Virtually unnoticed in the publicity over its advocacy of housing vouchers as a substitute for government-built housing, the President's Commission on Housing has issued a hard-hitting attack on local zoning and land-use regulation and called for substantial deregulation.

Chapter 15 of The Report of the President's Commission on Housing points out the extent to which zoning has been used to restrict housing supplies and keep prices ("property values") high. It sets forth a general standard that state legislators should enact laws providing that no zoning regulation that would limit or deny housing production should be deemed valid unless necessary to achieve "a vital and pressing governmental interest"—protecting health and safety or solving a unique environmental problem.

Going beyond generalities, the report urges the following specific standards for local zoning:

• Leave the density of development to be determined in the marketplace.

• Remove all forms of discrimination against manufactured housing.

• Place no minimum or maximum limits on the size of individual dwelling units.

• Avoid growth controls that limit housing construction.

• Don't adopt farmland preservation laws if they would limit housing production.

The report also urges local governments not to charge development fees that exceed the cost of the services or infrastructure actually provided to serve the new housing. And it endorses the idea of one-stop permit processing to reduce costly time delays in getting projects approved. Finally, it urges the US attorney general to seek an appropriate test case to have the Supreme Court reconsider the broad police powers granted to local-government zoning functions by the Court's historic (1926) Euclid decision upholding local zoning.

Does local zoning really increase development costs? Economist Richard B. Peiser of Southern Methodist University recently compared the cost of developing lots in Houston (private zoning via deed restrictions) and Dallas (conventional government zoning). It's an unusually fair comparison, not only because the cities are comparable in size, demographics, terrain, age, and general land-use patterns, but also because many of the same builders and developers operate in both cities. Moreover, any difference due to zoning in Dallas is probably greatly understated because the zoning laws there are administered very leniently. (The zoning process in Dallas adds only four to eight months to development time, compared to as much as several years in some parts of California.)

What Peiser found, after adjusting for extraneous factors, was that land development regulation makes finished lots cost about $2,000 more in Dallas—a difference of 16 percent. Thus, the Housing Commission was not making simply a rhetorical point. Even where "flexibly" applied, zoning regulations significantly increase the cost of housing.


The effects of California's Proposition 13, the 1978 referendum that substantially limited property taxes, are beginning to be seen, and they're encouraging. Perhaps the most dramatic effects of Prop. 13—and other subsequent tax reductions, including referendums that have all but eliminated state inheritance taxes and permanently indexed the state income tax—have been in the new annual budgets for the state and for Los Angeles County.

The state budget for the year beginning July 1 included the first decline in annual spending by California since 1943—a period that included the administrations of such luminaries as Earl Warren, Pat Brown, and Ronald Reagan. The new budget totals $25.2 billion—about two percent less than for the year recently ended. The New York Times noted that to bring about the reduction and balance the state budget, "legislators cut deeply into programs long protected by some of the state's most influential lobbying organizations": they slashed state aid to cities and counties by more than 20 percent, virtually froze state aid to school districts, raised fees at state universities by $100, and eliminated cost-of-living increases for state employees and most welfare recipients.

On a smaller scale, Los Angeles County has been having a similar experience and for the same reasons. While their annual budget of $5 billion does exceed last year's $4.7-billion figure, it is projected to reduce the county's work force to about 71,000, which represents the elimination of about 3,200 public jobs. The Los Angeles Times, describing the budget as "lean, mean, and thin," says that it puts the conservative county board majority in sight of its goal of cutting 10,000 from the county work force within three years.

In Los Angeles County as in Sacramento, there are a number of government programs that will feel the pinch, including the departments responsible for beaches, fire, mental health, and welfare, as well as the sheriff's office and the courts. But, contrary to some of the more dire predictions, the budget cuts have not turned California into a desolate wasteland. In fact, Trends can report that four months into the new fiscal year, the palm trees are still growing, the surfers are still surfing, and California's private sector is on a little better footing than before.


