What if Liberty Is Attached to Humanity?

Andrew Napolitano*

Andrew Napolitano

Andrew Napolitano

What if the Declaration of Independence states that the purpose of government is to protect our natural rights? What if natural rights are the freedoms we enjoy without neighbors or strangers or government interfering? What if those freedoms are listed in part in the Bill of Rights? What if the government is supposed to keep its hands off those freedoms because they are ours, we have not surrendered them and we have hired the government to protect them?

What if the reason some of our rights are listed in the Bill of Rights was the fear the colonists had after the American Revolution that the new government here might become as destructive of freedom as the British king and Parliament -- whose government they had just kicked out -- were before the Revolution? What if it is impossible to list completely the freedoms that all people enjoy by reason of our humanity? What if the Framers -- who wrote the Constitution and the Bill of Rights -- understood that?

What if, in order to address the impossibility of listing all rights, the Framers ratified the Ninth Amendment? What if the Ninth Amendment declares that the enumeration of certain rights in the Constitution shall not be construed to deny or disparage other rights retained by the people? What if this amendment was the Framers’ way of recognizing the inherent attachment of our personal liberties to our individual humanity?

What if the government is supposed to protect those liberties -- the ones that are enumerated in the Bill of Rights and the others that are too numerous to enumerate and are covered by the Ninth Amendment?

What if the government -- no matter which party controls the White House or Congress -- always claims that it is protecting personal freedoms? What if this is just an empty boast? What if there is a government within the government that never changes, never shrinks, answers only to itself, hates and fears personal freedoms, and is largely unrecognized by the Constitution?

What if that government, because of its secrecy, is largely unaccountable to the voters? What if it resides in the Federal Reserve, the military, federal law enforcement and intelligence establishments, and an enormous federal bureaucracy that regulates and spends in secret to a greater extent every year, no matter which party is in control?

What if the secret government commands the loyalty of the elected government by sharing secrets with it? What if the law requires those shared secrets to be kept secret? What if the elected government knows what the secret government is up to but cannot legally reveal it? What if members of Congress know why Hillary Clinton was not indicted but they learned it in secret and so cannot legally reveal it? What if members of Congress know the extent of the Donald Trump financial shell game but they learned that in secret and so cannot reveal it?

What if some personal courage has broken this mold? What if Edward Snowden revealed massive secret government spying on all Americans after the government had denied it? What if Sen. Dianne Feinstein revealed horrific torture by the federal government after the government had denied it? What if the elected government knew about the spying and the torture but was legally prevented from revealing it? What if Hillary Clinton was largely right when she said politicians have a public persona and a private persona? What if President Barack Obama has demonstrated his two sides by killing people in secret, with his undeclared wars, and denying it in public?

What if the interest rate you pay on your home mortgage or car loan is not established by the free market -- or even reached by bankers looking for your business -- but is fixed in private by the secret government? What if the secret government has decided that it prefers Clinton to succeed President Obama and so its agents in law enforcement will overlook all evidence of Clinton's lawbreaking in order to bring that about? What if the secret government has given Trump an enormous pass on his financial behavior, a pass unavailable to the average voter, and it needs to keep that secret?

What if government has no interest in personal freedom, except perhaps as a catchy phrase around which to rally support? What if government nurtures having foreign adversaries -- real and imagined -- so that it has an excuse, in repelling or resisting those enemies, to exercise unlawful powers?

What if the presidential election this year has become a beauty contest -- devoid of intellectual substance, without serious debate over the limited duties of government in a constitutional democracy, rolling in the gutter and largely motivated by hate and fear? What if both Clinton and Trump recognize the paradox that government is essentially the negation of personal liberty? What if whoever wins will largely use it for that purpose?

What if liberty really is attached to humanity? What if all rational people yearn for personal freedom? What if the government -- in order to stay in power -- has detached liberty from humanity and made it a gift of the state instead of a gift of God? What if government knows that by restricting and then expanding liberty, it can command loyalty?

What if there is a sense of hopelessness in the land? What if this hopelessness is bred by a government that kills, lies, steals, conceals and denies? What if that hopelessness is furthered by a rational fear that things will only get worse, no matter who wins the presidential election? What do we do about it?

*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.

An Open Letter to Trump

Richard Epstein*

Dear Mr. Trump:  

Richard Epstein

Richard Epstein

It is hard—perhaps impossible—to calculate the damage that you have done to the United States and its people, and the people of the world. The situation that the United States faces today is one of great uncertainty at home and great peril abroad. You are running at the end of Barack Obama’s failed presidency, against Hillary Clinton, one of the least trusted and most unfit candidates ever to run for high office. There is little question that any other Republican candidate, including your vice presidential nominee, Mike Pence, would be far ahead of her in the polls, because any other candidate would concentrate on her dubious ethics and weak policy proposals.

But not you. Instead of tackling substantive issues on the campaign trail, you have doubled down on your shameless efforts at self-promotion and self-justification. You have engaged in endless tweets that reveal a thin skin and an unstable psyche. You hired the lawyer Marc Kasowitz to write one of the dumbest demand letters in the history of defamation law to the New York Times, asking it to retract its story about your past sexual misconduct because, he bizarrely claimed, old stories cannot be true, even if they are. Though I’m no New York Times cheerleader, I found myself, along with millions of other Americans, cheering as the paper’s General Counsel, David McGraw, gave your lawyer the written drubbing that your bullying deserved.

