Friday, September 28, 2012

Romney, Lying Liars, and Concern About Concern Trolls

-- Posted by Neil H. Buchanan
Yesterday, in my Verdict column and my Dorf on Law post, I discussed Mitt Romney's recently revealed comments about "the 47%" -- the people who supposedly pay no taxes, and who (therefore?) have no intention to vote for him.  One of the documents that I cited in my column is a recent analysis from the Tax Policy Center (TPC).  That analysis nicely summarized most of the key points that debunk Romney's comments, using basic statistics (that is, facts).

Some readers might remember that TPC -- which has always enjoyed a well-deserved reputation for being solidly nonpartisan (and which is, for that matter, utterly orthodox in its economic approach to analyzing tax issues) -- was savaged by the right-wing echo chamber for having had the temerity to publish an analysis of the Romney tax non-plan.  Their analysis showed that, even after giving every benefit of the doubt and making every judgment call in Romney's favor, his tax plan could not meet all of his stated goals.  In particular, if he wanted to lower tax rates to the levels he has specified and not lose revenue, taxes would have to go up for middle class (and probably poor) people.

As I say, TPC was quickly attacked by the usual crowd, with claims that TPC was somehow an arm of the Obama campaign.  This should not have surprised anyone, of course, because even the fiercely nonpartisan Congressional Budget Office is regularly attacked by Republicans in Congress when its analyses do not support conservative positions.  TPC was forced to defend itself against these similar attacks, and it has continued with its important work.  When Romney's remarks about the 47% came out, TPC did what it should do in response to an issue that falls squarely within its area of expertise: analyze the numbers and announce its findings.  And those findings made Romney look foolish, or worse.

I first found out about the TPC's analysis of the 47% in the same place where I see many such studies: the indispensable TaxProf Blog.  On the comments board for the post about the new TPC study was a classic "concern troll" comment.  (For those who are unfamiliar with the term, a concern troll is a reader of a blog post whose comment boils down to something like this: "I am not saying that you're wrong, but I'm just very concerned that you're saying this in a way that is unhelpful.")  Concern trolls are almost never demonstrably wrong, of course, because they trade in counter-factuals: "Oh, if only you took a different tone, your point would have been so much more influential.  But by forgetting to follow the rules of polite society -- admitting that everyone has a point, never assigning blame or assuming bad faith -- you have done yourself harm, compared to what you could have achieved by playing nice."

Here is the concern troll's comment about the TPC's analysis:
"TPC is demolishing its reputation as a non-partisan source of information by repeatedly wading into political debates. Even if the analysis is perfectly accurate exactly down the middle, people on either side will not see it as such.  Accuracy issues aside, TPC's recent topic selection has shown a bias toward Democrats, their points of view, and their accusations against Republicans. ... TPC has always been above reproach, providing pertinent and accurate analysis of important and feasible policy alternatives. This year it's turning the corner to becoming yet another partisan think tank analyzing largely irrelevant topics that are being promoted by Democrats' campaign staffs. That's really sad. It's so hard to build a reputation for impartiality and so easy to destroy it through carelessness.  I'm reminded of the advice given by Obama's first Secretary of Defense Robert Gates: Just shut up. Although he phrased it less delicately."
So, the basic idea is this: If the TPC sees an issue that is within its area of expertise, and it has something to say about it that is relevant to current political discussion about taxes, it should just "shut the f*ck up" anyway, because telling the truth will destroy its reputation for impartiality -- "[e]ven if the analysis is perfectly accurate exactly down the middle."

Notice, of course, that this concern troll -- like all concern trolls -- is not really saying what s/he purports to be saying.  It is not that TPC needs to protect its reputation for impartiality, it is that it is destroying that reputation by showing a bias in its topic selection, looking at "largely irrelevant topics" that favor Democrats.  You know, irrelevant topics like whether a man with a 20% chance of becoming the next President, and who steadfastly refuses to give any specifics about his tax plan, can achieve the combination of feel-good goals that he has bothered to specify.  Irrelevant topics like whether a major party's candidate for President is at all accurate in his description of how the tax system affects different people in the country.

I have no idea who the author of that particular comment was, and it does not matter.  He or she perfectly captures the essence of trolldom.  Whereas the classic concern troll's comment is always couched as a matter of form ("You shouldn't have said it this way"), it is almost always a complaint about content ("You shouldn't have said that!") -- without being willing to argue about the merits.

Which means that concern trolling is merely another form of false equivalence.  Let us say, purely hypothetically, that one side of a debate is simply lying.  The other side is not as pure as the driven snow, but its partisans do not simply deny facts.  What does one do?  The US media defaults to "he said, he said" reporting.  And concern trolls tut-tut about calling lying liars what they are.

As I noted above, however, the concern troll's nominal argument is never actually wrong.  We cannot know, after all, whether being just a little bit less confrontational, forcing ourselves to be just a bit more even-handed, would have worked better.  Even though the liars are lying, it is always possible that the better path would be to smile and assume the best, pretending that nobody's pants are on fire.  It is just that all the evidence of the past generation or so suggests otherwise.

As I was writing my column on Wednesday, I found myself writing these sentences: "The idea that, at a given moment in time, only half of the country is paying taxes is, therefore, so wrong as to be laughable.  That it has become the key talking point for Republicans for almost six years now would be amazing, if it were not for that party’s track record when it comes to denying the realities of global warming, evolution, and any other inconvenient aspect of taking the actual economic or scientific evidence seriously."  I considered concern-trolling myself, but I decided that, especially in the current political environment, pretending that both parties are reality-based would be a much greater sin than risking the wrath of the trolls.

Maybe there's an ironic twist there.  Those who might express concern about the bluntness of such statements can themselves be concern-trolled: "I am not saying that you're wrong when you criticize people for being too critical, but I'm just very concerned that you're saying this in a way that is unhelpful."

Thursday, September 27, 2012

The 47% and Other Romney Gaffes

-- Posted by Neil H. Buchanan

In my new Verdict column today I try to find a fresh angle on Mitt Romney's much-discussed sneering dismissal of "the 47%" -- the people who owe no federal income tax in a given year, and who (according to Romney) will thus never vote for him.  (Whatever else might be said about all of this, one must at least acknowledge that Romney is no longer being overshadowed by his running mate, though not by design.)

There is so much wrong with what Romney said that nearly every commentator in the country has had a field day picking it apart.  That very notoriety, however, made it daunting to imagine being able to say something different about Romney's inflammatory statements.  For what it is worth -- and to put it in academic terms -- my column points out the methodological inconsistency between two Republican talking points.

In Romney's comments, which are absolutely mainstream Republican views (that is, not some aberrant off-the-cuff remark), the focus is on a "snapshot," or a "static view," of the world: in Year X, 47% of the people have zero net federal income tax liability.  Setting aside all of the other problems with that statement (other taxes, inclusion of retirees, and on and on), the basic problem is that Romney acts as if there is a cohesive, unchanging group of nontaxpayers over time.  (That he also thinks of those people as perfectly overlapping with Obama's voting base betrays yet another defect in Romney's political skills.)

Of course, many commentators have offered a variation on this point, discussing in particular the lifetime earnings profiles of people who do not pay federal income taxes in a given year.  Not only does everyone actually pay some taxes (at the very least, sales taxes and excise taxes) in any given year, but over the space of several years (and certainly several decades), the number of people who will fall into the "never paid federal income taxes" category approaches zero.  The arbitrariness of using an annual accounting method completely drives this misleading statistical factoid.

My additional point was to discuss how this focus on annual accounting contradicts the insistence by Republican and conservative commentators on measuring income inequality over time, or with a "dynamic view" rather than a static one.  Sure, they say, there are a certain number of people who are poor in any given year.  But it is not the same people who are poor in each year.  The economy, we are told, acts as a "blender," agitating the income distribution so that those at the bottom have a chance to rise to the middle or top, and those in other positions on the income spectrum will move around, too.

Fair enough, but only as a methodological point.  It does make sense to look at both a static and dynamic view of inequality.  The problem is that the inequality story does not get any better in a dynamic analysis than in a static analysis.  U.S. income mobility is shockingly low.  Beginning with the Reagan years, we have not only seen a huge increase in inequality, but we have also seen a huge decrease in income mobility.  There are a lot more poor people, and their prospects of breaking out of poverty are increasingly slim.

If the taxpayer/nontaxpayer issue itself mattered in some fundamental way, which it does not, then it would also be important to look at it from both static and dynamic perspectives.  Because I do not think that the maker/taker thing is at all coherent, however, the whole inquiry is nonsense, no matter whether one looks at snapshots or moving pictures.

Even so, Romney's side loses the argument in all four quadrants: taxpayer/nontaxpayer analyzed dynamically, taxpayer/nontaxpayer analyzed statically, inequality measured dynamically, and inequality measured statically.  A clean sweep!

