Obama's Global Tax Raid

Banks Need Fewer Carrots and More Sticks

Insolvent institutions should be taken over by the FDIC.

R. GLENN HUBBARD HAL SCOTT LUIGI ZINGALES

The results of bank stress tests -- expected tomorrow -- will no doubt prompt calls for further government guarantees and capital injections. But continuing to prop up the banks with government cash is a mistake. There is a better approach.

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A well-capitalized banking sector is a necessary ingredient for effective intermediation and economic recovery. But today's system is not well-capitalized. How can we move in the right direction?

In a market economy, the government can create the right incentives by using a combination of carrots and sticks. Thus far, the government has only used carrots with the banks. One major carrot is the Troubled Asset Relief Program (TARP). The initial infusions were very generous -- the Treasury got back securities worth $78 billion less than the $254 billion it invested -- as the Congressional Oversight Panel pointed out recently. In addition, the FDIC's guarantee of short-term debt was worth $100 billion just for the original nine TARP-participating banks. And the mortgage-related asset guarantees offered to Citibank and Bank of America were worth tens of billions of dollars more.

A new round of expensive TARP injections -- by converting the government's preferred stock into equity -- may follow the release of the stress-test results. In addition, the Treasury's Public-Private Investment Program (PPIP) plans to subsidize the purchase of banks' "toxic assets" by hedge funds and other investors. We estimate that the government will spend $2 for every $1 the private sector will put in. Yet even with this large subsidy, PPIP's chance for success is low because of the substantial gulf between the bid and ask prices on the toxic assets, and the reluctance of investors to partner with the government.

Not only is the carrot approach not jump-starting lending, it is also angering the American people. It's hard to justify to taxpayers that we need to reward the same group of people who, rightly or wrongly, are perceived as responsible for the current situation.

It's time for government to use the stick, beginning with creditors. The first step should be an announcement that the FDIC guarantees of short-term debt, set to expire at the end of October, will not be renewed. Insolvent banks -- defined not by stress tests, but as those that cannot fund themselves in the private market -- will be taken over by the FDIC. Of course, this takeover plan must be clear and credible. Otherwise creditors will play "chicken" with the government, knowing that at the last minute the government will flinch and fail to remove the guarantees.

Despite the clarity of such an approach, the market might be skeptical for several reasons. First of all, the FDIC lacks the staff to oversee, let alone run, several large and complex banks which may become insolvent. Second, the FDIC's main approach so far, as with Washington Mutual and IndyMac, has been to restructure the banks for acquisition. The trouble with this plan is that it is unclear who will buy the largest banks in the near future. Finally, it is politically unappealing to have a government institution run a significant fraction of our banking sector. Waiving the specter of nationalization, the creditors may try to force the government to bail them out.

We believe these problems can largely be avoided by adopting a simple approach. Rather than taking over and running banks, the FDIC should split each bank into two parts. One part ("the bad bank") will assume all the residential and commercial real-estate loans and securitized mortgages as assets, and all the long-term debt as liabilities. In addition, "the bad bank" will obtain a loan from the "good bank." This loan is necessary because the long-term debt of the old bank is not likely to be sufficient to fund the assets of the bad bank. The good bank will have all the remaining assets, including derivative contracts and its loan to the bad bank. It will have all the insured deposits and the FDIC-guaranteed short-term debt as liabilities. Once the split is accomplished, the good bank can be cut loose from FDIC receivership.

On the one hand, this split separates the toxic assets, whose value is very uncertain, in an institution that has no insured or guaranteed liabilities and poses no systemic risk. The bad bank will be like a closed-end mutual fund and can be run as such. The good bank will be well-capitalized, and the value of its assets will be clear.

The losers in this reshuffling are the long-term debtholders who get stuck in the bad bank. For this reason, we propose that they be compensated by receiving all the equity of the good bank. The old shareholders will get the equity in the bad bank. (In any restructuring, bondholders should do better than equity.) And the FDIC minimizes its risk because it guarantees the deposits in the good bank.

In fact, long-term debtholders who have debt claims against the bad bank and equity claims against the good bank will be better off under this plan than if the bank were liquidated or continued to operate as one bank. If the bank were liquidated, bondholders would stand to lose almost all their investment. If the bank continues to operate with government subsidies, the benefit of the subsidies are shared by both debt and equity. Under our plan, the debtholders will get all of the equity in the "good bank" and therefore all the upside of its future performance.

One of the major objections to letting banks fail is the argument that they are not really insolvent; they are just facing a temporary dislocation in the marketplace. But if this observation were true, the bad bank would surge in value, and the old shareholders of the banks, who received the shares in the bad bank, would gain. If it is false, the bad bank would default and the old shareholders would receive nothing (as they should).

In order for this plan to work, legislation would need to take effect before the withdrawal of the FDIC guarantee in October, so that FDIC procedures for handling failed banks can be applied to bank-holding companies. FDIC Chairman Sheila Bair has called for such legislation. Most importantly, this plan won't impose any new cost on the taxpayer.

Bold stress tests and government intervention reflect President Obama's use of Franklin Delano Roosevelt as a model in dealing with the current crisis. But he got the wrong Roosevelt. He should instead follow the motto of Theodore Roosevelt: Speak softly and carry a big stick.

Mr. Hubbard, dean and professor of finance and economics at Columbia Business School, was chairman of the Council of Economic Advisers under President George W. Bush. Mr. Scott is a professor of international financial systems at Harvard Law School. Mr. Zingales is professor of entrepreneurship and finance at the Chicago Booth School of Business.

Obama's Global Tax Raid

Obama's Global Tax Raid

President Obama revealed Monday that he's half a supply-sider. If only someone could explain to him the other half. We have a tax code, the President said, "that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York." That sounds like a great argument for lowering taxes on the guy creating jobs in Buffalo. Alas, that's not what he has in mind.

AP

Set aside that India is a poor example to make Mr. Obama's point, since its corporate tax rate on foreign-owned companies can be as high as 55%. The President's argument is that U.S. tax-deferral rules make it more expensive for American companies to reinvest overseas profits at home than abroad. This, he claims, creates a perverse incentive for companies to "ship jobs overseas" and reduces investment and job creation in the U.S.

He's right, except that his proposals would only compound the problem. His plan would limit the tax deferral on income earned abroad by tightening the rules, limiting allowable deductions and restricting eligibility for foreign-tax credits. This "solution" is antigrowth, job-destroying, protectionist and unlikely to raise the tax revenue Mr. Obama predicts. Other than that . . .

The current tax-deferral system is a clumsy attempt to deal with the fact that most other countries don't tax their companies' overseas profits. A German firm doing business in Ireland, say, pays no German income tax on its Irish profits, but it does pay Ireland's corporate income tax at its 12.5% rate. The U.S. company competing with that German business in Ireland, by contrast, pays Ireland the same 12.5% on its profits -- and it then pays Uncle Sam up to 35%, minus a credit for what it paid the Irish. And because almost everyone else's corporate tax rates are lower than America's (see nearby table), U.S. companies end up paying higher taxes than their international competitors.

