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Anastasia P. Boden and Nathaniel Lawson

Arizona thinks that some people ought to be able to take other peoples’ property when they can put it to “better use.” We think not.

Under the Arizona Condominium Act, a supermajority of condo owners can force a minority of owners to sell their units against their will. That’s exactly what happened when an LLC called PFP Dorsey Investments bought ninety out of ninety‐​six units in a condo building in Tempe and then forced the sale of the remaining six units to itself—never mind that the remaining owners, including Jie Cao, did not want to sell or to leave their homes.

After the condo association changed the locks and shut the owners out, Cao brought a lawsuit seeking to invalidate the Act. Now the case is on appeal in the state’s highest court and we’ve filed a brief in support.

Defenders of Arizona’s law say it’s necessary to prevent the “holdout problem”—property owners who supposedly strategically refuse to sell at market price to compel extra compensation. In theory, such holdouts hinder economic development projects and their alleged trickle‐​down effects.

But as we wrote in our brief, the fact that some people would rather see private property go to a supposed “better use” can’t justify confiscating it. The Founders were very worried that private interests might coopt government power for their own ends. In Calder v. Bull, 3 U.S. (3 Dall.) 386 (1798), Justice Samuel Chase wrote of a “law that takes property from A. and gives it to B.” and explained that “[i]t is against all reason and justice, for a people to entrust a Legislature with such powers.… The genius, the nature, and the spirit, of our State Governments, amount to a prohibition of such acts of legislation; and the general principles of law and reason forbid them.”

John Locke, whose works were very influential on the American founders, stated, “I have truly no property in that which another can by right take from me when he pleases against my consent.” William Blackstone, a similarly influential figure to early American jurists, said that an “absolute right, inherent in every Englishman, is that of property,” which cannot be violated “even for the general good of the whole community.”

The understanding that, as John Adams once said, “liberty cannot exist” without property rights led the Founders to draft the Fifth Amendment’s Takings Clause. That clause prohibits the taking of private property for private use and demands that, even when the government takes property for public use, it must offer property owners “just compensation.”

Unfortunately, the clause has been watered down over the years by a Supreme Court that has effectively written the words “public use” out of the Constitution and that now largely defers to governmental assertions that its property theft will lead to some public benefit. The results can be tragic.

In the infamous Kelo case, for example, the Court permitted the City of New London to confiscate Suzette Kelo’s little pink house to make way for a new business development spearheaded by Pfizer. Even after that tremendous legal battle, Pfizer abandoned its New London facility in 2009, costing New London 1,400 jobs.

A decade after the Kelo decision, the condemned properties at the center of it remained “empty and undeveloped,” occupied only by feral cats.

Kelo ignited popular pushback across the nation, including in Arizona, where residents passed the Private Property Rights Protection Act (PPRPA). In Cato’s brief, we argue that the Condominium Act is a quintessential private taking that violates the Arizona constitution and the PPRPA.

The Condominium Act is also terrible policy. Multiple studies have shown a strong connection between protection of property rights and economic well‐​being, including increased income per capita. Nations with similar languages, cultures, and traditions have greatly disparate Gross National Income (GNI) per capita depending on their respect for property rights. South Korea’s GNI per capita is at least 17 times the income of North Korea’s, Finland’s is between 2.5 times and more than 7 times Estonia’s, and Taiwan and Hong Kong’s are both more than four times China’s. The sheer benefit of property rights justifies their enforcement.

Moreover, eminent domain abuse causes more harm than any holdouts supposedly cause. In the early 1990s, for example, Bremerton, Washington, settled a suit about odor complaints from a sewage treatment plant and agreed to install odor controls. The city then condemned 53 homes near the sewage treatment plant, including one owner’s home of 40 years, supposedly to create an odor easement. However, days after the condemnations were finalized, the city rezoned the land and sold it to a car dealership for $1.99 million. The city never created the easement.

In 1997, Hurst, Texas, used eminent domain to seize 127 homes to expand a real estate company’s mall, hoping to increase sales and property tax revenue. Ten couples, who had lived in those homes for as many as 30 years, sued to stop the condemnations. The trial judge refused to stay the condemnations while the suits were ongoing, so the residents lost their homes. The judge also refused an extension to a resident whose wife was in the hospital for brain cancer, forcing him to leave her bedside to move out his belongings. A total of three couples died and four others suffered heart attacks during the litigation. There was evidence that the land surveyor who designed the roads for the mall was told to change the path of one road to run through eight of the litigants’ houses. After years of litigation and receiving no compensation, the families were forced to settle.

In contrast, the holdout problem is not as problematic as some suggest; economic development has long managed to succeed despite holdouts. Some have even gone on to become cherished parts of the community.

In 1902, Macy’s decided to move its flagship New York store to the corner of 34th Street and Broadway. The new store was planned to cover the entire block. However, the owners of the competing Siegel‐​Cooper Co. bought one parcel on the corner of the block to bargain for a lease of the old Macy’s location. Macy’s thwarted this plan by refusing to negotiate, and it instead built the store around the tiny parcel.

