A QUARTERLY MESSAGE ON LIBERTY

WINTER 2014VOLUME12NUMBER1

Iwant to begin by saying that, in my view, a good wayto measure the credibility of scholars and thinkersin Washington is by watching to see whether theycan stay true to their views, regardless of the impact

those views have on partisan politics. That’s why Catoscholars like Jim Harper and Julian Sanchez are the go-toleaders—the people we look to—on these issues of securi-ty and liberty. That said, this conference could not bemore timely.Back in September, a bipartisan group of senators,

myself included, kicked off the debate surrounding recentNational Security Agency (NSA) activities by introducingthe first comprehensive bipartisan surveillance reform billfollowing the June disclosures.

SEN . RON WYDEN

Sen. Ron Wyden (D-OR) has servedas the senior U.S. senator for Oregon since 1997. He spoke at a Cato Institute Conference onNSA surveillance in October.

Unveiling the Surveillance State

2 • Cato’s Letter WINTER 2014

Our legislation soughtto accomplish anumber of things: toend the bulk collec-tion of Americans’

records, to close the backdoor searchloophole that allows Americans’ com-munications to be reviewed without awarrant, to make the Foreign Intelli-gence Surveillance Court operatemore like a court that’s worthy of ourwonderful country, and to expand theability of our citizens to have theirgrievances heard in federal courts.The goal of our bipartisan group is

to set the bar for measuring whatconstitutes real intelligence reform.We know that in the months aheadwe’re going to be up against what I

call the business-as-usual brigade.The influential members of the gov-ernment’s intelligence leadership—including sympathetic legislators, re-tired government officials, and theirallies in think tanks and academia—want to fog up the surveillance de-bate. Their objective is to convinceCongress and the public that the realproblem is not overly-intrusive, con-stitutionally flawed domestic surveil-lance, but rather the sensationalisticmedia reporting surrounding it.

Their end game is to ensure that anysurveillance reforms are only skindeep.We’ve heard from the business-

as-usual brigade, for instance, thatsurveillance of Americans’ phonerecords—also known as metadata—is not actually surveillance, but sim-ply the collection of bits of informa-tion. We’ve been told that falsehoodsaren’t really falsehoods, they’re justimprecise statements. We’ve beentold that rules that have repeatedlybeen broken are actually a valuablecheck on government overreach.And we’ve been told that codifyingsecret surveillance laws and makingthem public laws is the same as re-forming overreaching programs.

These arguments leave thepublic with a distorted pic-ture of what the governmentis actually up to. When puttogether, those tiny bits of in-formation paint an illuminat-ing picture of what the privatelives of law-abiding Ameri-cans entail. Erroneous state-ments that are made on thepublic record—but nevercorrected—mislead the pub-

lic and other members of Congress.Privacy protections that don’t actual-ly protect privacy are not worth thepaper they’re printed on. And just be-cause intelligence officials say that aparticular program helps catch terror-ists does not make it true.I’m encouraged that the president

has said that he supports the creationof an independent advocate to arguecases before the FISA court. But Ibelieve that the intelligence leader-ship is going to continue to argue for

The goal of our bipartisan group is to set the bar for measuring what constitutes real intelligence reform.

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WINTER 2014 Cato’s Letter • 3

limiting the advocate’s man-date and resources. They willmost likely propose that theadvocate should only be al-lowed to argue cases at the re-quest of FISA court judges,without the ability to appealcases or assist companies andindividuals that wish to chal-lenge these overly broad sur-veillance orders.The executive branch has also

begun declassifying informationabout domestic surveillance activitiesin response to disclosures by themedia and the lawsuits filed under theFreedom of Information Act. Withany luck, that will continue. But whenit comes to greater transparency andopenness, the executive branch hasshown little interest in lasting re-forms. Requiring the government tobe more open about its official inter-pretation of the law is critical. It’s theonly way that fellow citizens can de-cide whether or not our laws need tobe changed.I also expect the defenders of busi-

