PolicyReport · Controlling for the unemploy-ment rate, federal spending increased by about one-half percent of GDP for each one percentage point decline in the rela-tive level of

by Joyce Lee Malco lm

The withdrawal of a basic right of Eng-lishmen is having dire consequences inGreat Britain, and should serve as anobject lesson for Americans. Today, in

the name of public safety, the British gov-ernment has practically eliminated the citi-zens’ right to self-defense. That did not hap-pen all at once. The people were weaned fromtheir fundamental right to protect themselvesthrough a series of policies implemented oversome 80 years. Those include the strictest gunregulations of any democracy, legislation thatmakes it illegal for individuals to carry anyarticle that could be used for personal pro-tection, and restrictive limits on the use offorce in self-defense. Britons have been taught,in the words of a 1992 Economist article, thatsuch policies are “a restraint on personal lib-erty that seems, in most civilized countries,essential to the happiness of others.” Theauthor contrasted those policies with “Amer-ica’ s vigilante values.”

The result of that tradeoff of rights forsecurity has been disastrous for both. ManyAmericans, either unaware of, or uncon-cerned with, the perverse impact of Britishpolicy, insist that our public safety demandsa similar sacrifice. But an examination ofthe experience of the British people offersa cautionary tale. A few examples under-score the situation in Britain today.

A homeowner who discovered two rob-bers in his home held them with a toy gunwhile he telephoned the police. When thepolice arrived they arrested the two men, andalso the homeowner, who was charged withputting someone in fear with a toy gun. An

Joyce Lee Malcolm is professor of histo-ry at Bentley College and the author of sixbooks, including To Keep and Bear Arms:The Origins of an Anglo-American Rightand Guns and Violence: The English Expe-rience. In 2003–04 she is a James Madi-son Fellow at Princeton University.

elderly woman who scared off a gang of youthsby firing a cap pistol was charged with thesame offense. The government is now plan-ning to make toy guns illegal.

The BBC offers this advice for anyonein Britain who is attacked on the street:You are permitted to protect yourself witha briefcase, a handbag, or keys. You shouldshout “Call the Police” rather than “Help.”Bystanders are not to help. They have beentaught to leave such matters to the pro-fessionals. If you manage to knock yourattacker down, you must not hit him againor you risk being charged with assault.

In 1999 Tony Martin, a 55-year-old farmerliving alone in a dilapidated house, woke tothe sound of shattering glass as two bur-glars broke in. Martin had been robbed sixtimes before, but like 70 percent of ruralEnglish villages, his had no police presence.He crept downstairs in the dark and shot atthe burglars, killing one and wounding thesecond. Both had numerous prior convic-tions. Martin was sentenced to life in prison

PolicyReportMarch/April 2004 Vol. XXVI No. 2

In This Issue

Continued on page 15

Self-Defense: An Endangered Right

At Cato’s December 12 conference, “Global Warming: The State of the Debate,” MichaelSchlesinger of the Climate Research Group at the University of Illinois and climatologist PatMichaels of the University of Virginia and the Cato Institute debate the consequences of globalwarming in the coming century.

Stossel in New York and D.C., p. 7

Niskanen on taxes and spending 2Barnett: Restoring the Lost Constitution 3Cato events, from FDR to nanotech 4Free speech and campaign finance 8Studies on Iraq, trade, high technology,

and the budget messes in New Yorkand Washington 12

Cato Calendar 13Sound policies for developing countries 14The science and economics of

global warming 18Cato’s e-mail newsletters 19To be governed . . . 20

FPO

problem. President George W. Bush, for example, has proposedand won the approval of most congressional Republicans for largeincreases in federal spending for agriculture, defense, education,homeland security, and Medicare, and he has yet to veto a singlespending bill. As a consequence, real federal spending during theBush administration is now growing at the fastest rate since theJohnson administration. And Congress has yet to act on the expen-sive energy and transportation bills or Bush’s proposal for a baseon the moon and manned exploration of Mars!

The political discipline necessary to control federal spending,especially without a tax increase, must involve a sustained com-mitment to principle. Members of the administration and Con-gress must increasingly ask why, rather than only how or howmuch. Does the Constitution authorize the program or activity?Is there any reason that the federal government is better qualifiedto perform the activity than state and local governments or the

private sector? Is the proposed federal activ-ity the best of alternative ways to accom-plish a shared goal? Is the marginal bene-fit of the federal activity higher than themarginal cost to the economy of the tax-es necessary to finance the activity? A neg-ative answer to any of those questionsshould be sufficient to deny, reduce, or elim-inate the activity, whether it is already fund-ed or merely proposed. A focus on domes-tic discretionary spending other than forhomeland security will not be enough. Suchspending is now only 18 percent of totaloutlays and includes most of the spend-ing that benefits specific districts that isespecially valued by members of Congress,particularly in an election year.

Above all, keep in mind that the sizeof government is best measured by the lev-el of spending and regulation. Reducingtax revenues only shifts part of the burden

of government spending to future generations.

—William A. Niskanen

For nearly three decades, manyconservatives and libertarianshave argued that reducing fed-eral tax rates, in addition to

increasing long-term economic growth,would reduce the growth of federalspending by “starving the beast.” Thisposition has been endorsed, amongothers, by Nobel laureates MiltonFriedman and Gary Becker in WallStreet Journal columns in 2003.There are two problems with thisposition.

First, this position is not con-sistent with the evidence, at least

beginning in 1981. In a professional paper published in 2002, Ipresented evidence that the relative levelof federal spending over the period 1981through 2000 was coincident with the rel-ative level of the federal tax burden inthe opposite direction; in other words, therewas a strong negative relation between therelative level of federal spending and taxrevenues. Controlling for the unemploy-ment rate, federal spending increased byabout one-half percent of GDP for eachone percentage point decline in the rela-tive level of federal tax revenues. Althoughnot included in the sample for this test, thefirst three years of the current Bush admin-istration were wholly consistent with thisrelation.

What is going on? The most direct inter-pretation of this relation is that it repre-sents a demand curve—that the demandfor federal spending by current votersdeclines with the amount of this spend-ing that is financed by current taxes. Future voters will bear theburden of any resulting deficit but are not effectively represent-ed by those making the current fiscal choices. One implication ofthis relation is that a tax increase may be the most effective pol-icy to reduce the relative level of federal spending. On this issue,I would be pleased to be proven wrong.

Second, acceptance of the “starve the beast” position has ledtoo many conservatives and libertarians to be casual about the sus-tained political discipline necessary to control federal spendingdirectly and to succumb to the fantasy that tax cuts will solve this

2 • Cato Policy Report March/April 2004

Chairman’s Message

“Starve the Beast” Does Not Work

❝ Acceptance of the‘starve the beast’position has led toomany conservativesand libertarians to becasual about the sus-tained political disci-pline necessary to con-trol federal spending.❞

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March/April 2004 Cato Policy Report • 3

Barnett: Restoring the ConstitutionCourts have eviscerated clauses that limit government power

Cato Book

Cato Policy Report is a bimonthly review published by the CatoInstitute and sent to all contributors. It is indexed in PAISBulletin. Single issues are $2.00 a copy. ISSN: 0743-605X.©2004 by the Cato Institute.•Correspondence should beaddressed to Cato Policy Report, 1000 Massachusetts Ave.,N.W., Washington, D.C. 20001. •WEBSITE: www.cato.org or call202-842-0200 or fax 202-842-3490.

CATO POLICY REPORTDavid Boaz....................................................................... EditorDavid Lampo ...................................................Managing EditorTimothy B. Lee..............................................Editorial AssistantPatricia Bullock...........................................Production Designer

CATO INSTITUTEEdward H. Crane..........................................President and CEOWilliam A. Niskanen ...................................................ChairmanDavid Boaz .........................................Executive Vice PresidentTed Galen Carpenter ...V. P., Defense & Foreign Policy StudiesRay Dorman..................................................V. P., DevelopmentJames A. Dorn ........................................V. P., Academic AffairsWilliam Erickson.................V. P., Finance and AdministrationRoger Pilon ....................................................V. P., Legal AffairsRichard Pollock ....................................V. P., Communications

Lesley Albanese..................................Director, External Affairs Virginia Anderson...................................Director, Web ServicesDoug Bandow .......................................................Senior FellowPatrick Basham.....................................................Senior FellowMichael F. Cannon......................Director, Health Policy StudiesSusan Chamberlin..........................Director, Government Affairs

Clyde Wayne Crews Jr...................Director, Technology StudiesChris Edwards............................Director, Fiscal Policy StudiesJagadeesh Gokhale................................................Senior FellowDaniel T. Griswold......Associate Director, Trade Policy StudiesMarie Gryphon...................................Education Policy AnalystGene Healy ............................................................Senior EditorLinda Hertzog..........................................Director, ConferencesDaniel J. Ikenson.......................................Trade Policy AnalystElizabeth W. Kaplan...................................... Senior CopyeditorTerry Kibbe ............................................Director, DevelopmentMark Lampman..........................................................ControllerDavid Lampo ...........................................Publications DirectorRobert A. Levy ...............Senior Fellow, Constitutional StudiesBrink Lindsey...........Director, Center for Trade Policy StudiesAaron Lukas..............................Center for Trade Policy AnalystTimothy Lynch ..................................Director, Criminal JusticeMark K. Moller.......................................................Senior FellowNeal McCluskey...................................Education Policy AnalystTom G. Palmer......................................................Senior FellowCharles V. Peña.......................Director, Defense Policy StudiesAlan Peterson.....................................................Director of MISEvans Pierre.......................................Director of BroadcastingChristopher Preble..................Director, Foreign Policy StudiesAlan Reynolds .......................................................Senior FellowClaudia Ringel ...........................................................CopyeditorJacobo Rodríguez ............................Financial Services AnalystDavid Salisbury ...........Director, Ctr. for Educational FreedomJohn Samples ...............Director, Ctr. for Representative Govt.Susan Severn................................................Director, MarketingKoleman Strumpf ..............................................Visiting ScholarJohn Tamny............................................Director, Development

Michael Tanner...............Director, Health and Welfare StudiesJerry Taylor........................Director, Natural Resource StudiesAdam Thierer..............Director, Telecommunications StudiesMarian Tupy.................Asst. Director, Global Economic LibertyPeter Van Doren.............................................Editor, RegulationIan Vásquez ....................Director, Global Economic LibertyParker Wallman.................................................Art DirectorMichael Wright.................................Director, Public AffairsJenifer Zeigler........................................................Policy Analyst

James M. Buchanan......................Distinguished Senior FellowEarl C. Ravenal .............................Distinguished Senior Fellow

Randy E. Barnett ...................................................Senior FellowJames Bovard ......................................Associate Policy AnalystLawrence Gasman...........Senior Fellow in TelecommunicationsRonald Hamowy...................................Fellow in Social ThoughtSteve H. Hanke......................................................Senior FellowJohn Hasnas..........................................................Senior FellowPenn Jillette ......................................Mencken Research FellowDavid B. Kopel.....................................Associate Policy AnalystChristopher Layne ...........Visiting Fellow, Foreign Policy StudiesPatrick J. Michaels....Senior Fellow in Environmental StudiesStephen Moore .....................................................Senior FellowP. J. O’Rourke ..................................Mencken Research FellowGerald P. O’Driscoll Jr...........................................Senior FellowJosé Piñera.............................Co-chair, Social Security ChoiceJim Powell.............................................................Senior FellowRonald Rotunda ............Senior Fellow, Constitutional StudiesTeller.................................................Mencken Research FellowCathy Young .................................................Research Associate

The Constitution found at the Nation-al Archives is not the same as the Con-stitution currently being enforced asthe law of the land, argues Cato sen-

ior fellow Randy Barnett in Restoring theLost Constitution: The Presumption of Lib-erty. The original document, crafted by theFounders to create a government of limitedpowers, has been gradually rewritten by ajudiciary intent on preserving the pretextof constitutional government while ignoringits substantive restrictions on state power.

