Due Process Is Vital to Freedom

Andrew Napolitano*

“No person shall … be deprived
of life, liberty, or property,
without due process of law…”

-- Fifth Amendment to the U.S. Constitution

Andrew Napolitano

Andrew Napolitano

The clash in American history between liberty and safety is as old as the republic itself. As far back as 1798, notwithstanding the lofty goals and individualistic values of the Declaration of Independence and the Constitution, the same generation -- in some cases the same human beings -- that wrote in the First Amendment that “Congress shall make no law … abridging the freedom of speech” enacted the Alien and Sedition Acts, which punished speech critical of the government.

Similarly, the Fifth Amendment’s guarantee of due process has been ignored by those in government charged with enforcing it when they deal with a criminal defendant whom they perceive the public hates or fears. So it should come as no surprise that no sooner had the suspect in the recent New Jersey and New York City bombings been arrested than public calls came to strip him of his rights, send him to Gitmo and extract information from him. This is more Vladimir Putin than James Madison.

I have often argued that it is in times of fear -- whether generated by outside forces or by the government itself -- when we need to be most vigilant about protecting our liberties. I make this argument because when people are afraid, it is human nature for them to accept curtailment of their liberties -- whether it be speech or travel or privacy or due process -- if they become convinced that the curtailment will keep them safe. But these liberties are natural rights, integral to all rational people and not subject to the government’s whim.

I can sacrifice my liberties, and you can sacrifice yours, but I cannot sacrifice yours; neither can a majority in Congress sacrifice yours or mine.

The idea that sacrificing liberty actually enhances safety enjoys widespread acceptance but is erroneous. The Fort Hood massacre, the Boston Marathon killings, the slaughters in San Bernardino and Orlando, and now the bombings in New Jersey and New York all demonstrate that the loss of liberty does not bring about more safety.

The loss of liberty gives folks the false impression that the government is doing something -- anything -- to keep us safe. That impression is a false one because in fact it is making us less safe, since a government intent on monitoring our every move and communication loses sight of the moves and communications of the bad guys. As well, liberty lost is rarely returned. The Patriot Act, which permits federal agents to bypass the courts and issue their own search warrants, has had three sunsets since 2001, only to be re-enacted just prior to the onset of each -- and re-enacted in a more oppressive version, giving the government more power to interfere with liberty, and for a longer period of time each time.

We know from the Edward Snowden revelations and the National Security Agency’s own admissions that the NSA has the digital versions -- in real time -- of all telephone calls, text messages and emails made, sent or received in the U.S. So if the right person is under arrest for the bombings last weekend, why didn’t the feds catch this radicalized U.S. citizen and longtime New Jersey resident before he set off his homemade bombs? Because the government suffers from, among other ailments, information overload. It is spread too thin. It is more concerned with gathering everything it can about everyone -- “collect it all,” one NSA email instructed agents -- than it is with focusing on potential evildoers as the Fourth Amendment requires.

Why do we have constitutional guarantees of liberty?

The Constitution both establishes the federal government and confines it. It presents intentional obstacles in the path of the government. Without those obstacles, we might be safe from domestic harm, but who would keep us safe from the government? Who would want to live here if we had no meaningful, enforceable guarantees of personal liberties? When our liberties are subject to the needs of the police, we will end up in a police state. What does a police state look like? It looks like the Holocaust and communism.

Everyone who works in government has taken an oath to uphold the Constitution. Hence, it is distressing to hear lawmakers calling for the abolition of due process for certain hateful and hurtful defendants. Due process -- fairness from the government, the right to silence, the right to counsel and the right to a jury trial with the full panoply of constitutional requirements and protections -- is vital to our personal liberties and to our free society as we have known it.

If anyone who appears to have been motivated to attack Americans or American values based on some alleged or even proven foreign motivation could be denied the rights guaranteed to him under the Constitution by a government determination before trial, then no one’s rights are safe.

The whole purpose of the guarantee of due process is to insulate our liberties from subjective government interference by requiring it in all instances when the government wants life, liberty or property -- hence the clear language of the Fifth Amendment. The star chamber suggested by those who misunderstand the concept of guaranteed rights is reminiscent of what King George III did to the colonists, which was expressly condemned in the Declaration of Independence and which sparked the American Revolution.

Supreme Court Justice Felix Frankfurter once wrote that the history of American freedom is, in no small measure, following fair procedures -- which means enforcing the guarantee of due process. Without due process for those we hate and fear -- even those whose guilt is obvious -- we will all lose our freedoms.

*Andrew P. Napolitano, a former judge of the Superior Court of New Jersey, is the senior judicial analyst at Fox News Channel. Judge Napolitano has written seven books on the U.S. Constitution.

Clinton’s Tax Conceit

Richard Epstein*

Richard Epstein

Richard Epstein

Hillary Clinton has revealed further details of her plan for the fiscal future of the United States. Her vision addresses both sides of the equation: how and from whom taxes should be raised; and how and for whom they should be spent. Her plan is squarely within the progressive tradition. She insists that “The middle class needs a raise,” and that the federal government will pay for the raise by increasing taxes on the top one percent, who once again must be made to pay their “fair share.”

The notion of diminishing returns from higher taxes at no point informs the key features of the Clinton plan: a four percent income tax surcharge on those earning over $5,000,000 per year; the imposition of the “Buffett rule” that requires an alternative minimum tax of at least 30 percent on those earning more than a million dollars per year; an increased capital gains rate for investments held for less than six years; a hefty increase in the estate tax, by reducing its base to $3.5 million per person from the present $5.45 million per person; an increase in the top rate from 40 percent to 45 percent; and capping the charitable deduction at 28 percent, even for people in a higher individual tax bracket.

Clinton plans to funnel many of these tax dollars into an aggressive form of industrial policy that gives public officials under her guidance the power to decide which businesses in which locations—chiefly inner-cities and depressed neighborhoods—will move to the head of the queue. In addition, she wants to spend more on infrastructure, but has said very little about how to insulate essential improvements and repairs from political intrigue. Clinton’s fatal conceit is that she will be able to manipulate the political levers to give targeted benefits to her preferred constituents, without reducing overall levels of growth.

But her plan will crater. The selective government interventions that she proposes will perversely distort key private decisions on consumption and investment. In a hypothetical tax-free world, investment and consumption decisions are made by individuals seeking out the highest rate of return for their various efforts. At the same time, there is always the impulse for charitable behavior among those individuals—whether to help the poor or to provide educational, artistic, or medical benefits to the community. In general, a legal system that enforces contracts, curtails aggression, and restrains monopolies and cartels will have resources flow to their best use. Secure property rights and voluntary exchange are the foundations for any sound social policy. Within this framework, private actors can establish through repeated interactions the correct relative prices for the goods and services needed for both production and consumption.

Obviously, this ideal system of private property and voluntary exchange does not run on vapors. Someone has to enforce the rights and duties it creates, which requires the collection of tax revenues in order to discharge these key government functions. Ideally, that system of taxation should have two constraints, one distributional and the other aggregate. First, a sound system of taxation should not change the relative prices attached to various alternatives from what they were in a tax-free world. If A prefers X to Y in that hypothetical tax-free world, A should prefer X to Y in a world with taxation. Otherwise, the collective intervention will subsidize inefficient choices. Second, the aggregate levels of expenditure should be set to produce outcomes that give back to each citizen a package of goods and services worth more than the taxes he or she pays to create them. Over-taxation chokes off productive private labor.

There is no perfect way to reach these dual objectives. But in our imperfect world, classical liberal theory offers a good way forward. It favors flat taxes on a broad base of income, or more preferably consumption, to achieve these two ends. The flat tax reduces political discretion in determining who should be taxed, and since no one is exempt from its reach, it gives each person an incentive to search for a uniform tax rate that maximizes the net benefits from funding all public goods. That tax reduces the factional gains from forming political blocs, and it cuts down on the uncertainty that private parties face when making long-term investment decisions.

