Carolina Journal Weekly Report

September 16, 2002

In This Issue:
Feature 1 - ‘Lockean Nation’ at War

Feature 2 – Golden LEAF to Sue State?

Feature 3 - Lottery, Tax Increase Lose

Feature 1
‘Lockean Nation’ at War
“Terror masters” threaten the free world, Barone says

The United States — a symbol of the worldwide triumph of ideals championed by 17th century philosopher John Locke — today finds itself threatened by the “terror masters” of the Middle East, magazine writer Michael Barone said Thursday.

“One of the things we’ve seen in our lifetimes, our adult lifetimes, was a victory of the Lockean model worldwide against the Hobbesian model,” of absolute monarchy espoused by philosopher Thomas Hobbes, said Barone, keynote speaker at a luncheon sponsored by the John Locke Foundation. Since the downfall of communism over the last decade, no “competitive ideas” to the Lockean model of natural rights, limited government, respect for property, and respect for human liberty, have arisen anywhere in the world, the senior writer for U.S. News & World Report said.

America’s free society today is threatened by “a group of people who hate us and hate our way of life and… who have gained access to weapons that are capable of destroying very large numbers of people. And they are trying to use those weapons to destroy this happy ending, or this Lockean civilization,” Barone said.

Citing President Bush’s speech to the U.N. on Thursday, Barone said the “terror master” nations of Iraq, Iran, Syria, and Saudi Arabia, which supports terrorists, are waging war against the United States. “The question we obviously want to ask is: Why is Bush now going against Iraq?” Barone said. The answer is fairly simple: “We couldn’t go against Iraq last winter because we were too busy in Afghanistan; we couldn’t take military action in the spring because we lacked sufficient numbers of precision weapons; we couldn’t take action in the summer because it was too hot in that part of the world, and now it’s about to unfold,” he said.

Bush made a strong statement to the U.N. by challenging the organization to enforce dozens of resolutions that Iraqi leader Saddam Hussein has violated since the Gulf War, Barone said. “There has been a lot of debate in Washington and around the world, a lot of talk about American being ‘unilateral,’ taking action on our own,” Barone said. But Bush knew that the only way to motivate the U.N. to punish Iraq was to threaten unilateral action by the United States if the organization failed to do its job. “If you want U.N. action, threaten to take action without the U.N., as Bush did in that speech,” Barone said.

Barone said he thinks Congress will decide what to do with Iraq before the legislature adjourns in October. “I think we’ll probably not see military action until after the election, based upon my conversations with people who are in some position to know what’s going on in the Pentagon,” Barone said.

Ahead of the Curve

• Last week, Carolina Journal reported that conferees from the House and Senate were planning to insert language in the state budget calling for a statewide lottery referendum. Since news about the questionable attempt surfaced, opponents of the lottery have expressed outrage over backroom maneuvering by legislative leaders.

Ran Coble, executive director of the N.C. Center for Public Policy Research, told the News & Observer of Raleigh that the idea was one of the worst he’d heard in his years observing the General Assembly at work. “It holds hostage the rank-and-file legislators’ desire to finally pass a budget,” Coble said. “The budget is the major item that is holding them here this long. By putting this provision in here it puts the rank and file in the position, ‘Well, should I just give in and vote for the budget even though it has the lottery in there?’” Coble also challenged the legality of the plan, saying he hopes some legislators will challenge it or possibly file a lawsuit.

Wednesday, House Republicans did question House Speaker Jim Black about the lottery provision. Democrat Rep. David Redwine, a leader in the negotiations, told the N&O, “In the 18 years I’ve been here, there have been issues that crop up in conference reports that haven’t been considered by either side.”

But Rep. Richard Morgan, a six-term Pinehurst Republican and former Rules Committee chairman, said, “I sure don’t remember that occurring previously. I wonder where you are getting it as a precedent that this has occurred before.” The budget is expected to reach the House floor Tuesday.

Feature 2
Golden LEAF to Sue State?
Organization challenges legislature's seizure of funds

A memorandum, obtained through a document request to Gov. Mike Easley’s office, reveals that Golden LEAF is considering suing the state for withholding the organization’s tobacco settlement funds.

