Topic: Regulatory Studies

White House Cites Cato in Report on Occupational Licensing

Occupational licensing needlessly regulates scores of workers in the United States. Indeed, despite years of criticisms from economists, the percentage of workers required to hold a license has risen substantially in recent years. The Cato Institute has been talking about the problem for years. But some of our readers might be surprised to see the latest critics: A recent White House report critiquing and evaluating  licensing requirements, Occupational Licensing: A Framework for Policymakers. We’re particularly pleased that the report cited both an essay in Cato’s monthly online magazine, Cato Unbound, and one of the entries in Cato’s online forum, “Reviving Economic Growth,” which will soon be published as an ebook.  

The White House report, which was prepared by the Department of the Treasury Office of Economic Policy, the Council of Economic Advisers, and the Department of Labor, documented the massive growth of licensing in the last few decades. Over a quarter of U.S. workers now need licenses to do their jobs, and the percent of workers who need state-issued licenses has increased five-fold since the 1950s. The report concluded that this can harm employment opportunities and inflate costs for consumers. It also disproportionately affects certain populations, including immigrants and anyone with a criminal history.

The report cited Mercatus Center scholars Tyler Cowen and Alex Tabarrok, who argued against the effectiveness of licensing in “The End of Asymmetric Information” for Cato Unbound. “Yelp, Angie’s List, and Amazon Reviews all make it easy for past buyers to report their observations on seller quality and for future buyers to observe a seller’s accumulated reputation,they wrote. Thus, they said, one of licensing’s supposed benefits, helping consumers identify quality work, is becoming obsolete.

Regulation, Competition, and “Antibiotic-free” Chicken

In an effort to distinguish itself from competitors, poultry producer Perdue recently ran advertisements touting its “no antibiotics ever” line of chicken products. This is not just another corporate ad campaign; the story goes deeper than that, as the New York Times recently reported. At issue is the definition of what makes poultry “antibiotic free.”

Poultry companies like Perdue and its main competitors, Tyson and Foster Farms, have long used antibiotics important to humans in the raising of chickens. Many scientists have advocated a ban on routine (non-disease) use of antibiotics in the raising of food animals because of concerns that such use will hasten the evolution of antibiotic-resistant bacteria. In 2012 the Food and Drug Administration issued nonbinding regulatory guidance on using human-important antibiotics in livestock.

Companies other than Perdue continue to use animal-only antibiotics called ionophores. Even if the FDA regulatory guidance was instead a legally binding regulation, such antibiotics would not be banned because they are not “human-important,” hence Perdue’s move to use the term “no antibiotics ever” in marketing its products.

Of Rotten Eggs and Guilty Minds

It isn’t every day that a person can go to his or her job, work, not participate in any criminal activity, and still get a prison sentence. At least, that used to be the case: the overcriminalization of regulatory violations has unfortunately led to the circumstance that corporate managers now face criminal—not just civil—liability for their business operations’ administrative offenses.

Take Austin and Peter DeCoster, who own and run an Iowa egg-producing company called Quality Egg. The DeCosters plead guilty to violating certain provisions of the Food, Drug, and Cosmetic Act because some of the eggs that left their facilities contained salmonella enteritidis, a bacterium harmful to humans. They were sentenced to 90 days in jail and fined $100,000 for the actions of subordinates, who apparently failed, also unknowingly, in their quality-control duties.

In other words, the “crime” that the DeCosters were convicted of didn’t require them to have put eggs with salmonella into interstate commerce, or even to have known (or reasonably been able to foresee) that Quality Egg was putting such eggs into interstate commerce. It didn’t even require the quality-control operator(s) most directly involved in putting the contaminated eggs into interstate commerce to have known that they were contaminated.

Texas Regulators Bark Up the Wrong Tree

For almost 50 years, Dr. Ronald Hines has been a licensed veterinarian in Texas. After a spinal cord injury prevented him from continuing to provide in-person services, Dr. Hines started a website to provide advice on pet care. He never tried to be an animal’s primary veterinarian—he noted a disclaimer to that effect—and did not prescribe medication. 

After a decade of such practice without any complaints or problems, the Texas State Board of Veterinary Medical Examiners charged Dr. Hines with violating state law by failing to be physically present at the location of the pets before providing veterinary services. The U.S Court of Appeals for the Fifth Circuit upheld this restriction on Dr. Hines’s speech because, according to the court, any speech by a professional within the scope of his profession directed toward an individual’s circumstances isn’t protected by the First Amendment. 

Dr. Hines has asked the Supreme Court to review the case and Cato has filed a brief supporting that petition, joined by the Mackinac Center for Public Policy. 

