Topic: Regulatory Studies

Libertarians and Right to Work Laws

By
David Boaz

Right-to-work laws are back in the news after the one-time union stronghold of Michigan passed one.

Vinnie Vernuccio and Joe Lehman of Michigan’s Mackinac Center for Public Policy take a victory lap in the Wall Street Journal, agreeing with Governor Rick Snyder in calling the bill “pro-worker”:

Right to work does not change any aspect of collective bargaining other than preventing employees from getting fired for choosing not to join or remain in a union and pay union dues or agency fees, which may go toward political causes they don’t support. Collective bargaining still exists in right-to-work states, and workers are of course free to organize.

But not all libertarians agree. In the same day’s Wall Street Journal, columnist Holman Jenkins notes that

right-to-work laws are designed to restrict an employer’s freedom of contract. They prohibit an employer from making union membership a condition of employment.

Jenkins sees this restriction of contract as a “bad fix trying to compensate for a prior bad law,” the 1935 Wagner Act. Jenkins prefers what he calls a “principled” approach to the problem of worker-employer freedom – the “deregulation of labor relations.” That would allow employers the ability to make union membership a condition for employment if they so choose. Or not.

Sheldon Richman, a longtime libertarian who was for many years editor of the Freeman at the Foundation for Economic Education and is now vice president of the Future of Freedom Foundation, similarly views right-to-work laws as a bad intervention trying to counterbalance another bad intervention. He quotes Percy Greaves Jr., a student of Ludwig von Mises: “Intervention creates problems that, unless the original intervention is repealed, beget further intervention, and so on.” Richman urges instead that we “let states opt out of the Wagner regime….Rather than prohibiting voluntary union-shop agreements between employers and unions, a state legislature could pass a bill simply declaring that the NLRB had no jurisdiction in that state.” He also examines the views of scholars such as Hayek and Mises on right-to-work laws.

Gary Chartier, whose book Anarchy and Legal Order: Law and Politics for a Stateless Society, is about to come out from Cambridge University Press, also says, “Right-to-work laws limit workers’ and employers’ freedom of contract. They prevent workers and employers from making mutually beneficial agreements. They don’t belong in a free society.”

Economist David Henderson counters with an argument about second-best solutions:

Gary avoids mention of the word “monopoly.” He recognizes that federal labor law gives unions the power to negotiate for the whole labor force in a plant or a firm. That’s monopoly. Many libertarians, including me, have looked much more favorably on “right to work” laws as an offset to this illegitimate government-created monopoly. It’s only a small offset, as we’ll see.

So what do you do, given that we have this federal law that Gary and I agree is a bad law? Try to abolish it, of course. But what do you do meanwhile? Many libertarians have argued that you work within the existing law to try to minimize the harm done by monopoly unionism. And a way to do that is with right-to-work laws.

It’s true that such laws make it illegal for employers to do what some of them mightwant to do: namely hire only union workers, require everyone who works for them to join unions, or require everyone who works for them to pay dues to a union. But are there really likely to be many such employers? I don’t think so.

Shikha Dalmia of the Reason Foundation hammers home that point:

To oppose all reform that does not deliver total freedom in one fell swoop is a recipe for policy paralysis. Right-to-work laws are desirable because, although they are partial, they are still pareto-optimal: By limiting the powers of union bosses, they leave employers no worse off and workers somewhat better off.

Once again, there are disagreements about policy among libertarians who share very similar economic and philosophical principles.

Topics: 
Law and Civil Liberties, Political Philosophy, Regulatory Studies

Cato Unbound on Assisted Suicide

By
Jason Kuznicki

Last month, a Massachusetts ballot initiative that would have legalized physician-assisted suicide in that state narrowly failed. It was only the latest in a decades-long set of legal and electoral battles over what we might call the last choice: when and how we may end our own lives, and with what forms of assistance.

Cato Unbound this month features a lead essay on physician-assisted dying by Howard Ball, a Professor Emeritus of political science at the University of Vermont and author of At Liberty to Die: The Battle for Death with Dignity in America.

Joining him are Patrick Lee, the John N. and Jamie D. McAleer Chair in Bioethics at Franciscan University of Steubenville, who argues that assisting suicide devalues the intrinsic good of human life; and Philip Nitschke, the Founder and Director of Exit International, a leading group advocating for end-of-life rights, who questions whether the act of deliberately terminating one’s life really needs a doctor – and by extension, the state – at all.

