Welcome to Cato Audio for October 2023. I'm Caleb Brown. In this month's offering, Brian Finucan discusses the possibility of a U.S. war in Mexico over fentanyl. Republican U.S. Senator Brian Haggerty discusses American leadership on cryptocurrency. Julie Gunlock urges resistance to the era of overweening parenting. And I speak with Michael Cannon about his new guide to reforming U.S. health care. First up, this month's Cato Roundtable.
I'm joined by Walter Olson, Senior Fellow at the Cato Institute, and Clark Neely, Senior Vice President for Legal Affairs at the Cato Institute. And we're going to get a better understanding today of RICO, as it seems to have popped up in multiple different ways in the last couple of months. So when we talk about racketeering, you know, how far off am I? We're not far off. The challenge really is understanding the terms that are relevant to a RICO violation. And the most important thing to keep in mind is that the actual crime, the thing that they say you're doing that's criminal, is to be a member of an enterprise, that's an important word here, that conducts its business through a pattern of racketeering activity. Now, good luck getting a handle on some of these terms. It's not difficult, as Caleb, as you pointed out in your opening, that we all know.
what the mafia is. We kind of have some basic understanding that it's a group of people that essentially make their living through organized crime of various kinds, whether it's shaking down sanitation workers or people at the Fulton Fish Market gambling rackets and so forth and so on. Where it gets particularly difficult is when you apply this RICO concept. And again, it's so important to remember that what RICO does is make it a crime to control or to be a member of an enterprise that furthers its goals through a pattern of racketeering activity. You start applying that to things that are outside of the traditional organized crime context and you start running into conceptual problems immediately, including...
what exactly is an enterprise? And what kind of existence does it have to have, independent existence, separate and apart from whatever criminal activity is that you're charging? What is the goal of this enterprise? And it's very difficult outside of the organized crime context, I think, to get a handle on that. And as we're going to discuss, I'm sure it is particularly difficult with respect to the Georgia Rico case against Trump. When Congress passed Rico in 1970, most of the public talked.
was about traditional organized crime, the five families of the day, and the need that was expressed for stronger prosecutorial tools to break it up. And it wasn't long after the law was passed that people noticed that it was being invoked against a much wider variety of white-collar offenses. So courts were asked, hey, wait a minute, why should this be extended to these areas? And by and large, the answer the courts gave was tough luck. You should be paying more attention to what Congress passes just because the hearings are about one thing. It doesn't mean that the law doesn't sweep much more broadly. And so they have allowed, by and large, the application of...
federal and state RICO laws to these things that are wildly remote from our ideas of the godfather. In Georgia, which is known for having one of the more frequently used and broad RICO statutes, some of the recent prosecutions include a group of teachers who were helping to falsify, I guess, grades or test results, not usual idea of racketeers, court reporters who had devised a system in which they weren't putting as many words on the page as it really would have been fair so they got paid a little more, not exactly showing up at your door, shaking you down, a much more nonviolent kind of... offense. So for those reasons, it's been controversial from the beginning. Prosecutors like it because it gives them some more tools, but the questions have been there from the beginning about, is this fair to miscellaneous persons who might get swept up, who might not be accessories to a crime, but are alleged to have participated in an organization, for example? What about some of the procedural advantages that prosecutors are given? Is that always fair?
So I'm imagining myself as a young person who is asked to carry packages from one place to another by my uncle, who wears a very nice suit and has many of his friends who hang out late at night and play poker together. And am I a member of that criminal enterprise? And do prosecutors need to prove that I knew anything in order to demonstrate that I'm a part of a criminal enterprise? That turns out to be an extremely difficult question. You are certainly through your conduct, you are advancing the business, the racketeering business of that.
entity that you just described. But you also raised this important question of mens rea or mental state. And the prosecutors, I think, will at a minimum have to show that you have reason to know and understand that you weren't sort of just being asked to deliver actual Girl Scout cookies or something like that. Because, of course, that's perfectly permissible. I mean, even mobsters are allowed to get takeout. And the takeout driver doesn't then become a member of a RICO enterprise. But it's not at all clear, to me at least.
what that threshold is and what level of knowledge or awareness is sufficient to tie, let's say, a kind of a marginal actor to even an avowed racketeering entity, like a mob family. And so I think at the margins, you run into these very difficult questions of due process. mens rea and really kind of what it boils down to is a sort of a recognition and unfortunately it's often sort of just recognized in theory that at least some level of notice is required or at least needed for fundamental fairness and that if you wouldn't have any reason to believe that simply the act of delivering packages at the behest of your uncle even maybe if you know he's in the mob because you know not everything that mobsters do is illegitimate some of them really do buy Girl Scout cookies that literally anything you do with them essentially ties you into that racketeering enterprise. That just can't be the law. But as you have pointed out, as Wally pointed out, it gets extraordinarily complicated. And at a certain point, it really does start to feel like trying to nail Jell-O to a post. And I think that's kind of where we are, unfortunately, without Heiko. You mentioned that RICO was adopted by the feds in 1970. Georgia adopted a RICO statute in 1980. Why does it, you know, a lot of states adopt very similar policies to the feds? Why this? The history differs from state to state. A lot depends on whether there is one.
advocate or perhaps prosecutors who decide to make a push, let's get this for our state. I don't know the history very well, but there was a thing called the Dixie Mafia, which sounds as if someday a movie should be made about it. And apparently it was one of the targets of Georgia Rico in the early days. But again, if you look at differences in the prosecutor's armament from one state to another, you often find complete accidents of history. So Georgia statute adopted in 1980, or at least went into effect in 1980. What I've heard in the news is just that this is a much broader statute than other states or the feds have. What makes it so broad?
