Posts tagged ‘Federal Government’

Challenging the Governments Arbitrary Closure of Privately-Funded Parks During the Shutdown

I have not updated this story in a while, but we continue to litigate against the Federal Government over the closure of privately-operated and privately-funded parks on public lands.  The closure is over, obviously, but it is a situation that is very likely to recur and we are attempting to fight this battle now to set a precedent.   The Wall Street Journal's law blog is running an update on the story here.

You can find all my posts from the shutdown here.

Why is the Federal Government Feeding My Account Information to Spam Marketers?

If you signed up for Obamacare, and then suddenly had a ton of spam in your email box trying to sell you stuff tailored to your pre-existing health conditions and other private health information, you would be pissed, right?

In the last two months my email box has been overrun with spam from people try to "help" me re-register for the government contractor data base, like this one:

click to enlarge

 

I am registered merely because I have one tiny contract to clean bathrooms in California and I cannot get paid unless I am in the system.  I checked my settings in the various government systems to confirm that yes, indeed, I had set it to not display my information publicly. But that does not seem to do a bit of good.  Everyone on the planet seems to have my email, my name, and my account expiration dates and CAGE code.  Wonderful.

You Ungrateful Slobs Should Be Thankful That The Federal Government Is Running Up Huge Debt

I know what you are thinking -- in this post title Coyote has engaged in some exaggeration to get our attention.  But I haven't!  Felix Salmon actually says this, in reaction to a group of CEO's who wrote an open letter to the feds seeking less deficit spending.

MW-AR995_debt_f_20120607165649_ME.jpgThere are lots of serious threats out there to the economic well-being and security of the United States, and the national debt is simply not one of them.  Nor is it growing. The chart on the right, from Rex Nutting, shows what’s actually going on: total US debt to GDP was rising alarmingly until the crisis, but it has been falling impressively since then. In fact, this is the first time in over half a century that US debt to GDP has been going down rather than up.

So when the CEOs talk about “our growing debt”, what they mean is just the debt owed by the Federal government. And when the Federal government borrows money, that doesn’t even come close to making up for the fact that the CEOs themselves are not borrowing money.

Money is cheaper now than it has been in living memory: the markets are telling corporate America that they are more than willing to fund investments at unbelievably low rates. And yet the CEOs are saying no. That’s a serious threat to the economic well-being of the United States: it’s companies are refusing to invest for the future, even when the markets are begging them to.

Instead, the CEOs come out and start criticizing the Federal government for stepping in and filling the gap. If it wasn’t for the Federal deficit, the debt-to-GDP chart would be declining even more precipitously, and the economy would be a disaster. Deleveraging is a painful process, and the Federal government is — rightly — easing that pain right now. And this is the gratitude it gets in return!

I seldom do this, but let's take this apart paragraph by paragraph:

There are lots of serious threats out there to the economic well-being and security of the United States, and the national debt is simply not one of them.  Nor is it growing. The chart on the right, from Rex Nutting, shows what’s actually going on: total US debt to GDP was rising alarmingly until the crisis, but it has been falling impressively since then. In fact, this is the first time in over half a century that US debt to GDP has been going down rather than up. 

So when the CEOs talk about “our growing debt”, what they mean is just the debt owed by the Federal government.

Duh.  Of course they are talking about the government deficit and not total deficit.   But he is setting up the game he is going to play throughout the piece, switching back and forth between government debt and total debt like a magician moving a pea between two thimbles.  We can already see the game.  "Look folks debt is not a threat, it is going down", but it is going down only at this total public and private debt number.  The letter from the CEO's made the specific argument that rising government debt creates current and future issues (see: Europe).  Just because all debt may be going down does not mean that the rise of one subset of debt is not an issue.

Here are two analogies.  First, consider a neighborhood where most all the residents are paying down their credit card debt except for Fred, who is maxing out his credit cards and has just taken out a third mortgage.  The total debt for your whole neighborhood is going down, but that does not mean that Fred is not in serious trouble.

