About Richard Epstein

Known to students at the University of Chicago and NYU law schools as “the libertarian,” Richard Epstein has established himself as an expert in constitutional law, contracts, corporate law, real estate law, torts, labor law—and even Roman law. He is reputed to be more knowledgeable about Justinian’s Code than anyone since the Emperor Justinian himself. The Peter and Kirsten Bedford senior fellow at the Hoover Institution, Richard Epstein is the author of several books including, The Case Against the Employee Free Choice Act.

Israel on the Legal Battlefield

 

Lawfare—using litigation to upend political leaders and causes—is suddenly prominent in both the United States and Israel. Indeed, the current corruption trial in Tel Aviv involving Israeli Prime Minister Benjamin Netanyahu is cut from the same cloth as Manhattan District Attorney Alvin Bragg’s bid to upend Donald Trump’s presidential aspirations. Both men face charges for events that took place years ago and were at worst minor sideshows. Bragg inflated charges of corruption out of Donald Trump’s alleged 2016 hush-money payments to former porn star Stormy Daniels, who claims she had a one-night stand with Trump back in 2006. Netanyahu is charged with accepting champagne, cigars, and other gifts between 2011 and 2016 from Arnon Milchan, an Israeli Hollywood film producer, and from James Packer, an Australian billionaire, while angling to get better press coverage of his political fortunes.

Trump, when charged, was in the midst of a presidential campaign. Netanyahu now must take time off from his day job of running a country and military to resist a deeply political legal attack, which could undermine his legitimacy both at home and abroad.

The Next Chapter in the Transgender Issue

 

A divided US Supreme Court has heard all oral arguments in United States v. Skrmetti, where the plaintiffs challenged a decision of the Sixth Circuit written by Chief Judge Jeffrey Sutton, which upheld a Tennessee statute banning medical and surgical interventions in transgender cases for minors. Sutton reached that conclusion only after making extensive findings about the improprieties of the practice and by stressing the risks associated with the procedure, including hormonal risks, removal of sex hormones, sterility, and adverse effects of other diseases, as well as long-term consequences that “are experimental in nature and not supported by high-quality, long-term medical studies.”

The Sutton opinion drew a sharp dissent from Senior Circuit Judge Helene White, who took a leaf from the work of the World Professional Association for Transgender Health (WPATH), which she said “is the leading association of medical and mental health professionals with expertise in treating gender dysphoria,” and from the Endocrine Society, “an organization representing more than 18,000 endocrinologists.” According to these organizations, “Gender-affirming care”—the name given to these procedures by their supporters—“improves short- and long-term outcomes for adolescents with gender dysphoria by reducing rates of depression, anxiety, self-harm, and suicidality, and brings their mental health into alignment with their peers.”

Energy Policy in Transition

 

The arrival of the second Trump presidency has brought out latent tensions in the troubled area of energy policy. Over a four-year period, the Democrats, under the leadership of Jor Biden, have made it their highest priority to turn away from fossil fuels to alternative forms of energy, most notably wind and solar. The key argument for this position was, and remains, that the existential threat of continued global warming makes it critical to adopt stern responses lest—in the words of Inside Climate News—Trump, along with people like Chris Wright, who has been tapped to lead the Department of Energy, manage “to turn the US into a pariah petrostate.”

At the political level, the current trend works in sharp opposition to the Biden administration’s nonstop initiatives that began on day one in 2021 with the shutdown of the Keystone XL Pipeline, which resulted in the cancellation of the project by TC Energy some six months later. TC Energy is a Canadian outfit operating in Alberta, whose Premier Jason Kenney reported that he was “disappointed and frustrated” by the unilateral cancellation without consultation.

Trump, a la Carte

 

November 5 was a watershed day in more ways than one. It marked the election of Donald Trump by a solid majority of the American public, who were on balance more pleased with his campaign’s platform and promises than they were with those of Kamala Harris. A large number of key issues ranging from energy and the environment to securities regulation, foreign policy, military readiness, and antitrust law were among the areas where voters saw clear differences and responded accordingly.