Macy’s has never owned the parcel since, but it advertised on the parcel’s exterior from the 1940s until Amazon outbid it in 2021. Despite Macy’s being unable to get part of the property it sought, it still successfully built the store and even leased the holdout parcel for advertising space.

When Wickham’s Department Store wished to expand onto the land of Spiegelhalter’s jewelry shop to create a grander structure, the jewelry store owners refused to sell. Ultimately, Wickham’s built its grand structure around Spiegelhalter’s. The resulting lopsided look became extremely popular. Decades after both stores shut down, when new developers planned to demolish Spiegelhalter’s and replace it with a tall, glass atrium, campaigns by local groups managed to get the developers to keep Spiegelhalter’s intact.

We detail several more examples of charming holdout stories that ended happily, all while respecting property rights, in our brief.

In sum, our Constitution, and Arizona’s, protects property owners’ ability to hold onto their property even when others would rather see it go to someone else for a purported better use. The Condominium Act directly contradicts that foundational principle. We hope the Arizona Supreme Court will agree.

Read our full brief here.

Thomas A. Berry

Social media sites face many choices when they set rules for users. How much speech is permissible? Will conversations be “anything goes” or strictly moderated for relevance and decorum? Will moderation decisions be automated, human, or a mix? Different sites have made different choices, and that’s as it should be. Indeed, the First Amendment requires that sites have the freedom to make these decisions for themselves.

Although social media may be a relatively new medium, long‐​established First Amendment principles give sites the right to control what content they host, just as newspapers and book publishers have a right to select the editorials and manuscripts they print.

Some states, including Texas and Florida, have attempted to infringe the First Amendment rights of social media companies in blatant ways, such as by forcing sites to host user content they do not wish to. And now New York State has joined the fray with its own unconstitutional intrusion into the editorial freedom of social media sites.

New York recently enacted an “Online Hate Speech Law” that requires social media sites to promulgate policies governing so‐​called “hateful conduct” and create “mechanisms” by which users can report such conduct. “Hateful conduct” is defined by the statute to include online speech that can “vilify” or “humiliate” a group or a class on the basis of race, sex, and other traits.

New York’s law was soon challenged in a lawsuit brought by several operators of online platforms, including law professor and First Amendment expert Eugene Volokh. As the operator of the “Volokh Conspiracy” blog, which allows user comments, Volokh himself would be forced to comply with the law’s requirements.

A district court ruled in favor of Volokh and blocked the law from going into effect, holding that it likely compelled speech in violation of the First Amendment. The court found that the law impermissibly required sites to publish a “hateful conduct” policy even if they would prefer not to publish any such policy, forcing them to speak when they would prefer to remain silent.

New York appealed that decision to the Second Circuit, and Cato has filed an amicus brief urging the Second Circuit to affirm the lower court and hold the law unconstitutional (with thanks to attorneys Joshua Zuckerman and Brian McCarty of Gibson Dunn, who drafted the brief on behalf of Cato).

In our brief, we explain why the law’s “reporting mechanism” requirement violates the First Amendment rights of both social media sites and their users by chilling free expression. Some sites may prefer not to have a reporting mechanism for so‐​called “hateful conduct,” given that most of the speech falling under New York’s mandated definition of that term is itself lawful speech protected by the First Amendment.

These sites may reasonably expect that if they did have such a reporting requirement, users would naturally self‐​censor for fear of being reported. By compelling unwilling sites to create a mechanism for users to report on each other, the law is likely to stifle the uninhibited flow of speech that these sites would prefer to allow.

Of course, social media sites are free to voluntarily create reporting procedures, and many had already done so prior to New York enacting its law. But the choice of whether to create such a mechanism, how it operates, and what speech to make reportable must be up to each individual site.

New York’s one‐​size‐​fits‐​all definition of “hateful conduct” puts a thumb on the scale, with the clear aim of inducing self‐​censorship of some lawful speech that New York would prefer to suppress. The Second Circuit should make clear that states can’t use mandates like “reporting requirements” to indirectly achieve online censorship that states couldn’t impose directly.

Thomas A. Firey

Usually, when some government proposal is floated in D.C., it should be evaluated with careful, sober policy analysis. But in the case of the Federal Communications Commission’s new “net neutrality” push to more‐​or‐​less reinstate regulations that were repealed a half‐​decade ago, an old internet meme suffices:

If you don’t remember net neutrality, it prohibited internet service providers (ISPs) from treating some data streams differently than others, typically by either charging more or limiting the delivery speeds for, say, high‐​definition movies from outside the ISP. Regulation supporters claimed that all data streams should be treated the same. ISPs and other internet infrastructure providers responded that if they were to provide more and better services for heavy users, they should be able to charge those users higher prices or moderate their use.

