June 23, 2015 10:43 AM
Ten years ago today, the U.S. Supreme Court issued a 5-4 decision upholding the City of New London, Connecticut’s “right” to condemn Connecticut homeowners’ properties, transfer them to a state-created entity called the New London Development Corporation, which would then transfer those properties to a private developer of a planned mixed-use redevelopment project aimed at supporting an adjacent Pfizer research facility. (Land of the free, right?) At issue was the interpretation of the Fifth Amendment’s Takings Clause “public use” standard.
The Court relied primarily on three previous cases involving the “public use” standard:
Berman v. Parker (1954)—This case upheld the right of municipalities to declare entire areas blighted, even if the parcel in question isn’t blighted. It also accepted Washington, D.C.’s argument that the area condemnation was necessary to prevent future blight. An all-around terrible decision.
Hawaii Housing Authority v. Midkiff (1984)—This case involved the redistribution of land titles in Hawaii. When the state moved to seize the properties, 49 percent of land in Hawaii was controlled by government and 47 percent was controlled by 72 private owners. The Court failed to recognize the central problem with land distribution in Hawaii at the time: almost half of the property was controlled by government, which created massive real estate market distortions—in addition to Hawaii’s odd economic history. While Justice Sandra Day O'Connor wrote the majority opinion in Midkiff, she also wrote a scathing dissent in Kelo, where she regretted her broad language in the Midkiff ruling that opened the door for a terrible opinion like Kelo.
Ruckelshaus v. Monsanto Co. (1984)—This case involved chemical industry trade secrets. While it was solely about intellectual property, the Court argued that this case was relevant because it dealt with public use in a purely economic context. The enormous distinctions between intellectual property and real property were lost on the majority in Kelo.
The result was the majority definitively watering down “public use” to a weak “public purpose” standard, leaving us with a “public purpose” standard that can be satisfied in the following situation: the government condemns your house in order to transfer it to a private developer, which the government expects the property will be put to higher use under the planned redevelopment and thus will increase its tax base. Think that couldn’t happen in the U.S.? Well, it did and was supported by the majority of the Supreme Court in Kelo.
June 23, 2015 6:55 AM
Many people believe U.S. companies should export as much as possible, and buy imports only when necessary. Adam Smith called this balance-of-trade obsession “mercantilism,”acidly noting in The Wealth of Nations that “in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer.”
Or, as Milton Friedman put it more recently, “imports are the goods and services we get to consume without having to produce; exports are the goods and services we produce, but don’t get to consume.”
Right now, the U.S. runs a current account deficit, popularly called the trade deficit, of $40.9 billion. That means Americans are importing more than they export. Trade balancers would instead prefer a current account surplus. A major part of the Export-Import Bank’s mission is to move the trade balance in that direction.
As it turns out, there is an easier way to shift America’s balance of trade towards exports that does not require an Export-Import Bank at all. First, fill a container ship with American-made goods. Then, send it out to sea. Once it leaves U.S. territorial waters, the goods count as exports in official statistics.
Before the ship reaches port overseas, have the crew sink the ship (and escape safely, of course). As far as U.S. trade balance statistics are concerned, the best place for all those goods is the ocean floor. That way they cannot be exchanged for imports.
The point is that exports are not automatically a good thing, and the Export-Import Bank’s mission in this regard is misguided.
June 22, 2015 4:05 PM
(Note: What follows is a hyperlinked version of the introductory paragraphs to the chapter of the same name in the new Fraser Institute/Mercatus Center book What America’s Decline in Economic Freedom Means for Entrepreneurship and Prosperity, edited by Donald J. Boudreaux.)
When policymakers neglect federal regulation, they ignore arguably the greatest element of governmental influence in the United States’ economy and perhaps in society itself. One cannot prove it, but it would be no great surprise to find the regulatory enterprise to constitute a greater bulk than federal spending. As a policy concern, regulation merits attention like the $18 trillion national debt receives. This essay provides a roadmap for focusing attention on regulation.
June 22, 2015 10:34 AM
One plank of the Export-Import Bank’s mission is to give financing to companies that might not be able to get it from the private sector. But another plank requires Ex-Im to keep its risk in check by only making or backing loans it is confident will be paid back. Both planks sound reasonable on their own, but in practice they contradict each other. This makes it difficult, if not impossible, for Ex-Im to be an effective contributor to the financial system.
If private sector banks are unwilling to lend to a company, it is probably because those banks don’t expect to get their money back. Prudence dictates that Ex-Im also stay away from such a risky investment, despite its mandate to provide financing where the private sector won’t.
A different company may look like a solid investment, with very little risk of default. This company certainly meet’s Ex-Im’s risk management criteria, and would qualify for Ex-Im financing. But this company will also have very little trouble securing private sector financing, leaving no market failure for Ex-Im to correct.
At the very least, the Export-Import Bank needs to refine its mission in a way that is logically consistent. Its current dual mandate simply will not do. Better, Ex-Im should close up shop and leave risk evaluation to companies that have their own money at risk, rather than ours.
