Archives: 01/2017

Can States Forcibly Unionize Small Businesses?

Imagine that you run a family daycare out of your home. You have no direct connection to the state government, but its bureaucrats decide that because you lack an “organized voice” as a profession, they’re going to appoint a union representative to speak on your behalf. So you get a union you didn’t choose and which you refuse to join. This union is now representing your “interests” before the state, which isn’t even your employer. All this despite the fact that you might not even agree with what the union is saying!

It sounds far-fetched, but this is what’s happening to Mary Jarvis and several others in New York. These plaintiffs have sued the Empire State, arguing that the imposition of an exclusive representative violates their First Amendment freedom of association.

In the 2014 case Harris v. Quinn, the Supreme Court ruled that states that unionize healthcare aides and other home-based workers who are “not full-fledged public employees” cannot require those who do not wish to join the union to pay fees to support it. This new case asks the question Harris left unanswered: May a state even mandate exclusive representation for those who are “not full-fledged public employees”—or not employees of the state at all?

The U.S. Court of Appeals for the Second Circuit said that the case is easily resolved under Abood v. Detroit Board of Education (1977)—which allowed the imposition of “agency fees” on union nonmembers—and does not require further First Amendment scrutiny. Abood, however, is like a house built on the sand: It treated the First Amendment concerns public unions (should) raise as already resolved by earlier cases when in fact those cases merely resolved the question of whether Congress has the constitutional authority to regulate those public unions. Abood’s reliance on the notion of “labor peace”—which was significant in those old cases but shouldn’t be a valid First Amendment interest—conflicts with the First Amendment’s ban on compelled speech and association absent a substantial government interest.

Although the Second Circuit treated this case as automatically resolved under Abood, it would actually be a vast expansion of precedent to say that “labor peace” justifies forcibly unionizing at-home workers who are independent from the state government. States are already doing this in a number of jurisdictions—including in the First Circuit, which recently upheld a similar Massachusetts law that Cato earlier urged the Supreme Court to hear—but expanding Abood here would enable the states to mandate exclusive representation for almost any private business.

Where does it stop? Cato has filed a brief asking the Court to answer that question once and for all, and ultimately to rule that Abood should not be read to give the states free rein to unionize individuals at the expense of their First Amendment rights. The case is Jarvis v. Cuomo.

Campaign-Finance Rules Chill Speech Unrelated to Election Campaigns

In 2014, the Independence Institute—a Colorado think tank—wanted to run a radio advertisement supporting the Justice Safety Valve Act, a bill granting federal judges greater discretion in sentencing nonviolent offenders. The text of the ad asked listeners to “call Senators Michael Bennet and Mark Udall”—Colorado’s two senators at the time—and tell them to support the bill.

But under the Bipartisan Campaign Reform Act of 2002 (BCRA, better known as McCain-Feingold), any organization that spends at least $10,000 on “electioneering communications” in one year is required to make several public disclosures, including “the names and addresses of all contributors who contributed an aggregate amount of $1,000 or more” toward the advertisement. Further, an “electioneering communication” is defined as any broadcast that “refers to a clearly identified candidate for Federal office” within 60 days of a general election. Since Udall was running for reelection that year, the ad would have qualified even though it had nothing to do with Udall’s campaign.

The Independence Institute challenged the rule as an unconstitutional burden on its First Amendment right to speak on issues of public concern. After losing before a three-judge district court, the Institute has now appealed directly to the Supreme Court. Cato, joining the Institute for Justice, has filed a brief urging the Court to grant the case a full hearing on the merits.

We make two broad points. First BCRA’s disclosure provision is undeniably content-based, which should subject it to strict scrutiny under the First Amendment (meaning the government needs to provide a compelling justification). The law applies only if a speaker chooses to make reference to a candidate for office, so the law expressly draws distinctions based on the expressive content of speech.

Second, mandatory-disclosure laws chill speech by forcing people to surrender their “privacy interest in keeping personal facts away from the public eye,” as the Supreme Court put it in U.S. Department of Justice v. Reporters Committee for Freedom of Press (1989). In the context of reviewing disclosures made under the Freedom of Information Act, the Court has recognized that “embarrassment in … social and community relationships” is among the consequences of disclosure that “must be given great weight.” U.S. Department of State v. Ray (1991).

Exactly the same analysis holds true for donors to advocacy organizations. For many people—without tenure, without salary protection, and without security details—government-mandated disclosure of their political leanings and personal data is a real barrier to political participation. Forcing people to divulge their personal information threatens to expose them to reprisals, and this deterrent effect is pervasive precisely because it is impossible to predict whether your viewpoint will trigger retaliation.