A further question is how this mega-gaffe measures up to Romney's other gaffes.  I will leave aside some of the more juicy ones (insulting the London Olympic oraganizers, for example) and compare the 47% comment to two other Romney moments: when he said that he "likes firing people," and when he said that "corporations are people."

The problem for Romney, of course, is that these gaffes are adding up, so that the merits of each comment individually are less important than how each one contributes to the big picture.  Moreover, it is not just that he is gaffe-prone.  Joe Biden says regrettable stuff, too, but his gaffes do not fit into a pattern.  Romney, by contrast, manages to say things that all contribute to his image as an out-of-touch superrich guy (offering to bet $10,000 with Rick Perry, mocking the crowd's raincoats at a NASCAR event, and so on).

The "I like firing people" comment seems to me to be the least objectionable of Romney's gaffes.  In context, what he was trying to say was that it is good to have choices, and if a person is dissatisfied with Vendor A, then it is good to have the option to take one's business to Vendor B.  That is such a fundamental aspect of market economics that it does not even rise to the level of "capitalism," because one could have multiple, profit-oriented vendors even without modern forms of capitalism.  Again, "I like to be able to take my business elsewhere" sounds a lot better than "I like firing people," but if Romney were writing on a clean slate, this would have been a forgettable slip.

"Corporations are people, my friend," an in-the-moment response to a heckler, is less forgivable.  One of the odd aspects of discussions about this comment is that many people (even some liberals) immediately defended Romney by saying, "Well, there's a way in which it's literally true."  Yes, but that is far different from looking at the comment in context, which is why the "I like firing people" comment is ultimately so inoffensive.  Even though corporations have legal status as persons in some limited situations, it is not true that corporations are people, especially not in the sense that was relevant to the context of Romney's reply.

The heckler's comment was, after all, not a statement that Romney was wrongly recognizing the legalities of corporate governance.  He was saying that what matters is people, and Romney's policies favored corporations.  To defend Romney's response with the observation that corporations do share certain legal rights with people really misses the point.  He could have said that policies favoring corporations end up helping real people, but that was not what he said.  (And frankly, that opens the whole issue of who controls corporations, which Romney would be wise to close tight.)  The out-of-context truth of corporate personhood, therefore, does not save Romney.

Even so, that gaffe is nothing compared to the awfulness of the comments about the 47%.  It is not even accurate to refer to those comments as a gaffe.  They are far worse than that.

One of my research assistants, trying to give Romney the maximum benefit of the doubt, suggested in conversation that Romney might not actually believe what he said, but that Romney knew what that particular audience would want to hear.  Under that view, he is not an elitist, just an especially craven panderer.

There is, however, just no way out of this for Romney.  Politicians who uncomfortably stand in front of groups that want to hear certain things can figure out ways to pander that are still minimalist.  A Republican moderate can give a speech to a Tea Party group, or a Democrat in the 1950's could give a speech to an all-white club, without pushing every button that the group wants to have pushed.  Romney's comments, by contrast, were "all in."  A reluctantly pandering Romney would not have said what he said.  His comments are based on the idea that it is not just that people are too poor to pay taxes, as I noted in my Verdict column, "it is that they are morally defective."

Moreover, as Maureen Dowd (if I recall correctly) commented, Romney's demeanor in delivering those comments suggested that he was physically and mentally exhausted.  We know that Romney does not drink alcohol, so this is the closest we will get to an in vino veritas moment.  He was too tired to measure his words, and he had an audience that would lap up his true views, so he let loose.

He was already losing the election, but the release of that tape might have made the trend irreversible.  And for good reason.  Again, part of this is a totality-of-circumstances inquiry.  Even without the rest of his track record, however, these comments -- dismissing people who refuse to "take personal responsibility and care for their lives," who feel entitled to food and housing -- are just devastating.  We now know how he really feels about millions upon millions of Americans, and it is not pretty.

As Romney said, however, 47% of the population is locked in to vote for Obama.  Similarly, 47% or so will definitely vote for Romney, even if he calls for martial law. Maybe these much-discussed comments can still be overcome with a good debate performance, or a big October Surprise of some sort.  For now, however, we area looking at a candidate who simply has to live with having revealed out loud some of the most deeply disturbing attitudes that most people can recall hearing from a major political candidate.

Wednesday, September 26, 2012

Opening Day at Supreme Court Poses a Question that Heraclitus Pondered

By Mike Dorf

The great pre-Socratic philosopher Heraclitus stated the following problem, which has much engaged philosophers ever since: Theseus sets out in a wooden ship; over time, various planks wear out and are replaced by new planks; eventually, every plank comprising the ship has been replaced; is the resultant ship the same ship in which Theseus set out?

In the foregoing statement of the Ship of Theseus puzzle, the issue is simply semantic: The answer depends on what we mean by same.  But to see the question as simply semantic is to miss what Heraclitus was doing in this puzzle.  In a great many contexts, we think sameness a matter of underlying reality.  The issue is acute in the philosophy of personal identity.  Am I the same person today as I was yesterday?  As I was when I was an infant?  As I will be when I am an old man?

Or, consider a variant of the Ship of Theseus problem that appears in the philosophical literature.  Suppose that as each of the original planks of the ship wears out, it is not simply discarded but set aside, and that after many years, someone reassembles them into their original pattern.  Now we have the question of which ship is the real ship of Theseus: The reassembled planks or the ship gradually constructed one-at-a-time from new planks?  This puzzle can also be dismissed as semantic, but taking it seriously may shed light on what we think about teleportation in the Star Trek fashion.  When Kirk and Spock beam down to a planet, do they beam down or are they killed aboard the Enterprise, while replicants who think they are Kirk and Spock and who have  their memories are created on the planet?  Would your answer change if--by analogy to the modified Ship of Theseus example--the transporter doesn't actually vaporize Kirk and Spock on the Enterprise but simply copies them, transmitting the information about the arrangement of their atoms down to the planet?  A reductionist view within the philosophical literature argues that even with respect to personal identity, these questions are semantic, but that is a contested view within philosophy, and so one needs an argument for dismissing the alternative views as confusing a semantic question for a metaphysical one.

And what has all this to do with law, you ask.  Well, next week the Supreme Court hears oral argument in Lozman v. City of Riviera Beach, which poses the question of whether a houseboat--or a "floating residential structure", as the petitioner calls it--is a "vessel" as that term is defined in the federal Dictionary Act, thereby triggering admiralty jurisdiction and the substantive rules of law that go with it.  Everyone agrees that a fully operational boat is a vessel and that a house on land is not a vessel.  How much does one need to modify the house before it becomes a vessel?

As with the Ship of Theseus, so too with the Houseboat of Lozman, we can see how a house can be transformed from a house to a boat (and thus a vessel) one modification at a time, such that it starts off as a non-vessel and ends up becoming a vessel but that the dividing line between non-vessel-ness and vessel-ness will be stipulative.  In this sense, the riddle of the Houseboat of Lozman closely resembles the Sorites Paradox (generally attributed to that great Greek paradox peddler, Eubulides of Miletus): You have a heap of sand; you remove a grain; you still have a heap;  you repeat the process; eventually you have no sand left, and thus no heap of sand, but the removal of no single grain of sand clearly demarcates the heap/non-heap distinction.

For myself, I don't think that every version of every one of these puzzles is simply a semantic question.  To my mind, Kirk and Spock are either really dead or really transported down to the planet.  But most of the classic statements of the puzzles do strike me as simply pointing out the imprecision of our language.

That's true of legal language too--and the critical point I wish to make is that this remains true even if one decides to be a purposivist in matters of statutory interpretation.  We can think that the question of whether Lozman's houseboat/floating-residential-structure is a vessel should turn on the purposes of admiralty jurisdiction.  But even so, there will be borderline cases in light of those purposes.  Indeed, one claim of anti-purposivist textualists is that resort to a statute's purpose leaves the judge considerable discretion.

Speaking of the textualist/purposivist debate, my latest Verdict column uses the Lozman case to shed light on the Hart/Fuller debate.  After all, whether Lozman's houseboat/floating-residential-structure is a vessel is a kind of watery version of the much-mooted hypothetical no-vehicles-in-the-park ordinance.

Tuesday, September 25, 2012

Occupy's First Anniversary

By Mike Dorf

On the first anniversary of the launch of Occupy Wall Street, pundits as well as past and present Occupiers have been weighing in on whether the movement succeeded or failed, and where, if anywhere, it goes from here.  Although I never manned the barricades, I'll admit that I have been intrigued by Occupy, and broadly sympathetic to its methods as well as most of its goals.  In this post, I want to say a word about the nature and future of Occupy.

From very early on, Occupy was criticized for lacking a concrete agenda.  Some of this criticism came from the right, and seemed deliberately obtuse about the clear concern with economic justice voiced by nearly all of the Occupiers.  But even many commentators who were broadly sympathetic with Occupy's orientation relative to conventional political categories were concerned about the movement's failure to come forward with a concrete program or to enter conventional politics.

