Topic: Regulatory Studies

Casket Case Shows Economic Liberty to Be Alive and Well

By
Ilya Shapiro

Last week, the Institute for Justice scored a resounding victory for the right to earn an honest living in an unlikely case that pitted woodworking monks against the Louisiana State Board of Embalmers and Funeral Directors.  The New Orleans-based U.S. Court of Appeals for the Fifth Circuit – where I clerked – ruled in a final, unanimous decision (including one Obama-appointed judge) that Louisiana violated the St. Joseph Abbey monks’ economic liberty when it forbade them from selling the caskets they make to support their religious order.

Significantly, the court ruled that the Constitution doesn’t allow the government to enact laws simply to shield industry cartels from honest competition.  Although IJ was already assured of victory, given that Fifth Circuit had issued a divided preliminary opinion in October, that ruling left open some tricky questions that this latest decision definitively settled.  

Last Wednesday’s ruling makes clear that laws having no purpose but to enrich certain protected interests are unconstitutional, using reasoning that should be a model for courts across the country.  

Louisiana now has 90 days to seek review in the U.S. Supreme Court – which supporters of economic liberty should welcome because IJ’s previous litigation created a split in the federal lower courts that can only be resolved, for the nation as a whole, by the Supreme Court. 

For more on St. Joseph Abbey v. Castille, see IJ’s case page and this Wall Street Journal op-ed by IJ’s Chip Mellor and Jeff Rowes. And if you’re a law student interested in using your legal skills to promote liberty this summer, you should apply to IJ’s epic public interest boot camp (of which I’m a graduate, though in my day there wasn’t any skydiving or aikido).

Topics: 
Law and Civil Liberties, Regulatory Studies

Three Cheers for Autonomy

By
Trevor Burrus

In today’s New York Times, philosopher Sarah Conly gives “Three Cheers for the Nanny State,” specifically, NYC’s famed big soda ban. Invoking aspects of the theory of “nudge,” made popular in a book by Richard H. Thaler and Cass R. Sunstein, Conly argues that, sometimes, the government can rightfully save us from ourselves.

The popularity of “nudge theory” is closely tied to the recent spate of popular science books on the foibles of the human brain. Books such as Predictably Irrational and A Mind of Its Own are part of a new self-help fad: the idea that scientists studying the error-prone human brain can help us understand why we are unable to quit smoking, lose weight, and many other common problems.

It was only a matter of time until government regulators and their champions embraced this new science in order to put a fresh spin on an old impulse—their never-ending desire to save us from ourselves. But despite the valid insights of cognitive neuroscience, both nudge theory and Conly’s editorial are no more defensible than any other paternalism. We should not be deceived into believing that there is any new wine in those old wineskins.

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Topics: 
Law and Civil Liberties, Regulatory Studies

Striking Down Bloomberg’s Soda Ban: A Matter of Law, Not Activism

By
Walter Olson

Much legal commentary at Slate follows a pat formula: judicial activism is a genuine menace, but not from left or liberal jurists. It’s those awful judges on the conservative and libertarian side who engage in the real activism when they strike down laws and government initiatives, or as in the case of ObamaCare, come close to striking them down. To observe the formula at its most mechanical, check out Emily Bazelon’s Slate article last Wednesday portraying a judge’s striking down of Mayor Bloomberg’s ban on big soda sizes as a venture in “conservative judicial activism.”

Never mind that none of the readily available biographical information about jurist Milton A. Tingling seems to justify describing him, as Bazelon does, as a “conservative judge.”  (Elected in Manhattan on the Democratic line, Judge Tingling appears to have fit his judicial career comfortably into the framework of Charles-Rangel-era Harlem politics, as David Bernstein mentions at Volokh Conspiracy. In a couple of earlier notable cases, Judge Tingling did rule against police and public-order interests, but we don’t ordinarily regard that sort of civil-libertarian streak as distinctively “conservative.”) 