Now, however, the election is over, and for Trump supporters and detractors alike, it is an entirely different game. No longer is it necessary to compare two bundles, choosing the better one as a whole, even if you disagreed with some of its content. Now it is possible, and indeed, necessary, to examine each stick in the winning bundle on its own merits. There is no duty to accept all of Trump’s proposals. Indeed, it is imperative to speak out on matters where the victorious candidate has gone astray, setting aside those features you might find attractive.

An Income-Tax Quagmire

 

In the final stages of the presidential campaign, the gap between left and right has become starker over whether the federal government should impose a generalized tax that reaches the unrealized appreciation of various assets. When the idea first surfaced in 2022, President Joe Biden defended his package on the ground that it “eliminates the inefficient sheltering of income for decades or generations.” But he never explains why the deferment of the tax on unrealized appreciation of capital assets, which has been a fixture of the tax code since the epochal case of Eisner v. Macomber (1920), is suddenly “inefficient.” Instead, he praised his initiative because it targets only the top one-hundredth of 1 percent of the population. “The billionaire minimum tax is fair, and it raises $360 billion that can be used to lower costs for families and cut the deficit.”

In the heat of the election, Biden has found a willing ally in Kamala Harris—to the manifest irritation of one of her billionaire supporters, Mark Cuban, who denounced the program as an “economy killer.” Cuban is right, and Harris wrong. It is pretty clear that Biden’s notion of fairness targets some heavy hitters. According to ProPublica, the years between 2014 and 2018 were kind to three titans of American business: Elon Musk, Jeff Bezos, and Warren Buffett. Together, they amassed the tidy sum of over $137 billion via the appreciation of their assets. The kicker is that under the current legal regime only $5.7 billion of those assets were subject to taxation. By contrast, the entire amount of unrealized appreciation would be subject to the newfangled Biden/Harris “billionaire minimum tax” that first singles out those households worth $100 million—not an easy job to do when there are illiquid assets, often subject to joint ownership, or located in various legal vehicles, or both—as a source of public revenue. Then it lowers the boom.

De-escalation’s Empty Promises

 

The past two years have witnessed sustained and bitter differences between the Biden administration and two Western democracies that it has pledged to protect against foreign attack and invasion: Israel and Ukraine. The differences in these ongoing conflicts are not over ends but over means. Russia launched its full-scale invasion of Ukraine in February 2022, about six months after the Biden administration executed its botched withdrawal from Afghanistan in August 2021, a move that went against the advice of all the president’s military and civilian advisers. And then, on October 7, 2023, Hamas broke its tenuous cease-fire with Israel with a full-scale assault on both Israeli settlements and the Nova music peace festival near the Gazan border. The one element that links these three conflicts is not just the perceived weakness of the three target nations, but also the inescapable perception that the United States cares more about short-term peace than long-term security in these vital theaters of war.

That perception has hardened over recent years as it becomes possible to extract a consistent, if disastrous, policy pursued by the Biden administration. The dominant impulse is to make sure that these localized conflicts will not expand into an open war that will lead to intensification of the current hostilities, followed by further entanglements with other nations, followed by an increase in the amount of death, injury, and property destruction. To achieve that end, the consistent Biden trope is to always play defense, never offense. The supposed logic of this position is that it will prevent Russia (along with, as it turns out, its allies China, Iran, and North Korea) from taking over Ukraine, even though it will not be enough to stop the continued bloody encroachment into key towns and cities in the Donbas, located in the far southeast of Ukraine. Similarly, the Biden administration has put a go-slow sign on Israel, seeking to delay its military efforts to remove the last elements of Hamas from Rafah by negotiating a cease-fire that could not, definitionally, result in the decapitation of Hamas, which would have to be a signatory to any such agreement. Any proposed deal might be for a short hiatus, or, as seems more likely, one that would insensibly morph into a permanent arrangement—at least until a rebuilt Hamas renewed its efforts to obliterate Israel and its citizenry.