Well, one of the things is sort of the number of predicate acts that the government has to show in order to tie you into this enterprise. In Georgia, it's anything, two or more acts will suffice. You know, like delivery of packages on two separate occasions, to use the example that you had earlier, whereas at the federal level, the requirement is for much more of a sort of a continuity. You have to show that the person was participating over a longer period of time and through a longer series of acts. So the Georgia standard is lower.
for tying somebody in to an enterprise. And I'm not intimately familiar with the law, but my impression, I'll just say that my impression is that the standards for essentially establishing the existence of this quote unquote enterprise, this association, in fact, of individuals who are pursuing unlawful ends through unlawful means also appears to be lower in Georgia to the point, as Wally pointed out, where a bunch of teachers kind of loosely working together to try to falsify standardized test scores to obviously make them look better. It's hard to imagine anybody who participating in that scheme, even if they're prepared to admit, yeah, we shouldn't be doing that. would say, oh, yeah, rather obviously we are part of a criminal enterprise that constitutes a RICO entity. And so, yep, but we took those risks with our eyes wide open. I sincerely doubt that. It's not clear that all of the areas in which the Georgia statute is wider are necessarily relevant in the Trump case. As Clark mentioned, the question of duration and number of acts probably is something the lawyers will be looking at. Georgia also makes more underlying crimes the basis of a potential RICO case. And again, whether that matters in this case, I'm not sure. It all adds up. And perhaps...
bolstered by the fact that federal RICO is administered by federal courts, which have often been somewhat skeptical of some of the sweeping applications of it. With a state RICO, you don't necessarily have that same record of state courts taking a close look and reining in some of the excesses. So one of the cases, and we'll obviously talk about the Trump case because it's a big one, but many protesters of Stop Cop City in Georgia have been hauled in on RICO charges. And to the extent that you're breaking the law, to the extent that you and your fellow protesters are doing so in an organized fashion, that might... be considered your participation, your knowing participation in a criminal enterprise that, you know, as much as we might want to defend protesters, that seems to be a legitimate argument. There is so much to argue along many different dimensions here. There is no doubt that Rico has a sauce for the goose, sauce for the gander element in that taken seriously would apply in all these perhaps surprising situations and nearly everyone is going to be alarmed by at least one of them. So part of...
proceeding with that overall evaluation of the laws is to look at what does it do. And one of the very first things it does is it multiplies penalties so that the behavior, which you might think looking at the law books would draw a particular type of sentence, can draw a much more severe sentence if prosecutors can successfully characterize it as we go. Of course, the elephant in the room is the attempt by Donald Trump and his team to overturn election results in Georgia. We have a phone call, a now... infamous phone call that Donald Trump had with then and current Georgia Secretary of State Brad Raffensperger, in which he basically urged him to find 12,000 votes and intimated in not too subtle ways the criminal liability that he personally would face for failing to uncover 12,000 votes for Donald Trump. And to be fair to the phone call, it didn't seem that Donald Trump was particularly concerned with how those votes materialized or whether or not they were legitimate. So I listened to that recording. I have a lot of thoughts. Let me try to maybe get us focused in this following manner.
Two things could be true. On the one hand, you could imagine a situation where Donald Trump calls a meeting with some of his senior advisors and he says, look... I don't care what happened in Georgia. You go down there and you tell every state official who has the ability to change the vote count that if they fail to do that, they can expect a very unpleasant visit from the FBI to their home imminently. That very clearly is over the line. And I think whether you just would call that sort of a conspiracy to force election officials to do a thing that is improper in the service of a plainly illegitimate end, which is to just simply flip the results in Georgia with no basis to believe that that's actually the correct result, that's indefensible.
And we probably wouldn't even be having this discussion because anybody who participated in such a brazen scheme would be on notice that what they're doing is wrong. You could just call it a conspiracy. It could just be a straight up conspiracy or you could call it a RICO. And I don't think too many people would probably lose sleep over that. The other end of the spectrum would be Donald Trump essentially convening the same group of people and saying, you know, it seems like there's real concern about some of the ballots that were cast in Georgia and the way those ballots were counted. I need you guys to go down there and get a handle on this and look into it. Talk to the relevant officials. He has every right. Every candidate has every right to do that. And even Donald Trump has every right to do that. And that's absolutely not criminal. There's nothing criminal about that. And, you know, charging anybody involved, let alone all of the people.
in that, what I just described, with crimes would be absolutely irresponsible and illegitimate. The challenge, of course, in this case, is that it was somewhere in between. And we've got this question of, did Trump sincerely believe that there were voting irregularities? Yes, I think he probably did, because guess what? There were, but they're always voting irregularities. And trying to figure out, well, did they rise to the standard where a responsible, law-abiding candidate would have made such a stink about it, is a question. And Caleb, as you kind of...
note this call with Brad Raffensperger, which I've listened to recently, honestly, it starts off being more like the second scenario I described. It sounds like, you know, you've got Trump's got his lawyers on the phone, he's got Mark Meadows on the phone, he's saying, like, you know, I'm really, he's listing all of these very specific irregularities that he thinks have occurred. But for me, at least, as the call goes on, it gets kind of increasingly sinister because, as you point out, Trump starts saying things like, you know, I'm putting you on notice, Brad, that there were problems down there. You have an obligation to deal with those problems. You may even have legal exposure. There could be a criminal liability for you to fail. And this is the most powerful man on the planet.
telling a sort of a mid-level state bureaucrat, in effect, that you might have legal problems if you fail to undertake the things that I'm telling you should undertake in terms of reexamining the votes. I personally think that crossed the line. So I think it was reasonable to bring charges. I do. And I think somebody has to sort this out. Somebody has to listen, for example, to the tenor that called to decide whether it crossed the line so there was more like extortion than simply, hey, I'm just asking questions. Where I think it gets really problematic is essentially including everybody who participated in any aspect of this effort to get...
Georgia election officials to take a fresh look at some of these issues and say, hey, you guys are all part of a RICO enterprise because some of you engaged in illegal activity and trying to bring this about. You are all responsible. You are an enterprise. The goal of this enterprise was to illegitimately flip the results of the election here in Georgia and anybody who participated in that, regardless of whether you personally committed crimes when you went about it, you guys are all part of this RICO enterprise and you're all going down. We should be, I think, a bit concerned about that.
