Topic: Regulatory Studies

Congress Is Getting a Special Exemption from ObamaCare—and No, It’s Not Legal

The Heritage Foundation’s John Malcolm and I have a new oped where we draw from newly uncovered to documents to show that the officials who bestowed upon Congress its own special exemption from ObamaCare likely violated numerous federal laws. Malcolm is a former assistant U.S. attorney, a former deputy assistant attorney general in the Department of Justice’s Criminal Division, and the current chairman of the Criminal Law Practice Group of the Federalist Society.

First, a little background. The Affordable Care Act threw members and staff out of the Federal Employees Health Benefits Program, and basically says they can only get health benefits through one of the law’s new Exchanges. Under pressure from Congress and the president himself, the federal Office of Personnel Management (which administers benefits for federal workers, including Congress) decided the House and Senate would participate in the District of Columbia’s “Small Business Health Options Program,” or “SHOP” Exchange, rather than the Exchanges that exist for individuals. The reason is that federal law would not allow members and staff to keep receiving a taxpayer contribution of up to $12,000 toward their premiums if they enrolled in individual-market Exchanges. Yet putting Congress in a small-business Exchange isn’t exactly legal, either. Both federal and D.C. law expressly prohibited any employer with more than 50 employees from participating D.C.’s SHOP Exchange. The House and Senate each employ thousands upon thousands of people.

Overtime Brings House Democrats Woe

Well, isn’t this a shame:

Brad Fitch, president and CEO of the Congressional Management Foundation, told Bloomberg BNA Feb. 16 that House “Democratic chiefs of staff are freaking out” about finding room in their budget for overtime wages.

It’s not clear whether the Obama administration’s forthcoming edict on overtime will apply to legislative staffers, but House Democratic leadership decided it would be prudent for their members to at least gesture toward the spirit of the controversial rule by preparing for compliance. [BNA Daily Labor Report] Now “the rule is creating administrative headaches” and more:

“We don’t have a set-hour kind of situation here; some kids work 12, 14, 16 hours a day, weekends, and I feel terrible that I cannot afford to give raises to the staff,” Rep. Alcee Hastings (D-Fla.) told Bloomberg BNA Feb. 11.

With $320,000 slashed from members’ representational allowances (MRAs) over the past four years, “I don’t see how we could pay overtime” for the “17 or 18 people that each of us is allowed to have—that’s problematic for me,” added Hastings, a senior member of the House Rules Committee.

Some members fear that an overtime mandate will result in having to send staffers home at 5 p.m., leaving phones unanswered and impairing constituent service. “Most members are of the sentiment that it’s impractical to be paying overtime,” said former Virginia Democratic Rep. Jim Moran, now a lobbyist, who suggests that members choose to close one of their district offices or reduce constituent correspondence to adjust to a smaller staff number.

If only there were some way for the U.S. Congress to influence federal labor law!

[cross-posted, slightly adapted, from Overlawyered]

Balancing the Federal Budget

Donald Trump says, “we’ve got to start balancing budgets,” and promises that he is “going to cut spending big league.” Trump provides few specifics, but his impulse is certainly commendable.

Ted Cruz offers a much more detailed plan, which includes abolishing four cabinet departments and a couple dozen agencies and programs. The presidential candidate is right that the “current and projected rates of government growth are unsustainable, irresponsible, and constitutionally indefensible.”

Large spending cuts should be on the agenda when the next president enters office in 2017. Spending cuts would spur economic growth by shifting resources from lower-valued government activities to higher-valued private ones. Cuts would expand freedom by giving people more control over their lives and reducing the regulations that come with spending programs.

What should the next president cut? I have updated a plan at DownsizingGovernment to cut dozens of agencies and programs across the budget. I’ve included cuts to entitlements, business subsidies, aid to the states, and other items. The cuts would not only balance the budget and begin reducing the government’s massive debt, but they would also enhance our civil liberties by dispersing power from Washington.

See the new spending cut plan here.

Will a Robot Steal Your Job?

Yesterday, The Guardian published a provocative opinion piece titled, “Are Robots Going To Steal Your Job? Probably.” 

