Topic: Regulatory Studies

Four More Things Washington Shouldn’t Do

Today AEI’s Rick Hess and Stanford’s Linda Darling-Hammond—two folks who don’t always see eye to eye—have a New York Times op-ed that decries federal micromanagement in education, then lays out four things they think Washington should do.

If only they’d stopped at lamenting micromanagement.

Let’s take their four should-do’s in order:

First is encouraging transparency for school performance and spending. For all its flaws, No Child Left Behind’s main contribution is that it pushed states to measure and report achievement for all students annually….To track achievement, states should be required to link their assessments to the National Assessment of Educational Progress (or to adopt a similar multistate assessment). To shed light on equity and cost-effectiveness, states should be required to report school- and district-level spending…

This sounds great, but the key is in the doing, and there is precious little evidence Washington can force real transparency. NCLB is exhibit A: Yes, the law required states to break out data for all students and numerous subgroups, but the underlying information was essentially a lie, with states setting very low performance thresholds and calling it “proficiency.” And despite what many NCLB supporters will tell you, when you break down NAEP data—as I have done—there is little support for the notion that traditionally underperforming groups, or anyone else, have done better with NCLB than without it.

How about requiring common standards, both for academics and spending?

Even if you started with excellent, challenging academic standards, they would quickly be gutted at the behest of teacher unions, administrator associations, and probably even parents if many kids and schools didn’t meet them and were punished as a result. We’ve seen it many times, and there’s nothing about being federal that inoculates government against concentrated benefits and diffuse costs; the people most directly effected by a policy having the greatest political power over it. And financial data? As Adam Schaeffer has found, there are countless ways to hide the truth about district finances, and there’s little reason to believe that Washington will be either willing or able to sustainably force clarity.

One last thing: Where in the Constitution is the federal government authorized to demand “transparency”? Nowhere.

Second is ensuring that basic constitutional protections are respected.  No Child Left Behind required states to “disaggregate” assessment results to illuminate how disadvantaged or vulnerable populations…were doing.  Enforcing civil rights laws and ensuring that dollars intended for low-income students and students with disabilities are spent accordingly have been parts of the Education Department’s mandate since its creation in 1979.

Here there’s a slight connection to the Constitution: under the Fourteenth Amendment Washington has the duty to ensure that states and districts do not discriminate. But the presumption underlying what Darling-Hammond and Hess argue—that test data can reveal discrimination—is dubious. Can and should disparities in group scores really be laid exclusively at the feet of schools, districts, and states? Aren’t myriad factors involved in academic outcomes, many of which are outside the control of government?

Third is supporting basic research. While the private market can produce applied research that can be put to profitable use, it tends to underinvest in research that asks fundamental questions. When it comes to brain science, language acquisition or the impact of computer-assisted tutoring, federal financing for reliable research is essential.

We hear this one a lot, and in theory it makes some sense: people won’t risk their money on research that has no discernable payoff. The problem is few people ever contemplate the full cost of government funding “basic” research, or the unintended consequences.

The main concern is that putting money into things with no discernable payoff might yield just that—no payoff. So we hear about successes—government got us to the moon!—but rarely about how much has been lost in failed efforts. People don’t shy away from funding basic research just because they’re shortsighted. It’s also because they factor in risk.

Then there’s this: while we would like to think that all scientists are superhumanly selfless, they are not. They are as self-interested as the rest of us. Perhaps that’s why Austan Goolsbee—yes, Obama administration Austan Goolsbee—found in 1998 that much government R&D funding translated not into more breakthroughs, but higher wages for researchers.

What about the presumption that private markets wouldn’t put money into “brain science” or new tutoring techniques? Highly dubious. Education companies would have strong incentives to invest in research that could make them more efficient and effective because that would increase their profit margins.  The problem is, it is almost impossible to run for-profit schools in the United States, which can’t meaningfully compete against “free” government schools. In Chile, however, we see burgeoning evidence that profit can lead to greater scale—which is crucial for research—and better outcomes.

Of course, there’s nothing in the Constitution authorizing the feds to finance research.