Bazelon assails Judge Tingling for supposedly substituting his own judgment for that of Bloomberg’s Department of Public Health on the merits of the drinks ban. But everyone agrees the question properly before the court was not whether the judge agreed with the ban. It was instead whether the ban could pass muster under the relevant New York precedent, a 1987 case called Boreali v. Axelrod in which New York’s highest court (to quote the case summary) ruled that the state Public Health Council “overstepped the boundaries of its lawfully delegated authority when it promulgated a comprehensive code to govern tobacco smoking in areas that are open to the public.” Boreali is a distinctive New York case, and creates a test for impermissible delegation that differs from what courts do when applying federal law.

Prof. Aaron Saiger, a specialist in local government law at Fordham Law School in Manhattan, had this to say the other day at Concurring Opinions about the drinks ruling: 

… Judge Tingling is right that New York State’s nondelegation doctrine – the doctrine that administrative law professors who teach only federal cases tell their students is a dead letter – prohibits the rule. The foundational case, Boreali v Axelrod, is nearly on all fours with this case. Health departments, pursuant only to sweeping language giving them authority over public health, cannot in New York State limit trade in legal markets over which the legislature has given them no explicit authority. If the City is to win its promised appeal, it is going to need to argue that Boreali should be overruled or limited.

The problem with that is that Boreali is right. Nondelegation is an important constitutional principle and should not be sidelined out of existence. … I think it’s not just reasonable, but better politics, better civics, and better constitutional law to require those shoves [i.e., paternalistic “nudges”] to come from a legislative, rather than an executive and bureaucratic, process.

Saiger’s commentary is all the more pertinent because he’s anything but a fan of the decision’s craftsmanship. Unlike Judge Tingling, he doesn’t think the ban was arbitrary or capricious; he doesn’t believe the city’s charter should be read to limit the Health Department’s decree powers to those responding to imminent or emergency health threats; and he’s not averse in principle, he says, to what the Mayor was trying to do. 

So what does Bazelon think about Boreali v. Axelrod? Does she think it should be overruled or can somehow be distinguished from the beverages case? It’s hard to tell, because her article never mentions Boreali at all, though Judge Tingling had laid it out at great length as the precedent on which he was basing his decision. 

Judges shouldn’t – and Judge Tingling didn’t – breeze right by the relevant case law in the course of reaching a foreordained conclusion. If only all legal commentators were as careful.

Topics: 
Law and Civil Liberties, Regulatory Studies

Guns and the Commerce Clause: On the Way to the Supreme Court?

By
Ilya Shapiro

Nearly two years ago, I wrote about an intriguing Commerce Clause case involving the Montana Firearms Freedom Act.  To wit, Montana enacted a regulatory regime to cover guns manufactured and kept wholly within state lines that was less restrictive than federal law.  The Montana Shooting Sports Association filed a claim for declaratory judgment to ensure that Montanans could enjoy the benefits of this state legislation without threat of federal prosecution.  The federal district court ruled against the MSSA.

On appeal to the Ninth Circuit, Cato joined the Goldwater Institute on an amicus brief, arguing that federal law doesn’t preempt Montana’s ability to exercise its sovereign police powers to facilitate the exercise of individual rights protected by the Second and Ninth Amendments. More specifically, for federal law to trump the MFFA, the government must claim that the Commerce and Necessary and Proper Clauses give it the power to regulate wholly intrastate manufacture, sale, and possession of guns, which is a state-specific market distinct from any related national one.

The lawsuit’s importance is not limited to Montana; a majority of states have either passed or introduced such legislation. The goal here is to reinforce state regulatory authority over commerce that is by definition intrastate, to take back some of the ground occupied by modern Commerce Clause jurisprudence.