On the expenditure side, a similar degree of stabilization is achieved by funding public, i.e. nonexclusive, goods that are shared by all alike. This is why the original Constitution limited the objects of taxation to paying the public debt, providing for the common defense, and securing the general welfare of the United States—which excluded all transfer payments between private parties. By securing a stable framework, this system gives the poorest members of society greater opportunities to find gainful employment and other opportunities—at least if not blocked by entry restrictions, including minimum wage laws and strong unions. The challenge of redistribution, intended to redress inequalities in wealth, is not fully addressed by these devices. But charitable deductions create an implicit public subsidy in which a diverse set of private donors, not government officials, make the key policy and management decisions.

The Clinton program rests on an exaggerated sense of the good that government can do. But her plan will backfire in a number of ways. First, by raising the capital gains rate she reduces capital mobility and thus locks people into inferior investments. The higher rates will depress the collection of the capital gains tax, by encouraging people to delay unloading bad investments. Second, by imposing the higher taxation rates on the richest individuals, her program further tamps down on investments made by people whose investment and management skills can best create new jobs for ordinary people. She wrongly thinks that governments can expand opportunities, when its level of entrepreneurial expertise is negligible at best. Unfortunately, we can expect her program to fail just as other government programs have in everything from solar energy to neighborhood cooperatives. Government officials work best when they have focused goals of the type that define a system of limited government. Going further by managing private businesses exponentially increases the risk of cronyism and other forms of misbehavior.

Precisely that will happen, moreover, with her misguided proposal to eliminate capital gains taxation for money invested into depressed areas, which is likely to reproduce the colossal waste that came from overspending in places like Baltimore, where massive federal investment has done nothing to stop crime or the population exodus. The right strategy is the exact opposite: encourage people to move to safer and more prosperous communities, which might jolt the political and civic leaders of places like Baltimore to get off life support. Programs that reward failure only create more failure. No private party would spend its money on such a fruitless mission—and the federal government should not create a useless bureaucracy to decide which supplicants should receive what forms of aid. Nor should it give tax breaks that favor unproductive investments over sensible ones.

Today, ordinary workers are leaving their home states in search of jobs and a better standard of living. They are moving to places like Texas where taxes are lower and labor markets are freer. But these business-friendly environments—and the people living and working there—will suffer if Clinton’s plan to strengthen unions and raise minimum wages is implemented on a national scale.

Similarly, her proposal to cap charitable deductions at 28 percent operates as a tax not only on donors, but also on the individuals who receive these benefits in relatively efficient form. The net effect is to reduce the flow of private support for charitable activities, which will increase the scope of badly run public programs. It would be a national tragedy to reduce the amount of private sharing of wealth. It is not the case that only the rich get hurt by the limitation on charitable deductions. After all, if the wealthy stop making gifts, that improves their own financial position. The real harm, then, is to the recipients of charity, who will receive less. Virtually every charitable entity in the United States should be up in arms at this crude effort to tax them out of existence.

It is equally unwise to impose an alternative minimum tax. That program is only necessary in order to backstop our progressive system of taxation, which is riddled with loopholes. But rather than add complexity, we should simplify and rationalize our basic tax system in ways that make a back-up tax unnecessary. In this regard, taxing capital gains is often a mistake. Even if we do not move to a consumption tax, it makes sense to exempt from immediate taxation receipts that are reinvested in other capital assets.

By this standard, the estate tax is the worst of all possible taxes, because it is a lump sum tax on wealth that distorts decisions on investments and consumption. There is no equity in imposing this tax on those people who die at 60, while deferring the same tax for 30 years for those who die at 90, especially when they may have consumed or given away their wealth tax-free in the interim. The standard argument in favor of the consumption tax is that it reduces the excess tax on savings, in ways that improve intertemporal wealth management. Raising the tax and reducing the exemption will have negative effects on resource management that will reduce taxes that could otherwise be received on dividends and salaries. Yet nothing in the Clinton plan addresses the interplay between tax systems.

There is little doubt that the middle class has suffered from a regime of slow growth. But Clinton’s crude efforts to use new targeted tax revenues to fund industrial policy will only complicate the tax code while frustrating private activities that could grow the economy. A far better approach toward growth is to reduce the barriers to entry in industry after industry. The combination of lower administrative costs, higher legal certainty, and greater private initiative will work far better than any set of progressive gimmicks with their perverse incentives and heightened political intrigue.

*Considered one of the most influential thinkers in legal academia, Richard Epstein is known for his research and writings on a broad range of constitutional, economic, historical, and philosophical subjects.

What Is the FBI Hiding?

Andrew Napolitano*

Andrew Napolitano

Andrew Napolitano

Earlier this week, Republican leaders in both houses of Congress took the FBI to task for its failure to be transparent. In the House, it was apparently necessary to serve a subpoena on an FBI agent to obtain what members of Congress want to see; and in the Senate, the chairman of the Judiciary Committee accused the FBI itself of lawbreaking.

Here is the back story.

Ever since FBI Director James Comey announced on July 5 he was recommending that the Department of Justice not seek charges against former Secretary of State Hillary Clinton as a result of her failure to safeguard state secrets during her time in office, many in Congress have had a nagging feeling that this was a political, not a legal, decision. The publicly known evidence of Clinton’s recklessness and willful failure to safeguard secrets was overwhelming. The evidence of her lying under oath about whether she returned all her work-related emails that she had taken from the State Department was profound and incontrovertible.

And then we learned that people who worked for Clinton were instructed to destroy several of her mobile devices and to remove permanently the stored emails on one of her servers. All this was done after these items had been subpoenaed by two committees of the House of Representatives.

Yet the FBI -- which knew of the post-subpoena destruction of evidence and which acknowledged that Clinton failed to return thousands of her work-related emails as she had been ordered by a federal judge to do, notwithstanding at least three of her assertions to the contrary while under oath -- chose to overlook the evidence of not only espionage but also obstruction of justice, tampering with evidence, perjury and misleading Congress.

As if to defend itself in the face of this most un-FBI-like behavior, the FBI then released to the public selected portions of its work product, which purported to back up its decision to recommend against the prosecution of Clinton. Normally, the FBI gathers evidence and works with federal prosecutors and federal grand juries to build cases against targets in criminal probes, and its recommendations to prosecutors are confidential.

But in Clinton’s case, the hierarchy of the Department of Justice removed itself from the chain of command because of the orchestrated impropriety of Attorney General Loretta Lynch and Bill Clinton, who met in private on the attorney general’s plane at a time when both Bill and Hillary Clinton were subjects of FBI criminal investigations. That left the FBI to have the final say about prosecution -- or so the FBI and the DOJ would have us all believe.

It is hard to believe that the FBI was free to do its work, and it is probably true that the FBI was restrained by the White House early on. There were numerous aberrations in the investigation. There was no grand jury; no subpoenas were issued; no search warrants were served. Two people claimed to have received immunity, yet the statutory prerequisite for immunity -- giving testimony before a grand or trial jury -- was never present.

Because many members of Congress do not believe that the FBI acted free of political interference, they demanded to see the full FBI files in the case, not just the selected portions of the files that the FBI had released. In the case of the House, the FBI declined to surrender its files, and the agent it sent to testify about them declined to reveal their contents. This led to a dramatic service of a subpoena by the chairman of the House Oversight and Government Reform Committee on that FBI agent while he was testifying -- all captured on live nationally broadcast television.

Now the FBI, which usually serves subpoenas and executes search warrants, is left with the alternative of complying with this unwanted subpoena by producing its entire file or arguing to a federal judge why it should not be compelled to do so.

On the Senate side, matters are even more out of hand. There, in response to a request from the Senate Judiciary Committee, the FBI sent both classified and unclassified materials to the Senate safe room. The Senate safe room is a secure location that is available only to senators and their senior staff, all of whom must surrender their mobile devices and writing materials and swear in writing not to reveal whatever they see while in the room before they are permitted to enter.

According to Sen. Chuck Grassley, chairman of the Senate Judiciary Committee, the FBI violated federal law by commingling classified and unclassified materials in the safe room, thereby making it unlawful for senators to discuss publicly the unclassified material.

Imposing such a burden of silence on U.S. senators about unclassified materials is unlawful and unconstitutional. What does the FBI have to hide? Whence comes the authority of the FBI to bar senators from commenting on unclassified materials?