How fair is that criticism?  To the extent that OWS is a haven for anarchists--as some of the "official" program indicates--it pretty clearly misses the point.  The anarchist wing of OWS thinks that the extant political system and any economic system that makes a place for substantial corporate activity is necessarily rotten.  Of course such people will not put forward a legislative program to be ignored by the people who hold power in that system.

But the truth is that, as with the American left more generally, anarchists are very much over-represented among the visible self-appointed leadership of OWS.  Rank-and-file Occupiers are not, fundamentally, radicals.  They seem much more in the tradition of pre-Marxist 19th-century American transcendental utopianism.  These are earnest, decent people--often more than a bit naive but certainly not bomb-throwers.  If that sounds like a condescending description, I don't mean it to be.  My point is simply that other than skewing young, the membership of Occupy is not all that different from American society more broadly.

So I don't think it quite right to defend the agenda-less-ness of Occupy on the ground that anarchists don't need an agenda, since Occupy is not mostly made up of anarchists. But neither is it agenda-less. Yes, as with any mass movement, there was some muddled thinking--with Ron Paul-style "end the Fed" signs and Tea-Party-style opposition to the bank bailouts of the late Bush Administration. But for the most part, Occupy has stood for a fairly clear progressive agenda that includes, at its core, the following:

--more progressive taxation;
--campaign finance reform;
--re-regulation of financial institutions, along the lines of Glass-Steagall
--debt relief for homeowners and students.

That list is remarkable not for being ill-formed or radical but for how moderate and mainstream it is. Each of these items has been proposed by multiple elected officials at some point over the last four years. Some portion of it was enacted before Occupy got going (in the form of Dodd-Frank) but to the extent that the rest of it has stalled politically, that does not appear to be because of any lack of specificity or disconnection from the world of political reality. With more Democrats in Congress, something like the foregoing agenda might well have been--or still be--enacted.

If there has been a substantial flaw in the Occupy vision and strategy, I think it is the movement's tendency to view American politics through a pox-on-both-your-houses lens. It's true, as Occupiers say, that in many respects the mainstream of the Democratic Party is almost as beholden to monied interests as the Republicans are. But there remains enough of a difference between the parties to render arguments about equivalence somewhere between silly and dangerous (should they be used to justify sitting out elections or supporting spoiler candidates).

Indeed, given how comfortably Occupy fits into the progressive wing of the Democratic party, the real question for the movement going forward may be figuring out its raison d'etre. Other groups that formed spontaneously have tended to simply become part of the furniture of American left/liberalism. MoveOn went this way over a decade ago. If the Occupiers do not wish to simply be absorbed by the American left, is there any constructive yet distinctive role that it might play?

Perhaps. Occupy's distinctiveness thus far has been its flat, consensus-based organizational structure. If that was a bit of a headache for outdoor protests, it poses a serious challenge as Occupy goes indoors and online. But it is also quite an opportunity. The 2008 Obama campaign began to harness the power of social networks for a conventional political campaign. In 2012, both parties routinely integrate Facebook and Twitter into their fundraising, politicking and organizing. But those are examples of basically top-down organizations trying to take advantage of the horizontal structure of social networks. A true horizontal movement (like Occupy) ought to be able to find opportunities in the new technologies that have thus far eluded more traditional organizations.

What are those opportunities? I certainly don't know, but then, I'm not a twenty-something Occupier. Occupy could disappear, but it also could invent some interesting new forms of political engagement. We'll have to check back in on it at a later anniversary.

Monday, September 24, 2012

The Future Soon

By Mike Dorf

The new (and terrific) film, Robot and Frank, holds some potentially interesting, if muddled, messages, about the promise and perils of technology.  Spoiler Alert: After the trailer, I'll give a very abbreviated plot summary, but I won't give away anything beyond what the trailer gives away.

[Readers of the email without embedded video, you can see the trailer by clicking here.]

Okay, here's the basic setup: Older man, Frank (played by Frank Langella), is beginning to suffer memory loss and has a hard time caring for himself while living alone.  His grown son gets him a robot to help.  The film is set in the near-future, when such technology is feasible but not yet so common that people are accustomed to having robot servants.  Frank at first resists the robot but then discovers that the robot has no moral qualms about helping Frank--an ex-con burglar--in new heists.  What amounts to a buddy movie ensues.

An important sub-plot involves the local library, which appears to be patronized by just about nobody, except for Frank, and it also appears that Frank's main reason for going to the library is to visit with the librarian Jennifer, played by Susan Sarandon.  But the library is being liquidated by wealthy yuppies, led by a character called Jake (played by Jeremy Strong), who has a nefarious air about him (somewhat like Paul Reiser's character in Aliens), even though it's never quite clear why.  In addition to a conflict with Frank and the robot, Jake's plan for the library is to scan then destroy most of the books and convert the library itself into a social space.  His rationale, which is portrayed as somehow debased, is that people can get whatever they want to read instantly without having to visit a library, so the space should be used for some purpose other than the storage of books.

The filmmakers pretty clearly mean the audience to disdain Jake's plan for the library, but other than the fact that librarian Jennifer, a sympathetic character, doesn't like the plan, they never really explain what's wrong with it.  Indeed, the antiquarian sentiments expressed by Jennifer and Frank with respect to the library appear to be incongruous within the film's larger story.  The robot repeatedly tells Frank that it lacks sentience but Frank doesn't believe it.  When Frank says the robot is his friend, he's trying to prevent his daughter (played by Liv Tyler) from realizing that he needs the robot to commit crimes, but Frank is also telling the truth: the robot is his friend.  The film's most poignant scenes involve Frank deciding whether to blank the robot's memory--and thus prevent that memory from being used as evidence against Frank--at the risk of "killing" his friend.  Aware of his own fading memory, Frank strongly identifies with the robot.

Far from being a cautionary tale along the lines of Terminator or The Matrix--or, in jokey fashion, the song for which I have named this post--Robot and Frank carries a relatively hopeful message about the robotic future.  Indeed, the closing credits feature clips of unthreatening robots that already exist performing helpful tasks.  So why the (implied) demonization of kindles, nooks, iPads and other e-readers, and the concomitant glorification of books?  I raise the question not so much to try to get inside the heads of the people behind Robot and Frank but because I have encountered the same attitude among colleagues in talking about the future of libraries.

A couple of years ago, I served on the search committee for Cornell's chief law librarian.  As one would expect, everybody we interviewed expressed ambivalence.  On the one hand, they all recognized that digitization meant they would need to re-imagine libraries for a future that is already upon us, in which the vast majority of what people need to read can be obtained much more cheaply and much more quickly via download than via printed books or journals.  On the other hand, they all also expressed the view that libraries would continue to play some function as curator--to preserve rare books and to serve older users still not fully comfortable with the transition to e-readers.

Now, it's easy to dismiss the second set of attitudes as mere nest-feathering.  Of course librarians want to preserve some function for printed books in libraries.  Otherwise, they're out of a job.  But what I discovered during our librarian search--and have repeatedly encountered since--is that there is substantial sentimental attachment to books.  Undoubtedly, there's a large generational divide.  Even my younger colleagues are still too old to have grown up reading on screens, and so they (and I) have a reflexive attachment to books on paper.  Indeed, even my pre-adolescent kids--who have and use Nooks--still mostly prefer to read on paper.  So some of the attachment to paper is probably just a reflection of the fact that for all of their advantages, e-readers still haven't fully overtaken paper.  But that day is coming soon.

When it does finally get here, will there be anything other than sentimentality and luddism to keep us attached to old-style books?  The closest I can come to providing a reason to say yes is to note that reading an old-style book is a commitment to the written word in a way that reading on an iPad or other high-end e-readers is not.  Such devices are not merely readers.  They are also video and gaming platforms, as much an alternative to a tv as an alternative to a book.

The more sophisticated robots become, the more they can simulate human qualities that satisfy basic needs for connection (notwithstanding the supposed uncanny valley).  The more sophisticated e-readers become, the less they feel like reading a book and the more of a threat they pose to reading--or at least so one might worry.  I don't know whether the makers of Robot and Frank were driving at this point, but it strikes me as a plausible one, in any event.

Friday, September 21, 2012

Unconstrained Politics and Government Spending, or, Is It Too Dangerous to Give Congress the Power to Call Some Projects "Investments"?

-- Posted by Neil H. Buchanan

In a post two weeks ago, partly in response to a student's inquiry regarding my advocacy of federal deficit spending, I described some extremely powerful examples of government investment spending that had recently been shown to have enormous payoffs.  These two investments (a massive research program in human genetics, and infrastructure spending to protect New Orleans from suffering a repeat of the devastation wrought by Hurricane Katrina) are exactly the type of spending that can easily be justified, even if they are financed with borrowed money.  (Indeed, as I have argued here on DoL, good financial accounting would suggest that they should be financed by borrowing, even if there were the political will to pay for them up front.)