Several different channels of activity are all brought into the RIGO charges, including the bogus electors and the legal design of the plan to put them over. So inevitably, people named in the Rico indictment who were only involved in one of the generals, and some of whom have already sought to separate their trials in one way or another, go to federal court or ask to be tried separately, they naturally wonder, do I have to worry with the potentially prejudicial effect of episodes being narrated that I wasn't at and didn't know about? Shouldn't I just be tried with respect to the particular branch of Trump's efforts that I was helping?
Again, RICO gives prosecutors a few extra cards on this. It enables them, by portraying this in Enterprise, often to get in all the evidence from all the different branches of the thing, even though that might increase the chances of conviction of someone who was in one of the more innocent lines. Yeah, because I was related to that. If you have a group of guys who hang out and it's clear that you're involved in some kind of enterprise and one of these guys, a bit of a loose cannon, and goes off under the auspices of your group that is otherwise not an illegal group and commits a bunch of crimes. There's something very sinister here that we need to talk about. Very sinister. And it ties into a theme that we've discussed many times before in various Cato podcasts. And that is this.
One of the tools or one of the levers that prosecutors get from RICO is that it takes conduct that would have had a relatively lower punishment. So the crimes, the predicate crimes that are alleged in the Georgia indictment range anywhere from one to five years. They're not terribly serious crimes. A RICO conviction in Georgia carries up to 20 years. And so what you can do is you essentially have this incredibly powerful hammer and you can go around to every defendant that you have indicted as part of this RICO enterprise and essentially have the following conversation. Hey, look, of course, we know you didn't play a huge role in this, but you could definitely go down for 20 years if this jury gets mad.
at really any of the folks, and we managed to tie you into this RICO enterprise, you're looking at 20 years. Now, that's one version of your future. Another version of your future is you work with us, and you turn on some of the other people, and we'll point you in the right direction. We both know who we want you to turn on. And the RICO charge can go away, and we could plead you out to a misdemeanor of some kind, and you won't even do any prison time. But that's going to depend on the quality of your cooperation and your testimony against the people that we really want to go to. So you could either be looking at 20 years if you don't play ball.
and we get you on the RICO charge, or you can have a bright future that might not even involve any jail time if you play ball with this prosecutor. And that is usually, if not the main dynamic, it is one of the main dynamics in most, if not all, of these RICO prosecutions. You're bringing pressure to bear on relatively smaller fish that you don't really care about all that much because they didn't play a big role, but you put them on the hook and have them seriously looking at 20 years, and then you get to tell them what it's going to take from them to get off that hook. And what it's going to take is helping you make the case against the really big fish. That's how these two things typically go down, and that's how they unfold. One of the roles that RICO plays.
Someone, I think it was Ken White, described it as an exclamation point. There are cases, I'm not saying this is one of them, where you're all that sure why they put in RICO, except that the press is going to treat it as a much more serious case, and the public is going to treat it as a much more serious case. And perhaps the defendants will treat it. Aside from the other facts, it's attention getting. And that's one reason why there is a bit of cynicism about RICO. The fact that rather than identifying...
penalties that have a closer match of justice. So much of it seems to be about putting power into prosecutor's hands for them then to maneuver with and negotiate with as they will. Yeah, I mean, look, think about how disgraceful it would be for a prosecutor to say to somebody, you know, I'm pretty sure you killed somebody. And, you know, that'd be 20 years. But, you know, if you work with us, we can get that down to a misdemeanor. Still pretty sure you killed somebody, but we're willing to take that down to a misdemeanor if you're cooperative enough. Like, that would be absolutely disgraceful and irresponsible, wouldn't it? But here you've got RICO, right? And they're threatening people with 20 years if they can tie them into this RICO enterprise, even if they were just a relatively small fish who played a minor role. And when they say, right, when they turn around and say, well...
But if you work with us, if you provide sufficiently compelling testimony against the big fish, I mean, we could drop that charge. We could take it down to a misdemeanor or something like that. When prosecutors are offering discounts that massive, threatening you with 20 years and then offering you maybe a couple of years or even a misdemeanor or a deferred adjudication if you will cooperate, then you know that the fix is in. And something incredibly unseemly and disgraceful is going on because they're charging people. They're overcharging. They're essentially saying to people, hey, we think you did this thing and we're going to expose you to a potential 20-year punishment. And you know what?
you probably would beat it, right? Better than 50-50 chance. But you know what? Let's discount that. If it's a 50-50 chance we make this RICO case against you, discount your 20 years to 10. You know, you want to go down for 10 years or do you want to play ball and testify against the big guy? And we just know there's like no mystery about how this goes down. We just know from decades of history here that what happens is that people start to play ball because, I mean, who wants that exposure? There's no rational person accepts that exposure. And unfortunately, as Alan Dershowitz once said, I think this is a wonderful way of putting it, when you have the ability, when the government has the ability to incentivize prosecution witnesses this way, by which I mean threatening them with massive...
punishments and then offering them a slap on the wrist if they'll play ball. The problem is that those witnesses may not just sing, they may compose. And that's obviously a huge problem. The idea that there are tools that prosecutors can use to whether they would admit it or not, encourage people to lie on the witness stand to get somebody they don't like. Oh, it happens all the time. I mean, this is classic sort of jailhouse snitch testimony. It happens so often where they'll get somebody who's, oh yeah, you know, we were cellmates for a few months and he told me the whole story about how he committed all these crimes. And then, you know, I'm not saying that's always false, but many false convictions have been supported or the key element.
was the testimony of, and I'm just gonna use the word that defense attorney is, a snitch, a witness who was incentivized by the government. And let's call that what it is too, bribed, bribed by the government, either with the promise of lower charges or dismissing charges or whatever it might be to testify against somebody else. And I'll tell you a shocking thing. I didn't even know this until a few years ago. There's actually a federal law that makes it a felony for any person to offer a witness a thing of value for their testimony. And there's no exception in that statute for prosecutors.
