Topic: Regulatory Studies

Dispelling the Myth of the Ravenous Fisherwoman

The U.S. Court of Appeals for the D.C. Circuit is considering whether the Environmental Protection Agency acted unreasonably when it issued regulations of hazardous air pollutants from coal and oil power plants under Section 112 of the Clean Air Act, regulations that provide far less than a penny in benefits for each of the nearly $10 billion in costs it imposes on the U.S. economy.

If this question sounds familiar, it’s because EPA tried this gambit before—and lost. In Michigan v. EPA (2015)—in which Cato also filed a brief—the Supreme Court rebuffed the agency for its failure to consider the costs of very the same regulations. On remand, EPA doubled down by issuing a supplemental finding that did no more than pay lip service to the Court’s admonition that rules whose benefits are greatly outweighed by their costs are irrational.

In light of the agency’s grudging concession that it could quantify only $4 to $6 million in statutorily-defined benefits to “women of child-bearing age in subsistence fishing populations who consume freshwater fish that they or their family caught” in enormous quantities, EPA attempted to justify its $10 billon rule by pointing to other non-statutory benefits, which it euphemistically calls “co-benefits.”

As we argue in our new brief, the D.C. Circuit should reject EPA’s end run around the Supreme Court’s decision and statutory limits on its regulatory authority. EPA’s failure to identify anything more than de minimis benefits for an action that will impose billions of dollars of costs is the height of arbitrariness. If EPA cannot justify the regulations forthrightly, it should withdraw them—not re-write the statute to target industries that it disfavors. 

Supreme Court Takes on the Empire State’s Language Police

In Federalist 10, James Madison warned of “a number of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens or to the permanent and aggregate interests of the community.” These groups—“factions” in Madison’s terms—come together to seek concentrated benefits from favorable legislation and regulation rather than competing in the marketplace, while spreading the costs throughout society.

While Madison conceded that such interests could not be stopped completely, he suggested that certain steps could be taken to mitigate the “effects” of these groups, and the damage that they can do to the public interest. The First Amendment is one such protection.

The New York legislature, however, ignored the First Amendment rights of both merchants and consumers when—at the behest of the credit-card lobby—it passed a law restricting how retailers can convey pricing schemes, as well as the public’s right to know about them. New York’s no-surcharge law—like those in 10 other states—insulate credit-card companies from consumer knowledge about who is actually causing the higher prices on goods when they use their credit card (“swipe fees”). The law does this not by restricting the merchants’ ability to charge different prices as between cash and credit payments—that’s legal everywhere—but by regulating the communications about the different prices.

To put it simply: the law allows merchants to offer “discounts” to cash-paying customers, but makes it a crime to impose economically equivalent “surcharges” on those who use plastic. By mandating how these merchants convey their pricing structure, New York is restricting speech on the basis of its content, which would seem to be an obvious First Amendment violation.

A federal district court agreed—as have two other federal courts, including the U.S. Court of Appeals for the Eleventh Circuit when it struck down a similar Florida law. The district court held that the law “plainly regulates speech”—not conduct—by drawing a line between prohibited “surcharges” and permissible “discounts” based solely on words and labels. The Second Circuit disagreed, however, holding that the law regulates “merely prices,” not speech. Cato filed an amicus brief urging the Supreme Court to take up this important case, and the Court has agreed to do so.

Along with the Pacific Legal Foundation, we have now filed another brief asking the Court to rule that collusion between business interests and state government can’t be used to circumvent constitutional rights. Indeed, the Framers sought to protect speech from the type of cronyism and rent-seeking the New York’s no-surcharge law manifests.

Is Hydroponic Farming Organic? Why Should Government Care?

Each time the government defines the characteristics of an acceptable product, some competition in the market is lost. The New York Times published an article on Wednesday that illustrates this perfectly.

The 1990 Organic Foods Production Act instructs the Department of Agriculture to set up a process for certifying food as organic. As part of that certification, organic farmers develop organic plans that “contain provisions designed to foster soil fertility, primarily through the management of the organic content of the soil through proper tillage, crop rotation and manuring.”

Should plants grown hydroponically be allowed under an organic plan? Hydroponic farming does not use soil, but instead uses nutrient-rich water. The futuristic technique is intended to be environmentally friendly and healthful—the same intention as organic farming. Yet in 2010 the National Organic Standards Board recommended to the secretary of agriculture that hydroponically grown plants be ruled ineligible for organic designation. The secretary of agriculture never acted on the recommendation.

