DT '94, Clipper, New Property... (long)

[Black Unicorn <unicorn@access.digex.net>]

Some months ago I published a small work on the list calling for
property rights to be assigned to privacy.  There was some
interest, but for some reason I chose to explore the subject
even further.


I prefer to release the work through the list, and I would appreciate
it if no one distributed it any further without consulting me.

Consider this a mailing among friends.  Look over the work, let
me know if you like it, or better yet send me some hate mail,
just as long as you get stirred up.

The work below is quite long, and some may find that the message
is cut off after the 650 mark.

If so, and if anyone really wants to read the end by the time
they get to the break, let me know and I will repost with breaks.

Should there be enough interest, I will put the work up
for ftp somewhere.


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Reliance on The New Property
and the
Questions of Electronic Privacy and Centralized Power
in an
Atmosphere of Federal Enforcement Empowerment.

- - a legal and philosophical notation -

March , 1994

Expansion Generally:

The United States of America is characterized of late by a culture of 
centralization.  Increasingly, whether a result of media, advances in 
infrastructure, sociological factors, or technology in general, the 
Federal Government has become the problem solving and allocative 
entity of choice and often the entity of first resort.  Causation 
explanations for the expansion are numerous but, it is the advancing 
technology model of explanation for expanding federal power that 
presents the most illustrative backdrop by which to examine centralist 
trends.  This is not because advancing technology suggests an 
unforeseen departure from the principals embodied in the Constitution 
of the United States by the "Founding Fathers," (although this 
supposition in itself has a distinct appeal) but rather because it 
exposes the double standard that permits the increase of federal power 
without parallel increases in individualist protections.  Technology 
is a common explanation for the need for greater regulation, but 
rarely accepted as a legitimate argument in reference to individualist 
rights, privacy being a key example.  This is not, of course, to 
suggest that the advance of technology is the best, most accurate or 
only legitimate explanation.  Clearly other examples exist and 
moreover, are equally or more persuasive than the technology model I 
intend to explore, but the common theme is generally applicable to all 
the models I have examined.
The advance of technology takes on a much more devious meaning when 
compared to the concepts of property outlined in Reich's "New 
Property" theories.  In 1964, Reich began to publicly question the 
effect of government expansion and the increasing reliance of the 
citizenry on government largess, over traditional property.  Reich 
reasoned that government largess required the application of property 
protections.
The difficulty in accepting Reich's "New Property" paradigm and using 
the model to justify a regulated state with new legal protections are 
its basic assumptions that:

(1) Government is always best suited to serve as the basic controller 
and decision maker for questions of distributional efficiency.
(2) The growth of government largess and regulation is inevitable.
(3) The growth of government largess and regulation is desirable, even 
with the proper protections.
(4) The expansion of property protection to government largess and the 
new property will effectively curb government abuses.

After critical analysis of some or all of these assumptions, the new 
property concept becomes much more workable and, apart from the 
author's apparent intent, a valuable conceptual tool in the argument 
against centralizing regulation.

As the types of governmental entitlements treated as new property 
increase in number and scope which is, in Reich's opinion unavoidable, 
the citizenry must depend on government to assure, protect and insure 
property rights of such a local and individualized character so as to 
be incompatible with a majoritarian representative form of decision 
making.  Clearly individualistic concepts like privacy, freedom of 
contract, and freedom of speech will fall victim to the shortfalls in 
representation throughout the political process when issues like 
security and distributive regulation are the other factors on the 
balance.  Additionally, and much more sinister is the use of 
government largess to affect behavior with the threat of its 
withdrawal.  Often this has the effect of denying otherwise 
enforceable constitutional protections.  History demonstrates that the 
judicial branch is generally unwilling or unable to police the 
continual expansion of federal power, or forbid the use of largess 
withdrawal coercion, and has been so situated since the late 1930's.  
Simple failure of process is clearly a necessary evil in cases where 
resort to the federal system is more efficient in accomplishing 
allocation of resources.  (Federal infrastructure projects, 
interstates for one example.)  It is also clearly important not to 
rule out regulation and oversight as a tool to rectify legitimate 
market failures.  It is important to recognize here, that the standard 
must be one of careful discretion focused on the proper definition of 
a market failure, and consistent guidelines for regulation for which I 
will turn to Stewart, Krier, and Manell.
However tolerable the legal process failures may be, an expansion that 
actively permits and creates largess to be used in coercion is never 
acceptable.  The difficulties begin when centralist regulation is 
applied to a market in such a way to either:

(1)  Extend the paternalistic hand of governmental entitlement over 
newly fabricated individual rights under the pretense of protecting 
them while at the same time appropriating actual individualistic 
concepts.  (I label these Creationist Entitlements)
or:
(2)  Engulf existing and legitimate individualistic concepts with 
regulation and then dismissing their loss as an unfortunate casualty 
of securing protections which are hardly entitlements at all.  
(Illusionist Entitlements)
[The health care legislation is a good example of a creationist 
entitlement.  A troubled industry is made the focus for scrutiny, a 
national crisis is declared, and every citizen becomes "entitled" to 
costless health insurance.  The absolute right to insurance has been 
"created."  Surely a desirable outcome, but deceptive none the less in 
that insurance was never considered, by any stretch of the 
imagination, an individualist right.  The net result is the absorption 
of privacy, freedom of contract concerns, and the reliance on 
government to insure the citizenry.  All these are substituted for the 
newly created "right" to health insurance and are thus casualties of a 
creationist entitlement.  National security, on the other hand, 
presents itself as an illusionist entitlement.  Violent crime has 
gripped the national agenda.  A crime crisis is declared, and federal 
law enforcement power is expanded.  The civil liberties swallowed up 
in the process are the casualties of an illusionist entitlement.]
The source of justification for such regulation is almost always that 
a "national crisis" must be solved.  The associated externalities, 
which are almost never shown to result from the lack of regulation are 
pointed to as creating the need for market preserving regulation.  As 
a result, essential property or personal rights are effectively 
engulfed in the public sphere, a realm with no interest, and in many 
instances possessing a negative incentive, in preserving them.  The 
balance that has historically depended on representation to counter 
the disregard for the individual inherent in the collective is thus 
bypassed by appointing a trustee with a glaring conflict of interest.  
In addition the Judicial branch, affords little or no protection.  
Clearly the distinct difference between individually secured rights 
and government entitlements, is that the latter are easily taken away 
by a variety of means not limited to underfunding, lack of resource 
allocation, coercive largess application, or simple incompetence in 
administration.
The most concerning potential expansions in federal power to date are 
looming on the horizon.  The Digital Telephony and Communications 
Privacy Improvement Act of 1994, and the Clipper or Key Escrow 
Proposals together utilize the complexities of what Wilson terms 
"client politics" and entitlement manipulation to expand the scope of 
federal law enforcement power, and by extension federal power 
generally, to an alarming breadth by capitalizing on the current 
national crisis externality, crime.  These proposals in effect make 
whatever rights to privacy existed within the context of 
communication, government entitlements.  The advances in encryption 
technology that returned the potential for self secured privacy are 
effectively eliminated under the nexus of the pending legislation.  In 
return for the high price paid, (Constitutional Amendments I, II, IV, 
V, X and the oft quoted, rarely guarded right to privacy) the 
citizenry is presented with a government backed insurance against 
crime.  An illusory entitlement to the benefit of new federal laws and 
increased funding for enforcement.  An entitlement likely to be lost 
in its effect by nation wide dilution, mismanagement, abuse and 
incompetence while at the same time empowering the federal mechanism 
by curtailing what defenses the citizenry retain.  There are strong 
indications that the new bills will create large regimes of government 
largess coercion, not withstanding the coercive effects of the Key 
Escrow plan admitted to by the administration.

Expansion of Federal Power Generally:

In a series of cases including, _Panama Refining Co. v. Ryan_, 293 
U.S. 388 (1935); _Railroad Retirement Board v. Alton Railroad_, 295 
U.S. 330 (1935); _A.L.A. Schechter Poultry Corp. v. United States_, 
295 U.S. 495 (1935), and _Carter v. Carter Coal Co._, 298 U.S. 238 
(1936), the United States Supreme Court struck down key segments of 
legislation in Franklin D. Roosevelt's New Deal Programs.  Much of the 
legislation was considered to have infringed upon traditional notions 
of private property, and it is thus understandable that the programs, 
which had lost favor in the years following the President's election, 
were vigorously challenged.  President Roosevelt's re-election and the 
court's refusal to adopt the legislation led to proposed changes in 
the structure of the Supreme Court.  Under the pretext that the 
Justices were too old to fully complete their duties, the President 
proposed that new Justices be appointed for each Justice then on the 
bench over the age of seventy.  As there were six justices then over 
seventy, the total number of Supreme Court Justices might well be 
fifteen today were it not for the timely retirement of Justice Van 
Devanter and the switch opinion of formerly anti-New Deal Justice 
Roberts in _West Coast Hotel Co. v. Parrish_, 300 U.S. 379 (1937).  
(The move was commonly referred to as "the switch in time that saved 
Nine.")  In addition, the court modifying bill's key sponsor, Senator 
Robinson fell to a fatal heart attack.  See generally, Stone, et al., 
Constitutional Law (1991 2d ed.).  See also, Leuchtenberg, The Origins 
of Franklin D. Roosevelt's Court-Packing Plan, 1966 Sup. Ct. Rev. 347.  
The pro-New Deal decision that followed opened the door for federal 
expansion under the crack in the law left by the New Court's reading 
of The Commerce Clause of Article I, section 8 of the United States 
Constitution.  See, e.g., _National Labor Relations Board v. Jones & 
Laughlin Steel Corp._, 301 U.S. 1 (1937).  By 1942, The Commerce 
Clause was construed so widely by The Court that it reached even 
private functions so intimate as to include the growth of wheat on 
private property for self consumption.  _Wickard v. Filburn_, 317 U.S. 
111 (1942) (Farmer's growth of wheat on private property for own 
consumption held as affecting commerce and thus within the reach of 
congressional regulation under The Commerce Clause).  The result was 
to allow nearly any activity to potentially affect interstate commerce 
when taken in its aggregate.  Combined with Justice Stone's outright 
dismissal of the Tenth Amendment, the power afforded Congress no 
longer had any practical limits.  _United States v. Darby_, 312 U.S. 
100 (1941).  Describing the rapid growth of Federal power from _Darby_ 
to date might in itself fill a textbook.  Let it suffice then to 
comment that much of the civil rights legislation of the 1960's found 
its authority in The Commerce Clause and more on point, that no 
statute that finds its base for authority in The Commerce Clause has 
been struck down on those grounds since _Wickard_.  The other powers 
granted Congress are no less encompassing than the Commerce Clause 
itself.