Powerful ethical and legal questions surround this choice. While a libertarian might be tempted to affirm that physician-assisted suicide is an exercise in personal autonomy, the matter is by no means so simple. The legal and constitutional traditions of our country have only occasionally affirmed such a right, and the potential for abuse in various assisted-suicide regimes may be unacceptably high. Add to this the concerns raised by those who argue for the essential dignity, not of a painless death, but of a natural one, and we confront a vast terrain of ethical issues.

As always, Cato Unbound readers are encouraged to take up our themes, and enter into the conversation on their own websites and blogs, or on other venues. We also welcome your letters. Send them to jkuznicki at cato dot org. Selections may be published at the editors’ option.

Topics: 
General, Political Philosophy, Regulatory Studies

Food Trucks Unwelcome in Arlington, Virginia

By
Ilya Shapiro

Libertarian arguments about the importance of economic liberty so often fall on deaf ears, but then you come across government abuses in this area that are so ridiculous that maybe even progressives can see the folly.  Here’s an excerpt from an email I just got from the Institute for Justice:

For those of you who follow IJ’s National Street Vending Initiative, you most likely know that cities across the country pass arbitrary and anti-competitive laws that make it practically impossible for food trucks and other vendors to succeed.  An opportunity to fight against one such law has presented itself in Arlington, Virginia.

Arlington County has a law in place that prevents food trucks from operating in one place for more than 60 minutes.  A local food truck named Seoul Food received a notice for violating this rule.  According to the owner of the truck, he informed the police officer that he did move from one parking spot to another within the allotted time.  The police officer still cited Seoul Food, however, because in the officer’s view the truck had not moved “far enough.”  It is important to note that the County Code does not specify any minimum distance a truck must move; it states only that “the vehicle must remain stopped for … no longer than sixty (60) minutes.”  Arlington Code Section 30-9(B).

The penalty for violating Section 30-9 is severe.  The Arlington County Code classifies a violation of the sixty-minute rule as a Class 1 misdemeanor, which is punishable by “confinement in jail for not more than twelve months and a fine of not more than $2,500.”  Thus, Arlington considers selling food to willing customers from a legal parking space to be as serious as  Reckless Driving, DUI, and Assault & Battery.

You can’t make this stuff up!

I followed up with one of IJ’s lawyers, who also noted that every police officer who Seoul Food’s owners interacted with has given them a different distance that the food truck purportedly has to move.  One said they just needed to move to an adjacent spot, while another said they had to go around the block. 

Alas, because the case is in criminal proceedings (!), IJ can’t represent Seoul Food.  Any Virginia-licensed lawyers with experience in criminal defense work who might want to help out pro bono – or media/others seeking more information on the case – please contact Krissy Keys, kkeys -at- ij.org.

Topics: 
Government and Politics, Law and Civil Liberties, Regulatory Studies

Trade Will Do More than Sanctions for Russian Rights

By
K. William Watson

The Senate will vote today to grant permanent normal trade relations to Russia.  The House already voted overwhelmingly to do so last month by a vote of 365-43.  The Senate vote, followed by certain presidential signature, will enable the United States to take advantage of Russia’s WTO membership, which it secured last December after 18 years of negotiation.  I’ve written before about why it took Congress so long to act on something despite its wide bipartisan support.  The culprits include self-defeating election year politics and foreign policy timidity.

Substantively, the debate has been about how best to sanction human rights abuses in Russia and/or elsewhere.  Should the bill impose financial and travel sanctions on Russian officials who’ve mistreated their people or on all foreign officials from all countries who we think have done so?  The sanctions have nothing to do with trade but they seem relevant because granting PNTR requires Congress to repeal the Jackson-Vanik Amendment that makes trade with the Soviet Union conditional on the latter not restricting Jewish emigration in 1970s.

But the bill would do more for human rights in Russia if it didn’t include any sanctions at all.  Rather than cause trouble with Russia (which has said it will respond strongly to any sanctions), those in Congress wanting to look like they care about human rights could have simply and correctly pointed out the substantial benefits to the Russian people that come from freer trade with the United States.