Congress long ago created the corporate tax deferral to compensate for this competitive disadvantage. Under deferral, a company doesn't have to pay the U.S. corporate rate until it repatriates its earnings. It can retain them overseas or reinvest them abroad with no penalty. But if it brings them home or pays them as dividends, the tax bill comes due.

The German company faces no such quandary. It pays the Irish tax, and it's free to invest that money in Ireland or Germany or anywhere else. This territorial tax system, embraced by most of the world, eliminates the perverse incentive to hold money abroad that America's deferral system creates. Adopting a territorial system would be the most obvious and simplest way to eliminate the distortion that tax deferral creates. Alternatively, Mr. Obama could lower the U.S. corporate tax rate to a level that is internationally competitive.

Yes, we know: Few major U.S. companies pay 35% of their profits in taxes because of the foreign tax-deferral and other deductions, credits and loopholes. But that's precisely why Mr. Obama should want to take the better path to corporate tax reform by reducing the rate and removing loopholes. America now has the worst of both worlds -- a high statutory rate and a tax code so riddled with complexity that it is both expensive to administer and inefficient at collecting revenue. And yet Mr. Obama's proposal to limit deferral only layers on the complexity.

In promoting its new global tax raid, the White House fingered the Netherlands, which it lumped with Ireland and Bermuda as "small, low-tax countries" that supposedly account for an outsize share of reported foreign profits of U.S. firms. The Dutch corporate tax rate is 25.5% -- which isn't even all that low by current European standards. And the U.S. is the largest foreign investor in that "small, low-tax country," according to the Dutch Embassy. Perhaps reducing American investment there and slamming the Netherlands as a tax haven is Mr. Obama's way of reaching out to friends and allies.

But the Netherlands won't be the only country hurt. The explicit goal of this plan is to reduce the incentive for U.S. companies to invest abroad, which Mr. Obama derisively calls "shipping jobs overseas." Foreign companies may relish the loss of U.S. corporate competitiveness that his proposal will bring in the short term. But in the long term, reducing U.S. investment globally will hurt everyone. And that investment is a two-way street -- the Netherlands is also the fourth-largest foreign investor in the U.S.

Some of Mr. Obama's advisers understand all this, but then their real goal isn't tax reform or U.S. competitiveness. It's a revenue grab, one made easier by the fact that overseas tax "avoidance" is easily demagogued. To that political end, Mr. Obama conflates tax deferral with the offshoring of jobs -- hence the sly reference to Bangalore, India. With trillions of dollars of new spending, the White House and Treasury are desperate for new tax sources to pay for it all.

But even as a revenue raiser, this is likely to fail. Fewer companies will keep their headquarters in the U.S., especially small or mid-sized firms that can slip away without becoming a political target. Those companies that can't flee will sooner or later demand relief from Congress, which will be happy to create even more loopholes.

If Mr. Obama's proposal has a silver lining, it is that he has embraced the principle that tax rates matter to investment decisions. If his new and short-sighted proposal becomes law, he and all Americans will discover just how much.

Freedom Watch 12: Ron Paul, Daniel Hannan, Lew Rockwell, Cody Willard, Peter Schiff, RJ Harris, Jason Sorens, Shelly Roche

Freedom Watch 12: Ron Paul, Daniel Hannan, Lew Rockwell, Cody Willard, Peter Schiff, RJ Harris, Jason Sorens, Shelly Roche

Another great show. Peter Schiff wasn’t on the original guest list but they found time to include him via phone. Great discussion on the role or lack thereof of the political system in achieving liberty.

Check out the complete show in the playlist below and feel free to use the embed code to put the show on your own site.




Ron Paul Puts Ben Bernanke On Notice

Ron Paul Puts Ben Bernanke On Notice

by Marc Gallagher

Today Ron Paul took the oppportunity during his questioning of Ben Bernanke’s Joint Economic Committee testimony to put him and the Fed on notice. Today Ron Paul’s H.R. 1207 is up to 124 official cosponsors, so Paul has some serious backing when it comes to the “transparency” issue.

Bernanke’s response was interesting given the recent failed FOIA requests by both Fox News and Bloomberg at having a full public accounting of where the money went. Bernanke is blowing smoke as usual. I worry that if H.R. 1207 passes that it won’t amount to much “real” transparency, but I’ve also stated that we have to start somewhere.

Watch Ron Paul take on Bernanke below.

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Counterfeiting versus Monetary Policy

Counterfeiting versus Monetary Policy

by Walter Williams

Congress is on a spending binge. With all the calls for bailouts, economic stimulus and other assorted handouts, there is a real risk of inflation in our future. If we do have a rapid inflation, it's likely that Congress, as they did in the financial meltdown, will blame it on everybody except themselves. Before Congress begins to shirk their responsibility, let's understand what an inflation is and is not.

Several prices rising are not inflation. Only when prices across the board rise is there inflation. But just as in the case of diseases, describing a symptom does not necessarily tell us the cause. That is the same with inflation; it is a symptom of something else. Nobel Laureate and noted monetary theorist Milton Friedman explained, "(I)nflation is always and everywhere a monetary phenomenon, in the sense that it cannot occur without a more rapid increase in the quantity of money than in output." Put another way, inflation results from an increase in the supply of money relative to the demand for money.

That being the case, who is responsible for inflation? It's not you or I because if we privately increased the supply of money to finance profligate spending, we would be charged with counterfeiting and go to prison. The Federal Reserve Bank, our central bank, is the only entity legally permitted to increase the supply of money, to finance Congress' profligate spending. The Federal Reserve Bank is supposed to be independent but it typically accommodates the wishes of Congress and the White House.

Central banks are villains in most countries; ours is just not as bad as others. In 1946, Hungary's central bank gave it the world's highest inflation rate. Prices doubled every 16 hours creating an annual inflation rate of 13 quadrillion percent. Last October, Zimbabwe's central bank produced history's second highest rate of inflation. Prices doubled every 25 hours, giving it an annual inflation rate of 80 billion percent. By comparison, Germany's inflation rate, which brought about the social disruption responsible for Hitler's rise to power, was a mere 30,000 percent that saw prices doubling every four days. You say, "Williams, that couldn't happen here." Except during the Revolutionary War and the War of 1861, our inflation has never exceeded 20 percent, but keep in mind that any hyperinflation was once 20 percent.

Knowing the dangers posed by central banks, we might ask whether our country needs the Federal Reserve Bank. Whenever I'm told that we need this or that government program, I always ask what we did before. It turns out that we did without a central bank from 1836, when President Andrew Jackson closed the Second Bank of the United States, to 1913 when Federal Reserve Act was written. During that interval, we prospered and became one of the world's major economic powers.

The justifications for Federal Reserve Act of 1913 was to prevent bank failure and maintain price stability. Simple before and after analysis demonstrates that the Federal Reserve Bank has been a failure. In the century before the Federal Reserve Act, wholesale prices fell by 6 percent; in the century after they rose by 1,300 percent. Maximum bank failures in one year before 1913 were 496 and afterward, 4,400. During the 1930s, inept money supply management by the Federal Reserve Bank was partially responsible for both the depth and duration of the Great Depression.

It is not wise for us to permit a few people on the Federal Reserve Board to have life and death power over our economy. My recommendation for reducing some of that power is to repeal legal tender laws and eliminate all taxes on gold, silver and platinum transactions. That way there would be money substitutes and the government money monopoly would be reduced and hence the ability to tax -- some people would say steal from -- us through inflation.