Who cares about this? Everyone who believes that the government works for us should care because we have a right to know what the government -- here the FBI -- has done in our names. Sen. Grassley has opined that if he could reveal what he has seen in the FBI unclassified records, it would be of profound interest to American voters.

What is going on here? The FBI investigation of Hillary Clinton has not served the rule of law. The rule of law -- a pillar of American constitutional freedom since the end of the Civil War -- mandates that the laws are to be enforced equally. No one is beneath their protection, and no one is above their requirements. To enforce the rule of law, we have hired the FBI.

What do we do when the FBI rejects its basic responsibilities?

*Andrew P. Napolitano, a former judge of the Superior Court of New Jersey, is the senior judicial analyst at Fox News Channel. Judge Napolitano has written seven books on the U.S. Constitution.

Europe Gets Apple Right

Richard Epstein*

Richard Epstein

Richard Epstein

On August 30, the European Commission issued a blockbuster ruling that required Ireland to recoup, with interest, the €13 billion in tax benefits that it has granted Apple since 1991. The tax breaks, the commission held, violated the European Union’s “state aid rules” that no company should be given preferential treatment under the law.

The decision elicited a strong reaction from Apple CEO Tim Cook who denounced it as “total political crap.” He was not alone in this belief. Holman Jenkins, Jr., writing in The Wall Street Journal, for example, said the decision was motivated by the European Commission’s desire to impose “tax harmonization” on all EU members as a way of “defending Europe’s stagnant social model,” which could not generate any Amazons, Googles, or Facebooks on its own. The United States Treasury echoed the same theme in a white paper that anticipated the EC’s ruling. And now Ireland, backed by Apple and Treasury, has decided to appeal the EC decision to the European Courts. Who is right, and why?

My initial judgment—always subject to revision on the strength of additional information—is that the EC was correct in its decision. In making this assessment, I admit that I harbor a deep suspicion of the EC in its multiple roles. In general, there is much to the charge that the EC’s policies are prejudiced against American companies that do business in the EU. But it is one thing to start with a strong presumption, and another to put the pieces together in a prudent fashion.

The first query is whether an antitrust outfit like the EC should be making judgments about tax policy in the first place. In this instance, the answer comes from Article 107 of the Treaty on the Functioning of the European Union, which provides, with multiple exceptions not relevant here, that “any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.”

The internal market refers to the free flow of goods across national boundaries among EU members. In this connection at least, the EU operates more like an open trading union and less like the top-down Brussels establishment whose regulatory abuses strengthened the case for Brexit. Harmonization in the EU is always harmonization-up rather than harmonization-down. In contrast, Article 107 is directed toward the issuance of selective benefits to individual firms, and, as such, does not prevent any member state from setting its general tax rates as high or low as it wants, so long as it does so on a nondiscriminatory basis.

The EU’s general nondiscrimination policy allows for members to compete for new business by offering an attractive tax environment. Indeed, the EC only demanded that Ireland impose its generally low 12.5 percent corporate tax rate on the revenues that escaped taxation elsewhere in the EU or, indeed, even in the United States. There was no effort to require Ireland to raise its overall tax rates so as to reduce its competitive advantage.

At this point, the EC’s application of Article 107 is not some form of retroactive taxation that hits Ireland from behind. Instead, what the EC protested was the peculiar two-step process by which Ireland determined Apple’s total tax burdens. First, income from various sales around the EU were allocated to activities in Ireland, which may have short-changed taxing authorities in other EU states where Apple does business, by booking all sales elsewhere in the EU to Apple Sales International (ASI), an Irish subsidiary of Apple. Thereafter, Apple allocated huge portions of the income from ASI and Apple Operations Europe to a shadowy “head office” that was not located in any tax jurisdiction at all. The EC did not challenge the somewhat dicey first step. But it did take after the second. “In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 percent on its European profits in 2003 down to 0.005 per cent in 2014" (EC italics).

Of ASI’s €16 billion profit, only €50 million was subject to Irish tax. Unless these numbers are grievously in error, the EC’s conclusion seems pretty straightforward: “This selective tax treatment of Apple in Ireland is illegal under EU state aid rules, because it gives Apple a significant advantage over other businesses that are subject to the same national taxation rules.” Indeed, the “decision does not call into question Ireland's general tax system or its corporate tax rate,” which includes its 12.5 percent corporate tax rate. Nor does it require that taxes be paid in Ireland on gains that are reallocated to the country of sale or are repatriated to the United States. Critics like the Journal’s Jenkins would do well to read the ruling before they mischaracterize its results.

Nor can the ruling be challenged on the ground that the larger concern with tax parity is deeply misplaced. Take the parallel practice in the United States. Individual states set their business income taxes, and it is important to encourage tax competition between jurisdictions to place downward pressure on taxation, without allowing for individual states to game the system for short-term advantage. Thus in Moorman Manufacturing Co. v. Bair (1978), the U.S. Supreme Court held that it did not offend the Due Process Clause of the Fourteenth Amendment for Iowa to use a single factor—sales within the state—instead of the standard formula that weighted property, payroll, and sales within the states equally. The Court held that each state was free to deviate from the norm in making its own decisions.

Unfortunately, Moorman suffers from two serious drawbacks that relate to the Apple-in-Ireland controversy. First, the multiplicity of formulas obscures the direct comparison of rates across state lines, which imposes an informational barrier against tax reduction. Standardization of rates here serves the same function as the standardization of the annual percentage rate of interest in loan transactions. It makes shopping easier. Second, the flexibility is open to gaming in that states can target, as in Moorman, an out-of-state corporation by picking a formula that maximizes domestic revenue—in this instance, sales within states. In my view, the standardization of the well-nigh universal tripartite formula should be done through the Due Process Clause. But if not, then it is surely allowed by treaty as in the EU case.

Nonetheless, figures on the left seem every bit as confused about the implications of the Apple decision as those on the right. Consider Massachusetts Senator Elizabeth Warren’s recent New York Times op-ed. Warren draws exactly the wrong inference from the EC ruling when she claims that the best way for the United States to fix its broken tax system is to increase the tax revenues collected from big corporations, so that they end up paying some “fair share,” which, inevitably, is some amount more than what they pay now. The point contradicts the EC’s observation that nothing in its Apple-in-Ireland decision requires individual nations to adopt either high or low rates. Following Warren’s ruinous proposal will make large American corporations less competitive in global markets, which, in the long run, will reduce the amount of wealth that they can create in the United States, much of which can be taxed as higher wages and dividends. High taxes will also reduce the likelihood that start-ups will take root in the United States.

Besides, U.S. corporations already pay high taxes. As the Tax Foundation reports, “The United States has the third highest general top marginal corporate income tax rate in the world at 39.1 percent, exceeded only by Chad and the United Arab Emirates.” The United States also has the highest corporate income tax rate among the 34 industrialized nations of the Organization for Economic Cooperation and Development (OECD). It is time to reduce taxes in the United States so that major corporations can invest at home and become competitive globally.

Warren also insists that our tax code “should favor jobs and businesses at home—period.” This destructive form of protectionism could easily trigger an international trade war, while blocking American businesses from buying inputs from overseas in order to make themselves fitter for international competition. Killing off international trade hurts both the United States and its trading partners. Warren’s rationale is the exact opposite of that behind the EC decision, which seeks to create a level playing field inside the EU.

Additionally, Warren wants to create special enclaves for small businesses, which cannot take advantage of many of the tax tricks that are available to large corporations. But this suggestion is only half right. A sensible regime of taxation, like that embodied in the Apple decision, removes the tricks that create hidden subsidies. Her proposals for special goodies to small businesses will be an open invitation to create a second set of subsidies that can only distort business decisions in the United States, as it has done in energy markets.

The level of new business formation in the United States has been in rapid decline over the past eight years. But that rate of decline will continue apace whether or not small businesses get tax breaks. The real culprit is the ever-greater strangulation of local businesses as a result of misguided reforms in labor and capital markets that Warren routinely champions. An old Milton Friedman quip exposes the central flaw in Warren’s approach: An oarsman finds that there is a hole in the front of his boat, and his solution is to bash a hole in the back of the boat to even things out. It is just that perverse logic that fuels the Warrens of this world.