Trade liberalization is, of course, not a panacea for corruption and official lawlessness in Russia, but it does actually and directly make the people of Russia more free.  Moreover, a wealthier and more cosmopolitan population is more likely to demand accountability from its leaders.  More trade on market terms will connect the Russian people with the world, increasing their expectations and exposing their plight.

WTO membership will require Russia to be more transparent and enable foreign countries to use law, rather than politics, to pressure Russia to further liberalize its economy.  PNTR will ensure that the United States is a part of that effort.  Poking Russian officials in the eye with sanctions is at best merely emotionally satisfying and at worst counterproductive to helping the Russian people hold their own officials accountable.

Topics: 
Regulatory Studies, Trade and Immigration

The UK’s Capital Obsession

By
Steve H. Hanke

Last Thursday, Mervyn King, the outgoing governor of the Bank of England, called for yet another round of recapitalization of the major UK banks. For some time, I have warned that higher bank capital requirements, when imposed in the middle of an economic slump, are wrong-headed because they put a squeeze on the money supply and stifle economic growth. So far, bank recapitalization efforts, such as Basel III, have resulted in financial repression – a credit crunch. It is little wonder we are having trouble waking up from the current economic nightmare.

So why would Mr. King want to saddle the UK banking system  with another round of capital-requirement increases, particularly when the UK economy is teetering on the edge of a triple-dip recession? Is King simply unaware of the devastating unintended consequences this would create?

In reality, there is more to this story than meets the eye. To understand the motivation behind the UK’s capital obsession, we must begin with infamous Northern Rock affair. On August 9, 2007, the European money markets froze up after BNP Paribas announced that it was suspending withdrawals on two of its funds that were heavily invested in the US subprime credit market. Northern Rock, a profitable and solvent bank, relied on these wholesale money markets for liquidity. Unable to secure the short-term funding it needed, Northern Rock turned to the Bank of England for a relatively modest emergency infusion of liquidity (3 billion GBP).

This lending of last resort might have worked, had a leak inside the Bank of England not tipped off the BBC to the story on Thursday, September 13, 2007. The next morning, a bank run ensued, and by Monday morning, Prime Minister Gordon Brown had stepped in to guarantee all of Northern Rock’s deposits.

The damage, however, was already done. The bank run had transformed Northern Rock from a solvent (if illiquid) bank to a bankrupt entity. By the end of 2007, over 25 billion GBP of British taxpayers’ money had been injected into Northern Rock. The company’s stock had crashed, and a number of investors began to announce takeover offers for the failing bank. But, this was not to be – the UK Treasury announced early on that it would have the final say on any proposed sale of Northern Rock. Chancellor of the Exchequer Allistair Darling then proceeded to bungle the sale, and by February 7, 2008, all but one bidder had pulled out. Ten days later, Darling announced that Northern Rock would be nationalized.

Looking to save face in the aftermath of the scandal, Gordon Brown – along with King, Darling and their fellow members of the political chattering classes in the UK – turned their crosshairs on the banks, touting “recapitalization” as the only way to make banks “safer” and prevent future bailouts.

In the prologue to Brown’s book, Beyond the Crash, he glorifies the moment when he underlined twice “Recapitalize NOW.” Indeed, Mr. Brown writes, “I wrote it on a piece of paper, in the thick black felt-tip pens I’ve used since a childhood sporting accident affected my eyesight. I underlined it twice.”

I suspect that moment occurred right around the time his successor-to-be, David Cameron, began taking aim at Brown over the Northern Rock affair.

Clearly, Mr. Brown did not take kindly to being “forced” to use taxpayer money to prop up the British banking system. But, rather than directing his ire at Mervyn King and the leak at the Bank of England that set off the Northern Rock bank run, Brown opted for the more politically expedient move – the tried and true practice of bank-bashing.

It turns out that Mr. Brown attracted many like-minded souls, including the central bankers who endorsed Basel III, which mandates higher capital-asset ratios for banks. In response to Basel III (and Basel III, plus), banks have shrunk their loan books and dramatically increased their cash and government securities positions (both of these “risk free” assets are not covered by the capital requirements imposed by Basel III and related capital mandates).

In England, this government-imposed deleveraging has been particularly disastrous. As the accompanying chart shows, the UK’s money supply has taken a pounding since 2007, with the money supply currently registering a deficiency of 13%.