The Fifth Circuit erroneously construed the Texas regulations as governing nonspeech conduct that only incidentally impacted speech. But everything that Dr. Hines did was speech!—there was no nonspeech conduct to regulate. Even if the regulations were content-neutral restrictions that incidentally restricted speech, the restrictions should have been reviewed under heightened scrutiny—meaning that the government would need to show a strong justification for its enforcement action. But the restrictions at issue here are explicitly content-based: Dr. Hines could’ve talked about any topic he wanted, except the topic of veterinary care. 

Under the lower court’s logic, the following people would be unknowingly violating Texas law: Dr. Sanjay Gupta provides health information online; Loveline Radio provides relationship and drug-addition advice; The Mutual Fund Show provides financial advice; in addition to radio talk shows on pet care. All these people, and many others, would be expected to know and follow the detailed regulations of every single state. 

The physical examination requirement doesn’t even make sense as a matter of basic veterinary practice. It only requires that vets visit a location, not that they actually examine a particular animal. It prevents a vet’s colleague from relying on notes and records when the primary-care vet is unavailable. Dr. Hines couldn’t even tell a client that her pet’s condition sounded serious and so the owner should, say, not let the animal drink water and bring it to him right away. 

Moreover, someone who wasn’t a licensed veterinarian could have provided the same advice as Dr. Hines without a problem; the law prohibits good information from qualified individuals while allowing unqualified individuals to give bad advice. The regulation just ends up hurting the poor, who can’t afford to travel to Dr. Hines, and practically creates geographic limitations on speech. 

The Supreme Court should take up Hines v. Alldredge and protect basic First Amendment rights in the context of occupational regulation.

King v. Burwell: How the Supreme Court Helped President Obama Disenfranchise His Political Opponents

Criticizing my recent post-mortem on King v. Burwell, Scott Lemieux kindly calls me “ObamaCare’s fiercest critic” for my role in that ObamaCare case. Other words he associates with my role include “defiant,” “ludicrous,” “farcical,” “dumber,” “snake oil,” “ludicrous” (again), “irrational,” “aggressive,” “comically transparent,” and “dishonest.”

Somewhere amid the deluge, Lemieux reaches his main claim, which is that (somehow) I admitted: “the King lawsuit wasn’t designed to uphold the statute passed by Congress in 2010. It was intended to ‘enfranchise’ the people who voted against the bill.” I’m not quite sure what Lemieux means. But perhaps Lemieux doesn’t understand my point about how the Supreme Court helped President Obama disenfranchise his political opponents.

As all nine Supreme Court justices acknowledged in King, “the most natural reading of the pertinent statutory phrase” is that Congress authorized the Affordable Care Act’s premium subsidies, employer mandate, and (to a large extent) individual mandate only in states that agreed to establish a health-insurance “Exchange.” That is, all nine justices agreed that the plain meaning of the operative statutory language allows states to veto key provisions of the ACA—sort of like the Medicaid veto that has existed for 50 years and lets states destroy health insurance for millions of poor Americans. The Exchange veto includes the power to shield millions of state residents from the ACA’s least-popular provisions: the individual mandate and the employer mandate.

No Markets, Then No Water. California’s Avoidable Crisis

This is what happens in a world without markets for water, as Eli Saslow reports in the Washington Post:

Their two peach trees had turned brittle in the heat, their neighborhood pond had vanished into cracked dirt and now their stainless-steel faucet was spitting out hot air. “That’s it. We’re dry,” Miguel Gamboa said during the second week of July, and so he went off to look for water….

For a few days now, they had been without running water in the fifth year of a California drought that had finally come to them. First it had devastated the orchards where Gamboa and his wife had once picked grapes. Then it drained the rivers where they had fished and the shallow wells in rural migrant communities. All the while, Gamboa and his wife had donated a little of their hourly earnings to relief efforts in the San Joaquin Valley and offered to share their own water supply with friends who had run out, not imagining the worst consequences of a drought could reach them here, down the road from a Starbucks, in a remodeled house surrounded by gurgling birdbaths and towering oaks.

The article reads like science fiction. And it’s so tragic, because markets could go a long way toward allocating California’s water to its highest-valued uses, as Peter Van Doren and Gary Libecap discussed recently. More Cato studies on water markets here.

The Right to Earn a Living Deep in the Heart of Texas

The same day three weeks ago that the Supreme Court ruled on same-sex marriage (Obergefell v. Hodges), our friends at the Institute for Justice claimed a strong victory in favor of individual rights and economic freedom in an important case before the Texas Supreme Court (a.k.a. SCOTEX).

In Patel v. Texas Department of Licensing and Regulation, the court was faced with a state constitutional challenge to a licensing requirement that hair threaders acquire cosmetology licenses – to the tune of nearly $9,000 and 750 hours – when such classes “are not related to health and safety or what threaders actually do.”