At its root, the Apple decision rests on premises far removed from Warren’s progressivism. It makes a classical liberal argument in favor of free trade across national boundaries. Though the EC often acts as a statist institution, it has made a sound economic decision by taking on an American icon that deserves to have its wings clipped.

*Considered one of the most influential thinkers in legal academia, Richard Epstein is known for his research and writings on a broad range of constitutional, economic, historical, and philosophical subjects.

Hillary Clinton and the FBI

Andrew Napolitano*

Andrew Napolitano

Andrew Napolitano

On Sept. 2, the FBI released a lengthy explanation of its investigation of Hillary Clinton and a summary of the evidence amassed against her. It also released a summary of Clinton's July FBI interrogation.

The interrogation was in some respects standard and in others very troubling. It was standard in that she was confronted with emails she had sent or received and was asked whether she recalled them, and her judgment about them was challenged. The FBI was looking for gross negligence in her behavior about securing state secrets.

The failure to secure state secrets that have been entrusted to one for safekeeping is known as espionage, and espionage is the rare federal crime that does not require prosecutors to prove the defendant's intent. They need only prove the defendant's gross negligence.

At one point during the interrogation, FBI agents attempted to trick her, as the law permits them to do. Before the interrogation began, agents took the hard copy of an innocuous email Clinton had sent to an aide and marked it "secret." Then, at her interrogation, they asked Clinton whether she recognized the email and its contents. She said she did not recognize it, but she questioned the "secret" denomination and pointed out to the agents that nothing remotely secret was in the email.

By examining the contents of the email to see whether it contained state secrets, which it clearly did not, Clinton demonstrated an awareness of the law -- namely, that it is the contents of a document or email that cause it to be protected by federal secrecy statutes, not the denomination put on it by the sender.

This added to the case against her because she later told the FBI that she had never paid attention to whether a document contained state secrets or not. In the strange world of espionage prosecution, this denial of intent is an admission of guilt, as it is profoundly the job of the secretary of state to recognize state secrets and to keep them in their secure government-protected venues, and the grossly negligent failure to do so is criminal.

The FBI notes of the interrogation recount that Clinton professed serious memory lapses 39 times. She also professed ignorance over what "C" means in the margin of a government document. "C" in the margin means "confidential," which is one of the three levels of federal state secrets. The other two levels are "secret" and "top secret." Under federal law, Clinton was required to keep in secure government venues all documents in those three categories. The FBI found that she had failed to do so hundreds of times.

By denying that she had paid attention to notes in margins designating the presence of secrets, by denying that she recognized a secret when she saw one and by denying that the location of planned drone strikes is secret (an obvious secret with which FBI agents confronted her), she succeeded in avoiding incriminating herself.

But by saving herself from indictment, she may have doomed her campaign for president. In this dangerous world, how can a person seeking the presidency be so dumb or ignorant or indifferent or reckless or deceptive about what is a secret and what is not?

The records released last week also reveal that the FBI must have been restrained from the outset from conducting an aggressive investigation. It did not present any evidence to a grand jury. It did not ask a grand jury for any subpoenas, and hence it didn't serve any. It did not ask a judge for any search warrants, and hence it didn't serve any. The data and hardware it gathered in the case were given to it in response to simple requests it made.

I counted five times in the report where the FBI lamented that it did not have what it needed. This is the FBI's own fault. This tepid FBI behavior is novel in modern federal law enforcement. It is inimical to public safety and the rule of law. It is close to misconduct in office by high-ranking FBI officials.

Someone restrained the FBI.

The FBI did not ask Clinton aggressive follow-up questions. Her interrogators just blithely accepted her answers. They failed to present her with documents she had signed that would have contradicted what she was telling them -- particularly, an oath she signed on her first day in office promising to recognize state secrets when she came upon them and to keep them in secure venues. And agents violated Department of Justice policy by not recording her interrogation when her lawyers told them she would not answer questions if her answers were recorded.

Now the FBI has interjected itself into the presidential campaign by releasing these documents. Notwithstanding the mountain of evidence pointing to Clinton's guilt, it is highly improper and grossly unfair to release evidence gathered against a person who will not be prosecuted. Moreover, it is tendentious to release only part of the evidence -- only what agents want the public to see -- rather than the complete file. Yet all this evidence is secret under DOJ regulations. Had any of it been intended for or presented to a grand jury, the release of it would have been criminal.

What happened here? The FBI seriously dropped the ball, and Clinton was more concerned about being indicted than she was about losing the race for the presidency.

It is apparent that some in FBI management blindly followed what they were told to do -- exonerate Hillary Clinton. There is no other explanation for the FBI's failure from the outset to use ordinary law enforcement tools available to it. Yet some in the FBI are not professionally satisfied by this outcome. They know that a strong case for prosecution and for guilt is being ignored for political reasons.

What else do they know?

*Andrew P. Napolitano, a former judge of the Superior Court of New Jersey, is the senior judicial analyst at Fox News Channel. Judge Napolitano has written seven books on the U.S. Constitution.

New York’s Self-Inflicted Housing Crunch

Richard Epstein*

Richard Epstein

Richard Epstein

People who live in New York City know that its frenetic pace can induce anxiety. In part, that angst stems from living in a highly congested city brimming with energy. But there’s also the anxiety from New York’s crazy-quilt pattern of land use regulation, which a New York Times editorial recently labeled “High-Rise Anxiety.” The unease stems from the many overlapping restrictions both on new construction and the utilization of existing facilities. These regulations have created a two-tier system in which some prosper handsomely while others scramble to make ends meet.

The current housing crunch in New York, and in other cities like San Francisco, is attributable to the complex set of prohibitions and subsidies that shape these markets. Under the modern administrative law system, private property rights are of little consequence when a developer is trying to build. What matters ultimately is that all of the relevant “stakeholders” have a right to participate in an endless negotiation process before anything gets done. The de facto presumption is against changes in both new and existing housing markets. The building permit is the unit of political currency, and each requires enormous inside connections, patience, and luck to obtain. It can take developers many years to obtain their precious permits, if they get them at all.

This permit impasse stems largely from the progressive view of administrative law. Its initial proposition is that markets fail for two reasons: first, they allow for exploitation of vulnerable tenants. Second, they ignore external effects on third parties.

As to the first, the alleged villains are unscrupulous landlords, whose drive for higher rents must be countered by a rent stabilization program to protect sitting tenants. The New York program was first put into place in 1969, where it was sold as “emergency legislation,” originally for three-year terms, routinely renewed. (The latest renewal was for four years.) The trigger to end rent stabilization is a vacancy rate of 5 percent or more, which will never happen for units that are priced below market rates. Hence rents are allowed to rise, if at all, only in accordance with an administrative rate formula tied to costs rather than to greater demand. The law thus leaves the landlord with all the downside in a weak rental market, while allowing tenants to not only pay in perpetuity only a fraction of market value for their units, but to be also protected from eviction at the end of the lease. At root, rent stabilization is a form of price controls on steroids.

By tying the price caps to the protection of sitting tenants, the law generates its own powerful local base of political support. If you could tweak the law so that the landlord that complies with the rent cap could select whatever tenant he wants at the expiration of an existing lease, then the entire system would collapse like a house of cards. Local tenants will not vote to ensure low rents for new arrivals. It is the territorial basis of this regulatory system that allows it to endure long after other price control systems, such as those for gasoline at the pump, bit the dust.

The second justification for regulation stems from the impact of new development on nearby communities. Everyone has a deep interest in whom their neighbors are and will be, and this is particularly true in New York, where population density puts people in close contact with one another. The city law puts current residents in a position of dominance, relative to their landlords, through the creation of an elaborate system of community development boards, officially described as follows:

Community boards are local representative bodies. There are 59 community boards throughout the City, and each one consists of up to 50 unsalaried members, half of whom are nominated by their district's City Council members. Board members are selected and appointed by the Borough Presidents from among active, involved people of each community and must reside, work, or have some other significant interest in the community.