There has been much wailing and gnashing of teeth over federal cutbacks in the government's loans for college students. Last year Congress reimposed a family income test to limit eligibility for the guaranteed student loan program; it's expected to save taxpayers $2.4 billion through 1985. Student groups and many college administrators talked as if there was no alternative to government funding and that therefore fewer students would be able to attend college.

That self-serving rhetoric is now being undercut. In July, Dartmouth College ventured into the bond market to raise funds for student loans. Its $29-million tax-exempt issue—rated AA by Standard & Poor's—sold out in less than 24 hours. Northwestern University is joining forces with a dozen other Illinois schools to sell $30–$40 million in tax-exempt bonds for student loans. And similar efforts are under way in the five other states whose laws allow colleges to issue tax-exempt bonds to finance loans as well as buildings. Business Week (July 26) reports that "a score of other states have enabling legislation in the works." Thus far, at least 100 private colleges are known to be preparing bond issues to finance student loans.

Not every college has the reputation of a Dartmouth, Harvard, or Stanford; not all student-loan bonds will be A A rated. But it seems clear that there are marketplace mechanisms for providing loans for college students.


Just as surely as the swallows can be counted on to alight at San Juan Capistrano, the supporters of a military draft can be counted on to trot out the argument that volunteer armies are inferior fighting forces to conscripted armies.

On the face of it, it seems dubious. One would think that soldiers (like soybean farmers, investment bankers, and plumbers) would do better at their work when they choose their profession voluntarily and make it their career, rather than when it's thrust on them by state coercion. And lately, there has been some very persuasive evidence that this is in fact the case.

The evidence comes from the Falkland Islands. There are several reasons that Great Britain was victorious there, including a series of bad decisions and strategic errors of omission by the Argentine military. But one of the most important reasons was the advantage of competence and training the British professional army of regulars had over the Argentine conscript army. As the Orange County, California, Register commented, "The British army has gone up against some pretty formidable odds through the ages, from Dunkirk to Khartoum and the Khyber Pass. But seldom has it been so badly outgunned and outmanned—nor its supply line so long [as in the Falkland Islands warfare].…The Argentine military forces, operating from mainland sanctuary only 400 miles away, had at least 20-to-1 air superiority and a fleet with submarines, a heavy cruiser, and a full-sized aircraft carrier."

British military historian Alistair Horne has noted, "One can be sure that the message is being keenly studied by NATO countries with largely conscript armies.…This professionalism of the British forces, as well as their capacity to fight after so long and rough a sea voyage, was undoubtedly underestimated by the junta."

Meanwhile, US Army personnel chief Lt. Gen. Maxwell R. Thurman in a New York Times interview has responded to two recent reports, one published by the Brookings Institution and the other by the Atlantic Council, calling for a revival of the draft. "I don't see [a need for a draft]," Thurman declared. He added that the military service could expand from its current force of 790,000 soldiers to 850,000 without resorting to peacetime conscription, so long as the current level of educational benefits and salaries is left intact.

The Brookings study pointed out that 33 percent of the army is black, compared with 13 percent of the general population. (It should be noted, however, that one reason the overall percentage of blacks in the army is higher is that blacks tend to stay in the service longer than whites, and the median age of American blacks is 22—six years younger than that of the general population—which means that a relatively large number of blacks are at an age at which military enlistment is highest.)

The Brookings study decried the high percentage of blacks in the armed forces and said, "Suspicion that black troops might be unwilling to carry out their assignments in certain domestic situations—a suggestion that is understandably reprehensible to many members of the black community—cannot be dismissed out of hand." Thurman's "careful and emphatic" reply to such nonsense was, "We don't have any evidence…that would substantiate those allegations." The high percentage of blacks in the Army "doesn't cause me any problems at all," he said.


Guess which country leads the world in contracting out municipal services to private firms? According to John Tepper Marlin of the Council on Municipal Performance, the leader is Japan. In a survey of 669 cities, he found on a fact-finding tour last year, nearly half of them contract out services. And the chief reason given by city officials is greater efficiency.