As you make yourself the central campaign issue, you also reveal that you are unfit to hold office. In your praise of Vladimir Putin, you show a flagrant disregard of the constitutional limitations associated with the office of the Presidency, so much so that I joined with other Constitutional originalists to oppose your nomination because of your extravagant views of unilateral presidential power. In addition, you stoked fears that you are anti-Semitic when you ranted: “Hillary Clinton meets in secret with international banks to plot the destruction of U.S. sovereignty in order to enrich these global financial powers, her special interest friends and her donors.” These wild charges ignore the more serious case against Clinton. With each passing day, more powerful evidence emerges that key government officials, including President Obama and Attorney General Loretta Lynch, may have improperly taken part in blocking criminal prosecutions against Clinton by using kid-glove procedures. These behaviors stand in striking contrast to the FBI’s overzealousness in the failed prosecution of Virginia Governor Bob McDonnell for far less serious offenses of supposed corruption—charges that were unanimously rejected this past June by the United States Supreme Court.

I have recently asked some of my colleagues about the scope of Article II, Section 4 of the Constitution, which provides that the President “shall be removed from Office on Impeachment for, and conviction of, Treason, Bribery, or other high Crimes and Misdemeanors.” Does that provision apply to actions that were committed by Clinton prior to her anticipated election as President, when she was Secretary of State? It is a serious interpretive question that we should hope never arises. Yet unless fresh revelations cease simply because she is elected President, this question could occupy public attention long after your juvenile antics have become old news. But the impeachment threat does not hang over her alone. Just this past Saturday, David Gelernter, a professor of computer science at Yale, publicly supported your candidacy as the best protection against Hillary Clinton, noting that impeachment by hostile Democrats and Republicans alike is, in this “abnormal year,” a vital safeguard against your potential abuse of power.

Right now, it seems that you will not do anything constructive to save your rapidly declining campaign. But there is still time for you to put the nation ahead of your insatiable ego. There are a number of reasons why you should abandon your pointless and petulant vendettas.

First, even as your presidential chances fade, the balance of power in Congress is still very much in play. Right now, it appears that you are quite happy to take down the rest of the Republican Party with you. But today, a divided government in which the Republicans control either—or preferably both—houses of Congress is more critical than ever. If the Republicans lose control of the Senate, all of Clinton’s judicial nominees will sail through. Spared the need to compromise, she will pick judges from the left-wing of her own party, which means the courts will rubber stamp the untenable political positions the Democrats have urged in recent years. There will be further unnecessary racial strife, as Clinton repeats her false charge of institutional racism against state and local police, which denigrates the work of tens of thousands of public officials and police officers. There will also be increased persecution of small religious groups that do not have the wherewithal to stand up to the Office of Civil Rights in the Department of Education, or the Equal Opportunity Employment Commission.

Then there’s the economy, which will implode under her so-called tax reforms. Her proposed higher taxes on ordinary income, capital gains, and large estates will deprive the private sector of the capital needed for innovation and jobs. Every emboldened alphabet government agency will be in the hands of the Democrats, which means that more senseless regulations and government programs will be created. A perfect example is Clinton’s madcap plan to subsidize the construction of half a billion solar panels, based on her idea that Hurricane Matthew offers striking evidence that global warming poses a grave threat to the overall economy. This is not the way to make America great again.

The only safeguard against the runaway progressivism of a Clinton presidency is a Republican Congress. But you compromise the chances that responsible conservative politicians will be elected when you call out House Speaker Paul Ryan for distancing himself from you. Each time you charge that elections are rigged against you, you further delegitimize our political system in ways that will make it harder for decent people of both parties to run for public office.

You have also failed to articulate a coherent vision of limited government and strong property rights on which the success of this nation depends. The Democrats are united at this point in their progressive vision that centralized government power will somehow lead to greater income equality on the one hand and improved growth on the other. This proposition ignores the simple truth that it is far easier to level downward than upward, which is what will happen if incentives for wealth creation are suffocated by high taxes and extensive regulations, making the pie smaller and the public mood more divisive than it already is.

So you have to clarify that your policies do not replicate that result. And the first point here is to back off the delusion that the way to make America great again is to tear up all trade agreements and build a wall to keep people from coming across the border from Mexico. On the first point, it is easy to claim that jobs lost in the rust belt have landed in Mexico or China—easy but flawed. The missing step is simple enough. There is nothing that says that the lost jobs can’t stay here if they don’t go to Mexico. The state-level differences in lost jobs are quite enormous, as states like Illinois will continue to lose jobs because of their own business climate. If the jobs do not go to Mexico, they will go to Tennessee, or perhaps just disappear.

One of the key benefits of free trade is that it forces nations and states to reform their own practices so that they can become more competitive. Knock down the exit threat and the massive internal impediments to growth gain a new lease on life. Allow for the trade, and you open up markets in other countries like Mexico, which increases the economic opportunities for their citizens, making them less likely to want to sneak across the border into the United States. Your opposition to the Trans-Pacific Partnership only doubles down on your systematic ignorance of how complex economic systems work, making it all the harder for you to differentiate your positions from those of the Democrats you oppose.

On other points, you do have comparative advantages that you should stress. You favor lower taxes and decreased regulation without embracing the protectionist creed that undoes much of the benefits that domestic reform could achieve. It is important to attack the populist urge to soak the rich. It is imperative to oppose any increase in union power, and to forcibly oppose union efforts to block the expansion of charter schools, a particularly foolish move supported by the NAACP.

