Tuesday, September 22, 2009

Paul H Robinson: Many restrictions on the use of force against aggressors make no moral sense

Israel and the Trouble With International Law. By PAUL H. ROBINSON
Many restrictions on the use of force against aggressors make no moral sense.
The Wall Street Journal, page A25, Sep 22, 2009

Last week the United Nations issued a report painting the Israelis as major violators of international law in the three-week Gaza war that began in December 2008. While many find the conclusion a bit unsettling or even bizarre, the report's conclusion may be largely correct.

This says more about international law, however, than it does about the propriety of Israel's conduct. The rules of international law governing the use of force by victims of aggression are embarrassingly unjust and would never be tolerated by any domestic criminal law system. They give the advantage to unlawful aggressors and thereby undermine international justice, security and stability.

Article 51 of the U.N. Charter forbids all use of force except that for "self-defense if an armed attack occurs." Thus the United Kingdom's 1946 removal of sea mines that struck ships in the Strait of Corfu was held to be an illegal use of force by the International Court of Justice, even though Albania had refused to remove its mines from this much used international waterway. Israel's raid on Uganda's Entebbe Airport in 1976—to rescue the victims of an airplane hijacking by Palestinian terrorists—was also illegal under Article 51.

Domestic criminal law restricts the use of defensive force in large part because the law prefers that police be called, when possible, to do the defending. Force is authorized primarily to keep defenders safe until law enforcement officers arrive. Since there are no international police to call, the rules of international law should allow broader use of force by victims of aggression. But the rules are actually narrower.

Imagine that a local drug gang plans to rob your store and kill your security guards. There are no police, so the gang openly prepares its attack in the parking lot across the street, waiting only for the cover of darkness to increase its tactical advantage. If its intentions are clear, must you wait until the time the gang picks as being most advantageous to it?

American criminal law does not require that you wait. It allows force if it is "immediately necessary" (as stated in the American Law Institute's Model Penal Code, on which all states model their own codes), even if the attack is not yet imminent. Yet international law does require that you wait. Thus, in the 1967 Six Day War, Israel's use of force against Egypt, Syria and Jordan—neighbors that were preparing an attack to destroy it—was illegal under the U.N. Charter's Article 51, which forbids any use of force until the attack actually "occurs."

Now imagine that your next-door neighbor allows his house to be used by thugs who regularly attack your family. In the absence of a police force able or willing to intervene, it would be quite odd to forbid you to use force against the thugs in their sanctuary or against the sanctuary-giving neighbor.

Yet that is what international law does. From 1979-1981 the Sandinista government of Nicaragua unlawfully supplied arms and safe haven to insurgents seeking to overthrow the government of El Salvador. Yet El Salvador had no right under international law to use any force to end Nicaragua's violations of its sovereignty. The U.S. removal of the Taliban from Afghanistan in 2001 was similarly illegal under the U.N. Charter (although it earned broad international support).

An aggressor pressing a series of attacks is protected by international law in between attacks, and it can take comfort that the law allows force only against its raiders, not their support elements. In 1987, beginning with a missile strike on a Kuwaiti tanker, the Iranians launched attacks on shipping that were staged from their offshore oil platforms in the Persian Gulf. While it was difficult to catch the raiding parties in the act (note the current difficulty in defending shipping against the Somali pirates), the oil platforms used to stage the attacks could be and were attacked by the U.S. Yet these strikes were held illegal by the International Court of Justice.

Social science has increasingly shown that law's ability to gain compliance is in large measure a product of its credibility and legitimacy with its public. A law seen as unjust promotes resistance, undermines compliance, and loses its power to harness the powerful forces of social influence, stigmatization and condemnation.

Because international law has no enforcement mechanism, it is almost wholly dependent upon moral authority to gain compliance. Yet the reputation international law will increasingly earn from its rules on the use of defensive force is one of moral deafness.

True, it will not always be the best course for a victim of unlawful aggression to use force to defend or deter. Sometimes the smart course is no response or a merely symbolic one. But every state ought to have the lawful choice to do what is necessary to protect itself from aggression.

Rational people must share the dream of a world at peace. Thus the U.N. Charter's severe restrictions on use of force might be understandable—if only one could stop all use of force by creating a rule against it. Since that's not possible, the U.N. rule is dangerously naive. By creating what amount to "aggressors' rights," the restrictions on self-defense undermine justice and promote unlawful aggression. This erodes the moral authority of international law and makes less likely a future in which nations will turn to it, rather than to force.

Mr. Robinson, a professor of law at the University of Pennsylvania, is the co-author of "Law Without Justice: Why Criminal Law Does Not Give People What They Deserve" (Oxford, 2006).