Finally, there is value in voluntary, competitive federal grants that support innovation while providing political cover for school boards, union leaders and others to throw off anachronistic routines.

Again, sounds good, but as Hess and Darling-Hammond themselves admit:

The Obama administration’s $4.35 billion Race to the Top competition tried to do some of this, but it ended up demanding that winning states hire consultants to comply with a 19-point federal agenda, rather than truly innovate.

It’s easy to say that Washington should enable district and union leaders to ignore political concerns, but federal policy is as much government policy as state and local, and government at all levels is a creature of politics. Government and politics cannot be separated, and to expect one governmental level to be above politics while the others are below it is, to say the least, extremely optimistic. And again, there’s no constitutional authority to issue education grants.

Darling-Hammond and Hess are right that Washington has meddled far too much in education. They are on thin ice in asserting that different meddling will work much better.

Revised DSM-5 Could Open Up Wider Legal Claims

The American Psychiatric Association is revising its highly influential Diagnostic and Statistical Manual, currently known as DSM-IV (the fifth version will be “DSM-V” or, since a switch to Arabic numbering is planned, “DSM-5”). Nearly 8,000 persons have signed a petition, sponsored by the Society for Humanistic Psychology, Division 32 of the American Psychological Association, which challenges the revision’s proposed widening of the definitions of mental disorder. The letter associated with the petition warns that the revision proposes to lower diagnostic thresholds for many categories of disorder without good reason, as well as introducing new constructs such as “Internet Addiction Disorder” that have “no basis in the empirical literature.” The expansion could lead to inappropriate medical treatment as well as other ill effects.

David Foley at Labor Related spells out some of the legal implications for the workplace:

Among others, the changes in the DSM-V could impact Americans with Disabilities Act claims (is the plaintiff disabled, what is a reasonable accommodation, etc), Family Medical Leave Act claims (does plaintiff suffer from a serious illness) and workers compensation laws (does plaintiff have an illness and was it caused by work).

Introducing a new category of Mild Neurocognitive Disorder, for example, could entitle workers to begin claiming job-related accommodation for cognitive deficits often associated with advancing age – perhaps especially significant since federal law has made it unlawful for most private employers to set policies of automatic retirement at any particular age. As Foley notes, the task force is also planning to reduce the diagnostic threshold for two disabilities that generate many ADA claims already: Attention Deficit Disorder and Generalized Anxiety Disorder.

Employers already face serious legal risks under existing law if they decline to accommodate employees with mental and behavioral deficits (which may include substance abuse, at least if the worker has entered rehab). As I noted the other day at Overlawyered, a hotel chain has agreed to pay $132,500 for dismissing an autistic front desk clerk rather than working with a state-paid “job coach” to remedy his deficiencies. The EEOC sued an insurance company that rescinded a job offer as an agent to an applicant after he tested positive for methadone. An Iowa jury awarded $1.1 million against a university for failing to accommodate an employee’s request for a lighter work load and other changes after she was diagnosed with depression, post-traumatic stress disorder and anxiety. And HR lawyers have warned employers that administering personality tests to new workers could violate the law by improperly revealing protected conditions such as “paranoid personality disorder.”

Earlier posts on the ADA and mental/behavioral deficits here (trucking firm sued for avoiding drivers with drinking history), here and here.

Should You Need a License to Help Someone Find an Apartment?

Kansas City Premier Apartments v. Missouri Real Estate Commission is quite similar to the occupational licensing case of Locke v. Shore, in which Cato also recently filed a brief, except that the speech-licensing regulation here concerns not artistic expression but rather the dissemination of consumer-demanded commercial information — specifically, rental property listings that are free to the public.

The Missouri Real Estate Commission, acting on a complaint by a licensed realtor, decided that Kansas City Premier Apartments, which provides local rental listings, was acting as an unlicensed real estate broker and was therefore subject to fine and even criminal prosecution. (Before KCPA began operations, it had asked the Commission whether it needed a license and did not receive a clear answer other than that it was a “grey area” of law.)