In a wide-ranging work of constitution-al scholarship, Barnett rejects “the consentof the governed” as a basis for constitutionallegitimacy. Echoing 19th-century scholarLysander Spooner, he argues that unanimousconsent would be impossible in a nation thesize of the United States and that anythingless cannot create a moral obligation onthe minority that withholds its consent.But he offers an alternative theory: a con-stitution is legitimate and binding in con-science to the extent that it protects thenatural rights of those under its jurisdiction.

On this foundation, Barnett builds acomprehensive theory of constitutionalinterpretation, arguing that the judiciary

went off the rails when it began ignoringthe clear limits on government power embod-ied in the Constitution. The scheme of enu-merated powers intended to limit the pow-ers of the federal govern-ment was killed by expan-sive interpretations of theNecessary and Proper Clauseand of the CommerceClause. Meanwhile, the lim-itations on state powerfound in the FourteenthAmendment were evis-cerated by a series of NewDeal–era decisions thatgave states virtually unlim-ited powers to legislateaway any rights notexplicitly listed in the Billof Rights. The Foundersintended to create islandsof government power ina sea of liberty, but the courtshave instead given us islands of liberty—embodied in the Bill of Rights and enforcedat the whims of the Supreme Court—in asea of government powers.

The Founders’ scheme of limited gov-

ernment took more than a century to unrav-el, and the lost Constitution is unlikely tobe restored overnight. But there have beenrecent movements in that direction. In 1995

the Supreme Court handed downthe Lopez decision, thefirst since the New Dealto declare that Congresshad overstepped its author-ity under the CommerceClause. In the 2003Lawrence v. Texas deci-sion, the Supreme Courttwice cited Cato’s amicusbrief in holding that thedefendants’ right to libertywas infringed by the Texassodomy law. These are smallsteps to be sure, but it is heart-ening that for the first timein decades courts are show-ing a genuine interest in thelost Constitution.

Restoring the Lost Constitution, pub-lished by Princeton University Press, is avail-able in hardcover for $32.50. It can be pur-chased in bookstores, at www.catostore.org,or by calling 800-767-1241. ■

that Roosevelt’s economic policies were inef-fective but asserted that his wartime lead-ership nevertheless made him a great pres-ident. The event was aired several times onC-SPAN’s Book TV.

◆ December 9: The overzealous enforce-ment of anti-discrimination law poses athreat to civil liberties, said author DavidBernstein at a Cato Book Forum for hisbook, You Can’t Say That! The GrowingThreat to Civil Liberties from Antidis-crimination Laws. In their drive to erad-icate every trace of discrimination fromAmerican society, federal bureaucrats haveconvinced the courts to neglect free speech,freedom of association, and other rightsordinarily protected by the Constitution.Courts, Bernstein argued, have erred whenruling that fighting discrimination is a“compelling state interest” sufficient tooverrule the protections found in the Billof Rights. John Leo of U.S. News & WorldReport agreed with Bernstein’s thesis andpointed out that too often “the indictmentis the conviction.” That is, the mere accu-sation of discrimination is enough to ruinreputations and blackmail firms into pay-ing large settlements.

◆ December 10: Two authors spoke outagainst the Bush administration’s abusesof civil liberties at a December 10 CatoBook Forum. Philip B. Heymann, formerdeputy U.S. attorney general and authorof Terrorism, Freedom, and Security, said

◆ December 3: The conventional wisdomthat Franklin D. Roosevelt rescued Ameri-ca from the Great Depression deserves athorough rethinking, argued Cato seniorfellow Jim Powell, author of FDR’s Folly:How Franklin D. Roosevelt and His NewDeal Prolonged the Great Depression, ata Cato Book Forum. In fact, in 1933 and1935 the New Deal probably strangled nas-cent recoveries in their cradles. FDR hikedtaxes, imposed new regulatory burdens onbusiness, restricted industrial and agricul-tural output, and broke up the largest andmost diversified—and therefore most sta-ble—banks. Columnist Michael Barone,author of Our Country: The Shaping ofAmerica from Roosevelt to Reagan, agreed

that the September 11 attacks signaled asea change in the nature of terrorism as anew breed of terrorists focused their effortson achieving high body counts rather thanmerely attracting world attention to theircause. The phrase “war on terrorism,” Hey-mann argued, fails to distinguish amongthe vastly different types of terrorist threats,ranging from ordinary car bombs, to long-running bombing campaigns, to high-pro-file spectacles like the September 11 attacks.James Bovard, author of Terrorism andTyranny, blasted the Bush administrationfor dragging its feet on anti-terrorism meas-ures prior to September 11, for passing theprivacy-violating USA Patriot Act, and forgiving the false impression that Iraq wascomplicit in the September 11 attacks.

◆ December 11: At a Cato City Seminar inSilicon Valley, “Nanotechnology: The Mon-ey, Science, and Politics of the ‘Next BigThing,’” experts debated the future of thisemerging field and the government’s rolein it. Eric Drexler, chairman of the Fore-sight Institute, argued that funding shouldbe directed at research on molecular assem-bly, which could form the foundation foran explosion of new nanotechnology prod-ucts. Kevin Ausman of Rice University madea case for government-funded researchon the basic science and environmentalimpacts of nanotechnology. Neil Jacob-stein, chairman of the Institute for Mole-cular Manufacturing, and Jennifer Fonstadof the venture capital firm Draper FisherJurvetson focused on the commercial oppor-tunities for nanotechnology, as well as basicresearch, and contended that governmentfunding has a role in supplementing theavailable venture capital. Cato’s WayneCrews pointed out that government spend-ing tends to be directed at large, wastefulpork-barrel projects. In addition, the harm-ful environmental consequences of nan-otechnology are likely to be more severe ifgovernment-funded research is shieldedfrom the liability to which private busi-nesses are ordinarily subjected.

◆ December 12: Two Cato experts exam-ined the good, the bad, and the ugly in theSarbanes-Oxley corporate governance reformlaw at a Cato Hill Briefing, “The State of

Cato Events

Eight Cato Briefings on Capitol HillSeminars on civil liberties, nanotechnology, immigration, and Iraq


Regulation magazine edi-tor Peter Van Dorenexplains the economics ofelectricity at a Hill Brief-ing on December 16.

Author David Bernsteinand columnist John Leodiscuss Bernstein’s book,You Can’t Say That! TheGrowing Threat to Civil Lib-erties from Antidiscrimina-tion Laws, at a December9 Book Forum.

Corporate Governance: A Retrospectiveon Sarbanes-Oxley,” and concluded thatthe bad and the ugly predominate. AlanReynolds pointed out that the law focus-es almost exclusively on mandating newprocesses and new reporting requirements,which will make running a corporationmore expensive but will be unlikely to facil-itate the detection of determined fraud.William Niskanen offered a survey of theacademic literature on corporate gover-nance, which shows little evidence that thereforms mandated in Sarbanes-Oxleyimprove the accountability of corporateboards or management. A genuine reformwould involve reviving the market for cor-porate governance, which would, he argued,increase the clout of shareholders and makehostile takeovers of poorly managed firmsviable.

◆ December 12: At a Cato Conference,“Global Warming: The State of the Debate,”climate experts debated the state of the artof the science and economics of globalwarming. Panelists emphasized that pre-dictions of catastrophic outcomes fail toaccount for human ingenuity. Given thathuman beings will have a century to pre-pare, they noted, even a large temperatureincrease is likely to be quite manageable.

◆ December 16: Peter Van Doren, editorof Cato’s Regulation magazine, discussedthe economics of the electricity market ata Cato Hill Briefing, “What Is the Role forMarkets in Electricity?” Electricity, heargued, presents a hard case for advocatesof free markets, because the United Stateshas never had a free market in electricity.Electricity poses other challenges too: elec-tricity requires real-time matching of sup-ply and demand, and the electricity grid asit exists today is a giant commons. Thosecharacteristics make the consequences ofbotched regulatory changes dire, as can beseen from the 2000 California energy cri-sis and the blackouts in the Northeast in2003. Nevertheless, Van Doren argued, thebenefits of market reforms would be sub-stantial. Of most benefit would be the debutof real-time pricing, in which energy con-sumption at peak times would cost morethan at other times of the day.


December 16: At a Cato Policy Forum, “TheUN Deadline for a New Iraqi Government:Progress, Problems, and Prospects,” expertsdebated how best to deal with the fractious mul-tiethnic environment in Iraq. Donald Devine ofthe American Conservative Union was cheeredby the news that the United States had delayedthe introduction of direct democracy. Majority-limiting institutions such as the rule of law, theseparation of powers, and federalism are need-ed before democracy can be successful, he

said. The Heritage Foundation’s John Hulsmanproposed a loose confederation of Iraq’s threeethnic groups as the optimal arrangement, giv-en the stark differences and historical animosi-ties among the Shia, Sunni, and Kurdish factionsin Iraq. Col. Kenneth Allard (ret.) urged theadministration not to bite off more than it couldchew and emphasized the need for an endur-ing commitment to rebuilding the country. Cato’sCharles Peña disagreed and argued that, with

Continued on page 6

Diane Ravitch, author ofThe Language Police, dis-

cusses political pressureson the textbook adoptionprocess at a January 12

Policy Forum televised byC-SPAN.

John Stossel signscopies of Give Me aBreak after a CatoBook Forum on Janu-ary 27. Cato presi-dent Ed Crane kib-itzes.

Cato’s Chris Prebleand Chuck Peña wel-

come Col. KennethAllard (USA, ret.) to

a December 16 Poli-cy Forum on the

future of U.S.involvement in Iraq.

a political commitment from the White House,it is still feasible to have the troops home to theirfamilies by next Christmas.

◆ December 17: At a Cato Hill Briefing, “TheCollapse of Campaign Finance Regula-tion,” Cato’s John Samples attacked theSupreme Court’s McConnell v. FEC deci-sion, handed down a week earlier, whichupheld key provisions of the McCain-Fein-gold campaign finance law. The deep divi-sions over the case, decided by a 5-4 vote,reflect a serious disagreement about the prop-er role of government in society, Samplessaid. For the majority, spending limits werea minor infringement of individual libertycompared with the imperative to cleanse thepolitical process of corruption. In contrast,the dissenting opinions reflected a more tra-ditional suspicion of state power over thepolitical process. In effect, Samples concluded,the decision defers to Congress in strikinga balance between reducing perceived cor-ruption and protecting speech. That is alarm-ing, he said, because Congress—whose mem-bers are frequently the targets of attack adsfunded by political donations—is hardly animpartial arbiter.