Blame Socialist Government Policies Not Capitalism for the Financial Crisis

Blame Socialist Government Policies Not Capitalism for the Financial Crisis

by Brian Simpson

Many blame capitalism for the current financial crisis. Even Alan Greenspan, who at one time was an advocate of the free market, blames capitalism. Last year he testified in front of a congressional committee that "A critical pillar to . . . free markets did break down. I still do not fully understand why it happened." The first thing that Greenspan and most other commentators on the crisis must do to understand why the crisis occurred is to learn that the free market did not cause the crisis because the U.S. is not even close to being a free-market economy. Massive government interventions in the market in the form of myriad regulations and financial irresponsibility on the part of the government are really to blame. This makes the "solution" being imposed doubly absurd: more government controls, borrowing, and spending to solve the problems created by government controls, borrowing, and spending.

But this isn’t surprising. Ayn Rand observed decades ago that "one of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary."

The real solution to the financial crisis is not more financial irresponsibility and government controls, but forcing the government to be financially responsible and abolishing the controls. This means we need to establish a free market in our financial system. As a part of the move to a free market, we need to establish a full-fledged gold standard--one that the government must be prevented from breaching. This is something we have never had in this country. We have been on a gold standard before, but the government intervened in many ways--from the very start of the nation--to undermine the gold standard, such as by issuing unbacked paper currency. The absence of a full-fledged gold standard has made it possible for the government to create periodic financial crises and depressions throughout our history. Abolishing controls and moving to a gold standard will not only help get us out of the current crisis but help prevent future crises as well.

How did the government cause the current crisis?

Consider these examples. The Fed injected massive amounts of money and credit into our financial system from 2001 to 2004 that led to skyrocketing housing prices and fostered irresponsible borrowing and lending by market participants. The Community Reinvestment Act of 1977 is used to intimidate banks and other mortgage lenders into making loans--such as subprime loans--in low- and moderate-income neighborhoods. Many of these loans would not have been made in a free market because they were made to borrowers who were not credit worthy. Making loans to people who cannot afford them is a policy that is destined to lead to a financial catastrophe.

In addition, Fannie Mae and Freddie Mac, enterprises created by the government to increase mortgage lending, foster irresponsible borrowing and lending by purchasing mortgage loans from lenders. Fannie and Feddie have been able to purchase large amounts of loans because, since their creation, they had the implicit financial backing of the government. Now that the government has taken them over, that backing is now explicit. Federal Home Loan Banks also engage in and foster irresponsible and excessive borrowing and lending. They can do this only because, as stated by The Wall Street Journal, they "benefit from a widespread belief the government would bail them out in a crisis."

The government appears to be a financial savior because the Fed has the power to create money. But the Fed’s creation of money does not solve problems; it creates problems. It causes prices to rise rapidly, devalues our savings and income, makes business planning and investing more difficult and risky, promotes more government borrowing, spending, and consumption, undermines economic progress, and thus lowers the standard of living in the economy. The situation is dire. The government is consuming our seed stock and no one seems to care!

To solve the problem, we need to get the government out of the money creation business and prevent it from taking us down the road to fascism. We need to tie the hands of government officials to force them to obey sound financial principles that every responsible individual obeys. We need to stop the government from making fascist power grabs, such as the one in which Treasury Secretary Henry Paulson recently coerced CEOs from the country’s nine largest banks with, as reported by The New York Times, a "take it or take it offer" to sell the government shares in their companies as a part of the massive government bailout. We need to limit the government’s ability to tax to instill financial responsibility in government and protect the right of individuals to keep the income they earn.

The government has become more financially irresponsible with every step we have taken away from gold. It’s no accident that government borrowing and spending soared as we moved off gold, and the price of gold has risen from $20.67 per ounce to as high as about $1000 per ounce recently. The gold price has risen because the Fed has injected so much money and credit into our financial system that the demand for gold has increased tremendously. A full-fledged gold standard would prevent the Fed from creating money and thus radically limit the spending in which the government can engage.

The gold standard is not as far-fetched as one might think. President Reagan established a commission to consider a return to gold. Today we need merely have the courage, which that commission lacked, to move back to the gold standard. With a fully-backed gold standard--where each dollar is backed by a dollar of gold--we can require individuals to be financially responsible, or suffer the consequences, without bringing down the rest of the economy or decreasing spending in the economy one cent. Under a fully-backed gold standard, we can let companies that are allegedly "too big to fail" fail. We just need to define a new gold dollar at a high enough price in paper dollars for the existing supply of potential monetary gold to be able to back the number of dollars in existence. This, along with abolishing other government controls, will make it possible to instill financial responsibility into the economy and lift the burden of onerous regulations.

These are radical solutions but desperate times call for radical measures.

To move forward, we need to abandon the profligate, short-range policies of Keynesian economics and the Marxist ideas that are used to justify government controls. We need to adopt the financially disciplined, long-term policies of "Austrian" economics, in particular that of its best expositor: Ludwig von Mises. Such policies need to be based on a respect for individual rights and freedom, as argued by Ayn Rand. If we don’t do this, not only will we all be dead in the long run, we will be in financial and economic ruins as well--and the type of ruins I’m referring to will make today’s financial crisis seem like prosperous times!

Brian P. Simpson is an associate professor at National University in La Jolla, CA. He is author of the book Markets Don't Fail! He has created a minor in economics that focuses on free market economics and the philosophical foundations of a capitalist society.

War and the "Peaceful Majority"

War and the "Peaceful Majority"

by Michael J. Hurd

Here’s a fascinating quote attributed to online writer Paul E. Marek:

"The hard quantifiable fact is that the peaceful majority, the 'silent majority,' is cowed and extraneous. Communist Russia was comprised of Russians who just wanted to live in peace, yet the Russian Communists were responsible for the murder of about 20 million people. The peaceful majority were irrelevant. China's huge population was peaceful as well, but Chinese Communists managed to kill a staggering 70 million people.

The average Japanese individual prior to World War II was not a war mongering sadist. Yet, Japan murdered and slaughtered its way across South East Asia in an orgy of killing that included the systematic murder of 12 million Chinese civilians; most killed by sword, shovel, and bayonet. And who can forget Rwanda which collapsed into butchery. Could it not be said that the majority of Rwandans were 'peace loving'?"

Marek went on to criticize the danger of Islamic fanaticism, particularly at a time when the new American President states that terrorism is the fault of Americans for hurting the feelings of Islamic leaders.

I’m really struck by the idea that “the peaceful majority were irrelevant” in Soviet Russia, and elsewhere. This drives home the point that a majority of Americans wanting peace is not enough to stop terrorism. Our fate will be determined by the course our government takes. Maybe most people don’t want dictatorship. It doesn’t matter. If we allow our own government to impose it on us, in stages—then we’ll get it. Once we get it, it will become harder (if not impossible) to get rid of it.