The student who inspired that post has an accounting background, so she completely and immediately understood the fundamental concept of "capital budgeting" -- classifying government spending into the separate categories of investment or non-investment programs -- and the logic of borrowing to finance the investment projects.  Showing how quickly this discussion returns to politics, however, she followed up with the statement that she simply does not trust Congress to make responsible decisions about which projects are high-payoff projects (and thus can be financed with debt).  Her skepticism is, of course, well-founded -- and, if anything, has become even more salient as the mindset among the newest members of Congress has become ever more unhinged from reality.

Therefore, my immediate response to the question, "But can we trust Congress?" was, "Of course not, and I don't intend to."  I then gave a shorthand description of my proposal to create an expert commission, the Growth Budgeting Board (GBB), to prevent exactly the kind of game playing that jumps to any reasonable person's mind when we consider giving Congress the power to borrow for "good" spending.  (My DoL post describing the proposal is here.  The law review article is available here.)

The underlying problem is that separating the federal government's investment projects from non-investment projects, and then allowing/requiring investment projects to be financed with borrowed money, makes it politically "cheaper" to approve investment projects.  Non-investment projects, after all, would have to be paid for with current-year tax revenues, which have an immediate political cost.  Because of the cognitive defects of our political system, the path to approving such projects would thus be rockier than those that had been blessed as "investments."

And one need not be a right-wing anti-government zealot to be skeptical about the long-term payoffs of some proposed investments.  (Right-wing anti-government zealots simply believe that there is no such thing as government investment.  For them, it is not even an empirical question, much less a difficult one.)  Just as a teenager tries to convince his parents that having a car of his own will be "totally worth it" -- allowing him to help with trips to the grocery, more regular visits to study at the library, and so on -- politicians at all levels of government have shown again and again that they can be equally giddy (if not more so) when it comes to telling implausible stories to justify pet projects.  The supposed payoffs from building new sports stadiums are not even the most absurd fantasies.  (My personal favorite is the federally-financed Lawrence Welk Museum, in North Dakota -- but that is only because my grandparents tormented us as kids by forcing us to watch "The Lawrence Welk Show" on Sunday evenings.)

Therefore, my GBB proposal is an attempt to use technocrats to discipline the Congressional budgeting process.  If you give Congress a tool to make projects look too cheap, then you should worry that Congress will abuse that tool.  Politically insulated professionals, using well-established accounting standards, would be able to prevent Congress from running amok (at least partially).  One can disagree with my analysis on multiple levels, but that is the core idea: Congress often misbehaves, so we need to figure out ways to discipline them.

Although I continue to believe that a GBB-like entity would be the right way to go (or, better still, simply having the Congressional Budget Office add GBB-like analysis to its existing scope of work), my student's question has caused me to think anew about a related question: What if we created a capital budgeting system (in which projects designated as "high-payoff investments" could be financed by deficit spending), but we did not also create a disciplinary mechanism to keep Congress's worst impulses in check?  Although that would be worse than my proposal, would it be worse than the status quo?  I doubt it.

Recall that, under the current system, we implicitly treat all government projects as having the same long-term payoff: exactly zero percent.  No matter how the government's money is spent, we act as if it is either pure waste or only a "sugar high" (to steal a phrase that is currently being misused to attack the Federal Reserve).  This means that, when Congress goes on the hunt to cut spending -- trying to prove that it is serious about fiscal discipline -- everything is on the chopping block.  One dollar of cancer research is the same as one dollar spent to cover a classical statue's partial nudity.

If Congress could designate some spending as investment, there would certainly be a lot of inaccuracy involved.  Some worthy projects would never be funded, or would be misclassified as non-investment.  Some wasteful projects would show up on the list of investments.  I have no doubt that the result would be highly inaccurate (both over- and under-inclusive), to say the least.

Again, however, the question is whether that would be worse than the non-system that is in place today.  It is difficult to see how it could be.  The procedural maneuvers and raw political power that would allow a member of Congress to "protect" a favored program by putting it on the investment list are all available now, to continue to fund the programs in the current system.  The only way that this could be worse is if the existence of the favored list would create its own inertia, so that a project that might have come under scrutiny in a world without a special designation would be free of scrutiny in a system of capital budgeting.

That latter possibility seems remote.  For one thing, most of the least defensible projects are not ongoing, but are rather one-shot deals.  There are, moreover, plenty of ways to sneak bad projects into spending bills now.  It seems no different to wage any battle that might be fought at the "Is it an investment?" level in a capital budgeting system than it is to wage that battle over including the project in an appropriations bill under the current system.  I realize, of course, that there are actually very few such battles; but again, I think that the low level of scrutiny would be identical in either case.

On the other side of the ledger, it seems likely that the investment list ("good" spending) would include at least some projects that actually ought to be there, and that would not otherwise be approved for funding under our current system.  The upcoming "fiscal cliff" partly involves across-the-board cuts in programs that are not differentiated as investments or non-investments, with certain categories of spending excluded (Social Security, Medicare, Medicaid, interest on debt).  If we had had a category of high-payoff investments in place, it is much more than plausible that those projects would have been spared the automatic cuts.  And even in regular, day-to-day budget battles, money for infrastructure or education could be more reliably preserved if it were designated as an investment.

As always, therefore, this involves a series of educated guesses about what Congress would do.  Even if I am too optimistic about the low likelihood of funding still more Lawrence Welk Museums, it certainly seems unlikely that any such additional waste would outweigh the gains from protecting real investments.

If, therefore, a proposal were made to separate the federal budget into investments and non-investments, but without any disciplinary mechanism imposed on Congress, I would still support it -- not because I trust Congress, but because I think they have already done about as much damage as they can do in this area, while the new process could preserve some important investments in future prosperity.

Thursday, September 20, 2012

Housing Subsidies, Incentives, and the Phantasm of Efficiency Analysis

-- Posted by Neil H. Buchanan

In my Dorf on Law post last Friday, I previewed a debate that was to be held later that day at the ABA Tax Section's Fall meeting in Boston.  There, in a modified high school/college debate format, we discussed the current U.S. tax subsidies that are quite consciously designed to increase the number of people in this country who buy the residences in which they live, rather than renting them.  The Affirmative team argued for a tax code that would have no incentives for home ownership, while the negative argued for a continuation (with possible modifications) of the current system of subsidies.

The specific resolution for debate was that "the United States should make the Internal Revenue Code neutral with respect to home ownership."  Due to an odd turn of fate, I ended up debating for both teams, which means that I was guaranteed to both win and lose the debate.  An audience vote determined the winner, with the Affirmative team getting 6 votes and the Negative team 3 votes, which meant that the majority in the room (of about 25 people) was either unconvinced by either side or had fallen asleep.  (I honestly doubt that the latter was true of anyone.)

The format of the debate included a five-minute "cross examination" period after each constructive speech, which amounted to a short Q&A, putting the speaker briefly in the cross-hairs of the (very supportive and constructively non-confrontational) audience.  Not surprisingly, some of the most productive moments of the debate occurred during those cross-examination periods.  I want to devote the remainder of this post to the first question that I received, after my First Affirmative Constructive speech.  That question highlighted what is, for me, one of the most interesting and ubiquitous questions not only in all of tax law, but in modern policy scholarship in general: What role should the concept of economic efficiency play in the design of public policies?

At the beginning of my speech, I (like any good First Affirmative debater) defined the key term in the resolution, which in this case was the word "neutral."  I defined a tax code as being neutral when it, "neither by commission nor omission, tends to give tax-planning-related reasons to alter one's decision" about owning a residence rather than renting it.  I then emphasized that I was NOT using the economic concept of "Pareto efficiency" as our standard of neutrality.

I explained that the reason to define neutrality without reference to Pareto efficiency is that it is not only unnecessary but misleading to do so.  Pareto efficiency, as I have written many times before (e.g., here and here), relies on an unfixed baseline that can be manipulated to make any subjectively preferred policy appear to be objectively efficient (and subjectively unappealing policies to appear, correspondingly, to be objectively inefficient).  Therefore, it ends up being unhelpful -- both analytically, and as a policy matter -- to try to categorize policies as efficient or inefficient.

This is why I use the word "phantasm" as a (clearly disapproving) descriptor of efficiency analysis in the title of today's post.  On a website called, the entry for phantasm includes the following helpful note: "fantasy  is imagination unrestricted by reality; phantasm  is a ghostly appearing figure or something existing in perception only."  Existing in perception only, indeed!  Thousands of us have been trained to see efficiency, being able to point on graphs to the supposed embodiment of the decrease in social welfare that exists when the government imposes inefficient policies.  When one actually looks under the sheet, however, the ghost does not exist.  What we want to label an objective fact -- "policy X is inefficient, while policy Y is efficient" -- dissolves into the night when we begin to think clearly about what underlies such a claim.