BCRA’s disclosure rule is content-based, intrudes on speech and association, and has not been shown to serve a legitimate governmental interest. Because enforcement of the rule raises a substantial question under the First Amendment, the Court should take up Independence Institute v. FEC and ultimately overturn the district court.

You Ought to Have a Look: How to Properly Worry about Climate Change, aka, Lukewarming

You Ought to Have a Look is a regular feature from the Center for the Study of Science.  While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic.  Here we post a few of the best in recent days, along with our color commentary.

In our last episode of You Ought to Have a Look (which was prominently quoted in an editorial in Nature magazine this week), we looked at reasons why folks who are wishing climate change mitigation should be the driving force behind most federal regulations should be very worried about what the incoming Trump Administration has in store. Most of his announced agency heads, etc., don’t share their vision (unlike those currently running the Obama Administration).

This week we start off with a guide to how folks should worry about climate change in general. Is it really true that, according to President Obama, “No challenge—no challenge—poses a greater threat to future generations than climate change”? The short answer is no. The long answer is provided by Manhattan Institute’s Oren Cass is his recent piece for National Affairs called “How to Worry about Climate Change”.

Oren describes how climate change is different from typical political policy questions:

Climate change is a different kind of problem from health-care reform, gender equality, or almost any traditional subject of political attention and action. Its relevant effects are still decades or centuries away. Scenarios with the most extreme effects, rather than the most likely ones, provide the sense of urgency and the rationale for policy responses. Those extreme outcomes are often distant ripples from the initial effect of a warmer climate, transmitted outward through multiple steps of causation and combined with other factors to produce or amplify the damage. By the time actual impacts arrive, the time for action may have long passed. But if climate change is not a typical policy problem, how should policymakers approach it?

…Yes, climate change is a problem. But what kind of problem?

He then sets out to answer that question:

Climate change—forecasted, irreversible, and pervasive—might therefore be called a “worrying problem.” Here, “worrying” does not mean “concerning” (though it is that as well), but rather something tailor-made for worry. Its effects exist primarily in the imagination and have poorly defined bounds that encourage speculation; a point of no return looms. Yet the contours of those bounds and that point may become clear only after it is too late to correct course.

Other worrying problems exist. They tend to emerge where clear long-term trends in technological or social change produce concerning side effects.

Oren provides other examples of “worrying problems” such as a global pandemic caused by international travel and urbanization, overuse of antibiotics, nuclear weapons, interconnectivity of financial systems, democratization of communications technologies, computer viruses, superhuman computer intelligence, weaponized nanotechnology, and many more, including social ones, as well as the sustainability of the Western welfare state itself. As Oren says there is “much to worry about,” but reminding everyone that “we should heed the well-known warning: ‘What worries you masters you.’”

The Results Are In: The IMF’s Venezuela Inflation Guesstimate Was Way Off

In October, the International Monetary Fund (IMF) committed a blunder when it issued a forecast for Venezuela’s end-of-year annual inflation rate. An inflation forecast in a country that is toying with hyperinflation is a mug’s game.

The IMF’s October 2016 World Economic Outlook (WEO) forecast for Venezuela’s 2016 year-end annual inflation rate was 720 percent. The IMF’s figure gave the appearance that it was based on a finger-in-the-wind estimate. Indeed, the last serious connection between Venezuela and the IMF was back in September of 2004, when an Article IV Executive Board Consultation occurred.

However, the IMF published a forecast anyway. What became a magic number of 720 percent was repeated over and over in the financial press. Sometimes the press reported it as a forecast, which it was, but more often than not, it was reported it as if it were a measured rate, which it was not.

The only accurate measured rate of the general level of inflation in Venezuela is produced by the Johns Hopkins-Cato Institute Troubled Currencies Project (TCP), which I direct. This project measures inflation as it occurs. It does not produce inflation forecasts. The TCP’s measured inflation rates are based on the long-established principle of Purchasing Power Parity. Using this method, changes in black market (read: free market) exchange rates are translated into overall inflation rates. Based on my calculations, the 30-day moving average for Venezuela’s annual year-over-year inflation in December 2016 was 290 percent. This rate is less than half of the IMF’s forecast.

Is U.S. Primacy a Burden or a Benefit?

Thanassis Cambanis argues in Politico that, contrary to what we may think, America’s role as global policeman, defender of more than 50 different countries, buyer of more than a third of worldwide military spending, etc. is not a costly burden compared to the benefits it yields. All this talk about how allies free ride off our security commitments and how the promiscuous use of U.S. military power imposes significant economic and geopolitical costs on the homeland are off base, according to Cambanis. Being the policeman of the world makes us richer, he says.