On foreign affairs, it is critical for you to hone in on the failures of the Obama administration in virtually all corners of the world. The growing instability in the Middle East stems from the President’s unwillingness to use force, which has given Putin, Assad, and ISIS free run over the area. The humanitarian consequences of America’s Middle East policy are also deplorable, and have bred chaos in other parts of the world. The refugee crisis has created major dislocations inside Europe, and has helped contribute to the breakdown of trust across the continent. Surely, you could say more about your proposals to increase the number of combat-ready troops and to repair the frayed relationship between the head of the military and the President of the United States.

It is not clear whether you have the good sense to rise above personal slights and indignities; but if you do not, one of two things will happen. Either you will lose the election and be condemned as one of the most destructive forces in American history for your inflammatory behaviors, or you will win the election and be an ineffective leader as your endless preoccupation with the personal and the petty will make you a divisive threat to the country that you hope to lead.

So here is my piece of not-so-friendly advice: Either shape up, or, even at this late date, step aside and let Mike Pence take your place at the head of the ticket.

Sincerely yours,

Richard A. Epstein

*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.

Can the Media Reveal Stolen Truths?

Andrew Napolitano*

Andrew Napolitano

Andrew Napolitano

It seems that at every turn during this crazy presidential election campaign -- with its deeply flawed principal candidates (whom do you hate less?) -- someone’s personal or professional computer records are being hacked. First it was Hillary Clinton’s emails that she had failed to surrender to the State Department. Then it was a portion of Donald Trump’s 1995 tax returns, showing a $916 million loss he claimed during boom times. Then it was those Clinton emails again, this time showing her unacted-upon doubts about two of our Middle Eastern allies’ involvement in 9/11 and her revelation of some secrets about the killing of Osama bin Laden.

The reason we know about these leaks is the common thread among them -- the willingness of the media to publish what was apparently stolen. Hence the question: Can the government hold the press liable -- criminally or civilly -- for the publication of known stolen materials that the public wants to know about? In a word: No.

Here is the back story.

When Daniel Ellsberg, an outside contractor working in the Pentagon, stole a secret study of U.S. military involvement in Vietnam in 1971, which revealed that President Lyndon Johnson had lied repeatedly to the public about what his military advisers had told him, the Department of Justice secured an injunction from U.S. District Judge Murray Gurfein, sitting in Manhattan, barring The New York Times from publishing what Ellsberg had turned over to Times reporters. Such an injunction, known as a “prior restraint,” is exceedingly rare in American legal history.

This is so largely because of the sweeping language of the First Amendment -- “Congress shall make no law … abridging the freedom of speech, or of the press” -- as well as the values that underlie this language. Those values are the government’s legal obligation to be accountable to the public and the benefits to freedom of open, wide, robust debate about the government -- debate that is informed by truthful knowledge of what the government has been doing.

Those underlying values spring from the Framers’ recognition of the natural right to speak freely. The freedom of speech and of the press had been assaulted by the king during the Colonial era, and the Framers wrote a clear, direct prohibition of such assaults in the initial amendment of the new Constitution.

Notwithstanding the First Amendment, Judge Gurfein accepted the government’s argument and found that palpable, grave and immediate danger would come to national security if the Times were permitted to publish what Ellsberg had delivered.

The Times appealed Judge Gurfein’s injunction, and that appeal made its way to the Supreme Court. In a case that has come to be known as the Pentagon Papers case, the high court ruled that when the media obtains truthful documents that are of material interest to the public, the media is free to publish those documents, as well as commentary about them, without fear of criminal or civil liability.

The government had argued to the Supreme Court -- seriously -- that “'no law' does not mean 'no law'” when national security is at stake. Fortunately for human freedom and for the concept that the Constitution is the supreme law of the land and means what it says, the court rejected that argument. It also rejected the government’s suggested methodology.

The government argued that because Congress and the president had agreed to void a constitutional mandate -- the First Amendment’s “no law” language -- in deference to national security, the judiciary should follow. That methodology would have rejected 180 years of constitutional jurisprudence that taught that the whole purpose of an independent judiciary is to say what the Constitution and the laws mean, notwithstanding what Congress and the president want. Were that not so, the courts would be rubber stamps.

Moreover, the high court ruled, it matters not how the documents came into the possession of the media. The thief can always be prosecuted, as Ellsberg was, but not the media to which the thief delivers what he has stolen. In Ellsberg’s case, the charges against him were eventually dismissed because of FBI misconduct in pursuit of him -- misconduct that infamously involved breaking in to his psychiatrist’s office looking for dirt on him.

Since that case, the federal courts have uniformly followed the Pentagon Papers rule. Hence, much to the chagrin of the Obama administration, the media was free to publish Edward Snowden's revelations about the ubiquitous and unconstitutional nature of government spying on Americans by the National Security Agency. The same is true for Trump’s tax returns and Clinton’s emails.

Are these matters material to the public interest?

Of course they are. In a free society -- one in which we do not need a government permission slip to exercise our natural rights -- all people enjoy a right to know if the government is spying on us in violation of the constitutionally protected and natural right to privacy. We also have a right to know about the financial shenanigans or uprightness and the honesty or dishonesty of those who seek the highest office in the land. That is particularly so in the 2016 campaign, in which Trump has argued that his business acumen makes him uniquely qualified to be president and Clinton has offered that her experiences as secretary of state would bring a unique asset to the Oval Office.