And there was actually a court case where the 10th Circuit Court of Appeals said, yeah, I mean, this applies to everybody. And it just set off, like, it sent DOJ into a frenzy where they then sought en banc review and made the argument that even though there's no explicit exception in the statute, of course, we have to be able to bribe witnesses because we've been doing it forever and it would be really hard for us to do our jobs if we couldn't bribe witnesses. So nobody else can do it for obvious reasons, right? Because you don't want bribe witness testimony in court because, of course, they might make stuff up, but it's different when we do it. Well, the hell with that. No, it's not. Well, we're going to leave it there.
Hopefully you have a better understanding of racketeering and some of the ins and outs. I've been speaking with Walter Olson, a senior fellow at the Cato Institute, and Clark Neely, senior vice president for legal affairs at the Cato Institute. And of course, we'll be following all of these issues, particularly those down in Georgia, on our website, cato.org. An alarming number of members of Congress believe it would be a good idea for the U.S. to go to war in Mexico over fentanyl. What are the likely consequences of using the U.S. military in this way? Brian Finnegan, senior advisor for the U.S. program at Crisis Group, spoke with Cato's Justin Logan in August.
Let me just preface my remarks by noting that because the legal guardrails on the unilateral use of force by the U.S. president are weak, it is not necessary that Congress enact any additional legislation for the president in practical terms to be able to wield the military against cartels in Mexico. So that's something just to bear in mind. So reflecting both the scale of the fentanyl crisis and also its political salience, by my count, there's 145 pieces of legislation that have been introduced in this Congress that refer to fentanyl. And they cover a broad range of topics from strengthening criminal penalties to increased border...
control to harm reduction, I'm going to focus on some more bellicose measures that have been introduced that frame the war on drugs as an actual war and propose either use of military force or sort of militarized approaches to countering fentanyl. The first and most extreme of these is the AOMF cartel introduced by Dan Crinshaw, representative of Walts in Florida. This is a real-deal war authorization that's cut and pasted from the 2001 authorization of use of military force. That's the authority for the U.S. war on terror. This measure reproduces many of the pathologies of that war on terror authorization. It would give the president the authority to use necessary and appropriate
force against a list of named drug trafficking organizations in Mexico, but also the unilateral authority to add additional groups against whom the president could use force. And because this authorization is so broad, necessary, and appropriate, the president would have the authority to launch an intermittent number of new wars against organizations in Mexico, and potentially even the Mexican state itself. There's also in the House, recently been passed out of the House Foreign Affairs Committee by VoiceVote, the Project Precursor Act, which would direct the Secretary of State to add fentanyl as a chemical weapon under the Chemical Weapons Convention. In the Senate, Lindsey Graham introduced a measure that would designate drug trafficking organizations as foreign terrorist organizations. There have also been measures introduced in the House that would direct the Secretary of Homeland Security to designate fentanyl as a weapon of mass destruction. Earlier this year, President Biden received a letter from 18 states attorneys generals making a similar request that fentanyl be designated as a weapon of mass destruction.
Now, the prospects for any of these measures actually becoming law being enacted is pretty dim at this point. It's not even clearly passed both House of Congress and the administration has shown no interest in signing this into law. But the danger in these framings, the danger in measures that... cast the war on drugs as an actual war and cast use of military force as an appropriate policy tool is like the way we hear on the campaign trail about using force against cartels, doing drone strikes, blockades, or shooting suspected drug traffickers. They normalize the idea that use of military force is an appropriate policy response to this crisis. And they make it more likely that a future president will actually use that authority. Again, the president doesn't need any additional authority given the weak guardrails he has. But they normalize the notion that it's an appropriate policy response for a future occupant of the White House to rely upon. Ryan, let me...
I'm going to do my best to keep this from becoming the Representative Crenshaw show this afternoon, but there's a lot that Representative Crenshaw has done vis-a-vis this policy. He has done, again, an authorization for the use of military force that, as you point out, has very clear parallels to the 2001 authorization of the use of military force. I'm going to read you a quote. He has done this sort of back and forth, what I would call kind of like hiding the ball. on what the legislation would do, he sort of is aghast and says, no one is talking about an invasion or a war with Mexico. Rather, the bill provides, as he puts it, quote, the minimum authority needed.
to operate with the Mexican military, and this is what I want to ask you about, your sort of analysis of, as we've done with other allies battling internal insurgencies. So there seems to be this underlying conceit behind the way we've framed this problem, is that whether you want to frame it as Mexico is engaged in a counterinsurgency war or a low-grade civil war, and what's vexing us is that they don't want our help, or they don't want help in the right way, or they don't want enough help. What are we to make of this? First of all, do you buy that? that that sort of sub-Rosa analysis is underpinning what's going on here? And if so, what are we to make of it? I think it's disingenuous. You don't need an AUMF. You don't need a statute drafted in this fashion to provide the authorities that he's referring to there. It depends on what exactly he has in mind.
fairly vague there. But in terms of you just wanted to share intelligence with the Mexican state to combat fentanyl trafficking, the president would not need additional authorities to engage in intel sharing, which I'm sure is taking place right now. So I think this attempt to walk back the clear implications of its own legislation to distance itself from the clear text of the statute is disingenuous. And frankly, it reminds me of some of the measures, the steps and language from members of Congress who voted for the Iraq War Authorization, who, after it was used to invade Iraq, tried to distance themselves from their votes for the authorization. Well, we didn't really intend it to be used to go to war, despite the fact that it provided that authority. And so I think any time you see members of
Congress introduced a war authorization, people should take it seriously. Brian Finucan is a senior advisor to the U.S. program at Crisis Group. The U.S. is lagging other countries in establishing a dependable framework for the development of cryptocurrencies. At the Cato Institute Center for Monetary and Financial Alternatives Conference, Republican U.S. Senator Bill Haggerty spoke about U.S. leadership in the area with Cato's Jennifer Schulte.