◆ December 18: The situation in Iraq is badand unlikely to improve, and the UnitedStates would be wise to withdraw its troops

before the quagmire gets worse, arguedCharles Peña and Patrick Basham at a CatoHill Briefing, “Iraq: Struggling Democra-cy or Rising Terrorism?” Peña reviewedthe arguments against going to war in thefirst place and noted that those argumentsare now even stronger, given the adminis-tration’s inability to locate any weapons ofmass destruction. The Iraq war, he empha-sized, is a dangerous distraction from thereal threat to American security—Al Qae-da. Basham gave a grim assessment of thechances for Iraqi democracy, arguing thatdecades of cultural development will beneeded before the Iraqi public will be capa-ble of sustaining a functioning liberal democ-racy.

◆ December 29: At a luncheon for his bookPutting Humans First: Why We Are Nature’sFavorite, author Tibor Machan discussedhis claim that the concept of rights doesnot apply to animals. There was a spiriteddiscussion of what moral obligations humanbeings might have toward animals.

◆ January 9: At a Cato Hill Briefing, “HowFree Trade Promotes Democracy,” DanGriswold argued that the benefits of freetrade extend far beyond boosting economicgrowth. By creating a prosperous middleclass and opening closed societies to out-side influences, he noted, free trade createsinternal pressures for political and socialliberalization. Comparing Cato’s own Eco-nomic Freedom of the World with FreedomHouse’s Freedom in the World, Griswoldfound that open economies tend to accom-pany free political systems, while closedeconomies tend to accompany repressivepolitical systems. As examples, he notedthat in Mexico, Chile, Taiwan, and SouthKorea, economic reforms led to economicgrowth, which subsequently spurred a tran-sition to democracy.

◆ January 12: At a Cato Policy Forum tele-vised by C-SPAN, “A Textbook Problem:The Politics of Textbook Adoption,” twoscholars blasted the practice of so-called text-book adoption, in which committees in cer-tain states choose acceptable textbooks forevery school in the state. The adoptionprocess, contended Diane Ravitch, author

of The Language Police: How PressureGroups Restrict What Students Learn, caus-es textbook makers to self-censor their prod-ucts in anticipation of adoption committeeobjections, creating bland, formulaic books.Frank Wang detailed how his former employ-er, Saxon Publishers, was excluded from thetextbook adoption process because it refusedto adopt the “checklist mentality” that adop-tion committees require. Both scholars agreedthat the adoption process should be scrapped.Stephen Driesler of the Association of Amer-ican Publishers defended the process, argu-ing that textbooks are purchased with pub-lic funds, and so public oversight is neededin textbook selection.

◆ January 16: Participants at the Cato Pol-icy Forum “President Bush’s ImmigrationProposal: Too Much, Too Little, or AboutRight?” considered the pros and cons ofthe president’s proposal for a temporaryworker program. White House policy expertMargaret Spellings laid out the benefitsof the president’s plan, pointing out thatthe U.S. economy is dependent on the esti-mated eight million illegal immigrants inthe country and so a realistic plan is need-ed to bring those workers out of the legalshadows. Frank Sharry of the NationalImmigration Forum argued that strongerworker protection and an easier route topermanent residence and citizenship wouldbe an improvement over the president’splan. Steven Camarota of the Center forImmigration Studies contended that greaterenforcement of existing law was a bettersolution. Cato’s Daniel Griswold praisedthe president’s plan, saying that it will begood for immigrant workers, the economy,and national security.

◆ January 21: The deepening quagmire inIraq has prompted calls to reinstate the draft.That would be a grave mistake, argued Catosenior fellow Doug Bandow at a Cato HillBriefing, “Dodging the Draft: Will ThereBe One? Do We Need One?” Bandow not-ed that, since the debut of the all-volunteerforce, the military has been transformed intoa highly skilled, capital-intensive fightingforce ill-suited to use raw recruits. Further-more, he said, a draft would undercut indi-vidual liberty, the very ideal our military fights


EVENTS Continued from page 5

Cato senior fellow Jim Powell ponders a questionabout Franklin Roosevelt at a December 3 BookForum for his book FDR’s Folly: How Franklin D. Roo-sevelt and His New Deal Prolonged the Great Depres-sion, broadcast several times on C-SPAN’s Book TV.


to protect. Lawrence Korb of the Center forAmerican Progress pointed out that a draftwould raise perennial controversies overgays and women in the military. A betteroption, he said, is to rebalance the compo-sition of active duty and reserve troops tobetter fit the needs of today’s missions.

◆ January 23 and 27: At a New York CitySeminar on the 23rd and a Cato BookForum on the 27th to promote his newbook, Give Me a Break: How I ExposedHucksters, Cheats, and Scam Artists andBecame the Scourge of the Liberal Media,ABC News anchor John Stossel said thatthe media establishment is suffocatinglyliberal. Early in his career, he said, he wonnumerous awards for his hard-hitting reportson corporate wrongdoing. Yet when Stos-sel began to turn the same critical eye togovernment programs in the 1990s, theawards stopped, and media critics accusedhim of being biased and mean-spirited.Give Me a Break tells the story of Stossel’stransformation from a liberal to a liber-tarian and proposes reforms that ensurethat America remains a place “wherefree minds—and free markets—make goodthings happen.”

◆ January 28: Dan Griswold took his mes-sage of immigration reform to Capitol Hillin a briefing titled “Willing Workers: Howto Fix the Problem of Illegal Immigration.”Rep. Jeff Flake (R-AZ) joined him, argu-ing that America needs to find a solutionfor the millions of immigrants who cur-rently live outside the law. In addition tosupplying the U.S. economy with desper-ately needed workers, he said, an effectiveimmigration reform will improve nation-al security by making it easier to keep trackof who is in the United States. Griswoldsaid that Flake’s bill is “compassionateconservatism at its best” and would helpalleviate the nation’s shortage of low-skilledlabor.

◆ January 28: People are suspicious of schoolchoice because they don’t understand thefree market, argued Herbert Walbergand Joseph Bast at a Cato Book Forum fortheir book, Education and Capitalism:How Overcoming Our Fear of Markets

and Economics Can Improve America'sSchools. That lack of understanding isunfortunate, they said, because Americanstudents rank near the bottom on stan-dardized tests, and inner-city children fareparticularly poorly. The problem, he said,is that decades without competition havemade the education bureaucracy wasteful,unresponsive, and riddled with conflicts ofinterest. Bast provided a historical per-spective, noting that education in Ameri-ca was much more market oriented andpluralistic prior to the “reforms” of the1840s. John Fund of the Wall Street Jour-nal argued that businesses need to be moreactive in promoting effective educationreforms, to ensure they will be able to findeducated workers in the future.

◆ January 29: At a Cato Policy Forum,“Antitrust in the High-Tech Marketplace:The Real Irrational Exuberance?” expertsdebated the merits of antitrust enforcementin the high-tech arena. Competitive Enter-prise Institute president Fred L. Smith Jr.argued that antitrust enforcement has his-torically been harmful to the economy andneeds reform. Ed Black of the Computerand Communications Industry Association

Cato’s Susan Chamberlintalks with former Cato

employees Derrick Max,executive director of the

Alliance for Worker Retire-ment Security, and Andrew

Biggs, associate commis-sioner of Social Security for

retirement policy, at theCapitol Hill Briefing where

Cato released a plan forprivate retirement

accounts.

At a Capitol Hill Brief-ing on January 30,Michael Tanner, direc-tor of Cato’s Projecton Social SecurityChoice, unveils a planto give Americanworkers the option toput their entire 6.2percent share of theSocial Security payrolltax into a personalretirement account.

argued that advocates of free markets shouldbe sympathetic to antitrust laws, whichcurb economic power and ensure that indus-tries remain competitive. Jonathan Zuckof the Association for Competitive Tech-nology disagreed. He said that antitrustlaws stifle innovation and that lawyers areapplying antitrust laws to industries theydon’t understand.

◆ January 30: “Honesty” is the buzzwordof the “Cato Plan for Social Security Reform,”which Michael Tanner unveiled at a CatoHill Briefing. Other plans, he said, makeunrealistic assumptions about the futureof the economy or ignore large future costswhile focusing on short-term expediency.The Cato plan, in contrast, gives an hon-est accounting of all transition costs andbenefit cuts needed to place the systemon a solid financial footing. The plan, Tan-ner said, is a “big” plan, in which employ-ees would be able to put the entire 6.2 per-cent employee share of the payroll tax intoa personal retirement account, which wouldallow workers to accumulate much largernest eggs than other plans that allow onlya portion of the tax to be diverted to per-sonal accounts. ■

On December 10, 2003, the SupremeCourt handed down its decision inthe McConnell v. FEC case. The Courtupheld key provisions of the McCain-

Feingold campaign finance law, includinga ban on soft money and restrictions on“issue ads” that mention a federal candi-date in the weeks before an election. FECvice chairman (now chairman) BradleySmith and Stuart Taylor of the NationalJournal discussed the pending case at a Sep-tember 17 Cato conference. John Samples,director of Cato’s Center for Representa-tive Government, analyzed the decision ata December 17 Cato Capitol Hill Briefing.Excerpts from their remarks follow:

Bradley Smith: As a member of the Fed-eral Election Commission, I am a defen-dant in the McConnell v. FEC lawsuit,and some of the plaintiffs, including theNational Rifle Association, named mein my individual capacity as well. I shouldnote that I am not today speaking on behalfof the commission. The views I’m express-ing are my own. I don’t feel too upsetabout expressing them, since before I wasappointed to the commission I wrote abook in which I said that the types ofreforms included in the McCain-Feingoldbill would be unconstitutional.

I think the problem with this debate isits sense of surrealism. The plaintiffs’ attor-neys placed themselves at a disadvantagewhen they accepted the common ten-dency to look at the Constitution as a hin-drance to government, rather than as aconsidered response to the problems ofgovernance. People venerate the Consti-tution, and the Bill of Rights in particu-lar, but they often feel they need to findways of getting around it without admit-ting that that’s what they’re doing.

The problem of special interest influ-ence was not unknown to the Founders.If you look through the constitutionaldebates, you see that both the federalistarguments and the anti-federalist argu-ments revolved consistently around thequestion: How do we make these mem-bers of Congress act in the public goodrather than for selfish personal gain?