Laffer: Tariffs, rising state and federal taxes, and currency devaluation ruined the 1930s, and they could do the same today

Taxes, Depression, and Our Current Troubles. By ARTHUR B. LAFFER
Tariffs, rising state and federal taxes, and currency devaluation ruined the 1930s, and they could do the same today.
The Wall Street Journal, page A25, Sep 22, 2009

The 1930s has become the sole object lesson for today's monetary policy. Over the past 12 months, the Federal Reserve has increased the monetary base (bank reserves plus currency in circulation) by well over 100%. While currency in circulation has grown slightly, there's been an impressive 17-fold increase in bank reserves. The federal-funds target rate now stands at an all-time low range of zero to 25 basis points, with the 91-day Treasury bill yield equally low. All this has been done to avoid a liquidity crisis and a repeat of the mistakes that led to the Great Depression.

Even with this huge increase in the monetary base, Fed Chairman Ben Bernanke has reiterated his goal not to repeat the mistakes made back in the 1930s by tightening credit too soon, which he says would send the economy back into recession. The strong correlation between soaring unemployment and falling consumer prices in the early 1930s leads Mr. Bernanke to conclude that tight money caused both. To prevent a double dip, super easy monetary policy is the key.

While Fed policy was undoubtedly important, it was not the primary cause of the Great Depression or the economy's relapse in 1937. The Smoot-Hawley tariff of June 1930 was the catalyst that got the whole process going. It was the largest single increase in taxes on trade during peacetime and precipitated massive retaliation by foreign governments on U.S. products. Huge federal and state tax increases in 1932 followed the initial decline in the economy thus doubling down on the impact of Smoot-Hawley. There were additional large tax increases in 1936 and 1937 that were the proximate cause of the economy's relapse in 1937.

In 1930-31, during the Hoover administration and in the midst of an economic collapse, there was a very slight increase in tax rates on personal income at both the lowest and highest brackets. The corporate tax rate was also slightly increased to 12% from 11%. But beginning in 1932 the lowest personal income tax rate was raised to 4% from less than one-half of 1% while the highest rate was raised to 63% from 25%. (That's not a misprint!) The corporate rate was raised to 13.75% from 12%. All sorts of Federal excise taxes too numerous to list were raised as well. The highest inheritance tax rate was also raised in 1932 to 45% from 20% and the gift tax was reinstituted with the highest rate set at 33.5%.

But the tax hikes didn't stop there. In 1934, during the Roosevelt administration, the highest estate tax rate was raised to 60% from 45% and raised again to 70% in 1935. The highest gift tax rate was raised to 45% in 1934 from 33.5% in 1933 and raised again to 52.5% in 1935. The highest corporate tax rate was raised to 15% in 1936 with a surtax on undistributed profits up to 27%. In 1936 the highest personal income tax rate was raised yet again to 79% from 63%—a stifling 216% increase in four years. Finally, in 1937 a 1% employer and a 1% employee tax was placed on all wages up to $3,000.

Because of the number of states and their diversity I'm going to aggregate all state and local taxes and express them as a percentage of GDP. This measure of state tax policy truly understates the state and local tax contribution to the tragedy we call the Great Depression, but I'm sure the reader will get the picture. In 1929, state and local taxes were 7.2% of GDP and then rose to 8.5%, 9.7% and 12.3% for the years 1930, '31 and '32 respectively.

The damage caused by high taxation during the Great Depression is the real lesson we should learn. A government simply cannot tax a country into prosperity. If there were one warning I'd give to all who will listen, it is that U.S. federal and state tax policies are on an economic crash trajectory today just as they were in the 1930s. Net legislated state-tax increases as a percentage of previous year tax receipts are at 3.1%, their highest level since 1991; the Bush tax cuts are set to expire in 2011; and additional taxes to pay for health-care and the proposed cap-and-trade scheme are on the horizon.

In addition to all of these tax issues, the U.S. in the early 1930s was on a gold standard where paper currency was legally convertible into gold. Both circulated in the economy as money. At the outset of the Great Depression people distrusted banks but trusted paper currency and gold. They withdrew deposits from banks, which because of a fractional reserve system caused a drop in the money supply in spite of a rising monetary base. The Fed really had little power to control either bank reserves or interest rates.

The increase in the demand for paper currency and gold not only had a quantity effect on the money supply but it also put upward pressure on the price of gold, which meant that dollar prices of all goods and services had to fall for the relative price of gold to rise. The deflation of the early 1930s was not caused by tight money. It was the result of panic purchases of fixed-dollar priced gold. From the end of 1929 until early 1933 the Consumer Price Index fell by 27%.

By mid-1932 there were public fears of a change in the gold-dollar relationship. In their classic text, "A Monetary History of the United States," economists Milton Friedman and Anna Schwartz wrote, "Fears of devaluation were widespread and the public's preference for gold was unmistakable." Panic ensued and there was a rush to buy gold.