The same applies to fighting terrorism. It’s fine to want peace. That’s what all rational people want. But if we allow our leaders to apologize for our actions, thereby implying that we deserved 9/11, or any other instance of terrorism, then we’re setting ourselves up to be attacked again. Nothing stirs up a terrorist like weakness—particularly moral weakness, or moral cowardice. Our last President mishandled many aspects of the war against terrorism and at times was appalling in his own apologies for our nation. But he also sent contradictory (and better) messages, in words and action, that the U.S. has every moral right to stand up for itself. The new President is showing no indication of any willingness to do this and, in fact, seems to blame America for terrorism waged against it.

We won’t survive if we continuously allow our government to do the wrong things. In a democratic society with freedom of expression, there is always hope that the people can push the government in the right direction. Wrong policies can be reversed every few years. The most disturbing thing about our present situation is not that the majority are merely indifferent, but that they have actually pushed our government to go in precisely the wrong direction. The majority of us are telling our government to nationalize most of the private economy; to nationalize all of health care, rather than control a portion of it, as it has up to now; to restrict freedom of speech on politically incorrect broadcasters, such as Rush Limbaugh and Sean Hannity; and, more generally: To do whatever it takes to bring “security” back.

Security will never exist in a state of existence where the government enjoys unfettered power. Statist and totalitarian societies are the least secure of all. Nevertheless, a majority have now given the American government a “green light” to take steps, and go places, it has never gone before in our history.

A free society requires much, much more than free elections and democracy.

These are necessary tools, but they are not absolutes. There’s only one absolute in a free society: The right of the individual—each and every individual—to be free from the initiation of physical force. This right makes the necessity of a strong limited government—with a police force, military and civil/criminal court system—quite obvious. Less obvious to most, but no less crucial, is the need to prevent the government from initiating force against its own citizens. Too many compromises have been made in this regard, from the founding of the American republic to the present day. Those compromises are escalating at an alarming rate. How far will we let our government go?

Marek continues:

"We are told again and again by 'experts' and 'talking heads' that Islam is the religion of peace, and that the vast majority of Muslims just want to live in peace. Although this unqualified assertion may be true, it is entirely irrelevant. It is meaningless fluff, meant to make us feel better, and meant to somehow diminish the spectra of fanatics rampaging across the globe in the name of Islam. The fact is that the fanatics rule Islam at this moment in history..."

Once again, the point is the same. It’s what people permit their governments to do that defines their fate—and the fate of others, when tho se governments are aggressors. It doesn’t matter if most Iranians want peace. Maybe they do, or maybe they don’t. But if they are either unable or unwilling to prevent their government from, for example, dropping a nuclear bomb on Israel, or exploding a dirty bomb in New York or Boston harbors—what does the will of the majority matter? If one of these tragedies occurs, will we say, “Well, the Iranian people don’t condone this. Their government does, but the people don’t. So we won’t retaliate.”

And, if we’d never take that position at that point—then why is no position taken to stop them now?

There are more important things than the will of the majority. The most important thing is the right of the individual. Governments that place the rights of the individual above the “rights” of the mob are governments worth having, protecting and defending. That was the whole point of the United States, originally.

Governments that ignore or outright sacrifice the individual for any other purpose are the most dangerous ones of all. Don’t be naïve and don’t ignore all of human history. The American government is just as capable of becoming evil as were the Soviets and the Nazis, and as are the Iranians and many other governments today. Americans had better get their government back on the right course—or at least off the completely wrong course.

On its current course, we’re going the way of our ancestors.

Dr. Michael Hurd is a psychotherapist, life coach and author of Effective Therapy (New York: Dunhill, 1997) and Grow Up America! Visit his website at: www.DrHurd.com.

Andrew Napolitano Interviews James Bovard, Ron Paul, and Others on Freedom Watch
by James Bovard

James Bovard is the author of Attention Deficit Democracy [2006] as well as The Bush Betrayal [2004], Lost Rights [1994] and Terrorism and Tyranny: Trampling Freedom, Justice and Peace to Rid the World of Evil (Palgrave-Macmillan, September 2003) and serves as a policy advisor for The Future of Freedom Foundation. Send him email.

Government Is the Systemic Risk

Government Is the Systemic Risk
by Sheldon Richman

The Obama administration and congressional leaders assure us that the government can protect us from the “systemic risk” posed by big banks, insurance companies, and hedge funds.

But who will protect us from the government?

In light of all we’ve learned about the national government’s conduct in both domestic and foreign affairs over recent years, there is clearly no greater risk to American society than the government itself. Yet people look to it for security. That, I submit, is the fruit of propaganda and popular complacency. When can we expect the “eternal vigilance” that was supposed to keep us free?

One could go on at length about how the government — which includes the Great Counterfeiter, the Federal Reserve — threw the economy into turmoil with the housing boom and subsequent bust. Blame, as the politicians will, “Wall Street,” the fact remains that none of the firms there could have engaged in such systemically risky behavior without the partnership of the government. When Congress and the White House push and facilitate the guarantee of bad mortgage loans on a wide scale, while the Fed provides at least some of the money and a safety net to banks that get into trouble, you have the makings of a disaster that could never have occurred in a free market. Those who blame greed and deregulation have willfully blinded themselves for ideological reasons. The facts are plain for all who are curious.

Of course, it is not only in domestic financial matters that the government endangers us. Foreign affairs also are a source of risk. Long-running and various brutal U.S. interventions in the Middle East have filled people with enough hate that some were willing to fly airplanes into buildings in New York. Since then America’s misrepresentatives have made things far worse through invasions, bombings, occupations, open-ended detentions, and torture. Through it all, government officials have lied to the American people about was happening. Lied: about (nonexistent) Iraqi weapons, about (nonexistent) ties between Iraq and al-Qaeda, about torture, about the need for the “enhanced interrogation” that they denied was torture. They lied about everything — to the people in whose name they acted.

The enormity of these crimes cannot be exaggerated. Not only did the perpetrators betray the people they claimed to “serve,” they endangered the people by creating more reasons for others to hate them. Obama’s disinclination to prosecute those who made and carried out the torture policy is a shameful demonstration that, when it really matters, genuine change is an illusion. And since there will be no consequences for official criminal conduct, we can be sure it will take place again. That’s what happens when our rulers and their henchmen are above the law.

Where is the change? Obama’s policy in Pakistan has spread U.S. murder to yet another country. Meanwhile, he beefs up the war in Afghanistan, where, among other outrageous things, the U.S. and Afghan governments destroy Afghan farmers’ poppy crop. The results of this abominable action are predictable. They create resentment in the farmers toward the United States, while creating sympathy for anyone who offers assistance. Meanwhile the Taliban finances its resistance to occupation through the drug trade.

By what right does an American president destroy a crop in a foreign nation? Because some Americans use the heroin that is made from those poppies? Because profits from the crop support the Taliban? Neither reason makes sense. No one uses heroin because Afghans grow poppies. People use it because they want it, and if they can’t get Afghan-based heroin, they’ll get some other kind. They should be free to use whatever substance they want in peace. There certainly is no justification for blaming the poor farmers of Afghanistan.

As for the profits financing the resistance, there wouldn’t be abnormal profits in drug-related activities if the U.S. government would drop its inhumane war on drug producers and consumers, which serves only to empower the state to invade our liberties and to create violent black-market gangs. And there wouldn't be an occupation to resist if the U.S. left Afghanistan.

