown Documents

    April 23, 2014 1:47 PM

    Last night, CEI filed suit against the United States Department of the Interior and the National Park Service for failing to produce documents in response to two pairs of Freedom of Information Act requests. Those requests, sent to them way back on October 9, dealt with these agencies' closures of private businesses and privately-run tourist attractions in the 2013 federal government shutdown, and also with their closures of public monuments and spaces, which are often open to the public even when no federal employee is on duty.

    The agencies have neither produced documents, nor set an estimated date for when they will be produced, nor indicated how many documents they might produce or withhold, even though FOIA contains a 20-day deadline for an agency to comply with a FOIA request. They have not provided the basic information that FOIA requires within that deadline, such as telling us how many documents they expect to produce (or, if the documents are exempt from production, how many they will withhold under a valid FOIA exemption), even though that information is required under the appeals court ruling in C.R.E.W. v. F.E.C., 711 F.3d 180, 186 (D.C. Cir.2013).

    During the shutdown in early October, these agencies closed down, or blocked access to, many private businesses that had apparently been allowed to operate in earlier shutdowns under prior Presidents (even as politically-connected businesses were allowed to remain open). After lawyers and legal commentators suggested that these closures of private businesses were illegal departures from past agency practice, I filed FOIA requests seeking to find out which officials were responsible for these improper closures, and how the decision to close them was made. Of all the agencies involved, the National Park Service was probably the worst offender, according to CEI's Myron Ebell. A judge later ruled against the National Park Service’s closure of a state park used by children, and against the U.S. Forest Service's suspension of timber operations.

    The Obama administration's behavior during the shutdown was controversial, to say the least. As part of the so-called "shutdown" (which did not actually shut down most of the government -- most federal workers kept working), it shut down tourist attractions -- even when doing so cost the government more money than leaving them open. It rented costly barricades to keep people out of open-air outdoor monuments that don't need to be manned, and are typically open even when unstaffed (like the World War II Memorial).

    And it sent Park Police to drive people out of privately-run tourist attractions on public land, like the Claude Moore Colonial Farm, endangering tourism-related jobs in the process. On October 2, PJ Media’s Bryan Preston reported that the federal government was “ordering hundreds of privately run, private funded parks to close,” using the government shutdown as an excuse.

  • CEI Podcast for April 23, 2014: Reforming Fannie and Freddie

    April 23, 2014 12:56 PM

    Senior Fellow John Berlau argues that a bill from Senators Tim Johnson and Mike Crapo intended to reform Fannie Mae and Freddie Mac would only make things worse.

  • Driverless Cars, Innovation, and Regulation: Let's Not Mess it Up

    April 23, 2014 8:11 AM
    CEI General Counsel Sam Kazman about to take a spin in Google's self-driving car. (Photo by Marc Scribner) CEI General Counsel Sam Kazman about to take a spin in Google's self-driving car. (Photo by Marc Scribner)

    For the past several years, I've been writing about highly automated vehicles -- widely referred to as driverless cars -- and the huge potential they have in reducing injuries and deaths (over 30,000 Americans die on the roads every year), improving mobility for the disabled and elderly, reducing the drudgery of commuting, and helping the environment... provided policy makers don't mess it up with onerous laws and regulations (see here, here, here, here, here, here, here, and here).

  • Pseudoscience and Clickbaiting Results in Beer Fear

    April 22, 2014 2:45 PM

    There’s a lot of pseudoscience about food out there. From genetically modified crops to organic foods to corn syrup, to preservatives, passionate opinions abound, but well-reasoned, well-researched reporting on the issues is scarce. Normally, I selectively address the more egregious offenses and ignore the rest. But once in a while, an article comes along that is so misinformed, so hyperbolic, and so viral that it cannot be ignored. When such an article maligns one of my favorite food items, beer, I am duty-bound to come to its defense.

    Recently, Organics.org turned a post by the blogger Vani Hari, better known as the “Food Babe,” into the worst kind of clickbait with the sky-is-falling headline, “8 Beers That You Should Stop Drinking Immediately,” which has been making the rounds on social media networks. But rather than exposing any dangers in beer, what Hari does reveal is that she does not understand the brewing process, how additives and ingredients function throughout that process, or how the beer industry is regulated.

    The first warning sign that the Food Babe’s information may be dubious is that one of her main sources was the book, Chemicals Additives in Beer, published by the Center of Science in the Public Interest (CSPI), which has a poor record when it comes to being scientifically sound. As food historian Maureen Ogle noted in her rebuttal (which I highly recommend):

    [T]his one fact set off my alarm bells: She [Hari] relied on information from the Center for Science in the Public Interest. If you’ve read Ambitious Brew, you know that I have zero patience with CSPI. For thirty years, that group has railed against the alcohol industry and lobbied for neo-prohibition. As a source of information, it’s untrustworthy, unreliable, and constantly shows a somewhat shocking disregard for science (weird, given the group’s name).