KCPA challenged the Commission’s decision on First Amendment grounds, but the trial court found it to be constitutional without giving a reason for its conclusion. The Missouri Supreme Court affirmed the trial court after simply presuming the constitutionality of the speech restriction — contrary to the U.S. Supreme Court holding in Bolger v. Youngs Drug Products Corp. that “[t]he party seeking to uphold a restriction on commercial speech carries the burden of justifying it” — and placing the burden of proving unconstitutionality on KCPA.

Cato has now joined the Pacific Legal Foundation on a brief supporting KCPA’s request that the U.S. Supreme Court hear the case. Our brief notes that “this case combines the nationally important commercial speech issue with the equally nationally important question of the extent to which the Constitution tolerates occupational licensing.” We explain the difficulties that the Court’s “commercial speech doctrine” has caused and argue for a movement toward greater protection for collective and commercial speech, and away from a confusing four-part test established in a 1980 case called Central Hudson.

As in Locke, this latest case raises the question of whether occupational licensing schemes that have an effect on speech are constitutional. Also as in Locke, an infinite array of professionals and ordinary people could get caught up in this regulation, including even a friend helping another friend find an apartment.

Beyond the technical legal points, the case implicates broader policy issues such as the right to earn a living and the impact that speech monopolies have on consumers. Indeed, the consumer impact may be even more apparent here than in other occupational licensing cases because so many people struggle to find affordable apartments and other rentals in this economy — not to mention over the course of their lives.

The Supreme Court will decide early in the new year whether to hear Kansas City Premier Apartments v. Missouri Real Estate Commission.

Rent Control Violates Property Rights and Due Process

This blogpost was coauthored by Cato legal associate Trevor Burrus, who also worked on the brief discussed below.

Rent control is literally a textbook example of bad economic policy. Economics textbooks often use it as an example of how price ceilings create shortages, poor quality goods, and under-the-table dealings. A 1992 survey revealed that 93 percent of economists believe that rent control laws reduce both the quality and quantity of housing.

As expected, therefore, New York City’s Rent Stabilization Law—the most (in)famous in the country—has led to precisely these effects: housing is scarce, apartment buildings are dilapidated because owners can’t charge enough to fix them, and housing costs have only increased (in part because costs are transferred to non-rent mechanisms such as “non-refundable deposits”). Yet the RSL persists, benefiting those grandfathered individuals who rent at lower rates but hurting the city as a whole.

Harmon v. Kimmel challenges New York’s law on the grounds that it is an arbitrary and unsupportable regulation amounting to an uncompensated taking that violates the Fifth Amendment.

Jim Harmon’s family owns and lives in a five-story brownstone in the Central Park West Historical District. The Harmons inherited the building—and along with it three rent-controlled tenants. Those tenants have occupied apartments in the building for a combined total of 91 years at a rate 59 percent below market. In their lawsuit, however, the Harmons face many unfriendly precedents that have given states free reign to regulate property, to the point that it is occupied on an essentially permanent basis while surviving Fifth Amendment scrutiny.

One way to challenge some of these laws is to argue they are so arbitrary and poorly justified that they violate the Fourteenth Amendment’s Due Process Clause. Because this is an especially difficult type of challenge to bring, Cato joined the Pacific Legal Foundation and the Small Property Owners of San Francisco Institute on a brief supporting the Harmons’ request that the Supreme Court review lower-court rulings against them. Although the Court has ruled that the Takings Clause does not permit challenges based on claims that the alleged taking fails to “substantially advance legitimate state interests,” the Due Process Clause is an independent textual provision.

We thus clarify the relationship between property rights and due process, arguing that a law which advances no legitimate governmental purpose can be challenged under the Due Process Clause. To hold otherwise would be to deny property owners any meaningful avenue for defending their property from onerous and irrational regulations.

FDA Considers Mandatory Salt Reductions

With little publicity, the federal Food and Drug Administration has begun laying groundwork for one of the more audacious regulatory initiatives of the Obama administration: mandatory reductions in the salt content of processed foods in the supermarket aisle and at restaurants.