Net neutrality supporters predicted that, if the internet companies got their way, disaster would result. Among the foretold parade of horribles: the rise of a vicious ISP cartel, wide‐​ranging internet censorship and loss of privacy, and the end of internet innovation and perhaps even the internet itself. For a sense of these apocalyptic visions, check out some editorial cartoons from the time.

But the internet companies won the political fight, net neutrality was repealed and … the World Wide Web continued on. In fact, most users didn’t realize that anything had changed. And a few years later, when a large chunk of American life suddenly moved online because of the COVID pandemic, the nation had a more built‐​out internet to handle the flood of electronic commerce, virtual education, and home entertainment.

Unfortunately, policymakers often do not react rationally when their ideas are disproven by reality; hence the FCC’s new net neutrality push. The same thing is happening at the Federal Trade Commission and the Justice Department’s Antitrust Division, where policymakers are undaunted by their string of false predictions of doom from specific corporate mergers and acquisitions.

To learn more about net neutrality, see this summary of articles on the topic that have appeared in my journal, Regulation, and the work of my Cato colleagues.

Jeffrey Miron

This article appeared on Substack on September 29, 2023.

The United Nations has released a report that calls for ending criminal penalties for drug use. Decriminalization is in line with libertarian principles, and penalties against users generate substantial harms, even when jail terms are absent (lower employment prospects, loss of public housing, deportation, reduced individual liberty, and racial disparities in police interactions).

But legalizing use is a halfway measure that often fails to eliminate harm from prohibition or even makes things worse.

Legalizing possession, but not production, does not eliminate the underground market, so violence and quality control issues remain. Indeed, to the extent decriminalization increases demand, it expands the black market and thus causes more violence. This describes Oregon, where violence and overdoses failed to decline even after decriminalization.

Another risk is that the criminal justice resources freed up from decriminalization shift to increased enforcement against drug supply, making violence and quality control problems worse. Enforcement pushes more transactions out of the legal sphere and disrupts agreements between market participants, increasing the scope for violence.

These concerns might seem inconsistent with the experience of some cities, states, or countries that have decriminalized and experienced reductions in prohibition‐​induced harms. Portugal’s drug decriminalization, for example, is often seen as responsible for the country’s low drug mortality rate. Decriminalization in the Netherlands is similarly praised for producing low heroin use and low HIV prevalence among users.

The likely explanation is that, while these places have labeled their policies as decriminalization, the policy changes also reduced supply‐​side enforcement, implying less disruption of the underground markets. Thus these examples again show that eliminating supply‐​side prohibition is crucial.

The UN should call for total legalization, the only approach that will fully resolve the harms identified in its report.

Alex Nowrasteh

Cato released two new briefing papers this week analyzing an OMB proposal to add new racial categories to U.S. government forms and surveys, particularly a Middle Eastern or North African (MENA) designation. The first paper details the demographics of MENA people in the US, and the second paper documents why creating such a racial category is bad policy.

The first paper by Cato adjunct scholar Andrew C. Forrester used the OMB’s proposed changes to race and ethnicity to create counterfactual American Community Survey (ACS) selected demographic and socioeconomic tables for the 2021 survey year. His goal was to see how the new racial rules, especially the creation of a new Middle Eastern or North African (MENA) category, would alter the results.

He created his counterfactual by relying on the ancestry and country of origin responses to allocate respondents to the new MENA race category and to subtract them from the White[1] and other racial categories, consistent with the new OMB proposal. These are his primary findings:

I find a total MENA population of 3.8 million in 2021—about 1 percent of the total U.S. population. The MENA population is most demographically similar to the Non‐​Hispanic White and Asian populations in terms of age, earnings, education, and occupation. Specifically, the MENA population is more highly educated and has higher earnings than Non‐​Hispanic Whites, but lower levels of education and earnings than the Asian population.

Read Forrester’s entire brief.

I wrote Cato’s second brief about the consequences of a new MENA racial category in U.S. government surveys. Specifically, I catalog and refute the most common arguments made by advocates and others in favor of a new MENA racial category. Since MENA respondents have higher incomes and education than White Americans, they would suffer under affirmative action rules in employment, university admissions, or anywhere else that does or could use government racial categories to allocate benefits.

Affirmative action in education is on the decline thanks to the Supreme Court. Still, it will hurt MENA Americans to the extent that affirmative action persists or is revived, just as it hurts Asian Americans. That should convince some MENA advocates and supporters of this new OMB rule to reconsider their support.

My brief details arguments for a MENA category to allocate benefits through government contracting rules, data accuracy, anti‐​discrimination laws, government surveillance and anti‐​terrorism laws, and more. Cato adjunct scholar John F. Early wrote excellent pieces opposing the reforms that would create the new MENA category, among other things, some months ago.

