January 28, 2020 2:29PM

ADA: Lawyers Sue Retailers for Not Putting Braille on Gift Cards

The Americans with Disabilities Act (ADA) reaches its 30th anniversary this year, which will touch off a year’s worth of coverage likely to be almost wholly celebratory in tone. Ten years ago, on the law’s reaching its 20th year, I took a less celebratory view that I think holds up well.

Meanwhile, back in the trenches, four law firms and associated clients over a period of about a week last fall launched a wave of more than 100 putative class actions charging that retailers are violating the ADA by marketing gift cards that do not include Braille versions. Earlier, the same four firms and their associated clients had filed hundreds of New York lawsuits alleging that websites fell short of accessibility to the disabled.

“The targets selected by plaintiffs in this new wave run the full gamut of retail establishments, including big box retailers, grocery stores, movie theaters, restaurants, clothing brands, and online gaming and other services,” reports one law firm. Typically, according to the Lawsuit Reform Alliance of New York (LRANY), “a successful plaintiff in [a local web accessibility] settlement will receive only $500 per case, but attorney’s fees average many times that amount, approximately $16,000 per case or more, depending on the law firm, the court and other factors, thereby giving plaintiff’s lawyers ample incentive to file as many cases as possible.” One attorney is said to have made about a million dollars a year this way over eight years.

Does the ADA really require Braille on gift cards as an accommodation? Who knows? The courts are unlikely to provide a firm answer any time soon, what with the Supreme Court speaking only very infrequently and generally on the subject. Last fall, in the Domino’s case, it ducked a chance to address the most pressing ADA issue of the past decade: the extent to which it requires redesign of websites.

And so the ADA continues making life miserable for businesses and other regulated parties both large and small (just this weekend San Jose Spotlight reported on the demise of a much‐​loved local coffee shop). As I wrote last year in this space:

Because ADA requirements are both obscure and voluminous and even compliance experts do not agree among themselves how much accommodation counts as enough, potential violations can be found at most businesses. While the ADA is a national law, much of the mass filing of accessibility complaints goes on under state laws that piggyback or expand on the federal version, often with added features enhancing damages or attorney’s fee entitlements.

Only Congress can clarify what this law means, and it consistently refuses to do that, no matter which party is in charge. You can read more about the ADA’s ongoing impacts here, here, here, here, and here [adapted from Overlawyered]

January 28, 2020 12:17PM

More Evidence that the CRA Doesn’t Always Help Low‐​Income Communities. But Proposed Changes Will Improve It

The Community Reinvestment Act is supposed to ensure that banks lend to low- and moderate-income households wherever they operate. But there are reasons to doubt its effectiveness.

In the Washington Post this summer, I reported findings (from a forthcoming paper with Andrew Forrester) that more than two-thirds of recent home mortgages in the District of Columbia for which banks can get CRA points went to high- rather than low-income borrowers. This is because current CRA regulations count loans to low-income borrowers and loans made in low-income census tracts (Figure 1a). D.C. has rapidly gentrified in recent years, as young professionals flocked into historically low-income neighborhoods, and many among these “gentrifiers” have bought homes. At present, CRA regulators take loans to gentrifiers into account when they evaluate banks, even though gentrifiers are not usually underserved borrowers.

Figure 1a: Loans to Low-Income Borrowers and in Low-Income Census Tracts Qualify for CRA Points

Note: LMI stands for low- and moderate-income, defined as a median family income below 80 percent of the median for the metropolitan statistical area. Yellow designates loans eligible for CRA credit (points).

Gentrification, as a rule, is a good thing for both new arrivals and historic residents. A recent paper from the Federal Reserve Bank of Philadelphia finds that gentrification benefits the original residents of low-income neighborhoods. While more-educated homeowners seem to gain most, even renters and the less-educated are better off as a result of the improved living conditions and increased opportunity that gentrification brings about. The impact of gentrification on migration by less-educated renters, arguably the most vulnerable group, to other neighborhoods is relatively small: 4 to 6 percentage points.

