Power & Market

Supreme Court Delivers Another Blow to Public Sector Unions

06/27/2018Tho Bishop

In a 5-4 decision released this morning, the Supreme Court ruled that public sector unions do not have the right to impose fees on non-union members. This ruling overturns a previous decision in Abood v. Detroit Board of Education, and is seen as a "decisive blow" to public unions.

Gary Galles offered background on the case in a June Mises Wire article:

In Janus v. AFSCME, the key issue was the Abood precedent, giving government employee unions authority to charge workers for the costs of negotiating on their behalf, but not for unwanted union political spending, which would violate their First Amendment rights. Mark Janus argued that all union expenditures are inherently political (e.g., if government union members get higher wages or better benefits, taxpayer costs will rise), which would result in banning all coerced non-member fees by government employee unions.

Unions and left-leaning groups ignored the Constitution and went all in defending Abood as a controlling precedent, requiring continuation under stare decisis. Unfortunately, Abood does not stand up as a Constitutional precedent.

The reason is the Supreme Court’s application of three-tiers of scrutiny for Constitutional rights. For some rights, notably economic rights, as in Commerce Clause cases, it applies a “rational basis” or minimal scrutiny test, requiring only that some legitimate government interest is involved, and the law has some rational relationship to that interest, which in practice is almost a rubber stamp. For First Amendment and other rights they deem more important, “strict scrutiny” is applied, requiring a compelling government interest and a law narrowly tailored to that interest, using the least restrictive means, which is a standard far more difficult to meet.

The central precedents that Abood relied on were Commerce Clause cases, addressing government’s right to regulate labor disputes, subject to minimal scrutiny. They did not address whether mandating union agency fees violated First Amendment rights, which the Supreme Court has increasingly held, that are to be subjected to strict scrutiny. Therefore, they provide no controlling precedent for Janus. The minimal scrutiny justification of advancing “labor peace” in Abood cannot meet the strict scrutiny standard for compelled speech in Janus, and does not justify stare decisis deference.

An interesting note on this case is that the plaintiffs arguments relied heavily on the work of Sylvester Petro, an early supporter of the Mises Institute and an expert in labor law. Earlier this year Mark Pulliam of Misrule of Law wrote a great tribute to Petro's work and how he his work has grown in influence over time:

Why is Petro relatively unknown despite his prolific writing? Part of the explanation lies in academic politics; Petro was an unabashed libertarian, a proponent of Austrian School economics, and an unrelenting critic of the National Labor Relations Act (particularly as interpreted and enforced by the National Labor Relations Board). Petro believed that the ideal regulation of labor relations consisted of enforcing consensual contractual arrangements and prohibiting coercion and the use of force, in accordance with the common law. The NLRA squarely rejects this paradigm, substituting instead a regime of cartel-style “exclusive representation,” mandatory “collective bargaining,” significant impairment of employers’ contract and property rights, and legal privileges for certain union conduct.

Perhaps no area of law is so full of myths as labor law, and nobody was more committed to debunking those myths than Petro was. During Petro’s teaching career (1950-1978), such views–although popular in the business community–were decidedly out of the mainstream in legal academia. While Richard Epstein found greater acceptance for the libertarian point of view in the 1980s, along with the advent of the “law and economics” movement that validated application of free market principles to legal analysis, during the 1950s and 1960s Petro was unfashionably ahead of his time. Petro, out-of-style during the heyday of his career, was largely forgotten by an increasingly politicized professoriate after he retired. Later generations of labor law professors, at home with the premises of the NLRA, found it easier to ignore Petro than to respond to his withering critique. The current generation of progressive intellectuals ruling the academy scorns Petro as an “ideologically driven” scholar holding “radically anti-union views.”...

Petro was a pioneer in opposing the application of NLRA concepts to public-sector labor relations, and even served as counsel for the dissenting employee in Abood v. Detroit Board of Education, 431 U.S. 209 (1977), arguing the case in the U.S. Supreme Court. It is fair to say that Petro anticipated all the problems and abuses that Abood created, which the Supreme Court has been forced to confront in a series of subsequent cases. Forty-one years later, many observers predict that the Court will finally overturn Abood in the Janus case this term. Once again, Petro was ahead of his time.

