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September 30, 2014 4:55PM

Pruitt v. Burwell: A Victory for the Rule of Law

From Darwin's Fool:

The U.S. District Court for the Eastern District of Oklahoma handed the Obama administration another – and a much harsher — defeat in one of four lawsuits challenging the IRS’s attempt to implement ObamaCare’s major taxing and spending provisions where the law does not authorize them. The Patient Protection and Affordable Care Act provides that its subsidies for private health insurance, its employer mandate, and to a large extent its individual mandate only take effect within a state if the state establishes a health insurance “Exchange.” Two-thirds (36) of the states declined to establish Exchanges, which should have freed more than 50 million Americans from those taxes. Instead, the Obama administration decided to implement those taxes and expenditures in those 36 states anyway. Today’s ruling was in Pruitt v. Burwell, a case brought by Oklahoma attorney general Scott Pruitt.

These cases saw two appellate-court rulings on the same day, July 22. In Halbig v. Burwella three-judge panel of the U.S. Court of Appeals for the D.C. Circuit ordered the administration to stop. (The full D.C. Circuit has agreed to review the case en banc on December 17, a move that automatically vacates the panel ruling.) In King v. Burwell, the Fourth Circuit implausibly gave the IRS the thumbs-up. (The plaintiffs have appealed that ruling to the Supreme Court.) A fourth case, Indiana v. IRS, brought by Indiana attorney general Greg Zoeller, goes to oral arguments in federal district court on October 9.

Today, federal judge Ronald A. White issued a ruling in Pruitt that sided with Halbig against King, and eviscerated the arguments made by the (more senior) judges who sided with the government in those cases...

Read the rest.

September 30, 2014 3:58PM

The EEOC Loses (And Loses. And Loses.) In Federal Court Again

We keep reporting in this space about how federal courts have slapped down the long-shot lawsuits and activist legal positions advanced by the Obama administration's Equal Employment Opportunity Commission (EEOC). In the Freeman case last year, a Maryland federal judge used such unflattering terms as “laughable,” “unreliable,” and “mind-boggling” to refer to Commission positions, while in the more recent Kaplan case, in which Cato filed a brief, a Sixth Circuit panel was only slightly more polite about the systematic shortcomings in the commission's case. Both of those cases arose from the commission's controversial crusade against the use of criminal and credit background checks in hiring.

Since our report in April, the commission has extended its epic, cellar-dwelling record of federal court losses with at least three more defeats. 

* Yesterday a Second Circuit panel ruled on a case in which the EEOC had claimed that female and male lawyers at the Port Authority of New York and New Jersey had not received equal pay for substantially equal work. The problems with the commission's case were many, including a seemingly "random" choice of comparison employees that tried to dodge the significance of substantial differences between them based on how long they had been practicing law and had been at the Port Authority. Above all, the EEOC chose to rest its case on the notion that "an attorney is an attorney is an attorney," which meant it was entitled simply to assume that Port Authority lawyers "in practice areas ranging from Contracts to Maritime and Aviation, and from Labor Relations to Workers’ Compensation" were all doing the "same" work meriting the same pay. The panel of appeals judges barely concealed its impatience with this unrealistic assumption -- judges are if nothing else experienced lawyers themselves -- and upheld the dismissal



* The Obama EEOC had stirred wide alarm in the business community when it decided to take the position that many clauses used in garden-variety severance agreements, in which the departing employee agrees not to sue or disparage the employer, are in reality unlawful "retaliation" against protected activity. But in the first tryout of that position, the commission fell flat on its face, as InHouse Cafe relates

On September 18, 2014, Judge John Darrah of the U.S. District Court for the Northern District of Illinois dismissed the EEOC's lawsuit against CVS challenging CVS' standard separation agreement. The judge will issue a written opinion explaining his decision at a later date.

* In late June, a federal judge in North Carolina granted summary judgment against the agency in a disabled-rights case brought by a complainant who, the judge found, "cannot perform the essential functions of the job with or without a reasonable accommodation." The case was notable in at least two ways. First, it had been brought against Womble Carlyle, one of the bigger law firms in the South, which seemed to betoken the commission's hubris: not only will we bring weak cases, it seemed to be saying, but we'll even bring 'em against the sorts of law firms that have the means and will to fight such things. The second notable feature was that the court had earlier ordered the EEOC to pay $22,900 in sanctions to the law firm, over an episode in which the plaintiff admitted that after the commission had begun representing her, she had shredded and discarded job-search records relevant to Womble Carlyle's case. Lawyers call that spoliation of evidence. 