At first glance, the author’s pessimism would seem justified. From robotic gardeners and farmers to robotic pizza delivery services, it seems like every day robots make new forays into jobs traditionally done by humans. 

But pause to consider technology in historical perspective. Pessimism about new technologies is not new. In 1918, people decried automobiles for destroying the livery stable business. In the early 1800s, frustrated textile workers known as “Luddites” famously smashed apart mechanized looms. The Guardian author himself admits that his fears echo those of the Luddites: 

This is not a new concern. Since at least as early as the time of the Luddites, in early 19th-century Britain, new technologies have caused fear about the inevitable changes they bring. 

The Luddites and livery stable proprietors were correct to realize that new machines would utterly change their industries, but they failed to appreciate the overall effects of new technologies on human wellbeing. 

Banning mechanized looms would have prevented everyone from enjoying cheaper clothing. Similarly, banning automobiles would have robbed everyone of enjoying modern transportation. 

It is certainly true that technological change makes some jobs obsolete, but it has also made humanity better off in many ways. Importantly, it has led to the creation of new jobs. 

In fact, technological progress tends to create more jobs than it destroys. The new jobs tend to be better, while the eliminated jobs tend to be difficult and dangerous. 

The debate over the precise ways in which robots will affect human employment, productivity, incomes, leisure time, and living standards rages on. Cato’s upcoming forum, “Will a Robot Take Your Job?” will tackle these questions and more. Please consider registering here.

Sens. Paul and Markey Propose Drone Restrictions

The MQ-9 Predator drone is probably best known as a tool of American foreign policy. Since 2002 the Bush and Obama administrations have used unmanned aircraft such as the predator in missions that have (according to New America) resulted in the deaths of hundreds of civilians and thousands of militants in the ongoing War on Terror.

However, Customs and Border Protection (CBP) has used predator drones in American airspace, albeit with limited success. As my colleague Patrick Eddington pointed out in September last year, CBP has a poor track record when it comes to using drones. At the end of 2014 the Department of Homeland Security’s Inspector General found

Although CBP anticipated increased apprehensions of illegal border crossers, a reduction in border surveillance costs, and improvement in the U.S. Border Patrol’s efficiency, we found little or no evidence that CBP met those program expectations.

In a blunt press release issued last year the Department of Homeland Security’s Inspector General’s office said that it  ”recommends that CBP abandon plans to spend $443 millionmore on additional aircraft and put those funds to better use.”

Two senators recently singled out border patrol drones for special treatment in proposed legislation that would restrict the government’s use of drones.

An amendment to the FAA Reauthorization Act of 2016 proposed by Sens. Rand Paul (R-KY) and Edward Markey (D-MA) would prohibit the government from using drones to “gather evidence or other information pertaining to criminal conduct or conduct in violation of a statute or regulation or for intelligence purposes except to the extent authorized in a warrant.”

Sen. Warren: My Opponents Keep “Saying Whatever They Want About Washington Policy Debates”

Sen. Elizabeth Warren (D-Mass.), as the business press reports, “is calling on the Securities and Exchange Commission to investigate several critics of the Department of Labor’s fiduciary rule, claiming they misled investors through duplicitous statements.”  It seems several large financial businesses have decried the pending rule as unworkable and seriously harmful to the retirement industry, but have also, in conference calls with investors, said they expected continued growth and profitability even if the rules go through. In a typically aggressive move, Warren cited by name four companies she wanted investigated for these statements, and wrote: “Corporate interests have become accustomed to saying whatever they want about Washington policy debates, with little accountability when their predictions prove to be inaccurate.”

It’s unsettling, to start with – as critics were prompt to note – that a powerful Senator should seek legal consequences for private actors whose “predictions” in Washington policy debates “prove to be inaccurate.” Predictions about effects are the standard way of arguing about public policy – one side predicts, say, that a certain change in policy will cause a slowdown in business or make some good more costly, the other side predicts it won’t, and eventually we find out who was wrong. Pundits, social scientists, and Senators themselves regularly offer predictions that prove wildly inaccurate, yet ordinarily without legal as distinct from reputational consequences.

