Category Archives: Economics

Miscellaneous economy stuff

Statutes, Judges, and DoJ

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The Supreme Court last Tuesday heard a case between Microsoft and DoJ concerning whether the emails of an alleged drug dealer must be turned over to the government pursuant to a search warrant to that effect.  The catch is that the emails are stored exclusively on servers in Ireland—nominally beyond the reach of the US’ long arm of the law.

The statute in question is the Stored Communications Act, enacted 30 years ago before email and similar electronic communications were available.

Microsoft handed over some account data that was stored in the US but said it shouldn’t have to hand over the emails, which were stored on a server in Ireland.
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The Second US Circuit Court of Appeals sided with Microsoft, ruling the 1986 law didn’t apply beyond US territory.

DoJ and the participating States’ Attorneys General argued that the appellate decision, if left intact, would hamper the government’s crime-fighting ability.  That’s likely accurate, but there are two things about that.  One is that the convenience of government is not an excuse for limiting individual liberties either directly or through the companies we own. Some of you have heard that from me before.

The other thing, though, is that extending the statute to reach beyond our borders is a political decision, not a legal one.  Only the political arms of our government—Congress and the President acting together (or with Congress overruling a veto)—can make that decision; only the political arms of our government can extend the Act or write a new one to fill the apparent gap.

There’s this bit of disingenuousity, too, from Solicitor General Noel Francisco:

Microsoft’s employees could prepare that disclosure without leaving their desks in the United States[.]

They could prepare such disclosures without leaving their desks in the US in 1986 when the Act was passed, too.  All they had to do was write letters to the managers of the overseas storage facilities.  Nothing has changed here except that email has replaced gofers and the mail room.  Nor has the status of the material stored overseas changed.

On the other hand, Microsoft and other massive tech companies also are raising red herrings.

Microsoft, Google, and other technology companies say…the case could threaten American dominance in the $250 billion cloud-computing industry, because foreign clients won’t use US firms if their data isn’t protected.

That also may be true, and it’s also not relevant.  That’s a question that’s strictly a business matter and not a legal one.  To the extent government help is useful in filling this business gap, it’s also a political question, and these businesses need to seek their recourse through those political arms of our government.

Finally, there already is an alternate route to getting the emails, as admitted by DoJ in their filings:

There is a diplomatic process, governed by legal assistance treaties, that allows the US to request that foreign law-enforcement counterparts share sought-after data, but it can be slow and ineffective, the department said.

There’s that convenience thing, again.

What does the text of the Act say? That’s what the Justices must apply, not a phantom Act that doesn’t exist but that does represent what Justices or DoJ officials might wish the Act to say.  Article I, Section 1, is quite clear about who gets to write the statutes in our system of government, and extending the reach of an existing statute is law-making that is beyond the reach of any member of the judiciary or of the DoJ.

Unnecessary

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The Treasury Department wants to keep Dodd-Frank’s “orderly liquidation” power, albeit with “tweaks.”  The authority was designed so the Federal government could take those financial institutions the government itself decided were “systemically important” and shut them down if the same government, in sequence with that SI claim, decided the business was not performing up to government-dictated standards.

That’s a lot of “decides” in government hands.  It also deliberately bypasses existing bankruptcy law that has done a fine job with business failures generally and would do a fine job with financial institutions in particular, were government not putting itself in the way.

To be sure, Treasury claims to want

…changes to the bankruptcy code to make it easier for such a failure to be resolved in bankruptcy court….

To my cynical mind, though, that just sounds like a distraction in order to slide by the continuation of Government control over decisions concerning whether a business is sound enough to operate and if not, Government control over the terms of the business’ demise.

No.

Dodd-Frank needs to be rescinded in toto, including both “systemically important” determinations and control over bankruptcy procedures.

It may be that existing bankruptcy law needs improvement, but that’s a separate question, and it should not be mixed in with Dodd-Frank legitimacy questions.

A Satirical Paean to the CFPB

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Todd Zywicki, a professor at George Mason University’s Antonin Scalia Law School, has written one for The Wall Street Journal.

