Tag: regulation

Government and Job Creation: Help or Hindrance?

I recently posted four charts eviscerating Obama’s record on jobs.

My Cato colleagues, Caleb Brown and Austin Bragg, have a good complement to those charts. They’ve put together a short video looking at how government spending and regulation undermine job creation.

Caleb says he will be doing more excellent videos like this, which is very encouraging since there is so much more ground to cover – particularly when trying to educate people in Washington.

One thing he should explain is that jobs don’t exist without profits. As I explained in a New York Post column last year, employers “only create jobs when they think that the total revenue generated by new workers will exceed the total cost of employing those workers.”

This seems like an elementary observation, but it’s one that most politicians don’t seem to understand. Or don’t care to understand.

That certainly seems to be the case at 1600 Pennsylvania Avenue. The president will speak tonight and supposedly will propose a $300 billion plan. He’ll claim, of course, that this new “stimulus” package will boost growth.

But a look at the various components that reportedly will be in his plan doesn’t create a sense of optimism. Especially since it appears that he’s mostly recycling proposals that already have failed at least once.

Maybe the President should copy the policies of a former resident of the White House, who also had to deal with a deep downturn, but managed to produce dramatically better results.

What’s a Conservatorship Good For?

A central reason that Fannie Mae and Freddie Mac have not played a bigger role in rescuing homeowners, or otherwise handing out “freebies,” is that these two companies are in conservatorship.

Conservatorship is almost like a bankruptcy proceeding, or a receivership in the banking context, but without the power to impose losses. I’ve been criticized for believing that a conservatorship requires Fannie’s regulator to “conserve” the company, and not simply allow it to be used as a slush fund. The basis of said criticism is that FHFA, Fannie’s regulator, has a broad public mission, which could include handing out freebies to underwater borrowers.

Matt Yglesias suggests that “clearly the purpose of creating the FHFA and taking Fannie and Freddie into conservatorship can’t have been to minimize direct taxpayer financial losses on agency debt.” Now, Matt makes a lot of Congress being vague in the statute. And he is correct about it being vague, in some areas, but it isn’t here.

As one of the two people (the other being Peggy Kuhn) who actually drafted that section of the Housing and Economic Recovery Act (HERA) during my time as staff on the Senate Banking Committee, I can clearly say the purpose of the drafters, in terms of conservatorship, was to nurse those companies back to health. Again, how do I know that? Because I was there.

Of course, if one simply read that section of the statute, Section 1145 of HERA, which amends Section 1367 of the 1992 GSE Act, one would clearly see what the purpose, duties, and role of a conservatorship actually is. For instance, what does the law say the powers of a conservatorship are? They are to ”take such action as may be—(i) necessary to put the regulated entity in a sound and solvent condition; and (ii) appropriate to carry on the business of the regulated entity and preserve and conserve the assets and property of the regulated entity.”

Now, I don’t see anything in there about handing out freebies to underwater borrowers. Citing an agency-written mission statement or a vague “purposes” at the beginning of an act is no substitute for actually reading the provisions of a statute.

2,000 Deaths per Year … for the Environment

Something as simple as the concept of tradeoffs can cause cognitive dissonance to good-hearted people who want too hard to drive the society toward their perception of the good.

A nice illustration of that is the cost in lives of making cars that use less gasoline. How can doing good for the environment possibly be harmful? Oh, it can be deadly.

Nicely illustrated by CEI’s Sam Kazman on John Stossel’s show.

Are Corporations People When They Make Video Games?

I note that I’m not hearing many critics of Citizens United decrying yesterday’s very welcome Supreme Court ruling, in which the majority held unconstitutional a California statute prohibiting the sale or rental of violent video games to minors. Perhaps that’s just because they’re concerned with corporate influence on elections as a policy matter, and not so much about Grand Theft Auto, but as a matter of First Amendment interpretation, it seems as though the elements that supposedly made Citizens United a travesty are present here.