I started my career, I have to say, many years ago at a place called the Boston Consulting Group. And our job was to understand and advance the competitive advantage of our clients, whether that be in a microeconomic setting, a company, or in a national setting, a microeconomic setting, a nation. If you think about the competitive advantage that the United States has, our capital markets have been an enormous source of competitive advantage. And we need to maintain strength in our financial markets. The fact that the U.S. dollar is the reserve currency in the world is a huge competitive advantage for us. And our policy is to continue innovation in that arena. I think are absolutely critical. America has been at the forefront.
of innovation as a nation in ways that it just makes me proud to be an American. I flew in yesterday on a beautiful jet. Where was that developed? The Kitty Hawk, North Carolina by Americans. If you think about the technologies that we use every day, we have been at the forefront again of leading economic development, making lives better for people around the world. And it all has to do with our ability to innovate. Agriculture, one of the most innovative sectors in the world. I remember back in the day when I was president of my future farmers chapter, learning about Dr. Thomas Malthus, probably the first.
you know, traditionally trained economist. And he was the first doomsday prognosticator as well because he compared the rate of population growth with the yield per acre of crops. And he decided that we're going to run out of food. This was back in the 1800s. Innovation in agriculture has brought us to a point where America has the ability to feed the world and transfer technology to other parts of the world. So innovation at its core is a huge piece of America's competitive advantage and our contribution to the world. We cannot leave a critical technology like cryptocurrency behind or allow other nations to develop that because we either get it wrong from a regulatory standpoint or we can't make up our minds and create so much uncertainty that no one will invest here.
So we've seen plenty of international destinations announcing their desire to become digital asset hubs at the UK, the UAE, Hong Kong, just to name a few. Are you concerned that these jurisdictions are going to attract talent and businesses that would have otherwise come to US shores? Well, I can understand their incentive. The development is taking place here. But when I was serving as US ambassador to Japan, Japan had taken a very aggressive posture with respect to fintech and with respect to cryptocurrency because they wanted to try to leap back into the lead in financial services. And they saw fintech and then cryptocurrency is a way to do it. But they had a number of problems at the time I was serving as ambassador.
2017, 2018, 2019, Tokyo had the largest volume of crypto trading in the world, so it was next. A great effort to try to bring that innovation in that direction. But I'll say this, the innovators are here in America. We should create the environment for them to want to stay here and develop more innovation. If you think about the power of the blockchain, it's not just cryptocurrency.
There's so many more things that can be done with the technology. You think what you can do is stable coins in terms of efficiencies, the back office efficiencies of self-executing contracts. There's an enormous amount of value to be created here. I want to see it happen in America. Do you see any signs that it's starting to leave America? Well, I certainly have the concerns because of the tremendous uncertainty that's been created by the current administration. Basically, what you have is an environment where we cannot get the regulators to come forward with any sort of clear set of requirements. You've got companies that are basically being regulated in arrears, if you will. They proceed according to what they think is a legitimate business practice. The SEC.
for example, deems that illegal, and in retrospect, it comes back and charges them for something that was never on the books as being legal or illegal. It is a terrible environment for those companies who are trying to invest and expand, and it's forcing them to look overseas to more favorable regulatory environments. That's not where we need to be right now. I'm going to turn the tables on you for a minute because when I testified in front of your committee in December during the FTX meltdown, explosion, whatever you want to call what happened with FTX, you asked me about the U.S. influence on financial regulation internationally if we were to continue down this path. I gave you an answer then that said that I think that we need to engage and failure to engage will prevent us from having influence in the future. I'd love to know your answer to that question. Does today's current regulatory environment affect the ability of the United States to influence international financial regulation? I would just put a nuanced answer to that. I think we need to lead.
And you have the largest financial market in the world right here in America. And if we set the standards in a sufficiently clear way, the innovation will happen here. We will be the leaders. We already have the dominant currency. We need to perpetuate that rather than step back and let these other countries and other city states, whatever you might see, try to step up and fill that void. They're going to try. I'm deeply concerned about some of the statements that we've heard from the BRICS countries. In fact, they're expanding the BRICS consortium right now. And they're talking about dethroning the almighty dollar. I can understand the reason. They're not all our adversaries. But they're looking for an alternative. They're looking to weaken this marketplace.
I want to see us strengthen it. And I think if we step into this in a way where we are forward-looking, if we apply reasonable regulatory boundaries that allow for innovation to take place, we'll see America thrive in this environment as well, and we will lead the rest of the world. And to kind of follow up on the idea of dethroning the mighty American dollar, there are some that would say that crypto itself and allowing crypto to flourish will itself dethrone the American dollar. Do you see it that way? Or is crypto development and this innovation a complement or another way to ensure that the United States continues to?
to grow. I see it much more as a compliment. We have a place in Nashville, Tennessee called Bitcoin Park. The people there that are coming literally from all over the world to work in Nashville to develop the next layer of technology, they're not there to throw in the dollar. They're there to find new and better ways to achieve a given result. And cryptocurrency has its role. Stablecoins have their role. But the private sector is the most important place to allow this innovation to occur. What concerns me is the heavy hand of government coming in and either just creating uncertainty, which is what we have now, or trying to go even further and regulate the marketplace out of existence or take over. That's when we're going to see all of these innovators leave the country and move someplace else.
Let's talk a little bit about specifics and how we move forward to gain the kind of regulatory clarity or the sensible regulatory framework that you're talking about. You've been a longtime critic of the SEC's stance on crypto, and you've been active in pushing for regulatory clarity, including by introducing two bills last year to provide clarity for stablecoin regulation and for digital assets more generally. What do you think the priorities should be for bringing clarity in the crypto landscape? Well, I think people need to know what they're buying, and that's one big aspect of the legislation I put forward, is to make it very transparent in terms of what's standing behind the digital currencies. And, you know, it's been a concern that perhaps the securities that back them up aren't worth 100 cents on the dollar. After seeing what happened with Silicon Valley Bank and others, I think that concern has become even greater. So my legislation would simply require the private firms that are developing these to post in a regular fashion the securities that are backing them up so people can see exactly what is behind the assets they're holding.