In the famous Federalist no. 10, JamesMadison’s basic answer was that you have

two choices: you can try to extinguish theliberty that gives birth to factionalism, oryou can try to control it in other ways.Extinguishing liberty is exactly what wedon’t want to do, so he came up with anumber of other suggestions. One wasfederalism. Despite the project of the Rehn-quist Court to try to restore it a morerobust federalism, we’ve pretty much sweptfederalism away. Another was the sepa-ration of powers among the three branch-es of government. That, too, has beenlargely eroded in recent years. Everybodynow looks to the president to initiatethe budgetary process, and agencies suchas mine, the Federal Election Commis-sion, blur the judicial, administrative, and

legislative functions of government.The third and perhaps the most impor-

tant suggestion was to create the govern-ment of limited powers spelled out in theConstitution. That too is pretty muchignored nowadays. It’s generally conced-ed—at least by anybody who is in a posi-tion to do anything about it—that if thefederal government wants to dictate schooluniforms, it can do that. If it wants to dic-tate the size of the hallways in your home,it can do that. It can dictate to whomyou rent your apartments, whom you hirefor your small family-owned business, andwhat you do with the corn that you grow

on your land.And that pushes all the burden of pro-

tecting our rights onto the Bill of Rights.In particular, we’ve put this tremendousburden on the First Amendment, whichwas an effort to restrain the abuse of gov-ernment power simply by allowing freedebate so that people could raise criticismsand expose corruption in government.

We Americans want big government.We want it badly. We want the governmentto give us prescription drugs, and we wantgovernment to do everything else it does.

But that presents us with a dilemma.Either we’re going to have to accept a cer-tain amount of influence peddling and fac-tional control of government, or we’re goingto have to accept the loss of some of ourcivil liberties as well as our economic lib-erties. And one of the civil liberties underattack is the right to free speech. The fun-damental principle behind campaign financeregulation is “We need to stop this FirstAmendment stuff.”

The Court has justified that approachby suggesting that the federal govern-ment has a compelling interest in prevent-ing corruption or the appearance of cor-ruption. I would not deny that campaigncontributions might influence how peopleon the Hill vote or carry out their activi-ties. But I think virtually all the evidencewe have shows that it’s not terribly impor-tant.

Worse, the “appearance of corruption”rationale is a blank check for Congress toregulate whatever it wants. If you look atGallup polling data from the late 1950s orthe early 1960s, when confidence in gov-ernment was at its absolute peak in thiscountry, you find that well over a third ofthe population agreed with the statementthat most members of Congress were cor-rupt.

Why did people think that? Maybe theythink politicians are corrupt because theythink, mistakenly, that elected officialscan use their campaign contributions tobuy themselves a fancy new car. Maybethey think people are corrupt because inpolitics you have to make deals, you don’talways get to stand on pure, hard prin-ciple. Maybe people think politics iscorrupt because they think candidates

Policy Forum

Free Speech and Campaign Finance


Bradley Smith: “The ‘appearance of corruption’rationale is a blank check for Congress to regu-late whatever it wants.”

prehensive solution, we can’t pass any par-tial solution.”

What this does is to allow Congress toessentially pick on whomever they want. Forexample, the groups that do what is knownas “bundling” best are Emily’s List and thetrial lawyers. Those are both Democraticconstituencies, and they are good at it becausetheir members have lots of money.

Bundling is not an effective strategy forsome of the Republican-allied groups, likethe Christian Coalition and Right to Lifegroups, whose members have below-aver-age incomes and are not as politically aware,by and large. But these groups have an off-setting advantage—they have a great net-work for getting information out to peo-

ple. So these groups like to distributevery biased voter scorecards to influencevoters. That is an effective strategy forthem.

So if you ban scorecards, you hit theRepublicans. If you ban bundling, youhit the Democrats. And that’s why, whenearly versions of McCain-Feingold includ-ed bans on bundling, you lost the sup-port of senators such as Dianne Feinstein(D-CA), a big supporter and supportee ofEmily’s List.

And in fact, sponsors of the bill spoke

proudly about putting together a coalition:“If we ban this, we’ll pick up this guy’svote. But if we drop this ban out of the bill,we’ll pick up those three votes. If we nailthat group, we’ll get some votes over here.And we’ll get more votes over here thanwe’ll lose by nailing that group.” It wasvery partisan and it was very open.

I would suggest that this is exactly whatthe First Amendment was designed to pre-vent. It was designed to keep the govern-ment out of decisions about whose ads are“sham” ads and whose ads are legitimateads, and to keep government out of theposition to pick winners and losers.

Stuart Taylor: I would like to explore asomewhat idiosyncratic corner of cam-paign finance reform that I’ve been puz-zling over: the distinctions among indi-viduals, nonprofit ideological corpora-tions, business corporations, labor unions,and political parties, which are treated dif-ferently by the law. And the question thatI’ve been puzzling over is: What justifiesthe difference?

I agree with the proposition—laid downin the Supreme Court’s Buckley v. Valeodecision—that an individual does not havea constitutional right to make an unlimit-ed contribution to a candidate because ofthe corrupting potential, but he does havea right to spend an unlimited amount onindependent advocacy for that candidate,including what’s called express advocacy.Buckley did not give that same right to cor-porations or unions.

I wrote in a recent column that unionsand business corporations should be restrict-ed more than nonprofit ideological corpo-rations in spending money on election-relat-ed broadcast advertising. As I understandit, the original version of McCain-Feingoldwould have barred election-related ads with-in 30 or 60 days of an election if they men-tioned the name of any federal candidateand were funded by a business corporationor by a labor union but would have allowedsuch ads funded by a nonprofit ideologicalcorporation, such as the National Rifle Asso-ciation, the Sierra Club, and the ACLU, ifthey were spending private contributionson it.


promise things they know they can’t deliv-er. We don’t know what people mean whenthey say they think things are corrupt.But, in any case, the appearance of cor-ruption is always going to be there.

There are two problems once we giveCongress a blank check to regulate speech.First, campaign finance regulation is inher-ently overbroad. In constitutional law,when we deal with fundamental rightslike the First Amendment, we say thatlaws are subject to “strict scrutiny” inmost cases. But in fact, the Court was pre-sented with this challenge in Shrink Mis-souri Government PAC v. Nixon, decid-ed in early 2000. And in that case theplaintiffs said to the state of Missouri:“Prove it! Give us some evidence of cor-ruption.” And the state of Missouri basi-cally said: “We really can’t prove it. We’vegot a couple of newspaper editorials wherepeople talk about corruption in the cap-ital, but that’s really it.” And the SupremeCourt, recognizing that it couldn’t upholdthe law if it applied strict scrutiny, sim-ply lowered the bar and said, “From nowon, as long as your solution is narrowlytailored, that will be enough.”

But is the solution narrowly tailored?Even if campaign contributions are some-times given for the specific purpose of gain-ing access to a member of Congress, wemust concede that the vast majority of cam-paign contributions are not made for thatpurpose. Most people, including mega-donors and even corporations, give mon-ey because they believe in what the candi-date stands for. That’s what all the politicalscience research tells us. So restrictions oncampaign giving, even if they can be justi-fied in principle by corruption concerns, areinherently overbroad.

The second problem is that they allowfor tremendous manipulation. One pointthat Seth Waxman, attorney for the con-gressional sponsors of the McCain-Fein-gold campaign finance law, made repeat-edly in oral arguments to Justice Scalia wasessentially: “You’re right, this isn’t goingto solve the problem; we may have to domore. But you can’t make us solve the prob-lem all at once. Congress is allowed to dealwith parts of it at a time. You can’t say thatjust because we weren’t able to pass a com- Continued on page 10

Stuart Taylor: “The NRA and other organizationsare reasonably efficient proxies for their membersin terms of political advocacy and therefore, underthe right of association, they should have a right toengage in such advocacy.”

❝ The First Amendment was designed to keep the government out of decisions about whose ads are ‘sham’ ads and

whose ads are legitimate.❞

What justifies the distinction? Well, Ihave, as many of us do, a 401(k) plan. AndI have it invested in the Standard & Poor’s500 Index Fund. So I own a little chunkof all 500 of the biggest corporations inthe country. I don’t have any idea, or anymotivation to find out, how they’re spend-ing my money, and the money of all themillions of other people who are similar-ly situated. There is a disconnect betweenthe amount of money controlled by thecorporation and spent on political advo-cacy and the support by the corpora-tion’s own shareholders for that spending.I think that is part of the justification forsubjecting business corporations to restric-tions that couldn’t be imposed on a wealthyindividual.

I think another reason is that when abusiness corporation gives political mon-ey—or, I should stress, when it spends onbroadcast advertising for politics—it is typ-ically engaging in rent seeking. That hasnothing to do with the public interest.It’s purely pursuit of a private interest thatI think deserves less protection.

Why treat nonprofit ideological cor-porations differently? If you join the NRA,you pretty well are signing on to its polit-ical agenda. That doesn’t mean you sup-port every political candidate that it sup-ports, but you know pretty much what’sgoing to be done with your money. TheNRA, the ACLU, NARAL, and the Nation-al Right to Life Committee are reason-ably efficient ways of pooling the assetsof a great many individual donors—peo-ple who couldn’t have a voice withoutpooling their assets. And I think ideo-logical corporations are better at doingthat than the alternative of political actioncommittees.

I struggled with this a little bit. I askeda lawyer for the NRA, “Why don’t you justsend a note to your members saying, ‘We’rereducing our dues from $35 to $25, butwe have a little box we’d like you to checkthat takes that $10 we just saved you andputs it in our political action committee’?”

The lawyer said that not many peoplecheck that box. Which made me stop andthink, “Well, is that because those peo-

ple really don’t want the NRA spendingany of their money on this kind of polit-ical advocacy, or is it because somethingabout the psychology of checking a boxsays I’m giving my money to a politicalaction committee?” And I think it’s thelatter—that is, it’s my guess that the reluc-tance of NRA members to check the “PAC”box does not warrant the conclusion thatthey would object to the NRA spendingtheir membership dues on election-relat-ed advocacy.

I also think the NRA and all those oth-er organizations are reasonably efficientproxies for their members in terms of polit-ical advocacy and that therefore, under theright of association, they should have a rightto engage in such advocacy, subject to therestriction that they could spend on politi-cal advocacy only private contributions.

John Samples: The decision in McConnellv. FEC was 5 to 4. There was a deep divi-sion between the majority opinion and thedissents. And it seems to me that thisdivision reflects divisions in society at large,and particularly among political elites.There are two visions of government inAmerica, I think. One I call the constitu-tional vision, which was best expressed bythe American Founders in 1787. The oth-er might be called the progressive vision,and that is what finds voice in the major-ity opinion of McConnell.

The constitutional vision is based ona distrust of political power and the peo-ple who possess it. It’s marked by a con-cern for the natural rights that Jeffersonmentions in the Declaration of Indepen-dence. Government is both necessary toprotect those rights and a danger to thoserights. The American Founders sought tolimit and control government as well as toempower it.

So in the Constitution you see all sortsof limits on political power. You see the sep-aration of power between the branches. Yousee federalism, the division of power betweenthe states and the national government. Yousee the doctrine of enumerated and limitedpowers. And you see the Bill of Rights. Theconstitutional vision is informed by a heavypresumption in favor of liberty and againstgovernment.