As the conservative Justice Alito notes in dissent, for example, the statute at issue here does not prohibit anyone from creating, possessing, freely loaning, or playing violent video games: It regulates only their rental and sale. In other words: Money isn’t speech! The majority opinion—authored by Scalia, but joined by the Court’s most liberal justices—roundly rejects the relevance of that distinction, which “would make permissible the prohibition of printing or selling books—though not the writing of them. Whether government regulation applies to creating, distributing, or consuming speech makes no difference.” While, of course, money isn’t speech, the majority here understands that when the effect and purpose of a regulation is to restrict expression, the First Amendment is not some hollow formalism, and also limits regulation that functions by targeting enabling transactions rather than the speech directly.

None of the justices seem to make much of the obvious fact that the great majority of popular video games—and probably just about all of the ones exhibiting the level of graphical sophistication and realism at issue here—are produced, marketed, and sold by (uh oh) corporations. In fact, the passage quoted above focuses entirely on acts (“creating, distributing, or consuming”) rather than particular actors, just as the First Amendment itself prohibits government interference with speech not with this or that type of speaker. The Court simply observes that because the statute “imposes a restriction on the content of protected speech, it is invalid unless California can demonstrate that it passes strict scrutiny.” In dissent, Justice Thomas argues that the games are not “protected speech” in the context of the statute, because the Founders would have considered all speech directed at minors unprotected (a premise whose chilling implications the majority is quick to point out). Justice Breyer allows that video games—including violent ones—are indeed “protected speech,” but argues that studies linking them to violence are enough to give the state a “compelling interest” in limiting their dissemination. What nobody suggests, even in passing, is that video games might cease to be “protected speech” if the statute were limited to games manufactured and sold by corporations—which, in practice, is pretty much all the games we’re talking about.

Someone who welcomed this decision as a victory for free speech, but nevertheless supports regulation of independent political expenditures, can always take Breyer’s route: Maybe God of War III is not really harmful enough to make its prohibition a compelling state interest, but the degradation of democracy by corporate influence is a serious enough problem that its regulation survives “strict scrutiny,” overriding ordinary First Amendment protection even in the domain of political speech normally regarded as its core. That is not a position I find plausible, but it is at least coherent. The position I doubt can be made coherent is one according to which a prohibition of a commercial transaction instrumental to corporate-produced speech (and intended precisely to curtail that speech) should not even trigger First Amendment protections when the speech expresses a political opinion, whereas the same prohibition is unconstitutional if the speech is about Kratos impaling a minotaur on his Blades of Chaos. Though if that’s the form political expression has to take to enjoy constitutional protection, I look forward to the impending release of Palinfamous 2 and Barack Band III.

100,000+ Cribs May Be Headed for Dumpsters Today

Last December the Consumer Product Safety Commission (CPSC) adopted new standards for crib design, a step mandated by the famously overreaching Consumer Product Safety Improvement Act of 2008 (CPSIA). The commission decided to go well beyond a set of voluntary design standards that had been widely adopted the year before; it also chose to make the new rules retroactive, rendering unlawful the sale of many existing cribs whose overall safety record is otherwise acceptable—no one would think of subjecting them to a recall, for instance. Commissioner Nancy Nord:

The day care industry did protest that the rule, as proposed, would result in approximately a $1/2 billion hit to a group that could not immediately absorb costs of such magnitude, especially on the heels of having just bought new cribs to meet the standards of 2009. As a result, at the last minute just before finalizing the rule, the Commission agreed to amend the proposed rule to delay the effective date for this group by 18 months. There was no analysis behind this date; basically, it was pulled out of a hat.

Manufacturers and sellers fared less well, however, and were stuck with a deadline of June 28, 2011, that is, today. Commission staff predicted that retailers would not suffer significant economic harm, which turned out to be wrong, as the commission learned when they began hearing from “small retailers who are stuck with stranded inventory that they cannot sell, also asking for a delay,” according to Nord.

How much stranded inventory? Quite a lot, says Commissioner Anne Northup:

The retailers of these cribs, which the Commission deemed were safe enough to continue to be used for another two years in day care facilities, stand to lose at least $32 million dollars when they are required to throw out noncompliant cribs on June 28.

That’s a lot of landfill space that may be needed in coming days. Nord again:

An internal survey of 5 retailers found that those companies had at least 100,000 non-complying cribs in inventory. A survey done by a trade association representing one part of the small retailer community found that 35 companies had 17,500 cribs that cannot legally be sold in two weeks.