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Spare Me Claims Gina Haspel Will 'Speak Truth to Power,' Real Truth-Tellers Go to Jail

05/16/2018James Bovard

In the Senate Intelligence Committee secret vote today on whether to confirm Trump nominee Gina Haspel as chief of the CIA, she will likely again be praised for promising to “speak truth to power.” This has recently become one of the favorite accolades in the least trusted city in America. But will Americans be as gullible this time around?

When 7-term congressman and dutiful Republican functionary Porter Goss was nominated in 2004 to become CIA chief, Sen. Barbara Mikulski (D-MD) endorsed him after he promised to “always speak truth to power.” Fat chance: after he was confirmed, Goss speedily sent a memo to CIA employees muzzling them, declaring that their job was to "support the administration and its policies in our work.” Goss bungled the CIA so badly that the Bush administration heaved him out after less than two years on the job; Goss later became a lobbyist for the Turkish government.

“Speaks truth to power” had a starring role in the 2005 Senate coronation of John Negroponte, America’s first Director of National Intelligence. While working as Reagan’s ambassador to Honduras, Negroponte perennially denied that the Honduran regime was committing vast atrocities, despite its killing of tens of thousands of its own citizens. (Honduras was aiding the Nicaraguan Contras at the time.) But that did not deter Sen. Jay Rockefeller, D-W.Va., Sen. Jon Corzine, D-N.J., and Sen. Mikulski from recycling the “truth to power” phrase in speeches endorsing Negroponte. 

When Michael Hayden was nominated as CIA chief in 2006, Sen. Carl Levin (D-MI) vouched that Hayden would “speak truth to power.” But Hayden profoundly misled Congress regarding the CIA’s torture program and his credibility was demolished in the 2014 Senate Intelligence Committee report on the enhanced interrogation program.

Read the rest at USA Today

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Sports Fans Win Big from Legalizing Gambling, Now Keep Congress Out of It

05/14/2018Tho Bishop

Very rarely do I have a reason to praise Chris Christie, but he delivered one today by winning his Supreme Court case granting states the power to legalize online gambling. 

This move is a major win for sports fans, even those who don't prefer to gamble. Why? Just as marijuana legalization has led to all sorts of entrepreneurial innovations in cannabis markets, the growth of legal sports gambling will lead to all sorts of new products to give gamblers a better edge - which will include better sports analysis. We have already seen this develop in the fantasy football industry. A great article on The Ringer chronicle the rise of a new generation online draft gurus who have challenged celebrity sports analysts like Mel Kiper Jr. for fan attention. What is only briefly alluded to in the piece is that this industry is largely driven by money invested in for-profit fantasy football players. Some of the most respected modern draft analysts explicitly make money from selling fantasy football products, including Rotoworld's Josh Norris and Evan Silva (this year's most accurate NFL draft projector), and FootballGuy's Matt Waldman.

A desire for a gambling edge has led to all sorts of fascinating research in fantasy strategy itself. For example, Shawn Siegele of Rotoviz applied Nassim Taleb's work on antifragility in his analysis on what deemed a "zero-running back strategy." Another fantasy entrepreneur, JJ Zachariason, applied economic analysis to position value to argue against selecting an early round quarterbacks in his popular e-book "The Late Round Quarterback." Again, money invested into the industry allowed others to create a career analyzing the subject in ways that have enhanced the understanding of millions of football fans. The division of labor at work.

Legalization of online sports gambling comes at a particularly interesting time for sports. The recent struggles of ESPN may in large part be due to increased politicalization of its analysis, but it's also a reflection of changing media trends as a whole. Podcasts, YouTube, social media (particularly Twitter), and an endless supply of online blogs have allowed sports fanatics of all sorts of new ways to consume serious sports analysis. As outlets such as the long successful Rivals.com have shown, the particularly devoted sports fan is willing to pay for high quality, niche-specific content. (A similar strategy is being embraced by The Athletic, which has invested tens of millions in a pay-for-content online model.) ESPN is trying to tap into this market with its new ESPN+ service, and it will be interesting to see what sort of gambling-specific products emerge on the platform.