The memorandum, dated July 25, was sent to Valeria Lee, president of the Golden Longterm Economic Advancement Foundation, from the nonprofit’s legal counsel, David Kyger of Smith Moore LLP of Greensboro. The memo was forwarded via electronic mail from Lee to Easley adviser John Merritt, who also serves on Golden LEAF’s board of directors. The document is identified as a “position paper on General Assembly Proposal to Divert Funds from the Foundation.”

Both houses of the General Assembly are negotiating a state budget for 2002-03. The state Senate’s budget proposal would intercept $40 million of the tobacco settlement funds directed toward Golden LEAF, while the House plan would take $87 million. Under the Master Settlement Agreement between tobacco companies and the state, half of the money paid to the state is to go to Golden LEAF. A consent decree issued by Wake County Superior Court requires the money to go to Golden LEAF for “economic impact assistance…to tobacco-dependent regions of North Carolina.”

In his memorandum Kyger said diversion of the funds by the state violates the terms of the court’s Consent Decree. He wrote, “the Court ordered that amounts received by the State under the MSA were to be distributed only (emphasis Kyger’s) as provided under the Consent Decree. The Consent Decree did not contemplate, and does not authorize, any diversion of that one-half to other recipients, or for other purposes.”

When establishing the Golden LEAF (also required by the Consent Decree) under Session Law, the legislature included an exception saying money would go to the nonprofit corporation “unless provided otherwise by an act of the General Assembly before the installment payment is received in North Carolina’s State Specific Account.” That account is not under control of the state, but is a third-party escrow account from which funds are paid to the state — or Golden LEAF.

Legislators who think seizing the money is legal say the Consent Decree authorized the Assembly to create Golden LEAF, preceding and superceding the decree’s requirements of payment to the nonprofit. The decree did not address the diversion of funds from the nonprofit, but the same court issued an “Acknowledgment of Legislative Approval” after the legislature created the nonprofit, stating the conditions of the decree were met.

Kyger wrote that the exception allowing for “an act of the General Assembly” to divert funds rendered the creation of Golden LEAF “hollow.” He also contended that “such a reading would conflict with the unambiguous mandate of the Consent Decree that the Foundation receive fifty percent of North Carolina’s MSA funds.” He said “violation…of the Consent Decree might have far-reaching adverse consequences for the State.”

Daniel McLawhorn, a lawyer with the state Department of Justice, also sent an advisory letter to Lt. Gov. Beverly Perdue in April, saying the legislature has legal authority to redirect tobacco settlement funds before they are paid to Golden LEAF.

A June 21 article in the Winston-Salem Journal said “at least some of [LEAF]’s directors say they are willing to fight legislators’ efforts to divert the settlement money in court.”

Capital Quotes

“We want to get out. It’s the middle of September, we’ve been here since May, and we’ve been told we’ll work through the weekend. And now he’s going to play golf?”

— House Minority Leader Leo Daughtry, talking to The Charlotte Observer about the House schedule. On Sept. 11, the House was not scheduled to convene until 3 p.m. so House Speaker Jim Black could play a round of golf at the RJR Championships Senior PGA pro-am in Clemmons. Black had a 7:20 a.m. tee time with Senior PGA player Doug Johnson.

“Using copyrighted material and putting a false caption on it to try and get elected is total garbage.”

— Rep. Wilma Sherrill, R-Buncombe, commenting to Asheville Citizen-Times on a picture in the Mountain Guardian News and Opinion. The caption stated “Buncombe County Sen. Steve Metcalf (D) and Rep. Wilma Sherrill (R) are ecstatic as Gov. Mike Easley (D) signs a bill stealing even more money from North Carolina taxpayers!” The photo apparently came from the Asheville Citizen-Times, had been altered, and was of a ceremony transferring air credits to the state. Sherrill defeated Mike Morgan, the Mountain Guardian’s associate editor, in the Republican primary.

“I think it’s terrible they did this on Friday when everybody is trying to leave for the weekend. They should have done it during the middle of the week.”