Efforts to silence the press or to punish it when it publishes inconvenient truths about the government or those who seek to lead it are not new, and the vigilance of the courts has been unabated. Thomas Jefferson -- himself the victim of painful press publications -- argued that in a free society, he’d prefer newspapers without a government to a government without newspapers. Would Clinton or Trump say that today?

*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.

Intellectual Myopia On Insider Trading

Richard Epstein*

Richard Epstein

Richard Epstein

This past week, the United States Supreme Court heard oral argument in Salman v. United States, an important case concerning federal securities law. At issue are the limitations placed on insiders who trade in the shares of companies on the basis of material, nonpublic information. The parties covered are not only those who obtain the information themselves, but the persons to whom they (as “tippers”) pass on that information, commonly called tippees.

The prohibition on insider trading is said to derive from Section 10(b) of the Securities Exchange Act of 1934, which makes it unlawful for any person to “employ any device, scheme, or artifice, to defraud,” as implemented under SEC Rule 10b-5.  The purpose of this prohibition on insider trading is to restore overall investor confidence in the exchange markets, by denying to certain insiders the ability to reap undue benefit because of the informational advantage from undisclosed information that they gain against their actual or potential trading partners.

The extension of Rule 10b-5 to insider trading only took place in 1962 in the critical SEC decision In Re Cady, Roberts, & Co., and it has been long surrounded by controversy. Salman concerns whether, under Rule 10b-5, the tipper of the inside information had to receive some tangible benefit from the tippee, or whether some more diffuse social benefit sufficed to trigger criminal liability. 

The simple fact that the SEC sought to expand the scope of the insider trading prohibition has generated serious uneasiness. In writing about this case in Defining Ideas, Professor Jonathan Macey, a noted securities law expert at the Yale Law School, reaches the grim conclusion that Salman could easily provide the government with an opportunity to unduly expand the reach of the securities law by allowing it to use its own ill-defined notions of “fairness” to attack just about anyone it wants. In the abstract, that point resonates with small-government groups, such as the Cato Institute, whose amicus brief for Salman stresses an argument Salman’s lawyer, Alexandra Shapiro, made in court—that what qualifies as criminal should be narrowly construed in order to avoid dangerous government overreach.

In general, I am no defender of increasing the breadth of government enforcement. But in Salman these fears are wildly overblown. In this instance, liability should be expanded to cover all individuals who make unauthorized use of insider information whether or not the tipper has received any benefit from the tippee.  To see whether this rule makes sense, let’s start with the facts of the case. Maher Kara, who worked in Citigroup’s healthcare investment banking group, passed along inside information to his older brother, Michael Kara, who knew that the information was stolen but nonetheless used it to make some advantageous trades. Michael then shared the information with his future brother-in-law, Bassam Salman, who then followed Michael’s trades.  Salman, like Michael, knew that he was trading on stolen information. At this point, it is instructive to analogize the situation to one in which Maher took some tangible property from Citigroup, which he then gave to Michael, who then transferred some portion of his booty to Salman, who then used or disposed of it for his own personal benefit. In these cases, the standard common law rule is that Citibank could recover any profits Salman got from the use or sale of the stolen property.

As I explained in a recent article in the Yale Law Journal, the applicable principle for dealing with stolen tangible property—and by extension stolen information—is that the only person with any valid claim to the property is the bona fide purchaser for value. Raising that defense bars two types of individuals from keeping the property. The first are those who bought the property with knowledge that it was stolen. The second are those who received it as a gift from the thief. When the theft is established, the law imposes a constructive trust on the donee, which in turn requires him to return the stolen property, or the proceeds of its sale, to the owner. The word “constructive” means that the recipient is treated as if he had received the property as a trustee, even though he did not.

The same basic framework carries over to the theft of information, such that Salman flunks both ways. He received the stolen information as a gift, and he knew that it was stolen. He is the lowest of the low, a bad faith donee. So why then does his pathetic case end up in the Supreme Court? Because the Justices have for years asked the wrong question, assuming that Maher and Michael had to receive in return some “personal benefit” from Salman for his use of the stolen information. More precisely, the question presented was:

Whether the personal benefit to the insider [Maher] that is necessary to establish insider trading under Dirks v. SEC requires proof of “an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature,” as the Second Circuit held in United States v. Newman, or whether it is enough that the insider and the tippee shared a close family relationship, as the Ninth Circuit held in this case.

The question presents a false choice, when the right answer is that no return benefit should be required at all, once Salman knew that he was trading on stolen information. Instead, the constructive trust should be imposed to capture his knowingly illegal conduct. The only interesting question is how the Supreme Court persuaded itself that some return benefit was required in insider trading cases. At this point, we need to unpack the two cases mentioned in the question presented.