 

How could this be? After all, hasn’t the Bank of England employed a loose monetary policy scheme under King’s leadership? Well, state money – the component of the money supply produced by the Bank of England – has grown by 22.3% since the Bank of England began its quantitative easing program (QE) in March 2009, yet the total money supply, broadly measured, has been shrinking since January 2011.

The source of England’s money-supply woes is the all-important bank money component of the total money supply. Bank money, which is produced by the private banking system, makes up the vast majority – a whopping 97% – of the UK’s total money supply. It is bank money that would take a further hit if King’s proposed round of bank recapitalization were to be enacted.

As the accompanying chart shows, the rates of growth for bank money and the total money supply have plummeted since the British Financial Services Authority announced its plan to raise capital adequacy ratios for UK Banks.

 

In fact, despite a steady, sizable expansion in state money, the total money supply in the UK is now shrinking, driven by a government-imposed contraction in bank money. So, contrary to popular opinion, monetary policy in the UK has been ultra-tight, thanks to the UK’s capital obsession.

Despite wrong-headed claims to the contrary by King, raising capital requirements on Britain’s banks will not turn around the country’s struggling economy – any more than it will un-bungle the Northern Rock affair. Indeed, this latest round of bank-bashing only serves to distract from what really matters – money.

Topics: 
Cato Publications, Finance, Banking & Monetary Policy, General, Government and Politics, International Economics and Development, Regulatory Studies

The IRS’s Illegal ObamaCare Taxes, Bagenstos Edition

By
Michael F. Cannon

As I posted a week ago today, Jonathan Adler and I have a paper titled, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.” Our central claims are:

  1. The Patient Protection and Affordable Care Act explicitly restricts its “premium-assistance tax credits” (and thus the “cost-sharing subsidies” and employer- and individual-mandate penalties those tax credits trigger) to health insurance “exchanges” established by states;
  2. The IRS has no authority to offer those entitlements or impose those taxes in states that opt not to create Exchanges; and
  3. The IRS’s ongoing attempt to impose those taxes and issue those entitlements through Exchanges established by the federal government is contrary to congressional intent and the clear language of the Act.

We hope to post an updated draft of our paper, with lots of new material, soon.

At the Disability Law blog and Balkinization, University of Michigan law professor Samuel Bagenstos writes that our claims are “deeply legally flawed.”

Like others before him, Bagenstos’s main argument in support of the IRS reduces to the absurd claim that the federal government can establish an Exchange that is established by a state. He also offers two new arguments. Each is a non sequitur, and like his main argument is contradicted by the express language of the statute.

As I have written before:

[T]he statute is crystal clear. It explicitly and laboriously restricts tax credits to those who buy health insurance in Exchanges “established by the State under section 1311.” There is no parallel language – none whatsoever – granting eligibility through Exchanges established by the federal government (section 1321).

(Bagenstos claims the statute’s tax-credit-eligibility provisions use the phrase “established by the State under section 1311” only twice. He neglects to mention: how the eligibility provisions refer to those limiting phrases an additional five times; that there is no language contradicting or creating any ambiguity about the limitation they create; and that the statute also restricts its “cost-sharing subsidies” to situations where “a credit is allowed” under those eligibility rules. At the risk of repeating myself, the eligibility rules for the credits and subsidies are so tightly worded, they seem designed to prevent precisely what the IRS is trying to do.)

Bagenstos correctly notes that Section 1321 directs the federal government to create Exchanges within states that fail to create their own. Like others before him, he takes that directive to mean that the phrase “established by the State under section 1311” in fact ”does not have the exclusionary meaning” you might think. The statute authorizes tax credits through federal Exchanges, he argues, because federal Exchanges are ”established by the State under section 1311.” The federal government, it turns out, can establish an Exchange that is established by a state.

Like others before him, Bagenstos finesses the absurdity of that claim by arguing that Section 1321 provides that a federal Exchange ”will stand in the shoes of a state-operated exchange.” So far as I can tell, the “stand in the shoes” trope was first advanced by Judy Solomon of the Center for Budget and Policy Priorities. It is based on a 180-degree misreading of Section 1321. If a state chooses not to dance, Section 1321 doesn’t instruct the federal government to step inside (read: commandeer) the state’s dancing shoes. It directs the federal government put on its own dancing shoes, and to follow all the dance steps listed in Title I. Since the language restricting tax credits to state-created Exchanges appears in—you guessed it—Title I, federal Exchanges are bound by that restriction.