Marlin's findings were presented at a series of seminars for revenue-squeezed city officials this spring in Philadelphia, Atlanta, and Cleveland. Since the Reagan administration took office, the once-radical idea of privatizing local services has become practically mainstream. A recent advocate is Ted Kolderie of the Hubert H. Humphrey Institute of Public Affairs (yes!) at the University of Minnesota. In his April 1982 report, "Many Providers, Many Producers: A New View of the Public Service Industry," Kolderie presents a compelling case for demonopolizing and debureaucratizing public services—whether by substituting volunteers, levying user fees, or contracting out.

Besides the United States and Japan, privatization seems to be catching on most rapidly in Great Britain. A number of local councils have contracted out refuse collection and other maintenance services, generally with 30 percent or more cost savings and improved performance.

Even the Middle East is getting in on the act. Saudi Arabia's capital city, Riyadh, contracts out its garbage collection to Britain's Pritchard Industrial Services and has recently signed up Denmark's Falck Company to develop a rescue services business. Falck provides similar services in Qatar and is negotiating a third contract in Kuwait.


Have you heard the doomsayers' lament about the destruction of the Amazon jungles? Most people "know" that when farmers cut down the trees and plant crops continuously, the rich jungle topsoil gets used up in a few years and turns into a compacted, red soil called "laterite," good for growing nothing. So the jungle is a "fragile ecosystem" that must be protected from man's depredations, etc., etc.

Wrong, wrong, wrong. Although the process of "laterization" does occur with certain types of crude continuous cropping, a 10-year study—the Tropical Soils Research Program—has shown great success in farming the Amazon's acid soils (Science, May 21). Three crops of grain per year can be produced, and the soil quality actually improves over time. The key is using the right types and quantities of fertilizer, whether chemical or organic.

The research was a joint effort of North Carolina State University and the Instituto Nacional de Investigacion y Promocion Agraria of Peru. It was carried out in Yurimaguas, in the Amazon headwaters region of Peru. Local farmers were successfully trained in the crop rotation and fertilization techniques. Since the methods appear to be quite profitable, the farmers are expanding their use on their own, and the Peruvian government is trying to make sure that adequate supplies of fertilizer and credit are available in the region.

It's not certain how widely applicable the new techniques will be. But the Tropical Soils Research Program researchers are generally optimistic.


Small-scale, flexible, privately owned urban transit seems to be making a comeback in this country. The two firms seeking approval to start jitney service in Los Angeles (see Trends, Aug.) have won approval from the state Public Utilities Commission. Both Maxi-Taxi and Express Transit District were awarded wide-ranging permission to operate 15-passenger vans, the former on 13 routes and the latter on 14. Charging $1.00 and 75¢, respectively, they will compete head-to-head with government-run mass transit systems charging 50¢ for conventional buses.

Similar service may be in the works for Houston. Several civic groups have asked the city council to repeal the 1924 law outlawing jitney service, repeal another law heavily regulating private consumer buses to and from the suburbs, and deregulate entry and pricing in the taxi market. Taxi deregulation took place several years ago in San Diego (see Trends, Oct. 1979 and Jan. 1981) and is working well. Houston mayor Kathy Whitmire is sympathetic to the proposals but wants more study before taking action.

Meanwhile, the London-based Economist has offered a similar solution for England's transit problems. "Open the door to anybody who wants to run a jitney," said the magazine (July 3) and "deregulate commuter transport permanently" so as to break the grip of the monopoly transport workers' union, which had virtually shut down commuter rail service.


Britain's intercity highways (called "motorways") are deteriorating just as US interstates are (see last month's lead item in Trends). The cause is the same: British politicians and bureaucrats are under pressure to spend the government's increasingly constrained revenues on other things (generally those benefiting well-organized interest groups). So highway construction and refurbishment get "deferred."