And just generally, what's your outlook here? The House Financial Service Committee, as you know, advanced a few bills. Some of your colleagues in the Senate have been introducing other legislation. Some of it's been constructive. Some of it's been aimed at limiting digital asset usage. What do you think we should expect to see in the near term coming out of Congress in the digital asset space? In this space in particular, I think the perspective that I've taken is rather than try to come up with a fulsome, complete package in one blow.
to try to take step-by-step processes, again, to provide certainty, to provide guardrails, provide transparency, like I just described, in terms of the assets that back up the currencies. That sort of incremental approach allows us, I think, to move in this in a way that creates certainty, allows us to learn from what we're doing, and allows us to continue to proceed with the input of the industry. I mean, my legislation is two pages, as opposed to some complex behemoth that comes out of the hill. And I admire my colleagues, but it seems that they value the legislation based on how many pages. And as a business person, I don't see it that way. Simplicity has a tremendous amount of value, particularly when we're talking about an industry that's evolving this rapidly. And the notion that we're going to be able to sit as legislators or as regulators and anticipate where the puck is heading here, I think is foolish. We need to just create broad enough boundaries, clarity so that the innovation can continue to happen and we can respond accordingly.
And so you've been a critic, as I said, of the SEC and the SEC's current enforcement stance. I think there's obviously some concern that the SEC's aggressive stance right here is what's out in front. And it itself is going to have an effect unless Congress is able to act very quickly. Obviously, Congress has its own set of priorities and things that it's doing at the same time. But how do you...
pull back the SEC, or can you? Well, you've touched at the very heart of my concern, and that is the SEC's current posture of regulating by enforcement proceeding. Rather than articulating a set of criteria, what they're doing is they're allowing the market to evolve, and then they're just picking and choosing where they want to. lay an enforcement proceeding and say, well, we don't like that, and therefore it's wrong and level multimillion-dollar fines against these corporations that are not in position to withstand that. And the net effect of all of this is to create increasing amounts of uncertainty. And at some point, the market's not going to tolerate it, and they're going to push the development of these innovative instruments and the whole ecosystem that goes with it, again, to other markets, and we'll be at a competitive disadvantage. I do not want to see that happen in America. Now, SEC Chair Gary Gensler has been dismissive of crypto's value.
and has been dismissive of the idea that if crypto leaves American shores, the U.S. is going to lose very little because we already have digital assets. And although he's not said this expressly, we're already thinking about the concept of a digital dollar coming from the central bank. What would you say to Gary Gensler? And you have the opportunity to say this directly to him when he testifies in front of your committee later this month. But what would you say to Gary Gensler about that? Well, I'm having trouble with understanding how his perspective has shifted because I spoke with him before his confirmation.
You know, he was at MIT at the digital lab there. Reports have come that he was actually trying to become an advisor to Binance before coming into the SEC. So it seems that his perspective has shifted on this. And he seems to be echoing some of my colleagues in the Senate that seem to have a perspective that the only use for this is for some sort of malicious behavior. And I don't understand what's created that mind.
that mind shift in Chairman Gensler's perspective. But I'll tell you this, the posture that he's adopting now is damaging the industry. It's damaging our potential to lead. And I think it's up to the Senate and to the House of Representatives to bring this into check. What we need to do is have more hearings on this. The Senate is controlled by Democrats. The Banking Committee has had far too few hearings on this. We just had an Appropriations Committee hearing where Chair Gensler came before us. And we need to be doing more of this oversight and having more of this discussion so I can get better insight into what's in his mind and also so I can share with him my...
very much business person entrepreneurial perspective and my perspective that America is best when we lead. Bill Haggerty is a Republican U.S. Senator from Tennessee. As fertility rates fall in much of the world, many policymakers are considering expensive policies intended to raise birth rates and support families more broadly. But do those policies work and should the government play a role in trying to reverse this trend? Julie Gunlock weighs in on the discussion on the state of parenting under contemporary family policies in August.
So as parents have gotten more involved, as they've gotten more concerned, we don't see sort of a rise in the happiness of children. In fact, I think we all know that kids are not doing great. We see some great writing on this. Jonathan Haidt, The Coddling of the American Mind. One of my favorite references is Julie Leifclot-Hames, who several years ago wrote a book called How to Raise an Adult, and where she talks about in her 18 years as a dean of admissions at a university, she sort of saw the decline of children unable to cope with being independent adults once they went to college. And of course, Lenore Skenazy, who is the founder of the free...
range kids movement. She talks a lot about this issue and how parents have gotten to the point where they avoid all risk. There could be a white van around the corner. There could be a falling chandelier or a falling piano. You can tell she lives in New York. But this is the state of parenting today. And it makes parents vulnerable to activists and politicians and regulators who want to take advantage of this fear and push public policy that I mentioned earlier makes it harder to parent. And we've seen some really great examples of that recently. And using children, using the fear of what will happen to children as sort of the mechanism to push these policies.
policies. It might seem like a stretch, but that's exactly what happened with the gas stove issue just a couple months ago. You know, the left and many sort of Democrat members of the House were like, oh, stop with the panic and keep your gas stove. This isn't a real issue, except that two very powerful members of the House and Senate, Cory Booker and Don Beyer, they wrote a letter to the Consumer Product Safety Commission to tie this back to kids. It was based on a study that was done that said that gas stoves harm children, give them asthma and other respiratory issues. That was incredibly compelling to people. Oh my gosh, you know, we've got a gas stove in our home, it's hurting our child. So again, using gas stoves or using children.
to really put fear about this very popular and common household item. Car seats. Vanessa, you mentioned car seats, and I just want to expand on that a little bit because this is kind of fascinating. Of course, nobody's against car seats. We're all pro-car seats. But when you look at how the sort of evolution of car seats, you know, I ask...