In so many ways, we’d be much safer if the government stopped protecting us.

Sheldon Richman is senior fellow at The Future of Freedom Foundation, author of Tethered Citizens: Time to Repeal the Welfare State

The Importance of the Marketplace of Ideas

The Importance of the Marketplace of Ideas —
in Both War and Peace
by Richard M. Ebeling

On June 2, 2007, Richard M. Ebeling gave the following Speech at FFF's conference Restoring the Republic: Foreign Policy and Civil Liberties. The speech can viewed below in its entirety.

Dr. Richard Ebeling, former Ludwig von Mises Professor of Economics at Hillsdale College in Michigan, was named the President of the Foundation for Economic Education in May 2003.

The Ninth Circuit v. the CIA

The Ninth Circuit v. the CIA
by Jacob G. Hornberger

The omnipotent power claimed by the CIA was dealt a major blow Tuesday by the Ninth Circuit Court of Appeals in the case of Binyam Mohamed et al v. Jeppesen Dataplan, Inc.

The five plaintiffs are victims of the CIA’s kidnapping, rendition, and torture program. All five were kidnapped overseas by CIA agents, transferred to brutal but CIA-friendly foreign regimes, and tortured.

They filed suit against the provider of the airplane that did the transporting—Jeppesen Dataplan, Inc. Before Jeppesen even filed an answer to the lawsuit, the U.S. government intervened and requested an immediate dismissal of the case on the ground that to permit it to go forward would result in the disclosure of “state secrets” that were vital to “national security.”

The district court granted the government’s motion to dismiss. The plaintiffs appealed. The court of appeals reversed the ruling of the district court and remanded the case with orders to reinstate it.

It is important to grasp the essence of the type of government under which we Americans now live. The CIA, which is at the core of federal power, can kidnap any person it wants, anywhere in the world. It can then transport that person to one of its secret prisons or simply transport him to a friendly regime for the purpose of torturing him.

As I have detailed in two blog posts this week, the CIA knows that as long as it is loyally following orders of the president, nothing bad is going to happen to it, even if laws are broken. No criminal prosecutions, just some regrets expressed by the president and promises never to do it again, and life goes on.

This case, however, involved a conspiracy, one that included the CIA and a private company that provided the transport plane. The victims decided to sue the airline company, seeking damages for what was done to them.

In opposing that lawsuit, U.S. officials are effectively saying, “No, you can’t sue the people who help us kidnap, rendition, and torture. Our power is full, complete, and omnipotent. We don’t have to explain, justify, defend, or be held accountable and neither do the people who help us. Everything we do to the victims will be kept secret.”

A 3-judge panel of the Ninth Circuit unanimously disagreed. As the court stated,

Separation-of-powers concerns take on an especially important role in the context of secret Executive conduct. As the Founders of this Nation knew well, arbitrary imprisonment and torture under any circumstances is a “gross and notorious … act of despotism.… But “confinement [and abuse] of the person, by secretly hurrying him to [prison], where his sufferings are unknown or forgotten; is a less public, a less striking, and therefore a more dangerous engine of arbitrary government.”

An interesting sidelight of the decision involved an astute observation on the part of the three judges: that federal officials “abuse” the state-secrets doctrine. That’s a mild, judicious way to put it. The more appropriate word is “lie.” The judges pointed to the original Supreme Court case that established the state-secrets doctrine, U.S. v. Reynolds, which was decided in 1953. In that case, executive-branch lawyers represented to the federal judiciary that the disclosure of a particular report would reveal national-security secrets. On the basis of that representation, the state-secrets doctrine was born and the plaintiffs’ suit was dismissed. In 1996, however, a review of the report revealed that the judiciary had been lied to. Disclosure of the report would have revealed not national-security secrets but rather gross incompetence that would have proved embarrassing to the government.

What happens now? When the case returns to the district court, the government will have the right to object to the disclosure of specific evidence that is secret or classified. But at least the plaintiffs will be able to seek recovery for what was done to them if they can prove their case without the use of secret or classified evidence. One thing is likely: the plaintiffs will have the opportunity to disclose under oath exactly what was done to them, notwithstanding almost certain government objections that their testimony will jeopardize “national security.”

This is assuming, of course, that the Obama Justice Department doesn’t appeal the Ninth Circuit ruling to a full panel of the Ninth Circuit or to the U.S. Supreme Court. Given that Obama has enthusiastically embraced the Bush administrations infringements on civil liberties, don’t be surprised to see the Justice Department appealing the decision.

For more analysis on this decision, see Glenn Greenwald’s blog post on it.

Yesterday, I mentioned that lawyers who spoke at our two conferences on “Restoring the Republic: Foreign Policy and Civil Liberties” are playing an important role in the national torture debate. Today’s Los Angeles Times has an excellent and moving op-ed by Joseph Margulies. And check out this recent insightful and passionate piece on torture by Andrew Napolitano.

And if you haven’t already done so, be sure to watch the conference speeches by Greenwald, Margulies, and Napolitano, which are on our website. They are timeless in nature and as important as ever.

Jacob Hornberger is founder and president of The Future of Freedom Foundation.

Chris Chocola on Taxes

Alan Greenspan on Gold Standard

A Torturous Debate

A Torturous Debate

Let's have some humility in the debate over interrogation methods

Cathy Young |

The release of the Justice Department "torture memos" has reignited the debate over the interrogation methods used by the Bush administration on terror suspects and the possibility of charges against officials who may have violated the ban on torture. As often happens, each side has not only its own opinions but its own version of reality. Bush administration defenders claim that brutal interrogations have saved countless lives, eliciting information that prevented new, post-September 11 terror attacks on U.S. soil. Critics counter that the methods authorized by the Bush Justice Department not only tarnished our image and made us more vulnerable by fanning the flames of anti-Americanism but also produced a lot of false data. Whatever genuinely valuable intelligence was gained by those means, they assert, could have been obtained in other ways.

It is doubtful that the disputed facts will ever be resolved, no matter how many more memos are released. This is a dispute about what-ifs, and proving or disproving what-ifs is an exercise in nailing the proverbial Jell-O to the wall. What's more, each side has a strong stake in proving its own righteousness and depicting the opponent as not merely wrong but evil. No benefit of the doubt is given as to motive. To bloggers on the left, the Bush-Cheney cabal authorized torture because they are power-drunk sadists. To bloggers on the right, Obama has authorized the disclosure of the memos because he is a power-drunk egotist intent on disparaging his predecessor no matter what the cost to the country.

At this point, the fullest disclosure possible is almost certainly the right decision. The existence of "enhanced interrogation" and the fact that it included abusive techniques has been widely known for several years. Under such circumstances, precise information is nearly always preferable to speculation. Still, in the latest CBS News poll, 62% of Americans—including 51% of Democrats and 60% of independents—oppose congressional hearings on the issue. There is likely to be even less appetite for prosecutions.

In a column in the British paper, The Guardian, writer Naomi Wolf argues that calls for prosecution of CIA agents who carried out the interrogations amount to hypocritical scapegoating. She points out that Democratic congressional leaders knew about and abetted these policies and that, for a while after September 11, a "mass consensus" of the American public supported torture to some degree. (In a December 2005 Associated Press-Ipsos poll, 61% of Americans said torture could be justified at least on rare occasions; slightly over half of people polled in France and Great Britain took the same view.)