London's Adam Smith Institute thinks it has a solution: private-enterprise motorways. In a new booklet, Private Road Ahead, by Gabriel Roth and Eamonn Butler, the institute makes the case for greater investment in roads, shows why the political process has failed to accomplish this, and suggests how the private sector could be enlisted. Of the three alternative schemes, the one getting the most attention would have private firms build and operate the roads with the government paying annual rental charges based on vehicle traffic. The alternative, of course, is to utilize tolls, making the users pay directly, without government involvement.

London's major evening newspaper, the Standard, gave the proposal favorable coverage (June 15), pointing out that transport minister David Howell attended the press conference announcing the book. The Economist (June 19) also covered the proposal, though more skeptically. Neither pointed out that, far from being a radical idea, the concept has been in use in Italy for three decades to build and operate that country's extensive motorway system (see Trends, May). So the Adam Smith Institute is merely suggesting that England adopt a proven method of coping with its motorway crisis.


Question: out of a total US defense budget of $258 billion, how much goes for defense of this country? If you said $90 billion—about 35 percent—you'd be close, according to foreign policy analyst Earl C. Ravenal of Georgetown University. In a study for the Cato Institute, Ravenal breaks down the defense budget into strategic forces ($54 billion) and general-purpose forces ($204 billion). While the former are largely for our own defense, $129 billion of the latter is for the defense of European NATO members, and another $39 billion goes to defend Asia (mainly Japan and South Korea).

The magnitude of these commitments to defend wealthy allies is beginning to sink in among policymakers faced with $100-billion deficits. Assistant Senate majority leader Ted Stevens (R–Alaska) is talking seriously about blocking funds for maintaining US troops in Europe. Stevens's challenge is the first such effort since the unsuccessful Mansfield amendment of the early 1970s. According to Aviation Week, the Defense Department is taking Stevens's efforts "even more seriously" than the Mansfield proposal because Stevens is attracting support from both liberals and conservatives. (Many conservatives are angered that the European allies spend an average of only 2.6 percent of their gross national product on defense, while the proposed Reagan budget calls for 7.5 percent of GNP).

No similar attempt to cut back on overseas commitments to Asia has yet surfaced. But there are growing signs of discontent in Japan with the Japan-US Security Treaty. In April, 158 leading Japanese citizens (Diet members, academics, government officials, etc.) issued a statement calling the one-sided treaty "a stain on our national pride" and urging significant revisions. Given the tremendous growth and prosperity of Japan, they said, "it is now inexcusable for Japan to continue to rely on the U.S." to bear the "sole responsibility" for the country's defense, as called for by the treaty. The next month, Defense Director Soichiro Ito created quite a stir by telling the Industrial Club of Japan that the treaty has destroyed the will of the Japanese people to defend their country and given them a sense that peace is a natural phenomenon that exists without efforts on their part.

Although Japan's National Defense Council approved a new five-year defense spending plan in July, it falls far short of the modest goals many had hoped for. Under the new plan, defense spending will average $13.1 billion over the next five years (slightly exceeding one percent of GNP), compared with $10.3 billion this year. Although correcting many gross deficiencies in hardware, the plan would not accomplish the interim goal of enabling Japan to defend its sea lanes out to 1,000 miles—a goal agreed to by President Suzuki in May 1981, but with no target date.

Will another US senator—perhaps from the East Coast—start to focus attention on the cost of indefinitely subsidizing Japan's defense?


Devotion to common sense and respect for individual rights have never been the government's strong suit. Its continuing prohibition of the sale and use of marijuana is a graphic example of that.

The government has long since abandoned its imaginative claims of marijuana leading to insanity and debilitation, but it has hardly abandoned the prosecution and imprisonment of pot smokers, even though an estimated 55 million Americans have tried marijuana at least once. From time to time the government, despite its best efforts, doesn't escape the embarrassment it richly deserves for such a policy. The most recent incident came in the wake of a report by the National Research Council's Committee on Substance Abuse and Habitual Behavior.