My mom and she held me on the way home from the hospital, not suggesting we return to that. But the state has continued to make it more and more difficult. Car seats, the buying of them, the using of them more and more difficult. In some states, the mandatory age, I mean, I think in California, what is it, 18? I'm kidding. It's not. But give them a year. It might be. It's like seven or eight, maybe nine. I think it's eight. And that's really tough. And I'll tell you why. You know, I have a minivan. I now have an SUV. But for people who have a Honda Civic or a smaller, a non-
Almost all non-SUVs cannot handle more than two car seats. Car seats are also huge now. And again, it's a long time until you can get them into a booster. And some of these small cars, you can't fit two car seats and a booster. So what happens? You have people who put their kids in the car without a car seat and without a booster. So in an effort to make things safer, you've actually made things less safe. So this is a real problem. And the other problem is that we find parents up to $250 for these violations of car seats without recognizing that many of them are really struggling. Are they not supposed to go to the grocery store? Or maybe they should leave their kids home and go to the grocery store, which there, again, is another violation of these sort of...
the rules today, which suggest we should hover and never take our eyes off our kids. I want to give just one other example, and that's more of the giving kids more freedom. Before 2012, the only people that we tracked were prisoners on work release, right? We gave them an ankle bracelet and they went to halfway house. Now pretty much every kid is tracked. You either have these sort of Apple trackers or they have watches. They have a bunch of apps on phones. And parents are really able to see their kids. This supports kids to know real freedom or independence, which is important. Kids are never, again, never alone, never independent. And this sort of impacts them and their ability to sort of test their own limits and figure out what they can and cannot do. And again, going back to the perception issue, that data point, parents are expected to keep an eyeball on their kids at all times.
Your report was really interesting in that it talked about that in 2020, there are 2.1 million investigations into child maltreatment. Those were unsubstantiated. OK, so it means someone went there, they looked into it, nothing was found. But I think we have to consider how that feels to a parent to be investigated, to be investigated by child safety officers and by the police. It has an incredibly dampening effect on parents. There was a disparity, though, in...
And who exactly is investigated? According to the American Journal of Public Health, they found that 37% of all children by the age of 18 will experience some sort of meeting or visit by CPS, which is a pretty astonishing number. But it is higher for African-American children who experience it at 53%. Now, we could say, well, it's just racism, right? Or CPS is racist, police are racist. Like, they just investigate African-American families more. But instead, we should examine.
something like the car seat situation where people, there are single black mothers who cannot afford a bigger car or cannot afford another car seat. And so they're being reported for things when they're trying to survive. And there's a great example of this. And Lenore Skenazy, who I mentioned before, she did a report on this years ago and she's great. Reason Magazine is so great about tracking these examples. And Lenore is, you know, she's the founder of the Free Range Kids Movement and she tracks these examples really well. And the story of Deborah Harrell, I think is a perfect example of this. She was a mom who was a manager at a McDonald's and her daughter was home for summer.
And she scrounged up enough money to get a laptop for her daughter so she could sit in the back of the restaurant. They were burglarized. The laptop was taken. And Deborah had a choice. She could let her daughter sit there all day in a McDonald's under fluorescent lights eating french fries. But there was a park just adjacent to the McDonald's. So she let her daughter go to that park. She gave her a cell phone and said, if there's anything wrong. And it really wasn't far. It wasn't far, the park to the McDonald's. She said, if anything's wrong, call me. This little girl was nine years old. Yes, young. But she was very mature. And she was able to handle herself. She was familiar with the area.
Parents there who were watching their kids, who didn't have to work at McDonald's, reported her to the police. She was arrested. Her daughter was put into state care for a week. It was terribly embarrassing. Lenore did reporting on this. John Stossel did some follow-ups. I mean, it has a sort of happy ending. They apologized, and she got her reputation back, and she didn't lose her job. But it was a terrible story. And here's a mom who's trying to do her best and brings her daughter to a park and is then penalized for that. So one thing I think, from a government standpoint, we need to stop criminalizing.
very reasonable parent decisions. And we also need to stop criminalizing poverty. There are multiple situations. I often hear, well, this doesn't happen very often. It actually does happen a lot. And parents who, whether they leave their child in a car on mistake or if there's an accident because they weren't home and they had another child watching their child, it is really horrible that there's very little sympathy for these parents who are trying to do their best to provide for their families and making decisions that years ago would have been reasonable. So on to solutions. Eight states have passed the reasonable childhood independence bills. I mentioned Deborah Harrell earlier. But parents are also...
being visited by the police for letting their kids play in the front yard, for letting their kids walk to a park, for letting their kids walk to school. Pretty insane stuff. But in many cases, police are investing. CPS has been called. So this bill will decriminalize those very reasonable behaviors. It will allow children to walk to school and play outside, to walk to nearby parks, and to briefly stay in a car in certain circumstances, for instance, when it's 60 degrees out and you roll down all the windows and you're just running in for a quick thing. These are important measures, I think, that will make parenting more attractive, that will make people want to parent. Again, this is eight states, but these are models for other states, and I certainly hope other states pass these bills.
We spoke about the book for this Cato Audio exclusive. The health sector of the U.S. economy is this sprawling, massive thing consuming $4 trillion per year and making almost no one happy. The price of health care, the prices for health insurance are much too high. The quality of care that people are receiving is too low. And all of these problems flow from the fact that state and federal governments have abandoned the principle that people have a right to make their own health decisions. When you uphold that principle, something pretty remarkable happens.