Federal Power and Centralist Regulation:

The expansion in federal power has produced an explosion of federal 
regulation since the first organized attempts to institutionalize 
regulation in the post depression years.  Federal regulation and the 
wide reading of the Commerce Clause gives states an incentive to buy 
into, and regulate industries otherwise served by the private sector.  
This is because the "Dormant Commerce Clause" can be circumvented when 
states participate in the markets they wish to regulate.  This is the 
"Market Participant" doctrine.  See _Hughes v. Alexandria Scrap 
Corp._, 426 U.S. 794 (1976); _Reeves, Inc. v. Stake_, 447 U.S. 429 
(1980); _White v. Massachusetts Council of Construction Employers, 
Inc._, 460 U.S. 204 (1983).  But see _South-Central Timber Development 
v. Wunnicke_, 467 U.S. 82 (1984).  The Dormant Commerce Clause refers 
to those markets upon which Congress has not yet imposed regulating 
legislation.  Often States are prohibited from regulating these 
markets under the rational that Congress has the enumerated power to 
"...regulate Commerce with foreign Nations and among the several 
States...."  U.S. Const. art. I, section 8, cl. 3, and therefore 
states have given the right to regulate to Congress.  _City of 
Philadelphia v. New Jersey_, 437 U.S. 617 (1978).  The exception to 
the grasp of the Dormant Commerce Clause encourages states to buy into 
the market and be free of congressional restrictions on interstate 
discrimination and restrictions on protectionist state regulations.  
Note however that states can easily accomplish the same regulation by 
harsh subsidies in markets they participate in.  As a result it is as 
if there existed no deterrent to state regulation at all.  "Under 
existing precedent, the State could accomplish [the] same result 
[regulation of the industry] in any number of ways....  It seems to me 
unduly formalistic to conclude that the one path chosen by the State 
as best suited to promote its concerns is the path forbidden it by the 
Commerce Clause."  _South-Central Timber Development v. Wunnicke_, 467 
U.S. 82 (1984) (Justice Rehnquist dissenting).
The net result is to encourage "spin off regulation" by the states, 
and as a result of the buy up of industry required, an increase in 
government largess and government holdings.  (Particularly now that 
all production from the state interests in the industry is regulated 
by the issuance of government contracts to manufactures.  Government 
contracts being a privilege, and not a right, withholding them is not 
subject to tradition constitutional protections.)  See, e.g., Charles 
A. Reich, The New Property, 73 Yale L.J. 733,762 n.5 (1964).
Federal legislators then typically respond to the protectionist 
regulations of states by preempting state practices with federal 
regulation.  This is "double spin off regulation."
Spin off regulation and double spin off regulation is not the only 
cycle of federal growth that feeds off it self to inflate federal 
power and holdings.  The cycle of government largess is equally if not 
more dramatically vicious.  Government largess is used to compel 
behavior, which in turn creates more government largess.  Thus, 
stifling taxes are imposed, a tax break is given to businesses who 
comply with regulation, control of these businesses becomes a power in 
itself which can be used as largess over the employees and downstream 
of the market.  More complicated and devious models are easy to 
imagine.

The New Property, coercion, regulation, and the individual.

Reich characterized the increasing reliance of the citizenry on 
government as a source of wealth as "The New Feudalism."  The chief 
characteristic, and the most convincing in my opinion, that Reich 
points to is the fact that wealth distributed by the government is 
conditional and subject to the state.  Charles H. Reich, The New 
Property 73 Yale L.J. 733, 768 n.5 (1964).  Reich points to 8 key 
factors in comparing the use of government largess to traditional 
understandings of feudalism:

(1)  Increasingly we turn over wealth and rights to government, which 
reallocates and redistributes them in the many forms of largess; (2) 
there is a merging of public and private, in which lines of private 
ownership are blurred; (3) the administration of the system has given 
rise to special laws and special tribunals, outside the ordinary 
structure of government, (4) the right to possess and use government 
largess is bound up with the recipient's legal status; the status is 
both the basis for receiving largess and a consequence of receiving 
it; hence the new wealth is not readily transferable; (5) individuals 
hold the wealth conditionally rather than absolutely; the conditions 
are usually obligations owed to the government or to the public, and 
may include the obligation of loyalty to the government; the 
obligations may be changed or increased at the will of the state; (6) 
for breach of condition the wealth may be forfeited or escheated back 
to the government; (7) the sovereign power is shared with large 
private interests; (8) the object of the whole system is to enforce 
"the public interest" - the interest of the state or society or the 
lord paramount - by means of the distribution and use of wealth in 
such a way as to create and maintain dependence.  Id. at 770.
Consider by way of illustrations some of Reich's examples, which I 
find quite elegant and persuasive.  In 1964 the New York Taxi 
medallion [the license required by the city to operate a taxi] was "a 
piece of tin worth 300 times its weight in gold."  Id. at 735 n.7.  
Television channels, which are issued at no cost, can be sold at 
extraordinary sums.  Id. at 735.
Clearly the ability to deprive citizens of wealth without traditional 
notions of process is power.   The words of Justice Stone illustrate 
the scope of the congressional spending power and the refusal of the 
courts to recognize traditional protections : "Threat of loss and not 
the hope of gain, is the essence of economic coercion."  _United 
States v. Butler_, 297 U.S. 1 (1936)  To resort to the mundane (in 
concept and in source), "He who can destroy a thing, controls a 
thing." and "...the power to tax is the power to destroy...."  
_McCuloch v. Maryland_, 17 U.S. (4 Wheat.) 316 (1819).  The wider the 
dependence on government wealth, the wider the power of government.
Reich asks the most relevant question in light of government largess 
coercion.  If, or when, the primary property is in the form of 
governmental distributed wealth, what constraints against the 
government will be available to the citizenry?
Where I depart from Reich is the manner in which to assure individual 
protections in light of the rise of new property.  Reich argues that 
additional protections are required, perhaps protections that would 
extend the constitutional umbrella over the new property or government 
largess.  Charles A. Reich, The New Property After 25 Years, 24 U.S.F. 
L. Rev. 223, 241 (1990).  This approach clearly presents the 
politically difficult problem of granting property rights to all 
government largess, including such largess as welfare and insurance.  
In addition, it exposes government largess to the same problem present 
in all rights not individually secured, namely dependence on 
government as an enforcement body for rights that often conflict with 
the general interest of the sovereign.  The complexity of allowing 
government to regulate a market or individualist right and then 
assigning a governmental oversight authority to prevent government 
abuse is a wasteful and unpolished solution that merely presents more 
opportunity for loss in the form of failure of process, abuse or 
inefficiency.
Instead the conceptually simpler approach is to prevent the expansion 
of federal power into individualist constructs to begin with.

The General Effect of Technology on Federal Power:

Technology has three basic effects on Federal Power.
(1) Technological advances expand existing power.

Technology, especially data processing technology, considerably 
increases the effect of existing power by reducing the cost of 
information collection, organization, and compilation.
Consider the Social Security Number.  Clearly, on the eve of its 
adoption, the Social Security Number was not conceived as an identity 
measure.  Regardless, the number proved exceptionally fitted to 
identification uses simply by its nature.  Each person (theoretically) 
has but one.  No two are alike, and almost every citizen has one by 
nature of economic coercion (its requirement to file tax return 
information for one).  On its face the number seems benign, but 
coupled with computing power and the ability to quickly collect, sort 
and exchange data, the Social Security number has become a powerful 
tracking tool.  In addition, the continued reliance on the number as a 
secure and accurate identifier creates a dangerous potential for 
abuse.  Technically confidential tax return information is available 
for the asking provided one has the subject's name, and Social 
Security Number.
It is a simple matter today to track the movements of a citizen by the 
combined information available from parking tickets, passport records, 
moving violations, credit card receipts, and telephone records.  The 
travel document that was once a mere request by the government of the 
United States that the bearer be treated as an American citizen, 
Comment, Passport Refusal for Political Reasons: Constitutional Issues 
and Judicial Review, 61 Yale L.J. 171 (1952), is today considered 
mandatory for travel outside the United States, and bears a bar code.  
Customs officials are today armed with computer terminals and bar code 
readers.  Driver's licenses, also basically mandatory, are 
increasingly growing magnetic strips and digitized databases of photos 
and even fingerprints are seeing increased use.  Parking enforcement 
officials travel about in mini-vans with portable terminals connected 
by radio link to the Vehicle Registry database prepared to seize any 
vehicle that might draw a red flag.  Many agencies are entirely 
impotent without the technology appearing as recently as the 1960's.  
How would the Security and Exchange Commission conduct enforcement 
without sophisticated data processing equipment today?
Data processing technology is not, however, the only impacting 
advance.  What would become of Federal Communication Commission 
enforcement power without advanced monitoring equipment?

