October 1, 1997

http://www.cato.org

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CATO LEGAL SCHOLAR: NO FEDERAL AUTHORITY TO BAN MEDICAL USE OF MARIJUANA

Attempt to override state medical marijuana referenda unconstitutional,

Pilon says

Both the medical marijuana movement and the federalism movement "reflect

the growing frustration of Americans with the accumulation of power in

Washington," Cato scholar Roger Pilon told the Subcommittee on Crime of

the House Judiciary Committee today.

Pilon, director of the Cato Institute's Center for Constitutional

Studies, was invited to testify on the federalism implications of the

administration's efforts to override the voters of California and

Arizona. Last November those voters decided to allow doctors to

prescribe marijuana for their patients suffering from specified

diseases. Pilon told the subcommittee that under our system of dual

sovereignty, "there simply is no power under the Commerce Clause, or

under any other clause of the Constitution, that allows the federal

government to regulate" such intrastate matters.

Just two years ago, Pilon said, the Supreme Court made it clear that the

power of Congress to regulate commerce among the states "is not a power

to regulate anything and everything, which would make a mockery of the

doctrine of enumerated powers." The administration's rationale for

overriding state policies on medical marijuana, he added, "will not even

pass the straight-face test."

Pilon also attacked the war on drugs generally, calling it a "a

monumental failure-indeed, a monumental disaster, wreaking havoc on

lives, communities, and institutions across this nation."

"Did we learn nothing from Prohibition?" Pilon asked. "If we cannot keep

drugs out of our prisons, and we cannot, what makes us believe we can

keep them out of the larger society?"

"The abuse of drugs now declared illegal, like the abuse of legal drugs,

should be treated as a medical matter, not as a crime," Pilon concluded.

The medical marijuana referenda movement is evidence "that a growing

number of Americans are coming to that view too."

Testimony of Roger Pilon:

(http://www.cato.org/testimony/ct-rp100197.html)

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CATO CHAIRMAN TELLS SENATORS A GLOBAL WARMING TREATY IS PREMATURE

Niskanen: Rush to judgment would be a "serious mistake"

"Our nation risks a serious mistake in the rush to judgment on the

proposed global warming treaty," William A. Niskanen, chairman of the

Cato Institute, said in testimony to the Senate Committee on Energy and

Natural Resources. "The major economic issues that underlie this

treaty are not sufficiently understood."

Niskanen, who was a member of the Council of Economic Advisers under

President Reagan, noted that a number of economists have investigated

the possible consequences of such a treaty, with results that weigh

heavily in favor of more careful study. For example,

* Hoover Institute economist Thomas Gale Moore estimates that moderate

warming in the United States could generate net benefits of about 1

percent of U.S. output.

* There appears to be little reason for an early decision on global

warming: the costs of doing nothing appear quite small, but the costs of

a major commitment to limit emissions or atmospheric concentrations are

very large. Yale economist William Nordhaus estimates that the worldwide

cost of global warming would be about 1.3 percent of world economic

product in 2050, but the net cost of stabilizing emissions at the 1990

level would be about $7.5 trillion (in 1989 dollars).

Niskanen pointed out that less extreme and less costly methods, such as

reforestation and spreading trace quantities of iron in the oceans, may

well be sufficient to offset the effects of increased carbon emissions.

Furthermore, the proposed treaty would exempt poor countries, despite

the fact that they will soon produce about half of global carbon dioxide

emissions. That would increase the relative cost to developed nations

and substantially dilute and delay any net reduction in emissions.

Niskanen added that, while some modest near-term measures might be

valuable, "there are too many scientific, economic, and political issues

yet to be resolved to support an early commitment to control the

emissions of greenhouse gases."