The price of healthcare falls and healthcare becomes more universal as a result. The quality of healthcare improves so that it can do more for people. Health insurance becomes more secure. But when you abandon that principle, when you let someone other than the patient make their healthcare decisions, then what happens is, and control their healthcare dollars, what happens is prices don't fall, they rise. Quality doesn't improve. Quality problems persist and often get worse. And that has been the story of the U.S. health sector. So what I recommend in recovery is...
upholding that right that all of us have to make our own health decisions. And that requires a whole slew of reforms because there's so many things that state and federal governments have done to take that right away from us. But it begins with changing who controls the money in our health sector, that $4 trillion. This health sector doesn't serve consumers because consumers don't control that money. Government does and employers do. Let consumers control that money and the system will serve them. It also recommends getting rid of all the barriers that state and federal governments have put in the way of higher quality, low cost health care, all sorts of regulatory barriers to
choice and competition that prevent people from offering consumers something better than what they're getting right now. And if you uphold that right of consumers to make their own health decisions, then we will see happening in health care what we see happening in other sectors of the economy where things become more universal because prices are falling at the same time quality is improving. It's fairly intuitive. I mean, anybody who's steeped in economics and watching how markets function, the trend generally is to improving quality, lower cost over time. Are physicians broadly aware of that? I mean, it seems like it's kind of a dumb question, but is.
Are physicians or physicians groups broadly aware of that fact about markets? I'm sure they are because they see it in their own lives. They just don't see it happening in their profession. The main reason is because government has disabled the market mechanisms that would deliver those sorts of outcomes, lower prices, higher quality. And part of the reason for that is the physicians lobbyists. When physicians join their specialty societies or join the American Medical Association and contribute money, what they're doing is they are empowering the lobbyists who then go to demand that government impose these barriers to competition, barriers to innovation, the barriers that are keeping health care prices high.
And the lobbyists will say, well, we're doing it to protect patients. Really what they're doing is they're trying to protect incumbent physicians is how it works out. And so that's another reason that physicians don't see that happening in their work is because many of them are lobbying to prevent it from happening. And you can see why they might want to do that because lower prices. will threaten existing business models. If nurse practitioners can provide basic primary care to people at a lower cost than physicians can, that will mean less demand for physicians to provide those services. And that's going to disrupt a lot of physicians' business models. So whether physicians are aware of why that's not happening in the health sector, don't really know, but physician lobbies are a big part of the problem. So I wonder, the reason I bring that up is because I wonder...
To the extent that physicians are asked or rather swear to first do no harm, does that apply to their business models? I think it does because that's how they're going to provide medical care according to the, you know. their plan for entering the marketplace and providing these services to people, if what you mean is, does that apply to their lobbying activities, their lobbying agenda? I think it should. And my colleague at the Cato Institute, a practicing general surgeon named Dr. Jeffrey Singer, who's a senior fellow at Cato, has written a version of the Hippocratic Oath that explains and affirms that, yes, this do-no-harm principle should also apply to physicians' political activities so that physicians should never engage in any sort of political activities that would deny their patients.
the right to make their own health decisions. And if the American Medical Association goes out and lobbies to block liberalization of clinician licensing laws that would allow nurse practitioners to practice independently, well, then the American Medical Association is encouraging government to violate the rights of its members' patients by lobbying for laws that would take away their right to choose an independent nurse practitioner. And so I think the answer is a forceful yes, that first do no harm principle should apply not just to what they're doing in the examination room or in the OR, it should also apply to what they're doing on the steps of the state capitals in the U.S. Congress. Now, between you and me and people who study this issue in even greater depth than you do, it's well known that there are certain medical services or products that over time have become less expensive and better.
And I think for the broader audience, though, can you help them understand what those things have in common and the opposite set of examples? Sure. So the most important chart that you've never seen in health policy is a chart that I've included in the book, Recovery. And what this chart shows is healthcare prices falling dramatically over a very short period of just two years for all sorts of... medical services, from lab tests to CT scans to shoulder arthroscopy to invasive surgeries like hip and knee replacements. Prices falling by 20, and in some cases, 37% over two years. When do you ever see that happening in healthcare? Almost never. If what you care about is making healthcare more universal, this should be the most important item on your agenda, is getting those prices down. Because lower prices is what delivers universality. We're not keeping 8 billion people alive on this planet right now because of government subsidies for food. We're keeping 8 billion people alive on this planet because innovation has driven down the price of food.
So that, and trade has enabled us to reduce the price of food even further. And that's what we should be trying to do in healthcare. And so this most important chart you've never seen showing those price reductions, that's wonderful news. It's terrific news. If you support universal healthcare, you should absolutely love this chart. So that's the good news. If you support universal healthcare, the good news is we found a way to drive down prices and make healthcare more universal. If you support universal healthcare and you think the way to do that is government subsidies, then the bad news is that the way that this series of studies and experiments drove down those prices was the way they did it was market mechanisms.
by putting the consumer in charge of their health spending, having them spend their own money on all of these services. Because what happened was when it was their own money they were spending rather than their employer's money or an insurance company's money. They paid attention to price in a way they didn't before. They demanded price information from hospitals that were providing hip and knee replacements. They got price information from the hospitals. And when they found out the price was higher at this hospital than that one, they switched their behavior. They switched to the lower cost hospitals to the point where hospitals that had monopolies that the insurance companies could not break, that the employers could not break, that they could not negotiate the prices for these hip and knee replacements down because the hospitals had so much market power. The consumers broke the hospital's market power by just changing their behavior and going to the lower price hospitals.
so that the high-priced hospitals reduced their prices for hip and knee replacements by 37% over a two-year period. That was about $16,000 per procedure on average. That, by the way, you save that much money, that's the federal poverty level right there. That's enough to bring any family out of poverty. And all they had to do was put the consumer in control of the money that the consumer was spending, and the consumers did a better job of delivering lower prices than...
employers and insurance companies with all of their purchasing power. Unfortunately, we see that elsewhere in the economy. We see it in these narrow experiments in healthcare where we let market mechanisms work. What we need to do is we need to scale those up, give consumers control over all $4 trillion that the U.S. health sector consumes. When we do that, we will see prices falling for all healthcare goods and services. Michael Cannon is author of the forthcoming book, Recovery. It will be available October 16th.
Start your workday with a dose of liberty delivered straight to your inbox. Cato Today is a daily email briefing of new Cato articles, studies, and multimedia commentary on the news that is driving the day. Sign up for Cato Today and all Cato Institute newsletters at cato.org slash ecommunity. That will do it for this edition of Cato Audio. I'm Caleb Brown. Talk to you again next month.