The Double-Taxation Bogeyman Rides Again

by Neil H. Buchanan

The sales job for the White House's non-plan to change the tax system is not going well, by all accounts.  As usual, Donald Trump's lack of focus has distracted everyone, as he flits from one personal feud to another and circles back around to his obsessions with destroying the health care system and building his expensive and pointless wall.

Even so, I stand by my prediction that at some point Trump and the Republicans will pass something that -- no matter how limited or small it is -- they will call "sweeping tax reform," and the supposedly hostile press will play along.

After all, this is a group of people who held a Rose Garden celebration merely because they managed to pass a (terrible) health care bill through one house of Congress.  Imagine their victory lap even if they have done nothing more than, say, change the exclusions for the Alternative Minimum Tax or the depreciation rules for capital investment?  Imagine the lies that their in-house economists will tell of how this new bill will trickle down to the paychecks of "the forgotten people."

Although I am predicting that the talk of a big rewrite of the tax code will end in failure, it is nonetheless interesting and important to keep track of what is happening while the farce plays out.

There is one misdirection play in particular that might actually be used by both Republicans and Democrats for different purposes.  In separate areas of the tax debate, both sides might claim that they are right because it is ever so important to avoid "double taxation."  They will both be wrong.

What to Do about SCOTUS Mistakes: A Not-So Modest Proposal

By Eric Segall

This week ProPublica issued a report with the headline "It's a Fact, Supreme Court Errors aren't Hard to Find." The group reviewed "dozens of cases" and said that it found a "number of false or wholly unsupported claims." Examples included erroneous voter registration rates in Chief Justice Robert's Shelby County decision striking down a key section of the Voting Rights Act; an unsupported conclusion by Justice Alito about the percentage of American companies that require background checks for its workers similar to the ones used for federal employees; and Justice Kagan's statements about the reliability of drug sniffing dogs in an important Fourth Amendment case. ProPublica claimed in the report to review 83 randomly selected opinions over a five year period and found assertions of "legislative facts" in 24 of those cases. The group alleged that seven of those opinions, more than 25%, contained false or unsupported statements of fact.

This report, which should trouble all Court watchers, commentators, and the American people, caught the attention of Fordham Law Professor John Pfaff, who wrote an op-ed on the problem in the New York Times. Pfaff observed that "policy is a major part of the Court's docket now" but neither the Justices nor their clerks have "any serious training" in empirical methods such as statistics. He argued that the Court has traditionally relied on amicus briefs "to provide it with that broad empirical background" but unfortunately "many amicus briefs include false or unsubstantiated empirical assertions, at least some of which make it into the Justices' opinions." Pfaff also noted that many, if not most Supreme Court cases, get to the Court after years of lower court litigation "providing interested groups plenty of time to gin favorable findings." So, in Pfaff's words, "what to do?"

Guns, Constitutional Tests, and Games

by Michael Dorf

My latest Verdict column asks whether a federal ban on bump stocks would violate the Second Amendment. The short answer is no, but as I explain, the full answer is a bit more complicated. During the litigation that culminated in the 2008 SCOTUS ruling in DC v Heller, it was taken for granted by all the lawyers and justices that the federal ban on possession and transfer of machine guns made after 1976 is valid. Indeed, as I note in the column, Walter Dellinger, arguing for DC, labored to persuade the Court that machine guns are indistinguishable (for Second Amendment purposes) from other firearms and that therefore the Court ought not recognize an individual constitutional right under the Second Amendment. The ultimate opinion for the Court strongly hints in dicta that the machine gun ban is valid, but doesn't do a very good job of explaining why.

My column argues that the actual test the Court announced for whether various types of weapons count as "arms" under the Second Amendment seems to point in favor of counting machine guns: There are enough of them in circulation--about half a million--to count as in "common use" and thus not "unusual." To be clear, I don't think the courts are actually going to invalidate the machine gun ban, but I do think that the explanation for the validity of the ban is problematic.

The column uses that fact as an occasion to discuss the validity of a hypothetical law that would ban bump stocks, but there is also a more immediate question. Various states have banned so-called assault weapons, especially semiautomatic rifles such as the AR-15. There is currently pending before the Supreme Court a cert petition by the plaintiffs who challenged Maryland's ban on semiautomatic rifles. They lost in the district court, won before a panel of the Fourth Circuit, and then lost before the Fourth Circuit sitting en banc. The cert petition alleges a circuit split regarding the proper test for determining whether arms are in "common use" but no split regarding bans on semiautomatic rifles or large-capacity magazines. Accordingly, it is difficult to predict whether the SCOTUS will grant cert.