David Chapman, an organic farmer in Vermont who has been a leader of the opposition to certifying produce from the hydroponic systems, said he would be driven out of business if the Department of Agriculture declared hydroponically grown tomatoes could be certified as organic. “Most people have no idea that the organic tomatoes and peppers they’re buying are hydroponically grown,” Chapman said. “I think most consumers believe those things are grown in the soil, and that farmers like me are taking care of the soil as they grow them.”

Colin Archipley, a hydroponic farmer in San Diego, is frustrated that there is even a debate over whether his produce is organic. “The reason this has become such a big deal is that systems like ours are becoming more popular because they’re more efficient, which means farmers are more sustainable and profitable,” he said. “That’s put competition on farmers, specifically in Vermont, and so what this really is about is market protection.”

The founders of our country understood that government should not arbitrate the struggles among competing religions and certify one rather than the others as state-sanctioned. Such insight applies not just to divine matters, but to profane ones like whether hydroponically grown food is or isn’t organic. Let consumers decide in the marketplace whether they think hydroponics is a good thing, rather than government decide through regulation.

Chris Christie Bets on Federalism

While he may be in the news for being on the outs from the Trump transition, as well as for legal troubles regarding Bridgegate, New Jersey Governor Chris Christie is also leading a challenge to federal law that could have a quite beneficial effect in rebalancing federal-state relations.

First, some background. Why do we even have states? While a fairly common question now in light of the federal Leviathan, it likely would have seemed quite foreign to the Constitution’s authors. The Framers saw federalism’s decentralization of government authority as a central bulwark of ordered liberty, preventing any one entity or bloc from gaining too much power over the nation while encouraging innovative competition among the several “laboratories of democracy.”

Unfortunately, federalism’s safeguards against centralized authority have slowly eroded, particularly since the New Deal Supreme Court’s expansive reinterpretation of the Commerce Clause paved the way for aggressive federal expansion under Presidents Roosevelt, Johnson, and beyond. One firewall that has survived, however, is the anti-commandeering doctrine: the idea that the federal government may not compel states or state officials to implement federal policies. In other words, states cannot be made into mere “puppets of a ventriloquist Congress.” Printz v. United States (1997).

It is this anti-commandeering doctrine that is under threat in Christie v. NCAA. The Professional and Amateur Sports Protection Act (PASPA) is a federal statute that does not allow states to “authorize” sports gambling “by law.” So when New Jersey wanted to repeal some of its old gambling laws, it was stopped from doing so by PASPA, prompting Gov. Christie to sue on the grounds that the law infringes on New Jersey’s sovereignty and further undermines the United States’ federalist structure.

The U.S. Court of Appeals for the Third Circuit interpreted this prohibition to bar states not just from affirmatively licensing sports gambling, but also from repealing or modifying preexisting state prohibitions. It held that PASPA did not violate the anti-commandeering doctrine because New Jersey wasn’t being compelled to pass new legislation, just forbidden from repealing existing laws. In doing so, it accepted an argument based almost entirely on semantics. Regardless of whether the federal government compels or forbids particular action, the result—a state’s being forced to regulate behavior that its duly elected representatives prefer to leave unregulated—is the same.

If allowed to stand, this absurd loophole may have wide-ranging implications across many policy areas and poses a serious threat to what remains of state sovereignty. Cato has joined the Pacific Legal Foundation and the Competitive Enterprise Institute on a brief supporting New Jersey’s petition for Supreme Court review.

We urge the court to take up the case so that it can clarify the proper scope of the anti-commandeering doctrine and ensure that the sovereignty of the individual states—so critical to the republic’s constitutional system of checks and balances—is not further eroded by an overreaching national government.

You Ought to Have a Look: Advice for Trump’s Transition Team

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 this You Ought to Have a Look, we hope that some of the “You” are members of, or influencers of, President-elect Trump’s transition teams.

With so much talk about the Trump’s plans on killing the Clean Power Plan, withdrawing from the Paris Climate Agreement, reversing the Keystone XL pipeline rejection, removing energy subsidies and reigning in the EPA (all good ideas in our opinion), we want to make sure the transition team doesn’t overlook other, invasive, burdensome, costly, and climatologically-meaningless regulations that were put in place in President Obama’s Climate Action Plan.

Here’s a rundown of some of the more significant of them.

Energy Efficiency Regulations from the Department of Energy. 