Wolf nonetheless advocates prosecutions—of President Bush, Vice President Cheney, former Secretary of State Condoleezza Rice, and the Justice Department legal advisors who provided justification for inhumane interrogation methods. But doesn't this, too, smack of scapegoating if their actions reflected a broad consensus? Of course, Wolf also treats the post-September 11 consensus as little more than vindictive, sadistic machismo. Could it have something to do with the fact that the United States was facing a unique threat—a stateless, shapeless, protean enemy which had just killed over 3,000 Americans in a single morning in two major cities in the United States? Is it so irrational that stopping another attack was the top priority?

While defenders of torture egregiously overuse visions of ticking time bombs, it would be too convenient to dismiss a scenario in which coercive interrogation—perhaps waterboarding—might be the only chance to avert an attack that would cause thousands to die in agony. Can any anti-torture absolutist say with full certainty that, faced with such a situation as President, he or she would stick to principle—and defend that choice to the American people if the attack happened?

This does not change the fact that torture, including torture by any other name, is a deal with the devil. Permitting cruelty toward helpless prisoners, no matter how guilty of barbaric acts, is liable to bring out the worst in people—and, in many cases, it has. Witness right-wing posters on various websites who sneeringly brush off protections for prisoners' human rights as sissy stuff. Experience, in the U.S. and in other countries, also shows that once you have legally authorized abusive interrogations in extreme emergencies, there is a strong tendency to define extreme emergency down until such methods are used far more widely than originally intended. And, while it would be absurd to suggest that the jihadists who behead people with dull knives hate us because of torture, there is little doubt that revelations of the inhumane treatment of captives provoked anti-American hostility among ordinary Iraqis.

There has to be an accounting for the things our government has done in the name of our safety. This accounting must be fair, and as transparent as it can be without compromising national security—but it must also be conducted with humility. So far, that is how Obama has handled the issue. The same cannot be said for the crusaders from the ranks of punditry.

Cathy Young is a contributing editor at Reason magazine. This article originally appeared at RealClearPolitics.com.

The Internet Saved My Tongue

The Internet Saved My Tongue

How I beat Canada's 'human rights' censors

Ezra Levant

Early on the morning of February 13, 2006, nearly 40,000 copies of the Western Standard rolled off the presses in Edmonton, Alberta. Tucked inside that week’s issue of Canada’s only national conservative magazine, on pages 15 and 16, was a story about the international controversy over a Danish newspaper that had printed a dozen satirical cartoons featuring the prophet Muhammad. Our article, which was illustrated by eight of the cartoons, would soon trigger a three year government investigation of whether I, as the Western Standard’s publisher, had violated the rights of Canadian Muslims by “discriminating” against their religion.

The investigation vividly illustrated how Canada’s provincial and national human rights commissions (HRCs), created in the 1970s to police discrimination in employment, housing, and the provision of goods and services, have been hijacked as weapons against speech that offends members of minority groups. My eventual victory over this censorious assault suggests that Western governments will find it increasingly difficult in the age of the Internet to continue undermining human rights in the name of defending them.

By commissioning the Muhammad cartoons, the Danish newspaper, the Jyllands-Posten, was making a point about the West’s fear of insulting Islam. A Danish author and longtime leftist activist named Kåre Bluitgen had written a children’s book about Muhammad, but because some Muslims consider visual depictions of their prophet taboo, Bluitgen found it difficult to find an illustrator. Jyllands-Posten editors wanted to highlight this Danish culture of self-censorship and show the newspaper’s support for freedom of speech by publishing their own cartoons of Muhammad.

A few of the images were critical of radical Islam, but the criticism wasn’t any harsher than that routinely heaped on other religions and ideologies in the editorial cartoons of Western newspapers. One showed Muhammad in heaven, saying, “Stop, stop, we ran out of virgins!” as suicide bombers floated up to the clouds. Another depicted Muhammad wearing a turban in the shape of a bomb.

The cartoons were published in September 2005, but they didn’t make international news until the next year, when a group of Danish imams went on a world tour to drum up Muslim anger against Denmark. The imams brought three additional cartoons along with the original dozen. Those three additions, which hadn’t been published in Denmark or anywhere else, were grotesque, including one showing Muhammad having sex with a dog. They were the imams’ own handiwork, added to the bundle in case the Jyllands-Posten efforts didn’t achieve the desired response. Up until that moment, the phrase cartoon violence had summoned to mind images no more harmful than Wile E. Coyote fighting the Road Runner. But after the imam tour in the spring of 2006, more than 100 people died in purportedly spontaneous riots against the cartoons. Half a dozen terrorist plots to avenge the artwork were uncovered across Europe. Demagogic governments from Tehran to Damascus seized the opportunity to deflect attention away from their own problems.

Every newspaper and TV station in the Western world covered the story of the riots, but almost none of them showed the original cartoons themselves. The media’s self-censorship was based on the same fear exhibited by Denmark’s illustrators. As a journalist, I was appalled by this cowardice masquerading as sensitivity. Western Standard editor Kevin Libin and I knew our readers would be interested in this story and would want to see for themselves what all the fuss was about.

As our publication date drew nearer, we couldn’t help noticing that no other mainstream publication in Canada was planning to reprint the cartoons. We’d be the first, and possibly only, one. We sent the magazine to our printers on Friday, February 10, for printing over the weekend. The next day, word of the deed somehow leaked. By Sunday our decision had become national news, even though no one except our staff and our printers had seen the spread.

I must have done 100 interviews that week. The first would be particularly memorable. At 7 a.m. on Monday, February 13, while our magazine was being trucked from our printers to the post office, I appeared on the Canadian Broadcasting Corporation’s Eye Opener radio show in Calgary. The amiable Jim Brown was the host, and the other guest was Syed Soharwardy. All I knew about Soharwardy at the time was that he was a Pakistani immigrant to Canada who worked for IBM and had a part-time gig as a preacher at a tiny mosque in a northeast Calgary strip mall. Soharwardy had very few followers—about 40 congregants in a city that was home to thousands of Muslims. But he was a big-time media hound, always trolling for interviews while the city’s more prominent imams rolled their eyes.

I explained the newsworthiness of the cartoons. But Soharwardy wasn’t quite in sync with our Canadian concepts of freedom of the press and the separation of religion and state. He called me a “terrorist” for publishing the cartoons—a bit rich, coming from someone who, I later learned, does the radical Muslim lecture circuit in Saudi Arabia. Then he announced to startled CBC listeners that he was a direct descendant of Muhammad and therefore felt personally offended. I wasn’t quite sure what to do with that one, so I kept on message, saying Soharwardy was free to follow the Koran as his law, but we were in Canada, not Saudi Arabia. People like me could publish whatever they liked. The debate degenerated into a shouting match.

With other interviews to get to, I soon put the verbal fracas out of mind. Soharwardy did not. He was accustomed to fawning media treatment, bestowed by politically correct reporters delighted to have a spot of diversity in their news. He wasn’t used to facing disagreement or being called a radical. In Pakistan, where Soharwardy had been a student at a madrassah, someone who spoke that way to the imams would have been whipped. In Saudi Arabia, where Soharwardy had lectured at an officially anti-Semitic university, my blasphemy might even have resulted in the loss of my head.

