Topic: Regulatory Studies

Indiana’s “Defense” of Religious Liberty

Continuing the media firestorm of the last few days, George Stephanopoulos spent over 11 minutes today on ABC’s “This Week” browbeating Indiana Gov. Mike Pence over the meaning of the Religious Freedom Restoration Act the governor had just signed, and the governor spent the entire 11 minutes refusing to say what the Act plainly says, that individuals and businesses, in the name of religious liberty, may discriminate against members of the LGBT community by, for example, declining to provide bakery or florist services for gay weddings.

Such today is the dishonesty of our politics, on both sides, that those who defend religious liberty cannot or will not speak plainly, while those who defend anti-discrimination measures—like Bill Clinton, who signed the federal Religious Freedom Restoration Act, and Barack Obama, who was an Illinois state senator when that state’s religious freedom act was passed unanimously—cannot bring themselves to say that they are limiting religious liberty—assuming the media would ever ask them to say that.

Doubtless spurred by the upcoming NCAA “Final Four” games in Indianapolis, we have here, of course, the continuation of the hysteria that followed the Supreme Court’s Hobby Lobby decision last year, which upheld the right of the deeply religious owners of that chain of stores to refrain from paying for abortifacients for their employees, as was required under the administration’s interpretation of Obamacare. (See Cato’s brief in that case, and some of my thoughts on the issue here and here.) “Hysterical” is no overstatement: ABC News reports today that Seattle’s mayor wants to prohibit city employees from traveling to Indiana. Why stop there? Prohibit travel across the U.S., where the federal law is in force.

In truth, we have in this Act the analogue of what we see every day in the area of free speech, which the left assiduously and rightly defends—but this is religion, and for the left, that’s another matter. Just as we defend a person’s right to say what he pleases, which is not the same as defending what he says, so too here we can defend a person’s right to discriminate on the basis of his religious beliefs without defending those beliefs or the actions they may require of a believer. As one more sign of how modern liberals have turned the Constitution on its head, they would have the statutory rights created by our anti-discrimination law trump the constitutional rights the First Amendment was ratified to protect. I discuss those issues in much greater depth here.

More Executive Overreach, This Time from the EPA

The Supreme Court heard arguments on Wednesday in Michigan v. EPA, asking whether it was unreasonable for the Environmental Protection Agency to ignore costs in determining the appropriateness of regulating mercury emissions from power plants. The EPA’s proposed regulations are expected to cost the coal industry a whopping $9.6 billion, but only offer a meager $500,000 to $6 million in public health benefits. 

Cato filed an amicus brief in the case that focuses on why the EPA chose to ignore costs in developing these regulations. It turns out that EPA could achieve its goal of comprehensively regulating utility emissions only if it ignores the costs. That in turn allowed the EPA to single out power plants – which it couldn’t do under other programs, and to avoid working through the states – as the other programs require. This strategy amounts to little more than a clever trick to circumvent statutory limits on the EPA’s own authority.

In effect, the EPA is exploiting nearly harmless levels of mercury emissions as a Trojan horse – an excuse to regulate all power plant emissions, even ones that are covered by other programs that deny EPA the ability to regulate in this fashion.

Chief Justice Roberts picked up on this point from our brief when he questioned the Solicitor General extensively as to the radical disparity between costs and benefits (see discussion starting p.59 here). He also asked pointed questions regarding the EPA’s attempt at making an “end run” around restrictions on the Clean Air Act.

Spring Regulation Issue: Oil, Obamacare and Tech Innovation

This week, Cato released the Spring issue of Regulation.

The cover article, by economist Pierre Lemieux, argues that the recent oil price decline is at least partly the result of increased supply from the extraction of shale oil.  The increased supply allows the economy to produce more goods. This benefits some people, if not all of them.  Thus, contrary to some commentary in the press, cheaper oil prices cannot harm the economy as a whole.

A related article examines the dramatic increase in crude oil transported by trains and whether additional safety regulation of tank car design should be enacted.  Economist Feler Bose argues that companies have an incentive to reduce accidents to reduce insurance rates.  Thus less-obvious ways to prevent accidents, like better track maintenance, may be more cost-effective and undertaken voluntarily to reduce insurance costs.

The issue has three articles on health policy.  Cal State Northridge professor Shirley Svorny describes how state medical licensure boards do very little to discipline doctors who cause medical errors.  Instead, medical quality is created by the private decisions of individual hospitals to grant privileges to doctors to treat patients and the decisions of specialty boards, such as those that govern cardiology, to certify members as qualified.  A second article concludes that the regulation of electronic cigarettes is likely, even though the evidence for adverse health effects is thin, because a powerful coalition of existing cigarette companies and anti-smoking activists would benefit. A third article examines questionable legal maneuvering by states to implement aspects of the Affordable Care Act (Obamacare).

Finally, two articles describe the regulation of emerging technologies. The first, by Oxford’s Pythagoras Petratos, examines nanotechnology and argues that both the Food and Drug Administration and the Environmental Protection Agency are ill-suited to regulate this complex technology. This bureaucratic burden could slow nanotech innovation in the United States. The second article, by Henry Miller of the Hoover Institution, describes the regulation of so-called “biosimilar” drugs.  Biosimilars are “generic” versions of patented biologic drugs, which are produced by living cells through genetic engineering rather than the chemical reactions used to produce traditional patented and generic prescription drugs.  He concludes that clinical trials will be necessary to prove biosimilarity and thus “biosimilar” drugs will not be cheap like traditional generic drugs.