The Philly Fed paper uses data from the 100 largest metropolitan statistical areas (MSAs), which needless to say differ widely in their local zoning laws, economic policies, history of segregation and discrimination, and other traits important for our analysis. It may well be that particular MSAs have worse outcomes from gentrification, for example, because zoning restrictions make it difficult for housing supply to respond to higher demand, causing displaced renters to face greater cost pressures and longer commutes. That, however, is not a direct consequence of gentrification but of local housing policy.

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January 28, 2020 12:03PM

Winner and Loser States from Big Government

American government has become much larger and more centralized over the past century. That has created winner and loser states as taxpayer cash floods into Washington and is then dispersed through more than 2,300 federal spending programs.

In 2020, the federal government will vacuum $3.6 trillion from taxpayer wallets in the 50 states and borrow $1 trillion from global capital markets. Then it will turn on the leaf blower to scatter $4.6 trillion back across the 50 states, except for the cut the middleman in D.C. will keep for itself.

The Rockefeller Institute has released a report detailing these cash flows. The report calculates a “balance of payments” for each state in 2018, which is federal spending less federal taxes paid by individuals and businesses in each state. The winner states have a positive balance and the loser states a negative one. Federal spending includes four items: benefits (such as Social Security), state‐​local grants (such as Medicaid), procurement (such as fighter jets), and pay for federal workers.

On a per capita basis, the biggest winner states are Virginia, Kentucky, Alaska, and New Mexico. The biggest loser states are Connecticut, Massachusetts, New Jersey, and New York. Those loser states have a large number of high‐​earning individuals who get hit hard under the federal income tax, which imposes higher rates on top incomes.

Figure 1 shows data from the Institute’s report. Taxes per capita are on the horizontal axis and spending per capita on the vertical axis. Each dot is a state. The figure excludes a portion of taxing and spending that could not be allocated by state.

States on the bottom right are the losers and those on the top left are winners. Connecticut is on the far right paying $14,004 in federal taxes per capita but receiving only $11,750 in federal spending. Connecticut would be better off in a decentralized United States with citizens paying their taxes to state and local governments rather than the federal government.



Every state is actually worse off than indicated in Figure 1 because federal borrowing in 2018 allowed for spending to be 22 percent larger than taxes. But borrowing is not a free lunch. It creates a cost that will hit residents of every state down the road — borrowing is just deferred taxes.

For Figure 2, I scaled up taxes to include both the current and deferred federal burdens. Connecticut residents paid $17,098 in current and deferred taxes per capita and received only $11,750 in spending. They are only getting back 69 cents in federal spending for every dollar of federal tax burden.

In the figure, the loser states from centralized government are below the line and the winner states above it. Actually, because centralization creates lower‐​quality government, residents of every state lose, as I discuss here.

The interesting political question is why do loser states such as Connecticut, Massachusetts, New Jersey, and New York stand for it? Politicians from those states should be pressing for a less progressive federal income tax and for devolution of government activities back to the states.

Research assistance from David Kemp.

January 28, 2020 10:49AM

Don’t Let Utopian Public Schooling Rhetoric Block School Choice

A little red schoolhouse

I recently read Democracy’s Schools: The Rise of Public Education in America by Johann Neem, which in its title delivers the bedrock myth of public schooling: that it is essential to building harmonious, well‐​informed, citizens of a democracy. And it’s not just in the title that Neem waxes poetic about the public schools. In his preface he briefly recounts his experience as an immigrant child in Bay Area, California public schools, concluding that “by democratizing access to the kind of liberal arts education that was once reserved for the few, the common schools prepare all young people to take part in the shared life of our democracy.” Neem echoes the rhetoric of Horace Mann, the “father of the common school,” who in the 1830s and 40s brought a missionary zeal to promoting largely uniform, free public schools in Massachusetts.