In any event, I want to use the balance of this essay to address a contention made back in 2011 by Judge Kavanaugh in his dissent from the opinion of the DC Circuit upholding the District's semiautomatic rifles ban. All of the judges on the panel agreed that semiautomatic rifles count as "arms" for Second Amendment purposes. The question was how to determine whether a law (more or less) banning this category of arms was nonetheless valid. Applying intermediate scrutiny, the majority said yes. By contrast, Judge Kavanaugh said no, but he gave a different answer to the threshold question of what standard of scrutiny applies. Noting that courts were divided over whether strict or intermediate scrutiny applies to laws infringing the Second Amendment, Judge Kavanaugh said neither. Instead, he wrote, courts should “assess gun bans and regulations based on text, history, and tradition.” In so stating, he echoed a point that Chief Justice Roberts made during the oral argument in Heller. There is a superficial appeal to their idea, but, as I shall explain, it is unworkable.

The role of “moderate” Republicans in the Trump end-game

by William Hausdorff

I started writing for this blog 15 months ago, in July of 2016, when it became evident that Trump was about to capture the Republican nomination for President.  In the first column, I conveyed my bewilderment that “decent individuals” of the Republican establishment were playing along with Trump.  I noted the creepy parallel with how the conservative German political establishment played along with Hitler in the early 1930s.

Even before Trump was inaugurated the questions continued--would the Republican Senate majority blithely approve all of his cabinet nominations, no matter how crazy, nasty, or unqualified?

Only one Trump cabinet nominee failed to be confirmed.  Most strikingly, even though the National Security Advisor position is not subject to Senate confirmation, the certifiable whack-job Michael Flynn was named to the post with nary a Senate peep despite his and his son/advisor’s tweets on all manner of sick, bizarre conspiracy theories.

Since then, the deranged toddler-president, a serial liar, openly corrupt in so many ways, bitterly obsessed with his predecessor and his opponent in the last election, continues to be loathed by more than half of the population.  Lashing out uncontrollably on all topics and individuals trivial and powerful, especially women, black athletes, and Hispanics, he flagrantly and personally taunts the nuclear-armed North Korean dictator, and declares his scorn for the victims of catastrophic hurricanes and flooding in Puerto Rico by hinting at viciously cutting off vital humanitarian relief. 

Meanwhile, by unilaterally withdrawing from international agreements, the US government is systematically alienating its closest allies in Europe, as well as the other superpowers badly needed to help control North Korea and the still volatile Syrian situation.

This is not just bad for the US, it’s bad for business and bad for the Party in power.  For these reasons, I believe this is not sustainable.  The federal government cannot continue to function like this, even in the medium term.  I believe that the Party in power recognizes that.

Originalism and Textualism in Action: Not Constraining and Not Neutral

by Joseph Kimble

In an August 25, 2017 blog post, Michael Dorf asked, “How Determinate Is Originalism in Practice?” His conclusion from the evidence: not very.

There followed a series of exchanges between Prof. Dorf and Prof. Lawrence Solum about sample size, alternative reasons for originalists’ ideologically conservative results (such as the need to sometimes compromise with the nonoriginalist justices), the reluctance of progressives to make originalist arguments, and other counters to Prof. Dorf’s conclusion. In the end, I thought his conclusion stood up: while you might expect originalism to lead to moderately conservative results, the decisions of Justices Scalia and Thomas are anything but. Even without data, it’s “blindingly obvious” (as Prof. Dorf puts it) that their decisions are overwhelmingly conservative. Originalism does not constrain.

And neither does its companion, textualism. Here the empirical evidence is compelling, if not incontrovertible.

The Care and Feeding of a Poltiically Useful Non-Scandal

by Neil H. Buchanan

How does a false story become the basis of a political hit job, serving an ideological agenda while refusing to go away, no matter how many times it is debunked?  Why do some tall tales of political perfidy last far beyond their expiration dates?

At this point, anyone familiar with the U.S. political conversation cannot possibly know which of several "genuinely fake" scandals I might have in my sights.  The claim that climate change is a conspiracy among scientists?  Benghazi?  Vaccines?  The Clinton emails?  There is an extensive menu of false-but-persistent stories from which to choose.

As it happens, I am returning once again to the non-scandal that has enveloped the Internal Revenue Service for more than four years.  The Republican Party has been obsessed with the completely fantasy-based claim that the Obama Administration directed the IRS to "target" right-wing political groups that had applied for tax-exempt status.

I recently wrote a column in which I described a new report that should finally "remove the head or destroy the brain" of this zombie.  Should have, but won't.  Today, I am here to explain why nothing will stop Republicans from acting as if there really was a scandal all along.