Our new Cato briefs add to his work by producing new research estimating the results of a new MENA race category and novel arguments against the creation of such a category. I conclude with something personal:

As a social scientist, I find a new government racial category tempting. It would be better to have access to that category with fewer mouse clicks, all else being equal. But all else is not equal. As a libertarian concerned about the scope and power of the government, I believe a new MENA racial category raises many more concerns that outweigh my interest as a social scientist. As an American libertarian, I oppose the creation of a MENA category for other principled, ethical, and universalistic reasons. As an American with Middle Eastern ancestry, I also oppose it out of self‐​interest for myself, my family, and my children.

[1] “White,” other races, and ethnicities are capitalized to be consistent with U.S. government stylistic guidelines

Andrew C. Forrester

The Office of Management and Budget (OMB) is working on a plan to update how the government collects information about race and ethnicity in the United States. Their goal is to better represent the diverse American population and simplify self-reporting on forms and surveys.

Over the most recent decade, the U.S. Census Bureau finds that the population identifying as multiracial increased dramatically since 2010. Given substantial demographic change over past decades, the OMB contends that the current racial and ethnic reporting standards set by Statistical Policy Directive 15 (SPD15) in 1997 need updating.

In a recent Cato Briefing Paper, I use public data to model the proposed OMB categories and analyze each group’s demographic and socioeconomic characteristics. Below is a summary of my Cato brief. Please read the longer version for more details.

Background

The current standards ask about race and ethnicity in two separate questions, designed to provide a “minimum set” of categories that can be used consistently across different sources. This means that the categories must be detailed enough to allow respondents to best self-report their background but broad enough to be compiled into a few consistent groups. The current categories are shown below.

Figure 1
Current Race and Ethnicity Categories

After consulting an interagency group of experts, the OMB proposed the following key changes:

Collapsing race and ethnicity into a single query that adds Hispanic or Latino origin as a separate race category.
Introducing a separate race category for those of Middle Eastern or North African (MENA) descent.
Obtaining by default more detailed racial breakouts within the updated racial categories.

The proposed standards are especially important, as they define how the government collects and understands demographic and socioeconomic trends,[1] administers civil rights enforcement laws,[2] and administers federal programs and grantmaking.[3] It is therefore critical to understand how data collected under the proposed classifications might alter each process.

Methodology

Using public-use microdata from American Community Survey (ACS) (published by IPUMS), I classified respondents in the ACS as MENA if: a) they reported a MENA ancestry or b) they were born in a MENA country. This broad classification follows similar work by the Migration Policy Institute and captures the MENA diaspora, or those likely to have some ancestral ties to the MENA region. With the MENA respondents identified, I approximated the proposed OMB measure by coding respondents as Hispanic or Latino — regardless of race — using the ethnicity question.

I then developed demographic and economic profiles for each group like the ACS Data Profiles, which contain frequently requested statistics on the American population. The tables draw on the wealth of social and economic information in the ACS, including age, sex, employment status, income, and educational attainment, among other things. Among the full set of tabulations (available in the paper here), here are a few stylized facts about the MENA population in 2021.

Stylized Facts

The MENA population is highly educated. Over 53 percent of MENA respondents who are ages 25 and older hold a bachelor’s degree or higher, compared to the White population at 38.6 percent and just below the Asian population at 56.8 percent.

Figure 2
Educational Attainment by Race and Ethnicity, Population Ages 25 and Over

The MENA population has high incomes. MENA households have a median income of $74,000, higher than that of White households ($73,000 and below that of Asian households ($99,000).

Figure 3
Median Household Income by Race and Ethnicity

The majority of the MENA population is foreign-born and most are naturalized. 58 percent of the MENA population is foreign-born, of which 70 percent are naturalized citizens. MENA immigrants are about 5 percent of the foreign-born population in the United States.

Figure 4
Nativity and Citizenship by Race and Ethnicity

Further Work

The OMB expects to have a revision to SPD 15 set by the Summer of 2024. In the meantime, this methodology provides a useful benchmark to the OMB’s proposal using current data — especially with detailed race and ethnicity results just released by the U.S. Census Bureau.

For more demographic and technical details, please check out my Cato brief, and check out more analysis by Cato adjunct scholar John F. Early. My codes are available on GitHub to anyone interested in replicating or exploring this further.

[1] For example, data collections through household surveys like the Current Population Survey (CPS) and the American Community Survey (ACS) among many others.

[2] For example, employment, mortgage applications, and school enrollment forms among many others.

[3] For example, grant-making at the National Institutes of Health (NIH)

Walter Olson

In Garrity v. New Jersey (1967), one of the most remarkable decisions of the Warren Court, a 5–4 majority of justices said public employees cannot be found guilty of crimes based on their admissions in disciplinary interviews conducted as a condition of employment.

Justice Harlan, writing in dissent, said the majority had fundamentally misunderstood the nature of the constitutional right against compelled self‐​incrimination. The relevant scope of “involuntary as a matter of law,” in his view, should be seen to reach only situations of actual legal compulsion, not those in which the price you pay for declining to speak frankly about how you behaved on the job is that your employer might not want to keep you on its payroll.