The Affirmative side's position, therefore was that Congress should not enact policies (or to refuse to enact other policies) that would tend to cause people to buy residences, rather than renting them.  Our arguments for that proposition, which I provocatively labeled "Favoring Housing Harms People," were entirely familiar to anyone who has followed the home ownership debate.  The "tax expenditures" that subsidize mortgage interest payments and other aspects of home ownership have the effect of redirecting money that the government could have used to promote other types of spending (or to create tax subsidies for other categories of appealing policies, such as expanding the Earned Income Tax Credit for the working poor).  More broadly, policies that favor ownership of residences change the way economic resources are deployed by private parties as well as by governments, causing the average size of houses and condos in this country to increase by something like 50% over the past generation or so.

As I mentioned above, a question during the cross-examination period captured an important point.  Professor Jonathan Forman, who teaches that the University of Oklahoma College of Law, asked me why I had said that I was not relying on a definition of "neutrality" that tracked the notion of Pareto efficiency, given that my arguments sounded very much like the usual Pareto-style complaints about the "waste" that results when the government shifts a demand or supply curve in a way that "distorts" the (otherwise presumptively efficient) market outcome.  Was this not, he asked, a tension in my argument?

The key point is that one can decry as "over-investment" the growth in the size of private residences without relying on a falsely-objective notion like Pareto-efficiency to do so.  Or, to put the point more specifically in this context, it is just as easy to describe a set of assumptions under which the growth in the size of houses was an improvement in efficiency as it is to describe a set of assumptions under which that expansion in the size of houses resulted in economic inefficiency.  By contrast, if one does what the Affirmative team did in this debate, which is simply to say as a normative matter that the world would be a better place with smaller houses in the U.S. (and, crucially, more resources devoted to normatively superior uses, such as environmental remediation or educational subsidies), then one need not rely on a phantasm to inaccurately describe as objective a subjective statement of priorities.

One might be tempted to say: "Well, you don't need Pareto-efficiency to justify your preferred policy, but I can use Pareto-efficiency to justify that same policy.  So what's the difference?"  (I am not -- repeat NOT -- saying that Professor Forman asked that additional question.  He asked only why my example sounded so much like an efficiency-based argument, which it arguably did.)  The difference is, in fact, quite profound.  Claiming that one is using a Pareto-efficiency standard to objectively condemn housing subsidies relies on a framework that is completely manipulable, whereas relying on a policy judgment that lays out the normative basis of the conclusion makes the terms of the debate clear, and it therefore makes clear why ownership subsidies should (or should not) be repealed.

This distinction caused me to recall a moment in graduate school, during a meeting of the "Political Economy Seminar."  Political Economy was the catch-all term for, roughly speaking, "the small group of marginalized people who reject Pareto-efficiency-based economic analysis."  (Pareto-efficiency-based analysis is known unaffectionately as Neoclassical Economics.)  One graduate student, however, was taking the seminar simply to take every opportunity to argue that the rest of us were deluded and wrong, and that Neoclassical Economics is obviously true and right.

At one point, the professor made a point that was based on an econometric analysis that she had recently published.  The angry grad student scoffed: "Well, that's Neoclassical Economics!"  The professor said that, no, it was simply an empirical conclusion.  The student replied, "Yes, but you used econometrics to reach that conclusion, and econometrics is neoclassical."  This is like saying that Catholics use literary analysis of historical documents to try to prove that Jesus existed, so anyone else who uses literary analysis of historical documents is a Catholic (and, therefore, must believe that Jesus existed).

All of which leads me back to an old, but oft-forgotten point.  Describing how people respond to incentives -- changes in tax rules, and all that -- is not Pareto-efficiency-based analysis.  Believers in the power of Pareto-efficiency analysis talk a lot about incentives, but noting that people respond to incentives does not validate Pareto-efficiency as the basis for sound policy analysis.  Pareto-efficiency-based analyses draw purportedly objective conclusions that, in fact, "exist in perception only."  Policy analysis is enhanced when we ignore phantasms and admit that we are struggling in a world in which objectivity is much to be desired (and applauded in the limited places in which it can be found), but in which subjectivity is always present.

Wednesday, September 19, 2012

Introversion and Class Participation

By Sherry F. Colb

In my Justia Verdict column for this week, I discuss a fascinating book by Susan Cain,  Quiet:  The Power of Introverts in a World That Can't Stop Talking, and I examine some lessons we might take from the book for a critical evaluation of our existing jury system.  I argue that as currently practiced, the jury system allows extroverts to dominate deliberation and that such dominance undermines the benefits presumed in bringing many people with different perspectives together to make decisions.  Especially relevant to this critique is research regarding conformity and the surprising results of a recent study that looked more closely at why people echo erroneous statements made by their peers.

In this post, I want to consider a different downside of extroversion-dominance:  its toll in the law school classroom.  Like many colleagues, I have from very early in my teaching career awarded "bumps" to student grades for excellent class participation.  What this means is that if a student regularly volunteers helpful ideas and answers to questions in class, then his or her grade on the examination may be increased by one step (B+ to A-, for example) at the end of the semester.  I have always considered this practice to be a reasonable way to reward and take into account the contributions of my students to class discussions and to serve as an incentive for those who might otherwise neglect their work to do the reading conscientiously and come prepared to talk about it.

After reading Quiet, however, I must grapple with some uncertainty about whether this practice is fair or indeed sensible (though I am bound to apply it this semester, as I promised to do so in the syllabus).  One of the things that emerge when I receive my students' exam grades at the end of each term is that there are always some students who perform outstandingly on the examination, even though I may never (or virtually never) have heard those students' voices in class.  My informal conclusion in those cases was that those students might have done just as well without the in-class component of the course, simply by doing the reading and that class-time was therefore of little use to them (on the assumption that silence in class corresponded with mental absence).

My thought now, however, is that the students who performed extremely well despite being quiet throughout the semester might very well have benefited from being in class, both from the lectures and from the contributions of their fellow students.  Their performance on the exam, in other words, might as easily reflect their getting a lot out of class-time notwithstanding their non-participation.  As Cain observes in Quiet, introverts often prefer to listen to what other people are saying and to absorb wisdom without  jumping into the fray.  While extroverts like multi-tasking -- and may therefore enjoy a combination of listening and talking in class -- introverts feel most comfortable dedicating all of their energy to listening and taking in what is happening around them, rather than switching back and forth between volunteering and listening.

Though people sometimes equate introversion with shyness (and the two are correlated), Cain explains that an introvert may not be shy but may simply like to listen and process information, whenever possible, rather than actively make her mark on the classroom proceedings.

One remark that has surfaced regularly in my student evaluations resonates with what I have learned about introverts.  Some students say that they wish I would more regularly call on people whose hands are not raised rather than relying primarily on volunteers as I have done.  I admit that my reliance on volunteers is in part a reflection of my assumption that people whose hands are not raised truly do not want to speak, and my calling on them would thus represent a sort of coercion that I prefer in general to avoid.  Though I typically plan to do a combination of taking volunteers and calling on non-volunteers, my tendency to avoid forcing people to do things they prefer not to do skews me toward volunteers.

Why, I would sometimes wonder as I looked at my evaluations, do people not simply volunteer if they want to speak?  Isn't it perverse to ask me to force them to talk?  I now think that we have two possibilities here, both of which make the advice of my students both comprehensible and wise, in the light of Susan Cain's book.  One possibility is that introverts find it undesirable to raise their hands and thereby announce "I have something to say," and that this feeling is independent of their feeling about actually speaking.  That is, some students may have no anxiety about speaking in front of the class but may have an aversion to singling themselves out by raising a hand.  Such students may well feel liberated by being called upon when their hands are not raised.

Another possibility is that students writing the evaluations are eager to hear the contributions of the introverts in the class -- knowing perhaps better than I do that some quiet students are actually full of valuable insights that they have contributed in private with their friends.  If I rely only on volunteers, I inadvertently keep my students from hearing the insights of the inttroverts, to everyone's detriment.

I suspect that both of these possibilities plays some role in the comments I find on my student evaluations (which are otherwise quite generous, I should add).  I will therefore try -- now with better understanding -- to incorporate more of the quiet students into class discussions.  With this resolution may ultimately come an obligation to stop awarding bumps for volunteering in class.  After all, if everyone -- whether favorably or unfavorably inclined to volunteer -- is equally likely to have  something valuable to contribute, it makes little sense to reward the extroverts over the introverts.  I shall therefore have to rethink my bumping policy, though I welcome thoughts and commentary by readers who either agree or disagree.  My thinking on bumping is now officially a work in progress.

Tuesday, September 18, 2012

Constitution Day Revisited in Light of the Health Care Rulings

By Mike Dorf

Yesterday was Constitution Day.  Under a federal law that was the brainchild of Senator Robert Byrd and which became effective in 2005, all educational institutions receiving federal funds were required to hold events promoting understanding of the Constitution.  At Cornell Law School, we had two panel discussions commemorating the 225th anniversary of the signing of the Constitution.  As one would expect in a university setting, the discussion included considerable criticism of the Constitution and various interpretations of it--thus demonstrating the foolishness of the underlying law, or perhaps demonstrating its unintentional wisdom.