Or on a larger scale, take consumer debt.  Most categories of consumer debt are falling in the US.  But student debt is rising alarmingly.  Just because total consumer debt may be falling doesn't change the fact that rising student debt is a serious threat to the well-being of a subset of Americans.

And when the Federal government borrows money, that doesn’t even come close to making up for the fact that the CEOs themselves are not borrowing money

What??  Whoever said that the role of the Federal government is to offset changes in corporate borrowing?  In his first paragraph, he already called the rise in total debt "alarming", and I get the sense that both CEO's and consumers agree and so they have been trying to reduce their debts.  So why should the Feds be standing athwart the private unwinding of an "alarming" problem?    And how does he know CEO's and their corporations are part of this deleveraging?  I see no evidence presented.  Corporate debt is but a small part of total US debt.  Corporations may be a part of this, or not.

In fact, they are not.  Corporate borrowing in the securities market has increased almost every quarter since 2008, such that total corporate bond debt is about 10-15% higher than in 2008 (see third chart here).  And here is total debt to GDP broken down by component  (this is for non-financial sectors) source.

Government debt is basically offsetting the consumer deleveraging.  Since consumers have to eventually pay this government debt off, as they are taxpayers too, then the government is basically flipping consumers the bird, forcing them to take on debt they are trying to get rid of.  Hard working consumers think they are making progress paying off debt, but the joke is on them - the feds have taken the debt on for them, and the bill will be coming in future taxes for them and their kids.

He might argue, "this is Keynesianism."  But is it?  If corporations are actually deleveraging, we still don't know how.  Is it through diverting capital investment to debt repayment (as I think Salmon is assuming) or are they raising capital from other sources and rejiggering the right side of their balance sheets?  And even if this deleveraging is coming at the expense of corporate investment, I thought Keynesians virtually ignored investment or "I" in their calculations  (you remember, don't you, from macro: C+I+G+X-M?).  In fact, if I remember right, "I" is treated as an exogenous variable in the famous multiplier "proof".

Money is cheaper now than it has been in living memory: the markets are telling corporate America that they are more than willing to fund investments at unbelievably low rates. And yet the CEOs are saying no. That’s a serious threat to the economic well-being of the United States: it’s companies are refusing to invest for the future, even when the markets are begging them to.

This is the real howler -- that "markets" are sending a low-interest signal.  Markets are doing nothing of the sort.  The Federal Government, via the Fed, is sending this signal with near-zero overnight borrowing rates and $30-$40 billion a month in money printing that is used to buy up government debt from the market.  If any signal is being sent at all, it is that the Federal Government is main economic priority is continuing to prop up the balance sheet and profitability of major US banks.

Investment is also not solely driven by the price of funds.  There must be opportunities where businesses see returns that justify the spending.  Unlike the Federal government, which is A-OK blowing billions on companies like Solyndra, businesses don't invest for the sake of spending, they invest for returns.  A soft economy combined with enormous government driven uncertainties (e.g. what will be our costs to comply with Obamacare) are more likely to affect investment levels than changes in interest rates.

 Instead, the CEOs come out and start criticizing the Federal government for stepping in and filling the gap. If it wasn’t for the Federal deficit, the debt-to-GDP chart would be declining even more precipitously, and the economy would be a disaster. Deleveraging is a painful process, and the Federal government is — rightly — easing that pain right now. And this is the gratitude it gets in return!

This is where economic thinking has ended up in 2012:  To Salmon, it does not matter where the Federal government spends this money, so long as it is spent.  He never even tries to justify that the government is running up debt in a good cause, because what it spends money on does not matter to him.  For him, the worst possible thing for the economy is for people to spend their money paying down debt.  Spend it on more drone strikes or more Solyndras or more squirrel research -- it does not matter to Salmon as long as the money is used for anything other than to pay down debt.

Here is the bottom line:  Businesses and individuals are trying to reduce their debt.  And many hard-working people think they are being successful at this.  But the joke is on them.  The government is running up trillions in debt in their name, thwarting American's desire to de-leverage.  Mr. Salmon wants us to thank the government for this.  Hah.