Garrity has become a key element of legal weaponry for public employees and their unions seeking to minimize consequences for on‐​duty misbehavior. (Although the original setting was one involving police officers, the decision applies broadly to public employment generally.)

Aside from its momentous reading of employment relations as themselves a species of coercion, Garrity has been cited as a key breakthrough for the “New Property” ideas associated with the late Yale law professor Charles Reich. He had argued that the holding of a government job or the receipt of welfare benefits should be analogized to property and protected in similar fashion by vigorous judicial action.

The Garrity doctrine plays a key role in this stomach‐​churning new Reason cover story by C.J. Ciaramella about impunity for prison rape.

Internal Affairs [at the federal Bureau of Prisons] then forced the correctional officers to sit for sworn interviews. Once those officers confessed to sexual assault, the possibility of criminal prosecution evaporated [under Garrity]…

By compelling prison guards to admit to criminal conduct, BOP internal affairs investigators got enough dirt to kick them out of the agency but also shielded them from future criminal prosecution.

Although it would technically be possible for federal prosecutors to bring charges now, they would have to rely on other evidence and prove that nothing in their case was tainted by those interviews. Perversely, the more detailed and thorough the confession, the harder it is to prosecute—a feature that any BOP employee who screws up badly enough to get called in for a sworn interview understands.

Interviews held on a condition of non‐​prosecution are known as “Garrity interviews,” but they had a nickname:

A former correctional officer at [the problem institution] says they were called “queen for a day.” As in, “Did you hear that Smith got queen for a day?” The term is more commonly used in criminal law to refer to a proffer agreement between federal prosecutors and a potential defendant—basically, spill the beans in exchange for possible immunity—but it worked much the same way between BOP internal affairs investigators and correctional officers.

Garrity interviews also allowed the BOP to quietly remove problem officers without the media attention that criminal charges would bring.

It’s hard to escape the conclusion that the 1967 decision has had some gravely damaging consequences. As an error in constitutional interpretation, it cannot practically be revised or revisited by agencies themselves, by lawmakers, or by lower court judges. That leaves the high court itself. Is it wise or prudent for the U.S. Supreme Court to afford Garrity the eternal benefit of stare decisis?

Thomas A. Berry

The Constitution requires, as a default rule, that “Officers of the United States” must be nominated by the president and confirmed by the Senate. The Constitution allows only one potential exception to this default rule: If an officer is merely an “inferior officer,” Congress may waive Senate consent. But even if an officer is inferior, Congress is limited to only three choices for who may appoint that officer: “the President alone,” “the Heads of Departments,” and “the Courts of Law.”

The Federal Vacancies Reform Act (FVRA) is one such statute that vests appointments in “the President alone.” Specifically, it grants the president authority to unilaterally appoint temporary, time‐​limited “acting officers” to fill vacancies in positions that normally require Senate consent.

When President Trump took office in January 2017, the acting commissioner of the Social Security Administration (SSA) resigned. A new acting commissioner, Nancy Berryhill, then purportedly took office. But President Trump did not select Berryhill to be acting commissioner. Rather, Berryhill was elevated pursuant to a Succession Order issued by outgoing President Obama the previous month, which named and ranked positions (not people) within SSA to fill potential future vacancies in the office of commissioner.

Plaintiff Brian Dahle later challenged an action that Berryhill took as acting commissioner, arguing that Berryhill was not validly serving under the terms of the FVRA when she took the action. But the Eighth Circuit rejected Dahle’s statutory arguments, holding that Berryhill was validly appointed by former President Obama as acting commissioner under the terms of the Succession Order.

The panel held that even though Obama was not the president when Berryhill was elevated, “presidential orders without specific time limitations carry over from administration to administration” and “a new president does not have to take affirmative action to keep existing orders in place.”

Dahle is now asking the Supreme Court to take his case, and the Cato Institute has filed an amicus brief supporting his petition. In the brief, we point out that the Eighth Circuit’s statutory holding raises a serious constitutional problem: Berryhill’s elevation via Succession Order was not an “appointment” under the meaning of the Constitution.

In the Federalist Papers, Alexander Hamilton explained that because the president alone would be responsible for choosing nominees, “the blame of a bad nomination would fall upon the President singly and absolutely.” But if an appointment is made by contingency order rather than by name, then the accountability mandated by the Appointments Clause vanishes. The people cannot blame President Obama for Berryhill’s performance, because Obama did not choose Berryhill for the position. Indeed, the people cannot blame any single person for Berryhill’s accession to the position of acting commissioner, because her accession resulted from the combined actions and inactions of no fewer than four people. That is precisely the diffusion of accountability that the Appointments Clause forbids.

The Supreme Court should take this case to review the Eighth Circuit’s decision in light of the Appointments Clause. When there is no clear line of accountability for a nomination, political accountability suffers. Requiring the president to take accountability for federal officers by actually naming those officers is not too much to ask.