The DoE and put forth a seemingly endless string of regulations governing the energy efficiency of all manner of power-consuming appliances large and small, from industrial boilers and refrigeration systems, to microwave ovens, and ceiling fans (and most things in between). The reason?

We have repeatedly submitted public comments as to why the climate change angle should be a non-starter (our latest in this long line is here). But besides that, the DoE standards result in appliances that work less well, cost more, and reduce consumer choice. Our big brother government thinks it’s doing us all a favor because we aren’t savvy enough to value long-term cost saving from energy consumption over other values. Not everyone agrees. Sofie Miller, senior policy analyst at the George Washington University Regulatory Studies Center, recently wrote:

This line of reasoning overlooks the possibility that consumers may have legitimate preferences for less-efficient appliances based on household characteristics or other observable product qualities (such as size, durability, reliability, or noise level). Also, the assumptions underpinning the DOE’s analyses may not be accurate; for instance, some consumers may have high discount rates, making future energy savings less important than immediate purchase savings. By regulating away the option for consumers to purchase less efficient appliances, the DOE claims to be improving consumers’ choice structure by removing choices. These rules aren’t technology-forcing, they’re consumer-forcing.

…the fact that consumers choose not to purchase efficient appliances indicates only that they do not value these attributes as much as the DOE does. As a result, these rules impose huge net costs on consumers, rather than benefits.

Yet the DoE has a lot more of these efficiency standard regulations in the offing (the public comment period is currently open for two more proposed regulations—governing walk-in refrigerators and residential furnaces).

These Scope of Practice Laws Don’t Improve Health Outcomes, Serve Mainly as Barriers to Entry

Scope of practice (SOP) restrictions in health care professions are often portrayed as a necessary intervention to protect consumer health and safety. Given how common this argument is, there have been surprisingly few studies trying to determine whether SOP restrictions actually have any impact on such outcomes. A new working paper seeks to fill this gap in the literature by determining whether SOP laws for certified nurse midwives (CNMs) affect health outcomes. On average, it turns out that the restrictions do not have a significant impact on maternal behaviors or infant health outcomes. Instead, they “primarily serve as barriers to practice and removing these restrictions has the potential to improve the efficiency of the health care system for delivery and infant care.”

SOP laws are determined at the state level, and regulate which activities and tasks certain professions can perform within the state. Physicians are generally unaffected, but other health practitioners are—in this case, CNMs specifically. Their level of restriction ranges from states with “no barriers,” where CNMs do not have oversight requirements, to states with “high barriers,” where they have to be under the direct supervision of a physician and may not write prescriptions. In heartening news, more states seem to be recognizing the wasteful nature of these laws. The recent trend for this specific case has been a move towards a more relaxed scope of practice environment.  

Scope of Practice for Certified Nurse Midwives by State, 1994 vs. 2013

Source: Markowitz et al.

Why Don’t We Allow Markets to Dictate Parking Policy?

There are two types of markets for parking in Washington DC: the private market, which tends to charge what the market will bear, and the government, which charges a price that’s deemed to be “fair” and “non-exploitative” to the constituents in residential areas. How’s that working out for everyone?

Not very well, it turns out. The “fair” price on residential streets is just $25 a year, which is less than one percent of the private market rate. As a result there’s a large excess demand for parking on city streets, which has created a few predictable and undesirable consequences: For starters, people spend a lot of time driving around looking for “free” on-street parking, which congests streets, increases pollution, and makes streets less safe for pedestrians, as automobiles do quick U-turns and other risky maneuvers to claim a spot that suddenly opens.

The pro-free-on-street parking people will acknowledge these costs to some degree but would dismiss them in the name of “fairness” by trotting out the canard that some poor people drive to work and therefore this reduces inequality. The problem is that most people with cars parked on city streets are wealthy and most of the attendant consequences of the lousy deal are all borne by the less-well-off, most of whom do not own cars.

Making residential on-street parking nearly free means that those who avail themselves of it fight fiercely to limit competition for those spots. As a result, every proposed housing development in these neighborhoods are bitterly fought in the name of (pick one) historical preservation, neighborhood harmony, architectural purity, or some other vague sentiment that belie the true motive. In the last few years residents of Northwest DC have sought to declare an empty lot and a parking lot as “historic” and prevent any development on them, for no reason other than some fraction of those in the new apartment buildings to be constructed may also want to park on the street.

New developments in the city take years to get approved and are invariably shorter than the existing buildings they abut. The result of all this is that housing becomes more expensive, and middle-income residents find themselves struggling to remain in the neighborhood.