Unfortunately, while sports fans should benefit from today's decision, there still remains the question of how the Federal government will respond.

As Lawrence Vance has recently noted, Republicans in Congress have already begun to work on legislation aimed at killing states' newly won gambling freedom:

So, is online sports betting in your future? Not if some Republican senators have their way.

Back in 2015, Senator Lindsey Graham (R-SC), with eight cosponsors, including Republican senators Tom Cotton, Mike Lee, and Marco Rubio (and one Democratic senator, Dianne Feinstein), introduced the Restoration of America’s Wire Act (S.1668) to “restore long-standing United States policy that the Wire Act prohibits all forms of Internet gambling, and for other purposes.” The bill would amend

provisions of the federal criminal code, commonly known as the Wire Act, to provide that the prohibition against using a wire communication facility for the transmission of bets or wagers, wagering information, or wagering proceeds shall: (1) apply to any bet or wager (currently, to bets or wagers on any sporting event or contest); and (2) include any transmission over the Internet carried interstate or in foreign commerce.

The bill was referred to the Senate Committee on the Judiciary, where it could still come up for a vote.

A new bill to effectively ban online gambling on a federal level, with a stated purpose almost as long as its text, was introduced in the Senate in September by Tom Cotton. Co-sponsored by Senators Mike Lee and Lindsey Graham, the bill (S.3376) is a “reaffirmation of the prohibition on funding of unlawful internet gambling.” It is designed to “ensure the integrity of laws enacted to prevent the use of financial instruments for funding or operating online casinos are not undermined by legal opinions not carrying the force of law issued by Federal Government lawyers.” The complete text of the bill reads:

The Memorandum Opinion for the Assistant Attorney General of the Criminal Division of the Department of Justice, dated September 20, 2011, shall have no force or effect for the purposes of interpreting section 5362(10) of title 31, United States Code.

That’s it. A one-sentence bill. Too bad all bills introduced in Congress aren’t this short. Perhaps then members of Congress would actually read them. The “Memorandum Opinion” in question concluded that “interstate transmissions of wire communications that do not relate to a ‘sporting event or contest’ fall outside the reach of the Wire Act.” You can read a legal analysis here. This bill was likewise referred to the Senate Committee on the Judiciary.

But whether these bills pass, are voted on, or even make it out of committee is immaterial. The fact remains that certain members of Congress think it is their duty to keep Americans from gambling; that is, spending their own money as they so choose.

In totally unrelated news, Las Vegas casino mogul Sheldon Adelson recently donated $30 million to the Republican Party's Congressional efforts. 

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Stockman on Fox Business: No, the Pentagon Doesn't Need Its Budget Raised to $700B

04/25/2018David Stockman

David Stockman brought some sanity to Fox Business's Mornings with Maria earlier today. He blasted the hypocrisy of both parties on spending, warned of the dangers of rising bond yields, and called out the absurdity of US foreign policy.

Stockman Battles Fox Business: No, the Pentagon Doesn't Need Its Budget Raised to $700B

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Salerno at AERC 2018

03/28/2018Mises Institute

In his introductory remarks, last week, Joe Salerno articulated the strategic importance and uniqueness of the Mises Institute's annual Austrian Economics Research Conference. If you missed the live broadcasts, those videos are available on Mises.org.

The Austrian Economics Research Conference | Joseph T. Salerno

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Senate to Vote on Continuing US Support for Saudi's War on Yemen

03/20/2018Tho Bishop

Updated: The Vote Failed 55-44

A bipartisan group of senators (Mike Lee, Bernie Sanders, and Chris Murphy) are forcing a vote on the US involvement in the Yemen conflict with a vote expected sometime today. The timing of the vote coincides with a visit by Saudi Crown Prince Mohammad bin Salman, whose country has waged war again Yemen since 2015. The Trump Administration, which has a pricey love affair with Saudi Arabia, is working to kill the effort. 