Somewhere, I'm sure, someone is thinking the commission's real problem must be with holdover Republican-appointed judges unwilling to cut civil rights complainants a break. So it's worth noting that in the Port Authority case, two of the three judges on the appellate panel are Obama appointees, while the district judge who dismissed the case was an appointee of Bill Clinton. The district judges in Illinois and North Carolina who dismissed the commission's claims are respectively Clinton and Obama appointees. The problems with overreaching, extreme, and just plain sloppy litigating at the EEOC go beyond differences between liberal and conservative judges. 

September 30, 2014 3:13PM

Peace, Love, & Liberty: A Brilliant New Book

Peace Love & Liberty

Hundreds of thousands of protesters are marching in Hong Kong under the banner of "Occupy Central for Love and Peace." Have I got a book for them!

Cato Senior Fellow Tom G. Palmer has just edited Peace, Love, & Liberty, a collection of writings on peace. This is the fifth book edited by Palmer and published in collaboration with the Atlas Network, where he is executive vice president for international programs, and Students for Liberty, which plans to distribute some 300,000 copies on college campuses.

But don't write this book off as a student handout. There's really impressive material in here. Palmer wrote three long original essays: "Peace Is a Choice," "The Political Economy of Empire and War," and "The Philosophy of Peace or the Philosophy of Conflict." These are important and substantial articles. 

But his aren't the only impressive articles. The book also includes:

  • Steven Pinker on why we've seen a decline in war
  • Eric Gartzke on how free trade leads to peace
  • Rob McDonald on early Americans' wariness of war
  • Justin Logan on the declining usefulness of war
  • Radley Balko on the militarization of police
  • Emmanuel Martin on how we all benefit if other countries prosper
  • Chris Rufer on a businessman's view of peace
  • Sarah Skwire on war in literature
  • Cathy Reisenwitz on what individuals can do to advance peace

Plus classic pieces of literature including Mark Twain's "War Prayer" and Wilfred Owen's "Dulce et Decorum Est."

And all this for only $9.95 at Amazon! Or even less from Amazon's affiliates. If you want to buy them in bulk -- and really, you should, especially for your peace-loving friends who aren't yet libertarians -- contact Students for Liberty.

September 30, 2014 2:44PM

Government Crowding Out, USPS Style

This is a really bad policy idea: the U.S. Postal Service wants to get into the grocery delivery business. Economists will sometimes support government interventions in industries where there are serious market failures. But with grocery delivery, private businesses are already performing the service, and no market failure is evident.

The USPS grocery idea is a desperate attempt to save the agency’s hide, rather than to solve any problems in the marketplace. The Washington Post frames it correctly: “After nearly six years of multibillion-dollar losses, the U.S. Postal Service has developed a new plan to help turn its finances around: Daily grocery deliveries.”

The problem is that government expansion into an activity squeezes out private providers and deters entrepreneurs from getting in. As the government expands, the private sector shrinks. Such “crowding out” occurs in many areas. An op-ed in the Wall Street Journal [$] today on retirement savings in different countries notes, “OECD data show a strong negative relationship between the generosity of public pensions and the income that retirees collect from work and private saving.”

The decline in mail volumes is prompting the USPS to extend its tentacles. GovExec reports, “from banking to passport photos, nearly all postal reform stakeholders agree any legislation must unchain the Postal Service to leverage its unique, in-every-community network to create new sources of revenue.” By “stakeholders,” GovExec appears to mean groups—such as the labor unions—that benefit from the subsidized status quo.

The Wall Street Journal reports [$] that the grocery gambit “is the latest in a string of aggressive moves by the Postal Service to compete in the package-delivery market.” But why would we want the government “aggressively” undermining private businesses, especially in an industry like package delivery that is already efficient and competitive?

If the USPS expands into new areas such banking and groceries, we will end up with a mess of cross-subsidies between the agency’s different activities. Banks, for example, would complain that subsidized USPS banking was undercutting them, which would be inefficient and unfair. Such disputes would be chronic, and each dispute would descend into a battle over accounting between lobby groups in front of Congress.