All-in-all, this is an awful argument to try to justify Congressional and Presidential fecklessness vis a vis  the budget.

Top Down vs. Bottom Up

I have written any number of times on the technocratic-statist urge to overturn emergent order that is created bottom up in favor of imposing their own top-down vision of how society should run.  The following is from David Mamet via Mathew Shaffer (hat tip Maggies Farm) and is a nice synopsis of this mindset

The problem is that “the Left today is essentially an elitist movement, and it has invested a lot of time and money in the idea that they know better.” Elites have been led to think “by getting the grades, and getting into good schools and think-tanks and government positions that they are fit” to reorder society more rationally. But this requires first demolishing the order produced by the organic processes of tradition, democracy, and markets — the culture. Why are some so susceptible to this fatal conceit? “They get out of elite schools being told nothing but, ‘You’re the best.’” Hubris — a dramatist’s area of expertise.

More good stuff, from the same interview

“There is no secret knowledge. The Federal Government is really the zoning board writ large,” he writes. What does that mean? He explains to me: “Mark Twain famously said, ‘God made the Idiot for practice, and then He made the School Board.’ The zoning board is like that — they’re just a bunch of people with power. Some are good, some are bad. But they gotta be watched like hawks, because power corrupts.” So “secret knowledge” is a Hayekian insight wrapped up like a Talmudic paradox. The secret is there is no secret — no special caste has the knowledge or goodness, inaccessible to the rest of us, to order society. Hence Mamet’s skepticism of technocracy and his preference for order created from the democratic and disaggregated processes of the marketplace.

And here is one more nice quote from Mamet, a while ago in the Village Voice

in the abstract, we may envision an Olympian perfection of perfect beings in Washington doing the business of their employers, the people, but any of us who has ever been at a zoning meeting with our property at stake is aware of the urge to cut through all the pernicious bullshit and go straight to firearms.

Death of the Commerce Clause

A century of Progressive attacks on the Constitution have come to this.  I am just going to quote Radley Balko in full:

"¦.a federal judge has just ruled that the federal government can force me to purchase a product from a private company, under the argument that my not purchasing that product affects interstate commerce.

For those of you who support this ruling: Under an interpretation of the Commerce Clause that says the federal government can regulate inactivity, can you name anything at all that the feds wouldn't have the power to regulate?

And if you can't (and let's face it, you can't), why was the Constitution written in the first place? As I understand it, the whole point was to lay out a defined set of federal powers, divided among the three branches, with the understanding that the powers not specifically enumerated in the document are retained by the states and the people.

But if that set of powers includes everything you do (see Wickard and Raich), and everything you don't do (what Obamacare proponents are advocating here), what's the point in having a Constitution at all?

Raich was bad enough.  In that case the high court said the Feds could regulate home-grown marijuana that was grown and consumed entirely in California because that activity might still affect prices in other states (presumably because Californians could have smoked imported weed if they had not grown their own).  (I can't understand how anyone can call this a "conservative" court when it handed down Raich.  Clarence Thomas wrote in Raich:

Respondents Diane Monson and Angel Raich use marijuana that has never been bought or sold, that has never crossed state lines, and that has had no demonstrable effect on the national market for marijuana. If Congress can regulate this under the Commerce Clause, then it can regulate virtually anything and the Federal Government is no longer one of limited and enumerated powers.

The Federal Government is Working Hard To Shield States From Their Own Irresponsibility

Many states managed to grow state spending in the last decade far faster than inflation and population growth, soaking up every new dime in bubble-generated tax revenue they could.   It may seem like states were forced to make a lot of hard decisions last year, but in fact they were sheltered from really dealing with the full measure of their own fiscal problems by large influxes of Federal "stimulus" money.  As I demonstrated way back in January of 2009, most of the stimulus was actually ear-marked not for the mythical shovel read project, but for "stabilization" of state and federal budgets.  This is a couple of months old, but still applies:

A historic nosedive in state tax collections extended into the third quarter of the year, and only an infusion of federal economic stimulus money has averted widespread program cuts and worker layoffs.
Tax collections from July through September dropped an average of 8.3% from a year earlier in the eight states that release up-to-date monthly tax figures, a USA TODAY survey found. New York's tax collections fell 8.9%, despite an income tax hike earlier this year. States reporting partial third-quarter results showed a similar downward spiral in tax collections, including 13.2% drop in Arizona.