Romina Boccia and Dominik Lett

The federal government may be heading toward a partial shutdown as soon as this weekend as Democrats and Republicans remain at great odds over funding bill details, including how much to spend on regular appropriations. In addition to disagreements over additional border funding, Ukraine aid, and disaster assistance, neither the House nor the Senate have fully embraced the spending limits agreed upon in the May debt limit deal, with the House seeking to spend less and the Senate seeking to spend more by abusing a budget deal loophole.

The May Fiscal Responsibility Act set spending limits on discretionary funding but left a loophole for any spending designated as an emergency. In 1991, the Office of Management and Budget laid out five criteria all emergency and disaster spending should meet: necessary; sudden; urgent; unforeseen; and not permanent. Under current law, however, Congress can label pretty much anything as emergency spending, making it exempt from budgetary enforcement mechanisms.

In other words, the Fiscal Responsibility Act’s $1.59 trillion discretionary spending cap for fiscal year 2024 has little to no bite if appropriators decide the caps shouldn’t apply. By late July, the Senate Appropriations Committee did just that, promising to add $13.7 billion in emergency spending to circumvent discretionary caps. They went a little overboard, designating nearly three times that amount as emergency spending.

Each year, Congress is supposed to produce 12 spending bills—often combined into an omnibus bill—which fund everything from the Department of Defense to the Department of Energy (about 27 percent of total federal spending). Across 9 of the 12 annual appropriations bills, the Senate allocated $37 billion in net emergency spending (known as “budget authority,” or BA). That’s just $3 billion less than Biden’s latest Ukraine funding request.

The emergency Ukraine package saw significant pushback from the House. The Senate’s “regular” emergency appropriations should face yet more scrutiny for being in blatant violation of the May debt limit deal spending caps.

Last month, we examined the $2 billion in “emergency” spending provided by the Commerce, Justice, and Science (CJS) appropriations bill. Most of it was not for urgent, unexpected, and temporary events. Here we examine the remaining $35 billion in Senate discretionary funding designated for emergencies. Table 1 details emergency designations broken down by Senate appropriations bills. These funding items do not qualify as emergency spending under any reasonable definition of the term.

Housing assistance

The Senate designates $13 billion in housing and rental subsidies as emergency spending (S.2437 & S.2624). See Table 2 for a breakdown. About $10 billion goes to tenant- and project-based rental assistance such as Section 8 vouchers. These Housing and Urban Development programs have been argued over for half a century—that hardly sounds like an unexpected and temporary expenditure.

They are also a harmful use of taxpayer dollars. As former Manhattan Institute scholar Howard Husock explains, “Federal interventions undermine neighborhoods, encourage dependency, and create disincentives for long-term maintenance and improvements in housing. They also rest on the false premise that the private sector cannot provide housing for those of modest means.”

Defense

The Department of Defense receives $8 billion in emergency budget authority (S.2587). None of the funds address emergencies. Take the $2 billion Congress provides to address “revised economic assumptions” and “higher than anticipated fuel costs.” One year earlier, Congress was able to budget for similar costs without resorting to emergency designations.

Another $2 billion goes toward so-called “unfunded priorities”—essentially wish-list items that didn’t make the base budget. Providing emergency funding for these unfunded priorities can incentivize “budget gamesmanship,” where the Department of Defense places critical programs on the unfunded priorities list. This process inflates total defense spending and undermines fiscal commitments. If these priorities merit funding, appropriators should budget for them within existing budget caps, following the regular process.

What about the $1 billion appropriation to “address defense industrial base capacity and workforce shortfalls?” People say the defense industrial base is declining. If this is true (debatable), it is partly due to budget unpredictability. When contractors fail to meet deadlines (often under short-term contracts), they come running to Congress to ask for more money in the following year. The result is a mismatch between funds and good strategy. Overreliance on emergency spending is part of the problem—not the solution.

If policymakers want to strengthen national security, they should reevaluate protectionist “Buy American”–style laws or consider reforming defense contracting to allow for more innovative small businesses to compete. Policy reforms in either area would have the added benefit of pushing costs downward by welcoming more goods and services suppliers, thus increasing competition.

Foreign aid

Foreign aid receives nearly $2 billion in emergency funding (S.2438). Congress provides $1.1 billion for international disaster assistance—a massive slush fund for natural disasters, disaster preparedness, or food security and $900 million is for general economic aid (some of which is for Ukraine and surrounding states). The related statutory language is similarly vague. Ultimately, the dispersion of this aid is largely left up to the president and the United States Agency for International Development (USAID).

Most of fiscal year 2024’s international aid is not considered emergency spending. Indeed, the $2 billion in additional emergency spending has no reasonable justification for being urgent, unexpected, and temporary in nature. International disaster assistance appropriations and Ukraine-related economic aid deserve the same oversight and trade-off considerations the rest of the discretionary budget process faces.

Health research

Health research and administration gets $1 billion in emergency funding (S.2624). Most of that budget authority is for federally funded research programs such as the National Cancer Institute, National Institute of Neurological Disorders and Stroke, and National Institute of Mental Health. Setting aside the limitations of federally funded research, all of these line items are recurring or predictable. They do not merit emergency designations.