ness-as-usual to attempt to codify thesurveillance authorities that reform-ers want to appeal. This is truly a dan-gerous proposition. Not only would itspark a new era of digital surveillancein our country, it would also serve as abig rubber stamp of approval for in-vading the rights of law-abidingAmericans. Their argument will bethat nobody ought to worry aboutsuch data collection because there arerules about who can be scrutinizedwhen. But there are several problemswith this “trust us” argument.First, when the Founding Fathers

wrote the Fourth Amendment, they

didn’t say that it’s fine to issue generalwarrants as long as there are rules de-termining when you’re allowed tolook at the papers you seize. Theysaid that the government should onlybe allowed to obtain somebody's pri-vate effects if they have evidence thatthat person is involved in nefariousactivities. The reason is that collect-ing private information about peoplehas an impact on their privacywhether you actually look at it or not.Second, none of these rules in-

volves individual review by a judge. Ifthe NSA decides that it wants to lookthrough the bulk phone records data-base or conduct a backdoor search fora particular American’s emails, it cando so without the approval of anyoneoutside the NSA. Clearly, there aren’tenough independent checks on thegovernment’s authority.Third, when examining the actual

track record of our intelligence agen-cies, it’s clear that the rules have beenbroken a lot. In 2009 the FISA courtitself ruled that “the minimizationprocedures proposed by the govern-ment in each successive applicationand approved as binding by the ordersof [the FISA court] have been so fre-quently and systematically violatedthat it can fairly be said that this criti-

When examining the actual track recordof our intelligence agencies, it’s clear thatthe rules have been broken a lot.

“ “

cal element of the overall [businessrecords] regime has never functionedeffectively.”Even if these rules were somehow

written in a way that completelyerased the privacy impact of bulkrecords collection—which I don’tthink is possible—the routine viola-tion of these rules over the years clear-ly demonstrates that trying to rely onthem is a seriously flawed approach.In short, the business-as-usual

brigade is going to argue that the bestway to protect Americans’ rights is tocodify these rules into law. This wouldbe a huge mistake. Codifying the rulesfor bulk phone records collection—ineffect, putting a congressional impri-matur on invading the rights of law-abiding Americans—will just makethis constitutionally flawed programmore permanent. In particular, it willmake it easier for the executive branchto use the Patriot Act to collect othertypes of records in bulk in the fu-

ture—including medical, financial,and firearm records. This will normal-ize overly broad authorities that wereonce considered unthinkable in ourcountry.The defenders of this approach

were hoping that public outrage aboutthese programs would fade once therewere details out there. But the exactopposite has occurred. The morepeople learn about these programs,the less they actually like them. Pollsshow that public opinion has movedsignificantly in a pro-reform directionsince those initial disclosures weremade back in June. The fact is thatmost Americans think their govern-ment can protect our security and ourliberty.As a result of this groundswell of

public concern, members of Congresshave been outlining ideas for reform.But make no mistake about it, thebusiness-as-usual brigade is going tobe working very hard behind thescenes to preserve existing authoritiesand avoid real change.When it comes down to it, the ef-

fects of these constitutionally flawed,overly intrusive surveillance programsgo beyond the invasion of individualprivacy. American companies that arebelieved to have been the subject ofgovernment surveillance orders aretaking a major hit both internationallyand here at home. This is coming at atime when we all know our economyis fragile. If a foreign enemy was doingthis much damage to our economy,people would be in the streets withpitchforks.So what is the bar for reform? First

and foremost, meaningful reform hasto end the bulk collection of Ameri-

4 • Cato’s Letter WINTER 2014

WINTER 2014 Cato’s Letter • 5

cans’ records. The NSA can’teven demonstrate that thisbulk collection providesvalue beyond what their ex-isting authorities give them.Back in June intelligence offi-cials kept suggesting thatbulk phone records collec-tion had helped in 54 terror-ism investigations. Thatnumber has not held upunder real scrutiny.I believe that meaningful legisla-