California Targets Legacy and Donor Admissions

 

It should come as no surprise that California has taken the lead in enacting legislation that restricts the way private universities make their key admission and scholarship decisions. This intervention is not only at the college level, but under AB 1780, the restriction also covers activities in both graduate and professional schools, with these blunt words: “(a) It is the intent of the Legislature to stop the practice of legacy and donor admissions and protect students as they pursue their higher education.” The legislation applies only to “a nonpublic higher education institution (formed as a nonprofit corporation) in this state that grants undergraduate degrees, graduate degrees, or both.” In so doing, it prohibits a practice that has enjoyed widespread support at private institutions for many years. It thus represents a political judgment that these universities have made serious mistakes in running their own shops that should be overcome by legislative fiat.

My views run in the opposite direction. Programs that endure do so only because they supply benefits to these institutions that may well be compromised by a diktat imposed from above.

Unworkable “Solution” to Housing Crisis

 

Representative Alexandria Ocasio-Cortez of New York and Senator Tina Smith of Minnesota have boldly announced a “solution to the housing crisis” in the form of the Homes Act of 2024. Their new confection contemplates the creation of a nonprofit “community land trust,” whose mission is to “develop a stock of permanently affordable, quality, publicly financed, and climate-resilient housing that is shielded from market speculation” as a way to “stabilize” housing markets that serve families who cannot pay for market-rate housing. These organizations must be “democratically accountable to residents, the community, and the public, with residents having a direct role in management decision-making, such as through a tenant organization.” Furthermore, these organizations are required to meet a series of simultaneous (but often clashing) conditions on such matters as gender and racial balance, long-term sustainability, efficient energy, and long-term safety for residents in a healthy environment. The federal budget for this operation is now set at $30 billion from 2025–35, drawn from a mix of direct appropriations and government borrowing. No one knows what the true costs will be.

To make good on their innovation requires that AOC and Smith first make an accurate diagnosis of the malady to which they then respond with a sensible cure. In their recent New York Times op-ed, the two advocates come up short on both points.

Bipartisan Naivete on Economic Growth

 

The recent debate between Kamala Harris and Donald Trump revealed the worst sides of both candidates. As Heather Mac Donald wrote, the egregious partisanship of the ABC pair David Muir and Linsey Davis aside, there was no excuse for Trump’s unforced whoppers and his random asides on stage. The more serious problem, however, deals with substance.

On this point, Trump’s major shortfall was instantly evident. His opening remarks reaffirmed his view that tariffs on foreign imports could raise billions of American dollars from the Chinese and other outsiders, without once considering whether or not those increased taxes would in part be passed forward both to American consumers and to American manufacturers. The former would find it harder to put food on the table, and the latter would be less able to compete in global markets if the higher price on key foreign inputs raises the costs of exports destined to these same foreign markets. It would have helped if Harris had denounced these tariffs, but she is on the same page: the Biden administration recently announced huge tariff increases up to 100 percent on electric vehicles (EVs), as well as hikes on chips and steel. These tariffs will not clean up the air by making the shift to EVs more expensive, but they will endanger public health by increasing the costs of vital medical equipment. Another foolish economic move is the potential blocking of a purchase of struggling US Steel by Nippon Steel, a decision that has now been deferred until after the presidential election. Congratulations for a bipartisan mindset that is lose, lose, lose all around.

Washington’s Weak Excuses For Restraining Israel

 

We are less than a month away from the first anniversary of Hamas’s bloody breach of a cease-fire, which launched war in Gaza. This war should have ended months ago with a decisive win by Israel, and would have done so if not for the interventions of the Biden-Harris administration. By putting all the pressure on Israel to reach a cease-fire on just about any terms, so long as they are acceptable to Hamas, the Democrats have strengthened Hamas’s bargaining position while delaying an end to the conflict.

Representative of the administration’s mindset is the latest apologia for the Biden-Harris regime, written by Thomas Friedman in the New York Times, grandly titled “How Netanyahu Is Trying to Save Himself, Elect Trump, and Defeat Harris.” This hit piece begins by accusing Benjamin Netanyahu of dragging out negotiations with Hamas over the release of the hostages, and purports to hold him accountable for the death of six Israeli hostages (one with dual American citizenship) who were shot in the head by Hamas leaders. Later in his essay, Friedman does briefly refer to the real villain of the situation, Yahya Sinwar, as a “murderous Islamo-Fascist leader” to make the point that it is “also” (along with Netanyahu) in Sinwar’s interest to prolong the war for two ends: first, to create massive strains in the now fragile US-Israel alliance, and second, to provoke internal discord in Israel.