The progressive vision, on the otherhand, says that government is to be trust-ed, that government should be empoweredto do good. Progressives make a presumptionfor government and its beneficence andagainst liberty. They don’t deny that Amer-icans have a right to free speech, but theyare much more willing to say that othervalues might override that right or that theright might be weaker. And this is the tone,I think, of the majority decision inMcConnell—that freedom of speech is aprivilege granted by Congress rather thana right against political power.

The Supreme Court, as well as Con-gress, has been willing to restrict liberty,particularly in the economic sphere. In fact,in a famous 1941 footnote, the SupremeCourt said, in essence: “Henceforth, any-thing Congress does about economic lib-erty or private property will not violate theConstitution as long as it has a rationalbasis. However, we will oversee the polit-ical process to protect the natural rights tofreedom of speech and to freedom of polit-ical activity.”

The question for some time after thatwas, Do those political rights include theright to give money to candidates andcauses in politics? The question wasanswered in 1976, in the famous case ofBuckley v. Valeo. The Supreme Court heldthat the First Amendment covers the rightto spend money on politics, on candidates,and on political causes, because money,in American society, is inevitably andineluctably intertwined with freedom ofspeech.

Today, the connection between moneyand speech is widely derided by partisansof restricting campaign finance. But if youdeny that money is tied to speech, imag-ine that the government mandated that theWashington Post’s budget for newsprint,for salaries, or for Internet employees werecut by 50 percent in the next year. Wouldthat affect freedom of the press or freedomof speech?

Well, Buckley says, of course it would.You would get less speech. For that rea-son, Buckley said, freedom to spend is pro-tected by the Constitution. On the otherhand, Buckley said, contribution limitsdon’t implicate freedom of speech as strong-

POLICY FORUM Continued from page 9

❝ The constitutional vision is based on a distrust of political power and the people who possess it.❞


❝ People who supported the McCain-Feingold bill say forthrightly that the law would stop attacks on themselves. ❞

ly. Therefore Congress might have othervalues that justify regulations. Namely, toprevent corruption or the appearance ofcorruption Congress could regulate con-tributions. Buckley struck down spendinglimits and affirmed contribution limits.

The McConnell majority is more trust-ing of government than the Buckley major-ity was. The new majority says, pursuantto Buckley, there is balancing to be done,but it defers to Congress’s judgment instriking the balance between the limit-ed free speech claim and the corruptionrationale.

This is problematic because in Feder-alist 10 James Madison says, “No man isallowed to be a judge in his own cause,because his interest would certainly biashis judgment and, not improbably, corrupthis integrity.” Yet the Court has allowedCongress to be a judge in its own cause;Congress has an interest in the soft mon-ey ban in McCain-Feingold. Elections from1995 to 2002 were marked by groups andindividuals raising soft money that sup-ported ads that were critical of membersof Congress, in some cases harshly so.

Remember the NAACP ad in Texas thatessentially accused candidate Bush of beingcomplicit in the brutal murder of an African-American man? That was a soft money ad.The NAACP received a $9 million softmoney gift in 2000 to run those ads. Theywere also doing it against members of Con-gress who do not like going through theexperience of being attacked. It is no con-demnation of Congress that it wanted tostop those ads. If you or I were in Con-gress, we too would want to stop such ads.That’s why we have our Constitution: tostop the human tendency toward tyranny.

Now, of course, Congress could notsimply ban the ads. What it did insteadwas to prohibit soft money fundraising byfederal officials. Now, a member of Con-gress might say: “We didn’t ban any ads;all we did was ban soft money fundrais-ing. Groups and individuals are still freeto run such ads. They just have to do itwith money raised under federal contri-bution limits.”

But if you can raise money, like theNAACP, in one $9 million contribution,or in $100,000 contributions, or if George

Soros will give you $5 million, it’s easyto raise money. It’s certainly a lot easierto raise it than if you try to do it in $2,000increments. Transaction costs are impor-tant to politics. If you make it harder toraise money under the limits, there willbe less money raised. If less money israised, there will be less money spenton ads.

And indeed, the remarkable thing aboutall of this is that this is exactly what waspromised by Senator McCain to his fel-low senators, that there would be lessmoney for what were called attack ads.

Senator McCain, on the floor of the Sen-ate, said: “If you cut off the soft money,

you’re going to see a lot less of that [attackads]. Prohibit unions and corporations[from making soft money contributions]and you will see a lot less of that. If youdemand full disclosure for those that payfor those ads, you’re going to see a lot lessof that.”

Sen. Maria Cantwell (D-WA) agreed:“This bill is about slowing political adver-tising and making sure the flow of nega-tive ads by outside interest groups doesnot continue to permeate the airwaves.”Sen. Barbara Boxer (D-CA) too: “Theseso-called issue ads are not regulated at all

and mention candidates by name. Theydirectly attack candidates without anyaccountability. It is brutal. We have anopportunity in the McCain-Feingold billto stop that.”

People who supported the bill say forth-rightly that the law would stop attacks onthemselves. A soft money ban could beexpected to lead to less criticism of incum-bents, to less information about them inelections, to less competition for their jobs.Yet the Supreme Court is saying that Con-gress is the right institution to balance freespeech against corruption or the appear-ance of corruption. The Court forgot whatMadison said during his resistance to theSedition Act: “The right of freely exam-ining public characters and measures, andof communication is . . . the only effec-tual guardian of every other right.”

A lot of independent groups like theNAACP ran ads. That money wasn’t raisedby members of Congress, members ofnational parties, national officeholders.And unfortunately for McCain-Feingoldsupporters, under Buckley the Court hadsaid that you could regulate only ads thatexpressly advocated the election or defeatof a candidate. Yet McCain-Feingoldrequired that money for any ad that men-tions or clearly refers to a candidate forfederal office that runs 30 days before aprimary or 60 days before a general elec-tion has to be raised under federal elec-tion law. Clearly this ran against Buck-ley, which limited federal regulation toads that expressly advocate the electionor defeat of a candidate. So the SupremeCourt had to overrule Buckley to acceptMcCain-Feingold. And that’s not all thathappened. The majority seems to say thatCongress can regulate any ad that is intend-ed to influence an election. If that is nowCourt doctrine, we no longer have con-stitutional limits on Congress’s power toregulate electoral speech.

In 1788 Thomas Jefferson wrote to afriend: “The natural progress of things isfor liberty to yield and for government togain ground.” In that sense, the decisionin McConnell v. FEC is progressive, partof the natural progress of things, which isfor liberty to yield and for government togain ground. ■

John Samples: “There are two visions of govern-ment in America—the constitutional vision, bestexpressed by the American Founders in 1787,and the progressive vision, which finds voice inthe majority opinion of McConnell v. FEC.”

Cato Studies

Al Qaeda: The War We Need to FightNew studies on Iraq, trade, neoprohibition, and the “Republican Spending Explosion”


By diverting resources from the fightagainst Al Qaeda, the war in Iraq endan-gers national security, charges CharlesPeña in “Iraq: The Wrong War” (Pol-

icy Analysis no. 502). Peña dissects the admin-istration’s arguments for going to war andfinds them wanting. Iraq’s conventional mil-itary is underfunded and poorly trained, hepoints out, and there was little evidence thatIraq possessed weapons of mass destruc-tion. The administration’s claims of ter-rorist links do not hold up to scrutiny, heargues. The evidence of direct Iraq–Al Qae-da ties is paltry, and Hussein’s secularismput him at odds with Al Qaeda’s Islamistgoals. The only credible terrorist links areto regional terrorist groups that pose nothreat to the United States. In short, Peñaconcludes, the war in Iraq is a dangerousdistraction from the real war on terrorismbeing fought in Afghanistan.

◆ Drinking AloneDespite the spectacular failures of Prohi-bition seven decades ago, there appears tobe growing support for a new, piecemealeffort to limit Americans’ access to alco-hol, says Radley Balko in “Back Door toProhibition: The New War on Social Drink-ing” (Policy Analysis no. 501). The multi-pronged effort includes raising taxes onalcohol, censoring alcohol advertising, andimposing new requirements and restric-tions on bars. Most worrying, the crusadeagainst drunk driving has turned into a cru-sade against social drinking. By enforcingever-lower blood-alcohol limits and usingconstitutionally dubious searches and road-blocks, law enforcement officials have begunharassing moderate drinkers who pose lit-tle danger to others on the road. Balko sin-gles out two groups as major supportersof this neoprohibitionist agenda: the RobertWood Johnson Foundation and MothersAgainst Drunk Driving. The former’s $8billion in assets allows it to bankroll anti-alcohol efforts around the country, whilethe latter’s many ties to government offi-cials blur the line between law enforcementand advocacy.

◆ Mission Creep at HomeThe increasing use of the military for civil-ian police work is cause for alarm, says Cato

senior editor Gene Healy in “Deployed inthe U.S.A.: The Creeping Militarization ofthe Home Front” (Policy Analysis no. 503).The United States has a long history of hos-

tility to domestic lawenforcement by the mil-itary, arising out of colo-nial experiences withBritish abuses. The PosseComitatus Act was passedin 1878 to codify that hos-tility, but its strictureshave sometimes been evad-ed and ignored, especial-

ly since the September 11, 2001, attacks.An egregious example was the illegal six-month deployment of National Guardsmento the Mexican and Canadian borders toassist in civilian border control in 2002.Increasing militarization would be disas-trous, Healy argues, because military offi-cials are trained to kill, not to enforce thelaw and protect the rights of Americans.Furthermore, the military enjoys nearly totalimmunity from civilian scrutiny. Healy urgeslawmakers to resist calls for increasing mil-itarization and to instead demilitarize theWar on Drugs and scrutinize other domes-tic uses of the military to ensure that therights of Americans are not being violated.

◆ BTU Wise, Dollar FoolishGovernment regulations mandating higher-efficiency appliances are not as beneficial asofficial cost/benefit analyses claim, says econ-omist and law professor Ronald Sutherlandin “The High Costs of Federal Energy Effi-ciency Standards for Residential Appliances”(Policy Analysis no. 504). Such analyses maketwo major errors. First, they assume that therewould be little improvement in efficiency inthe absence of government mandates. Sec-ond, they dramatically underestimate theappropriate discount rate, especially for low-income households. Because of the illiquidnature of the home appliance market and thelimited savings of poor households, the 3–7percent discount rates used in governmentcalculations are completely inappropriate, hesays, and suggests that a discount rate of atleast 35 percent is more appropriate. Whenthose two factors are taken into account,Sutherland concludes, energy efficiency reg-ulations are a net drag on the economy.