These intensely local boards make sure that outsiders have to face an uphill battle to secure the needed permissions to build new projects, because these will always have some real, if often exaggerated, impact on nearby residents. It takes little imagination to see that the members of these boards will often have their own axes to grind, which explains why so many well-positioned people are keen to serve on these boards without compensation.

These boards are especially active in responding to gentrification, which does not benefit sitting tenants, even if it improves the overall position of the city. In responding to this issue, the New York Times supports Mayor Bill de Blasio’s “big idea” to rezone neighborhoods to require developers to include a certain number of affordable housing units in a new project, while strengthening the rent stabilization law. This two-prong approach is risky. Such affordable housing provisions have mushroomed all throughout New York, having received a constitutional blessing in state courts.

One way to fund an affordable housing program is through direct public subsidies, given to eligible tenants who qualify for assistance. The relative advantage of this system, as the late Justice Scalia recognized in Pennell v. San Jose (1988), is that it puts the public subsidy on-budget, where democratic processes can determine both its size and the preferred beneficiaries. But voters resist these subsidies for just this reason: powerful political forces will vie to direct the largest share of the subsidies to themselves.

Indeed, it was just these political forces that recently undid New York’s long standing 421-a program that allowed for the construction of affordable housing, subsidized by a complex system of tax-exemptions, but applicable only in poorer neighborhoods. That program was not renewed in January 2016 because Governor Andrew Cuomo refused to back it unless it required developers to pay construction workers, yet another stakeholder, union-level wages that would have raised, by one estimate, construction costs by 13 percent—or roughly $45,000 per unit.

The tragedy of this debate is that both Mayor de Blasio and Governor Cuomo are so imbued with the progressive spirit that they do not realize that the true villains here are their own restrictive land use programs that have long hobbled New York’s housing markets. Their common position is misguided even by progressive standards. Rent stabilization laws necessarily distort prices in local housing markets by giving sitting tenants perverse incentives to stay in their current housing units. It is just too costly to give up a current subsidy on a large unit to pay higher market rates on an unregulated smaller unit elsewhere in town. So the rigidity in ownership leads to a systematic underutilization of existing housing that chews up valuable public resources while simultaneously reducing the city’s tax base. Any responsible social welfare calculation has to take into account the countless numbers of individuals, in and out of New York, whose own opportunities are systematically constrained by the current rules.

A similar critique is properly directed at the extensive veto rights given to neighbors. The common law, from its earliest days, long recognized that special rules were needed to deal with harmful interactions with neighbors. The judge-made nuisance law protected people against pollution, noise, vibration, and other similar hazards. All of these restrictions add to the overall value of land by stopping antisocial forms of behavior. The easy verification of this proposition comes from a close look at the various planned developments that include voluntary covenants that protect against these asocial behaviors. No one, regardless of wealth or political persuasion, advocates a relaxation of these guidelines, or protests the efforts of local governments to block activities that threaten the health and safety of a neighborhood. Nor does anyone think that a local government goes beyond its proper function by making sure that current and future infrastructure, on such matters as public utilities and street access, can support construction or expansion.

Most strikingly, none of the current land use disputes are about these issues. Instead, the argument here is that the class of recognized externalities that call for government regulation goes far beyond these limited cases, to include rules that allow one set of neighbors to decide the wealth and ethnicity of their potential neighbors. The difference in the two approaches is astounding. Nuisance disputes are rarities in today’s cities for the simple reason that no one wants to rent or buy in a pig sty. But when the composition of the community—by age, race, income, disability, or family status—becomes grist for the public mills, externalities are always everywhere, even for new construction projects built on vacant land.

The situation gets more convoluted when new developments have to manage issues like views and light, landmark status, and neighborhood character, which are always fair game for public deliberation. The current legal worldview starts from the premise that renting or owning in a given community gives an expanded entitlement to block or limit the activities of other people, without having to pay these latecomers any compensation for the loss or curtailment of their own property rights. The correct solution is this: the government can condemn these development rights for their fair market value. But don’t hold your breath.

In shifting away from the common law approach, the law does not solve the problem of externalities. It magnifies it. The older common law rules wisely recognized that the “harm principle” is hopelessly broad as stated. That principle, as announced by John Stuart Mill in On Liberty, holds: “That the only purpose for which power can be rightfully exercised over any member of a civilized community, against his ill, is to prevent harm to others.” Virtually every human action produces some effects that will leave someone worse off, especially in dense urban settings. Hence, the only way to make this plausible-sounding principle work is by limiting its application, as is done in the law of nuisance. The public deliberations of large classes of harms, including the blocking of views, must be treated as nonactionable, that is, outside the scope of legal protection on the simple ground that the overall social welfare is better advanced if these ubiquitous losses are systematically ignored.

The willingness to use the narrower definition of harm—one that deals with force, fraud, and monopoly—was never universally observed prior to the rise of the modern system of land use regulation. But legislatures, courts, and the public gave it far more respect than it receives today. Hence this grim warning: so long as every externality counts in administrative proceedings, all sides in the current land use disputes will contribute to high levels of anxiety that are a necessary consequence of the modern progressive state.

*Considered one of the most influential thinkers in legal academia, Richard Epstein is known for his research and writings on a broad range of constitutional, economic, historical, and philosophical subjects.

Graduate Students as Protected “Employees”

Richard Epstein*

Richard Epstein

Richard Epstein

Last week, the National Labor Relations Board held that the graduate students of Columbia University who work as teaching assistants, including any research assistants “engaged in research funded by external grants,” are statutory employees protected under the National Labor Relations Act, and thus entitled to join an elected union of their own choosing. The three-member Democratic majority held in Trustees of Columbia University v. Graduate Workers of Columbia-GWC that graduate students were employees under Section 2(3) of the NLRA. This section provides, most unhelpfully, “the term ‘employee’ shall include any employee,” with exceptions irrelevant to the issue at hand.

The Board’s decision was notable in part because a long list of research universities, led by Yale University, had filed a strong amicus curiae brief, warning against the undesirable consequences that could follow if the Board overruled its 2004 decision involving Brown University that came out the other way because “the services being rendered are predominantly academic rather than economic in nature.” These include coursework, individual research, and teaching under the close supervision of their professors, as part of an integrated program leading to an advanced degree.

The universities’ position was strongly resisted in an amicus curiae brief submitted on behalf of the American Association of University Professors making several claims and factual assertions: (1) that the change in status was no big deal; (2) that NYU had entered into a voluntary agreement with a branch of the UAW that was working well; and (3) that over 35,000 graduate students in public universities were organized outside the reach of the NLRA. The rejoinder to this assertion was twofold. The universities noted that the NYU agreement has had its ups and downs, and that public universities are very different institutions than private ones. They also urged that it was dangerous to upset an established tradition by fiat, when not a single one of these universities has ever dealt with a single unionized graduate student. At present, no one has any strong evidence either way.

There is a rich irony that the great research universities, so politically liberal, would resist graduate unions in their own backyard when they would never question the desirability of the NLRA in business contexts. Indeed, the greatest difficulty for the universities is that they have to explain why they need an exemption from a general rule in the first place.

In my mind, they should not have to face that difficulty, for there is ample reason to doubt that the NLRA should apply to any business whatsoever. An elaborate, often bitter, election procedure allows the union that captures a majority of member votes to become the exclusive bargaining agent of all employees, dissenters including. The law then requires that the two sides bargain in good faith to reach a collective agreement. The collective bargaining procedures are cumbersome and costly. They often generate suspicion and distrust and require high levels of formality to make them work. Once in place, they are often disruptive of sensible business relationships. If those negotiations break down, unions may strike, and employers may lock out workers. The adverse effects on third parties, who are deprived of key services, are chalked up as simple “incidental” losses that the law necessarily ignores. This is a high price to pay to give unions a legal monopoly against the unionized firm.