Making “Freedom” More than Just a Word

 

On August 22, Vice President Kamala Harris gave the speech of her life, accepting the Democratic nomination for the presidency. That speech was strong on delivery but weak on policy, making it ideal for rallying the faithful but less so for winning over her many political skeptics. But the speech was then pushed from the top of the news cycle by the announcement that Robert F. Kennedy Jr. had given up his effort to run as a third-party candidate. Instead, Kennedy announced he would join forces with Donald Trump in a move that may restore some of Trump’s campaign momentum lost at the Republican Party convention, where the former president’s acceptance speech rambled on far too long.

It is a maxim in politics that a concrete indictment has more legs than a general denunciation of a political opponent of the sort that Harris offered with such lines as, “In many ways, Donald Trump is an unserious man, but the consequences of putting Donald Trump back in the White House are extremely serious.” So what was striking about the Kennedy endorsement of Trump was that a lifetime Democrat of the purest type had issued a stinging indictment, filled with particulars, of what he regarded as the systematic betrayal of small-d democratic ideals by the Democratic Party. This included a full-scale attack to keep Kennedy off the ballot—which may prove to have been a strategic miscalculation if it turns out Kennedy, the historic Democrat, would have drawn more votes from Trump than from Harris.

How to Shrink an Economy

 

This past week, Kamala Harris, the Democratic nominee for president of the United States, put forward an economic plan for the revitalization of the American economy. But the law of unintended consequences means that her plan would do the exact opposite. It is a rare achievement for a major political figure to put forward a childlike plan for economic revival that is deservedly both panned by the Washington Post editorial board as a collection of “populist gimmicks” and ridiculed by the Wall Street Journal as “Venezuelan-style left-wing populism.” For once, left and right unite to denounce this toxic one-two combination: huge restrictions on competitive markets coupled with massive programs of redistribution.

Harris is obviously worried about the high inflation rates that during the darkest Biden period reached a temporary high of close to 9 percent. The upshot was that while the stock market did very well, the labor market did not, such that the country has seen a decline in real wages during the Biden years of about 3.9 percent, compared to a 2.6 percent increase during the first three years of the Trump administration before COVID (and the notorious COVID-era restrictions). There is no great mystery here, for, as countless economists have noted, if more dollars chase fewer goods, inflation results from the confluence of these two major forces. Unwise regulation, such as the effort to force EV vehicles on an economy that can ill bear their cost, and major expenditures, such as President Biden’s programs for student loan forgiveness, for which the Democrats should be grateful that they have been blocked in the courts, further contribute to inflation.

Clouds over the American Economy

 

The first lines of A Tale of Two Cities capture the mood of the day:

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity . . .

New York’s Threat to the Hotel Industry

 

New York politics, both state and local, is famous for progressive politicians who launch gratuitous assaults on the city’s economic base. Their implicit premise is that their endless meddling will be devoid of negative economic consequences, notwithstanding the chronic population losses at both the state and city levels, driven chiefly by high taxes and extensive regulation. That tendency for self-destruction is again on display in the New York City council, where a consumer advocate turned legislator, Councilwoman Julie Menin, has introduced a bill that threatens to upend the fragile hotel economy in New York City. “This is like a nuclear bomb. It will destroy a major segment of the industry. This is a bazooka to kill a gnat,” Vijay Dandapani, president and CEO of the Hotel Association of New York City, is quoted as telling the New York Post. Sadly, it looks as if he is right.