The problem is that once you delve into the reality of public schooling, it does not at all match the rhetoric. To the credit of Neem and many other historians, they do not duck the reality, even if they seem to ultimately let the rhetoric get the better of them. Neem’s book is focused on pre‐​Civil War education, so he may have a different view of later public schooling, but towards the end of the book he offers a sober take on the reality of common schooling:

Schools may have effectively taught the basics, the three ‘Rs and a bit more, but they were less effective at inspiring young people to be citizens and to engage in self‐​culture. Instead, students saw schooling as something to get through. While in some cases this led to actual violence between teachers and students, in most cases there was tacit agreement that teachers had the authority to demand students’ compliance, and that students, with the support or pressure of their parents, would have to perform. There is little evidence that students left school wanting more.

Public schools were not forging unified, enlightened citizens, as was the goal, but were largely just a mundane part of life. Which would be fine, except that taxpayer support of uniform public schooling is compelled on the grounds that it is so much more than what it actually is — it is essential for “democracy,” right? — and in that privileged position it has often been worse than just ineffectual at its professed purpose. It has imposed or reinforced inequality and injustice.

I won’t go over all the injustice in detail — you can see where I’ve discussed it in more depth—but remember that for much of its history public schooling often discriminated against minority religions, most notably Roman Catholics. It often either completely barred or segregated African Americans—not just in the South—and in some places Mexican and Asian Americans. It attacked the culturally unifying language of German immigrant communities. It now systematically treats religious Americans as second‐​class citizens. And it forces people with different values, cultures, and identities to fight to see which “equal” people win, and which lose.

School choice is fundamentally different from this. Based not on rhetoric about creating social and personal perfection, but on the reality of diverse human beings and communities, choice enables families to pursue the education that they want, that respects their cherished values and cultures, and that removes the threat that those with the most political power will impose their idea of “the good” on everyone.

No doubt believers in public schooling such as Neem are guided by good intentions — they truly seek the ideal of unity and enlightenment for all — but too often, especially if they oppose school choice, they may let their ideals overtake their understanding of reality. And sometimes, it may lead them to forget that liberty is the country’s truly bedrock value.

January 27, 2020 2:12PM

The Folly Of Bernie Sanders’ National Rent Control Proposal

“Landlords cannot be allowed to raise rents to whatever they want, whenever they want,” Senator Bernie Sanders boomed on Twitter in November. “We need…a national rent control standard.” Now, his presidential campaign advocates one: under Sanders’ housing proposals, all landlords nationwide would only be able to increase rents annually by one and a half times the rate of inflation or 3 percent, whichever is higher. Assuming the current CPI for Urban Consumers is the inflation measure used, that would mean a rent increase cap today of just 3.4 percent.

Given the likely unconstitutionality of a truly national rent control law, one suspects Sanders should be taken seriously but not literally. What he is really doing here is endorsing a spate of new rent control laws across states, encouraging left‐​wing activists to push for more stringent restrictions elsewhere. California has already instituted a 5 percent plus inflation cap for older buildings. Oregon has passed a rent increase cap of seven percent per year above CPI. New York just expanded protections for existing rent stabilized tenants and is expected to follow the others with a proposal for a general rent cap.

But that Sanders’ national proposal probably won’t or can’t be implemented doesn’t mean his reasoning won’t damage housing policy across the country. His claim that landlords can charge “whatever they want” entrenches the idea that rents are set through greed or market power, not supply and demand. And if crude, low level rent increase caps are implemented even in individual cities, it could have disastrous consequences in “hot” markets – particularly given proposals like his are shorn of the exemptions one usually sees for small‐​time landlords, new properties or vacant units, that can provide a safety valve for the rental market.