So Soharwardy visited the Calgary Police Service, where he demanded that I be arrested. The police politely explained to him that he wasn’t in Saudi Arabia or Pakistan anymore and that police in Canada don’t enforce the Koran or get involved in political disputes. Next he filed a complaint with the Alberta Human Rights and Citizenship Commission (AHRCC). This body was more receptive to the idea that I should be punished for giving offense.

The AHRCC sent me a copy of Soharwardy’s complaint, a mishmash of personal braggadocio, Islamic supremacism, and whining, all handwritten in English surprisingly broken for someone who had been living in Canada for 20 years. It was riddled with misspellings, including erroneous renditions of my name and the name of my magazine. But the nature of Soharwardy’s thinking still managed to shine through.

“Ezra Lavant [sic] insulted me on air on CBC radio,” Soharwardy wrote. “He also said that the hateful cartoons are justified to be published in his magazine Western Standards.” He complained that “CBC, CTV and other media” dared to speak with me. Noting that he was “openly the follower and related to Prophet Muhammad,” Soharwardy wrote that our publication of the cartoons “have sighted violence, hate and discrimination against my family and me.” Such incitement (I’m guessing that’s what he meant) would have been quite a feat, given that the magazines hadn’t yet landed in any mailboxes and wouldn’t be on newsstands for another week.

As proof of his claims, Soharwardy included a raft of email messages he had received, including one that called him “excitable” and “humourless” and told him to “laugh” a little more. Another message said that there “are many fine Muslims out there,” but that radical Islam deserved to be mocked. This was the “violence” that Soharwardy faced: ordinary Canadians telling him off.

Soharwardy followed up his original complaint with a detailed list of legal arguments—but not from any Canadian law books. He cited passages from the Koran as his precedent, insisting that “the respect and obedience to Prophet Muhammad is the most basic requirement of Faith.” At the end of his letter, he offered both artistic and religious criticism of all eight of our Muhammad images, adding, “I am quite disturbed and mentally tortured by these cartoons.” And his demands were clear: “I am expecting a formal apology…from the Western Standard. Please help.”

The AHRCC was more than happy to help. The Alberta Human Rights, Citizenship, and Multiculturalism Act prohibits publishing anything that “is likely to expose a person or class of persons to hatred or contempt.” The theory was that hurtful words necessarily lead to hurtful deeds, and the vagueness of the law meant it was particularly useful as a tool of political censorship.

I consulted Tom Ross, a Calgary lawyer experienced in dealing with HRC complaints. Ross said there were two ways to respond: We could try to make the problem go away quickly, possibly with a cash payment, an apology, and participation in a reeducation session. Or we could fight like hell. After that initial conversation, we didn’t waste any time talking about option number one. I was outraged that a government agency was getting involved with the editorial decisions of our magazine.

The Western Standard was prepared to debate our decision to run the cartoons, but voluntarily, in a process involving our subscribers (who enthusiastically agreed with our decision), our advertisers (who were nervous at first but ultimately supported us), and our distributors (most of whom stood with us and saw strong newsstand sales). In the edition following the one in which the cartoons appeared, we ran an extended letters section, with the entire spectrum of views represented, including a worried mother of a Canadian soldier in Afghanistan, a Muslim immigrant to Canada who said she wanted to get away from Shariah law, and nutcases who said I published the cartoons only because I was Jewish. That’s what a public debate in Canada looks like.

Soharwardy didn’t participate. He preferred a Shariah-style solution. Six weeks after we published the cartoons, when members of the public had already chewed the issues over and made up their minds, when the commotion was dying down and we decided to let our extra security staff go, I got around to writing the Western Standard’s reply to Soharwardy’s complaint. “The complaint is a frivolous and vexatious abuse of process,” I began. “It has no basis in fact or Canadian law. It is contrary to Canadian values of freedom of speech, freedom of the press and religious plurality, under which Canadians are free from compulsion to submit to religious edicts. The complaint is an attempt to abuse the power of the state to chill discussion about subjects that are in the public interest. It is also an inappropriate combination of mosque and state, using a secular government agency to enforce a Muslim religious precept, namely the fundamentalist prohibition of the depiction of Mohammed.”

I still believe every word of that, but it’s a bit embarrassing that I actually thought those principles mattered. As I learned since, the right to not be offended trumps freedom of speech in Alberta. That’s the official position of the provincial government, as argued by its lawyer in Lund v. Boissoin, a case in which a Christian pastor was given a lifetime ban prohibiting him from criticizing gay marriage.

"If the [Commission] does not dismiss this complaint,” I continued, “the AHRCC will be discredited and its liberal reputation will be brought into disrepute. This complaint perverts the cause of human rights. If the AHRCC allows itself to be used to attack the publication of a good faith debate on these issues, the AHRCC will become a tool of censorship.…The AHRCC will send a message that the state, with its unlimited resources, will not hesitate to interfere with and harass media that discuss controversial topics.”

Unfortunately, I got that part right. A year later, in March 2007, Maclean’s magazine was hauled before three human rights commissions to answer for its discussion of radical Islam, in the form of an excerpt from Mark Steyn’s bestselling book, America Alone. Two years later, the Alberta commission ruled that Rev. Stephen Boissoin, a Christian pastor from Red Deer, may never again preach against gay marriage—or even disparage it in private emails. Needless to say, such gag orders cast a pall over public discussions of these issues.

I also had a sense that fighting the complaint would be costly. “Even an acquittal…is a punishment,” I wrote. “The process becomes the penalty.” I had no idea, however, that the process would stretch on for three years and cost me more than $100,000. The trouble and expense of such investigations help explain why so many people roll over when faced with a human rights complaint.

Eight months passed.

The AHRCC offered to set up a “conciliation meeting” with Soharwardy and representatives from the Edmonton Council of Muslim Communities, which had filed an almost identical complaint. I told the commission there could be only one form of “conciliation” that I would accept: that these complainants reconcile themselves to Canadian values and leave their Saudi-style approach to free speech overseas. The AHRCC’s next move was to offer me a plea bargain: It told Tom Ross, my lawyer, that if I agreed to publish an apology in the magazine and pay a few thousand dollars to the complainants, I could walk free. I replied that I would fight the AHRCC and its hijackers all the way to the Canadian Supreme Court before I did that—and even if I lost there, I’d contemplate doing jail time for contempt of court before apologizing.

One year after I had rejected the commission’s terms of surrender, it told Ross it was launching a formal investigation. I was to present myself to a “human rights officer” to be interrogated about my decision to print the controversial cartoons. If I refused the AHRCC’s “invitation” to be interrogated, its officers, under Section 23 of the Alberta Human Rights, Citizenship, and Multiculturalism Act, could enter my office and seize any “records and documents, including electronic records and documents, that are or may be relevant to the subject matter of the investigation.” Computer hard drives, confidential files, private correspondence, even letters between me and my lawyer could be seized, all without a search warrant. Section 24 of the act allowed AHRCC employees to ask a judge for permission to enter my home and take whatever they liked there, too.

