Tag Archives: investor’s business daily

Principles of Law: Simplicity Is Beautiful

Countries across the world have turned to democracy in recent decades. There are still a few monarchies here and there, and plenty of dictatorships. Cuba and North Korea are even keeping the last dying embers of communism alight. But more and more, democracy is seen as the way to go.

One of the first things a new democracy needs is a Constitution. One of a Constitution’s jobs is to establish the government’s structure – how the executive, legislative, and judicial branches are composed, what their powers are (and aren’t!), and a few rules of procedure.

The U.S. Constitution is a model of simplicity. You can read the whole thing in under a half hour. And that is the secret of its success. It doesn’t need to outline the specifics of agricultural or trade policy. That’s Congress’ job.

The EU’s de facto Constitution runs well over 200 pages. Where the U.S. Constitution paints with a broad brush, the European Union fills in every last detail. Most countries, including the U.S., are turning to this top-down model and rejecting the Constitution’s more bottom-up approach.

The thinking goes, “How can something so simple be effective when the modern world is such a complicated place? The 21st century is very different from the 18th century.”

Good question. The answer is that those extra layers of complexity are precisely why a bottom-up approach is more important than ever. Top-down governance is hard enough even in a simple agrarian economy. It is literally impossible in a world like ours. Too many variables. The more rules there are, the easier they are to subvert.

Transitioning democratic countries regularly used the U.S. Constitution as a model when drafting their own Constitutions. But that’s happening less and less, according to a thought-provoking Investor’s Business Daily editorial.

The reason is a shift in the intellectual climate. Negative rights are out of fashion now. Positive rights are all the rage. Negative rights are the kind that pervade the U.S. Constitution: don’t hit other people, don’t take their stuff, don’t break your contracts. Don’t, don’t don’t.

Positive rights are much less dour. And they are all over most new Constitutions. You have the right to health care, or a job with six weeks vacation, and so on. People think of new positive rights all the time, too. There is a push in some countries to give people the legal right to Internet access. Sounds great. Who could be against that?

I can. Positive rights do sound nice, but in practice they are profoundly illiberal. That is because positive rights often contradict each other. If I break a bone and my doctor has a legal right to be on vacation, one of us has to have our positive rights violated. That means someone has to decide. Someone with a lot of power. Life and death, in some cases. A government with the power to make those kinds of decisions is very powerful indeed. Positive rights systems require large, powerful governments. Rights violations are both frequent and arbitrary.

Negative rights have no such conflicts. That’s a big reason why the U.S. Constitution is so simply constructed. In fact, most of it isn’t even about granting this power or that to government. Most of that is contained in Article I, section 8. The majority of the document is about placing strict limits on those powers. When the people are left alone, they largely prosper. Let them build from the bottom up. The view from the top on down is too distant and blurry to catch the necessary details.

In the law, as in so many other areas, simplicity is beautiful. As democracy continues to march across the globe, newly forming governments should keep that in mind.


Substantive Reform Must Include Cutting Regulatory Burdens

Spending, deficits, and taxes are getting all the attention from reformers in both parties. In today’s Investor’s Business Daily, Wayne Crews and I argue that regulation is not to be forgotten:

Regulations cost the average business $8,086 per employee per year. Small businesses are especially hard-hit. Firms with fewer than 20 employees pay $10,585 per employee per year for regulatory compliance, according to the Crains’ report. When hiring employees becomes more expensive, fewer get hired. No wonder unemployment is so persistent.

We also offer up some reform ideas:

One reform is to purge the books of obsolete and clearly harmful rules. There is no need for Washington to have rules still on the books for a Y2K crisis that never even materialized. Nor is there any need for it to regulate the size of holes in Swiss cheese, which it does in great detail.

President Obama should appoint an annual bipartisan commission to comb through the Code of Federal Regulations and recommend rules for elimination. Congress would then be required to vote up-or-down on the package without amendment.

Read the article here; for more intellectual ammunition, see the just-released 2011 edition of Wayne’s “Ten Thousand Commandments” study.

Eliminate the Cap on H-1B Visas

My colleague Alex Nowrasteh has an op-ed in Investor’s Business Daily where he makes the case for liberalizing the H-1B visa for skilled immigrants.

An oft-neglected point he makes is that if companies can’t legally get the workers they want to come here, they’ll go abroad to hire them.

As with most anything else, prohibiting or limiting immigration comes with unintended, but not unforeseeable consequences.

Read the whole thing here.

Regulation without Representation

Congress never actually votes on most regulations. Over 3,500 regulations hit the books most years. But Congress usually passes fewer than 200 bills per year. As Wayne Crews and I explain in today’s Investor’s Business Daily, this is regulation without representation.

Only Congress, and not agencies, have the power to legislate. But that is exactly what is happening now. Bills to regulate carbon emissions, regulate the Internet, and more all failed in Congress. But agencies are enacting rules. If you can’t legislate, regulate. This is wrong.

It allows politicians to escape blame for unpopular or controversial regulations. Don’t blame me, blame bureaucrats! It also gives agencies little incentive to rein in their worst impulses. If they can do whatever they want, they will work to expand their budget and authority.

The first step in solving the problem of regulation without representation is requiring Congress to vote on major regulations. Not all regulations — 3,500 votes is a bit much. And agencies do deserve some independence on administrative affairs and minor detail work.  But requiring 200 votes on major rules costing at least $100 million each is the least Congress should do.

The REINS Act, recently introduced by Rep. Geoff Davis and Sen. Rand Paul, would do just that. There are many facets to regulatory reform. There is much more to do. But putting a damper on regulation without representation is a good start.

You can read Wayne’s and my article here.

Against a Value Added Tax

Over at Investor’s Business Daily, Wayne Crews and I make the case against a Value Added Tax. Policy makers have been flirting with the idea as a way to reduce the $1,400,000,000,000 budget deficit.

We argue that a VAT is:

-Complex; it would require roughly doubling the size of the IRS.

-Untransparent; most VATs don’t show up on receipts the way sales taxes do. Taxpayers are clueless as to how much tax they actually pay.

-Vulnerable to special-interest tinkering; politically incorrect goods are routinely penalized with higher rates. Politically favored goods are granted exemptions.

-Prone to increases; 20 out of 29 OECD countries with a VAT have increased their rates since implementing a VAT.

A point we didn’t make is that VATs affect industrial organization. VATs are applied at each stage of the production process. That gives companies an incentive to reduce the number of taxable steps. That means more vertical integration than would otherwise occur. This can decrease the efficiency of the manufacturing process. Which means higher prices and fewer goods. Plus the tax.