Topic: Government and Politics

Government Exceeds Its Powers in Enforcing the Endangered Species Act

“It is not rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits,” the Supreme Court held last year in Michigan v. EPA.It seems that the U.S. Fish and Wildlife Service (USFWS) did not get the message, with its willy-nilly imposition of significant economic costs when designating “critical habitat” for endangered species.

A California builders’ association is now asking the Court to establish that judicial review is available for individuals and businesses affected by these agency actions that purport to enforce the Endangered Species Act (ESA). The ESA specifically requires federal agencies to take economic impacts into consideration, but the USFWS routinely ignores the costs of designating land as a critical habitat. The San Francisco-based U.S Court of Appeals for the Ninth Circuit held that the designation of critical habitat is an action fully committed to agency discretion, and that it may ignore any cost implications at its leisure, but this would seem to contradict Michigan v. EPA and other precedent.

The USFWS employs a cost-benefit accounting method called “baseline analysis,” which separates the impacts that would occur absent designation (baseline impacts) from the impacts attributable to designation (incremental impacts). It then only considers the incremental impacts, despite enormous disparities between baseline and incremental costs—one order of magnitude or two—and fanciful estimates that the economic impact of critical habitat designation is often $0.

Cato, joined by the Reason Foundation and National Federation of Independent Business, filed an amicus brief urging the Supreme Court to take up this important question of whether courts can even review the government’s Enron-style of cost-benefit analysis. Independent research by Reason’s Brian Seasholes found that in examining 159 of the 793 species that have critical habitat designation, there are at least $10.7 billion in economic impacts, hundreds of jobs lost per species designated, and regulatory burdens affecting 60,169,546 acres of land (11,261,054 privately owned) spanning 37 states and two territories.

The Supreme Court Misread Constitutional History Regarding “One Person, One Vote”

Two months ago, the Supreme Court ruled that states have leeway in determining how to draw their legislative districts, more specifically that they don’t have to equalize the number of voters per district to satisfy the constitutional principle of “one person, one vote.” The decision was really a “punt,” not resolving the tensions between “representational equality” and “voter equality”; it’ll take some future case after the next census to force the justices to face the issues left unresolved. 

Former Cato intern (and future legal associate) Tommy Berry and I have now published an essay in the Federalist Society Review explaining how the Court “shanked” that punt by misreading constitutional structure and application. Here’s a sample (footnotes omitted):

In Evenwel, the Court decided that it is acceptable for a state to ignore the distinction between voters and nonvoters when drawing legislative district lines. According to the Court, a state may declare that equality is simply providing representatives to equal groups of people, without distinction as to how many of those people will actually choose the representative. A state may use this constituent-focused view of equality because “[b]y ensuring that each representative is subject to requests and suggestions from the same number of constituents, total-population apportionment promotes equitable and effective representation.”

But ignoring the distinction between voters and nonvoters achieves a false picture of equality at the expense of producing far more serious inequalities. Rather than placing nonvoters and voters on anything approaching an equal political footing, it instead gives greater power to those voters who happen to live near more nonvoters, and less power to those who do not.

As we argued before the decision came down, the framers of the Fourteenth Amendment recognized that granting such extra voting power runs the risk of harming the very nonvoters to whom it ostensibly grants representation. This recognition manifested itself in the enactment of the Fourteenth Amendment’s Penalty Clause. In both ignoring that clause and oversimplifying the debates over the Fourteenth Amendment, the Court’s opinion paints an incomplete picture of constitutional history.

Read the whole thing. For more, see Tommy’s blogpost on our article, as well as our earlier criticism of Justice Ginsburg’s majority opinion for misreading the Federalist Papers.

Members of Congress Introduce Cato ‘Large HSAs’ Concept

WASHINGTON, DC - JANUARY 29: (L-R) Sen. Jeff Flake (R-AZ), and Sen. Patrick Leahy (D-VT) speak at a press conference on Cuba at the U.S. Capitol January 29, 2015 in Washington, DC. Flake is introducing legislation with bipartisan support that would lift a longstanding ban on U.S. citizens traveling freely to Cuba. (Photo by Win McNamee/Getty Images)

Sen. Jeff Flake (R-AZ), Rep. Dave Brat (R-VA), and other members of Congress have introduced legislation based on the “Large HSAs” concept I first proposed here and developed herehereherehere, and here.

The “Health Savings Account Expansion Act” (H.R. 5324S. 2980) would expand the availability and benefits of tax-free health savings accounts (HSAs) in several ways. It would nearly triple existing HSA contribution limits from $3,400 for individuals and $6,750 for families to $9,000 and $18,000. It would allow tax-free HSA funds to purchase health insurance, over-the-counter medications, and direct primary care. It would eliminate the mandate that HSA holders purchase a government-designed high-deductible health plan. And it would repeal ObamaCare’s increase of the penalty on non-medical withdrawals. Americans for Tax Reform and FreedomWorks have endorsed the bill.