For more efficiency and less lobbying, Congress should be encouraging the USPS to shrink, not expand. Does it make sense for a letter carrier to deliver groceries? The best way to find out is to privatize the letter carrier, repeal its legal monopoly, and then let it have a go. Postal privatization works. Britain, Germany, and the Netherlands have shown the way. 

September 30, 2014 9:50AM

How School Choice Saves Money

School choice programs expand educational opportunity, but at what cost?

Opponents of school choice frequently claim that vouchers and scholarship tax credits "siphon" money from public schools and increase the overall cost of education to the taxpayers. However, these critics generally fail to consider the reduction in expenses associated with students switching out of the district school system, wrongly assuming that all or most school costs are fixed. When students leave, they claim, a school cannot significantly reduce its costs because it cannot cut back on its major expenses, like buildings, utilities, and labor. But if that were true, then schools would require little to no additional funds to teach additional students. A proper fiscal analysis considers both the diverted or decreased revenue as well as the reduction in expenses related to variable costs.

A new study by Jeff Spalding, Director of Fiscal Policy at the Friedman Foundation for Educational Choice, does exactly that. The study examines the fiscal impact of 10 of the 21 school voucher programs nationwide, finding a cumulative savings to states of at least $1.7 billion over two decades. Spalding, the former comptroller/CFO for the city of Indianapolis, is cautious, methodical, and transparent in his analysis. He walks readers through the complex process of determining the fiscal impact of each program, identifying the impact of each variable and explaining equation along the way. He also makes relatively conservative assumptions, such as counting food service and interscholastic athletics as fixed costs even though they are variable with enrollment. Critically, Spalding accounts for those students who would have attended private school anyway, explaining:

One common complicating factor is student eligibility. If a voucher program allows students already enrolled in a private school to qualify, then those students do not directly relieve the public school system of any costs. Thus, there is a new public cost incurred for the vouchers provided to those students, but no corresponding savings for the public school system. Anytime voucher eligibility extends to students not currently enrolled in a public school, the net savings calculation must include that complicating factor.

States save money when the variable cost of each student to the district schools is greater than the cost of the voucher, accounting for the students who would have attended private school anyway. After wading through each state's byzantine school funding formula, Spalding calculated that the voucher programs reduced expenditures across all 10 programs by $4.5 billion over two decades while costing states $2.8 billion, producing $1.7 billion in savings.

In the last 40 years, government spending on K-12 education has nearly tripled while results have been flat. Moreover, the Census Bureau projects that the elderly will make up an increasingly larger share of the population in the coming decades, straining state budgets with spending on health care and retirement benefits. Schools will have to compete with hospitals and nursing homes for scarce resources.

In other words, our education system needs to become more effective and financially efficient, fast. Large-scale school choice programs promise to do both.

September 30, 2014 9:21AM

Amtrak Shouldn’t Get to Write Its Own Ticket

Article One, Section One of the Constitution vests “all legislative powers” in Congress. The sovereign power to make laws comes from the people, so their representatives—Congress—should make those laws.

It sounds simple enough, but once the federal government started ballooning in size and regulating everything under the sun, that simple understanding had to go. There was too much governing for Congress to handle on its own, so the courts adjusted, allowing a proliferation of government agencies to exercise lawmaking power, within certain guidelines.&

We've now apparently gotten to the point, however, that there's so much governing to do that it's too much for the government to handle on its own. In a case now before the Supreme Court, Amtrak—the for-profit, quasi-public entity that the federal government has deemed private for these purposes—has been given a part to play in making laws to regulate its competitors in the rail transportation industry.

If you think this sounds like a far cry from “all legislative powers” being vested in Congress, you’re not alone. The Association of American Railroads, which represents the rail companies subject to these regulations, sued the Department of Transportation, arguing that the Passenger Rail Improvement and Investment Act of 2008 unconstitutionally vests federal legislative power in a private entity by giving Amtrak the ability to set rail standards (in conjunction with the DOT). AAR has battled through the federal courts, most recently winning in the U.S. Court of Appeals for the D.C. Circuit, and is now trying to preserve that victory before the Supreme Court.