Well, after much delay – in part due to the Ninth Circuit’s waiting for Supreme Court instruction on the Commerce Clause in the Obamacare litigation – MSSA v. Holder finally saw oral argument two weeks ago.  The Goldwater Institute’s Nick Dranias, who was the principal author of our joint brief, was able to get 10 minutes of argument time and sent me this report afterwards, which I reprint with his permission:

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Topics: 
Law and Civil Liberties, Regulatory Studies

Unlike Policymakers, Consumers Use Logic to Avoid Horsemeat

By
K. William Watson

A scandal has recently erupted in Europe after it was discovered that horsemeat was being sold to consumers in processed foods claiming to be 100% beef. This is, of course, already blatantly illegal, but that hasn’t stopped regulators from trying to figure out how to increase their oversight of Europe’s already highly regulated food market.

Unfortunately, some policymakers have used this scandal to push for increased trade barriers within the European Union. Their preferred barrier is the increased use of mandatory country of origin labels. This policy ignores the fact that horsemeat can be passed off as beef in any country and that doing so is illegal in all of them.

Nevertheless, this call for labels reveals a justified concern that complex supply chains obscure relevant information from consumers. But, consumers don’t need protectionist mandates to solve their problems; a little common sense will do just fine. The Scottish Farmer, an advocacy group for Scottish agriculture, reports that 92% of local butcher shops in Scotland have reported increased patronage since the horsemeat scandal broke.

If complex supply chains are perceived as unreliable, consumers will forego the price benefits of frozen packaged food and choose to buy meat from a simpler and more transparent source. Such rational consumer behavior will likely do more to improve the quality of international supply chains than any tweak in complex regulatory oversight.

Topics: 
General, Regulatory Studies, Trade and Immigration

Banzhaf’s Boast: “Undergrads Required to Lobby for Obama Policy”

By
Walter Olson

I normally resist the temptation to pay attention to George Washington University law professor John Banzhaf, given his reputation as a bit of a publicity chaser, but this Monday press release from him was enough to get me to forsake my usual practice: 

Undergrads Required to Lobby for Obama Policy

At 4 PM today, undergraduate students in a major university will be assigned homework requiring them to lobby their local legislators in favor of a major Obama policy – fighting obesity.

FOR IMMEDIATE RELEASE PRLog (Press Release) - Mar. 4, 2013 - More specifically, some 200 undergrads will be asked to contact legislators in their home cities, counties, or states asking them to adopt legislation similar to that already adopted in New York City – and apparently to be considered in D.C., Cambridge, Mass, New York State, and perhaps elsewhere  – banning restaurants, delis, movie theaters and many other businesses from selling high-sugar drinks in cups or containers larger than 16 ounces.

Because asking the students to lobby on behalf of whatever opinions they themselves actually consider worth lobbying for would just be too old-school. Readers at Overlawyered have met Prof. Banzhaf before in various of his academic and activist capacities: proposing lawsuits against parents of obese children and against doctors who do not adequately warn their patients against obesity, urging that parents who smoke not be allowed to adopt kids, threatening school officials in Massachusetts with lawsuits naming them personally if they allow soft drinks to be sold on school property, promoting suits against individual administrators at his own institution, GWU, and filing a losing complaint against single-sex dorms at crosstown rival Catholic University of America.

Monday’s Banzhaf press release does mention that students will be given other optional topics to lobby about if they don’t pick the NYC-style soda ban. All the other examples given, however, involve alternative ways of extending regulation and taxation in the food and beverage realm. Presumably any student that believes that the government should stay out of this area has had the foresight to drop the course.

Topics: 
Education and Child Policy, Law and Civil Liberties, Regulatory Studies

Permitting Oil and Gas Exports Is a No-Brainer

By
Scott Lincicome

Following today’s deadline for interested party comments, the U.S. Department of Energy will begin to consider sixteen pending applications to export natural gas to countries like Japan with whom the United States does not have a free trade agreement.  The issue is a contentious one: energy producers, many other U.S. companies and a large, bipartisan swath of Congress have urged DOE to approve all export license applications, but opposition has materialized among certain domestic consuming industries and environmental groups.  As a result, the Obama administration has delayed consideration of all but one application, and is expected to eventually permit a portion of the remaining exports in an attempt to placate both sides of the debate.