Two basic facts define the hotel market in New York City, where a shortage of units has raised already-high rates. The first is that about 150 of the city’s 700 hotels have been converted to house migrants, reducing available rooms. The second is that of the 700 hotels in the city, some 400 are now nonunion. Menin’s proposal is supported by the Hotel Trades Council because the effect—and indeed, the purpose—of the regulation in question is to increase the costs of being a nonunion hotel. Under its official summary, the bill would require:

Keeping Rental Markets Safe

 

There is little dispute that the housing market for both rentals and sales is in distress. A recent Harvard study states: “Lack of affordability defines both the for-sale and the for-rent housing markets,” which has led to higher prices, sluggish sales, and higher rates of eviction from rental units. On the progressive left, the explanation is always the same: “The nation’s largest landlords have shown their burdensome rent hikes are based on greed, not need, after reporting billions of dollars in higher profits over the last year.” The consequence of this dire movement is, according to the White House, that “[s]ome corporate landlords have taken advantage of the shortage of available units by raising rents by more than increases in their own costs—resulting in huge profits at a time when millions of Americans are struggling to cover rent each month.”

Consequently, the Biden administration has proposed that the federal government inject itself into the corporate housing market. Its new proposal is that “corporate landlords, beginning this year and for the next two years, would only be able to take advantage of faster depreciation write-offs available to owners of rental housing if they keep annual rent increases to no more than 5 percent each year.” This would cover “landlords with over fifty units in their portfolio,” accounting for some twenty million units. New construction would be exempt from this anti-gouging policy that, thankfully, requires congressional action to implement.

Threats to the Rule of Law

 

Anyone watching the slugfest within the Democratic Party knows about its deep divisions over whether Joe Biden should run for re-election, or indeed stay in office for the duration of his term. But for all these divisions, Democrats are strongly united on two unassailable propositions. The first is that Joe Biden has been a great president on both domestic and foreign affairs. And second, the transcendent threat to democracy is embodied in Donald J. Trump, even if, as Frank Bruni wrote in the bellwether New York Times last week (before the assassination attempt deeply discredited harsh political denunciations on all sides), that Trump slyly remained on good behavior as Democrats duked it out among themselves. To make matters worse, Trump was going to—according to yet another Times stalwart, Jesse Wegman—strengthen a Supreme Court that goes about gaslighting the public by pretending to be moderate. This is the court, of course, that has handed down decisions like United States v. Rahimi, which held sensibly that nothing in the text or history of the Second Amendment required striking down a federal law that forbade a person guilty of domestic violence to possess a firearm.

One reason the Democrats are so panicky is that they fear they cannot count on Trump to defeat himself in the upcoming election—even more so now that images of a bloodied, defiant Republican candidate have been dominating news pages this week. But there is another narrative even more dangerous to the Democrats’ re-election story that needs airing. Biden and his administration have been far from blameless on key issues of public affairs. Indeed, their deeds are a far greater threat to democracy than Trump’s ill-chosen words. (Despite Trump’s improbable denial that he ever led chants of “lock her up” against Hillary Clinton, for instance, while in office Trump never sought to indict her or any other Democratic insider.)

Upending the Sackler Bankruptcy?

 

In Harrington v. Purdue Pharma, the United States Supreme Court by a 5–4 vote rejected a final settlement in bankruptcy that sought to provide some $11 billion over ten years to provide immediate benefits to persons and institutions ravaged by the opioid crisis. The list of recipients to date includes about 1,200 cities, counties, and other local governments, as well as some 60,000 individuals who have been adversely affected by the opioid epidemic claiming damages from $3,500 to $48,000. The case concerned the debtor, Purdue Pharma LP, but the root of the protracted proceedings is the release of claims against the Sackler family, technically third parties to the proposed reorganization of Purdue.

During these agonized negotiations, no one doubted that the bankruptcy court was the appropriate forum in which to consolidate the multiple claims against Purdue and the Sacklers. But there was an ongoing donnybrook over how much money should come from the Sacklers, who owned Purdue, from which they had over the years taken approximately $11 billion, leaving the company in a compromised financial condition. To buy peace, the family was prepared to return some $6 billion into the bankruptcy settlement, with this catch: their contributions were all that could ever be demanded from the Sacklers for the payment of both present and future claims. Needless to say, with such diverse constituencies, there was a protracted struggle as to whether the proverbial bird in the hand was worth two in the bush. And as time wore on, more weary individuals and institutions were prepared to take the deal, even knowing that it let the Sacklers retain large sums of money in complex foreign trusts outside the reach of American creditors. The United States was adamant that the settlements were insufficient, which is why its trustee William K. Harrington sued to set them aside.

