Topic: Regulatory Studies

Haywood v. Drown

The Supreme Court ruling in Haywood v. Drown got lost in the news last week, but it was an important constitutional case involving the principle of federalism.  The issue concerned the  extent to which the central government can commandeer state judicial systems.  Unfortunately, by a narrow 5-4 vote, the Court gave the central government a green light.

Justice Clarence Thomas filed  another one of his sober, scholarly opinions in dissent and I think he makes the case rather well.  Excerpt:

The Court holds that New York Correction Law Annotated §24, which divests New York’s state courts of subject-matter jurisdiction over suits seeking money damages from correction officers, violates the Supremacy Clause ofthe Constitution, Art. VI, cl. 2, because it requires the dismissal of federal actions brought in state court under42 U. S. C. §1983. I disagree. Because neither the Constitution nor our precedent requires New York to open its courts to §1983 federal actions, I respectfully dissent.

Although the majority decides this case on the basis of the Supremacy Clause, see ante, at 5–13, the proper starting point is Article III of the Constitution. Article III, §1, provides that “[t]he judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.” The history of the drafting and ratification of this Article establishes that it leaves untouched the States’ plenary authority to decide whether their local courts will have subject-matter jurisdiction over federal causes of action.

Until this setback, the Court’s conservatives were doing well in this corner of the law.  In New York v. United States (1992), the Court ruled that state legislatures were not subject to federal direction.  In Printz v. United States (1997), the Court ruled that state executive officers were not subject to federal direction.  This case stood for the proposition that state courts are not subject to federal direction.  Alas, Justice Anthony Kennedy joined the liberals to subordinate the states to federal control.

Here’s a practical example to illustrate the problem.  It’s bad enough when Congress wants to pass a law like the Americans with Disabilities Act (pdf)–a law that will create a flood of litigation.  But what if Congress goes a step further and writes the law in such as way as to say ”take all those time-consuming lawsuits to the state courts. Federal judges and personnel can’t be bothered with that stuff!”  So state courts get clogged or state lawmakers must raise taxes to alleviate the added burden, which blurs accountability.  That’s what is likely to happen. Or, to be precise, continue to happen with increasing frequency.  The feds have permission to foist costs on to the states.

But, to be clear, the main issue here is the proper division of federal and state authority.  Even if Congress were to get around the problem of unfunded mandates by throwing money at the states, each state should retain control over its judiciary.  As Justice Thomas notes, the issue of federal supremacy is too often distorted by liberals.  Within its proper sphere, the feds are supreme.  Liberals want supremacy and federal authority that is plenary.  Wrong.  Obama’s Supreme Court nominee should be asked about federalism and the doctrine of enumerated powers at the confirmation hearings.

A Compelling Government Interest in… Fabulous Drapes!

Libertarians often disagree with their non-libby friends about the need for government-mandated occupational licensing in fields like medicine. The idea behind such licensing is that the government has a compelling interest in protecting citizens and that licensing actually achieves that end. The evidence is not as cut and dried on the latter point as many people assume, but at least there’s enough meat there to warrant a discussion.

Whatever you think about occupational licensing in the context of medicine, there’s one field where the government’s “compelling interest” – and ability to successfully execute on it – is particularly hard to defend: interior design.

In three U.S. states, government officials are, right now, “protecting” their citizens from bad Feng Shui, misguided uses of prints with plaids, gauche arrangements of bric-a-brac, and other crimes against fabulosity. No one in Florida, for instance, can call himself an interior designer lest he receives the official imprimatur of the state. The Institute for Justice has filed suit to overturn the licensing requirement. Imagine the harm to Floridians if they succeed….

No. I can’t imagine any either.

In this field, more than any other, the real reason for most occupational licensing becomes apparent: cartelization to protect incumbent businesses from competition.

UPDATE: Check out this video by ReasonTV about the interior design license laws around the country.

Wal-Mart: Health Food Store?

As someone who believes in liberty, my natural inclination is to defend a company like Wal-Mart from the usual attacks.  You know, the company should pay its employees more (sure, just like all other companies, including libertarian think tanks!).  Wal-Mart destroys local businesses (that is, enterprises which offer fewer choices but at higher prices, and whose customers cheerfully flee when given an alternative).  The people most likely to attack Wal-Mart are those who would never shop there and don’t know anyone who does shop there.

