Topic: Regulatory Studies

David Hyman Now Blogging at Volokh Conspiracy

Fans of Cato adjunct scholar David Hyman – you know, the guy who claimed that Medicare is a tool of the devil – will be happy to know that he is now blogging at The Volokh Conspiracy.

Hyman’s inaugural post – the first in a series on capping non-economic damages in medical-malpractice cases – can be found here.

And seriously, he was just kidding about that whole Medicare/devil thing.  Honestly.

Larry Summers on Employer Mandates

President-elect Barack Obama has named former Treasury Secretary Larry Summers to head his National Economic Council.  Obama also wants to require employers to offer health insurance to their workers.

It is therefore instructive to recall what the head of Obama’s National Economic Council has written about employer mandates:

Economists have generally devoted little attention to mandated benefits- regarding them as simply disguised tax and expenditure measures. Uwe Reinhardt’s reaction is probably typical: “[Just because] the fiscal flows triggered by mandate would not flow directly through the public budgets does not detract from the measure’s status of a bona fide tax.”

Suppose, for example, that there is a binding minimum wage. In this case, wages cannot fall to offset employers’ cost of providing a mandated benefit, so it is likely to create unemployment….

Mandated benefit programs can work against the interests of those who most require the benefit being offered…

If policymakers fail to recognize the costs of mandated benefits because they do not appear in the government budget, then mandated benefit programs could lead to excessive spending on social programs. There is no sense in which benefits become ‘free’ just because the government mandates that employers offer them to workers…

It can plausibly be argued that mandated benefits fuel the growth of government.

The Surreptitious Socialism of the Strong

George Will despairs that we already have a good bit of the socialism that John McCain warned about in the waning moments of his decade-long quest for Rooseveltian power. That is, we already have a lot of government redistribution of wealth, though we have almost no overt advocacy of socialism:  ”This is partly because Americans are an aspirational, not an envious, people. It is also because the socialism we do have is the surreptitious socialism of the strong, e.g., sugar producers represented by their Washington hirelings.”

Rent-seeking, economists call it–using the government to get privileges, such as a grant, a subsidy, a tariff, or a restriction on one’s competition. It’s one of those things we free-marketers rail against all the time, in papers on free trade, corporate welfare, government spending, and virtually every other activity of the modern state. More broadly, we point out, as Will did, that it’s impossible to have nonpolitical allocation of trillions of dollars of taxpayers’ money handed out by government. If you don’t want the powerful to lobby and manipulate in order to get their share of the money, then leave it in the marketplace. If you put it in the hands of politicians, expect political allocation.

Responding to Will, Christopher Orr at the New Republic says, “insofar as there are two kinds of spreading the wealth around, ‘rent-seeking’ (which we can all agree is bad) and ‘socialism’ (which Will implicitly concedes is less bad), conservatives are relatively more friendly to the former and liberals are relatively more friendly to the latter.” Hmmm. Is that so? I suppose if you think of the Bush administration as “conservatives,” then you have a good case. And Orr may be too young to remember actual conservatives back in the days B.G.W.B.

But I’m not. And I recall, for instance, the first program that Democrats rallied around when the Reaganites stormed ashore in 1981 with their pitchforks and meat cleavers in hand. Nexis confirms that a day after the administration made a broad budget-cutting proposal, these words led page A1 of the Washington Post: “The entire Democratic leadership in the House joined yesterday in warning the Reagan administration to keep its budget-cutting hands off the synthetic fuels subsidy program Congress created last year.” Democrats love corporate welfare, and even liberal intellectuals are far less critical of it than are libertarians and free-market conservatives.

And it’s not just corporate welfare. All the elements of the liberal interventionist state are both product and generator of rent-seeking. You can say that rent-seeking is an unfortunately inevitable by-product of having the government do good. But to want a $3 trillion federal government with vast regulatory powers that isn’t awash in rent-seeking is, as Milton Friedman wrote, like saying “I would like to have a cat, provided it barked.” Cats meow, and government money flows to those with political power.

Cato Today

Op-Ed: “Will the GOP Learn from This?” by Michael Tanner in the Orange County Register

As it emerges from the electoral rubble, the Republican Party must decide what it actually believes in before beginning rebuilding its battered fortune.

Michael Tanner on the election landslide

Republicans now have two more years in the wilderness to decide whether or not they actually stand for limited government and individual liberty. One wonders, whether they will hear the message.