— Faye Gordon, who works in uptown Charlotte, discussing a protest by the Metrolina Minority Contractors’ Association with The Charlotte Observer. In January, a lawsuit forced the city to abandon its minority-owned business contracting regulations. The MMCA, upset that replacement regulations have not been adopted yet, requested a response from the city by Friday, Sept. 6. When it did not receive one, MMCA members blocked two intersections with construction equipment in uptown Charlotte at 5 p.m.

Feature 3
Lottery, Tax Increase Lose
Supporters of big government fall in primaries

Delays may have put North Carolina lawmakers in the unfamiliar position of facing primary challengers in the midst of a legislative session, but candidates’ attempts to use support for a state lottery and a local-option sales tax increase to defeat primary opponents largely failed, according to a preliminary analysis of Tuesday’s election results.

Before the primaries, John Locke Foundation President John Hood identified 12 legislative races where the state lottery issue divided either Democratic or Republican candidates.

These races included incumbent vs. incumbent contests, incumbents being challenged in primaries, and races without incumbents. In 10 of the 12 races, candidates running as lottery supporters lost their nomination bids.

Prominent examples of the trend included Rep. Edd Nye defeating Rep. Nurham Warwick in the House 22 Democratic primary, Rep. Ronnie Smith defeating former Rep. Bruce Ethridge in the House 13 Democratic primary, Sen. Phil Berger defeating Sen. Bob Shaw in the Senate 26 Republican primary, Sen. Ellie Kinnaird defeating Sen. Howard Lee in the Senate 23 Democratic primary, Rep. Jeff Barnhardt turning back a strong pro-lottery challenger in the House 75 Republican primary, and Sen. Charlie Albertson defeating a pro-lottery challenger in the Senate 10 Democratic primary.

“We’ve been told that those who oppose a state lottery in North Carolina are taking a grave political risk, given the public opinion polls and the well-financed interests who favor state-sponsored gambling,” Hood said. “But if Tuesday’s results are any indication, the lottery is not at all the winning political issue that its supporters claim it is.”

He added that the only major counterexample was in House 64, where longtime Republican Rep. Cary Allred beat back a challenge from Keith Whited, who had contrasted his position against the lottery with Allred’s support.

Another unifying theme in a number of legislative races, Hood reported, consisted of Republican candidates with experience in local government challenging GOP incumbents who earlier this year voted against giving localities the authority to levy an additional half-cent sales tax.

The N.C. House defeated the provision, which would raise the average sales tax rate in most counties to 7 percent for at least six months, but the N.C. Senate included it in its version of a new state budget, so the issue remains alive in current budget negotiations.

Challengers such as former Hickory Mayor Bill McDonald in Senate 44, Gaston County Commissioner Joe Carpenter in House 110, Stokes County Commissioner Barry Lawson in House 91, and Hickory Mayor Pro Tem Hamilton Ward in House 88 made support of a sales tax increase for local governments a key element in their campaigns. All of them lost to opponents of the proposed tax increase, including Sen. Austin Allran, Rep. Debbie Clary, Rep. Rex Baker, and Rep. Mark Hilton.

“When given a choice, voters seem to have sent a very clear and loud message on Tuesday: whatever the governor or state legislature do to local governments, don’t raise our taxes because of it,” Hood said.

On The Cutting Edge

Terrorism and Poverty

• “An understanding of the causes of terrorism is essential if an effective strategy is to be crafted to combat it,” say economists Alan Krueger and Jitka Maleckova. One thing they found in a new study from the National Bureau of Economic Research is that there is no evidence that the cause of terrorism is poverty.

The researchers identify politically motivated violence or terrorism with hate crimes, which bear a resemblance in that “the target of the offense is selected because of his or her group identity, not their individual behavior, and because the effect of both is to wreak terror in a wider audience than those directly affected.”

Their review of the literature found the occurrence of hate crimes is largely independent of economic conditions.

Furthermore, opinion polls conducted in the West Bank and Gaza Strip indicate support for violent attacks against Israel does not decrease with higher education and higher living standards.