It’s always nice to find evidence to back my inclinations.  It turns out that Wal-Mart not only lowers prices for poor people, but improves their health.  Reporting on this improbable result is Radley Balko, formerly at Cato and now at Reason:

In the popular imagination, a big-box store such as Wal-Mart is more often seen as part of the problem than part of the solution: We associate Wal-Mart with large women in stretch pants, fat kids sucking down tubs of soda, and morbidly obese men inching down the snack-food aisle in motorized shopping carts. The store makes candy, chips, and soda ridiculously cheap—so wouldn’t Wal-Mart contribute to the obesity problem?

That’s what economists Art Carden of Rhodes College and Charles Courtemanche of the University of North Carolina at Greensboro suspected. So they conducted a study to find out. Carden and Courtemanche have done a number of studies on Wal-Mart. Carden insists they get no funding from the company, directly or indirectly. Rather, he says, the two free-market economists have been intrigued by the Wal-Mart debate and wanted to test some of the more common criticisms of the store. Generally, they’ve found that the worst fears about Wal-Mart are unfounded, and that the stores have a mostly positive impact on their communities.

But they thought this one might be different. “We expected the study to show an increase in obesity in communities with a Wal-Mart,” Carden says. “We know that Wal-Mart lowers the cost of food, but we figured it’s not always the best food for you.”

To their surprise, they found the opposite—there was a small but statistically significant reduction in obesity rates in communities with a Wal-Mart, perhaps because the store also sells fresh produce of good quality at a good price.

Broadening the study to big-box stores in general, the effect was even more pronounced. “People actually bought more produce, more fruits and vegetables,” Carden says. “Instead of just eating more, they ate a higher-quality diet—a lower-fat diet than the rest of the population.”

It appears that people aren’t as stupid as paternalistic politicians believe.  And markets ain’t half bad either.

Sarbanes-Oxley under Attack… from the Supreme Court!

Today the Supreme Court agreed to review a case brought by our friends at the Competitive Enterprise Institute that challenges the constitutionality of the Public Company Accounting Oversight Board (PCAOB, pronounced “peek-a-boo”).  The constitutional problem with the PCAOB – there are many policy problems – is that its officers are appointed in an unconstitutional manner. 

Under the Appointments Clause of Article II, section 2, the president has the exclusive power to appoint and remove government officials.  The members of the PCAOB – which enforces the massive regulatory scheme Sarbanes-Oxley imposes on public companies – are appointed by the SEC, however, which then has limited supervisory/removal power.  While this structural defect may seem like a minor technicality, what it means is that the awesome power to set accounting standards – not least Sarbox section 404, which has cost the economy over a trillion dollars – impose taxes, and levy criminal and civil penalties is vested in a bunch of unaccountable bureaucrats.  Entities with similar authority, even those having a modicum of political independence, such as the IRS Commissioner and Federal Reserve governors, are all vetted by the president and the Senate.

The court below (the D.C. Circuit), however, held that PCAOB members are inferior officers and, as such, Congress “may limit and restrict the power of removal as it deems best for the public interest.”  But this gets the Constitution backwards; Congress isn’t allowed to insulate important decisionmakers from political accountability.  As CEI’s press release says:

If the President can pick and remove the PCAOB members, as the Appointments Clause requires, he will be on the hook for their policy failures, and thus have an interest in making them develop sound policies that protect investors and don’t stifle economic growth.  He won’t be able to blame the red tape on an unaccountable agency whose officials he doesn’t select or control.

The Court will hear the case, Free Enterprise Fund v. PCAOB – which I previously blogged about here – in late fall.

Obama’s Unerring Instinct for Aides with Authoritarian Instincts

President Obama has appointed New York City health commissioner Thomas Frieden to head the Centers for Disease Control. Public health is an important issue, but as Jacob Sullum points out at Reason, Frieden has a weak grasp of what’s “public” in the world of health:

Frieden, an infectious disease specialist who is known mainly as an enthusiastic advocate of New York’s strict smoking ban, heavy cigarette taxes, trans fat ban, and mandatory calorie counts on restaurant menu boards, embodies the CDC’s shift from illnesses caused by microbes to illnesses caused by lifestyle choices. “Dr. Frieden is an expert in preparedness and response to health emergencies,” Obama said today, ”and has been at the forefront of the fight against heart disease, cancer and obesity, infectious diseases such as tuberculosis and AIDS, and in the establishment of electronic health records.” Some of these things are not like the others. When it comes to justifying the use of force, there is a crucial difference between health risks imposed by others (such as bioterrorists or TB carriers) and health risks that people voluntarily assume (by smoking or overeating, for example). In the former case, even those who believe that government should be limited to protecting individual rights can see a strong argument for intervention; in the latter case, intervention can be justified only on paternalistic or collectivist grounds. Frieden either does not recognize or does not care about this distinction.