A Tax Argument Too Far

 

This past week, the Supreme Court in Moore v. United States upheld the power of the US government to impose a mandatory repatriation tax (MRT) on income in an American-controlled foreign corporation that has been returned to the United States after it went untaxed while kept abroad. The MRT imposed a tax of $14,729 on Charles and Kathleen Moore, even though they could not lawfully take that money out of the Indian farm-equipment company, known as KisanKraft, in which they had invested. That situation is not unusual under US tax law, which imposes a tax at the partner level on income that has been earned and retained because it cannot be distributed because of, for example, a dispute among the partners as to its proper allocation.

The rule followed in Moore, if extended widely, could easily create a liquidity crunch, which is why it was easy enough for Congress to postpone the tax until the money was received by the individual shareholder or partner. Timing questions like these run through the Internal Revenue Code. Justice Brett Kavanaugh’s majority opinion noted that cases like Heiner v. Mellon (1938) had long imposed that tax, so the odds of the Moores winning on that point were always slim, given the broad power of Congress to fine-tune the tax system under the Sixteenth Amendment, which reads:

The Law and “Bump Stocks”

 

In Garland v. Cargill, the Supreme Court has struck down (by a 6-3 vote, split along conservative versus liberal lines) a Trump administration regulation including semiautomatic weapons equipped with so-called bump stocks in the definition of “machine gun” under the National Firearms Act of 1934. The 1934 Act defined a machine gun as “any weapon which shoots, is designed to shoot, or can be readily restored to shoot, automatically more than one shot, without manual reloading, by a single function of the trigger.” A standard semiautomatic weapon requires a succession of distinct trigger pulls, each a “reloading,” that falls outside the statutory definition. A bump stock is a device that increases the rate of those successive trigger pulls through a back-and-forth motion that uses the weapon’s recoil to activate each distinct pull. If speed of firing is the defining feature, there is a puzzle: just how much of an increase in speed is needed to warrant treating the bump stock as a machine gun? Conversely, if the sharp line between a single and multiple firings holds, then the speed of any release does not matter: one trigger pull that produces a hundred bullets makes for a machine gun; a hundred separate (albeit rapid) pulls of the trigger that release a hundred bullets always makes a semiautomatic weapon.

When there’s a need to create a statutory dichotomy, sharp discontinuities are always better than sliding scales. Think of traffic lanes: better to delineate each direction cleanly than permit one lane to gradually meld into the next.

Progressive Confusion about Human Welfare

 

The deep political polarization in the United States has spilled over to the academic realm. Today’s progressive thinkers are determined to undermine the influence of the great conservative and libertarian thinkers—most notably John Stuart Mill, Friedrich Hayek, and Milton Friedman. One prominent entry into the genre comes from Joseph Stiglitz, winner of the Nobel Prize in Economics, in his recent polemic The Road to Freedom: Economics and the Good Society. Stiglitz’s title plays off the title of Hayek’s far greater 1944 book, The Road to Serfdom. Stiglitz writes as a man possessed of strong opinions but incapable of sustained discourse. He flits from topic to topic in disorganized fashion, making it virtually impossible to extract from his multiple musings a clear account of either his rhetorical targets or his view of the “good society.” Stiglitz the economist is plainly out of depth in writing about political philosophy or law.

This harsh judgment of Stiglitz should not be misinterpreted as an uncritical celebration of the far deeper thinkers he attacks. John Stuart Mill is famous for his articulation of the harm principle in his 1859 book, On Liberty: “The only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others.” Unfortunately, his principle is both too broad and too narrow. Too broad, in that his thesis has no explicit libertarian base, so that Mill does not distinguish between harms caused by competition, which are generally to the good, and harms by the use of force and fraud, which are not. He makes this mistake because he wrongly isolates the particular transaction from its systematic effects on third parties, for which competition produces positive-sum gains, while force and fraud produce negative-sum games. Mill thus never mentions monopoly power, nor does he have any discussion on the optimal form of taxation: to raise taxes to supply public goods, to guard against the dissipation of common-pool assets, or to regulate the organization of network industries like railroads. Yet his conception of harm is too narrow insofar as it does not comfortably reach either antitrust or common-pool problems.