tion also has to reform Section 702of the Foreign Intelligence Surveil-lance Act. Congress intended forthis program to target foreigners,but as the court pointed out in a re-cently declassified document, tensof thousands of wholly domesticcommunications were swept up inthe collection. The FISA courtcalled this a violation of the “spiritof the law.”Finally, Congress needs to create

an independent advocate to make theother side of the case on significantmatters before the court. Right now,when the FISA court considers amajor question of law, like whetherthe Patriot Act permits the dragnetsurveillance of innocent Americans,the court’s only going to hear one sideof the argument. I don’t know of anyother court in America that is soskewed. The court’s major opinionsshould then be redacted and released,so that the American public has anopportunity to understand how theirlaws and Constitution are actuallybeing interpreted.Executive branch officials spent

the last several years making mislead-ing statements about domestic sur-

veillance to both Congress and theAmerican people. That should neverbe allowed to happen again.Winning the reform battle is not

going to be a glamorous exercise. Itcertainly hasn’t been over the last fewyears for the handful of reformerswho have tried every day to advancethe cause. We worked very hard, forinstance, to get a few short lines of asecret court opinion declassified be-cause we knew that once we startedpulling out the threads, eventually thewhole secret law edifice would startto unravel. In time, the ElectronicFrontier Foundation, an importantprivacy group, filed a lawsuit andmanaged to get that entire opinion—which detailed serious constitutionalviolations—declassified and releasedto the public.It’s going to take a groundswell of

support from Americans across thepolitical spectrum who are willing tolet their members of Congress knowwhat they want, communicate thatbusiness-as-usual is no longer okay,and insist that liberty and security arenot mutually exclusive. For the mil-lions of law-abiding Americans whocare about protecting those values,the time for action is now. n

“If a foreign enemy was doing this muchdamage to our eco-nomy, people would be in the streets withpitchforks.

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6 • Cato’s Letter WINTER 2014

Dan Pearson joins the Cato Institute after serving for 10 yearson the U.S. International Trade Commission (USITC). Pearsonwas nominated to the USITC by President George W. Bush in2003. He served as chairman in 2006–8 and as vice chairman in 2008–10. Prior to joining the USITC, Pearson worked onagricultural and trade issues for Sen. Rudy Boschwitz (R-MN)and for Cargill.

cato scholar profile

Daniel R. Pearson

WHAT DREW YOU TO THE CATO INSTITUTE?For years I’ve chafed over excessive governmentintervention in the marketplace. Readers whohave been around since the 1973 oil embargowill recall that U.S. price controls on crude oilled to shortages of gasoline and long lines at fill-ing stations. A policy of trying to prevent theprice from reaching a market-clearing level cre-ated huge costs and inefficiencies. My conclu-sion was very libertarian: it is far better to let theinvisible hand of the marketplace work than forthe government to stand in its way.In the early 1980s my career shifted from

farming in Minnesota to dealing with agricul-tural and trade-policy issues for Sen. RudyBoschwitz (R-MN). My efforts from that timeon have been largely devoted to reforming poli-cies so that domestic and international marketsare able to do their important work of balancingsupply and demand. Having long been a fan ofCato, I found the opportunity to continue thatwork here to be particularly appealing.

WHAT WILL YOUR WORK FOCUS ON?At Cato I hope to build on my past work by ap-plying economic reasoning to public policiesthat influence international trade. This will gobeyond just dealing with “border measures”(tariffs, quotas, etc.) and will include arguing forreform of domestic policies that distort marketsignals, thus leading to protectionist bordermeasures. Open and competitive markets do a fine job of allocating resources, promotinggrowth, and expanding international trade.

It’s unfortunate that so many policymakersin this country and overseas seem uncomfort-able with the marketplace. The market is alwaystrying to tell us something. My objective will beto encourage policymakers to listen to what themarket is saying, and then to develop policiesthat work in harmony with those forces insteadof against them. My initial efforts will focus pri-marily on reform of trade remedy measures (an-tidumping and countervailing duties), on agri-culture/food policies, and on rebuilding supportfor multilateral trade liberalization.