(2) Technology justifies new federally empowering legislation.
There are few major regulations that seek to address electronic 
privacy, restrict federal or local power, which justify themselves on 
advancing technology grounds.  The best examples of such legislation 
in the public sector, The Right to Financial Privacy Act of 1978, Pub. 
L. No. 95-630, sections 1100-122, 92 Stat. 3697 (codified throughout 
12, 31 U.S.C.), The Fair Credit Reporting Act, 15 U.S.C. section 1681 
(1988), The Family Educational Rights and Privacy Act, 20 U.S.C. 
section 1232g(b)(2)(A)-(B)(1988), are sectorized approaches to 
legislation and offer little if any resort to civil actions.  The 
private sector versions of these acts, The Fair Credit Billing Act, 15 
U.S.C. section 1666 (1988), The Fair Debt Collections Practices Act, 
Id. section 1692, and The Electronic Fund Transfer Act, Id. section 
1693, fall far below the pace set by Omnibus legislative efforts in 
Europe and both the public and private legislation is lacking in its 
implementation.  See Peter Mei, The E.C. Proposed Data Protection Law 
25 Law & Pol'y Int'l Bus. 305 n.1 (Fall 1993).
Despite the fact that it is seldom if ever used as a justification for 
legislation to protect the individual, often it is the case that new 
centralizing regulatory legislation is called for to "cope with recent 
advances in technology."  More interesting still is the propensity to 
create regulations in the form of "living documents" that usually 
include a clause to "provide a flexible response to changes in 
technology."  Often the result is to create legislation that possesses 
no theoretical limit to its scope or enforcement power in seeking to 
advance the stated purposes.  Export regulation can often be so 
characterized.  Some prime examples of technologically justified 
legislation include:  The National Competitiveness Technology Transfer 
Act of 1989, Pub. L. No. 101-189; Reproductive Technology Legislation, 
Pub. L. No. 102-493; Genetic Technology Acts, 15 C.F.R. 295.1; and 
numerous export regulations e.g., 22 U.S.C. 2751.  Often these 
legislative efforts grant powers much beyond that needed to enforce 
the stated goal, or beyond that which could be justified by the 
advance of technology alone.  (See, e.g., 50 U.S.C. Appx.) (Supposed 
export justification accomplishes many forms of "fringe benefit 
regulation.").

The New Property and Technology:

Technology gives government great power.  Government has the power to 
gather information, to coerce through largess manipulation, to compile 
records, and to make resistance to policy difficult.  At the same 
time, government uses technology, both directly and as a justifying 
rational for increased regulation and federal empowerment.  The 
increase in government power, and especially the creation of new types 
of government largess (Guaranteed Internet Access, Federal Computer 
Educational Assistance Programs, Universal Health Care) is a threat to 
individualism in the Unites States.  Certainly Charles Reich's 
concepts of government coercion only gain credibility and ominous 
implications when the raw power of government augmented with 
technology is factored in.  If indeed we have "no principal that 
forbids organized society from making use of our dependency to achieve 
goals of social control,"  The New Property After 25 years, supra, at 
224, then we must either develop such a principal as Reich suggests, 
Id. at 225, or resist the continual growth of federal power.
Considering the current judicial disposition to allow government 
coercion by the threat of largess withholding, See, e.g., _Steward 
Machine Co. v. Davis_, 301 U.S. 548 (1937) (Federal tax imposed on 
employers.  Employers who participated in state unemployment funds 
received 90% refund.  Statute upheld and held not to constitute 
coercion.), it is highly unlikely that largess will see the 
constitutional protections Reich seeks.  Indeed restrictions of these 
largess coercions, an important legislative tool for federal 
empowerment, might well invalidate every major regulatory program 
instituted since the New Deal legislation.
Assuming such protections were possible to implement, an assumption 
that ignores the time, legal, philosophical and momentum restraints, 
it is difficult to assert that constitutional protections overseen by 
government would not be watered down by a "balancing" test, or the 
lack of sufficient redress for the victim of coercion.  Reich's model 
of restricting government with a governmental regime intended to 
protect citizens from government is simply clumsy.
Instead it is today within the power of the citizenry to protect 
itself from many forms of government largess coercion and control.  
Consider encryption as an example.  Encryption is empowering.  With 
encryption, and specifically public key encryption, the individual 
thwarts millions of dollars in governmental surveillance development.  
(The author assumes a basis knowledge of public key encryption on the 
part of the reader.)  If theories are correct, and in the battle 
between cipher and cryptoanalysis the cipher always wins, the prospect 
for government control is unusually poor.  Consider the crossbow as an 
analogy.  The crossbow was an advance in technology that allowed the 
common man without training to unhorse and usually kill a mounted, 
armored knight at range.  Chuck Hammill, Address at the Future of 
Freedom Conference (Nov. 1987).  The threat to the balance of power 
prodded the church and the monarchs to take all steps available to 
eradicate the use of crossbows; excommunication and death for example.  
Id.  Of course, it was never wrong for the knights to use crossbows 
against heathens.
Today, the advent of public key cryptography threatens government's 
control over the transfer of information.  It is no surprise then that 
government is desperately trying to maintain a grip over the 
technology that threatens to be available to everyman.  Witness the 
attempt to legislate the information highway, the Digital Telephony 
Bill, the Clipper Key Escrow proposal.  If these technologies, digital 
communications, Internet access and encryption, cannot be directly 
banned or restricted because of constitutional restraints, they can 
certainly be converted to government largess without constitutional 
issue.  The new feudal, federal system has seen a crossbow in the 
making, and it seems that the knights want exclusive use rights.
What implications would truly anonymous transactions, digital cash 
have on the current tax collection structure of the United States?  
The registration of automobiles?  Firearms?  What impact might truly 
untraceable and secure communications across an unsecured 
channel*[reword]?  The current technologies threaten to break the 
current trend of federal empowerment, and worse for the centralists, 
reverse it.