Yet despite its rocky start, the original promise of the CFPB is sound: to protect and empower consumers, promote fair and competitive markets, and stabilize the financial system.

At least, I hope it’s satirical; it’s hard to believe that Zywicki could be this naive.  Some examples:

Working with the private sector and Congress to reverse this growing exclusion of Americans from the financial sector is a moral imperative.

To turn Herb Croly’s words around a bit, the average Federal bureaucrat is morally and intellectually inadequate to serious and consistent conception of his responsibilities as a democrat.  The private sector needs no Congressional or bureaucratic organization to function inclusively; it needs only a free market unhindered by bureaucrats’ intrusions.

The bureau can help unleash the power of FinTech by invigorating dormant tools like the no-action letter program and Project Catalyst….

Sure—the bureaucracy should do better by pushing other bureaucracies. Gotta be satirical, right?  Right?

The CFPB should concentrate its efforts on empowering families….

[Sigh]  Not by differently purposing an intruding a bureaucracy, but by getting rid of it.  Sounds like Zywicki was serious rather than satirical.

The CFPB must go.

Student Loan Debt

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This is appalling, and it says a lot (albeit it’s not the only thing able to be said) about the morals of those we’re “graduating” from college and university these days.

A study released Friday by the Brookings Institution finds that most borrowers who left school owing at least $50,000 in student loans in 2010 had failed to pay down any of their debt four years later.

Scofflaws. They need their wages garnished. If they’re unemployed, they need to be put into work programs–there are always highway rights of way that need cleanup, and ditches that need digging. They also can be put into AmeriCorps VISTA.

But no bailouts.

The 529 Plan Expansion

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Recall that the tax reform enacted last December expanded the usability of 529 Plans to include expenses for K-12 education.  Now some are worried that this will harm State tax collections.  It’s a bogus beef on a number of fronts.

In December, as part of a broad tax overhaul, Congress expanded the accounts to cover up to $10,000 a year in expenses for kindergarten through 12th grade.

State budget officials are now concerned that a large number of parents will use 529 accounts to pay private-school tuition, giving them a new write-off for their state taxes.

School choice—the horror.  How terrible it is that parents have a way to help their children escape failing public schools or simply to transfer them to schools of their choice rather than be faced with the often poor choice of public school or home school.

There’s this bit of disingenuosity, too:

That could result in potentially millions of dollars in lost tax revenue at a time when most states are struggling to close budget deficits.

“I’m worried that families could use these accounts to avoid paying state taxes,” said Illinois state treasurer Mike Frerichs, a Democrat. “This is only going to put a deeper hole in the budget.”

This is especially rich coming from nearly bankrupt Illinois and that State’s Treasurer.  What’s actually blowing a hole in Illinois’ budget is its profligate spending, in Illinois’ case wastrel spending on public union pensions and teachers union pensions in Chicago.  Beyond that, using 529s to defray the costs of educating a child in Illinois isn’t tax avoidance, it’s parents seeing to the welfare of their children.

Then there’s this bit.

The Cruz provision [the amendment that inserted the 529 expansion into the tax reform bill] is projected to cost the federal government $500 million over nearly a decade, but it could cost the states much more, research suggests.

This is nonsense. Aside from the fact that it doesn’t cost the Federal government anything to not get what doesn’t belong to it, it’s also not costing the States anything for the same reason: the money isn’t the States’; the money belongs to the citizens of the States.

Furthermore, instead of worrying about deficits caused by not getting revenue that isn’t theirs, the States should worry about deficits caused by their profligate spending—and that’s not just Illinois.

This misunderstanding by American Enterprise Institute‘s Deputy Director of Education Policy, Nat Malkus, is surprising.

It’s not federalist at all.  I don’t think that the federal government should be cavalierly making problems for states by messing with state taxes.

Federalism isn’t touched by the 529 expansion.  That expansion doesn’t impact State taxes in the slightest; those remain the sole decision of the State governments.  All that’s “messed with” is tax collections, collections of OPM.