I’m sure I will have lots to say about Flake-Brat, but here are a few initial impressions.

  1. Flake-Brat would free workers from the government program we call employer-sponsored insurance—but only if that’s what workers want. The federal tax code currently tells the average worker with family coverage she can either surrender $13,000 of income to her employer and let her employer choose her health plan, or surrender a huge chunk of that money to the government by paying income and payroll taxes on it. The Flake-Brat bill would allow her to keep that money and either save it, use it to stay on her employer’s health plan, or use it to purchase better coverage somewhere else, all tax-free. The choice would belong to her, not to Congress or the IRS.
  2. Flake-Brat is a bigger tax cut than you’ve ever seen.  Large HSAs would be the largest-ever scaling back of the federal government’s role in health care. The Flake-Brat bill is effectively a $9 trillion tax cut. That’s how much money the current tax exclusion for employer-sponsored insurance will divert from workers to their employers over the next decade. Flake-Brat would return that money to the workers who earned it. Flake-Brat is thus an effective tax cut equal to all of the Reagan and Bush tax cuts combined. It is nine times the size of the tax cut associated with repealing ObamaCare.  Unlike health-insurance tax credits, Large HSAs involve no government spending and would not mandate that taxpayers purchase health insurance, as existing HSAs and health-insurance tax credits do. (The bill and its sponsors describe that requirement as a “mandate.”)
  3. Flake-Brat would make health care better, more affordable, and more secure. It would do so by dramatically reducing government’s influence over the health care sector. By shifting from employers to consumers nearly a quarter of the $3 trillion Americans spend annually on health care, Large HSAs would begin to make the health care sector and health policy respond to the needs of patients. Large HSAs are also less restrictive than existing HSA law or health-insurance tax credits. As a replacement for ObamaCare, Large HSAs would encourage innovative products like pre-existing conditions insurance that make coverage more affordable and secure.
  4. Flake-Brat shows Congress could create Large HSAs with or without repealing ObamaCare. Large HSAs are the most promising ObamaCare replacement plan to date, but Congress can create them before it repeals ObamaCare. The Flake-Brat bill would create Large HSAs even with ObamaCare still on the books. In fact, Flake-Brat would build support for repealing ObamaCare by exposing consumers to the full cost of its hidden taxes.
  5. Flake-Brat is a marker. The Flake-Brat bill defers consideration of a number of issues. All else equal, expanding tax breaks for HSA contributions would reduce federal revenues and increase federal deficits and debt. Like any proposal to level the playing field between employer-sponsored coverage and other coverage, the bill creates the potential for employer plans to unravel as (healthy) people choose better options. Were Congress to enact Flake-Brat with ObamaCare still on the books, there could be even more complicated interactions. The bill doesn’t totally level the playing field, either. Everyone would get an income-tax break, but only those with an employer who facilitates HSA contributions would get the payroll tax break. (Large HSAs can completely level the playing field with a simple tax credit that mimics that exclusion for such workers.) The authors don’t address these issues in the bill, or their supplemental materials. They will have to address them at some point. Fortunately, there are solutions. (For more on those solutions, see the “developed” links in the second paragraph.)

All in all, the Flake-Brat bill is a much-needed addition to the debate over the future of American health care.

Johnson and Weld Are Right, Clinton Is Wrong: Congress Should Privatize the VA

Listening to Hillary Clinton put her big-government ideology before the needs of veterans (see below video) brings to mind an email exchange I had recently with a correspondent who had questions about privatizing Medicare, Medicaid, and the Veterans Health Administration.

The video is an interview with Libertarian presidential and vice presidential candidates Gary Johnson and Bill Weld into which MSNBC interjected a telephone interview with Democratic candidate Hillary Clinton. Clinton protests (starting at 4:20) that Congress should not privatize the VHA, while Bill Weld, a former two-term Republican governor of Massachusetts, gives one of the best explanations I’ve seen of why it should (10:00).

The email exchange follows the video.

Wanna Fight Superbugs? Stop Overprescribing Government

PHILADELPHIA, PA - JUNE 15: Dr. Ezekiel Emanuel speaks onstage at the Klick Health Ideas Exchange on June 15, 2015 in Philadelphia, Pennsylvania. (Photo by Neilson Barnard/Getty Images for Klick Health)

Ezekiel Emanuel notices that inflated demand for antibiotics has led to overuse, and that antibiotic-resistant infections may be killing 23,000 Americans per year. He notices the pharmaceutical industry is focusing more on expensive non-cures for cancer that only extend life by months than on new antibiotics. But he hasn’t noticed that government intervention is causing these problems, so he thinks the solution is—you guessed it—even more government.