June 22, 2015 9:40 AM
The Federal Register passed the 35,000-page mark with new regulations covering everything from food additives to chimpanzees.
On to the data:
- Last week, 81 new final regulations were published in the Federal Register, after 64 the previous week.
- That’s the equivalent of a new regulation every two hours and 4 minutes.
- So far in 2015, 1,446 final regulations have been published in the Federal Register. At that pace, there will be a total of exactly 3,064 new regulations this year, which would be several hundred fewer rules than the usual total of 3,500-plus.
- Last week, 1,542 new pages were added to the Federal Register, after 1,752 pages the previous week.
- Currently at 35,437 pages, the 2015 Federal Register is on pace for 75,078 pages.
- Rules are called “economically significant” if they have costs of $100 million or more in a given year. Eleven such rules have been published so far this year, none in the past week.
- The total estimated compliance cost of 2015’s economically significant regulations ranges from $1.39 billion to $1.46 billion for the current year.
- 119 final rules meeting the broader definition of “significant” have been published so far this year.
- So far in 2015, 255 new rules affect small businesses; 35 of them are classified as significant.
June 19, 2015 2:07 PM
When government has a lot of money and power, it is natural for people to curry its favor. It is just as natural for those wielding money and power to use it for personal gain. The Export-Import Bank provides numerous real-world examples of this human frailty. Last year, The Wall Street Journal reported that four Ex-Im employees have been removed or suspended in recent months, “amid investigations into allegations of gifts and kickbacks.”
Johnny Gutierrez, an Ex-Im employee, was one of the four, and recently pleaded guilty in court to accepting $78,000 in bribes from an executive of Impex Associates, a Florida-based construction equipment manufacturer that has received Ex-Im financing on multiple occasions. The other cases involve two “allegations of improperly awarding contracts to help run the agency,” and another employee who accepted gifts from an Ex-Im suitor. A spokesman responded to the allegations by drily noting that "the Export-Import Bank takes extremely seriously its commitment to taxpayers and its mission to support U.S. jobs."
June 19, 2015 12:36 PM
The 2010 Dodd-Frank Act effectively restricted U.S. business’s ability to obtain minerals from the war-torn nation of the Congo and surrounding countries. That caused massive unemployment and hunger in the Congo, and huge job losses in mining communities. By driving out Western buyers, it gave Chinese firms a virtual monopoly on some Congolese minerals.
Dodd-Frank imposed costly auditing and reporting requirements on companies that use minerals such as tin, tungsten and gold, requiring them to report on their use of minerals not just from the Congo, but also peaceful neighboring countries like Tanzania, which are effectively punished merely for being next to the Congo. At least 6,000 companies are affected, including Apple, Ford, and Boeing, costing them billions of dollars.
African smugglers have benefited from Dodd-Frank, notes a recent article in Politico, as “clean miners” in the Congo, the world’s poorest country, simply can’t afford to comply with Dodd-Frank’s certification requirements.
As Politico reported,
the boycott prompted by the Dodd-Frank Act put thousands of eastern Congolese miners out of work. The World Bank has estimated that 16 percent of Congo’s population is directly or indirectly engaged in informal mining; in North Kivu in 2006, mining revenue provided an estimated two-thirds of state income. But revenues to the provincial government’s coffers fell by three-quarters in the four years before 2012, in part because of what officials called the “global criminalization of the mining sector” of eastern Congo, as encapsulated in laws like Dodd-Frank. The state’s loss is the smugglers’ gain: When the official routes are closed, the clandestine trade picks up the slack.. . .
Despite Dodd-Frank and the spate of efforts to curb conflict mineral violence in the early 2000s, it appears unlikely that the certification schemes will ever reliably cover the whole of eastern Congo’s mining trade. Clean miners have been squeezed, as the retreat of Western buyers has let Chinese comptoirs gain a near-monopoly on Congolese coltan, allowing them to dictate prices.
The efforts to impose some control on the mineral trade . . . .does so at the cost of weakening the already precarious livelihoods of eastern Congo’s diggers and porters and their dependents.
This harm was completely predictable. As Walter Olson noted earlier,
Economic sanctions, when they have an effect at all, tend to inflict misery on a targeted region’s civilian populace and often drive it further into dependence on violent overlords. That truism will surprise few libertarians, but apparently it still comes as news to many in Washington, to judge from the reaction to this morning’s front-page Washington Post account of the humanitarian fiasco brought about by the 2010 Dodd-Frank law’s “conflict minerals” provisions. According to reporter Sudarsan Raghavan, these provisions “set off a chain of events that has propelled millions of [African] miners and their families deeper into poverty.” As they have lost access to their regular incomes, some of these miners have even enlisted with the warlord militias that were the law’s targets.