Since the United States is so extravagantly rich in relative international terms but also historically speaking, identifying even major costs can be difficult. But Cambanis misses the mark with some selective accounting. He makes his case with three main points. First:

[M]ost of America’s defense spending functions as a massive, job creating subsidy for the U.S. defense industry. According to a Deloitte study, the aerospace and defense sector directly employed 1.2 million workers in 2014, and another 3.2 million indirectly. Obama’s 2017 budget calls for $619 billion in defense spending, which is a direct giveback to the American economy…

Of course, a “giveback” to the American economy implies the real truth: that in order to create jobs by massively subsidizing the military industrial complex, the government has to first extract resources from the more productive sectors of the private economy. If the U.S. pared back its global role and initiated serious restraint-oriented cuts to the defense budget, it could produce something on the order of $150 billion in annual savings. That could serve as quite a stimulus if left in taxpayers’ pockets.

DACA Definitely Did Not Cause the Child Migrant Crisis

Senators Dick Durbin and Lindsey Graham have introduced a bill to extend the Deferred Action for Childhood Arrivals (DACA) program, which since 2012 has provided work permits and lawful presence to 800,000 young immigrants brought illegally to the United States as children. One difficulty for the bill is that the GOP House passed a bill to end DACA in 2014, arguing that DACA caused a surge of young children to come to the border starting in 2012 and reaching its peak in 2014.

At the time, my colleague Alex Nowrasteh published an article arguing against this thesis. First, he noted that DACA specifically prohibited recent arrivals from applying for the benefits. DACA applicants had to be under the age of 31, have arrived in the United States before they were the age of 16, and have continuously resided in the United States since June 15, 2007. Second, Nowrasteh explained that the surge began well before DACA was unexpectedly announced on June 15, 2012. He wrote:

From October 2011 through March 2012, there was a 93 percent increase in UAC arrivals over the same period in Fiscal Year 2011.  Texas Governor Rick Perry warned President Obama about the rapid increase in UAC at the border in early May 2012 – more than a full month before DACA was announced.  In early June 2012, Mexico was detaining twice as many Central American children as in 2011.  The surge in unaccompanied children (UAC) began before DACA was announced.

As the bill was being debated on the House floor, Rep. Zoe Lofgren, the ranking member of the House Subcommittee on Immigration and Border Security, proceeded to introduce Nowrasteh’s article into the record as evidence against the underlying reason for the bill. Unfortunately, Border Patrol had not yet released their monthly UAC arrival figures for 2012, so Nowrasteh’s report had to rely on comments from border agents and local officials about the increases in arrivals rather than the raw Border Patrol data. The anti-DACA bill passed on a party-line vote.

Removing Barriers to Infrastructure Investment

As Obama administration officials head for the door at the Department of the Treasury, they have released a new study on infrastructure. The study—completed by outside consultants—profiles 40 large transportation and water projects that the authors believe would generate economic growth.

For each project, the study gives the estimated benefits, costs, and benefit-cost ratio. Many of the 40 projects appear to be worthwhile, such as an $8 billion Hampton Roads highway project with a benefit-cost ratio of 4.0. The report is silent on who should fund each project, but such high returns suggest that the states have a strong incentive to invest by themselves without aid from Washington.

What the states need from Washington is not money but to get out of the way. The Treasury report suggests that some “major challenges to completion” of projects are imposed by governments.

One challenge is “significantly increased capital costs:”

Capital costs of transportation and water infrastructure have increased much faster than the general rate of inflation over the past 20 years … Increased capital costs are also a product of enhanced design standards and regulatory requirements related to performance, safety, environmental protection, reliability, and resiliency.

Another challenge is “extended program and project review and permitting processes:”

Successful completion of the review and permitting processes required by the National Environmental Policy Act of 1969 (NEPA), which requires federal agencies to assess the environmental effects of their proposed actions, is an important part of project development. NEPA helps promote efforts to prevent or eliminate damage to the environment, but has also extended the schedule and generally increased the cost of implementing major infrastructure projects. This is a long-standing challenge that has spanned the last 20 to 30 years. Studies conducted for the Federal Highway Administration (FHWA) concluded that the average time to complete a NEPA study increased from 2.2 years in the 1970s, to 4.4 years in the 1980s, to 5.1 years in the 1995 to 2001 period, to 6.6 years in 2011.

Other FHWA data show that the number of environmental laws and executive orders creating barriers to transportation projects increased from 26 in 1970 to about 70 today, as shown in the chart below sourced from a trade association.

The upshot? The incoming Trump administration can spur infrastructure investment by working with Congress to repeal rules that unnecessarily delay projects and increase costs. Other steps include cutting the corporate tax rate to increase private investment and ending the bias against the private provision of facilities such as airports.

For more on infrastructure, see here, here, and here.