Government Inflates Demand for Antibiotics

In the Washington Post, Emanuel warns that “high patient demand leads to overprescribing” of antibiotics, which “breeds resistance” and can lead to superbugs against which we humans have no defenses.

Yet the main reason patient demand is so high is that the federal government—through Medicare, Medicaid, the tax code, Emanuel’s beloved ObamaCare, and other measures—have anesthetized patients to the cost of antibiotics and everything else. We would have less antibiotic overuse and resistance if government just let people keep their own money to spend on health care.

Government Distorts Pharmaceutical Research

Emanuel then complains pharmaceutical manufacturers are spending far more money to research and develop cancer treatments that only add a few months to cancer patients’ lives (and cost more than $100,000 a pop) that they spend developing lower-cost antibiotics.

If this state of affairs fails to reflect patients’ preferences, perhaps the reason is that Medicare offers to make drug companies and oncologists fantastically wealthy by paying for cancer treatments regardless of value.

Overprescribing Government

Rather than admit that government can be incompetent to the point of contributing to the problems it is trying to solve—as his fellow Obama-administration alumnus Larry Summers does—Emanuel doubles down on the Big Government ideology. He proposes requiring hospitals to track antibiotic (over)use as a condition of receiving Medicare subsidies.

Does it occur to Emanuel that a Medicare program stupid enough to subsidize five decades of antibiotic overuse might not be competent enough to track, much less solve that problem?

Next, Emanuel illustrates why the passive voice should be unconstitutional: “every antibiotic prescription should be electronically reviewed to be certain it meets national guidelines.” Like many devotees of the passive voice, Emanuel employs it to hide what he means, which is: “The federal government and its agents should review every antibiotic prescription you and your family receive, even when the government isn’t paying for it.”

What could possibly go wrong? I mean, can you imagine any reasons why people might want a little privacy when it comes to their use of antibiotics? Emanuel can’t—or he doesn’t care.

Finally, he proposes to have the federal government award $2 billion prizes to anyone who secures FDA approval for a new antibiotic. A system of prizes might actually do a better job than the federal government’s patent system of encouraging antibiotics R&D. But Emanuel does not address such thorny questions as who gets to define which new antibiotics will qualify; who sets the amount of the prize; what sort of complications financing the prizes would create; how this award would affect the FDA, and lobbying of the FDA; or whether the net effect of this system would be positive or negative.

Ezekiel Emanuel has no time for such trifles. He’s got himself a hammer, and by God he’s found a nail.

Conclusion 

Government is like antibiotics. Some amount is necessary. But overprescribing it makes things a lot worse.

A good indication you’ve overdosed on the statist Kool-Aid is when you make dismissive comments like this one Emanuel levels at current antibiotic-tracking programs: “Unfortunately, they are voluntary.”

Big Bureaucracies Beget Bad Behavior

One of the problems with big government is that it stimulates the worst sort of behavior from people and attracts legions of cheaters on the inside and outside.

On the outside, the more than 2,300 federal subsidy programs are under constant assault by dishonest individuals, businesses, and criminal gangs. The improper payment rates for the earned income tax credit and school breakfast programs, for example, are more than 20 percent. Medicare and Medicaid are ripped off by tens of billions of dollars a year. It’s a sad reality that when the government dangles free money, millions of people will falsify application forms to try and get some of it.

Five Facts about the Minimum Wage

1. A dozen California metropolitan areas – including big cities like Fresno, Stockton, Bakersfield and Modesto – already have unemployment rates from 8.0% to 18.6%. Yet California’s statewide minimum wage is now scheduled to rise every year through 2022.

2.  News reports imagine that raising the minimum wage will push up other wages, so average wages would supposedly rise more quickly. On the contrary, three of the four most recent increases in the federal minimum wage were quickly followed by prolonged stagnation in average wages.  change in avg and min wage

3. In 2015, twice as many earned less than the $7.25 federal minimum wage (1,691,000) as the number paid that minimum wage (870,000).

4. Every time the federal minimum wage has been increased the number earning less than that minimum always increased dramatically.  This was not just true of teenagers but (as the graph below shows) also for those over 25.  When the minimum wage is pushed up faster than the market would have moved it, the effect is to greatly increase the proportion of jobs paying less than the minimum (including working for cash in the informal economy).  Employers offering less than the minimum, legally or otherwise, then enjoy a flood of unskilled applicants unable to compete for scarcer opportunities among larger businesses subject to minimum wage laws. Such intensified rivalry for sub-minimum-wage jobs then pushes the lowest wages even lower.more were paid less than min when min wage went up

 5. Regardless of federal, state or city laws, the actual minimum wage is always zero.