First, take Dirks. Raymond Dirks was an officer of a broker-dealer of a corporation who received from Ronald Secrist, a former officer of Equity Funding, reliable information that Equity had deliberately inflated its share values. Dirks freely shared this information with clients and investors, who sold their stock to avert future losses, when he could not persuade either the SEC or the Wall Street Journal to investigate based on his tips. The legal question was whether Dirks, who surely operated from mixed motives, was guilty of aiding and abetting insider trading—and no more, since he did not trade himself. The answer given by the ever-prudent Lewis Powell was that he was not. He was not an insider and hence he could only be held responsible “when the insider has breached his fiduciary duty to the shareholders by disclosing the information to the tippee [here Salman, once removed] and the tippee knows or should know that there has been a breach.” Justice Powell then introduced the personal benefit test into the equation by noting that the question of whether the insider was in breach of his fiduciary duty depends “in large part on the personal benefit that the insider receives as a result of the disclosure.”

At this junction, the dispute under the personal benefit test is whether tangible benefits are required, as suggested in Newman, or whether a set of close family interconnections, such as those found in Salman, suffices.

This entire learned debate is an irrelevant diversion. The simple point here was that Dirks knew that this was inside information, and so the key question is what should he do with that information in order to expose a scandal. The simple answer is that he should make that information public before sharing it with his various clients, but his failure to do so makes him guilty of abetting the insider trading, which is what the lower court found. And that is surely the case in the ordinary situation where the tippee receives information about inside share value that he shares with his customers when there is no whiff of scandal at all. In neither case is there any room for an actual fiduciary duty of the sort that corporate officers and directors owe to a firm. It is enough to impose the constructive trust by analogy to the physical transfer.

This view of the transaction helps explain the correct resolution of the situation presented in Newman, on wholly different facts. In that case, officers of two corporations released information to a selected group of analysts at the behest of the company in order to stimulate interest in the firm’s shares in ways that would increase their value. Unfortunately, the SEC promulgated Regulation FD. (i.e. fair disclosure) in 2000, making it unlawful to release company information selectively to some analysts unless, in the name of “full and fair” disclosure, it released the information to all. As usual, the SEC missed the mark. So long as the world is on notice that these selective disclosures are made, all traders can take that into account in making their own decisions for those firms (which need not be all firms) that engage in the practice. There is accordingly no fraud.

As it happens, Regulation FD imposes sufficient dislocation on firms that management tends to authorize,sub rosa, just these selective disclosures on the theory announced above—that inside information can be used by all recipients for their purposes, so the taint on all transferees is removed. Sadly, that line of argument was not open to the Court in Newman, so it then decided the case on two related grounds. First, the remote tippees (three and four links away) received this information as part of a deluge of information from multiple sources that made it impossible for them to know whether they had inside information or not—a problem completely absent in Salman. Second, the Second Circuit held that the diffuse set of personal benefits linking the various parties together—all of which were weaker than the close family ties in Salman—flunked the personal benefit test as announced in Dirks, setting up the conflict between the circuits when the Ninth Circuit in Salman held that the family connections sufficed.

During the oral argument before the Supreme Court, the Justices and the lawyers inconclusively bandied about endless hypotheticals as to what counts as a personal benefit. But as is so often the case, no one bothered to rethink the relevance of that issue at all. The correct resolution involves knocking out Regulation FD, and asking whether the release of the information was authorized expressly or implicitly by the firm—and if not, whether the tippee knew of its illegal release. In this scenario, the personal benefit test becomes irrelevant and Salman gets the hard punishment he deserves.

It is sometimes said, as by Professor Macey, that this view of liability opens the floodgates on insider information, but it does nothing of the sort. In United States v. O’Hagan, a 1997 Supreme Court decision fleetingly mentioned by the Court in the oral argument for Salman but extensively discussed by Macey, the defendant was the lawyer for a large firm, MetLife, who took confidential information that he received from MetLife, which he then used to buy shares on his own account, thus running up the price that MetLife had to pay to complete the operation. This situation is an open-and-shut breach of the standard agreements always imposed by law firms and investment banks on their members—never to trade against the interests of a client. Clearly, that decision retains its full force no matter which way Salman comes out because of the enormity of the self-dealing. But should the case have come out differently if James O’Hagan had given key information to a casual friend who did the same thing? The danger to the client interest is the same whether the insider uses the information alone or shares it with a friend.

If you think of the securities law as trying to reinforce the restrictions that private parties impose on their employees and independent contractors, then Salman has to be decided for the SEC to prevent wholesale breaches of insider’s fiduciary and contractual duties—but only if the Supreme Court shakes off its intellectual myopia and rethinks the question as a matter of first principle.

*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 if Trump and Clinton Have the Same Core Beliefs?

Andrew Napolitano*

Andrew Napolitano

Andrew Napolitano

What if the most remarkable aspect of this presidential election is not how much the two principal candidates disagree with each other but how much they actually agree?

What if they are both statists? What if they both believe that the government’s first duty is to take care of itself? What if they both believe in the primacy of the state over the individual? What if, in clashes between the state and individuals, they both would use the power of the state to trample the rights of individuals?

What if the first priority of both is not to decrease the size and scope of government but to expand it? What if they both believe that the federal government may lawfully and constitutionally right any wrong, tax any behavior and regulate any event? What if they both want to add a few thousand new employees to the federal payroll, give them badges and guns and black shirts, and engage them as federal police to insulate the federal government further from the people and the states?

What if, when James Madison wrote the Constitution, he took great pains to reserve powers to the people and the states that were not delegated away to the feds? What if both Hillary Clinton and Donald Trump couldn’t care less about that?