Federal stimulus money has protected states from making big cuts in the number of government workers, in aid to schools or in spending on Medicaid, the health care program for the poor. But most federal stimulus money ends in December 2010.

This is not a new trend, from Tad DeHaven of Cato:

201001_blog_dehaven_tot

According to the Goldwater Institute, over a third of the AZ state budget is federal money.

Where-the-Budget-Comes-From

How can there possibly be any accountability for how this is spent, though it actually is larger than the amount raised by state taxes?  If we want the government to buy us goodies in this state, we should at least pay for them ourselves and not take money from others.  By the way, every time I raise this argument, someone says "well our state pays more federal taxes than it gets back."  First, every state says this so it can't possibly be true in every case.  Second, it's a terrible practice from the standpoint of accountability.

Related, via Matt Welch:

The biggest single national political donor in the country during the 2007-08 election cycle, according to OpenSecrets.org, was the overwhelmingly Democrat-supporting teachers union the National Education Association. What category of worker was the biggest single beneficiary of stimulus spending? Public school teachers. Who, according to Vice President Joe Biden, accounted for 325,000 of the first 640,000 jobs "created or saved." While it's true that teachers are Americans (even my brother), in the vast majority of these cases, the jobs in question weren't "created," just maintained, since it is nearly impossible to fire public school teachers.

Does Anything Exceed the Commerce Clause Nowadays?

A question has been going around on legal blogs -- "Does a Federal Mandate Requiring the Purchase of Health Insurance Exceed Congress' Powers Under the Commerce Clause?"

My answer is:  Nowadays (not in the original intent) is there anything the Feds can do that exceeds current interpretations of the commerce clause?  In Raich, the Supreme Court decided that a product (marijuana) that was grown in state for personal consumption, like tomatoes in your own garden, and was used legally under state law, can still be regulated under the commerce clause.    As Clarence Thomas wrote in dissent:

Diane Monson and Angel Raich use marijuana that has never been bought or sold, that has never crossed state lines, and that has had no demonstrable effect on the national market for marijuana. If Congress can regulate this under the Commerce Clause, then it can regulate virtually anything and the Federal Government is no longer one of limited and enumerated powers

No kidding.

Unfortunately the theory that this personal use in California could somehow affect marijuana pricing in other states (by growing their own, they reduced demand for out of state weed which might affect prices in Arizona -- again similar to an argument that growing your own tomatoes might affect prices in another state) won the day in the Court.   With the Supreme Court accempting this "butterfly effect" argument  (because truly the demand of one person in a national market is like a butterfly flapping its wings in China and affecting a hurricane in the Gulf of Mexico), anything falls under the commerce clause.

Those Enumerated Power Thingies Were So 18th Century

Jonathon Adler argues that Senator Feinstein grossly exaggerated the number of cases where the Supreme Court said the Congress had exceeded the bounds of the commerce clause.  Feinstein said it was dozens of times in the last 10 years, Adler counts about two.  I don't have my own count, but smaller numbers seem right to me -- just look at the extent of activities Congress currently pursues under the banner of the Commerce Clause.   For god sakes, several years ago the Supreme Court ruled that federal marijuana laws trumped state laws based on the commerce clause -- even when the drugs are grown for personal use and don't cross state lines.  As Clarence Thomas wrote in that case in dissent:

Respondents Diane Monson and Angel Raich use marijuana that has never been bought or sold, that has never crossed state lines, and that has had no demonstrable effect on the national market for marijuana. If Congress can regulate this under the Commerce Clause, then it can regulate virtually anything and the Federal Government is no longer one of limited and enumerated powers.