◆ Democracy in Iraq: Don’t Hold Your BreathIt is fitting that, in the Islamic calendar, weare at the beginning of the 15th century,rather than the 21st, opines Patrick Bashamin “Can Iraq Be Democratic?” (PolicyAnalysis no. 505). Iraq, he says, is cen-

turies behind the West indeveloping the culturalattitudes and valuesrequired for a stable lib-eral democracy. Withoutpolitical trust, social tol-erance, support for indi-vidual liberty, and sup-port for gender equality,he contends, democrat-

ic experiments are likely to be illiberal andshort-lived. Most Iraqis, Basham notes,value nepotism and tribal loyalties overabstract political principles or the publicinterest. And given centuries of ethnichatreds, elections are likely to devolve intobitter and violent power struggles betweenShiite, Sunni, and Kurdish factions. Thepower of clerics with illiberal political agen-das is another serious obstacle to reform,he argues. For all those reasons, the WhiteHouse is in for a nasty surprise if it expectsto establish liberal democracy in Iraq anytime soon, Basham concludes.

◆ Trade and TerrorFree trade and free markets do more thanraise living standards, argues Daniel T. Gris-wold in “Trading Tyranny for Freedom:How Open Markets Till the Soil for Democ-racy” (Trade Policy Analysis no. 26). Gris-

wold contends that openmarkets spur the creationof an educated, financiallyindependent middle classthat begins to demandpolitical reforms. In addi-tion, the growth of awealthy business class pro-vides a check on the pow-er of the state. Griswold

tests his claim empirically by comparing inde-pendent rankings of political and econom-ic liberty. He finds a statistically significantcorrelation, with increasing economic lib-erty strongly linked to rising political free-dom. Griswold predicts that the rapid rateof economic growth in today’s China will

Gene Healy

Patrick Basham

Daniel T. Griswold

increase pressures for political reforms.Expanding free trade with the Middle Eastand Cuba could have similarly salutary effectson those countries, he says.

◆ Empire State ExtravaganceThe state of New York is facing a budget cri-sis brought on by its addiction to spending,says economist Raymond J. Keating in “Clean-ing Up New York’s Budget Mess” (PolicyAnalysis no. 506). Had lawmakers held spend-ing increases to the rate of inflation, he notes,state spending in FY04 would be $77 bil-lion instead of today’s $95 billion, and therewould have been room to balance the budg-et and cut taxes. Instead, the legislature hasraised taxes and still faces persistent deficits.Keating recommends that New York law-makers undertake a systematic review of thestate budget and cut or eliminate those pro-grams that have outlived their usefulness. Inparticular, he says, skyrocketing spendingincreases on Medicare, education, and cor-porate welfare need to be scaled back. He pro-poses a series of specific cuts to bring the budg-et back under control.

◆ Digital Discrimination? Proposals for Federal Communications Com-mission rules mandating that broadbandproviders practice “network neutrality” bynot restricting users’ accessto Internet content arenot as innocuous as theysound, argues AdamThierer in “‘Net Neu-trality’: Digital Discrim-ination or RegulatoryGamesmanship in Cyber-space?” (Policy Analysisno. 507). Such proposalstreat infrastructure as a fixed resource to bedivided among incumbent service providers,ignoring the possibility of innovation andnew capital investments. Neutrality man-dates could reduce the incentive to investand innovate, Thierer points out. In addi-tion, Thierer says, such rules are likely to bethe opening wedge for broader regulation ofthe broadband marketplace, as companiesseek to “game” the regulatory system to theiradvantage by lobbying regulators for morefavorable interpretations of nondiscrimi-nation rules. Vertical integration of con-

duit and content may not be a bad thing.Many users want value-added services andmight welcome the simplicity of having thoseservices made more easily available than oth-er Internet content. Finally, Thierer argues,broadband providers have property rightsin their infrastructure investments, and restrict-ing how those investments can be used vio-lates those rights.

◆ Digital Price Fixing Doesn’t Work EitherIn “Compulsory Licensing vs. the Three ‘Gold-en Oldies’: Property Rights, Contracts, andMarkets” (Policy Analysis no. 508), law pro-fessor Robert P. Merges criticizes compulso-ry licensing schemes for digital content, cit-ing two major problems with the idea. First,although compulsory licensing could lowertransaction costs somewhat once the systemwas established, the intense lobbying effortthat will inevitably surround the fee-settingprocess is likely to negate those savings, heargues. Second, compulsory licensing is sub-ject to “legislative lock-in,” as legislative iner-tia makes prices extremely difficult to change.That is likely to lead to below-market prices,causing underproduction of digital content.In contrast, he says, the “golden oldies” ofproperty rights, contracts, and markets aremore than sufficient to allow content hold-ers, distributors, and consumers to arrive atfair market prices and to create institutionsthat allow efficient payment of royalties.

◆ Hey, Big SpenderThe last three years of Republican-dominat-ed government have made it clear that theGOP has abandoned any commitment it mayonce have had to fiscal responsibility, arguesVeronique de Rugy in “The Republican Spend-ing Explosion” (Briefing Paper no. 87). Indeed,

each of Bush’s first threebudgets has increasedspending at a faster ratethan those of any presi-dent since Lyndon John-son. Some defenders of thepresident argue that spend-ing on defense and enti-tlements is the primary cul-prit, but de Rugy rejectsthat claim, noting that real

nondefense discretionary spending has increasedby 23 percent during the first three years of

the Bush administration. Since Republicanscaptured Congress in 1995, beneficiaries ofGOP spending hikes have included the LaborDepartment (up 99 percent), the EducationDepartment (up 94 percent), and the Com-merce Department (up 71 percent). Thosedepartments are hardly vital to national defenseor homeland security, de Rugy notes. Sheargues that the president and Congress shareresponsibility for the lack of spending disci-pline, as either could have acted to slowrunaway spending growth. ■


Veronique de Rugy

Adam Thierer

Cato Calendar

Milton Friedman PrizePresentation Dinner

San Francisco • Ritz-CarltonMay 6, 2004

The Republican Revolution 10 YearsLater: Have We Made Any Progress?

Washington • Cato Institute May 20, 2004

Speakers include Newt Gingrich, DickArmey, Ed Crane, Thomas Edsall,

Major Garrett, and Stephen Moore.

Looking Worldwide: WhatAmericans Can Learn from

School Choice in Other CountriesWashington • Cato Institute

May 27, 2004Speakers include Charles Glenn,Andrew Coulson, Eugenia Toma,Harry Patrinos, and James Tooley.

Cato City SeminarNew York • Waldorf-Astoria

June 10, 2004

Cato UniversitySan Diego • Rancho Bernardo Inn

July 24–30, 2004Speakers include Tom G. Palmer,

Nathaniel Branden, Deroy Murdock,Richard Stroup, Jane Shaw, and

Piotr Kaznacheev.

Arguing for Liberty: How toDefend Individual Rights and

Limited GovernmentCato University

Quebec City • Chateau FrontenacOctober 28–31, 2004

Privatization of state-run industries isanother method of minimizing the corruptingpotential of government economic control.Anderson recommends that countries pri-vatize state-owned companies by sellingthem to the highest cash bidders, with nostrings attached. That will maximize botheconomic efficiency and government rev-enues. Government should not attempt tospread the ownership of firms among manysmall shareholders, he argues, nor should itattempt to judge bidders on criteria otherthan price.

Anderson recommends a “hands-off”approach in two other policy areas as well:bankruptcy law and competition. In bothcases, he argues that government controlof private business is to be avoided wher-ever possible. With regard to bankruptcylaw, this means that companies that arenot able to renegotiate their debts should beliquidated rather than placed under court-supervised restructuring. In competition pol-icy, he urges government officials to focuson reducing government barriers to compe-tition, which are likely to be more substan-tial than any created by anti-competitivepractices in the private sector.

Just Get Out of the Way is availablein hardcover for $24.95. It can be pur-chased in bookstores, at www.catostore.org,or by calling 800-767-1241. ■

Cato Book

Experts often recommend complex regulations based on those of rich countries

Developing Countries Need Simple Rules


Few Americans appreciate how well thebasic institutions of our society func-tion. We are blessed with a relativelyhonest and efficient bureaucracy, an

educated and law-abiding electorate, and agenerally fair and effective legal system. Cor-ruption, incompetence, and violence are rel-atively rare. As a result, economic policydebates in the United States tend to revolvearound relatively esoteric issues: should com-panies be required to expense stock options?Does the tort system need a cap on punitivedamages? Should the top income tax ratebe 33 percent or 35 percent?

Unfortunately, the blessing of good insti-tutions can create a blind spot when Westernpolicymakers advise their colleagues in poorcountries about economic reform. Like fish inwater, they have trouble imagining a worldwithout honest and efficient institutions andthe culture that supports them. Policymakersin the developing world do not have the lux-ury of making such naive assumptions. Theymust build the institutions of a free societyfrom scratch, while simultaneously cultivat-ing public acceptance and support for them.

Just Get Out of the Way: How Govern-ment Can Help Business in Poor Countriesby Robert E. Anderson is a valuable correc-tive for policymakers in rich countries fac-ing the “fish out of water” experience of devel-oping effective policies for countries that lack

good institutions. Policies that assume high-ly trained andtrustworthypublic officialsare simplyunrealistic innations thatlack suchoff ic ia ls ,Andersonargues. Fur-thermore,institutionsthat haveevolved inwealthycountriesover the course of centuries mightnot be suitable for poor countries with muchlower levels of economic development. Oneexample is the banking system. Andersonargues that the American model of depositinsurance is unlikely to work well in poorcountries. Many banks in those countries aregovernment-run Ponzi schemes. Governmentsneed to get out of the banking business, hecontends, and should refrain from guaran-teeing the deposits of private banks. Instead,disclosure regulations should ensure that depos-itors have accurate information, and indi-vidual depositors should take responsibilityfor depositing in financially healthy banks.

the steps by which this result was achieved, twobasic questions spring to mind: why did theBritish people permit it to happen, and why didBritish governments insist upon it? Starting in1920 British governments reversed centuries ofcommon law with the first serious limits on pri-vately owned firearms. The motive was notcrime control but fear of revolution. The statuterequired anyone wanting to keep a firearm toget a certificate from his local police chief cer-tifying that he was a suitable person to own aweapon and had a good reason to have it. Thiscertificate had to be renewed every three years.Unfortunately, the definition of “good reason”was left to the police, and the Home Office,through guides to police classified until 1989,systematically narrowed it. First, police wereinstructed that it would be a good reason tohave a revolver if a person lived in an isolatedhouse “where protection against thieves andburglars is essential, or has been exposed to def-inite threats to life on account of his perform-ance of some public duty.” (Note that the onlythreat to life that was deemed a sufficient rea-son to own a handgun was one related to “somepublic duty.”) By 1937 police were to dis-courage applications to possess any firearm forhouse or personal protection. In 1964 they wereadvised that “it should hardly ever be neces-sary to anyone to possess a firearm for the pro-tection of his house or person” and that “thisprinciple should hold good even in the case ofbanks and firms who desire to protect valu-ables or large quantities of money.” Finally, in1969 the Home Office announced that “itshould never be necessary for anyone to pos-sess a firearm for the protection of his house orperson.” Since those changes were secret, therewas no opportunity for public debate.