Frieden told the Financial Times in 2006 that “when anyone dies at an early age from a preventable cause in New York City, it’s my fault.” That’s a breathtaking vision of the scope and power of government. If you eat butter or salt, or smoke, or climb mountains, or ride a motorcycle, or bungee-jump, or run with the bulls in Pamplona, Dr. Frieden feels that he and the government are personally responsible. This isn’t paternalism; your parents usually let you make your own decisions along about the age of 18. And it isn’t fair to nannies to call it “nanny state” regulation: after all, nannies are paid to take care of children until they can care for themselves; they don’t barge into your home or your bar or your restaurant uninvited, issuing orders to adults. Maybe the right term is food fascism, for the attempt to use force to tell adults what they can and can’t eat, smoke, or purchase.

More on the distinction between public health problems and health problems that are merely widespread here.

And more about Obama’s appointment of “a bunch of statist ideologues who have been waiting years or decades for an election and a crisis that would allow them to fasten on American society their own plan for how energy, transportation, health care, education, and the economy should work” here.

Week in Review: The War on Drugs, SCOTUS Prospects and Credit Card Regulation

White House Official Says Government Will Stop Using Term ‘War on Drugs’

The Wall Street Journal reports that White House Drug Czar Gil Kerlikowske is calling for a new strategy on federal drug policy and is putting a stop to the term “War on Drugs.”

The Obama administration’s new drug czar says he wants to banish the idea that the U.S. is fighting ‘a war on drugs,’ a move that would underscore a shift favoring treatment over incarceration in trying to reduce illicit drug use…. The Obama administration is likely to deal with drugs as a matter of public health rather than criminal justice alone, with treatment’s role growing relative to incarceration, Mr. Kerlikowske said.

Will Kerlikowske’s words actually translate to an actual shift in policy? Cato scholar Ted Galen Carpenter calls it a step in the right direction, but remains skeptical about a true change in direction. “A change in terminology won’t mean much if the authorities still routinely throw people in jail for violating drug laws,” he says.

Cato scholar Tim Lynch channels Nike and says when it comes to ending the drug war, “Let’s just do it.” In a Cato Daily Podcast, Lynch explained why the war on drugs should end:

Cato scholars have long argued that our current drug policies have failed, and that Congress should deal with drug prohibition the way it dealt with alcohol prohibition. With the door seemingly open for change, Cato research shows the best way to proceed.

In a recent Cato study, Glenn Greenwald examined Portugal’s successful implementation of a drug decriminalization program, in which drug users are offered treatment instead of jail time. Drug use has actually dropped since the program began in 2001.

In the 2009 Cato Handbook for Policymakers, David Boaz and Tim Lynch outline a clear plan for ending the drug war once and for all in the United States.

Help Wanted: Supreme Court Justice

Justice David Souter announced his retirement from the Supreme Court at the end of last month, sparking national speculation about his replacement.Souter Dedication

Calling Souter’s retirement “the end of an error,” Cato senior fellow Ilya Shapiro makes some early predictions as to whom President Obama will choose to fill the seat in October. Naturally, there will be a pushback regardless of who he picks. Shapiro and Cato scholar Roger Pilon weigh in on how the opposition should react to his appointment.

Shapiro: “Instead of shrilly opposing whomever Obama nominates on partisan grounds, now is the time to show the American people the stark differences between the two parties on one of the few issues on which the stated Republican view continues to command strong and steady support nationwide. If the party is serious about constitutionalism and the rule of law, it should use this opportunity for education, not grandstanding.”

Obama Pushing for Credit Card Regulation

President Obama has called for tighter regulation of credit card companies, a move that “would prohibit so-called double-cycle billing and retroactive rate hikes and would prevent companies from giving credit cards to anyone under 18,” according to CBSNews.com.

But Cato analyst Mark Calabria argues that this is no time to be reducing access to credit:

We are in the midst of a recession, which will not turn around until consumer spending turns around — so why reduce the availability of consumer credit now?

Congress should keep in mind that credit cards have been a significant source of consumer liquidity during this downturn. While few of us want to have to cover our basic living expenses on our credit card, that option is certainly better than going without those basic needs. The wide availability of credit cards has helped to significantly maintain some level of consumer purchasing, even while confidence and other indicators have nosedived.

In a Cato Daily Podcast, Calabria explains how credit card companies have been a major source of liquidity for a population that is strapped for cash to pay for everyday goods.