Topic: Regulatory Studies

Telegraph Messengers, Elevator Operators and the Connecticut Economy

Attorney/blogger Daniel Schwartz notes that even as the state of Connecticut continues to enact new labor laws at a hectic pace – from obligatory employer-paid sick leave, a first-of-its-kind law, to new curbs on consideration of workers’ credit records in hiring – it seldom gets around to repealing any of the obsolete old ones, such as its laws regulating the working conditions of telegraph messengers and elevator operators and saying disabled persons need a doctor’s note to accept night-time work in stores and restaurants. Because more law equals better law, right?

Not at all by coincidence, the New Haven Register noted ruefully in February that Connecticut has had zero job growth since 1990 and that the state “is projected to have the lowest national job growth rate — less than 1 percent — through 2016, according to IHS Global Insight, a New York economic analysis company.” At this rate, Connecticut is going to need every telegraph messenger and elevator operator job it can get. Is it any wonder the country is looking elsewhere – and in particular to states like Texas – for policy leadership?

Monks Successfully Defend Their Right to Earn an Honest Living

Last week, a federal court in Louisiana ruled that a state law prohibiting sales of caskets by non-licensed merchants was unconstitutional.  A monastery that has made caskets for over a century sued the state to protect their modest casket business. It should come as no surprise that our friends at the Institute for Justice were leading the charge against the law:

Under Louisiana law, it was a crime for anyone but a government-licensed funeral director to sell “funeral merchandise,” which includes caskets.  To sell caskets legally, the monks would have had to abandon their calling for one full year to apprentice at a licensed funeral home and convert their monastery into a “funeral establishment” by, among other things, installing equipment for embalming.

The Honorable Stanwood Duval of U.S. District Court for the Eastern District of Louisiana ruled, “Simply put, there is nothing in the licensing procedures that bestows any benefit to the public in the context of the retail sale of caskets.  The license has no bearing on the manufacturing and sale of coffins.  It appears that the sole reason for these laws is the economic protection of the funeral industry which reason the Court has previously found not to be a valid government interest standing alone to provide a constitutionally valid reason for these provisions.”

Thus, even though merely economic liberty was at issue and therefore courts need apply only “rational basis” scrutiny to the regulation at issue, this regulation fails for being completely beyond any conceivable rational basis. And indeed, like so many regulations, this one was nothing more nor less than a barrier to entry for small businesses. Established funeral directors had used the power of the government to illegally control the market, eliminating competition and artificially driving up the prices of caskets. Not only was the funeral-director cartel denying the monks their right t earn an honest living, but they were taking advantage of the people they serve (ultimately, everyone in Louisiana) by extracting ill-gotten profit – often at the time of their customers’ greatest sorrow.

You can read the full opinion here and watch a video that tells the monastery’s story below. Congratulations to the monks of St. Joseph Abbey and the great attorneys at IJ!

Commerce Clause Abuse, Non-Obamacare Division

The federal government is currently engaged in a misguided attempt to use a noneconomic statute – the Endangered Species Act – to regulate under its Commerce Clause authority a noneconomic activity, the potential “take” of the noncommercial, wholly intrastate delta smelt.  Acting under this purported authority, the U.S. Fish and Wildlife Service issued an opinion in 2008 that requires a reduction of critical water deliveries in California for the alleged benefit of the threatened delta smelt species.  The delta smelt-based water cutbacks have resulted in substantial hardship to farmers and other water users in Southern California and the San Joaquin Valley.  

In 2009, the Pacific Legal Foundation filed a lawsuit contending that regulation of the delta smelt is not a valid exercise of the Commerce Clause.  The district court and the Ninth Circuit Court of Appeals disagreed.  Cato joined Chapman University’s Center for Constitutional Jurisprudence and former attorney general Edwin Meese in filing a brief that supports PLF’s request for Supreme Court review.  

We argue that the Court should take this case in order to delineate the constitutional distinction between federal and state power and protect the states’ exclusive police power to regulate and advance the health, safety, and welfare of the people.  Specifically, our brief argues: (1) that the federal government’s regulation of a wholly intrastate, noncommercial species exceeds Congress’s powers under the Commerce Clause; (2) the expansive application of the ESA to the delta smelt, because it is noncommercial species that doesn’t travel across state lines, intrudes on the core police powers reserved to the states; and (3) that the Supreme Court should repudiate the aggregation principle of Wickard v. Filburn (the 1942 wheat-farming case central to the Obamacare litigation).  Striking down the expanded interpretation of the ESA at issue here is not enough. 

If left untouched, the Ninth Circuit decision opens the door to unlimited and abusive assertions of power by an assortment of federal agencies.  The Court needs to reinforce and rebuild the limits of the Commerce Clause and to reign in a federal government that continues to believe that the Constitution sets no bounds on its power. 

The name of the case is Stewart & Jasper Orchards v. Salazar.  The Supreme Court will decide this fall whether to hear it.

Federal Government Subsidizes and Penalizes Boeing Co.

When an entity is as mammoth and undisciplined as the $3.8 trillion U.S. federal government, it’s inevitable that its programs will be working at cross purposes. Just ask the civil aircraft manufacturer Boeing Company.