But what I found really depressing in Adler's post was this:

Adding up all of the cases in which the Court found statutes exceeded all of the federal government's enumerated powers, including the sovereign immunity cases, the commandeering cases, and the 14th Amendment cases, in the last twenty years still doesn't get us to the three-dozen-plus cases Feinstein claimed. Add in the federalism-related constitutional avoidance cases, and we're still a ways off.

Given all the expansions of federal and Executive power over the last 10 years, and the hundreds of cases in front of the Supreme Court, the Court has not been able to rouse itself more than a handful of times to declare that the feds have exceeded their powers under the Constitution?  Bummer.

More Auto Bailout Thoughts

I don't think I have ever gotten as much mail from as many different readers as I have received on the auto bailout.  Readers seem fairly unified in their outrage and horror at the prospect.

Via insty:

Nancy Pelosi calls the deal a barber shop, where everybody will take a haircut.

There is already an available process for operating companies that cannot meet their obligations where all the parties take a haircut:  Its called chapter 11.  We have about a zillion man-years of experience with it, in companies great and small.  And it does not take idiotic Senators flashing billions of our tax money to mediate it.

The auto industry is tremendously magnetic for wannabee technocrats in Congress, in large part because in perhaps no other industry is there a bigger gap between what the average American wants to buy and what the country's intelligentsia things they should buy.

But US automakers are failing because they have not been very responsive to customers; they have grown fat and complacent, feeling protected by their monopoly power position; they have consistently failed over decades-long periods to make tough decisions vis-a-vis labor and costs; and they have refused to make real prioritization decisions (GM brand strategy is a good example).  It is therefore hilarious that Congress thinks it can do better, because wouldn't these same traits be high on the list of failings of the Federal Government itself?

And this is funny, if you have not seen it yet.

Michael Lewis on ... Whatever the Hell is Happening on Wall Street

As usual, Michael Lewis is a great and informative read, trying to unravel the whole subprime mortgage / CDS / CDO bundle somewhat for laymen.  The article does not excerpt well, but I would summarize it in saying he identified four mistakes by the financial world.  The first two I would describe as real problems but not really new mistakes -- something similar could have been said about S&L's in the 1980's.  These are:

  1. A lot of subprime loans were issued to people with no freaking hope of repaying them, in an incredible general lowering of underwriting standards.  (we all should remember, though, the government and the media was trumpeting this as good news -- increase in home ownership rates, blah blah blah).
  2. People who bought these securities grossly underestimated the default risks, particularly in the crappiest tranches  (securitized packages of loans are resold in tiers, with a AAA tranche getting first call on any payouts, and the tail end BBB tier getting high interest rates but who takes the first principal losses if the loans default).

    But Lewis highlights two mistakes that are in some sense brand new.  These mistakes were effectively vast increases in leverage that acted as a multiplier for the subprime problem, while simultaneously spreading the problem into the hands of AAA investors who accepted the higher returns without paying too much attention to how they were obtained

  3. Someone started scooping up the BBB tranches from various securities packages, bundled these together, and somehow got a ratings agency to declare that the top 60% tranche of these repackaged dog turds were AAA. 
  4. Credit default swaps, originally insurance policies on loan portfolios, turned into a sort of futures market on subprime mortgage packages.  But, unlike futures markets, say in oil, where the futures trading volume are generally well under the total volumes of the underlying commodity flowing around the world, CDS values grew to as much as 100x the underlying commodity volume (in this case subprime mortgage securities).  CDS's went from a risk-management tool to a naked side-bet.