Cato, joined by the National Federation of Independent Business, has filed a brief supporting AAR. We argue that this case is different from other cases where courts have found prudential reasons for not enforcing the nondelegation doctrine, the concept that Congress can't delegate its own legislative powers. As we explain, the judicial administrability, political accountability, and necessity arguments in favor of liberal delegation of lawmaking powers are far less valid in the context of delegation to private entities. Further, apart from these prudential concerns, the Court has vigilantly enforced these important structural limitations on delegation and should continue to do so here.

It’s perhaps too late to expect the courts to meaningfully rein in the massive delegation of power to the administrative state—though we should limit that delegation to implementation of law rather than actual legislation—but, as our brief explains here, it could be much worse. Many agencies are already dominated by the private interests they're supposed to regulate (a dynamic known as "regulatory capture"), but allowing a private entity to secure a legislative role in governing its competitors not only exacerbates the problems that the administrative state already poses, it makes a mockery of the Constitution and erodes one more important structural protection for liberty.

The Supreme Court will hear oral arguments in Dept. of Transportation v. Association of American Railroads on December 8, with a decision expected in the spring.

This blog post was co-authored by Cato legal associate Julio Colomba

September 29, 2014 3:52PM

Addressing the Critics of This Purportedly No Good, Very Bad Chart

For the past few years I have charted the trends in American education spending and performance (see below). The goal is to see what the national data suggest about the productivity of our education system over time. Clearly, these data suggest that our educational productivity has collapsed: the inflation-adjusted cost of sending a student all the way through the K-12 system has almost tripled while test scores near the end of high-school remain largely unchanged. Put another way, per-pupil spending and achievement are not obviously correlated.

Media Name: coulson_nat_ed_trends_chart_sept_2014.gif

Not everyone is happy with these charts, and in this post I'll respond to the critics, starting with the most recent: Matt DiCarlo of the Albert Shanker Institute, an organization that honors the life and legacy of the late president of the American Federation of Teachers. DiCarlo finds the chart "misleading," "exasperating," and seemingly designed to "start a conversation by ending it." Since we're actually having a conversation about the chart and what it shows, and since I've had countless such conversations over the years, perhaps we can agree that the last of those accusations is more of a rhetorical flourish than a serious argument.

DiCarlo links to a couple of earlier critics to do the heavy lifting in support of his antipathy, but he does admonish the use of a single percent-change y-axis as "not appropriate for and totally obscur[ing] changes in NAEP scale scores." This is ironic. When I first began to publish these charts, I used two separate y-axes, as shown in the image below which dates back to around 2009.

Media Name: 2009_spending_naep_chart_2_y_axes.jpg

This, DiCarlo may be exasperated to hear, was roundly critized for the ostensible crime of using... 2 separate y-axes, which, apparently, is only done by knaves and charlatans according to several e-mails I received at the time. But of course the use of 2 separate y axes is not inherently misleading. It depends on why they are used, whether or not the scales are sensible, etc. But when you are trying to reach a suspicious audience, it's not very effective to just say: "no, you're mistaken, there's nothing wrong with this use of 2 y-axes." They'll just put that down to more knavery on your part. So, thinking I would eliminate one source of spurious objections, I switched to a single percent-change axis. And now we have DiCarlo's objection to that. Catch-22.

But let's investigate DiCarlo's criticism. Does the percent change scale obscure important changes in the NAEP scores? Looking at the first chart, it is easy to see that the science score fell and never quite recovered to its original level before the test was discontinued, while the reading and math scores seem largely unchanged. As it happens, the raw NAEP score for math rose from 304 to 306, while the raw reading score rose from 285 to 287, and the raw science score fell from 305 to 295. We can see the science decline quite clearly, so it hasn't been obscured. But the two-point gains in math and reading look essentially like flat lines. Which raises the question: is a two point gain essentially equivalent to a flat line, or is it substantial?

Some people like to answer that question by saying that a gain of x points on the NAEP is equivalent to one school-year's worth of learning. But, according to a 2012 paper commissioned by the NAEP Validity Studies Panel, claims of that sort are unempirical guesswork.

Fortunately, there is a tried-and-true metric that researchers use to quantify effect sizes: they express them in terms of standard deviations, and those measures can in turn be converted to percentile scores. For example, the earliest available std deviation for the mean reading score of 17-year-olds was 46 points. Dividing 2 by 46, we get an effect size of 0.0435 SDs. That would take you from being in the middle of the pack in the early 1970s (that is, the 50th percentile), to being at the 51.7thpercentile. So instead of outscoring half your peers, you'd outscore 51.7 percent of them. That’s not a huge difference is it? That’s not a spike-the-football, endzone dance, “In. Your. Face!” kind of improvement. It’s really pretty small.