Politicians love Boeing because it not only makes valuable products but it also exports billions of dollars worth around the globe. To give a boost to those exports and supposedly create more jobs in the United States, the federal government’s Export-Import Bank offers preferential loans to foreign governments and airlines to help them buy more Boeing aircraft.

As my Cato colleague Sallie James documents in a new study, “Time to X Out the Ex-Im Bank,”

the number-one user of the Ex-Im Bank is the Boeing Company. Of the 35 aircraft sales supported by Ex-Im in FY2010, 28 were Boeing products, and the Congressional Research Service estimates that more than 60 percent of the value of Ex-Im Bank loan guarantees supported Boeing aircraft sales in that year.

No wonder critics refer to the Ex-Im as “Boeing’s Bank.”

Yet the same federal government is making it more difficult for Boeing to manufacture its airliners cost-effectively in the United States. Under the sway of organized labor, the National Labor Relations Board is seeking to prevent Boeing from expanding its production in South Carolina, a right-to-work state where the company’s employees are non-unionized.

In a column at today, Harvard economist Edward L. Glaeser rightly worries that the NLRB action is undermining one of the most important advantages enjoyed by American-based companies—the freedom of labor, capital, and goods to move freely within the United States. As Glaeser notes:

The profound role that mobility has played in our country, enabling repeated reinvention, causes me to be deeply worried about the possibility that a National Labor Relations Board complaint will prevent Boeing Co. from moving plane production from [unionized] Washington state to South Carolina.

In the spirit of compromise, Congress should eliminate the Ex-Im Bank, while telling the NLRB to back off and let U.S. companies deploy their productive resources in whatever locations within the United States that make the most competitive sense.

Overregulation: The View From a Helicopter Cockpit

Philip Greenspun discovers that an FAA inspector is happy to march a little helicopter charter outfit run by a single owner/pilot through the same paperwork slog that a much busier operation would face:

Finally, the FAA inspector looked at my random drug testing program to make sure that everything was in place. I’m subject to the same drug testing requirements as United Airlines. I am the drug testing coordinator for our company, so I am responsible for scheduling drug tests and surprising employees when it is their turn to be tested. As it happens, I’m also the only “safety-sensitive employee” subject to drug testing, so basically I’m responsible for periodically surprising myself with a random drug test. As a supervisor, I need to take training so that I can recognize when an employee is on drugs. But I’m also the only employee, so really this is training so that I can figure out if I myself am on drugs. As an employee, I need to take a second training course so that I learn about all of the ways that my employer might surprise me with a random drug test and find out about drug use. But I’m also the employer so really I’m learning about how I might trap myself. … Five minutes after the FAA inspector left, I received a phone call. “I’m from the FAA and we’d like to schedule an audit of your drug testing program.”

Things proceed to get crazier from there. And none of the craziness is likely to change so long as being worried about regulatory overkill is construed in Washington as being Against Air (or Food or Toy or Drug) Safety.

As Central Falls Falls

The New York Times has an article today on the plight of Central Falls, Rhode Island, a 19,000-population industrial city that may declare bankruptcy under the fiscal weight of $80 million in pension obligations for police and fire officers. Unlike some coverage of municipal fiscal woes, this one does not dance around the way some of the problem originates in misguided labor policy:

The city, just north of Providence, is small and poor, but over the years it has promised police officers and firefighters retirement benefits like those offered in big, rich states like California and New York. These uniformed workers can retire after just 20 years of service, receive free health care in retirement, and qualify for full disability pensions when only partly disabled.

“Promised” is a word of art here, because the city wasn’t really making all of these concessions on a voluntary basis, as its negotiator explains:

state law called for binding arbitration, which for many years was a clubby process that emphasized comparable benefits all across the state more than any city’s ability to pay.

“Binding” arbitration, just to be clear, does not mean that the city agreed beforehand to settle disputes with the unions by way of arbitration; it means that state law imposed an arbitrator’s edict whether city managers ever signed up for the arbitration route or not. It thus differs from the contractually specified arbitration upheld lately in consumer contexts by the U.S. Supreme Court in AT&T v. Concepcion, a decision assailed by many of the same politicos who see no problem with genuine mandatory arbitration in the labor context.

The crisis in municipal finance wrought by binding public-sector arbitration and related laws comes as no surprise to readers who remember Cato’s excellent 2009 study “Vallejo Con Dios: Why Public Sector Unionism Is a Bad Deal for Taxpayers and Representative Government” by Don Bellante, David Denholm, and Ivan Osorio. (The California city of Vallejo declared bankruptcy in 2008 following the failure of negotiations with police and fire unions over unsustainable compensation.)

One point the otherwise thorough Times article omitted: many politicians in Washington have worked for years to impose a Central-Falls-like legal climate on states and localities lucky or farsighted enough to have avoided one in the past. During last fall’s lame duck session, then-Majority Leader Harry Reid (D-Nev.) tried to push through the truly appalling Public Safety Employer–Employee Cooperation Act, which not only would have forced police and fire unionization on reluctant states and localities but also provided that in case of impasse (quoting Heritage) “States would have to provide a dispute resolution mechanism, such as binding arbitration.” And the misnamed Employee Free Choice Act (EFCA), a priority of President Obama during his first years in office, would have imposed binding arbitration on the private sector. Central Falls may now be hurtling toward the waterfall, but how many other communities are just one political shove away from plunging into the same fiscal rapids?