Bagenstos’s second argument is that since it was not necessary for Congress to restrict tax credits to state-created Exchanges to overcome the “commandeering problem,” the statute does not do so. But that’s a non sequitur. Just because Congress didn’t have to do something doesn’t mean Congress didn’t do it. The express language of the statute says Congress did it.

Bagenstos’s third argument is that because the Senate Finance Committee didn’t have to restrict tax credits to state-created Exchanges in order to have jurisdiction to direct states to create them, the Committee-approved language—which is now law—must not do so. Again, that’s a non sequitur. And not only does the express language of the statute impose that restriction, but Senate Finance Committee chairman Max Baucus (D-MT) admitted that’s what he was doing.

Along the way, Bagenstos contradicts himself, Baucus, and Timothy Jost by categorically claiming, “Nor is there any reason to think that Congress would have intended to treat participants in state- and federally-operated exchanges differently,” while conceding the commandeering problem and the Finance Committee’s limited jurisdiction are two reasons why Congress might have intended to do so.

Bagenstos’s interpretation of the statute violates the “mere surplusage” canon of statutory interpretation. It violates the expressio unius est exclusio alterius canon of statutory interpretation. It violates common sense.

Like others before him, Bagenstos offers no rebuttal to Baucus’s admission that the  statute means exactly what it says, and nothing whatsoever from the legislative history that supports the IRS’s attempt to violate the express language of the statute by imposing taxes that Congress never authorized.

Topics: 
General, Government and Politics, Health Care, Law and Civil Liberties, Regulatory Studies

State Protectionism Isn’t ‘Rational’

By
Ilya Shapiro

A large part of what is wrong with modern jurisprudence – the Obamacare ruling is Exhibit A – is that judges refuse to judge, instead bending over backwards to defer to legislative bodies. One egregious aspect of this egregious trend is to uphold economic regulations whenever there is some conceivable “rational basis” for their enactment, even if the measures clearly infringe liberties that that the Constitution was meant to protect, such as the right to earn an honest living,  Hettinga v. United States is such a case.

Hein and Ellen Hettinga are dairy farmers (“producers” under the law at issue) as well as processors and distributors of milk (“handlers”) doing business in Arizona and California.  Under a federal pricing and pooling arrangement spawned by milk market regulations put in during the New Deal, handlers must pay into a settlement fund designed to redistribute money to milk “producers.”

Two of the Hettingas’ dairy operations fell within exemptions from that arrangement until Congress enacted the Milk Regulatory Equity Act in 2005.  The MREA revoked such exemptions for “large producer-handlers,” who were targeted for enjoying a significant competitive sales advantage over non-exempt handlers and for decreasing the values redistributed to producers under the pricing scheme.

The Hettingas challenged the constitutionality of the MREA, arguing that it constituted a bill of attainder and violated the Equal Protection and Due Process Clauses.  The federal district court dismissed their complaint and the U.S. Court of Appeals for the D.C. Circuit affirmed that dismissal without requiring the government to demonstrate even a plausible justification for the revocation.  Effectively, the courts transmogrified “rational basis review”—the last vestige of substantive scrutiny of economic regulations—into a mere pleading formality, obligating courts to dismiss any legal challenges if the government simply asserts that the regulation has a “rational relationship to a legitimate government interest.”

Cato has now filed an amicus brief urging the Supreme Court to take this case and establish clear guidance for the application of rational basis review.  We argue that, properly applied, rational basis review preserves the judiciary’s role as guarantor of constitutional government and individual rights.

Protectionist regulations, which often masquerade as public-interest measures, benefit the powerful at the expense of politically weak and disfavored groups, like the Hettingas.  Although substantive review of economic regulations has ebbed following the infamous Footnote Four from the 1938 case of Carolene Products, the Court has never adopted a rule of absolute deference to the political branches.

Yet absolute deference is precisely what happens when rational basis review is transformed into a mere pleading burden.  The Framers recognized that an independent judiciary was necessary to prevent factions from usurping the political process and “disregarding the rights of another or the good of the whole.”

The Court should grant review and disavow such a dangerous abdication of the judiciary’s necessary role.

Topics: 
Law and Civil Liberties, Regulatory Studies

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