Testimony of William A. Niskanen

(http://www.cato.org/testimony/ct-wn093097.html)

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FEAR OF FINANCIAL DERIVATIVES UNFOUNDED, EXPERT SAYS

Economist examines misconceptions in new Cato study

"Financial derivatives should be considered part of any firm's

risk-management strategy," writes Thomas F. Siems of the Federal Reserve

Bank of Dallas in a new Cato Institute Policy Analysis. "The freedom to

manage risk effectively must not be taken away."

In "10 Myths about Financial Derivatives," Siems examines common

misconceptions about derivatives-- complex financial instruments often

blamed for the bankruptcy of Orange County, California, and the collapse

of Barings Bank. According to Siems, the following are myths:

* Derivatives are new, high-tech, financial products;

* Derivatives are purely speculative and highly leveraged;

* The size of the derivatives market makes trading them an unsound

banking practice;

* Only large corporations and large banks have a need to use

derivatives;

* Derivatives are simply the latest risk-management fad;

* Derivatives take money from productive uses and never put anything

back;

* Because of the risk involved, banking regulators should ban the use of

derivatives by any institution covered by federal deposit insurance.

Siems concludes that regulatory and legislative restrictions on

derivatives are not a solution to dealing with their risk. "A better

answer," he writes, "lies in greater reliance on market forces to

control derivatives-related risk raking, together with more emphasis on

government supervision, as opposed to regulation."

Policy Analysis no. 283 (http://www.cato.org/pubs/pas/pa-283es.html)

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CATO LEGAL SCHOLAR: CAMPAIGN FINANCE PROPOSALS UNCONSTITUTIONAL

The First Amendment is not a "loophole," Pilon tells Senate committee

"Despite a string of Supreme Court cases, now spanning more than two

decades, many in Congress persist in believing that they have the power

to restrict what the First Amendment was plainly written and meant to

protect," Cato scholar Roger Pilon told the Senate Governmental Affairs

Committee. The Senate panel has been examining violations of

current campaign finance laws and is now considering the advisability

and constitutionality of new, more restrictive rules.

Pilon, director of the Cato Institute's Center for Constitutional

Studies, reminded the senators that the Court "has said repeatedly that,

under the First Amendment, campaign contributions are protected speech,

and any regulation of political contributions or expenditures will be

upheld only if they achieve a compelling governmental interest by the

least restrictive means =96 the highest possible constitutional hurdle."

The Supreme Court's landmark 1976 decision in Buckley v. Valeo struck

down many of the provisions Congress had attached to the Federal

Election Campaign Act on grounds that they were impermissible under the

First Amendment. "Since then," Pilon told the committee, "the Federal

Election Commission has fought to close the perceived 'loopholes'

created by Buckley. In response, the Court has repeatedly held that the

First Amendment is not a loophole."

Among the measures now being considered in Congress is a provision that

would ban political action committees (PACs), groups formed in the wake

of the 1974 FEC amendments to support candidates for public office at a

level not permitted individuals. But a PAC ban is "grossly

overinclusive" and cannot meet Court requirements that federal laws in

this area address a compelling government interest and be narrowly

tailored, Pilon stated. "People and organizations have a right to join

together to enhance their political voices. Prohibiting such activities

strikes at the very heart of the First Amendment."

A "fallback" plan would simply lower the permissible amount of PAC

contributions from $5,000 to $1,000 per election. Pilon said that this

alternative approach is no more constitutional than the PAC ban, since

it is neither narrowly tailored nor based on a compelling interest.

"Indeed," he said, "it is difficult to identify any interest - other

than incumbency protection =96 that is served by making it more rather

than less difficult for candidates to raise money."

Other provisions that attempt to limit soft money cannot rely on the

anti-corruption rationale that stiffer regulation would require to be

constitutional. Since soft money goes to parties, not candidates, "there

is no possibility of the kind of quid-pro-quo corruption that justifies

limits," Pilon declared.

Testimony of Roger Pilon

(http://www.cato.org/testimony/ct-rp092597.html)

For more on campaign finance reform, =

see http://www.cato.org/pubs/pas/pa-282es.html

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