According to Science magazine, the committee, which is supported by the National Institute on Drug Abuse (NIDA), issued a report in July that expressed preference for ending criminal penalties for possession of small quantities of marijuana. It also recommended that the federal government seriously consider regulating rather than prohibiting the supply of the drug.

After comparing states where marijuana has been decriminalized with those where it has not, the committee concluded: "The existing evidence on policies of partial prohibition [of marijuana] indicates that partial prohibition has been as effective in controlling consumption as complete prohibition and has entailed considerably smaller social, legal, and economic costs."

National Academy of Sciences President Frank Press was reportedly incensed with even these half-way liberalizations. He took the unusual step of publicly disagreeing with the central recommendations of an academy report and even suggested that the committee may have exceeded its charge. And NIDA administrator William Pollin says he was "not pleased" with the report. He told Science that the committee's mandate was merely to come up with "an analysis of costs and benefits on a range of policy options" including marijuana decriminalization, because NIDA was interested in learning "under which options you would get a decrease in overall consumption."

The committee's chairman, Louis Lasagna of the University of Rochester Medical School, said that the committee report's recommendations differed little from those of the National Commission on Marijuana and Drug Abuse in 1972 (which, incidentally, provoked a similar reaction from the Nixon administration). Furthermore, the report went through an arduous review process before its publication.

The Reagan administration, like its predecessors, is not about to reduce the penalties for marijuana sale or use on either ethical or medical grounds. And like its predecessors, it has had the silliness of its policy exposed by its own appointees.


An objective observer of government farm programs has to conclude that they constitute a negative-sum game. Taxpayers pay once in taxes to buy up surplus crops stimulated by price supports, then pay again at the supermarket in higher prices. The dollars gained by the farmers are far less than those lost by consumers.

Yet farm programs arose in response to a genuine problem—the unpredictability of farm income, due to the vicissitudes of nature, the long time-lags between deciding how much to plant (based on last year's crop prices) and harvest time, etc. An economist recognizes the problem as uncertainty and quickly proposes hedging against it in futures markets. But there's a big problem: options on agricultural commodities have been banned by federal law since 1936. Only much more expensive and risky futures contracts are available, and only 10 percent of all food producers use them.

That gap in the market may finally be filled, however. Both houses of Congress are considering legislation to legalize agricultural options. According to the Wall Street Journal (July 6), pilot programs on the Chicago Board of Trade could be in operation by mid-1983 if Congress gives the okay this year (see p. 46).

The American Farm Bureau Federation supports the idea, as at least a partial replacement for the $10-billion-a-year federal price-support program. So does agricultural economist Bruce L. Gardner, author of The Governing of Agriculture (reviewed in REASON in July). "Over the long term, options could permit movement toward less reliance on the general taxpayer and greater market determination of prices and resource allocation." Even Agriculture Secretary John R. Block thinks the idea is "a possibility." So there may eventually be a way out of this particular negative-sum game of political economy.


The Congressional Budget Office, to its credit, has finally heeded the wisdom detailed in REASON's May 1981 cover story on Amtrak. It has issued a report sharply critical of government-subsidized passenger trains.

Although hardly a bastion of free-market economics, the CBO told Congress, "Because the public benefits that Amtrak conveys appear limited, continuing large Federal subsidies are difficult to justify." It pointed out that these subsidies could not be rationalized on any of the grounds usually offered, such as energy efficiency, national security, and transportation for the poor. On the contrary, the report suggested that Amtrak's subsidies are little more than pork barrel for relatively high-income travelers.

Moreover, the prospects for Amtrak's future are hardly rosy. The report projects steeply higher fares and steady declines in the already meager number of passengers. And there's no change the CBO could foresee that could make Amtrak economically viable, including reduction of labor costs. Indeed, even if the train system's labor costs "were halved, its costs per passenger mile would still exceed those of air and bus," the report concluded.

Is it possible that Amtrak might rise to solvency because of changes the CBO did not foresee? Maybe Amtrak will become solvent next Thanksgiving as thousands of travelers happily stand in line to make reservations on Amtrak's least-popular routes. Maybe the government will find a way to run trains using tap water as fuel. And maybe conductors will choose to work on a volunteer basis.