King v. Burwell Doesn’t Present a ‘Coercion’ Question

I have a post over at National Review Online’s Bench Memos blog that explains why, contrary to Supreme Court Justice Anthony Kennedy’s concerns, the King v. Burwell challengers’ interpretation of the Patient Protection and Affordable Care Act (a.k.a., PPACA, ACA, and ObamaCare) doesn’t coerce states. At least, not under the Court’s current tests for determining whether Congress is coercing states.

If you happen to be a busy Supreme Court justice, here’s a spoiler:

1. The ACA’s exchange provisions don’t penalize states. They let states make tradeoffs between taxes, jobs, and insurance coverage.

2. Roughly half of states appear to consider those costs tolerable. Prior to 2014, eight states voluntarily imposed this supposedly coercive penalty on themselves.

3. This “deal” is comparable to what the Court allowed in NFIB v. Sebelius. In NFIB, the Court allowed states collectively to turn down Medicaid subsidies for as many as 16 million poor people. The exchange provisions permit states to do the same for 16 million higher-income residents.

I have no objection to the Court lowering the bar for demonstrating that cooperative federalism programs coerce states. But the Court will have to lower the bar quite a bit to find the ACA’s exchange provisions coercive.

If you aren’t a busy Supreme Court justice, or even if you are, read the whole thing.

The Grapes of Wrath: California Raisins Are Back at the Supreme Court

When Marvin Horne told the United States Raisin Administrative Committee (yes, there’s a raisin administrative committee) that he wasn’t going to turn over nearly 30 percent of his crop to the government in exchange for nothing, he probably didn’t expect his case would go to the Supreme Court—twice. That little act of civil disobedience was thirteen years ago, and the Hornes now stand on the precipice of vindicating an important constitutional right—the Fifth Amendment right not to have your property taken without just compensation—as well as putting a wrench in the gears of what Justice Elena Kagan called “the world’s most outdated law.”

Like much of our agricultural policy, the Raisin Administrative Committee (RAC) is a relic of New Deal-era cartelization schemes. Trying to understand the logic behind American agricultural policy is like trying to find the logic in a Marx Brothers movie—it can’t be done and you’re better off just sitting back and laughing at the antics. Yet our agricultural policy has real-world effects on farmers like the Hornes, who are subject to the whims of the RAC as it tries to stabilize the price and supply of raisins. Sometimes the RAC pays for the raisins it takes, and sometimes not. In 2002-2003, the RAC offered far less than the cost of production for 47 percent of the Hornes’ raisins, and in 2003-2004 they offered nothing for 30 percent of the raisins. The Hornes had had enough, and they refused the order, arguing the seemingly simple point that the confiscation would be a taking without just compensation under the Fifth Amendment.

Another Fishy Regulation

All across the globe, people see the United States as a land of opportunity and dream of making their way here to work hard and enjoy the prosperity that our system of laws helps provide. Cindy Vong made that dream a reality by emigrating from Vietnam, becoming a U.S. citizen, and starting her own nail salon in Gilbert, Arizona. Thanks to a state occupational-licensing scheme, however, Ms. Vong may no longer be free to pursue her vision of happiness.

The Arizona Board of Cosmetology—yes, that’s an actual entity—got wind that Ms. Vong’s spa offered a treatment that uses small fish to exfoliate dead skin from the feet. This is a perfectly safe practice popular in East Asia and the Middle East. Learning that the Board intended to apply its exfoliation-instrument sterilization standards to her fish—how does one sterilize a fish?—Ms. Vong volunteered her spa as a test project until the Board was able to revise its existing rules to address this increasingly popular treatment. Without so much as bothering to evaluate whether the fish treatment is unsafe—there is no such evidence anywhere—the Board ignored her request and, summarily concluding the treatment unsafe, shut down Ms. Vong’s business. So much for “Land of the Free.”

SCOTUS to Government: Somethin’ Fishy ‘Bout Your Prosecution

This morning the Supreme Court ruled in Yates v. United States that Sarbanes-Oxley—the massive legislation prompted by the accounting scandals of the early 2000s—can’t be used to prosecute a fisherman who caught undersized grouper.  It makes eminent intuitive sense. Luckily, it’s also correct as a matter of statutory interpretation. That is, even though the relevant provision (Section 1519) punishes those who would knowingly destroy or conceal “any record, document, or tangible object” in order to impede an investigation, Justice Ginsburg is correct in writing for the plurality that “it would cut §1519 loose from its financial-fraud mooring to hold that it encompasses [objects not] used to record or preserve information.”

And Justice Alito, in a narrow concurrence that ultimately controls the case, is even more correct to apply traditional canons of statutory construction—the rules that guide judges in interpreting laws—and thereby find that “tangible object,” in the context of the list of nouns that are Sarbanes-Oxley’s target, refers to “something similar to records or documents.” In a colorful opinion rife with salamanders, crocodiles, and oil derricks, Alito asks the correct question: “How does one make a false entry on a fish?”

As Cato wrote in our brief, words such as “record” and “document” modify the term “tangible object” to include things like hard drives and floppy disks (remember those?), not grouper. Moreover, an all-encompassing reading of “tangible object” would render the words “record” and “document” unnecessary. And the broader context of Sarbanes-Oxley illuminates the relevant meaning here: The Act focuses on financial fraud in the context of companies, not fauna. Thus, the words “tangible object” should be read differently in Sarbanes-Oxley than they would be in, say, the Federal Rules of Criminal Procedure.

If the term “tangible object” were read as broadly as the government wished, it could criminalize an unfathomable range of activities, from throwing away cigarette butts to washing away footprints in the sand. It wouldn’t provide adequate notice about potential legal violations, to which individuals have a right to so they can plan their actions accordingly and avoid getting caught in government nets.

After all, prosecutors and law enforcement officials can’t arbitrarily expand the range of criminal offenses as if they themselves were fishermen, exaggerating the size of their catches to a credulous legal system.