    Moreover, I couldn’t find a copy of the book anywhere or even a listing that might demonstrate its existence.

  • Victory for Maryland Parents and Consumers: Energy Drink Ban Voted Down

    April 21, 2014 3:55 PM

    A bill that would have banned the sale of energy drinks for minors in Maryland was recently voted down in committee almost unanimously. The bill was introduced after the death of 14-year-old Anais Fournier, which was reportedly linked to the consumption of energy drinks, and several news stories linking energy drinks to an increased number of hospitalizations fueled the panic over energy drinks potential hazards. However, Maryland lawmakers, to their credit, did not rush to legislate on a matter that would affect all Marylanders based on a few anecdotal cases.

    While it’s understandable that parents would want lawmakers to do something to protect their children from potentially hazardous products, legislating based on anecdotal evidence isn’t the answer. In fact, a ban would likely do more harm than good. As Maryland Del. Doyle Niemann (D-Mount Rainier) told me over email, “There may be issues with energy drinks, but I agree that there are limits to how much can and should be done legislatively.”

    On March 15, after hearing the concerns of citizens and business owners in Maryland, the House Economic Matters Committee rejected the bill 22-1. Despite the emotional testimony of the parents of the late Anais Fournier, lawmakers did not seem convinced that a ban was appropriate or that the scientific case against energy drinks is conclusive.

  • Taxable Bitcoins 2: We're Not Gonna Pay it!

    April 21, 2014 1:21 PM

    Reason magazine’s Brian Doherty recently addressed the IRS’s recent announcement that bitcoin transactions are taxable. As I addressed in my last piece, while the IRS may have sought to clarify their taxation process for bitcoins, it has only caused further confusion. I agree with Doherty that this announcement is not detrimental to bitcoin, but there are unresolved issues that need to be considered.

    The plan is for the IRS requires users to self-report their transactions to the IRS; it is easy to see why compliance might be a problem. For a currency based upon subverting government regulations, there will likely be a group of Bitcoin users who choose to avoid payment of taxes to the IRS wherever possible. The question at this point is how likely is it that the IRS will be able to actually enforce taxation on bitcoins.

    This is where the debate gets messy. The block chain, bitcoin’s public ledger, is a record of all transactions that have occurred between bitcoin users. The block chain uses digital wallets as a medium for storing and transferring bitcoins between individuals. It is possible for the IRS to monitor the block chain -- which is publicly available for viewing online -- and discern when a transaction occurs that meets the taxation threshold.

  • CEI’s Battered Business Bureau: The Week in Regulation

    April 21, 2014 11:43 AM

    84 new regulations, from stair-climbing wheelchairs to crustacean irradiation.

  • CEI, Former State Department Officials Defend Freedom of Contract in Supreme Court Case against Argentina

    April 17, 2014 4:11 PM

    [caption id="attachment_74355" align="alignright" width="300"]Argentina President Cristina Kirchner Argentina President Cristina Kirchner[/caption]

    Can a country seeking to welsh on its debts invoke sovereign immunity to evade not just court orders to pay those debts, but also post-judgment discovery aimed at collecting on those judgments? Can it do so to prevent not just discovery directed at it, but also at third-party banks? Most importantly, perhaps, can it do so even though it contractually waived sovereign immunity? The answer is yes, according to Argentina, which is seeking to stiff many of its bondholders. Thankfully, the U.S. Court of Appeals for the Second Circuit disagreed with this attack on property and contract rights in a 2012 decision.

    But amazingly enough, the Obama administration has taken Argentina’s side at the Supreme Court. It is joined by the government of France, which has experienced downgrades in its credit rating due to stubbornly-high government spending under Socialist Francois Hollande that consumes well over half of France’s economy. The willingness of the Obama administration to take Argentina’s extreme position is disturbing given that the Second Circuit’s ruling was unanimous.

    CEI and several former State Department officials have filed an amicus brief asking the Supreme Court to uphold the appeals court’s ruling, and reaffirm the availability of the post-judgment discovery needed to protect property and contractual rights. The former State Department officials include counsel of record John Norton Moore, former Counselor on International Law to the Department of State; Robert F. Turner, former Deputy Assistant Secretary of State for Legislative Affairs; Abraham D. Sofaer, a former federal judge and former Legal Adviser to the Department of State; Professor Malvina Halberstam, former Counselor on International Law to the State Department; and Davis R. Robinson, former Legal Adviser to the State Department. John Norton Moore, who teaches international law and national-security law at the University of Virginia, was extensively involved in drafting the Foreign Sovereign Immunities Act (FSIA) involved in the case. Judge Sofaer was appointed by President Carter to the federal bench in 1979.

  • CEI Podcast for April 17, 2014: Brexit Strategy

    April 17, 2014 10:34 AM

    Iain Murray, CEI's Vice President for Strategy, along with Freedom Association Director Rory Broomfield, won second place Institute for Economic Affairs' Brexit Competition. The goal of the competition is to devise a strategy for Britain's exit from the European Union.

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