It is also critical not to forget the uncertainty that comes from unionization. On the one side, firms develop consistent anti-union strategies long before any union arrives. Once unions get in place, it is very difficult to predict how relations will develop. Unions typically have to choose between two opposite strategies, in part in response to the strategies that resisted their recognition. Some unions prefer to reach quick deals with employers that give them a large share of the pie without disrupting the firm’s relationships with its customer base. But other unions, probably a minority, prefer to take a high risk and high return strategy, in which they back strong demands on wages and conditions by their willingness to strike. It is virtually impossible to predict which strategy will dominate in any case, which means that unionization injects a wild card that adds a layer of uncertainty that nonunionized firms don’t face.

Given the high stakes of unionization, it is deeply problematic that the NLRA gives so little guidance as to which groups are covered. In Columbia, the NLRB majority applied “the common law” definition of employee, which includes the graduate students to whom the university pays a wage for the performance of particular tasks under its direction. But the common law never had to face the question of sorting out dual relationships between instruction and employment, about which the NLRA says nothing. And private parties in a common law regime could always modify and tailor their business relationship in whatever way they saw fit in order to advance their mutual benefit.

It is therefore telling that the elite research universities, who know their own businesses, oppose the change. Hence, it is proper to ask the question of whether the imposition of a union arrangement for employment will impair the educational mission of the university. The answer is yes. Yale University President Peter Salovey observed that “I have long been concerned that this relationship would become less productive and rewarding under a formal collective bargaining regime, in which professors would be ‘supervisors’ of their graduate student ‘employees.’”

Of course, the question is ultimately empirical and, on that issue, the Board’s majority took the position of the American Association of University Professors that the great universities could take these problems in stride, just like NYU has done. Not only is the question an empirical one, but generalizations are difficult to make because collective bargaining agreements go off in so many different directions. The majority of the NLRB was not overly concerned with these issues because of the success of unionization at NYU and public universities. It is surely the case, therefore, that unionization does not spell the immediate death of the university. But the NLRB’s ruling raises the further question of whether the deal will hold firm in the long run, given that unanticipated events could lead to work stoppages, loss of morale, or bad publicity that could damage relationships with donors or students.

On this score, it is instructive to look at how the collective bargaining agreement works at NYU. (Note that the law school, where I teach, is not covered by the agreement.) The contract is well drafted and it does not include all the graduate students that are covered in the NLRB decision. In particular, it does not cover the Medical or Business school, and, most importantly, it does not cover “research assistants at Polytechnic Institute, [and] research assistants in the Biology, Chemistry, Neural Science, Physics, Mathematics, Computer Science and Psychology departments.” It then sets out a salary scale for the covered graduate students that started at $26,200 in 2015 with modest increments over the next four years. In addition, the agreement specifies an elaborate grievance procedure that allows individual union members to challenge within limits their course requirements.

So where can things go wrong? Here the greatest peril does not come from the implementation of the agreement by NYU and the UAW. Instead, it comes from the Fair Labor Standards Act, which regulates the standard for wages and hours of all employees. The Department of Labor issued a general ruling that any worker who earns less than $913 per week or $47,476 annually for a full-year worker—roughly double its previous level—is eligible for overtime compensation on an hourly basis. This rule applies to all employees whether or not they are unionized, and it is not waivable by the workers who are protected.

The FLSA’s definition of an employee is no better than that in the NLRA: “the term ‘employee’ means any individual employed by an employer.” There is no reason to think that the Department of Labor will shrink from using the same definition that was adopted by the NLRB, instead of taking its cue from the NYU collective bargaining agreement that exempted research assistants from its scope. After all, the common law test could still be applied even if the costs of its administration skyrocket in the new context.

The news is very grim. As applied to the university context, the FLSA forces both the union and the university to abandon their simple salary scale for unionized workers, in favor of a verifiable procedure to separate their teaching from their student hours, which could prove difficult, especially when overtime pay is at issue. None of this bookkeeping and monitoring is necessary under the sensible salary arrangement in the NYU contract. In addition, the NLRB rule applies to all research assistants, so in all likelihood they too will be covered by the FLSA rule. But, once again, no one quite knows how to separate out the time that a research assistant spends on his or her own work and on that of the employer. Nor are government and private grants sufficiently flexible to provide the needed overtime support if it turns out that these students spent far more than 40 hours per week in their laboratories, just like their professors.

All too often, employment decrees are handed down on high by regulators who look only at their own bailiwick but then ignore the consequences of their handiwork. The FLSA rule is scheduled to go into effect on December 1, 2016. At this point, every university and research laboratory in the land has to scramble to make sense of the new rules and figure out where to get the additional funds to pay the extra salaries and institute compliance systems to ward off the inevitable lawsuits that this massive uncertainty invites. And the Department of Labor, of course, does not address the serious operational difficulties created by its regulations.

There is an old adage that applies here: it takes enormous work to build up institutions with genuine academic excellence and distinction, but it takes only a few boneheaded rulings to send them crashing down. The Department of Labor should postpone and modify its new regulations. If it does not, Congress should do something to protect our great research institutions.

*Considered one of the most influential thinkers in legal academia, Richard Epstein is known for his research and writings on a broad range of constitutional, economic, historical, and philosophical subjects.

Our Regulator-In-Chief

Richard Epstein*

Richard Epstein

Richard Epstein

Now that we are in the final lap of President Barack Obama’s presidency, the debate has begun over his historical legacy. The New York Times is contributing to that debate with a six-part series assessing his presidency called “The Obama Era.” The first article in that series, “Once Skeptical of Executive power, Obama Came to Embrace It,” argues that Obama is, in the journalists’ words, our “Regulator in Chief,” having issued about 50 percent more major orders than his predecessor George W. Bush. Though the article uncritically embraces Obama’s statist policies, the President’s major initiatives on labor markets, environmental protection, drugs, health care, and labor markets have been both more far-reaching and socially destructive than those of his predecessor.

What spurs the president to action is his moral certitude. He knows what is best for the country. To be sure, he disclaims any intention to regulate “just for the sake of regulating.” But there are, he believes, many good reasons to regulate. As he says, “there are some things like making sure we’ve got clean air and clean water, making sure that folks have health insurance, making sure that worker safety is a priority—that, I do think, is part of our overall obligation.”

Unfortunately, his bold statement reveals a deep misunderstanding of policy and the role of regulations in improving society. First, the mission of “making sure” that the right outcomes occur is beyond the power of any regulator, who has limited resources to face a multitude of potential problems. Establishing a set of coherent priorities requires an awareness of the necessary trade-offs that have to be made along the way.

Sometimes, for example, it is possible to develop clear rules, like traffic rules for public highways. But that approach misses the point in dealing with water or air pollution. The question here is not a binary one of whether or not we have clean air or water. The question is just how clean the air and water ought to be in a sensible system of regulation. Obama’s use of absolutes carries with it the implicit notion that we should push this goal to its natural limit. But the better approach goes first after low-hanging fruit, without trying to drive pollution levels close to zero. Sooner or later, often sooner, the costs at the margin start to outstrip the benefits, at which point the rational approach is to pull back.

Nonetheless, the Obama administration works the opposite way, by making extravagant assumptions in its cost/benefit analysis of regulations. For the President, the preferred strategy is to increase the estimates of benefits and to lower the costs of compliance, at which point the unthinkable becomes the inevitable. The writers of the New York Times piece note with evident approval that the President uses relatively high estimates of the “social cost of carbon” to justify very stringent regulations on power plant emissions. It is just that logic which led the Obama administration to use similar calculations for the “social cost of methane” to justify sharp restrictions for oil and gas drilling that go over the top, as well demonstrated by policy analystPaul Driessen writing for The Committee for a Constructive Tomorrow.

The EPA starts with the assumption that US releases will have some measurable impact on the environment. But the initial step should surely be to put the United States into global perspective where 17% of pollution “is from energy production and use; 26% comes from agriculture, landfills and sewage; and the remaining 57% is from natural sources.” The American contribution to global methane production is about 9 percent, of which about 30 percent comes from oil and gas drilling. The industry, moreover, has made substantial progress in reducing emissions from fracking, thereby reducing the need for regulation. Methane is, of course, just another word for natural gas, which is itself a valuable fuel, so strong incentives already exist for potential polluters to capture it.