As I explain in a new Cato Institute paper, however, such a Solomonic decision might achieve the administration’s political objectives but will do nothing to fix the fundamental problems raised by U.S. export regulations for natural gas or similar rules for crude oil.  These exports continue to be governed by licensing systems adopted when the United States was a net energy importer and dependent on fossil fuels for energy production – a picture far different from the production, price, and trade realities that exist today due to revolutionary fossil fuel extraction technologies like hydraulic fracturing (“fracking”) and horizontal drilling.  In fact, domestic production of crude oil and natural gas has skyrocketed in recent years, driving down prices, boosting downstream industries, creating ample export opportunities and potentially reversing the United States’ historic position as a net energy importer.  However, our gas and oil export licensing systems – respectively governed by the Natural Gas Act of 1937 and the Energy Policy and Conservation Act of 1975 – continue to treat fossil fuel exports as a rarity and subject them to a long, opaque approval process under which the federal government retains ample discretion to approve or deny most export license applications.

Perhaps unsurprisingly, these outdated systems, and the restrictions they impose on U.S. exports, create a host of problems:

  • First, by depressing domestic prices and subjecting export approval to the whims of government bureaucrats, the U.S. licensing systems retard domestic energy production, discourage investment in the oil and gas sectors, and destabilize the domestic energy market. Artificially low prices prevent producers from achieving a sustainable rate of return on the massive up-front costs required to drill and extract oil and gas, and investors lack any assurances under the discretionary licensing systems that domestic prices will not collapse when output increases.  Such concerns have led the IEA to recently warn that U.S. export restrictions put the “American oil boom” at risk.  And contrary to certain politicians’ claims, independent reports show that the exportation of oil and gas would not cause a traumatic spike in prices, thus enabling consumers to continue to benefit from hypercompetitive U.S. fuel and feedstock supplies.
  • Second, restricting U.S. gas and oil exports could hurt the U.S. economy. Recent studies indicate that these exports - even in unlimited quantities - would not only benefit U.S. energy producers, but also increase real household income.
  • Third, both export licensing systems raise serious concerns under global trade rules.  The General Agreement on Tariffs and Trade (GATT) prohibits WTO Members from imposing export restrictions implemented via slow or discretionary licensing systems like those at issue here.  Moreover, several nations, including the United States, impose anti-subsidy measures (called “countervailing duties” or “CVDs”) on downstream exports (e.g., steel) due to export restrictions on their upstream inputs (e.g., iron). Thus, the crude oil and natural gas licensing systems could lead to anti-subsidy duties on energy-intensive U.S. exports that negate the very price advantages created by the licensing systems – a heightened risk, given that American exporters are increasingly targeted by foreign CVD actions.
  • Fourth, current policy contradicts several other Obama administration priorities.  Most obviously, restricting oil and gas exports undermines the president’s National Export Initiative and stands in stark contrast to his full-throated advocacy of other energy exports, particularly renewables like biofuels and solar panels. Moreover, the use of export restrictions to benefit downstream industries contradicts longstanding U.S. policy of using countervailing duties to discourage foreign imports that unfairly benefit from export restrictions on upstream inputs.  Finally, the U.S. government has long opposed restrictive and opaque export licensing systems in WTO negotiations and dispute settlement.  The current U.S. export licensing regulations for oil and gas contradict these positions and undermine multilateral efforts to rein in such restrictions.

If President Obama really wants to develop America’s vast energy resources, grow the U.S. economy, restore some coherence to U.S. trade and energy policy, and avoid potentially embarrassing trade conflicts, he should order DOE to immediately approve all, not just some, of the pending license applications for natural gas and crude oil.  He then should pursue, with Congress, an overhaul of our archaic licensing systems so that they reflect the new American energy landscape and the United States’ position as a global export power.  Such reforms would bolster investment, production, and employment in the oil and gas sector, stabilize the U.S. energy market and benefit the overall economy, avoid the myriad policy and legal problems raised by the current system, and produce a rare moment of bipartisan comity in Washington.  It’s a no-brainer.

 

Topics: 
Energy and Environment, General, Regulatory Studies

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