After weeks of haggling over the details, the interrogation was scheduled for Friday, January 11, 2008, nearly two years after we published the cartoons, at my lawyer’s office in downtown Calgary. The human rights officer in charge of the investigation— Shirlene McGovern, a bland, middle-aged woman in casual clothes—did not seem intimidating. She arrived smiling and chatty, extending her hand to shake mine. I declined. Then McGovern, who had barred members of the press from the meeting, spotted the video camera we had set up, and she hesitated. She had agreed that I could record the proceedings but hadn’t explicitly consented to videotaping. With a shrug, she agreed to the camera. It was a decision she would come to regret.

I had prepared an opening statement. “When the Western Standard magazine printed the Danish cartoons of Muhammad two years ago,” I said, “it was the proudest moment of my public life. I would do it again today. In fact, I did do it again today.…I posted the cartoons this morning on my website, EzraLevant.com.” It was more refined than telling McGovern to fuck off, but it had the same effect. She was stunned.

“I am here at this government interrogation under protest,” I continued. “It is my position that the government has no legal or moral authority to interrogate me or anyone else for publishing these words and pictures. That is a violation of my ancient and inalienable freedoms: freedom of speech, freedom of the press, and in this case, religious freedom and the separation of mosque and state. It is especially perverted that a bureaucracy calling itself the Alberta Human Rights Commission would be the government agency violating my human rights. So I will now call those bureaucrats ‘the commission’ or ‘the HRC,’ since to call the commission a ‘human rights commission’ is to destroy the meaning of those words.”

McGovern rolled her eyes. But I kept going. I declared that “the commission is a joke,” comparing it unfavorably with Judge Judy. I quoted Alan Borovoy, general counsel of the Canadian Civil Liberties Union, who had recently condemned the complaints against me as abusive. I called the AHRCC a violation of 800 years of British common law and 250 years of Canadian law, including our 1960 Bill of Rights and our Charter of Rights and Freedoms. I even quoted from the 1948 United Nations Universal Declaration of Human Rights, which protects free speech. “I have no faith in this farcical commission,” I concluded. “But I do have faith in the justice and good sense of my fellow Albertans and Canadians. I believe that the better they understand this case, the more shocked they will be.”

At the beginning of her interrogation, McGovern said, “I always ask people…what was your intent and purpose of your article?” Always? Just how often does McGovern haul people in for questioning about their politics? That’s one of the mysteries about these star chambers; we know only about the cases in which the targets are stubborn enough to fight. According to the HRC’s annual reports, the vast majority settle without a hearing. And why did my “purpose and intent” matter? Would the article we ran be legal if I had happy thoughts, but illegal if my thoughts somehow offended the commission’s sensibilities?

Toward the end of the meeting, McGovern cavalierly stated, “You’re entitled to your opinions, that’s for sure.” But that just wasn’t true, was it? If I had been entitled to my opinions, I wouldn’t have been summoned to a 90-minute interrogation by the government on pain of having my office and home searched if I refused. And I wouldn’t be standing accused in a human rights proceeding that could end with me being forced to pay tens of thousands of dollars, issue an apology, undergo re-education, and/or refrain from unapproved speech in the future.

When I got home, I watched the video of the interrogation. Then I spent the weekend uploading clips onto the Internet, using the video site YouTube. I emailed a couple of dozen friends, relatives, and colleagues about them. I thought the clips would get 1,000 views, maybe 10,000 at most. But that weekend, my “channel” on YouTube was the fifth-most-watched video site on the Internet. Within 10 days, 400,000 people had seen them.

The resulting media storm reminded me of the initial reaction in February 2006, when we had published the cartoons. But this time it was bigger, and the support I received was more uniform. The issue was no longer whether we should have published the cartoons; it was whether we had the right to do so. Even journalists and pundits who took issue with our decision in 2006 stood firmly with us in 2008.

Had I been charged with hate speech 10 years ago, I could not have fought back as effectively. If all this had happened in 1996 instead of 2006, few would have known anything about my battle. YouTube, which brought my story alive for 600,000 people by the time the traffic died down, debuted only in 2005. Before that, there was no universally surfed repository of current event–themed videos, and bloggers were much less prevalent. And without the credit card donations made possible by PayPal (which was started in 2000), it’s unlikely that I could have raised the money to cover my legal expenses.

In short, the Internet saved me. In that sense, my story isn’t just about free speech. It’s also about the way new technology has leveled the playing field between big government and private citizens.

The Internet may also spell the beginning of the end for the HRCs of the world. In the days after my meeting with McGovern, I began to blog about human rights commissions and free speech, encouraged by my worldwide support. EzraLevant.com became one of the five most popular political blogs in Canada, according to the statistics on Alexa.com. The Internet support, which soon crossed over into the mainstream media, reassured me that I was the “normal” one—that free speech was normal, that resisting government nosiness was normal—and that it was the HRCs and the Syed Soharwardys who were affronts to our Western values.

Ten days after my YouTube videos went up the AHRCC wrote to my lawyer saying that McGovern had quit my case, citing the popular backlash against her. Soharwardy, too, came under scrutiny. He’d always styled himself as the friendly neighborhood imam. But suddenly, with thousands of bloggers jumping down his throat, he was no longer in control of his own media image. Even the local Calgary newspapers, which used to dutifully go to Soharwardy for explanations of Muslim holidays, started asking him tough questions. It wasn’t long before the press dug up some of Soharwardy’s more outrageous comments, such as his call for all Canadians to live under Shariah and his accusation that Western aid agencies were kidnapping Muslim children.

A few weeks after a disastrous meeting with the editorial board of the Calgary Herald, Soharwardy abandoned his complaint against me, sticking taxpayers with the $500,000 tab for the AHRCC’s investigation and leaving me and the Western Standard with $100,000 in expenses. He just walked away, as the Alberta Human Rights, Citizenship, and Multiculturalism Act permitted him to do, without a penny in penalties or even an apology. A few months later, with Soharwardy out of the picture, the AHRCC quietly snuffed out the piggyback complaint from the Edmonton Council of Muslim Communities.

As Soharwardy told CBC’s nightly newscast The National, “People were looking at Ezra Levant as a martyr of freedom of his speech…taking this into a different direction that I did not want.” No kidding. Soharwardy wanted to use Alberta’s Human Rights and Citizenship Commission as a weapon to bully me, a critic of radical Islam who had embarrassed him on CBC radio. And he did bully me in the commission’s kangaroo court. But in the court of public opinion he had self-detonated. Within a few months, he left town, telling journalists he was going on a cross country “multifaith” walk against violence.

None of this would have happened had I not videotaped my interrogation and uploaded the results onto YouTube. I was the one who was supposed to crumple under the weight of a politically correct accuser and the AHRCC bureaucrats he coopted. Instead, McGovern quit and Soharwardy abandoned his complaint. For the first time in nearly three years, I felt as if my allies and I might win this fight— not just the narrow legal struggle about publishing a bunch of cartoons but the larger fight for our freedom.

Ezra Levant, former publisher of the Western Standard, is the author of Shakedown: How Our Government is Undermining Democracy in the Name of Human Rights (McClelland & Stewart Ltd.). This article is adapted from the book by permission of the publisher.