WHY HAS TRADE LIBERALIZATION BECOME SO CONTROVERSIAL IN THEUNITED STATES?In one sense, opposition to trade liberalization issurprising. Almost all economists agree that freertrade makes societies better off by providing awider variety of goods and services for con-sumers, while encouraging firms to produce effi-ciently in order to meet world-class competition.However, it’s also well understood that liberaliza-tion results in some companies and workers find-ing it hard to succeed. Much of my time at theUSITC was spent on antidumping casesbrought by industries that were having difficultydealing with competition from imports. Thoseindustries usually aren’t hesitant to argue thatfreer trade is bad—and to make imports a scape-goat for any and all problems they’re facing. Theongoing challenge for supporters of liberalizationis to educate thought leaders and policymakersthat the benefits of open markets far outweighthe costs. n

January! February! The holidays are overand it’s time to think about paying thebills and gathering your tax information.It can also be a good time to take stock of

your financial situation. For example do you have an updated will?

Federal estate tax laws have changed a good dealover the last few years. Right now—and likelyfor the next few years—we have a fairly gener-ous exclusion from Federal estate and gift taxes:inflation adjusted $5,340,000 for an individualand $10,680,000 for a married couple. Willswritten a few years ago when the exclusion wasdrastically lower may simply not “work” any-more. That’s because those older wills frequent-ly “pegged” gifts and bequests to the exclusionamount, thus leading to unintended, supersizedgifts under the new exclusion rules. And what about your IRAs, 401Ks, and

other tax advantaged retirement savings ac-counts? We tend to forget that these assets passby operation of law, that is, by the beneficiarydesignation form you filled out on the first dayof your job or when you opened the account.Do you remember who you designated? It’s al-ways a good idea to make sure that you and per-haps your lawyer have copies of these designa-tion forms—and to take a moment to thinkabout whether you chose the right beneficiary. There is a growing debate about the best way

to maintain—and appropriately share—a list ofuser IDs and passwords. Most of us have somesystem for storing them for our ever-proliferat-ing investment accounts, medical accounts, on-line vendors, professional associations, travelsites, and so on. The list is practically infinite!Some of us use encrypted spreadsheets whileothers prefer the simplicity, and risk, of an oldfashioned notebook. And, let’s be honest, manypasswords are scribbled on Post-Its scatteredaround our homes and offices. So give some

thought to what is, for you, a practical and safestorage system. And also think about the factthat we all—especially as we get older—need toshare that system with a spouse, friend, orlawyer. Otherwise we can easily leave a horren-dous riddle for our heirs: deconstructing a life inthe absence of passwords often proves dauntingand expensive. Our password list may well serve another

important purpose: that of having a master listof investment assets, bank accounts, retirementaccounts, insurance policies, real estate hold-ings, mortgages, and other indebtedness. If youprefer to maintain two separate lists, that’s fine.The important thing is to have a clear, readablerecord of your IDs and passwords as well as ofyour assets and liabilities. And, finally, remem-ber to share information about your assets andliabilities with a spouse, friend, or lawyer—andto tell them where your safety deposit box andkeys are located. So far we have been talking about the nitty

gritty details. But it’s also important to take stockof the big picture and to think through your es-tate plan. Will your assets flow to the right peo-ple, the people you really care about? Will thesepeople be able to handle the inheritance or dosome of them have “special needs” such that itmight be a good idea to include a trustee or cus-todian? Have you consulted with a lawyer orother adviser to make sure your plan is tax effi-cient? And have you included gifts to those char-ities—such as Cato—that you really care about?

Taking Stock

IF YOU WOULD LIKE MORE INFORMATION ABOUTPLANNED GIVING AT CATO OR IF YOU WOULD LIKETO JOIN THE CATO LEGACY SOCIETY, PLEASE CON-TACT GAYLLIS WARD, DIRECTOR OF PLANNED GIV-ING, AT GWARD@CATO.ORG OR AT (202) 218-4631.

WINTER 2014 Cato’s Letter • 7

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