To see the folly of a national rent policy, consider the differential state of major U.S. housing markets. According to a Demographia report last week, Rochester, New York has a median house price just two‐​and‐​a‐​half times the median income for the city. Similarly affordable housing can be found in Cleveland, Ohio and Oklahoma City (both 2.7 median multiples). On the other end of the spectrum, major Californian housing markets such as Los Angeles, San Jose, and San Francisco all have mean multiples above 8, while Seattle (5.5), Miami (5.4), and New York (5.4) are still deemed “severely unaffordable.”

Given housing affordability varies so much, we shouldn’t be surprised that rents similarly differ by locality. And if we accept that rents differ across the country for similar housing because of different household sizes, incomes, land use and zoning laws, and more, it stands to reason that average rents will change at different rates year‐​to‐​year as these supply and demand factors vary.

Looking across the last 20 years shows this clearly (see Table 1). In the broad housing markets around San Francisco, Seattle, Miami and Denver, average rent increases have exceeded what Bernie Sanders’ proposal would allow in over one of every two years. In contrast, cities such as Milwaukee, Cleveland, and St Louis have rarely seen rent increases exceed Sanders’ arbitrary cap. Within cities, we’d expect differences by neighborhood too (though perhaps with lower variance).

Years in Which Bernie Sanders' Rent Control Law Would Have Bound, On Average, By Metropolitan Area (2000-2019)

Is there any reason to suspect that landlords have been greedier in Miami than Milwaukee, or Seattle than St Louis? Or is it more likely that supply and demand trends have been different across cities over that 20 years? This evidence, plus the fact that rents within individual cities’ neighborhoods tend to quickly converge for certain property types and size, suggests that landlords cannot raise rents to “whatever they, whenever they want.” In reality, they are constrained both by tenants’ ability to pay and the availability of substitute properties. Or, to put it another way, by supply and demand.

Once one accepts that rental prices are overwhelmingly the product of market forces, not landlord greed, you see why rent control, especially as Sanders’ envisages, is such a misguided idea. It effectively seeks to drown out the message that rising rents is submitting – of an increased relative scarcity of rentable accommodation that has led rents to rise to clear the market. Instead, capping rents forces on the market the comforting lie that property is abundant. That produces a whole range of well‐​documented consequences.

Consider neighborhoods where market rents are expected to rise in the coming year beyond Sanders’ current 3.4 percent cap. The rent control will therefore bind, and if market rents continue increasing rapidly (perhaps because of an unresponsive supply of new housing to demand) then rents paid will become lower and lower relative to the underlying market rent. For hot rental markets:

  1. Once it becomes clear rent controls are likely to be implemented, some landlords may seek to raise rents today before the cap becomes law, second‐​guessing how market rents will evolve in the very near future.
  2. Once the rent control binds, there will be a shortage of property relative to the quantity demanded. Existing landlords will, on the margin, seek to find ways to convert rental accommodation into non‐​controlled forms of accommodation, such as condos, offices, use through AirBnB, owner‐​occupancy, and more.
  3. Since rents cannot adjust to the new market reality over time, and there are no exemptions for new properties, capital investment in new rentable accommodation will fall in neighborhoods affected. Existing buildings will likewise be knocked down and replaced with buildings for other uses. These effects will be exacerbated if landlords perceive rent control to be the precursor for other restrictions on how they use their buildings or choose their tenants. The overall supply of rentable accommodation in the market will therefore fall relative to where it would have been.
  4. Existing tenants who do not want to move will benefit significantly from the controls, with big rent savings. But over time that will mean many people being in accommodation that is the wrong size or location for them. Extensive wait lists for properties and black‐​market bribes will likely proliferate.
  5. Ordinarily, crude rent controls can lead to a deterioration of property quality. Landlords have incentives to either allow the property quality to deteriorate so that the market rent falls to the controlled rent or else to change the tenure type to non‐​controlled forms. In the case of Sanders’ proposal, however, landlords can apply for waivers from the controls if significant capital improvements are made. In very hot markets there are therefore big incentives for rapid gentrification – converting to very expensive, high‐​end properties and then fixing rents very high initially to reflect binding rent controls into the future.