But don't count on it.


For 12 years, a magazine has been published in the Soviet Union that complains of that country's shortages of fuel, raw materials, equipment, consumer goods, and labor; of the unrealistic centralized state planning of the economy; of backward Soviet technology; and of the lack of economic incentives for production. And such treasonous articles are not mimeographed and typed by dissidents huddled in a tiny Moscow apartment, then passed around by hand. Rather, it is edited by Abel Aganbegyan, a member in good standing of the Soviet Academy of Sciences, and distributed to 100,000 of the most influential factory managers, economists, and planners in the country.

Its name is Eko, a shortened form of the Russian word for "economics," and according to a recent article in the Wall Street Journal, it was founded because the government felt that businessmen needed something like the business press in the West. The function it serves is quite important: "To Soviet managers," says the Journal, "it is the only major forum for a continuing critique of the Soviet economic disease."

Eko is clearly free to publish articles that would never be seen in the mainstream Soviet press. For example, while the government's position is that central planning has eliminated inflation, two economists wrote an article for the February Eko on inflation between 1976 and 1980 (16 percent for wages, while production of consumer goods grew by only 14 percent). And it tends to idealize Western management and work styles as a model that the Soviets should emulate (it has serialized Arthur Hailey's book Wheels and Dale Carnegie's How to Win Friends and Influence People).

When it comes to free-enterprise reforms, however, the USSR is all bark and no bite compared to China, which has been taking great leaps forward into marketplace capitalism on two fronts.

The first and most extensive is agricultural. The basic unit of agricultural organization is still the commune, which consists of between 3,000 and 8,000 people, and all land officially belongs to the state. But some 80 percent of communes are now run under what is called the "production responsibility system," which emphasizes the link between work and pay.

One very common system is to break up the communes into production groups of 20–30 families. Economists Martin and Kathleen Feldstein report that these groups are given a minimum production quota to meet and assigned a certain parcel of land. If they produce in excess of the quota, they can keep the proceeds for themselves or sell it on a free market at whatever prices they can negotiate.

The results are impressive. The Economist reports that in Guanghan county, where reforms have been widespread, annual per capita income has risen in four years from 74 yuan to 117 yuan, and there are reports of some peasant families with incomes as high as $5,000 per year—more than double the salary of China's vice-premier Deng Xiaoping.

The other area of reform is a Chinese version of free-enterprise zones in four southern coastal cities. Profit taxes there are limited to 15 percent; businessmen can sign contracts without getting approval from the central government; and the government has liberalized foreign investment terms. The result is that in 1981, industrial production jumped 11.4 percent; 220,000 new jobs have been created in one province alone; and income per capita in those areas has nearly tripled.

"The Chinese people want to get rich and their happy days for getting rich have already started," exulted the People's Daily. "This is a trend which cannot be reversed."


Try to visualize what would happen if Indianapolis or Houston or Atlanta were confronted with even half the problems that Beirut has today. As one banker in Beirut observed to an American reporter, "What we're going through would destroy most cities. Could you imagine the reaction if New York went through what we did last week—no water, no electricity, no food or medicine getting in? You'd have people killing each other to get into the supermarkets." And although he didn't say so, there would probably be a festival of rationing, price freezes, and market controls by whatever government entities were still around to make a bad situation even worse.

Beirut, however, is a curious contrast to that. Amidst the rubble, the people there are surviving in a siege economy that has spontaneously given rise to a semblance of a free market. The Lebanese civil authorities cannot control the bloodshed, let alone economic activity; so to the extent Beirutis are surviving, it is largely because of their own ingenuity and entrepreneurial skill. As the Los Angeles Times said, "It is in fact one of the oddities of this war—and one of the most telling features of Lebanese society—that West Beirut has not buckled under the Israeli siege."