The (Il)legitimacy of Pending Legislation:

(1) The Digital Telephony and Communications Privacy Improvement Act 
of 1994:

The Digital Telephony and Communications Privacy Improvement Act 
expands federal power by placing a positive burden on the common 
carrier to provide law enforcement with communications intercept and 
"call setup information" and imposes penalties upon common carriers 
who do not comply.  The Digital Telephony and Communications Privacy 
Improvement Act of 1994, section 2.  See also, Mike Godwin, Section-
by-Section Analysis of the 1994 Draft of the Digital Telephony 
Legislation (1994).  Godwin suggests that the new burdens on common 
carriers are imposed because 18 U.S.C. 2518(4) is not commonly read to 
impose such a burden, and thus common carriers are often reluctant to 
provide the kind of solutions to intercept problems law enforcement 
would like.  Mike Godwin, Section-by-Section Analysis of the 1994 
Draft of the Digital Telephony Legislation (1994).  The specific 
provision provides "Common carriers shall be required to provide 
forthwith, pursuant to court order or lawful authorization, the 
following capabilities and capacities in order to permit the 
government to conduct electronic surveillance and pen register and 
trap and trace investigations effectively."  Digital Telephony Bill, 
section 3 (amending 18 U.S.C. 109, section 2237(a)).  The draft goes 
on to provide for simultaneous interception of communications and call 
setup information.  Digital Telephony Bill, section 3 (amending 18 
U.S.C. 109, section 2237(a)(1)).  The intercepted information then 
must be forwarded to a facility of the government's choice.  Digital 
Telephony Bill, section 3 (amending 18 U.S.C. 109, section 
2237(a)(4)).  Penalties for failure to comply are set at $10,000 per 
day and subjects offending common carriers to F.C.C. sanctions or 
fines.  Digital Telephony Bill, section 3 (amending 18 U.S.C. 109, 
section 2237(f)).  Enforcement power is given to the United States 
Attorney General or at the Attorney General's request, the Federal 
Communications Commission.  Digital Telephony Bill, section 3 
(amending 18 U.S.C. 109, section 2237(e)).
Apparently the Digital Telephony Bill does expand federal enforcement 
power significantly by giving new powers to the Attorney General, 
placing new burdens on common carriers, and assigning new fines for 
non-compliance.  In addition, the bill would make interception a much 
easier task for federal and local law enforcement, both of which 
benefit from provisions of the Digital Telephony Bill.  As the 
technical nuances of forwarding intercept information to the 
government "location" are not addressed, one wonders if government 
officials can access any intercept and call setup information they 
wish, or if they must request the information from the common carrier, 
presenting evidence of their lawful authority in the process, and have 
it forwarded.
The reference to common carriers raises the question, will these 
include "public access" internet providers.  Note that the Digital 
Telephony Bill adopts the definition of common carrier in 47 U.S.C. 
153(h):
"Common carrier" or "carrier" means any person engaged as a common 
carrier for hire, in interstate or foreign communication by wire or 
radio or in interstate or foreign radio transmission of energy.  47 
U.S.C. 153(h)(1993).
In addition, it is possible that such providers might fall under the 
"common carrier support services" provider provision of the Digital 
Telephony Bill.  Digital Telephony Bill, section 2.  Mr. Godwin 
suggests this might impose obligations upon local telephone service 
providers to acquire "transactional information" from Internet 
providers when e-mail is sent.  Mike Godwin, Section-by-Section 
Analysis of the 1994 Draft of the Digital Telephony Legislation 
(1994).  The implications for anonymous mail in this instance would be 
dire.
Of particular interest is the focus on "pen register" and "call setup" 
information.  Pen register and call setup information has a much lower 
standard of protection than the actual communication.  _Smith v. 
Maryland_, 442 U.S. 735 (1979)(Installing pen register without warrant 
did not violate suspects fourth amendment rights).  See also, 
_California v. Greenwood_, 486 U.S. 35 (1988)(Information voluntarily 
turned over to third parties, including call setup information, not 
protected by fourth amendment).  See also, 18 U.S.C. 3123 (1988).  The 
net effect of this section of the Digital Telephony Bill would be to 
make such virtually unprotected information trivial to collect.
Although the proposed legislation may or may not technically expand 
authority it most certainly does give law enforcement huge increases 
in capabilities, especially in data collection.