In short, a Sanders national rent control proposal would bring a lot of economic damage. But even if implemented more locally, such a crude rent cap would bring significant downsides to local housing markets, and the economy more broadly. And all based on the misguided idea that landlords have vast market power to set rents.

January 27, 2020 11:40AM

True Tolerance Supports School Choice

It is National School Choice Week, a week dedicated to highlighting the power of choice in education, including public and private school choice. All week, we at Cato’s Center for Educational Freedom will be highlighting how choice contributes to social harmony.

Today’s focus is tolerance, spurred in part by a growing critique that private school choice programs enable people to select schools that sow intolerance. Just last week, the Orlando Sentinel ran a series of articles attacking Florida’s private school choice programs because parents can select schools that have policies that some people — including the Sentinel—deem “anti‐​LGBT.” The schools and the parents that use them, of course, view their policies differently: as upholding important religious teachings.

Let’s start with some basic private school facts. As I discussed a few months ago, a recent federal study found that private schools are generally safer and have more harmonious climates than public schools. They are less likely to experience gang activity, hate‐​related graffiti, bullying, or hate speech. Parents, as you can see below, are also much more satisfied with them.

Parents more satisified with private schools

But surely private schools produce less tolerant students and graduates? After all, they pull kids from inclusive public schools and put them in exclusive settings. The children do not learn to peacefully coexist with those who look or think differently from themselves.

Not really. Research, often after controlling for student characteristics such as family wealth, has typically found that compared to public schoolers, private school students and graduates are as tolerant or more tolerant of others.

One possible reason for this is precisely that choice enables people with different values to choose schools that share them, rather than making diverse communities into combatants forced to fight out whose values will win, and whose will lose. Indeed, right after the Orlando Sentinel ran its articles, pieces appeared in other outlets about parents fighting public school readings they believe force inappropriate, including pro‐​LGBTQ, views on their children. We see such throwdowns perpetually in the Sunshine State and nationwide.

Meanwhile, in Georgia and elsewhere, private schools are popping up specifically for LGBTQ kids. Why? Because public schools are often very intolerant places for them, if not by official policy, by school culture. School choice enables LGBTQ or other children who don’t fit in at their assigned public institutions to find schools that are warm and affirming.

Unfortunately, to garner sufficient political support to extend equal school choice — not paying once for public schools and a second time for private — to everyone, people broadly need a basic tolerance for beliefs and opinions different from their own. But human beings seem to have a powerful predilection for demanding equality for themselves, but not those with different values. We are seeing this more and more when it comes to religious schools that disapprove of LGBTQ behavior, but have also seen it from some school choice supporters when programs might include Islamic schools.

True tolerance is allowing others to be treated equally under the law even when you disagree with what they believe. This in no way means you have to approve of their views — freedom also means you can speak out against beliefs you find abhorrent, and shun the people who hold them — but you cannot use the legalized force of government to treat them differently.

Such political tolerance is for the good of all society. Until human beings are omniscient and infallible, it is extremely dangerous to enable one group to forcibly impose on all their conception of a good and proper life. It is an existential threat to everyone’s freedom.

January 27, 2020 8:57AM

The ACA Expanded Insurance Coverage of Contraceptives. Prices Soared.

In today’s Los Angeles Times, Cato senior fellow Dr. Jeffrey A. Singer and I note that once the Affordable Care Act’s contraceptives‐​coverage mandate took full effect in 2014, “prices for hormones and oral contraceptives stopped falling and instead skyrocketed. By 2019, they had risen three times as fast as prices for prescription drugs overall.” Here we provide the underlying data.

The Affordable Care Act (ACA) dramatically expanded insurance coverage for prescription contraceptives such as “the pill.” From August 2012 through January 2014, the federal government phased in the ACA’s requirement that nearly all private health insurance plans must cover all Food and Drug Administration‐​approved prescription contraceptives with no cost‐​sharing. In addition, from 2014 through 2017, the ACA enrolled an estimated 5 million previously uninsured women of child‐​bearing age in either private insurance plans subject to that mandate or in Medicaid, which also covers prescription contraceptives with no cost‐​sharing.