The resolution, if successful, would require the US military to cease all support for militarily not targeting al-Qaeda or “associated forces.” While this qualification likely means the US will not stop intervening in the country, it is an attempt for the Senate to clearly recognize that Yemeni forces are not subject to any of the Authorization for the Use of Military Force (AUMF) vote that Congress have passed since 2001.

While this specific vote is being brought up under the War Powers Act, it is worth mentioning that the necessity of this vote is more an indictment on that legislation than anything else. Without its authorization during the Vietnam War, the ability for the US military to get involved in conflicts like Yemen without first receiving the explicit support of the legislature would be far more limited.

As Tom Woods has noted:

Until the War Powers Resolution, no constitutional or statutory authority could be cited on behalf of such behavior on the part of the president. Now it became fixed law, despite violating the letter and the spirit of the Constitution.

It so happens, moreover, that thanks to a loophole in the resolution, the 60-day clock begins only if and when the president reports to Congress under Section 4(a)(1) of the Resolution. Surprise, surprise: presidents have therefore reported to Congress in a more generic manner rather than expressly under that section. They issue reports "consistent with" rather than "pursuant to" the Resolution.

Even still, in a few cases presidents have acted as if the 60-day limit were in effect, perhaps out of political considerations (even if from a strictly legal point of view it was not). But Bill Clinton’s multi-year military intervention in Bosnia alone, without even so much as a nod in the direction of Congress, made perfectly clear that the resolution, whatever good points may be buried within it, was effectively a dead letter.

The Resolution calls for "consultation" by the President with Congress before committing troops to combat. This consultation, we are told, is to occur "in every possible instance." (Who could possibly find a loophole there?) In practice, presidents have interpreted this provision to mean that they must notify Congress following the initiation of hostilities — not exactly what its drafters probably had in mind.

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Shawn Ritenour Named a Mises Institute Senior Fellow

03/13/2018Mises Institute

The Mises Institiute is excited to announce that Dr. Shawn Ritenour is our newest Senior Fellow. Dr. Ritenour is a professor of economics at the historic Grove City College, where he assists with the annual Austrian Student Scholars Conference. 

Dr. Joseph Salerno, academic vice president of the Mises Institute, had this to say about the announcement: 

We are thrilled to have Shawn Ritenour accept our invitation to become a Senior Fellow.  Shawn is a renowned scholar in the Misesian tradition.  He is the editor of the Mises Reader, the most important compilation of selections from Mises's works yet published.  His own treatise, Foundations of Economics: A Christian View, is much more than a mere economics  textbook and can be read with great benefit by anyone wishing to achieve a foundational  understanding of modern Austrian economics in the tradition of Mises and Rothbard.

Dr.  Ritenour will be giving the Lou Church Memorial Lecture at this years Austrian Economics Research Conference. Read more from Shawn Ritenour here

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SCOTUS Is Right to Not Overturn California's Gun Waiting Period

02/20/2018Ryan McMaken

The Hill today reports that the US Supreme Court is refusing to hear a case challenging a California law prescribing a waiting period for gun purchases. In other words, the SCOTUS is allowing the California law to stand:

The Supreme Court on Tuesday refused to hear a challenge to a California law that requires there be a 10-day waiting period after all gun sales, even if the person is already a registered gun owner.

California’s "cooling off period" is the second longest in the country, according to court documents, and was enacted to give state authorities time to run a background check and give individuals who might want the firearm to harm themselves or others an opportunity to calm down.

Only eight other states and the District of Columbia have any kind of waiting period.

Two California residents, Jeff Silvester and Brandon Combs, who already own guns legally, challenged the application of law along with two nonprofits: The Calguns Foundation Inc. and The Second Amendment Foundation Inc.

They argued the waiting period is unconstitutional when it’s applied to "subsequent purchasers" — individuals who already own a firearm according to California’s AFS database or have a valid concealed-carry license and individuals who clear a background check in less than 10 days.