In math, the story is similar. The earliest SD available is for the 1978 admin of the test, and it was 35. A two-point gain would be an effect size of 0.057 SDs, which would raise you from median performer to the 52.3rd percentile. Again, this is not winning the lottery. This is not an “I’d like to thank the Academy” kind of moment.

So the fact that the reading and math scores look essentially flat in the chart at the top of this post is an accurate representation of the trend in raw NAEP scores. They are essentially flat.

Next, turning to the cost series in the top chart, both of the earlier critics cited by DiCarlo believed they smelled a rat. The legend of the version of the chart they reviewed referred to the cost trend line as a "13yr running total, i.e. K-12, spending per pupil," which I thought was self-explanatory. It wasn't. It seems that at least one of the critics was unfamiliar with the concept of a running total, thinking it was equivalent to simply multiplying the current year figure by 13. It's not. Because of his misunderstanding, he wrote: "the cost figure increases (supposedly the total cost of a K-12 education taken by multiplying per-pupil costs by 13) are false." Of course the error was his own, the result of failing to understand that a running 13yr total is the annual per-pupil spending for the given year, plus the corresponding figures for the preceding 12 years. This is an estimate of what was spent to put a graduate in the given year all the way through the K-12 system--i.e., the total cost of that graduate's K-12 public schooling.

The other critic cited by DiCarlo seems not to have read the chart's legend at all, claiming that I use "total rather than per pupil spending (and call it 'cost')." The legend explicitly states that it is a running 13yr total of per-pupil spending.

But, though both these critics were mistaken, I did learn (to my great surprise) that the idea of a running total is not universally understood. So, since that time, I have elaborated the explanation in the legend and raised it to the top of the chart in an effort to make the cost trend line easier to understand.

Yet other critics have alleged that the overall flat performance of 17-year-olds is purely the result of changing demographics---i.e., the increasing test participation rates of historically lower-scoring groups, and so the aggregate data are misleading. There is a little something to the premise of this argument, but the conclusion still doesn't follow. I explained why in my 2011 testimony before the House Education and the Workforce Committee, but I'll summarize it here for completeness. 

It is true that both black and Hispanic students now score higher than they did in the early 1970s, and the difference isn't negligible as it is with the overall aggregate trend. The first caveat is the that the trends for white students, who still make up the majority of test takers, are only marginally better than the overall trends. Whites gained four points in each of reading and math, and lost six points in science. The overall picture for whites is thus also essentially a flat line, and it is their performance that is chiefly responsible for the stagnation in the overall average scores, not the increasing participation of historically lower-scoring groups.

The second caveat is that all of the improvement in the scores of Hispanic and black students had occurred by around 1990, and their scores have stagnated or even declined slightly since that time (see the testimony link above). While the improvements for these subgroups of students are not negligible, they have no relationship to the relentlessly rising spending trend. Spending increased before, during, and after the period during which black and Hispanic students enjoyed their score gains. If per-pupil spending were an important cause of those gains, we would expect more uniform progress, and that is not what the data show.

Finally, what of the claims that it is unfair to chart test scores over this period because students have become harder to teach---because of poverty, single-parent families, low-birthweight or other factors associated with student performance. Claims like this are seldom accompanied by any sort of systematic numerical analysis. That's too bad, because if the overall trend in such factors really has been negative, then they might well be dragging down student performance and skewing the NAEP scores lower. Fortunately, several years ago, prof. Jay Greene of the University of Arkansas decided to take these criticisms seriously, tabulating the trends in 16 different factors known to be associated with student achievement (including the ones listed above), and combining them into a single overall index of "teachability." What Greene found is that, if anything, children have become marginally more teachable over this period. So we should expect some improvement in scores even if schools haven't improved at all.

In sum, while I grant that this particular chart does not capture every interesting piece of the puzzle---no single chart could---it is both useful and an accurate depiction of the lack of correspondence between spending and student achievement in U.S. schools over the past two generations, and of the fact that spending has risen out of all proportion with the academic performance of students near the end of high school.