According to the Times, food and fuel are expensive but available at prices that fluctuate with market conditions, which depend on the military situation. In mid-July, gasoline was available for about $4 a gallon, and fresh vegetables and eggs were finding their way into the city despite the blockade. A pound of green beans was going for $2, a bottle of drinking water for $4, and taxis were charging $40 an hour (although sometimes higher if it meant going through some of the worst war zones).

Stockpiling (or judicious hoarding) is far from unknown. The Lebanese, a resourceful people with a rich tradition of entrepreneurship and international trading, have stockpiled supplies in their basements and backrooms. One carpenter told an American reporter, "I've got 500 pounds of sugar. I've got meat, drinking water, everything. I don't have a thing to fear for a year. This is the real Lebanese way to do it." Indeed.

According to the Wall Street Journal, the economy of West Beirut runs on cash. Normal banking operations have been impossible since the Israeli invasion, and although most merchants accepted credit cards during the first month of the siege, that has generally disappeared.

The market for goods and services in Beirut is obviously far more precarious than any peacetime economy would be. But its very existence, like the survival of Beirutis, is akin to Samuel Johnson's description of "a dog's walking on his hinder legs. It is not done well; but you are surprised to find it done at all."


Two birds with one stone. According to an International Monetary Fund survey, those non-oil-producing developing countries that are most successful at curbing inflation are also enjoying relatively stronger economic growth. Contrary to the neo-Keynesians, you can have your cake and eat it too.

Don't blame deregulation. The Teamsters Union erred when it told Congress in June that trucking deregulation had cost the union more than 100,000 jobs and 416 trucking-firm failures. The General Accounting Office found that only 59 of those firms were federally regulated and had folded after the act's passage—and most of those were actually victims of the recession and the stiff competition that benefits consumers.

Creationists zapped. In June, a federal judge in Baton Rouge, Louisiana, threw out a lawsuit aimed at forcing the teaching of so-called creation science in Louisiana public schools. A separate ACLU lawsuit challenging creationism is now expected to move forward to a landmark decision on the issue.

Federal Reserve indicted. A federal grand jury in Utah has handed up a criminal indictment against the Federal Reserve System for issuing currency not redeemable by gold or silver coin, in violation of Article I, Section 10 of the Constitution. After the indictment was formally dismissed by a flabbergasted District Court Judge David Winder, a quorum of the grand jury was not daunted: they rewrote the document as a petition for a civil lawsuit against the Fed.

Scam up in smoke. Congress has passed and the president has signed legislation curtailing government subsidies for tobacco growers, which have cost some $600 million over the last 50 years. Tobacco allotment owners who don't actually grow the crop will have to give up their shares rather than lease them, and growers will have to contribute to a fund that pays most of the tobacco support program's costs.

Tax credit ruling. The Eighth Circuit Court of Appeals in St. Louis has upheld a Minnesota law that permits parents to deduct their children's private and parochial school tuition from gross income on their state income tax returns. Disagreeing with a First Circuit Court of Appeals decision, the St. Louis court rejected arguments that such laws violate the First Amendment's mandate for church-state separation. The issue will probably go to the Supreme Court.

Biggies back free trade. "U.S. executives have cast a resounding vote in favor of free trade," says pollster Lou Harris. In a survey commissioned by Business Week, only 19 percent of the top business executives surveyed believe that trade between Japan and the United States is "fair," but they are opposed by an overwhelming margin of 70 percent to steps to restrict Japanese imports.

Moonies over Minnesota. In a major decision on religious freedom, the Supreme Court struck down a Minnesota "anti-Moonie" law regulating religious groups that raise more than 50 percent of their money by asking the public for donations. Justice Brennan wrote for the Court that the law "distinguishes [unconstitutionally] between well established churches…and churches which are new and lacking in a constituency." Justice Rehnquist said in his dissent that members of the Unification Church have yet to prove that they are a legitimate religious group.

Forest trading. Interior Secretary James Watt is reportedly considering raising money to pay a $200-million bill for the expansion of Redwood National Park in California by selling large sections of nearby US Forest Service lands.