But is Constitution Day itself unconstitutional, as Kent Greenfield argued last year in the New York Times?  Greenfield suggested that by threatening to withhold federal funds from educational institutions that do not celebrate Constitution Day, the law was an unconstitutional condition on the academic freedom, and thus the free speech rights, of those institutions.  As Lyle Denniston explained, however, the notoriously slippery unconstitutional conditions doctrine may or may not condemn Constitution Day.

Here I want to pursue another possibility--which was jokingly raised by Jamal Greene at the Cornell event yesterday but which strikes me as serious: In light of the 7-2 ruling of the Supreme Court on the Spending Clause aspect of the Health Care Case, maybe Constitution Day is unconstitutional because it falls outside of the affirmative powers of Congress, quite apart from the First Amendment.

At least as applied to private institutions, there is an initial question of whether the Court's Spending Clause doctrines are even relevant.  All of the contemporary cases involving challenges to Congress's Spending Clause power involve conditions attached to money given to states.  Further, as the Court explains those limits in the Health Care Case, they backstop the further federalism principle that Congress may not "commandeer" the States by requiring them to regulate private actors.  When conditional spending becomes "coercive," however, Congress has crossed the line into commandeering.  The anti-commandeering doctrine is about preserving state sovereignty, and so it has not been applied to laws that commandeer private parties, but the 5-4 ruling on the Commerce Clause aspect of the Health Care Case could be thought to endorse a theory advanced by Randy Barnett, under which Congress is forbidden from commandeering "the People" as well as the states.  Accordingly, we might plausibly think that conditional spending in the form of grants to private actors is also forbidden when the conditions cross the line into coercion.

In any event, even if the Spending Clause doctrine does not apply to private universities, it does apply to state universities.  Thus, it's worth asking whether the law establishing Constitution Day can survive a challenge under the Spending Clause, because such a challenge would be viable for at least some universities.

How viable?  Well, as in the Health Care Case, so too under the Constitution Day law, a university that fails to hold Constitution Day ceremonies could lose all of its federal funding.  Moreover, the Constitution Day law, like the invalidated Medicaid provision, applies to "pre-existing" funding, rather than just to "new" funding.  Thus, prima facie, one could see Constitution Day running afoul of the newly rigorous Spending Clause test.

Pointing in the opposite direction are two important factors: 1) There is no enforcement mechanism by which institutions that fail to hold the required festivities will actually lose their federal money; and 2) Although federal aid to higher education is substantial, it is not quite on the same scale as Medicaid funding, which accounts for over 20% of the average State's budget.

In my judgment, that's probably enough to put the Constitution Day law on the permissible side of the divide between inducement and coercion.  But we will need to see quite a few more Spending Clause challenges to discover exactly where that line falls.

Monday, September 17, 2012

SDNY Indefinite Detention Decision Misunderstands Implications of Facial Invalidation

By Mike Dorf

Last week, in Hedges v. Obama, federal district judge Katherine Forrest permanently enjoined the enforcement of the federal statutory provision that authorizes indefinite detention of U.S. citizens, having found the law unconstitutional on its face.  The government has sought reversal on an expedited basis.  The case presents a number of interesting questions about standing, mootness, free speech, the overbreadth doctrine, and vagueness under the Due Process Clause of the Fifth Amendment.  But here I want to focus on the remedy Judge Forrest ordered: She enjoined the government from enforcing the statutory provision against anybody, not just against the eight plaintiffs in the case.

Wait, you're thinking: "Isn't that the point of invalidating a law on its face--that it cannot be enforced against anyone?"  Apparently that's what Judge Forrest thought too.  But if so, she was wrong.

A ruling by a federal court that a law is unconstitutional "on its face" is one way of finding that the plaintiffs may not be subject to that law, but it is not authorization for issuing rulings applicable to persons who are not parties.  Such persons can only take advantage of such a ruling by the ordinary means by which judicial decisions have force: (1) The ruling may be a precedent to be followed in other cases; or (2) The ruling may have issue-preclusive effect (under a doctrine formerly called collateral estoppel).  Neither approach works here.

A ruling of a single federal district judge has no binding precedential effect.  It may be cited by litigants as persuasive precedent in subsequent cases involving other parties, but no judge must follow it in the way that a district court must follow the precedents of the appeals court in the circuit that encompasses the district court or that district courts and appeals courts must follow Supreme Court precedent.  Indeed, a district judge's ruling in one case is not even binding as a matter of precedent on the very same judge in a subsequent case involving different parties (although a district judge would look rather foolish if she failed to follow her own prior decisions, absent some good reason for a change of heart).

What about preclusion?  Couldn't litigants in subsequent cases use the facial invalidation in the earlier case to preclude the government from re-litigating the law's validity?  The short answer is no.  The modern law of issue preclusion sometimes permits non-mutual issue preclusion--that is, it sometimes permits persons who were not party to an earlier case to use the result of that case to estop relitigation by the losing party in the earlier case--but non-mutual issue preclusion is not permitted against the government.  The reason is that the government is involved in so much litigation, that it would not be fair or sensible to make the first case that happens to come to judgment decisive of all future cases.

So why did Judge Forrest enjoin the challenged provision's application to everybody in the world?  I think she confused the stated rationale for the First Amendment overbreadth doctrine with its remedial implications.  Under a general rule that has been much criticized (including by me), courts say that they do not generally consider the effect of a law on third parties in deciding whether the law is valid as applied to the parties before the Court.  There is a widely-acknowledged exception, however, for laws burdening free speech.  Under the overbreadth doctrine, a party whose own conduct is not privileged by the First Amendment may nonetheless invoke the First Amendment to shield himself from prosecution if the law being applied to him also reaches the protected speech of third parties not before the Court.  The idea behind the overbreadth doctrine is that overbroad laws have a "chilling effect" on third parties.

In an earlier opinion in the Hedges case, Judge Forrest cited a couple of district court decisions that she characterizes as having issued injunctive relief going beyond the parties to an overbreadth case.  But she cites no Supreme Court opinions that make that move, and she offers not-especially-persuasive grounds for distinguishing language in Supreme Court cases that states that injunctive relief beyond the parties is unavailable.

Having criticized Judge Forrest for misunderstanding the law, I should say in defense of her position that it has a certain logic to it.  If the point of permitting overbreadth challenges is to protect the rights and interests of third parties not before the court, then shouldn't those third parties be able to benefit from the ruling?  And given what I have just said about the limited impact of a district court ruling, isn't the only way to do that by issuing an injunction that goes beyond the parties to the case?

The short answer is no.  For one thing, if Judge Forrest's decision is upheld on appeal to the Second Circuit, then it will be binding throughout the Second Circuit as a matter of precedent, and if it is upheld on certiorari by the Supreme Court, then it will be binding everywhere for the benefit of everyone who might otherwise be subject to the law.  The fact that a single district court's judgment about a law's facial validity is not binding beyond the parties to the case makes considerable sense when one compares constitutional litigation in the U.S. with constitutional litigation in countries that do permit laws to be challenged in so-called "abstract" cases.  In those other systems, typically the power to invalidate a law and wipe it off the books is reserved to the constitutional court, rather than lodged in trial courts.

Moreover, even at the district court level, a ruling of facial invalidity can be given wide scope if the case is litigated as a plaintiff class action.  If the plaintiffs had sought and received class certification, then the government could have been enjoined from enforcing the law against everyone within the class.  The problem, however, is that the Hedges case was not brought as a class action.  Further, if it had been so brought, it is highly unlikely that the case could have been properly certified as covering everyone potentially subject to the law.  Perhaps the plaintiffs might have properly been certified as representing journalists and scholars, but given the wide variety of contexts in which the challenged law could apply, it is doubtful that the plaintiffs could have satisfied the criteria set forth in Federal Rule of Civil Procedure 23 for representing a class of everyone who might be subject to the law.

Hence, even if the appeals court affirms the district court ruling on the merits, I think it highly unlikely that the broad scope of the remedy will be upheld on appeal.  In the meantime, is the government bound by the injunction?  Yes.  Sure, Judge Forrest misunderstood the meaning of a facial challenge, and was therefore not legally entitled to enjoin the law's application to non-parties, but whenever a party appeals an injunction, the party argues that the judge made a mistake.

As the Supreme Court held in Walker v. Birmingham, a party who believes that a judge should not have enjoined his conduct must still comply with the injunction, pending vacation of the injunction on appeal--or else face contempt charges.  The Walker rule has been applied to injunctions against government officials as well as to injunctions against private parties and thus, even though Judge Forrest shouldn't have enjoined the law's application to non-parties, unless and until her decision is overruled, such applications are indeed forbidden.