As a result of these changes, the share of consumers who are sensitive to the price of contraceptives plummeted. The Kaiser Family Foundation reports that, among women with large‐​employer coverage who use oral contraceptives, “the share experiencing out‐​of‐​pocket spending…declined from 94 percent in 2012 to 11 percent in 2017.” From 2012 through 2014, ACA‐​mandated coverage of contraceptives all by itself “account[ed] for nearly two‐​thirds (63%) of the drop in out‐​of‐​pocket spending on retail drugs” across all consumers.

The ACA’s reshaping of the market for oral contraceptives precisely coincided with a dramatic increase in prices for those items. Since December 2009, the U.S. Bureau of Labor Statistics’ (BLS) Producer Price Index (PPI) has measured the prices manufacturers receive for a sample of domestically produced hormones and oral contraceptives. The nearby figure shows what happened to real prices for hormones and oral contraceptives before and after the ACA’s contraceptives‐​coverage mandate took effect.

Before the mandate took effect — i.e., during a period when consumers more often paid for oral contraceptives directly — price changes for hormones and oral contraceptives generally followed a path similar to that of non‐​prescription drugs, which insurance typically does not cover, and which also fell in real terms. Prices for hormones and oral contraceptives actually fell by 12 percent in real terms.

As the mandate began to take effect and as the ACA made oral contraceptives seem “free” to more purchasers, prices for hormones and oral contraceptives began to rise. By the time the mandate took full effect in early 2014, prices for hormones and oral contraceptives reversed five years of real reductions and caught up to the 17 percent growth in real prices for other prescription drugs.

Once the mandate took full effect, prices began to rise rapidly. From May 2013 through May 2019, while real prices for non‐​prescription drugs and prescription drugs overall rose just 12 percent and 37 percent, respectively, prices for hormones and oral contraceptives rose 108 percent. That’s nearly three times the rate of price growth for other prescription drugs.

The PPI for hormones and oral contraceptives has limitations as a measure of prices for hormonal contraceptives in general and oral contraceptives in particular. First, it samples and estimates changes in the initial prices drug manufacturers receive, not the ultimate prices insurers and consumers pay. Second, it samples and estimates changes in prices only for domestically produced drugs, excluding drugs produced in other countries and Puerto Rico. Third, it encompasses drugs other than contraceptives that may have an important influence on the index.

Unfortunately, the BLS neither discloses which drugs it samples nor the relative contributions of contraceptives versus other hormonal drugs. The PPI for hormones and oral contraceptives is therefore an imperfect measure because it does not necessarily reflect the changes in consumer prices for all hormonal contraceptives available to consumers, and may instead reflect changes in (non‐​consumer) prices for non‐​contraceptive hormonal drugs. The BLS’s Consumer Price Index (CPI) for prescription drugs lacks some of these shortcomings. Unfortunately, the BLS does not publish CPIs for prescription drugs at the level of therapeutic class.

Even with these limitations, these data suggest that trying to make oral contraceptives “free” for insured consumers had the unintended consequence of making them far more expensive for insurance companies and women who buy them without insurance, including young women who prefer not to purchase them through their parents’ insurance.

In the Cato Institute book Overcharged, Cato adjunct scholars Charles Silver and David Hyman explain why paying for health care through insurance often causes prices to rise. Despite the supposed purchasing power of third‐​party payers, insurers are not very good at reducing prices. When consumers don’t care about prices, they actively resist attempts by third‐​party payers to negotiate lower prices. This dynamic gives providers, including manufacturers of oral contraceptives, free rein to raise prices.

In a forthcoming Cato Institute white paper, Singer and I propose taking away the FDA’s power to require women to obtain a prescription before purchasing birth control pills.