(2) The Escrowed Encryption Standard:

On April 16, 1993 the administration announced the Escrowed Encryption 
Standard initiative.  The proposal allegedly seeks to address and 
reconcile the conflict between privacy of citizens and the intrusive 
needs of law enforcement.  In effect the initiative proposes a 
standard public key encryption algorithm for voice and data 
communications.  The algorithm is implemented in hardware, the 
"Clipper" chip, that will be installed in a variety of communications 
devices.  The keys required to decrypt the communications between the 
devices are segmented and "escrowed" between two agencies.  The 
cooperation of both agencies is required in releasing the key segments 
to allow wiretapping of any individual device using the Clipper chip.  
The theory is that the encryption algorithm will provide security for 
the public from unauthorized eavesdroppers, while allowing law 
enforcement access to the encrypted communications.  The program is 
described as "Voluntary."  See generally, Statement of the White House 
Press Secretary, April 16, 1993.
The Escrowed Encryption Standard is justified by the reliance of law 
enforcement, and particularly federal law enforcement, on interception 
of telephone communications in the battle against drugs and terrorism.

The Effects of Legislation:

Security and privacy are often considered mutually exclusive in their 
nature.  One cannot serve both masters without duplicity.  
In this respect, the Escrowed Encryption Standard , which is presented 
as a compromise between the two, is a paradox.  Clearly the EES is not 
at all interested in privacy for citizens.  If indeed strong 
cryptography is such a threat to law enforcement, its availability can 
only be privacy enhancing in reference to whatever other listeners 
might seek to overhear.  If law enforcement, especially in light of 
the scope of federal power, does not have the resources to penetrate 
the currently available strong encryption methods, then EES is not 
required for privacy.  Indeed the EES initiative merely limits privacy 
to a manageable level under the guise of a government entitlement to 
privacy.  The government here has created an illusionist entitlement 
to privacy, and given it to the citizenry hobbled, while with the 
other hand taking what tools were present for the citizens to see to 
their own privacy in electronic communications.
The concept of "standing" illustrates the enhanced privacy available 
to citizens in the context of one constitutional right, the Fourth 
Amendment to the Constitution of the United States.  The Fourth 
Amendment is protected by a doctrine called the exclusionary rule.  
Law enforcement is deterred from violating the Fourth Amendment by the 
exclusion of such evidence as is illegally obtained from admission at 
trial.  _Mapp v. Ohio_, 367 U.S. 643 (1961).  In order to exert this 
redress, a complaining party is required to have "standing."  Simply 
put, it must be your constitutional rights that have been violated in 
order to obtain any redress.  Were a third party to be searched 
without the process of a warrant, there would be little redress except 
for resort to a civil suit, few of which are successful and fewer of 
which are profitable.  _Zurcher v. Stanford Daily_, 436 U.S. 547 
(1978).  Encryption fills the standing gap.  Instead of relying on 
inefficient process to insure individual privacy in communication, it 
is now possible for the individual to secure such privacy and 
protection provided by the amendment but not enforced by the 
exclusionary rule or civil procedure.
If strong encryption presents no threat to law enforcement other than 
as a cost in time and resources, then it is clear that the scope of 
domestic monitoring is beyond that which is authorized by court order.
According to filings for the year of 1992 state and local authorities 
performed 846 "intercepts" averaging $46,492 per intercept.  Donald P. 
Delaney, Dorothy E. Denning, Wiretap Laws and Procedures, Sept. 23, 
1993.  Intercepts under the Foreign Intelligence Surveillance Act of 
1978 numbered 484 for 1992, costs are unreported.  Id.  See also, The 
Foreign Intelligence Surveillance Act of 1978 50 U.S.C. sections 1801-
1811.
Non-FISA intercepts totaled in cost for the year of 1992 near 40 
million dollars by these figures.  If the implementation of EES is 
merely a cost cutting measure, and the costs are associated with the 
economics of decryption of suspect's intercepts using strong 
encryption, an assertion that lacks any basis, then the EES proposal 
must total in costs less than 40 million per year and the sum of the 
FISA intercepts assuming each of these was an interception of 
encrypted material.  If the EES proposal exceeds the cost of these 
intercepts, we must assume that either:
(1) The plan is not economically sound.
(2) There are more domestic intercepts than are reported as 
legitimate.
It might be added that EES will not itself reduce the cost of actual 
interception from the common carrier, while Digital Telephony might.  
This may explain the similar timing of the initiatives as an attempt 
to coordinate a cohesive data policy.
In addition, encryption technology is a growing and thriving market.  
The market for security software, fueled by virus and general security 
interests has attracted many competitors and several contributors in 
the public domain who have helped to prop up the quality of commercial 
software.  The fact that a market has evolved even in the face of 
harsh export restrictions suggests that a free marketplace would be a 
significant force.  Clearly regulation is not proper here where: (1) 
There has been a fairly liquid exchange and availability to consumers 
of information in the marketplace.  (2) There are no restricted 
commodities (within the United States).  (3) There are large numbers 
of buyers and sellers in the market.  (4) There are no localized 