This is interesting stuff, and it was really only reading this piece that I think I started to understand #4 above (though if readers think I am describing this wrong, let me know).  All of this leads me to a few thoughts:

  • Nothing about this convinces me any of these firms need to be saved or bailed out.  Let them die.  Maybe the guys who rebuild the industry in their place will be smarter and more careful.  The country is going to face a recession whether Wall Street is bailed out or not -- too much (paper) value disappeared from consumer's net worths (or their perceptions of their net worth) for that not to be the case.  I lived through Texas in the 1980s when the S&L industry went bust almost to the last institution.   Nearly every one of the top 10 banks in the state went into FDIC recievership. 
  • I have seen people observe that this is an indictment of capitalism because so many people made such bad mistakes.  Sure.  No one said capitalism is a gaurantee against stupidity, or even fraud.  The difference is that the consequences of said stupidity and fraud have to be less in a free market system than if the same people had the power of cersion via government.  In a free market, these guys will fail and be wiped out and get washed away.  The people who they drag down may consider themselves to be innocent, but they participated of their own free will -- if they did not understand what they were doing, that is their problem.  In a statist system, you still have mistakes like this, but they are infinitely more catastrophic, as the stakes in play are often higher.  And the people who made the mistakes are never punished financially, because they are in charge of the machinery of state  (or friends of those in charge).  They make damn sure the power of the state is used to make everyone else pay for their mistake, kind of like ... this $700 billion bailout.
  • Lewis seems to have a hypothesis that the main system change that allowed all this to happen was the shift in ownership structure from partnerships to publicly-held corporations.  And certainly you do get some added agency risks with this, though I find this explanation a bit shallow.  I do think that folks with money are going to approach Wall Street "experts" and rating agencies with a lot more skepticism for a long time, and that can't be a bad thing.
  • The opportunity really exists for someone smart to start a brand new rating agency from scratch.  The only reason the current ones won't get wept away is simply that there are not many alternatives right now.  Warren Buffett should partner with someone well-connected with the new administration (Maybe Larry Summers, since there is no way he will survive a confirmation hearing with his men-are-from-large-standard-deviations-women-are-from-narrow-distributions baggage.)
  • Lewis is unfair in depicting all the mortgage lenders as predatory.  I am sure some were cheats, but remember that as far as Congress, the Administration, the Federal Government, and the media were concerned, these lenders making subprime loans were doing God's work -- they were expanding home ownership and bringing the dream of owning a home to poor people historically redlined, blah blah blah.  It is only with hindsight that we demonize them for doing the wrong thing -- at the time, absolutely everyone on in the country was pushing them to do exactly what they did.  This is also why Democrats struggle to suggest a resposive regulatory package to this whole mess, as any real reform would have to address minimum underwriting standards, which in turn would have the direct effect of limiting lending to the poor, an outcome with which no Democrat wants to be associated.

Update:  Just to be clear, as I have said before, this is about half of what happened.  There are really two stories, and usually authors focus on one or the other.  Story 1 is the steps taken by the Federal Government  (Fannie, Freddie, Community Reinvestment Act, mortgage interest deduction, low interest rates) that fueled the housing bubble and the expansion of credit to questionable borrowers.  It is described here, among other places.  Story 2 is the one above, how private firms decided not only to purchase these questionable loans made on bubble-inflated assets, but to leverage these assets up to staggering levels. 

Dumbest Thing I Have Read Today

Apparently from the lips of Barack Obama, via the WSJ and Tom Nelson:

"I want you to think about this," Barack Obama said in Las Vegas last
week. "The oil companies have already been given 68 million acres of
federal land, both onshore and offshore, to drill. They're allowed to
drill it, and yet they haven't touched it "“ 68 million acres that have
the potential to nearly double America's total oil production."

Wow.  I would not have thought it possible to blame government restrictions on drilling, which the oil companies have decried for years, on the oil companies themselves.  But apparently its possible. 

1.  Just because the Federal Government auctions an oil lease, it does not mean that there is oil there.  And if there is oil there, it does not mean the oil is recoverable economically or with current technology.  Does this even need to be said?

2.  The implication is that oil companies are intentionally not drilling available reserves (to raise prices or because they are just generally evil or whatever).  But if this is the case, then what is the problem with issuing new leases?  If oil companies aren't going to drill them, then the government gets a bunch of extra leasing money without any potential environmental issues.  Of course, nobody on the planet would argue Obama's real concern is that the new leases won't get drilled -- his concern is that they will get drilled and his environmental backers will get mad at him.