What if both of them reject the Madisonian principle that the federal government is limited in scope to the 16 unique and discrete powers given to it by the Constitution? What if they even reject the corollary to that principle, which is that the balance of governmental powers -- those not delegated by the Constitution to the feds -- resides in the states? What if they both reject the Madisonian principle that in areas of governmental power retained by the states, the states should be free from federal interference?

What if this principle of a limited federal government depends upon the principle of natural rights -- areas of human behavior and choice stemming from our humanity and immune from government interference? What if the Declaration of Independence and the Ninth Amendment to the Constitution define our natural rights as inalienable? What if both Trump and Clinton reject that? What if she believes in killing innocents by drone and he believes in torturing innocents at Gitmo?

What if both Clinton and Trump accept the principle that the federal government can address any problem for which there is a national political consensus? What if this idea -- championed by Woodrow Wilson, who hated the values of Madison -- is the opposite of what the Framers wrote and intended?

What if this Wilsonian principle has unleashed the federal government to regulate nearly all aspects of personal behavior and to enhance immeasurably the powers of an unelected, unseen and unaccountable federal bureaucracy, which never seems to shrink or change?

What if both Trump and Clinton embrace the idea that federal power, rather than being limited by the Constitution, is limited only by what the feds can't get away with politically? What if this concept was expressly rejected by the Framers but both Trump and Clinton don’t care? What if neither of them believes that a limited federal government must reside and remain within the confines of the Constitution?

What if Trump wants the police to be able to stop anyone they wish based on just a hunch that the person is armed or possessing contraband? What if the Fourth Amendment -- which requires the police to have individual articulable suspicion, not just hunches and not judgments based on race, in order to stop a person -- was expressly written to prohibit just what Trump wants? What if Trump doesn’t care because he prefers votes to constitutional fidelity?

What if Clinton wants free higher education for all in America who go to community colleges, all of which are government-owned? What if the Constitution does not delegate regulatory or spending authority over education to the feds? What if there is no such thing as “free” college? What if someone somewhere will need to pay for it?

What if all federal revenue is already committed to wealth transfers (Medicare, Medicaid, Social Security, welfare), interest payments on the federal government’s debt (now north of $400 billion annually) and the Pentagon (which spends crazily so its budget won’t be reduced in the future)? What if the Clinton “free” college deal would mean the feds would need to tax more or borrow more or both?

What if more taxation means less money for the productive aspects of society? What if more borrowing produces a decrease in the value of what you already own? What if a dollar spent by the feds produces far less wealth -- jobs, income, productivity -- than a dollar invested in the private sector? What if Clinton doesn’t care because she prefers votes to economic productivity?

What if both Trump and Clinton believe they can use the federal government to bribe the poor with handouts, the middle class with tax breaks, the rich with bailouts and write-offs, and the states with block grants? What if Trump himself has benefited enormously from federal write-offs available only to the very rich?

What if neither talks about personal liberty in a free society? What if they both talk about the government’s duty to keep us safe? What if neither talks about the government’s first duty, which is to keep us free? What if neither believes that the government works for us? What if they both really believe that we work for the government?

What if Mark Twain was right when he said that the reason we get to vote is it doesn’t make much difference?

*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.

She Clobbered Him (Don’t Shoot the Messenger)

Andrew Napolitano*

Andrew Napolitano

Andrew Napolitano

In this weekly column and in my on-air work at Fox News, I have characterized former Secretary of State Hillary Clinton as a crook and as the "Queen of Deception." I have argued that there is enough credible evidence in the public domain to indict, prosecute and convict her of espionage, perjury, misleading Congress, public corruption, providing material assistance to terrorist organizations and obstruction of justice.

I can point to five times when she lied under oath. I know of FBI agents who believe that their hands were tied by the Obama administration in the criminal investigation of her. And I know of American intelligence agents who firmly believe that Americans died because Clinton failed to keep state secrets secure.

She sent emails containing state secrets to a former aide whom she knew lacked any security clearance and whose emails were hacked by hostile foreign governments, and she left classified documents in a bedroom in a foreign embassy where personnel without clearances had access to them.

She refused to use government-secured email devices because she wanted to keep her behavior hidden from the public and from the president. Some of that behavior had to do with using the power of the government to enrich her family’s foundation. I have argued that there is strong, credible evidence to demonstrate that she exercised her official behavior as secretary of state in accordance with the financial needs of her family’s foundation. She refused to see some foreign dignitaries until they gave money to the foundation.

She had her close personal aide, Huma Abedin, employed by the foundation while she was employed by the State Department, such that folks who dealt with Abedin knew that she would ask them for money for the foundation as Clinton’s official gatekeeper; and they’d need to make those payments in return for favorable treatment from the secretary of state.

She even permitted Russian President Vladimir Putin to gain control of a Utah uranium mine in return for the payment by an intermediary of $145 million to her family’s foundation.

Some of the behavior Clinton hid involved her waging an illegal and disastrous war in Libya, in which she used the American intelligence community rather than the U.S. military so as to keep Congress largely in the dark. She conspired with a dozen members of Congress and with President Barack Obama to fight the secret war to topple Libyan strongman and American ally Col. Moammar Gadhafi.

She used her lawful authority as secretary of state to authorize exemptions to the U.N. embargo of arms to Libya by American and foreign arms dealers. She permitted the sale of arms to groups in Libya that were masquerading as anti-Gadhafi militias but -- according to the CIA -- were actually terrorist organizations.