Stage two came in 1953 when the govern-ment introduced the Prevention of Crime Actthat made it illegal to carry in a public place anyarticle “made, adapted, or intended” for an “offensive purpose” without lawful authorityor “reasonable excuse.” An item carried fordefense was, by definition, an “offensive” weapon.Police were given broad power to stop andsearch everyone. Individuals found with offen-sive weapons were guilty until proven innocent.In Parliament the government admitted the actwas “drastic” but insisted the public shouldbe discouraged “from going about with offen-sive weapons in their pockets; it is the duty of

glars admit to fearing armed homeownersmore than the police, only 13 percent are “hotburglaries.” As for the effectiveness of strin-gent gun control, since handguns were bannedin 1998, handgun crime has more than dou-bled. Gun crime has recently been describedas spreading “like a cancer.” Units of Britishpolice are, for the first time in their history,routinely armed, and American policemenare being hired to advise British departments.

Withdrawal of the Right to Self-DefenseThe right to self-defense runs deep in the

Anglo-American tradition. William Black-stone, whose Commentaries on the Laws ofEngland was published 10 years before theAmerican Revolution and was an immedi-ate bestseller on both sides of the Atlantic,identified three “great and primary rights”of individuals: personal security, personalliberty, and private property. He put per-sonal security first. For Blackstone and gen-erations of common lawyers, the right topersonal security was not the expectationthat government would protect everyone—that was then, and remains today, imprac-ticable. It was the right of the individual toprotect himself, with force if necessary:

[I]f the party himself, or any of thesehis relations, be forcibly attacked inhis person or property, it is lawful forhim to repel force by force. . . . Forthe law, in this case, respects the pas-sions of the human mind; and . . .makes it lawful in him to do himselfthat immediate justice, to which heis prompted by nature. . . . It consid-ers that the future process of law is byno means an adequate remedy forinjuries accompanied with force; sinceit is impossible to say to what wantonlengths of rapine or cruelty outragesof this sort might be carried, unlessit were permitted a man immediatelyto oppose one violence with another.

Self-defense was universally regardedas the primary law of nature, so funda-mental that England’s great jurist insisted,“It is not, neither can it be in fact, takenaway by the law of society.” On that pointBlackstone was wrong, as we have seen.

The practical elimination of the right to self-defense was not the work of a day. As we review

for killing one burglar, 10 years for wound-ing the second, and 12 months for owningan unregistered shotgun. The prosecutorclaimed Martin had lain in wait, then caughtthe burglars “like rats in a trap.”

The wounded burglar was released afterserving 18 months of a three-year sentence.He then sued Martin for injury to his leg,claiming it prevented him from workingand interfered with his martial arts train-ing and sex life. He was awarded £5,000of taxpayer money to prosecute the suit.

Martin’s sentence was reduced to five yearson a finding that he had had an abusive child-hood, but he was denied parole because hehad expressed no remorse for killing “one soyoung” and posed a danger to other burglars.As the Independent newspaper reported,“Government lawyers say burglars ‘need pro-tection.’” “It cannot possibly be suggest-ed,” the attorneys argued, “that members ofthe public cease to be so whilst committingcriminal offences, and whilst society natu-rally condemns, and punishes such personsjudicially, it can not possibly condone their(unlawful) murder or injury.” The Law Com-mission advised the government: “Even acriminal who had committed a serious offencemust be allowed to exercise his civil rights.”

The impact of such policies on public safe-ty has been stark. An amazing trend of near-ly 500 years of declining interpersonal vio-lence in England reversed abruptly in 1954as violence began to increase dramatically. In2001 Britain had the highest level of homi-cides in Western Europe, and violent crimeswere at three times the level of the next worstcountry. “One thing which no amount of sta-tistical manipulation can disguise,” the shad-ow home secretary, Oliver Letwin, pointedout in October 2003, “is that violent crimehas doubled in the last six years and contin-ues to rise alarmingly.” Indeed, with the excep-tion of murder, violent crime in England andWales is far higher than in the United States.And while the American murder rate has beenin decline for more than a decade, the Eng-lish murder rate has been rising. You are sixtimes more likely to be mugged in Londonthan in New York City. More than half ofEnglish burglaries are “hot burglaries”(some-one is at home), while in America, where bur-


SELF-DEFENSE Continued from page 1

Continued on page 16

❝ William Blackstone identified three ‘great and primary rights’ of individuals: personal security, personal liberty,

and private property.❞


society to protect them.” Objections raised dur-ing the debate echoed Blackstone and tradi-tional common law practice. One MP remind-ed government ministers that “there are manyplaces where society cannot get, or cannot getthere in time. On those occasions a man has todefend himself and those whom he is escorting.It is not very much consolation that society willcome forward a great deal later, pick up the bits,and punish the violent offender.” Lord Saltounpointed out: “The object of a weapon was toassist weakness to cope with strength and it isthis ability that the bill was framed to destroy.I do not think any government has the right,though they may very well have the power, todeprive people for whom they are responsibleof the right to defend themselves.” However,he added, “Unless there is not only a right butalso a fundamental willingness amongst thepeople to defend themselves, no police force,however large, can do it.”

Under common law there was an obligationto help someone being attacked. In keeping withtheir reversal of common law practice, the gov-ernment began to warn the public not to go tothe aid of anyone in distress. It was best to “walkon by” and leave the problem to the profes-sionals. The 1953 act, which the governmentclaimed it needed to protect the public againstjuvenile delinquents, has been rigorously enforcedagainst law-abiding people. And the scope ofthe law is so broad that a legal textbook explains,“Any article is capable of being an offensiveweapon,” although the authors add, if thearticle is unlikely to cause an injury, the onusof proving intent to do so would be “very heavy.”

The third stage in the suppression of theright to self-defense came in 1967 when a broadrevision of criminal law was passed. Tuckedwithin the complex statute was a section thataltered the traditional standards for self-defense.Everything was now to depend on what seemed“reasonable” force after the fact. If the victimof an attack harmed or killed his assailant, hecould be charged with assault or murder.And it was never reasonable to defend prop-erty with force. According to the Textbookof Criminal Law, the requirement of reason-ableness is “now stated in such mitigated termsas to cast doubt on whether it [self-defense]still forms part of the law.” The author adds,“For some reason that is not clear, the courts

occasionally seem to regard the scandal ofthe killing of a robber as of greater momentthan the safety of the robber’s victim in respectof his person and property.”

Dismantling Traditional Public ProtectionsAt the same time that it was insisting upon

sole responsibility for protecting individu-als, the government began to dismantle its tra-ditional means of protecting the public. Itadopted more lenient approaches towardoffenders. For both ideological and practicalreasons, sentences for crimes were sharplyreduced and fewer offenders were incarcer-ated. It was argued that prisoners were notrehabilitated in prison, and, of course, it isexpensive to keep them there. Those under21 were almost never sent to prison. Cautions,payment of fines, and community service havebecome the preferred punishments for crimes.Judges have had to provide a written justifi-cation for any sentence involving incarcera-tion. Those few offenders sent to prison wereroutinely released after serving only a third oftheir sentence. When the public became out-raged by the rise in violent crime, the timeserved was increased to half the sentence. Thereluctance to use prison persists. So althoughexisting prisons are overcrowded, the com-missioner for prisons announced that he won’tbuild more unless prisons can demonstratea better rate of rehabilitation.

For the sake of cost cutting, the governmentalso “rationalized” police stations. The consol-idation of country stations has left most of ruralBritain without a police presence. Police werealso withdrawn from foot patrols and replacedby surveillance cameras. England and Walesnow have far fewer police officers per head ofpopulation than America, France, Germany, andItaly. The upshot is not surprising: British policecatch far fewer offenders than their Americancounterparts and bring fewer to justice, and thosewho are convicted serve less time. A governmentreport of June 2002 pointed to the great gapbetween crimes reported—5.2 million in2001–2002—and convictions, 326,000. In 2002fewer than 1 in 10 of London street robberieswere reported as “cleared up.”

The British public is finally becoming arousedby the soaring rate of violent crime and theirmandated helplessness. The government is prom-ising action, but that action does not includerelinquishing its monopoly on force and restor-

ing any measure of the right to self-defense, aright government ministers and police like torefer to as “vigilantism.” Instead, the Blair gov-ernment means to reduce crime by bringingabout more convictions and to do this by elim-inating other ancient rights. In July 2002 itannounced that the venerable double-jeopardyrule that prevents anyone being tried twice forthe same crime would be scrapped, retroactively.Hearsay evidence will be admitted in court,jurors will be informed of a suspect’s previousrecord, and the number of jury trials will bereduced. As the director of Liberty, a British civ-il liberties group, pointed out, however, “Erod-ing the rights of suspects won’t give victimsthe rights they have waited too long to receive.”

Millions of people in Britain live in fear. Elder-ly people are afraid to go out and afraid to stayin. The government has insisted upon a monop-oly on the use of force—but it can only enforcethat monopoly against the law abiding. By prac-tically eliminating self-defense, it has removedthe greatest deterrent to crime, people able andprepared to defend themselves. Peter Hitchens,a British columnist, recently pointed out, “InBritain now we have the worst of both worlds,police who can’t or won’t protect us, and noright to protect ourselves.” He blames the changeon indulgent lawyers, judges, civil servants, andjuries. They have certainly played an impor-tant part. But they were empowered by legalchanges that permitted the government to removethe most basic of all rights. It is unclear whythe British people tolerated this.

Perhaps it was because the 1953 act thatremoved the right to carry anything for protec-tion, on the promise that society would protecteveryone, came in the wake of new governmentprograms for cradle-to-grave welfare, nationalhealth insurance, and government housing. Tomany people, and to the government itself,personal protection must have seemed like justone more area where the state could handle thingsfor the individual. From the government’s pointof view, there was no need to run the risk of peo-ple causing trouble by trying to defend them-selves. The professionals would handle it. Ofcourse there is no way “society” can protecteveryone all of the time. And the governmenthas always known that. The safety of individ-ual citizens has taken a back seat to the politicalpreference for order and power. The result wouldnot have surprised Blackstone. And it should bea lesson to Americans. ■

SELF-DEFENSE Continued from page 15

❝ The safety of individual citizens has taken a back seat to the political preference for order and power.❞

Endangered Species Act after 30 Years


The winter issue of Regulation featuresarticles on campaign finance regula-tions, agricultural subsidies, antitrustlaw, endangered species protection,

and more. Mercatus scholar Daniel R. Sim-mons and Randy T. Simmons of Utah StateUniversity examine the perverse incentivescreated by the Endangered Species Act 30years after its passage. They find evi-dence for at least one perverse effect: sincethe passage of the act, landowners havebeen more likely to destroy habitat nearendangered species to prevent them fromsettling on their land. Because of such unin-tended consequences, they argue, the acthas done little to restore endangered pop-ulations to health.

Economist Russell L. Lamb argues thatincreased vertical integration of agricul-ture has helped to stabilize agriculturalprices, undermining the traditional argu-ment that farm subsidies are needed to sta-bilize prices. Farmers, he notes, increas-ingly enter into long-term agreements with

specific agribusiness firms rather than selltheir products on the more volatile spotmarket. To facilitate the phaseout of agri-cultural subsidies,Lamb advocates abuyout program inwhich the least pro-ductive farmerswould be given finan-cial incentives toleave the industry,while those whochose to remain inthe industry wouldbe required to oper-ate without sub-sidies.