Let’s assume – okay, let’s pretend – that Warren’s goal here is not to chill the speech of companies that are vocally criticizing one of her own pet policy projects. Let’s imagine that her sole concern is for the well-being of the SEC’s formal constituency, investors. (It’s like pretending that when the Attorney General of New York investigates ExxonMobil for not telling investors that fossil fuel use is destroying the world, it’s really shareholder welfare that’s on his mind.) Would it actually make her happy if the four financial companies dropped the happy talk with Wall Street and said, yes, the Labor rule could mess up our business in important ways that we can’t fully understand or predict? Even if that increased the volume of opposition to the rule by causing shareholders to take alarm? 

America’s Economic Problem Is Regulation, not Trade

Even when Donald Trump seems to get something right, he’s mostly wrong. At least when it comes to economics.

Many Americans are suffering financially. Yet the problem is not trade: Americans have grown wealthy as a trading nation. In contrast, regulation has done much to harm U.S. competitiveness.

The Obama administration is busy writing new rules to turn America into its vision of a good society, irrespective of the impact on liberty or prosperity. Last year Uncle Sam spent $62 billion to run the rest of our lives.

Observed Patrick McLaughlin and Oliver Sherouse of the Mercatus Center: “Over the last 20 years the regulatory budget has more than doubled in real terms while the number of total restrictions has grown by about 220,000—a 25 percent increase.”

The problem is not only the expense of enforcement. Far greater is the cost of the impact on the economy.

Last year Clyde Wayne Crews of the Competitive Enterprise Institute assessed the impact of regulation in his working paper entitled “Tip of the Costberg.” He figured the total price of regulation to be $1.88 trillion.

However, these figures almost certainly are too low. Crews argued: “Too often, regulatory impacts don’t get measured. But further, the disruption of market processes and the derailment of wealth, safety and health creating processes themselves are for the most part wholly neglected.”

Regulatory costs play out in many ways. One aspect is what an individual or company spends to comply with government dictates. Far harder to measure is what does not occur as a result of arbitrary and expensive rules. What products are not launched, what enterprises are not started, what jobs are not created?

Of course, regulations theoretically are promulgated because they yield net benefits after costs. However, agencies have an incentive to inflate the value of what they are doing. That means exaggerating problems and “social costs,” overstating alleged benefits, and discounting compliance costs.

Overall how much have we lost from excessive, unnecessary regulation? A lot, according to economists John W. Dawson and John J. Seater.

They considered the cumulative impact of losing a couple percent of economic growth year in and year out from 1949 through 2005: “That reduction in the growth rate has led to an accumulated reduction in GDP of about $38.8 trillion as of the end of 2011. That is, GDP at the end of 2011 would have been $53.9 trillion instead of $15.1 trillion if regulation had remained at its 1949 level.”

Increased regulation also contributes to increased inequality. In January McLaughlin and Laura Stanley of Mercatus concluded that such rules “skew income toward politically connected producers and away from individual who lack the resources necessary to navigate the legal and regulatory framework.” 

Finally, there is the issue of lost liberty. Crews released a second study last year entitled “Mapping Washington’s Lawlessness 2016.” It reviewed what he termed “regulatory dark matter.”

The regulatory process is essentially lawless, beyond the normal accountability of a democratic system. As Crews explained: “Congress passes and the president signs a few dozen laws every year. Meanwhile, federal departments and agencies issue well over 3,000 rules and regulations of varying significance. A weekday never passes without new regulation. Beyond those rules, however, we lack a clear grasp on the amount and cost of the thousands of executive branch and federal agency proclamations and issuances, including memos, guidance documents, bulletins, circulars, and announcements with practical regulatory effect.”

Americans are suffering. But closing off the economy is no answer to them.

As I pointed out in American Spectator online: “Policymakers should address federal, state, and local governments which are doing so much to prevent American companies from out-competing foreign operations and rewarding Americans accordingly. These are the bad policies to blame for creating today’s economic problems and imposing widespread financial hardship, thereby fueling the populist Trump bandwagon.”