She rejected the advice of the CIA and thereby provided material aid to terrorist organizations -- a felony under U.S. law. The result of her secret war was the destruction of all order and culture in Libya, the institution of mob rule and the assassination of the American ambassador.

Yet none of the above was articulated by Donald Trump in his debate with Clinton earlier this week.

Trump utterly failed to capitalize on her greatest vulnerabilities -- the widespread and largely well-grounded belief that she is untrustworthy and her well-documented record as a failure as secretary of state. I know one of his debate coaches very well. I suspect that the coach gave him superb ideas and one-line zingers, none of which he used. I also suspect that the coach’s advice went in one of Trump’s ears and out the other.

Presidential debates are not won on points and counterpoints. They are won on general impressions. The general impression from Monday’s highly anticipated debate is that Clinton brilliantly controlled the ball and Trump came utterly unprepared. She succeeded in arresting her fall in the polls and reassuring her Democratic base. He failed to give independents and wavering Republicans a good reason to back him.

She clobbered him.

But both candidates’ performances deeply disappointed me. I confess to a moral preference for personal liberty in our supposedly free society. Did you hear the word “freedom” or any of its variants or the Constitution mentioned by either debater? I did not.

Neither talked about natural rights -- personal liberties coming from our humanity and untouchable by the government. Trump argued for letting the police stop you on a whim. Clinton argued for massive increases in wealth transfers.

Neither understands the economy. Both want the government to force employers to pay higher wages, to impose higher taxes on the most productive in our society, to impose tariffs on goods we import and to increase our $19.5 trillion national debt. Aren’t those behaviors just what got us into our present precarious economic straits, where all federal tax revenue is now consumed by wealth transfers, the Pentagon and interest on the government debt, with the government being run on borrowed money and borrowed time?

Neither mentioned the primacy of the individual over the state, and neither spoke about the guarantees of liberty in the Bill of Rights. Both believe in a government that can right any wrong, regulate any behavior and tax any event.

Who really wants a choice between two proponents of monster government, bigger than it is now? Whatever became of "that government is best which governs least"? Who will protect us from a government that takes more than it gives?

*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 Government’s Civil Rights Bullies

Richard Epstein*

Richard Epstein

Richard Epstein

Earlier this month, the U.S. Commission on Civil Rights issued its report Peaceful Coexistence: Reconciling Nondiscrimination Principles with Civil Liberties. The report, which was occasioned in part by the same-sex marriage debate, tries to determine the correct relationship between antidiscrimination laws and the First Amendment’s protection of the free exercise of religion. Currently, persons of religious faith have been legally charged with discrimination under state antidiscrimination laws for refusing to provide their individualized services to same-sex couples because they sincerely believe that marriage is a relationship existing only between one man and one woman. The question is: should they be granted a religious exemption?

The report’s title, Peaceful Coexistence, conveys, perhaps unintentionally, a grim social reality in the United States. Historically, of course, it described the uneasy relationship between the United States and the Soviet Union at the height of the Cold War. In that context, the phrase described how two nations, organized under radically different principles, could avoid the dangers of mutual annihilation through nuclear warfare.

One would hope that the stakes would be lower in this domestic debate, but judging from some of the rhetoric surrounding the issue, they are not. The Chairman of the USCCR, Martin Castro, recently commented publicly that “The phrases ‘religious liberty’ and ‘religious freedom’ . . . remain code words for discrimination, intolerance, racism, sexism, homophobia, Islamophobia, Christian supremacy, or any form of intolerance.” And there are powerful echoes of that position in a statement by five of the commissioners—Castro, joined by Roberta Achtenberg, David Kladney, Karen Narasaki, and Michael Yaki—who write: “These laws”—which seek exceptions to the antidiscrimination laws—“represent an orchestrated, nationwide effort by extremists to promote bigotry, cloaked in the mantle of ‘religious freedom.’”

These claims are dangerously hyperbolic in the same-sex marriage context. In making my argument, I will put aside all constitutional questions and examine the issue solely as a matter of first principles. The central point is that there is a heavy and real burden, frequently ignored, on those who wish to make claims of bigotry and phobia.

Let’s define our terms. “The English noun bigot,” Wikipedia tells us, “is a term of abuse aimed at a prejudiced or closed-minded person, especially one who is intolerant or hostile towards different social groups (especially, and originally, other religious groups), and especially one whose own beliefs are perceived as unreasonable or excessively narrow-minded, superstitious, or hypocritical. The abstract noun is bigotry.” Phobia, meanwhile, is defined as a “persistent, abnormal, and irrational fear of a specific situation that compels one to avoid it, despite the awareness and reassurance that it is not dangerous.” The issue is whether these terms are more applicable to the people of faith attacked by the commissioners, or to the aggressive commissioners themselves.

One way to answer this question is to examine a case before the Washington Supreme Court, Arlene’s Flowers, Inc. v. Ingersoll, which tests the scope of Washington’s law against discrimination that protects “the right to be free from discrimination because of race, creed, color, national origin, sex, . . . [or] sexual orientation.” The law further gives a person “deeming himself or herself injured by any act” done in violation of the statute the ability to sue for “the actual damages sustained… together with the cost of suit including reasonable attorneys' fees or any other appropriate remedy authorized by this chapter.” The provision contains no religious exemption for those who refuse to provide services on grounds of conscience.