A regulation cannot reduce the total level of emissions to zero. So the question is, why bother when oil and gas operations in the United States produce only 0.000004% of atmospheric methane? At most we can expect only a miniscule reduction of global temperature increases on the unlikely presumption that regulations could cut methane emissions in half, assuming that other distortions are not introduced into the system.

This same frame of mind occurs over and over again. To give but one other example, the mandate of the Food and Drug Administration is to make sure that only safe and effective medicines reach the market. Here, the case for regulation is even weaker than it is for pollution because medicines are not forced down the throats of unwitting patients, but are taken willingly under physician supervision. The FDA may have its doubts about the prescribing practices of physicians, who, as required by good medical practice, routinely prescribe off-label uses of approved drugs for patients—that is those uses not approved by the FDA. Nonetheless, the FDA’s constant refrain that detailed clinical trials are needed to protect unwitting patients from dangerous products sounds hollow. Worse still, the FDA uses an antiquated risk/reward approach that no sane person would apply in his or her own life. People in need want to know only whether they are better off taking a new and risky therapy than not. They do not care about the inability to document the safety or effectiveness of the drug except to the extent that it bears on their choice. The FDA clings to the outdated notion that long-term clinical trials supply the gold standard for evaluating new and controversial therapies.

Its overzealous approach has cost many lives and created many tragic situations, including the current impasse where the FDA has denied approval for drugs dealing with Duchenne’s muscular dystrophy, by slow-walking the drug eteplirsen through its endless approval process. Yet the cost/benefit analysis is a no-brainer. Without the drug, the boys who are diagnosed with the disease will suffer serious paralysis leading to death. With it, the production of the missing protein, dystrophin, gives them a chance of leading a more normal and healthy life. There is no downside. Yet the President has not issued a single executive order that has broken the FDA stranglehold one new medicines. Why? Because he does not fully consider the risks of excessive regulations and the problems those regulations create, including death. Sadly, none of this is mentioned in the New York Times piece.

Presidential blindness also extends to the health care system. What does it mean to insist that “folks have health insurance”? Universal insurance is a pipe dream, so the question is how best to improve the numbers. Removing endless mandates is a good first step. But the Obamacare health care exchanges are burdened with additional requirements that have led to widespread and repeated accounts of their failure. Yet there was not a word of this when Obama lauded the “progress” in health care brought about by his legislation in a recent “special communication” in JAMA, a prestigious medical journal. Nor did he address the adverse selection and moral hazard problems that are breaking the system. More mandates spell more trouble. Only deregulation can open nationwide markets to low-priced care. But for the man who wields the executive pen, the failure to make the exchanges work will be regarded as proof-positive that some government option is needed to fill the gap.

Finally, the President’s orders have done nothing good for the workplace. Yet the Times fails to critically evaluate the many initiatives of the Obama administration in the areas of wages and hour regulation. Instead, it lauds the increase in overtime eligibility brought about by changes in the wages and hour laws, without asking once how these rules will affect established patterns of business in such key areas as the gig economy, tech startups, university laboratories, and ordinary business. In some industries, the hour is a meaningless measure of productivity. In others, increasing the number of workers eligible for worker’s compensation requires many firms to reengineer key parts of their business. The implicit assumption of the President—and the Times—is that more regulation is better, without taking into account the administrative costs needed to put the new schemes into place, or the increased efforts of compliance.

Similar objections apply to the effort of the President to increase by executive order the minimum wage paid to employees of government contractors. It sounds like a humane policy in theory, but it’s important to ask if these high minimum wages will do good, given the evident risk that they will drive up unemployment, especially in teenage and low skill markets. The Times cites the claim of government economist Betsey Stevenson that higher minimum wages will reduce turnover and thus improve overall production. Then it adds, anecdotally, that Noble Prize–winning economist George Akerlof and his wife, Federal Reserve Chairwoman Janet Yellen, found that they got better babysitting care when they paid a premium over market.

But these time-worn arguments get matters exactly backwards. If higher wages will increase productivity, as they sometimes do, firm managers will not miss the point and will increase wages themselves. The correct government response therefore is to leave matters as they are, because no one in government knows on a firm-specific basis that a $15.00 minimum wage will improve workplace performance. Indeed, if the minimum wage is set too high, the present generation of parents would be less likely to pay their babysitters those premium wages once the base is artificially raised. It is just astounding that major economists concoct dreamy policies that are based on the premise that omniscient government officials are needed to correct the assumptions of the fools that populate ordinary businesses.

The damage done by each of these various initiatives helps explain the persistent anemic growth rates in the American economy. We need a president who has the humility to question his or her own assumptions. Whether we will get one seems highly unlikely given the depressing performance of both leading candidates.

*Considered one of the most influential thinkers in legal academia, Richard Epstein is known for his research and writings on a broad range of constitutional, economic, historical, and philosophical subjects.

Hillary Clinton Short-Circuited?

Andrew Napolitano*

Andrew Napolitano

Andrew Napolitano

When former Secretary of State Hillary Clinton was asked last week if she has misled the American people on the issue of her failure to safeguard state secrets contained in her emails, she told my Fox News colleague, Chris Wallace, that the FBI had exonerated her. When pressed by Wallace, she argued that FBI Director James Comey said that her answers to the American people were truthful.

After Clinton recognized that even her strongest supporters doubted her statement, she attempted to walk it back. In doing so, she repeatedly lied again, but offered as an excuse a bizarre claim that she had “short-circuited” her answer.

Who knows what that means? She claimed that she and Wallace were talking over each other and her answer had been misunderstood and misconstrued. Yet, Clinton said that Comey exonerated her as being “truthful” to the public when in fact he stated that she had been truthful during her three-hour, closed-door, unrecorded interview with the FBI.

Clinton told a group of largely pro-Clinton journalists that she had short-circuited her remarks. Then, she acknowledged that Comey had only referred to whatever she told the FBI as being truthful. Then, she lied again, by insisting that she told the FBI the same things she has told the press and the public since this scandal erupted in March 2015.

But that cannot be so, because she has issued a litany of lies to the press and to the public, which the FBI would have caught. In her so-called clarifying remarks, she again told journalists her oft-stated lie about returning all work-related emails to the State Department. She could not have told that to the FBI because Director Comey revealed in July that the FBI found “thousands” of unreturned work-related emails on her servers, some of which she attempted to destroy.

On the state secrets issue, she has told the public countless times that she never sent or received anything marked classified. She could not have said that to the FBI, because even a novice FBI agent would have recognized such a statement as a trick answer. Nothing is marked “classified.” The markings used by the federal government are “confidential” or “secret” or “top secret.” When Director Comey announced last month that the FBI was recommending against indictment, he revealed nevertheless that his agents found 110 emails in 52 email threads containing materials that were confidential, secret or top secret.

The agents also found seven email chains on her servers that were select access privilege, or SAP. SAP emails cannot be received, opened or sent without knowing what they are, as a special alphanumeric code, one that changes continually, must be requested and employed in order to do so. SAP is so secret that the FBI agents investigating Clinton lacked access to the code.

Could Clinton have legally received, opened, stored or sent a secret or top secret email without knowing it, as she has claimed? In a word: NO.

That’s because, on her first day in office, Clinton swore under oath that she recognized her legal obligation to recognize state secrets and treat them according to law -- that is, to keep them in a secure government venue -- whether they are marked as secrets or not.

This past weekend, we learned how deadly the consequences of Clinton’s failure to secure secrets can be.

Last Sunday, Iran executed a scientist who sold Iranian nuclear secrets to the U.S. The secrets were eventually passed on to Secretary of State John Kerry for his use during the negotiations that led to the recent U.S.-Iran nuclear accord. But the sale of the secrets and the U.S.’s payments for them (several million dollars) were consummated under then-Secretary Clinton’s watch. The scientist was lured back to Iran, fearing harm to his family. Upon his return, he was arrested, tried and convicted of treason.

One email sent to Clinton, from Richard Morningstar, a former State Department special envoy for Eurasian energy, referred to this scientist as “our friend.” The fact that Clinton’s aides referenced this spying scientist as “our friend” shows a conscious awareness of their duty to hide and secure state secrets -- his name and what he had done for the U.S. Yet, at the same time, Clinton put these state secrets at risk by having them sent to her via her non-secure home servers. This “our friend” email was a top-secret email, which Clinton failed to keep secure. It was either one of the 110 that the FBI found on her servers or one of the work-related emails she did surrender.