Dumbest Thing I Have Read Today

Apparently from the lips of Barack Obama, via the WSJ and Tom Nelson:

"I want you to think about this," Barack Obama said in Las Vegas last
week. "The oil companies have already been given 68 million acres of
federal land, both onshore and offshore, to drill. They're allowed to
drill it, and yet they haven't touched it "“ 68 million acres that have
the potential to nearly double America's total oil production."

Wow.  I would not have thought it possible to blame government restrictions on drilling, which the oil companies have decried for years, on the oil companies themselves.  But apparently its possible. 

1.  Just because the Federal Government auctions an oil lease, it does not mean that there is oil there.  And if there is oil there, it does not mean the oil is recoverable economically or with current technology.  Does this even need to be said?

2.  The implication is that oil companies are intentionally not drilling available reserves (to raise prices or because they are just generally evil or whatever).  But if this is the case, then what is the problem with issuing new leases?  If oil companies aren't going to drill them, then the government gets a bunch of extra leasing money without any potential environmental issues.  Of course, nobody on the planet would argue Obama's real concern is that the new leases won't get drilled -- his concern is that they will get drilled and his environmental backers will get mad at him.

Can't Anyone Reality Check Numbers?

I am constantly frustrated with the media's inability to reality check the numbers they publish.  In many cases, just a few seconds thought would tell them that the numbers make no sense.

Today's example actually comes from a "meth-is-death" web site which is run by the Tennessee state attorneys-general association and is linked prominently from the Federal Government's anti-drug web site  (Hat tip to Reason).  Here are their numbers, copied right from the site:

  • 1 in 7 high school students will try meth.
  • 99 percent of first-time meth users are hooked after just the first try.
  • Only 5 percent of meth addicts are able to kick it and stay away.
  • From the first hit to the last breath, the life expectancy of a habitual
    meth user is only 5 years.

So 14.3% (1 in 7) try meth, 99% of those who try are hooked, and 95% of those hooked stay hooked, and all of those hooked die in five years.  So .143 x .99 x .95  or 13.45% of all kids are dying on average by the age of 23.  Wow.  There must be a really huge conspiracy out there to cover up all these deaths. Given that there are about 17,000,000 high school age kids, that means that in the next 5 years or so nearly 2.3 million of them are going to die.   And adults who run anti-drug programs wonder why kids don't take their warnings seriously. 

Maybe Raich Lets Congress Fix Kelo

I wrote before that I thought the definition of interstate commerce in Raich was crazy, but maybe there is an upside.  Under this ridiculously broad definition of interstate commerce (where growing marijuana in your backyard for persona consumption was called interstate commerce), couldn't a real estate development with tenants who are multi-state corporations also qualify?

To this end, Eugene Volokh writes that Congress is already considering legislation to control eminent domain for private development in the aftermath of Kelo:

Sen. Cornyn (R-TX) Proposes Limits on Eminent Domain:

Sen. Cornyn is introducing a federal bill (S. 1313, "The Protection of Homes, Small Businesses, and Private Property Act of 2005") that would bar "economic development" takings:

(a) . . .  The power of eminent domain shall be available only for public use.

(b) . . .  In this Act, the term "public use" shall not be construed to include economic development.

(c) . . . This act shall apply to (1) all exercises of eminent
domain power by the Federal Government; and (2) all exercises of
eminent domain power by State and local government through the use of
Federal funds.

Part C is in there to help it pass constitutional muster, but maybe Raich makes this unnecessary.

PS- I am mostly kidding here - I in no way want to condone Raich.

So Much for Federalism and the Commerce Clause

I tend to be a pragmatic, rather than a dogmatic, federalist.  What I mean by that is that I support federalism for the pragmatic reason that it tends to slow statism, rather than a dogmatic belief that federalism is somehow morally superior.  Generally, federalism has been good for this country, as it has provided a check to states that go nuts on taxation and over-regulation.  The exodus of businesses from the Northeast in the 60's and 70's and from California more recently are examples of this effect at work, as citizens vote with their feet for the regulatory regime they prefer.