June 18, 2015 2:23 PM
Complete with cowboy boots, wagon wheels, lamps made out of whiskey bottles, and wanted posters of the most “notorious” U.S. regulators—if you’re talking to a CEI staffer—this year’s annual dinner embodied the theme: Bourbon and BBQ Bash.
Dinner guests were not disappointed with this year’s dinner movie production inspired by some of our favorite western movies, featuring some of CEI’s best work, and of course, starring some of CEI’s most beloved staffers.
Watch the 2015 CEI dinner movie, “The Magnificent 7,” below:
June 18, 2015 2:17 PM
Keynote address by business and nonprofit leader Carly Fiorina delivered at the Competitive Enterprise Institute’s annual dinner on June 11, 2015.
Excerpts from text as prepared for delivery:
When I was a little girl, my mother told me: “What you are is God’s gift to you. What you make of yourself is your gift to God.” My mother and father would encourage me always to work hard, to aim high, to find and make the most of my gifts. I didn’t feel gifted as a young girl or a young woman, but my mother’s words seemed like both a promise and a challenge.
I would start my career as a secretary in a little nine-person real estate firm. One day, two men who worked there approached my desk and said: “We’ve been watching you and we think you can do more than type and file. Do you want to learn about business?”
They saw potential and possibilities in me and so I came to see these things in myself.
Whether it is in business or in charity or in any other human endeavor, my experience tells me that human potential is limitless. Usually, it is underutilized or worse, squandered and wasted. It is the only limitless resource we have in this world, and it is all we need to solve every problem.
Last week I was at a fundraising event where donors brought their children: some sons and many, many daughters. At the end of the event, a little girl approached me. She asked: “Have you ever wished you were someone else?” I answered: “I used to sometimes when I was younger, but now I know that I am who God intended me to be. Have you ever wanted to be someone else?” She looked away and said: “I don't know.” She was 10 years old and at that age “I don't know” means “Yes.” So I reassured her: “You are exactly who God wants you to be. Don't wish to be someone you are not. Find out who you are.”
It has been 95 years since women got the right to vote. 50 years since the Feminine Mystique. 16 years since I was named the first female CEO of a Fortune 50 company.
There are only 23 female CEOs in the S&P 500. Fun fact: there are more CEOs named John than there are women. Among those same companies, there are only 19 women for every 100 Board members. 84 percent of women strongly agree that women can lead just as effectively as men. Only 43 percent of men agreed with the same statement. Companies headed by male executives receive 98 percent of all venture capital funding in Silicon Valley. That’s $1.88 billion dollars—compared to just $32 million for women. Recent studies from the NYU Child Study Center suggest that a girl's self-esteem peaks at age 9 and declines from there.
I believe it is time to have a conversation about the state of women in America. Women represent half of all human potential. Women around the world continue to be subjugated and marginalized. Here in this country where women have more opportunities than anywhere else on earth, we still can make our country a better place by fully tapping the potential of every woman.
Today, women hold nearly 48 percent of all US jobs, up from 37 percent 40 years ago. By 2011, this relatively small increase in the workforce accounted for one-quarter of our GDP. In other words, more than a stunning three and a half trillion dollars was generated by the increase in women’s participation in the economy: greater than the GDP of Germany and more than half of the GDP of both China and Japan. Additionally, companies with more women on their boards outperform their competitors.
In other words, the facts are in and the data is clear. Realizing the potential of women isn’t just the right thing to do—it’s the smart thing to do.
June 18, 2015 12:03 PM
Greece’s neglected payment to the International Monetary Fund on Friday, June 5, has caused escalated tensions in the negotiation process between creditors and Greek Prime Minister Alexis Tsipras. As the pressure to settle on a deal increases, Greece decided last week that they would take the option, posed to them by the IMF, to settle all four of their June loan repayments at the end of the month. This has spurred unrest for the people of Greece, as well as its creditors and Troika.
After the announcement that Greece would be missing its scheduled repayment, Tsipras took the stage to address the Greek Parliament on the latest deal proposed by European Commission President Jean-Claude Juncker. The deal would provide Greece with a €7.2 billion bailout, which would require Greece to undergo major economic reforms. Tsipras notably stated that the deal proposed by the European Commission was “absurd” and labeled it as “irrational, blackmailing.” The European Commission officials were surprised by the complete rejection of their proposed deal.
Soon after, on June 8, President Obama announced in a press conference that, “What [a deal] is going to require is Greece being serious about making some important reforms, not only to satisfy creditors, but more importantly, to create a platform whereby the Greek economy can start growing again.” As pressure builds for Tsipras and Greek creditors, the world waits anxiously for one of them to cave.
It appeared that Tsipras had no intention of conceding any ground when Athens proposed another deal, on June 9, insistent upon debt relief. However, creditors came back with a stone-walled response: debt relief was off the table, and furthermore, that Greece must accept major economic reforms.
Tsipras seems to be testing the European Commission’s patience; the term “paperology” has been coined by the Commission to describe the Greek Prime Minister’s actions.