externalities.  Stewart, Krier and Manell, Environmental Law and 
Policy (3d ed. 1990).  In this case the market is restricted by a 
supposed externality of "national security."
The contention that law enforcement and counterintelligence activities 
will fall apart without the unhindered ability to wiretap is without 
merit.  Supporters of the EES proposal are utilizing a logical fallacy 
in pointing to the number of convictions obtained by the use of 
wiretaps as evidence of EES's merits.  Indeed law enforcement has 
relied heavily on their ability to wiretap with basic impunity.  The 
abuses that do come to light surely indicate that more lie 
undiscovered below the surface of investigatory processes.  The 
assertion that law enforcement cannot properly adjust their methods to 
rely instead on physical microphones and non-intercept type 
surveillance is a mere front to preserve the current regime; one of 
rubber stamp approval and lowered standards of "cause."  Law 
enforcement has found in the ability to wiretap an easy circumvention 
of the Fourth Amendment because courts have indicated that the key 
legal principal (the manifestation of an expectation of privacy) is 
lower in telephone conversations than in the home.  How is it that 
when the citizenry attempts to exert an increased shield of privacy 
over telephone and electronic conversations by not turning them over 
to the third party (common carrier) in intelligible form the 
government seeks to make this impossible?  _Smith v. Maryland_, 442 
U.S. 735 (1979)(An individual has no legitimate expectation of privacy 
in the numbers dialed on his telephone because he voluntarily conveys 
those numbers to the telephone company...)  See also, _California v. 
Greenwood_, 486 U.S. 35 (1988).  _Katz v. United States_, 389 U.S. 347 
(1967)(What a person knowingly exposes to the public, even in his own 
home or office, is not a subject of Fourth Amendment protection).  
What evil is there in individuals filling the gap that fails to 
enforce higher protections on our phone and electronic conversations, 
which incidentally, we rely on today much more than in years past.  
That the government has an affirmative right to be allowed access to 
the raw conversation is perhaps understandable.  That the government 
has a right to be provided with a plain meaning translation of what 
they intercept is not.  Even the provisions in the Digital Telephony 
Bill recognize that the government will not place a duty of 
translation on the common carrier.  The Digital Telephony and 
Communications
Privacy Improvement Act of 1994, section 3(i)(5) (Amending 18 U.S.C. 
109 section 2237).  Why then is it obvious that this burden should be 
placed on the citizen?  At the very least, the increased expectation 
of privacy manifest in the attempt to encrypt conversations, even 
under the EES initiative, should entitle the parties to greater 
protections of process under the Fourth and Fourteenth Amendments, 
_Katz_ and _Greenwood_.
The EES program is presented as a voluntary program.  Unfortunately 
the government's definition of voluntary falls short.  In the case of 
the EES program, government is trying to establish a de facto standard 
by requiring all government communications to be made with the new 
technology.  The result is the threat of withholding the government 
largess of government contracts to the companies that rely on such 
contracts for their existence.  The companies in turn, in the interest 
of economy, will request that other associations outside of a 
government context be made with the new technology.  Coupled with 
import/export policies that make competing technologies highly 
unprofitable to market, the level of coercion is obvious.
In order for the EES program to accomplish its goals in relation to 
crime and the use of strong encryption to deter law enforcement 
interference, other technologies must not be readily available in the 
United States.  Clearly any group of criminals that might wish to use 
strong encryption would not adopt a standard labeled at the outset as 
penetrated by the government.  It is hard to take the government's 
assertion that the program will be voluntary at face value in light of 
these analysis.
The dangers of allowing government to make privacy a collective good 
distributed, and incidentally seized, by government itself, which is 
essentially what the EES and Digital Telephony Bill proposals do, 
should be self apparent.  There is little or no reason to believe that 
this form of government largess will be treated any different as far 
as coercion by threat of withdrawal is concerned.  Coupled together, 
the ability to eavesdrop on citizenry and cripple a blossoming ability 
for the individual to secure his or her own privacy, the government 
has not only eliminated the most significant potential advance in 
individual and private property, but also gained a good deal of 
capability in preparing future regulation.  Digital cash, which 
without EES would be potentially untraceable and anonymous, will be 
tracked as easily or easier in the new regime than the hard currency 
of today and yesterday.  A governmental control of the information 
structure through subsidy will impose government requirements for 
disclosure on what would otherwise be private carriers with no such 
requirements.  If these concepts are available to reasoned analysis, 
they have likely occurred to the administration.  Clearly anonymous 
digital cash and completely untraceable transactions, at little or no 
cost, are not in the administrations best interest.  This suggests 
that the Digital Telephony, National Information Infrastructure and 
EES proposals are about, and have always been about, much more than 
law enforcement, assured access and privacy, but also continued 
control, regulation, and the status quo.

unicorn@access.digex.net


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