In the cover story,Northwestern University law professorRobert H. Sitkoff considers the argumentsfor and against regulation of corporatepolitical activity. Rent seeking by corpo-rate lobbyists is a serious concern, he says,but a less-recognized problem is extortion

of legitimate businesses by politicians. Cor-porate campaign contributions, he con-cludes, are more likely to be an act of self-

defense than an act of bribery.The University of Maryland’s

Tim Brennan argues that, in theMicrosoft antitrust case, legal the-ory got ahead of courtroom reali-ties. Most economists would havefound the prosecutors’ argumentsin the Microsoft case simplistic, heargues, but a more nuanced casewould have been difficult to defendin court. Brennan warns that, as eco-nomic theory becomes more com-plex, misapplication and oversim-plification of economic doctrines willbecome more common, often to detri-

mental effect.Regulation can be purchased at news-

stands, from the Cato Store at www.cato-store.org, or by calling 1-800-767-1241.One-year subscriptions are available for$20.00. ■

An Invitation to Attend The Liberty Event of the Year

Milton Friedman Prize for Advancing Liberty Awards Dinner

May 6, 2004 • San Francisco, California

�

The Milton Friedman Prize for Advancing Liberty is given every other year to a single individual for significant achievement in the advancement of liberty.

For more information, please contact Lesley Albanese at 202-789-5223 or visit

www.cato.org/friedmanprize2004

“Those of us who were fortunate enough to live and be raisedin a reasonably free society tend to underestimate the impor-tance of freedom. We tend to take it for granted. It has madeus in the West more complacent, so having a prize emphasiz-ing liberty is extremely important.” — Milton Friedman

Regulation: Perverse incentives and unintended consequences

Is the Earth warming? If so, is that a problem?

Global Warming: Science and Economics


Global warming is an issue fraught withcontroversy. Not only do climate sci-entists disagree over the amount offuture warming and the extent of

human causation, but economists are alsodivided over what actions, if any, shouldbe taken to solve the problem. At a Decem-ber 12 Cato conference, “Global Warm-ing: The State of the Debate,” climate changeexperts debated the accuracy of globalwarming models, the advisability of gov-ernment intervention, and the extent towhich human ingenuity could mitigate theharms of global warming without govern-ment restrictions on the use of fossil fuels.

Arizona State University’s Robert Balling

noted that CO2 emissions do appear tobe a major cause of recent global tem-perature increases but argued that imple-menting the Kyoto protocols would havealmost imperceptible effects. Cato’s PatMichaels agreed, arguing that there is clearscientific evidence that the Earth will warmless than a degree over the next centuryand that small variations in greenhousegas emissions will have a negligible effecton climate change. Michael Schlesingerof the University of Illinois disagreed with

Cato Conference

the previous speakers, pointing out thatthe complexity of climate models and themany areas of potential uncertainty makeit possible that small changes in emissionscould have large effects.

Even if we can expect substantial warm-ing in the future, however, that doesn’t nec-essarily justify the costly and intrusive poli-cies mandated in Kyoto, said economistGary Yohe. Future technologies might dra-matically reduce the costs of reducing green-house emissions. And even if projectedwarming occurs, there are many practicalways human beings can cope with theincrease, from moving to cooler climatesto investing in air conditioners. Further-more, as University of Alabama professorJohn Christy stressed, the detrimental effectsof global warming are dwarfed in less devel-oped countries by pressing short-term issues,such as poor sanitation and air quality.

Nevertheless, some panelists arguedthat action was needed. Paul Portney, pres-ident of Resources for the Future, arguedthat each side in the debate could learnfrom the other. Global warming alarmists,he said, underestimate the costs of imple-menting the Kyoto protocols and assumethat human beings will do nothing to mit-igate the harms of warming absent gov-

Cato chairman William Niskanen welcomes Thomas Schelling, Distinguished University Professor at the Uni-versity of Maryland and former president of the American Economic Association, to Cato’s December 12 con-ference on the science and economics of climate change.

Robert Mendelsohn of Yalediscusses the costs andbenefits of programs toreduce greenhouse gasemissions.

Cato’s Jerry Taylor,William Cline of the Insti-tute for InternationalEconomics, and PaulPortney of Resources forthe Future display differ-ing reactions to an argu-ment about the econom-ics of climate change.


ernment intervention. However, he said,skeptics exaggerate the costs of doing some-thing about the problem. The world shouldbegin laying the groundwork now so thathumanity can respond effectively if warm-ing turns out to be worse than expected.William Cline, senior fellow at the Insti-tute for International Economics, took avery long-term view of the problem. Hecalculated the relative costs of action andinaction over the next 300 years and con-cluded that an international agreementis needed to discourage the use of fossilfuel by requiring countries to levy carbontaxes.

Cato’s Peter Van Doren argued that thescientific controversy needn’t be settledbefore policymakers act, since markets typ-ically satisfy people’s preferences whetheror not those preferences are rational. Henoted that there are market-oriented alter-natives to the draconian requirements ofthe Kyoto protocol. For example, tradableemission permits would make the costs ofmitigating climate change explicit andwould give society a flexible way to dealwith the problem if a consensus emergesthat reductions are needed. ■

The Cato Institute offers a number of e-mail newsletters free of charge. Go towww.cato.org/enewsletters to sign up for

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Moller, Cannon Join Cato Policy StaffNews Notes

Mark Moller has joined the Cato Institute as a sen-ior fellow in constitutional studies and the editorin chief of the Cato Supreme Court Review. Beforejoining Cato, Moller practiced law with the Appel-

late and Constitutional Law PracticeGroup at the law firm of Gibson, Dunn& Crutcher. He engaged in a number ofhigh-profile representations, includingserving as a member of the team that suc-cessfully litigated Bush v. Gore before theSupreme Court and as an adviser to judi-cial nominee Miguel A. Estrada duringhis Senate confirmation hearings. Mollerearned his J.D., with honors, at the Uni-versity of Chicago Law School in 1999

and a Masters in common law legal history and theoryfrom the University of Cambridge, where he studied with

noted legal historian J. H. Baker. Michael F. Cannon has joined the Cato Institute as direc-

tor of health policy studies. Previously, Cannon served asa domestic policy analyst for the U.S. Senate Republican

Policy Committee, where he advised Sen-ate leadership on health, education, labor,welfare, and Second Amendment policy;as health care policy analyst for Citizensfor a Sound Economy Foundation in Wash-ington, D.C., and as director of govern-ment affairs for the National Center forPolicy Analysis.

Cato senior fellow Patrick Michaels hasreceived the 2003 Climate Science Paperof the Year award from the Association of

American Geographers. Ed Crane has been awarded the2003 Sovereign Fund Award for Advancing Freedom.

Michael F. CannonMark Moller

the Finnish capital, Helsinki, said theman’s closest colleagues had been outat meetings when he died.

He said everyone at the tax office wasfeeling dreadful—and procedures wouldhave to be reviewed. . . .

Finnish citizens pay among the high-est taxes in the world, but enjoy one ofthe best welfare systems.

—BBC, Jan. 19, 2004

◆ Because in Los Angeles’s $4.8 billionbudget, there are no lower priorities thanpolice and fire protection

California Gov. Arnold Schwarzeneg-ger (R) announced billions of dollars inbudget cuts and fee increases Friday. . . .

Los Angeles Mayor James K. Hahn(D) said Friday that if the legislatureapproves Schwarzenegger’s request, thecity would lose at least $45 million andcould be forced to fire police officersand firefighters.

—Washington Post, Jan. 10, 2004

◆ Protecting consumers, uh, sellersOn Oct. 21, New York Gov. George

Pataki signed into law a bill designed tocurb predatory pricing of motor fuel. . . .

The law, as signed, will prohibit retailpricing of motor fuel below 98 percentof cost. . . .

“We are grateful for Gov. Pataki’s wis-dom and strength in signing this bill inthe face of stiff opposition from Wal-Martand the Retail Council of New York State,”said Thomas J. Peters . . . of the EmpireState Petroleum Association.

—Fuel Oil News, Dec. 2003

CATO POLICY REPORT1000 Massachusetts Ave., N.W.Washington, D.C. 20001

ADDRESS SERVICE REQUESTED

“To Be Governed...”

◆ Spending lots of money with nothing toshow for it? Sounds like good training forthe presidency

[Gov. Howard] Dean has been forcedinto the new strategy in large part by hisheavy spending in the first two contests.He raised $41 million last year, a recordamong Democratic presidential candi-dates, but spent most of it by the timethe Iowa and New Hampshire contestswere over.

That leaves Dean claiming just $3 mil-lion in his treasury. Campaign ChairmanSteve Grossman conceded in a phoneinterview Friday that the spending in thefirst two states was “enormous.”

“Perhaps we were not as disciplinedwhen we had momentum and when thingswere going our way,” Grossman said.

—Los Angeles Times, Jan. 31, 2004

◆ Baby steps to honestyGov. Mark R. Warner brought his tax

campaign to McLean yesterday. . . .Warner joked with the group several

times about the political peril of evenmentioning tax increases in Virginia.

“I know no one likes to say it, espe-cially in Richmond,” he said. “They like‘revenue enhancements’ or ‘user fees,’they’re much more melodious. But let’scall it what it is—a tax reform plan.”

—Washington Post, Jan. 24, 2004

◆ The welfare state at workA tax office official in Finland who

died at his desk went unnoticed by up to30 colleagues for two days. . . .

The head of personnel at the office in

◆ And certainly a dedicated anti-smokingideologue would know more about restau-rant economics than restaurateurs

Selby Scaggs, the owner of the AnchorInn Seafood Restaurant in Wheaton [Md.],is convinced that there is nothing healthierfor his business than cigarette smoke. . . .

After Montgomery County’s indoorsmoking ban took effect Oct. 9, Scaggs’salcohol sales dropped 40 percent, andthe [computer] game business fell by morethan half. . . .

“These laws either have no impact orare good for business,” said Stanton A.Glantz, director of the Center for Tobac-co Control Research and Education at theUniversity of California at San Francisco.

—Washington Post, Dec. 28, 2003

◆ Republican budget austerityOne congressional district in the area

around DeKalb, Ill., appears to be faringexceptionally well in the Labor and Healthand Human Services appropriations con-ference report. The 14th CongressionalDistrict, one of the richest in the state,looks to get 43 percent of all the projectsearmarked for Illinois, even though it hasonly about 5 percent of the population.

Nearly one-third of the $16,445,000headed for the district would go to North-ern Illinois University in DeKalb. . . .

We can be sure of one thing: The proud14th’s success has got nothing to do withwho represents it in Washington. Thatwould be House Speaker J. Dennis Hastert(R), who picked up a graduate degreeat Northern Illinois University.

—Washington Post, Dec. 12, 2003

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Documents

PolicyReport · Controlling for the unemploy-ment rate, federal spending increased by about one-half percent of GDP for each one percentage point decline in the rela-tive level of