Article: “Advice to President-elect Obama,” by Will Wilkinson in Marketplace

Here’s my advice: First, you’ve got to get spending under control….Second, drop the xenophobic claptrap….Third, get real on the ‘new energy economy.’

Op-Ed: “Is It Constitutional?” by Richard Rahn in the Washington Times

Which section of the U.S. Constitution gives the federal government the power to bail out banks? If you don’t know, it could be because no constitutional authority exists for such an action. It is all too common for both Congress and the executive branch to ignore that the Constitution limits what they can and cannot do.

Op-Ed: “US Urged to Overhaul Nuclear Arsenal,” by David Isenberg in the Asia Times

The handling of US nuclear weapons and policy were recently center-stage due to two different events. First was the release on October 24 of a report billed as a nuclear weapons roadmap for the future by the US Air Force. Titled “Reinvigorating the Air Force Nuclear Enterprise”, it called for the establishment of a global strike command and a headquarters for air force staff to handle nuclear assets.

The ‘Business Case of the Century’

On Monday, the Supreme Court will hear the case of Wyeth v. Levine, which the U.S. Chamber of Commerce has called the “business case of the century.” A Vermont woman who had to have an arm amputated after a nausea drug was improperly administered sued the drug’s manufacturer, Wyeth (she also sued the clinic, physician, and physician’s assistant, but these parties settled). She won in state court, and Wyeth sought review in the U.S. Supreme Court under the theory of “preemption” — that states cannot regulate (by statute or common law) in fields, like pharmaceuticals, where the federal government already does. Here the FDA had approved Wyeth’s label, but Wyeth did not change that label to conform to Vermont’s particular (and stronger) laws.

I don’t know whether this is the “business” case of the century, but it may well be that for the pharmaceutical industry. The outcome turns on a close reading of the statute — as Dan Troy and Becky Wood detailed in the most recent Cato Supreme Court Review, the Court is much more likely to endorse “explicit” rather than “implicit” preemption — but everyone (especially patients) will be better off if the Court upholds FDA preemption here. The courts should not be micro-managing what goes on labels or we will end up with the “overwarning” problems that defeat the labels’ purpose. Moreover, litigation is a blunt regulatory instrument that tends to skew the FDA’s already warped incentives to give too much weight to rare side-effects at the cost of prohibiting or suppressing useful drugs. These incentives, and the related litigation costs, ultimately affect the development of new drugs.

Bush’s Midnight Regulations?

The lead story in today’s Washington Post — above the economy, above the election — is a warning that the Bush administration may deregulate something before it leaves office. Here’s the online headline and subhead:

White House Makes a Last Push to Deregulate

New regulations, which would weaken rules aimed at protecting consumers and environment, could be difficult for next president to undo.

The story begins:

The White House is working to enact a wide array of federal regulations, many of which would weaken government rules aimed at protecting consumers and the environment, before President Bush leaves office in January.

The new rules would be among the most controversial deregulatory steps of the Bush era and could be difficult for his successor to undo. Some would ease or lift constraints on private industry….

Once such rules take effect, they typically can be undone only through a laborious new regulatory proceeding, including lengthy periods of public comment, drafting and mandated reanalysis.

OK, that’s news. A fair story. Although of course the reporter quotes no economist critical of regulation — just a couple of White House flacks and a business lobbyist — though he does quote at least three pro-regulation “public interest” activists issuing dire warnings of impending doom.

But I was curious: Did the Post run a prominent story a few days before the 2000 election about the Clinton administration’s push to impose sweeping regulations before they left office? You know the answer: of course they didn’t. Before election day, according to a Nexis search, there was one reference at the tail end of the jump of a Post story in the Business section to the Mercatus Center’s Midnight Regulations website. So they knew about the problem — Mercatus was publicizing it, and the Houston Chronicle ran a front-page story — but the Post didn’t think voters needed to know.

Even though, as today’s story mentions after the jump,

[T]he last-minute rush appears to involve fewer regulations than Bush’s predecessor, Bill Clinton, approved at the end of his tenure. …

“Through the end of the Clinton administration, we were working like crazy to get as many regulations out as possible,” said Donald R. Arbuckle, who retired in 2006 after 25 years as an OMB official.

Maybe they didn’t quite grasp the problem back in 2000. We’ll see whether there are such stories toward the end of the Obama administration in the Post — and on Diane Rehm, and on ABC News, and in the New York Daily News, and all the other places that are very concerned about “midnight deregulation.”