Other spending tricks

Across two bills, the Senate provides $4 billion in gross budget authority for refugee and migration assistance (S.2624 & S.2624). However, about $2 billion comes from a transfer in previously allocated emergency budget authority from “United States emergency refugee and migration” to “Enduring Welcome Administration and Support”—an Afghanistan refugee program. The net emergency budget authority for refugee and migration assistance is $2 billion.

The canceling of certain budget authority—sometimes called rescissions—was a more frequent feature of previous decades. In some cases, rescissions promote more responsible spending. By canceling existing budget authority, appropriators can justify new expenditures without breaking the bank. Unfortunately, some rescissions obscure the true cost of spending by rescinding funds that were already scheduled to expire or were unlikely to be spent altogether. Based on CBO’s projections by spending accounts, it looks like Senate appropriators are shifting unspent funds around rather than making real cuts.

Restrain emergency spending

At the core of the emergency spending exemption is a good idea—sudden, urgent events may demand budgetary escape valves. However, the latest round of Senate appropriations demonstrates just how strong the temptation is to use emergencies as a justification to evade discretionary spending caps. Routine abuse of emergency designations erodes the credibility of fiscal commitments and adds to deficits and the already unsustainable growth in the debt.

Congress should commit to restraining emergency spending. Establishing a mechanism like CUTGO to account for emergency spending and offset could restore fiscal credibility and reduce the temptation to abuse emergency designations. Such a mechanism could retain the emergency cap exemption, track spending (plus interest costs), and reduce discretionary limits over the following five years.

Congress should incentivize and commit to forward-looking budgetary planning to gain control of America’s worsening fiscal trajectory and restore transparency and accountability in federal budgeting. Budgeting and paying for emergency spending is a good place to start.

James Bacchus

In a joint appearance last Friday with Director‐​General Ngozi Okonjo‐​Iweala of the World Trade Organization at the Center for Strategic and International Studies in Washington, U.S. Trade Representative Katherine Tai tried to reassure those who care about international trade of the strength of the commitment of the Biden administration to the WTO.

This would be reassuring if not for the fact that Tai also continues to perpetuate wrongful myths about the WTO and its supposed unfairness towards the United States, myths that I address in a new essay published today as part of Cato’s Defending Globalization project.

“The United States is committed to the organization and its foundational goals and values,” Tai insisted, and is “proud to champion the international rules‐​based order and the multilateral trading system.” WTO reform, however, is much needed, she added, and, in contemplating this needed reform, “we all need a WTO focused on its foundational goals.”

This affirmation of the support of the Biden administration for the WTO was, however, called into question by the almost simultaneous publication by Politico of an interview with Ambassador Tai before her speech, in which she said, “I don’t have enough time and money to waste resources in Geneva on a process that we don’t actually believe in.”

In context, it appears she meant to say that she would not be investing energy and resources in an institution in which she did not believe. But those who question the truth of her commitment and that of President Joe Biden to the WTO‐​based multilateral trading system can perhaps be forgiven for thinking she may have meant something else.

While making some good points about the need for reforms that align trade more with climate change and other aspects of sustainable development and that create more transparency in the WTO and its workings, Tai said, “The WTO and the multilateral trading system’s rules were never meant to be immutable or static.”

True enough. The original idea was for the WTO to be an ongoing framework and forum for revising existing rules and negotiating new rules as the world needed. But WTO rules were meant to be binding. And like the Trump administration, the Biden administration does not seem to believe the United States is bound by WTO rules.

Tai rightly criticized trade‐​distorting subsidies of other “certain Members”—by which she later acknowledged she meant China. But what of our own actions? The Inflation Reduction Act (IRA) includes a spate of subsidies that may or may not be consistent with binding WTO rules, and certainly are not to the extent that they are coupled with “Buy American” domestic content requirements, which are prohibited under those rules.

She did not mention the IRA in her speech, nor did she mention the half dozen WTO cases in which unilateral tariffs imposed by the Trump administration on Chinese and other imports have been found by WTO jurists to be illegal under WTO rules—judgments the Biden administration has simply ignored.

In her speech, Tai accused the WTO of suffering from a “lack of restraint.” Equally, she bemoaned the way in which the WTO has supposedly diminished lawful “policy space” for members to take needed domestic actions and second‐​guessed members’ legitimate security interests.

In her interview with Politico, she said that the WTO should avoid “holding its members back from exercising their rights—whether it’s on the essential security side or their right to develop, or to correct for deindustrialization.”

None of this is true. WTO jurists and other WTO members simply expect the United States to fulfill the trade obligations to which it agreed in the WTO treaty. And, to resort to a popular political retort these days, “what about” the lack of restraint of the United States itself when it comes to applying unilateral and discriminatory trade measures?

The hypocrisy of the Biden administration is most evident in WTO dispute settlement, which it has crippled by refusing to join other WTO members in appointing new judges on the trading system’s final tribunal of appeal, the WTO Appellate Body.