Could this email have been used as evidence in the treason trial of the now-executed scientist?

That is not an academic question. Most of the intelligence community seriously mistrusts Clinton, as her recklessness has jeopardized their work. Some feared that many of their undercover colleagues were compromised or even killed due to Clinton’s emails.

Hillary Rodham Clinton has established a clear and unambiguous record of deception. Her deceptions are not about the time of day or the day of the week; they are about matters material to her former job as Secretary of State and material to national security.

Do you know any rational person who continues to trust her?

*Andrew P. Napolitano, a former judge of the Superior Court of New Jersey, is the senior judicial analyst at Fox News Channel. Judge Napolitano has written seven books on the U.S. Constitution.

The Blue State Model Has Failed

Richard Epstein*

Richard Epstein

Richard Epstein

The defining economic truth of the last decade has been the want of sustained growth. Progressives and classical liberals agree that economic growth is a good thing, but they differ profoundly in how to best to achieve it. The only way to spur growth is to undo the structural barriers to gains from trade by pruning the law books of taxes and regulations that block these transactions in the futile effort to achieve redistribution. The combination of lower administrative costs, greater legal certainty, and improved private returns fueledAmerican growth in earlier times, and will revive it today.

Evidently, this message has not registered with progressive thinkers Jacob Hacker and Paul Pierson, professors at Yale and Berkeley respectively. In their New York Times column, “The Path to Prosperity Is Blue,” they criticize the Republican obsession to “cut and extract.” They deride that position for claiming, “Cut taxes and business regulations, including pesky restrictions on the extraction of natural resources, and the economy will boom.”

But this caricature displays confusion about many basic economic and political matters. The first is the appropriate role of regulation. Regulating extractive industries is always a complicated story, given the need to control against the pollution that can flow from the extraction and use of any raw materials. But the dangers in question are not confined only to coal and natural gas—they also include risks from such “clean” sources like solar and wind energy whose supposedly pollution-free technology can still incinerate birds or hack them to bits. The correct recipe for growth in extraction industries starts with increasing total useful output per unit of pollution, which is best achieved by combining effective controls on the demand side with controls directed toward limiting pollution and kindred ills on the supply side. “Keep it in the ground” does neither.

Hacker and Pierson are equally misguided on taxation. They make the argument that blue states dominate in all key areas, such as median household income, life expectancy and birth, high taxation of the top one percent, patent rates, and bachelor degrees. They attribute this to the amount of money that these states are prepared to spend on education in order to provide the human capital needed for general expansion. Sure, no one can quibble with the need for human capital formation. But that is a good reason to attack the public school monopoly by encouraging charter schools that can supply a better education at a fraction of the cost.  Hacker and Pierson, though, believe that any such declines in expenditures should be treated with suspicion, for they care more about how much money is spent than about how well it is spent. The success or failure of any education system, public or private, depends on injecting competition into it.

Hacker and Pierson make the methodological mistake of dwelling on static figures, like overall education and wealth levels, instead of trying to identify measures of economic growth. In particular, they take issue with Stephen Moore, one of Donald Trump’s economic advisors, for looking to measures such as “job growth or a state economic size” as indices of economic health. Their triumphant rebuttal of Moore’s approach is to claim that he should be an unabashed devotee of India because its huge economy creates millions of jobs each year.

Yet absolute size is exactly what growth measures should ignore. A better measure of a state’s prosperity is population changes—or how people vote with their feet. Do they move into a state or do they move away from it? This is the best objective indicator of the relative health of rival states.  By Hacker and Pierson’s logic, the advantages that the blue states have in terms of education, for example, should lure people into them. But as it turns out, the migration is in the opposite direction—to states like Texas, which have friendly business climates, and away from progressive bastions like New York. Just compare the changes in electoral votes in the two states to get a sense of the relative migration: In 1950, New York had 45 and Texas had 24, while in 2010, New York had 29 and Texas had 38.

Countless anecdotes illustrate the basic difficulty with the blue-growth thesis. Take Vermont, known not only for Bernie Sanders, but also for its string of ill-conceivable left-wing initiatives. Vermont has had virtually no growth in population during the last five years. But as journalist Geoffrey Norman has pointed out, the state’s high income and educational level did not insulate it from the fiscal reversals of its unaffordable single-payer program for medical services, which the Democrats are now flirting with at the national level in the wake ofthe breakdown in the health care exchanges under the Affordable Care Act. When one sees, as he reports, more “for sale” signs than political signs, it is a tacit admission that many people think that exit is the best option for a state system beyond repair. The very rich, especially rich retirees, may stay in the state, but ordinary people seeking job and business opportunities will leave in increasing numbers. Ironically, their exodus could increase average income within blue states and reduce it elsewhere—and the Hacker/Pierson measures ignore this effect.

A similar tale of woe applies to blue Massachusetts, which has benefited mightily from the technology hub located around the great universities in the Boston area. But even in Massachusetts, you get what you pay for, and the state is now in the business of purchasing its version of gender equity at the expense of wealth. Last week, Massachusetts unanimously passed yet another variation of pay-equity statutes, signed by its Republican governor Charlie Baker. The legislation forbids employers from asking prospective hires their salary history while still allowing workers to freely talk about wages and other compensation among themselves.

Under standard economic models, this statute is a business absurdity, for it is widely agreed that imperfect information is an impediment to gains from trade. The lack of ability to get key information will have the unfortunate effect of slowing down job mobility for all workers, and it will lead to a new cycle of senseless regulations that will have to take into account the job applicant who wants to offer his or her salary history to the employer to substantiate a request for a higher wage.

So why do this? The explanation offered by Karyn Polito, Massachusetts’ Lieutenant Governor, is that the measure will help overcome the gender gap in employment under which women earn 82 percent of men in the state and 79 percent of men nationwide. But it is ridiculous for Polito or anyone else to defend this law as a pro-growth measure, let alone one that could grow the economy by the size of the supposed wage gap, or $2.1 trillion annually. At best the increased wages are a transfer payment that has no impact on growth. But the reality is likely to prove far worse. Employers respond to incentives. Some will reconfigure their workforces; others will contract their operations; and others will just shut down. The added administrative costs are pure dead-weight losses. Never judge a law by its intended consequences.

The rich irony, of course, is that the defenders of the Massachusetts law offer no coherent theory to explain why or how mandated ignorance can promote the stated goal of workplace parity. Just after the legislation was enacted, the Wall Street Journal ran yet another story about how sophisticated personnel managers at successful businesses like Google were “overhauling” their pay practices to eliminate any perceived gender discrimination in the workplace. And why not? The firm that does not adequately pay for services will lose its best workers to competitors that do. So Google has thrown a wrinkle into the analysis when it says, perhaps for strategic reasons, that it asks about salary history only as a way to figure out the salaries competitors pay. But suppose the company uses it for other purposes. Why assume that that hurts women? The net effect of the Massachusetts statute is to make it harder for these firms to set accurate salaries and benefits for employees.

This same story plays out over and over again. The regulation of labor markets is regarded as the path to growth in rich blue states that are determined to undermine their own competitive advantage. The harm done by excessive regulation, taxes, and public expenditures plays itself out time and again in liberal bastions like Massachusetts, Vermont, California, Connecticut, Illinois, and New York. But as conventional progressive wisdom spreads to Washington, its implications will be dire: Jobs will disappear and wages will fall. One common response is that all a business needs to survive is a level playing field. Wrong. If that level field has the wrong institutional arrangements, it magnifies error. We are not far from the day when we shall have to modify the sage remark of John F. Kennedy that a rising tide will raise all ships. A rising tide of taxation and regulation will sink all ships if the progressive vision of Hacker and Pierson takes hold at a national level.

*Considered one of the most influential thinkers in legal academia, Richard Epstein is known for his research and writings on a broad range of constitutional, economic, historical, and philosophical subjects.