In a September 15 “Request for Comments, Data, and Information” (PDF) published in the Federal Register, the FDA solicits from the public “comments, data, and evidence relevant to the dietary intake of sodium as well as current and emerging approaches designed to promote sodium reduction.” Among the specific ideas it has in mind: setting federally prescribed “targets” for “stepwise” reductions in the amount of salt allowable in various foods, the phased nature of the reductions indicated because consumers’ “taste preference for sodium is acquired and can be modified.”

Various government programs (notably in Mayor Bloomberg’s New York City) already arm-twist producers into supposedly voluntary reductions, but the FDA notice hints broadly that voluntary measures will not suffice. Its public comment period ends next Tuesday, November 29; let’s hope the agency gets an earful from citizens about the importance of freedom and consumer choice.

As I noted last month in a Cato podcast with interviewer Caleb Brown, the FDA’s new initiative plunges it deeper into social engineering than it has gone in the past. It’s one thing to limit adulteration or contamination of foods, or the use of mysterious chemical additives; it is another to order the reformulation of recipes to reduce intake of a substance that 1) occurs naturally in virtually all foods; 2) is beneficial to health in many circumstances; and 3) has been sought out and purposely added to the human diet through recorded history.

As the FDA acknowledges, salt is far more than a flavor enhancer, capable of such miracles as turning vegetable soup into something small children will gladly eat. It also continues to be (as it has been through history) vital in preventing a wide range of bacterial spoilage and food poisoning dangers in the food supply. It also assists with texture, appearance, and shelf life. Consumers notice when it is missing, as Campbell’s found when it was forced by lagging sales to restore salt to its Select Harvest soup line, and as H.J. Heinz found when it faced a consumer revolt in Britain after reformulating its HP Sauce at the urging of the British government (see Telegraph and Daily Mail accounts).

As I noted a while back, the government’s dietary advice has changed often through the years, and its recommendations in retrospect have regularly proved to be unfounded and even damaging. Sure enough, reports have begun to come out that the salt panic has been exaggerated and may even pose some health dangers of its own. “New review questions benefit of cutting down on salt,” reported Reuters about a new review of more than 160 scientific studies published in the American Journal of Hypertension. “It’s time to end the war on salt,” per a July Scientific American article by Melinda Wenner Moyer.

And as for post-Thanksgiving dieting? As Reader’s Digest points out, eating more produce and less processed food is known to be a healthy step, and will much reduce your sodium intake. In the mean time, you can file comments here about whether you’d like to go on making these choices yourself, or have FDA Commissioner Margaret Hamburg make them for you.

Demos vs. Cato: Say No to Bailouts

Over at PolicyMic, Cato scholar Daniel J. Mitchell debates Demos co-founder David Callahan on whether massive government bailouts saved us from a second Great Depression, or plunged the economy into a prolonged recession that hurt taxpayers and undermined the self-corrective mechanisms of the market. Mitchell argues:

The Bush-Obama policies of bailouts and regulation have been bad for taxpayers, but they’ve also been bad for the economy.

A vibrant and dynamic economy requires the possibility of big profits, but also the discipline of failure. Indeed, capitalism without bankruptcy is like religion without hell.

Yet that’s what politicians from both parties have created. Profits are private and losses are socialized, so is anyone surprised that Wall Street responds to these incentives with imprudent risk?

Read Mitchell’s post here, and the other side here.

Crumbling Bridges and Infrastructure Fearmongering

When I testified to the Joint Economic Committee yesterday, the subject of bridges came up again and again. Numerous people said or implied that our bridges are crumbling and falling down, and that more funding was desperately needed.

The problem with that narrative is that the number of bridges that are in bad shape has been falling steadily over time. The nation’s bridges appear to be in better condition than ever, as indicated by data from the Federal Highway Administration. The FHWA’s inventory of bridges identifies those that are “structurally deficit” and “functionally obsolete.” Definitions for those terms are here.

The chart shows that the share of the 100,000+ bridges in the National Highway System that are either S.D. or F.O. has declined steadily since 1992.  (Hat tips: Randal O’Toole and Matt Fay)