David R. Henderson  

Jonathan Turley Echoes Milton Friedman

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As federal agencies have grown in size and scope, they have increasingly viewed their regulatory functions as powers to reward or punish citizens and groups. The Internal Revenue Service offers another good example. Like the patent office, it was created for a relatively narrow function: tax collection. Yet the agency also determines which groups don't have to pay taxes. Historically, the IRS adopted a neutral rule that avoided not-for-profit determinations based on the content of organizations' beliefs and practices. Then, in 1970, came the Bob Jones University case. The IRS withdrew the tax-exempt status from the religious institution because of its rule against interracial dating on campus. The Supreme Court affirmed in 1983 that the IRS could yank tax exemption whenever it decided that an organization is behaving "contrary to established public policy" -- whatever that public policy may be. Bob Jones had to choose between financial ruin and conforming its religious practices. It did the latter.
This is from "The patent office goes out of bounds in Redskins trademark case," Washington Post, June 20, 2014. It's written by Jonathan Turley, a law professor at George Washington University.

Turley continues:

There is an obvious problem when the sanctioning of free exercise of religion or speech becomes a matter of discretionary agency action. And it goes beyond trademarks and taxes. Consider the Federal Election Commission's claim of authority to sit in judgment of whether a film is a prohibited "electioneering communication." While the anti-George W. Bush film "Fahrenheit 9/11" was not treated as such in 2004, the anti-Clinton "Hillary: The Movie" was barred by the FEC in 2008. The agency appeared Caesar-like in its approval and disapproval -- authority that was curtailed in 2010 by the Supreme Court's decision in Citizens United.

Reading this reminded me of Milton Friedman's argument, early in his 1962 classic, Capitalism and Freedom, about how it would be very difficult to have freedom of speech or freedom of the press in a socialist or socialistic economy because the government would own a large percent of the resources and would inevitably use this power over resources to favor particular viewpoints. (I don't have the book handy, but it's in either the first or the second chapter.) Friedman made the argument about a socialist economy. Turley makes the broader point: even if the government doesn't own the resources but simply has a lot of control over resources, it can and will go after freedom of speech.

Turley also goes further than Friedman in another way, but a way that Milton would surely have agreed with. Turley writes:

Even water has become a vehicle for federal agency overreach. Recently, the Obama administration took punitive agency action against Washington state and Colorado for legalizing marijuana possession and sales. While the administration said it would not enforce criminal drug laws against marijuana growers -- gaining points among the increasing number of citizens who support legalization and the right of states to pass such laws -- it used a little-known agency, the U.S. Bureau of Reclamation, to cut off water to those farms. The Bureau of Reclamation was created as a neutral supplier of water and a manager of water projects out West, not an agency that would open or close a valve to punish noncompliant states.

I recently argued against a local ballot measure in Monterey County to study the feasibility of forcing, and, if feasible, take steps to force, a private water monopoly to sell its assets to a government monopoly. I argued for property rights, and that was and is a good argument. But I didn't think to make the point that Turley makes: the allocation of water would become more politicized.

Turley's solution? He closes:

What is needed is a new law returning these agencies to their core regulatory responsibilities and requiring speech neutrality in enforcement. We do not need faceless federal officials to become arbiters of our social controversies. There are valid objections to the Redskins name, but it is a public controversy that demands a public resolution, not a bureaucratic one.

I bet even he would be skeptical of his own solution. Who would enforce that law? That selfsame government that is, in the normal course of things, abusing its power. So what would be a solution? As much as possible, get the government out. End the Bureau of Reclamation. Cut taxes with a meat axe so that the IRS is less important.

Personal note: I met Jonathan Turley at an antiwar event we both spoke at in northern Virginia in 2008. I liked him. Part of it was his message. Another part, to be honest, is that his smile reminded me of the smile of my mentor, Harold Demsetz, who got me into economics. I've enjoyed much of what I've read by Turley since then. That's why I was a little surprised when one or two libertarian lawyer friends on Facebook made catty remarks about him. I challenged one of them at the time and didn't get much of an argument back.

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COMMENTS (6 to date)
John Thacker writes:

Another organization that took a good stance on this is, unsurprisingly, the ACLU. They rightly worried about the free speech implications of the government deciding to take a trademark away. (Note: written before the decision, but objecting to the idea.)

At first blush, it might seem obvious that the USPTO should have the ability to deny registration to racist or vulgar trademarks. But, as with all things free speech, who gets to decide what's racist or vulgar? That's right, the government, which is just ill-equipped to make these kinds of determinations. The motorcycle group above is a good example of the potential unintended consequences.

To its credit, the USPTO's Trademark Trial and Appeal Board (TTAB) engages in a very searching inquiry into whether a particular mark is offensive and considers extensive testimony and evidence by social scientists, advocacy groups, linguists, lexicographers, and others.

At the end of the day, however, the ultimate determination is inherently subjective and the TTAB and reviewing courts have a significant amount of discretion in deciding what's disparaging and what's not. It's not unlike "I know it when I see it" in obscenity law, and it raises similar problems.

The ACLU is pretty committed to free speech, as when they filed a brief in favor of Citizens United.

John Thacker writes:

I also suggest reading the excellent ACLU post on the topic, made back before the decision was made. They are rightly skeptical of the government power here, finding it similarly questionable to government power over obscenity.

David R. Henderson writes:

@John Thacker,
Thanks. I’ll look at both. By the way, I have consistently learned from your comments.

John Thacker writes:

Thank you very much for the compliment. Sorry for the sort of double-post; apparently excerpting too much of the link triggered the spam filter, but it got posted eventually.

KLO writes:

I don't really see how the PTO invalidating the Redskins' trademarks is an example of agency overreach. Congress passed a law that disallows the registration of marks that disparage persons living or dead. This may be a bad law, but Turley's proposed solution would not address the fact that the PTO, by reviewing the Redskins' trademark, is simply following the law Congress itself passed.

Likewise, Congress requires that the IRS determine whether an applicant qualifies for tax exempt status. This necessarily requires that the IRS consider an applicant's speech when that speech is relevant to this determination. Turley's proposed solution, as a general prescription that agencies not consider the content of speech, would not override Congress's more specific command that the IRS determine whether an applicant qualifies for tax-exempt status.

Turley equivocates on whether the problem is caused by Congressional overreach or agency overreach. His solution suggests agency overreach, but his examples are all of agencies acting on statutory directives. Perhaps we should keep it simple, and, as you, David, suggest, blame the government more generally for this, and not "faceless federal officials." Presumably, congressman are not "faceless" but they are nonetheless a big part of the problem.

Dallas Wood writes:


Doesn't your proposal suffer from the same flaw as Turley's? Specifically, who will keep the government out of water use or lower taxes? The same government that made those regulations and raised those taxes?

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