Friday, September 14, 2012

Debating Housing Subsidies in the Tax Code -- Against Myself

-- Posted by Neil H. Buchanan

I am in Boston, attending the American Bar Association Tax Section's Fall CLE Meeting. Because this is a joint meeting with the Real Property, Trust & Estate Law Section, the Teaching Tax session is devoted to a debate about the Internal Revenue Code's treatment of home ownership.

When I say "debate," I really mean a debate. The session's organizer, the University of Pittsburgh's Tony Infanti, had a fun idea to organize a formal debate, adapting high school and college debate formats to create a real two-sided debate, complete with cross-examination. What Tony did not know when he invited me to be one of the debaters is that I spent most of my youth (and much of my early adulthood) involved in debate competitions. From October of my 9th Grade year until the Spring of my tenth year out of college, I was a debater or a coach in standard high school "on topic" debate and college "parliamentary debate." (Lincoln-Douglas debate was actually introduced the year after I graduated from high school, and I never coached that style of debate.) I promised not to revert (too much) to my debate geek days -- not, for example, "spreading" (and if you do not know what that means, count your blessings) -- so they let me stay.

Because Professor Infanti wanted to include more people in the debate, and because he had three broad subjects that he wanted us to discuss, we adapted the format to create three-person teams. (The usual formats are either one- or two-person teams.) Unfortunately, one of the negative team members ended up having to withdraw, so we had the idea that I would debate on both sides, as the First Affirmative and then as the Third Negative. Being able to take either side of an issue is one of the skills/pathologies that debate instills in young people, so I did not feel any compunction about contradicting myself. (I argue with myself all the time, after all.) It is, however, unique to have the same person debate on both sides in the same debate. This will be fun.

This was evidently not quite complicated enough, because one of the Affirmative team's debaters became ill on Wednesday and had to withdraw as well. We did not decide to revert to a two-on-two format, however, because of the three subjects that we were planning to debate. So, I am now the First Affirmative, and UC Davis's Dennis Ventry is now both the Second and Third Affirmative. Florida State's Steve Johnson is the First Negative, Chris Christensen (a practicing attorney) is the Second Negative, and I am the Third Negative. Confused? I am sure we will be.

So much for form. What about substance? As regular readers of Dorf on Law know, I am actually in a state of mind where I can comfortably debate both sides of the question. (The formal resolution, by the way, is: "Be it resolved that the United States should make the Internal Revenue Code neutral with respect to home ownership.") Not only have I recently bought a house, after years of suggesting that doing so is not a good idea, but I have also been rethinking my original categorical opposition to subsidies for home ownership.

Interestingly, one of the major reasons I have become less dogmatic about this issue is that Professor Lily Kahng's work has convinced me that there are some serious distributional problems with housing tax policy that are realistically best solved by expanding the tax benefits of home ownership to lower middle-class people (a group that is, not coincidentally in the U.S., disproportionately people of color). After hearing Professor Kahng's arguments in June of this year, I have started to develop some thoughts about the class issue as well.

To make today's debate even more confusing, Professor Kahng is the person who was scheduled to argue on the Affirmative side (that is, against tax subsidies for housing), even though she is the one who made me reconsider my opposition to tax subsidies. Again, this is going to be fun (though probably chaotic).

The three issues that we plan to discuss today are: the (nontaxation of) imputed income from owned housing, the mortgage interest deduction, and the exclusion of income on the sale of a home. Professor Ventry has done some important work arguing against the mortgage interest deduction, and I am looking forward to his comments. Professor Johnson apparently agrees with the Affirmative side on many of today's issues (which means that he will fit right into the mishegas), but he will argue against taxing the imputed income from owned housing.

That latter issue (on which I will take the Affirmative position) is probably the least familiar of the three that we will discuss today. My economics training explains why I find it so seductive, but my legal training (to say nothing of my status as a human being) makes me doubt the economic argument.

The basic idea, in any case, is that a person who owns a house can either live in it or rent it to someone else. If she rents it out, she receives money that must be included in income (offset by appropriate deductions for maintenance, etc.). If she lives in it, she avoids having to pay rent to someone else. So, the house is -- even if she is not actually renting it out -- providing imputed income that would be taxed under a consistently applied income tax system. If a house could be rented out for $2500 per month, for example, the person is receiving $30,000 per year in housing "services," which another person would have to buy using after-tax income. Failing to tax that $30,000 in income is thus a subsidy to home ownership, compared to renting.

As I said above, the economist in me loves this argument. The underlying logic is right. There is no question that there is a horizontal inequity created by the failure to treat owner-occupied housing as generating income. Moreover, the agencies (staffed by economists) that compute the various measures of national income -- most importantly, Gross Domestic Product -- include the estimated value of housing services in their measures, not actual home sales.

And then there is reality. Other than the national freak-out that would inevitably follow any proposal to tax owner-occupied housing, one cringes to imagine how to administer a system that would try to apply this new tax rule fairly. I cannot wait to hear what I say this afternoon when I try to argue in favor of this rule!

If there is blog-worthy material in today's debate (which seems highly likely), I will write a follow-up post next week. In the meantime, there is no need to wish me well. I am guaranteed to be on the winning side this afternoon. And some chump named Buchanan will be one of the losers. I'm gonna clean his clock.

Thursday, September 13, 2012

How Much Would You Pay Not To Be Nagged By Your Parents?

-- Posted by Neil H. Buchanan

In my new Verdict column, I add to my series of columns discussing life under a hypothetical Romney Administration. (The previous two columns in the series are here and here, and the respective Dorf on Law posts building upon those columns are here and here.) Moving beyond the broad political and macroeconomic questions that I covered earlier in the series, I address one of the core policy debates of the 2012 election, from a relatively unusual angle. Specifically, I ask how Romney/Ryan's desired cuts in spending on the elderly (especially the voucherization of Medicare, and turning Medicaid into a block grant program) would effect the children of the elderly, rather than the elderly themselves.

In tax-speak, my column addresses the question of "incidence." That is, when the government imposes a tax -- on, say, retail sales -- we know that the payer of the tax is not necessarily worse off because of the tax. A retailer who can get his customers to accept higher prices, for example, would be able to avoid bearing any burden of the tax. In that case, the tax hits the customer, not the retailer (who merely acts as a middleman between the customer and the government).

The story is the same for spending. Even if the government gives a person a check, that person is not necessarily going to be better off because of it. A minor child, for example, might have a parent who simply takes possession of any money that comes into the child's possession (but does not use it for the child's benefit). Merely receiving the check, therefore, does not automatically translate into benefiting from the money. Similarly, cutting off benefits does not always mean that the former beneficiary will be worse off, if she can find someone else to make up the difference.

In the case of benefits for the elderly, the too-familiar argument is that greedy Baby Boomers are stealing their children's birthright, lavishing Social Security and health care benefits on themselves, leaving the bill to be paid (in the form of public debt) by future generations. My usual response to this argument has to do with public investment (see, e.g., my post from last Friday, here on Dorf on Law). In today's column, I argue instead that the incidence of the benefit cuts for the elderly is not what it seems. Attempts to transfer money from older generations to younger generations will be largely defeated, with younger generations still ending up paying for the care of their parents and grandparents.

The basic mechanism is simply a financial transfer. When parents receive less money from Social Security and Medicare, the money that they spend to make up the difference ultimately has to come from somewhere. If there was going to be an inheritance, it will be smaller (or might disappear entirely). The family home might end up reverse-mortgaged, for example, leaving the survivors with nothing. Even while the elders are alive, they will be more likely to need money from their children and grandchildren. Different families will have different ways of handling these situations, but the net effect will be a transfer of money from younger to older generations.

The most potent part of the argument, however, is not financial. Rather, I invoke the image of Mom and Dad showing up at Junior's door, looking to move into the guest room. The open (but unappreciated) secret about Social Security and Medicare (and Medicaid, through payments for nursing home care by elders who must impoverish themselves to become eligible) is that they are an indirect (but extremely effective) way of keeping Mom and Dad out of the kids' houses.

The major social change in America in the last century, from the standpoint of intergenerational relations, is the increased amount of independent living of parents as they age. Is this something that people prefer, or was it forced upon them? Revealed preference theory would unmistakably suggest that it is strongly preferred, because there is nothing forcing people to have their parents live elsewhere. That so many families spend the extra money necessary to keep the generations in separate homes -- forsaking the obvious savings from combining households -- tells us that there is something very desirable about not having Mom and Dad too close, during one's adulthood. And, to hear aging parents tell it, they are delighted not to be a burden on their children.

Again, however, parents really are a burden, in a very basic sense. They have to be, because the whole point of retirement is that they are no longer working, which means that someone has to be making the things that Mom and Dad buy. Spending their money to continue to live in their own house -- and, even for many modest middle-class families, maintaining a second house in the winter -- reduces the aggregate wealth of the family. That everyone seems happy about this arrangement (even, in many cases, fiercely committed to it) tells us quite a bit about how unwelcome it would be to put elderly people in the position of having to spend all of their money to supplement the inadequate Ryan Vouchers to buy health insurance.