The 9th Circuit Court of Appeals disagreed. It said the 10-day waiting period is a reasonable safety precaution for all purchasers of firearms and need not be suspended once a purchaser has been approved.

Now, I am not supporter of laws such as these. On the other hand, I also am opposed to the federal government stepping in to overturn state laws. 

State autonomy in this matter is important from a decentralist and pro-federalism position. But it is also important from a legal position, because as Brion McClanahan has made clear in his work on the Constitution and the Bill of Rights, the Second Amendment does not apply to the states. 

Many gun-ownership advocates wrongly claim that the Second Amendment applies to the states, but this is not the case. In other words, they accept the legal doctrine of "incorporation" invented in the late 19th century which applies the Bill of Rights to state governments.

McClanahan notes, however, that not only is "incorporation" a faulty legal doctrine, but it was never applied to the Second Amendment until very recently. 

In this podcast [beginning around12:00] with McClanahon, he examines the historical realities surrounding the adoption of the Bill of Rights, and it is clear that the provisions of the Bill of Rights were intended as "restricting clauses on the general government" and that "these amendments were to apply only to the general government." 

There is a reason, after all, that nerly all state constitutions contain some provisions guaranteeing a right to bear arms. This was seen as the domain of the state governments. 

Federalism, properly understood, puts gun regulation in the hands of the state government. And while I am generally laissez faire on this issue, I agree with McClanahan that the federal government ought not to be the agency to which gun advocates appeal for protections of gun-ownership rights. 

More: Decentralize the Gun Laws by Ryan McMaken

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Stakeholders and Corporate Social Responsibility

02/08/2018Peter G. Klein

Nicolai Foss and I have written a paper criticizing currently fashionable "stakeholder" approaches to the firm and the idea that managers should pursue "corporate social responsibility." BlackRock CEO Larry Fink, who manages $6 trillion in corporate assets, made a splash last month by insisting that corporate executives focus not on shareholders, but on a broader segment of society: "Companies must ask themselves: What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioral finance and other tools to prepare workers for retirement, so that they invest in a way that that will help them achieve their goals?"

Foss and I argue that this view ignores the basic function of ownership, which is to exercise responsibility for productive resources. Building on Mises's judgment-based view of entrepreneurship, we argue that corporations should be run in the interests of owners -- and that not everyone affected by a company's actions, let alone society at large, is an owner. Here is the abstract:

We argue that the stakeholder and CSR literatures can benefit from more systematic thinking about ownership. We discuss general notions of ownership in economics and law and the entrepreneurial notion of ownership we have developed in prior work. On this basis, we argue that stakeholder theory needs to deal more systematically with ownership as an economic function that can be exercised with greater or lesser ability, may be complementary to other economic functions, and works better when assigned to homogeneous groups. Some stakeholder groups are likely to lack what we call “ownership competence,” even if they have made relationship-specific investments, in part because of diverse interests. We also discuss CSR from the perspective of ownership and support Friedman’s original position, but with a twist. The point of Fried-man’s paper is not that firms “should” maximize profits, but that managerial pursuit of “socially responsible” activities in a discretionary way imposes costs on owners. We suggest this problem is exacerbated with entrepreneurial managers who can devise new ways to disguise self-interested actions as CSR initiatives.

The paper is titled "Stakeholders and Corporate Social Responsibility: An Ownership Perspective" and is forthcoming in Advances in Strategic Management. A manuscript copy can be downloaded at SSRN.

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Salerno on the Tom Woods Show: The Truth About F.A. Hayek

01/31/2018Mises Institute

Joe Salerno joined The Tom Woods Show this week to discuss the works of F.A. Hayek and why he has been a source of controversy within some libertarian circles.

One of the topics discussed is the debate over dehomogenizing the work of Hayek and his mentor Ludwig von Mises on the impracticality of socialism. Since this is the 30th anniversary of this debate, we will have a panel dedicated to it at this year's AERC. 

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