In early 1933, the federal government (not the Federal Reserve) declared a bank holiday prohibiting banks from paying out gold or dealing in foreign exchange. An executive order made it illegal for anyone to "hoard" gold and forced everyone to turn in their gold and gold certificates to the government at an exchange value of $20.67 per ounce of gold in return for paper currency and bank deposits. All gold clauses in contracts private and public were declared null and void and by the end of January 1934 the price of gold, most of which had been confiscated by the government, was raised to $35 per ounce. In other words, in less than one year the government confiscated as much gold as it could at $20.67 an ounce and then devalued the dollar in terms of gold by almost 60%. That's one helluva tax.

The 1933-34 devaluation of the dollar caused the money supply to grow by over 60% from April 1933 to March 1937, and over that same period the monetary base grew by over 35% and adjusted reserves grew by about 100%. Monetary policy was about as easy as it could get. The consumer price index from early 1933 through mid-1937 rose by about 15% in spite of double-digit unemployment. And that's the story.

The lessons here are pretty straightforward. Inflation can and did occur during a depression, and that inflation was strictly a monetary phenomenon.

My hope is that the people who are running our economy do look to the Great Depression as an object lesson. My fear is that they will misinterpret the evidence and attribute high unemployment and the initial decline in prices to tight money, while increasing taxes to combat budget deficits.

Mr. Laffer is the chairman of Laffer Associates and co-author of "The End of Prosperity: How Higher Taxes Will Doom the Economy—If We Let It Happen" (Threshold, 2008).

How Missouri Cut Junk Lawsuits

How Missouri Cut Junk Lawsuits. By MATT BLUNT
We showed how to do malpractice reform, if Congress wants a model
The Wall Street Journal, page A23, Sep 22, 2009

There has been a lot of talk in Washington about cutting wasteful health-care spending, but it is troubling that such talk has not created a sense of urgency for national tort reform. It is especially frustrating because states have already shown that curbing junk lawsuits can cut costs, create jobs, and increase the quality of care available to patients.

I know this because that is exactly what happened in Missouri when, as governor, I helped to enact comprehensive reforms.

I took office in January 2005 at a time when runaway lawsuits were driving up the cost of doing business in my state and forcing doctors and other business owners to close their doors. The U.S. Chamber of Commerce Institute for Legal Reform keeps a list of states ranked according to their legal environment. At the time, Missouri ranked among the 10 worst.

"Venue-shopping," a tactic that involves shifting a case to a friendly court regardless of where the injury occurred, was common. Defendants could be made to pay 100% of a judgment even if they were only 1% responsible for the injury. And caps on damages had been rendered meaningless by state court decisions.

This legal environment raised the cost of health care for everyone and imposed stiff costs on businesses. It also forced doctors to close their doors. For example, the eastern half of Jackson County, one of Missouri's largest, lost its only neurosurgeons in 2003 due to high malpractice insurance costs. Many other parts of the state suffered from a lack of doctors able to deliver babies. One obstetrician who delivered more than 200 babies annually was forced to quit after his annual insurance premiums skyrocketed 82% in just one year. Making matters worse, few new doctors wanted to move to Missouri. One Kansas City area doctor sent letters to more than 400 physicians finishing their residencies and did not receive a single response back.

To counteract these problems we required that cases be heard in the county where the alleged injury occurred, and we changed the law so that defendants could only be forced to pay a full judgment if their fault exceeded 50%.

We put a $350,000 cap on noneconomic damages and created rules to prevent baseless cases from getting off of the ground. Previously, personal injury lawyers could file cases if they got a written affidavit from any qualified health-care provider claiming that there was negligence. We tightened that by requiring that the affidavit come from an active professional practicing substantially the same specialty as the defendant.

We also took another common-sense step. Doctors often express empathy to a suffering patient regardless of fault. Saying you are "sorry" for someone's plight is a testament of good character, and should not be used against you in court. But tort lawyers were claiming that such statements were an admission of guilt. We stopped that abuse.

Tort reform works. Missouri's medical malpractice claims are now at a 30-year low. Average payouts are about $50,000 below the 2005 average. Malpractice insurers are also turning a profit for the fifth year in a row—allowing other insurers to compete for business in Missouri. This will drive down costs, which will save government programs money as well as improve the system for patients. It will also leave doctors with more resources to invest in better care.
Since 2005, Missouri has moved up to 31st on the Chamber of Commerce Institute for Legal Reform's list.

Because we passed tort reform, cut taxes and controlled state spending, Missouri's economy is now in better shape than it would have been. During the four years I was in office, about 70,000 net new jobs were created in my state.

Texas has seen similar success from its 2003 tort reforms. The number of doctors applying for a license in that state has increased by 57% and doctors' insurance rates have declined by an average of 27%. There are now more doctors in Texas providing care in previously underserved areas.

There is no reason that the success that Missouri, Texas and other states have experienced cannot be replicated nationally. States are demonstrating that tort reform lowers costs, expands access, and creates jobs. The time to get behind national tort reform is now.

Mr. Blunt, a Republican, is a former governor of Missouri.