Retailers pleading for a longer transition period got no mercy from the hard-line pro-regulation Commission majority led by Obama appointee Inez Tenenbaum. In a similar way, the much vaster stranded-inventory problems and compliance nightmares engendered by CPSIA as a whole keep getting worse rather than better, due to an equally obdurate attitude from the commission’s current leadership and its Democratic allies in Congress. Politically and with the press, there seems to be little downside in striking cost-no-object For the Children postures, even if the result is to place untenable burdens on the sorts of local shopkeepers and service providers who specialize in meeting the everyday needs of children.

Related, at my website Overlawyered: “Thanks for standing by for eight months after we told you to stop selling your infant slings pending a recall. We’ve decided no recall is needed. What, you’re out of business? Never mind.”

Don’t Let the Aphorism Be the Enemy of Thought

I am often told that pointing out the serious shortcomings of government-funded school vouchers and the relative superiority of education tax credits is a case of “making the perfect the enemy of the good.”

It’s isn’t.

That is a misapplication of Voltaire’s famous aphorism. What the aphorism exhorts is that we not pursue an unattainable perfection when a good alternative is within reach. Education tax credits are not only attainable, they are usually easier to obtain than vouchers. Consider a recent example: Pennsylvania’s state House has voted 190 to 7 to expand its existing EITC tax credit program while the state Senate has been deadlocked for weeks looking for the bare minimum of votes to pass a voucher bill.

On top of that, it is dubious to cast vouchers as “the good” when they will expand the scope of compulsion of taxpayers to funding many new types of schooling to which they might well object, impose heavy new regulations on private schools (homogenizing the available “choices”), and more pervasively curtail direct payment by consumers in favor of third party government payment.

Even those who may not be fully convinced that vouchers are inferior should pause before trying to enact them in states that already have education tax credit programs with good growth prospects. Why make the dubious the enemy of the pretty darned good?

Yes, Says Virginia, There Are Limits on Federal Power

Today, the Fourth Circuit became the first appellate court in the nation to enter the Obamacare fray.  It heard two very similar cases back-to-back, Liberty University’s, in which the government won in the district court, and the Commonwealth of Virginia’s, in which Judge Henry Hudson struck down the individual mandate back in December.  Going into the hearing, Virginia Attorney General Ken Cuccinelli’s legal team had done a wonderful job setting out the reasons why Hudson was correct and why Congress went too far in asserting the unprecedented power to compel people to enter into contracts with private insurance companies.  I was proud to sign Cato’s brief supporting that position and continue to maintain that the federal government cannot require people to buy goods or services under the guise of regulating interstate commerce.  Moreover, the individual mandate is the linchpin of the overall legislative scheme (as everyone concedes), so if it falls, the rest of the law—at least its central provisions—must fall with it.

Indeed, the Fourth Circuit judges—a Clinton appointee and two Obama appointees, in a random selection unfortunate to the challengers—struggled with the idea that Congress could regulate “inactivity.”  The government—which has now determined that the challenges are so serious as to send the solicitor general to argue in lower courts—claimed that Congress can do anything it wants relating to anything that in any way affects a national market such as that for health care.  Given that decisions not to buy insurance, or to self-insure, or not to pay for health care until presented with a bill, clearly have a substantial effect on interstate commerce, the argument went, Congress can require people to buy health insurance.  The judges seemed to agree to a certain extent but were still troubled by the textual truism that a power to “regulate” implies an active object or activity that is being regulated.  And indeed, if a “decision” not to buy something or the state of not having acquired something is all that is required to invoke congressional jurisdiction, then the Constitution’s enumerations of federal power mean absolutely nothing.

The government is understandably unconcerned with articulating a principled limit on its own power, and this particular panel of judges may find some way to avoid dealing with the activity/inactivity conundrum, but one can only hope that the Supreme Court ultimately rejects the claim that Congress can grant itself unlimited power simply by legislating in an area of great national concern.

Starting at 2pm Eastern, you can stream the oral arguments from the Court’s website here.