Analyzing information on 129 members of Hezbollah who were killed primarily while involved in paramilitary actions in the late 1980s and early 1990s with a general population survey of similarly aged individuals in Lebanon, they found that education and poverty are statistically insignificant predictors of whether individuals become martyrs for Hezbolla. Indeed, having a standard of living above the poverty line or a secondary-school education or higher is positively associated with participation in Hezbollah.

Israeli Jewish settlers who attacked Palestinians in the West Bank in the early 1980s were overwhelmingly from high-paying occupations.
These terrorists were better-educated and had higher incomes than the general populations from which they came.

Reported in the Wall Street Journal, 8-21-2002.

Murder Rate and 911

• U.S. murder rates began a dramatic decline beginning in the early 1990s. The usual explanations given for the good news included more police and better policing, more prisons and the aging of the population, including the graying of criminals.

But one factor often overlooked has been the improvement in emergency responses.

A study led by Anthony R. Harris, of the University of Massachusetts at Amherst, draws attention to the role the 911 number and improved trauma care have played in saving the lives of victims of attempted murder.

Homicides peaked in 1991 at 24,700, then dropped throughout the decade to 16,000 last year.
Without better emergency care, the 1999 total of about 15,500 homicides might have been more than four times that high — nearly 70,000 — the researchers estimate.

The study concludes that slow and steady annual declines — averaging 2.7 percent for deaths by knifing, 3 percent for deaths by firearms, 4.4 percent for deaths by poisoning and other means — all contributed to the precipitous decline overall.

Unlike in 1960, before there was a 911 number to call, a person shot during a robbery might have lain in place and bled to death, but today the victim would be swarmed over by a dozen or more medical personnel in the critical first hour, then whisked to a hospital, where a fully informed trauma team would be standing by.

Reported in the New York Times, 8-25-2002.

Insurance Regulation

• Proponents of insurance rate regulation argue that regulations protect consumers from paying too much for insurance by suppressing rates for high-risk individuals. However, a recent study shows that while rate regulation makes coverage more affordable for some, it increases the cost to the average consumer.

Rate regulation is associated with large residual markets, where insurers are obligated by law to insure high-risk individuals at affordable rates. Insurance providers lose money on residual markets because the revenue generated at suppressed rates is often much lower than what insurers spend recovering damages for high-risk individuals. When rates are raised to make up the deficit, the burden is borne by the average consumer.

The benefits of regulatory reform are clear. Before the 1999 rate reform of the auto insurance industry in South Carolina, it boasted a residual market of 40 percent — the largest in the nation.

After reform the number of insurers doubled, making more choices available to consumers. Competition drove down the average premium when compared to other states. The 40 percent residual market was greatly reduced as more insurers specialized in high-risk motorists.

The bottom line is rate regulation is an inefficient tool for protecting consumers from paying excessively high insurance rates. Regulating insurance rates to keep them low for all drivers, including high risks, actually drives prices up for the average consumer. Rate deregulation is the only solution that keeps rates low for the average consumers.

Reported in the The State Factor, July 2002.

Coming Up

• R. James Woolsey, former director of the Central Intelligence Agency, will speak at a special John Locke Foundation dinner at 7 p.m. Oct. 30 at the Brownestone Hotel in Raleigh.

Woolsey is a partner in the law firm of Shea & Gardner in Washington, D.C. He returned to the firm in January 1995 after being director of the CIA for two year. He has been a member of the boards of directors of several corporations.

Woolsey has also served in the U.S. government as: ambassador to the Negotiation on Conventional Armed Forces in Europe, Vienna, 1989-1991; under secretary of the Navy, 1977-1979; general counsel to the U.S. Senate Committee on Armed Services, 1970-73; and adviser (during military service) on the U.S. Delegation to the Strategic Arms Limitation Talks (SALT I), Helsinki and Vienna, 1969-1970.
He earned a bachelor of arts degree in 1963 from Stanford University (with great distinction, Phi Beta Kappa), a master of arts degree from Oxford University, and an LL.B from Yale Law School in 1968, where he was managing editor of the Yale Law Journal.

For more information or to preregister, contact Kory Swanson at (919) 828-3876 or [email protected].



Material published here may be reprinted provided the
Locke Foundation receives prior notice and appropriate credit is given.


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