What Does a Faux-Nobel Prize Tell Us About Economic Policy?

by Neil H. Buchanan

"You can't beat something with nothing."  That adage is usually trotted out when someone wants to say that a purely negative argument is not enough to win, that is, that "merely" showing that someone else is wrong is somehow never sufficient to win a debate.

As such, the saying ought to be the opposite of a truism.  If someone makes a bad argument, the only thing necessary to beat that argument should be a clear refutation.  "I am a great deal maker," says a man.  "No, you make bad deals," you respond.  "Oh yeah?  Show me someone who makes better deals!"

As illogical as that is, it is surprisingly common for people to continue to accept bad claims until someone proves an alternative claim.  Criminal lawyers will tell you that sowing reasonable doubt in a jury's mind is almost never enough, because jurors want "a better story."  If the defendant is not the murderer, then who is?

One would hope that such mindlessness would not infect arguments among academic experts, but it does.  In particular, the field of economics has been dominated for decades by people who proffer a bad theory but who have thrived by saying, "Oh yeah, you say our theory's bad?  Where's yours?"

It is no small matter that that dominant theory is rigged to generate right-leaning policy prescriptions.  Combined with serious financial backing from conservative sugar daddies, the field of economics has been built upon a default theory that purports to prove Ronald Reagan's assertion that government is always the problem and never the solution.

There have, of course, been plenty of economists with orthodox training who have argued in favor or both micro- and macroeconomic theories that lead to centrist and liberal policies.  But it has always been true that such theories and policies are viewed with suspicion and must be ten times as strong to receive even one-tenth of the credibility that standard right-wing dogma receives by default.

Thankfully, economists have in recent years started to relent, and the world is becoming better for it.  The orthodoxy is at last starting to crack.  The interesting question is whether the orthodox theory is dying because of its own inherent weakness or because something came to replace it.  Did nothing beat something, or did something beat something?

Irrationality, Baselines, and Government "Intervention"

by Michael Dorf

Shortly after the news of the Las Vegas mass shooting broke last week, business reporters noted that, as is typical after mass shootings, the share price of companies that manufacture firearms went up. Why? Because in the wake of such events, gun sales spike. Why? Because people who are thinking of buying a gun think they better do so quickly, before the government makes gun purchases illegal. Savvy investors know this will likely happen, so they bid up the share price of the gun manufacturers in anticipation of the increased demand, increased sales, and thus better short-term profits.

But this only makes sense if the investors also anticipate that serious gun control will not actually be enacted. After all, if a mass shooting were to lead to the enactment of serious gun control, then the short-term spike in sales and thus profits would be more than wiped out by the long-term decline in business for the gun manufacturers. And it must also be true that the potential gun purchasers do not realize that gun control won’t actually be enacted; if they did, they wouldn't feel the need to stock up now. Indeed, we must assume even more—namely that some of the people buying guns in the wake of a mass shooting are not merely buying early but buying guns they otherwise wouldn’t have bought at all. After all, if gun purchases are merely shifted from (say) 2018 Q2 to 2017 Q4, that should have a small impact on share price, which, in a perfectly rational market, aggregates the value of the firm out to infinity. If all that were happening was the shifting in the timing of purchases, there should be only a modest benefit to the firm from earlier sales (because of the time value of money), probably not enough to justify the price spike we see following mass shootings.

And the market eventually figures this out. Thus, if you look at the performance of firearms stocks, you see that the gains they make in the immediate aftermath of a mass shooting are usually given up by about a week thereafter. For example, at the beginning of this week, American Outdoor Brands (the parent of, among other brands, Smith & Wesson) was trading for slightly less than it was before the Las Vegas tragedy, after having gone up then down. Storm Ruger stocks followed the same trajectory. Perhaps this means that the market figured out that this time there will be serious gun control, but that seems extremely unlikely, given the talk about, at most, banning bump stocks. Rather, it looks like Wall Street investors who bid up share prices of firearms stocks in the wake of mass shootings are not perfectly rational actors. If they were, they would anticipate the eventual fall of the stocks and so not buy. Indeed, if even a substantial minority of investors appreciated the pattern, they would also appreciate the arbitrage opportunity and bet against the firearms stocks for the medium-term aftermath of a mass shooting, which should eliminate the effect altogether. So these predictable gains-then-losses following mass shootings provide further evidence that the efficient capital markets hypothesis is not perfectly accurate. It appears that collectively, investors buying firearms stocks in the wake of mass shootings are victims of the availability heuristic: they overweight recent salient events in making their decisions.