The recent decision on medial marijuana, where the Supreme Court ruled 6-3 that federal marijuana laws trump state medical-marijuana statutes seems to be another nail in the federalism coffin.  One can tell immediately that the ruling is all about federalism (rather than drugs) when you have the spectacle of the three most conservative judges supporting state legalization laws and the most liberal judges ruling for continued marijuana illegality under federal law.  Again reading my handy pocket Constitution (courtesy of Cato), it is hard for me to find where the feds have purview over regulating California home-grown pot smoked in California.  By accepting the argument below, the Supreme Court has basically ruled that the feds can pretty much regulate intra-state commerce, since you can probably make a similar argument in any case:

lawyers for the U.S. Justice Department argued to the Supreme Court
that homegrown marijuana represented interstate commerce, because the
garden patch weed would affect "overall production" of the weed, much
of it imported across American borders by well-financed, often violent
drug gangs

By the way, think about that for a minute.  They are arguing that home-grown weed would "affect" the inter-state commerce of "violent drug gangs".  How would it affect it?  It would reduce their commerce!  So the feds are claiming purview over home-grown pot because it would, what?  Unfairly reduce the inter-state trade of violent drug gangs?

Clarence Thomas makes the point succinctly that accepting this argument is the end of the distinction between inter- and intra-state commerce:

Respondents Diane Monson and Angel Raich use marijuana that has never
been bought or sold, that has never crossed state lines, and that has
had no demonstrable effect on the national market for marijuana. If
Congress can regulate this under the Commerce Clause, then it can
regulate virtually anything and the Federal Government is no longer
one of limited and enumerated powers.

Is it just me, or does this Supreme Court seem all over the place in its rulings?  Maybe you constitutional scholars out there can figure it out.

Update:  More from Reason

More thoughts:  The left complains that the right is trying to create a theocracy via the Supreme Court.  The right argues that it just wants to protect constitutional limits on government, which the left wants to exceed.  I have been and still am suspicious of some conservative judges on the court, but I must say that the way the votes fell in this case certainly hurts the "theocracy" argument.  I would start to believe if it wasn't for the fact that in the next case, if recent history is any guide, everyone will likely reverse their positions again.

Washington State is Grabbing from the Feds

By Federal law, U.S. Federal Government lands and property are exempt from state and local property taxes, just like sales to the U.S. Government are exempt from state sales taxes.  This means that, for example, the feds don't have to pay property taxes to Wyoming for the buildings and improvements in Yellowstone National Park.

Most states may sulk about this but they live with it.  However, a few of the most tax-avaricious states, including California and Washington, have found partial way around this. 

I just got my "Leasehold Excise Tax Return for Federal Permit or Lease" from the state of Washington.  What the heck is this?  First, some background.  My business runs campgrounds under concession contract with the US Forest Service in Washington State.  These concession contracts are legally like leases, in that I lease the facilities for a percentage of sales payment in return for running them for-profit.  Washington State can't charge property taxes on the campground itself, since its Federal property, so they charge a steep tax on the rent we pay to the Federal Government.  In Washington, the tax this year is 12.84% of the rent payed.

Yes, that's right.  The state only charges this special tax for rents payed to the US Government. No other rents get taxed.  The tax exists for no reason other than to get around the limitations on taxing the US Government's property.

If asked, Washington would piously state that, oh, we aren't taking any money from the feds, we are taking it from private entities.  Yes and no.  Yes, I as a private entity, I am paying it.  But, given how I bid for these leases, the state tax clearly comes right out of the Feds hands.  When I bid this project, I figured out what rent I could pay the government, and then backed out how much I would have to pay Washington State and bid the lower sum to the Feds.  In this case, Washington State is very clearly taking money right out of the US Government's pocket.

And for what?  Washington State provides no services or utilities to the campground.  The US Forest Service provides the fire protection, its own law enforcement officers, its own water and sewer systems, and its own roads.  There are no residents on the property, so no one associated with the property is using schools or other services.  And, because of sky-high sales and lodging taxes in Washington (from 10-12.5% of sales for camping), the properties are already contributing a ton to state coffers.