In my column, I suggest that the net transfer back to the older generations is larger than the taxes that would be avoided by "piling debt on future generations." That is, in the aggregate, it is possible that the economies of scale from running a nationwide health care program, along with a nationwide pension system, more than makes up for the increased taxes (or decreased GDP) that would come from running larger deficits to, in essence, keep the parents in their own homes and out of their children's and grandchildren's day-to-day lives.

Of course, from the standpoint of pure resource usage, the splintering of families is probably a net loser for society. More time spent traveling, more single-family homes in more new residential developments (in more and more fragile ecosystems), and all of the other aspects of the scattering of the modern family represent resources that would either be unexploited otherwise, or that could be used for something else.

This, however, is where willingness to pay becomes a powerful concept. Just because it costs us a lot to do something does not mean that it is a bad idea. If we are willing to pay for something, then standard microeconomic theory tells us that the subjective value of doing it is at least as high as the cost.

Which raises the question: How much more would younger people pay to keep Mom and Dad out of their houses? Even if someone were to prove that my supposition above is wrong -- that the net aggregate cost of scattered living is higher than the net aggregate cost of multigenerational households -- how much is it worth not to have to face on a daily basis the legendary tensions of family dinners at the holidays (and the increased tensions of grandparents telling their children how to rear the next generation)? My bet is that, if it were put to a vote by, say, those born between 1972 and 1987 (current 25-40 year olds), they would pay a lot more than they currently have to pay in taxes, to guarantee that their parents will never move in with them.

As cynical as this analysis is, of course, it does not require believing that all families are at each others' throats, all the time. My own family's holiday gatherings are joyous and harmonious. (Really!) Even so, we deeply appreciate the independence that separate households allow. It appears that many people in this country agree, and that they would worry about the emotional toll of experiencing too much of a good thing. As noted above, I suspect that enough people are sufficiently worried that, if put to the test (and if the choice was made crystal clear), we would likely see them gladly trade off a few dollars more in taxes to maintain their peace of mind.

Wednesday, September 12, 2012

Why So Much IP?

By Mike Dorf

My latest Verdict column discusses the recent 2d Circuit decision in Louboutin v. Yves Saint Laurent, in which the court (more or less) upheld trademark protection for Louboutin's red-soled high-heeled shoes.  I criticize the core holding as over-protecting intellectual property, connecting the case to others, including Apple's recent victory over Samsung.  It's only a small over-simplification to say that I come down on the "the law should protect less" side of the ongoing debate over intellectual property.

Suppose you agree with me that the law over-protects IP.  You might be inclined to lobby for less protection.  Or you might be inclined to engage in guerrilla action by downloading pirated software, music or movies (a course of action that DOL strongly condemns)!  But whatever your normative views, you also might be interested in knowing why our law over-protects IP.  Here I'll name a couple of explanations and then offer a hypothesis of my own.

Two complementary accounts focus on the Patent & Trademark Office (PTO).  In one, the PTO simply lacks the resources to spend enough time investigating the novelty and creativity of patent applications, and thus tends to grant patents it should not grant.  In the second and related account, the PTO's fee-based funding mechanism creates incentives for the PTO to grant rather than reject patent applications.  A nifty new paper by my colleague Michael Frakes and Univ of Illinois law prof Melissa Wasserman shows that the PTO is in fact responsive to the incentives that the fee/funding structure creates.

I think there is much to the accounts of over-protection by the PTO--and not just because the PTO granted a patent for a peanut-butter-and-jelly-sandwich-with-the-crusts-cut-off (although it later revoked that patent).  But even assuming that the PTO bears some of the blame, there appears to be more to the story.  After all, we can find examples of other actors over-protecting.  The 2d Circuit decision in Louboutin shows judges over-protecting; the Apple/Samsung verdict shows a jury over-protecting (at least with respect to Apple's claims to have invented the rectangle with rounded edges); and the 1998 Copyright Term Extension Act (upheld by the Supreme Court in the Eldred case), shows Congress over-protecting.  What gives?

Over the past couple of decades, technology has made copying easier.  This is obvious for digital media like music, movies and software, but it's also true for physical stuff.  The spread of Japanese-style just-in-time production methods and the rise of nimble Chinese factories have shortened the time it takes to go from deciding to copy a competitor's product to being able to have a copy on the market.  As a result of these overlapping trends, there is now much less "natural" or "automatic" protection conferred by the first mover advantage than there was a generation ago.

So here is my hypothesis: The over-protection we see coming from Congress, courts, agencies, and even ordinary citizens when sitting on juries is a crude effort to give some advantage back to the first movers.  It's crude because the core issue is not simply more or less IP; there's a distributional piece here too.  The fact that Apple can patent the rectangle or that Louboutin can trademark the color red doesn't do anything for musicians who lose out on royalties as a result of file-sharing.  But if I'm right, the zeitgeist has absorbed a general sense that creators of intellectual property are getting ripped off more these days, and that translates into a general willingness to provide more IP protection whenever the issue arises.

To be clear, this is only a hypothesis.  I haven't tested it, nor have I looked into whether anyone else has.  I haven't even verified my underlying assumption that we are seeing more IP protection lately than in earlier periods.  Hey, rank speculation is the reason why blogs were invented (but not patented, thankfully)!

Tuesday, September 11, 2012

Wrong But Not (Entirely) Hypocritical

By Mike Dorf

According to many Democrats, the Republicans have been engaged in an extraordinarily cynical grand political strategy over the last three and a half years: First they used every lever available to prevent President Obama and the Democrats from enacting their full economic agenda; then, when the reduced economic agenda that did manage to get enacted came up short, Republicans claimed (and continue to claim) that the Democrats had their chance and failed.  Paul Krugman laid out a nice summary of the argument in his column yesterday.

There's much that's right about this story.  That's what prompted Jon Stewart to say something bleep-worthy when he played the clip of Mitt Romney's acceptance speech in which Romney made the following incredible claim: "I wish President Obama had succeeded because I want America to succeed."  This from a man who has been running for president more or less full time for the last six years.

But there's also a fair bit that's not quite right about Krugman's story.  Although Republicans did obstruct, so-called "blue-dog" Democrats were instrumental in preventing the President from getting the bigger stimulus that economists like Krugman wanted.  Moreover, by putting his economic policy in the hands of Tim Geithner and (for a time) Larry Summers, Obama signaled from the beginning that he was not interested in bold progressive action.

Of course, these are criticisms of Obama from the left, not the right.  Seen within the truncated bounds of what can be accomplished on the American political spectrum, the obstructionist charge has teeth.  Certainly one can find examples of politicians (including Romney and Mitch McConnell) saying that they hoped Obama's policies would fail so that he would only serve one term.  But it's still not clear to me that the Republican obstructionism of the last 3.5 years is mostly hypocrisy rather than ideological commitment.

To make sense of the Krugman narrative, one must begin with the premise that Republicans know that Keynesianism is right, so that increased government spending during a recession would lead to economic growth.  However, according to the Krugman narrative, in order to sabotage the economy, the Republicans voted against stimulus measures, hoping that as a consequence the Obama Administration and Congressional Democrats would get the blame.

Is this a plausible account of Republicans' behavior over the last several years?  I think the answer is yes for some but no for most.  Most Republicans are ideological Hayekians, who believe that stimulus spending gives the economy a short-term boost that is not self-sustaining, causing more damage in the long run.  When such people voted against the stimulus in 2009, they thought the were blocking a harmful program.  Thus, when they look at the anemic pace of the recovery, they think that if only we had let the economy find its natural bottom, we would be doing better now.  For them, the stimulus was too large, not too small.

Krugman thinks the Hayekian view of the economy is so clearly wrong that Republicans can't really believe it.  And not only can he point to 2009 statements by Republicans saying that they wanted Obama to fail; he can (and did) also point out how Republicans do appear to believe in the power of government military spending and stimulus through tax cuts.  So the Republicans are just claiming to be Hayekians as the thinnest cover for their real goal of harming the economy and thus leaving Obama and the Congressional Democrats to blame.

But people believe all sorts of crazy things that contradict other things they also believe.  Indeed, even people that Krugman does not regard as otherwise-crazy sincerely believe the Hayekian line.  They're called Europeans.  Sure, it has been a disaster for them, but the fact that so many of them have stuck with austerity for so long--even when, as in the case of the UK, they have their own currency and so could have tried massive stimulus--just goes to show the power of an idée fixe.

Accordingly, I do not think it has been shown that the GOP as a whole engaged in a cynical game of deliberately tanking the economy to gain political advantage.  Most of the party's elected officials probably  really believed--and continue to believe--that by opposing Democratic Keynesianism they were helping the economy.  Lucky for them (in a political sense), they were wrong.