The sole owner of Arlene’s Flowers is Barronelle Stutzman. The plaintiffs Robert Ingersoll and Curt Freed are a same-sex male couple planning a marriage. Ingersoll was a long-time customer of Stutzman who requested that she prepare the floral arrangements for his impending same-sex marriage to Freed. Stutzman refused, and gave as her reason her Christian belief that marriage takes place only between a man and a woman. She politely referred him to several other florists who were prepared to take his business, and she was even prepared to sell him the flowers he might use to create the appropriate arrangement. But she did not want to prepare the arrangements herself. In light of this, the actual damages in this case were the $7.91 it cost Ingersoll to drive to another florist. Notwithstanding, Ingersoll and Freed, represented by the American Civil Liberties Union, prevailed at trial in a lower court.

The first question is: why apply antidiscrimination law to ordinary business transactions? There are literally tens of millions of people in the United States who follow these Christian beliefs, but there is no evidence of any resistance to doing business with anyone who walks in the door. Wholly apart from the law, it is bad business to turn away customers, especially if those arbitrary sentiments drive other potential clients away. So long as an omnipotent state does not put a decisive thumb on the scale, as it did under Jim Crow, the forces of competition will quickly fill the gap in the provision of services. So why provoke a battle royale over $7.91?

One reason offered by the liberal members of the USCCR is that the case is not really about these actual damages at all, but about the larger issue of emotional distress. Thus, a statement by five of the commissioners quotes Chai Feldblum of the Equal Employment Opportunity Commission as follows:

If I am denied a job, an apartment, a room at a hotel, a table at a restaurant, or a procedure by a doctor because I am a lesbian, that is a deep, intense, and tangible hurt. That hurt is not alleviated because I might be able to go down the street and get a job, an apartment, a hotel room, a restaurant table, or a medical procedure from someone else. The assault to my dignity and my sense of safety in the world occurs when the initial denial happens. That assault is not mitigated by the fact that others might not treat me in the same way.

The term “assault” is used in a very broad sense here; it bears no relationship whatsoever to the common law definitions that mention the use or threat of force against another person, which cannot be found when a person who refuses to do business offers helpful suggestions as to where a disappointed customer may go. The law does recognize a tort of intentional infliction of emotional distress, but limits it to cases of extreme and outrageous conduct, far removed from the Feldblum scenario.

Worse still, it is dangerous to describe these injuries as “deep, intense and tangible,” when people can readily find cordial services elsewhere in a competitive industry. Nor is this supposed injury greater than that which people might feel when turned down for many other reasons, such as when a baker refuses to bake a cakethat says “Blue Lives Matter” on it. But these emotional losses just don’t count. Finally, treating these self-generated harms as actionable gives people the perverse incentive to magnify their sense of loss, when the correct social objective is to minimize it to promote general civility.

Feldblum’s account looks at only one side of the equation. It never asks about the emotional and psychological harms that people like Stutzman the florist might suffer. Indeed, she should bear the heartache if Ingersoll stalks out of her shop never to return, and should have no redress if others follow suit. But in this instance, her emotional harms arise not from customer dissatisfaction, but from concerted legal action by those bullies who want to force her out of business, unless she buckles under state power by engaging in specific acts that violate her deepest beliefs.

But not to worry. The die-hard defenders of the antidiscrimination law tell us how to make her problem go away. The same five commissioners insist:

Providing commercial goods and services does not require that one “blesses” an event. Taking pictures is not “testifying” to one’s spiritual endorsement of a legally recognized ceremony. Frosting a cake is not “helping to celebrate something ... believe[d] to be a transgression of divine law.” Selling flowers is not “contribut[ing] to” a marriage celebration. Those are secular, commercial, quid pro quo transactions; straightforward exchanges of products and services for money.

Really? The expert expositors of Stutzman’s religious beliefs are the same civil rights commissioners who are prepared to trash the lives and reputations of every businessman and businesswoman who acts contrary to their commands. What gives them the moral authority to decide the religious rights and obligations of other people? More to the point, note how well their dismissive attitudes fit the definitions of bigotry and phobia.

Stutzman has thought long and hard about her position. She draws subtle distinctions key to her faith. She works hard to respect the beliefs of those who disagree with her. She understands that she risks the loss of their business and that of others by living according to her beliefs. But she draws a line on principle. Her conduct bears no relationship to a “prejudiced or closed-minded person, especially one who is intolerant or hostile towards different social groups.” Her actions are not borne of some irrational fear.

But the words “bigotry” and “phobia” clearly do apply to the five commissioners who happily denounce people like Stutzman. They show no tolerance, let alone respect, for people with whom they disagree. They exhibit an irrational fear of those people’s influence. They show deep prejudice and hostility to all people of faith. They indulge in vicious overgeneralizations that make it harder to live in peace in a country with people of fundamentally different views. And they seem to take pleasure in bullying little people who can’t fight back.

This issue is bigger than whether religious people should be granted exemptions from certain laws. It’s about the role of state power in our lives. Our nation has to seriously rethink the question of whether it wants the state to force people to do business with others. The only cases where that makes sense are with common carriers and public utilities that have some clear level of monopoly power, where the refusal to deal means having many people going without essential services altogether. But competitive markets have powerful corrective powers. Government monopolists do not. Unfortunately, that lesson is lost on the commissioners of the USCCR, who, in their willingness to beat up on little people, fail to understand that they are the problem, not the solution. 

*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.

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.