The goal of dispute settlement reform, Tai said, “is about providing confidence that the system is fair.” The US has presented no evidence that it is not fair. “The Appellate Body systematically overreached to usurp the role of Members themselves to negotiate and create new rules. And in so doing, it undermined the ability of all Members to defend their workers from harmful non‐​market policies.”

“Systematically overreached?” This is, to borrow her word, very much a rhetorical overreach. Why, we might ask, have none of the 163 other members of the WTO said that the Appellate Body engaged in “systematic overreach.” Put simply, it is because it did not.

The US has presented no evidence that the dispute settlement system is not fair to Americans. For the most part, the US has simply lost a number of cases it should have lost because it wanted to apply anti‐​dumping duties, anti‐​subsidy duties, and other trade remedies beyond what the WTO rules allow.

Have I mentioned that the United States played a major role in writing the current trade remedy rules during the Uruguay Round of trade negotiations, that we spent the previous several decades trying to get the rest of the world to agree on rules for applying such remedies, and that, indeed, we insisted on many of them as they are written?

I should know. I was there, first at the USTR and later as a Member of Congress.

What we have here is an elaborate and prolonged charade for sheer protectionism—for unlimited trade remedies. Why? Because Biden, Tai, and others who are defending this indefensible position of the United States are afraid that if they profess anything less than full‐​throated support for the maximum amount of discretionary latitude in applying trade remedies, then they will lose the upcoming national elections in protection‐​minded Pennsylvania, Michigan, and Wisconsin—three key swing states that could decide who wins the presidency (and, for that matter, control of the Congress) in 2024.

Why won’t the president and his USTR be honest with us about this?

The United States has—after several years of recalcitrance on the subject—recently finally acknowledged that it wants to abolish the Appellate Body and eliminate the current automatic right of appeal. The rest of the members of the WTO continue to favor a two‐​tier system with an automatic right of appeal.

When asked by the CSIS moderator what the dispute settlement system should look like, she did not answer, although she did say she thought an outcome on dispute settlement reform at the upcoming 13th Ministerial Conference of the WTO in Dubai in February is “in the realm of possibility.” Let us hope so—so long as it does not include a restored Appellate Body shorn of the independence and impartiality that are essential to its success in helping uphold the rule of law in world trade.

In response to all this, Dr. Ngozi demurred on the question of the Appellate Body. That is, after all, a matter for the WTO to resolve, not the Director‐​General. Yet, she politely pointed out that between 1995 and 2022, real per capita incomes in wealthier countries rose by about 50 percent, while in emerging markets and developing economies it increased by over 140 percent, from a much lower base.

As a recent issue of The Economist highlighted, the US has been the fastest growing major advanced economy over that period. Peterson Institute research estimates that between 1950 and 2016 trade expansion raised US incomes by over $7,000 per capita, or $18,000 per household. Simply put, Americans have profited enormously from trade and from membership in the WTO.

She also put into context the much over‐​cited “China shock” report some years back by David Autor and his co‐​authors, who told the world that increased exposure to imports from China explains more than a third of the manufacturing job losses in the United States between 1999 and 2011, some 2 million to 2.4 million jobs.

In addition to overlooking the fact that it is the adoption of automation and not trade that has accounted for a considerable majority of the job losses in US manufacturing, the Autor report—as its authors acknowledged at the time—tells only half of the trade story.

The other half of the story is this, as the Director‐​General indicated: Robert Feenstra at UC‐​Davis and Akira Sasahara at Keio University in Tokyo indicate that between 1995 and 2011, while increased goods imports from China eliminated 2 million jobs in the United States, increased exports to China and elsewhere added 6.6 million jobs to the US economy, 4 million of them from higher‐​services exports.

In their overall trade policy, Tai, the president, and his administration are proceeding from a bogus economic premise. Like the Trump administration before them, they are also being less than candid with the other members of the WTO and with the American people about the source of their animus against the Appellate Body. Little wonder few have been persuaded by Ambassador Tai’s assertion that the Biden administration supports the WTO. Actions do speak louder than words, especially in Washington.

President Biden emphasized at the United Nations this week, “We’re going to continue our efforts to reform the World Trade Organization and preserve competition, openness, transparency, and the rule of law while, at the same time, equipping it to better tackle modern‐​day imperatives, like driving the clean‐​energy transition, protecting workers, promoting inclusive and sustainable growth.”

Amen, Mr. President. I am ready to vote for you one more time. But you need to know, if your White House staff and cabinet members will not tell you, that this worthy goal cannot be accomplished while your administration continues to undermine WTO dispute settlement by perpetuating the big lie that the system has been unfair to the United States of America. It has not. You should know it. And you should say it for all to hear.

My explanation of these and some other myths about the WTO that abound within the Washington Beltway can be read in my contribution to Cato’s Defending Globalization Project, “The World Trade Organization: Myths versus Reality.”