August 3, 2020 9:54AM

Occupational Licensing Reform Moves Forward

By Michael D. Tanner and Kelly Lester

With an unemployment rate currently over 10 percent and many businesses permanently closing due to the pandemic, policymakers should make it as easy as possible for unemployed workers to find new opportunities.

State policymakers have tools at their disposal that could help put the unemployed back to work by eliminating barriers that prevent workers from moving between careers. Despite a wave of deregulation early in the COVID-19 crisis, many states still have occupational licensing requirements on the books that are hindering economic recovery by choking off access to new jobs, hindering interstate mobility for workers, and increasing costs for consumers.

The often lengthy and costly process involved in getting a license to practice hair‐​braiding, nail care and many other trades represent a significant barrier to would‐​be small business owners who cannot afford the time or expense involved. Nearly two million jobs are lost annually due to licensing requirements — a burden that falls hardest on low‐​income communities.

Despite claims by licensing proponents, studies looking at a wide variety of professions have found that the licensing process does not significantly protect public health and safety. Some research has even found that licensing has a slightly negative effect on quality. But, while quality remains unchanged, prices to consumers increase. According to economist Morris Kleiner, licensing can raise prices anywhere from 5 to 33 percent depending on the type of occupation and location. It is estimated that consumers pay, in total, $200 billion annually in extra costs due to licensing.

And forget easily moving your business from one state to another. Most states will not recognize an occupational license from another state, requiring entrepreneurs to go through the costly hassle all over again.

As a result, both the current and previous administrations have called for licensing deregulation. Licensing reform is one of the major aspects of President Trump’s Governors’ Initiative on Regulatory Innovation.

States have slowly begun to act. In signing legislation that allows his state to recognize licenses from other states, Missouri Governor Mike Parson said, “Eliminating governmental barriers to employment and allowing citizens to become licensed faster is an impactful, commonsense step that we believe will have a positive impact in the lives of a lot of Missourians.”

Arizona enacted similar reforms last year. Iowa has also created a universal licensing system with hopes of increasing migration into the state. Several more states, including California, Florida, and Missouri, have made it easier for people with criminal records to receive licenses. Florida has loosened other licensing requirements as well, as has South Dakota.

While those reforms are a good first step, all states can and should go further, reviewing all current occupational licensing requirements with an eye toward standardizing requirements, reducing costs, and eliminating restrictions that are not related to public safety.

The pandemic has created a unique window of opportunity for reform, forcing states to reevaluate the impact of regulations on jobs and poverty. States should seize on this opportunity to expand the freedom to work.

July 31, 2020 4:24PM

Problems and Insights within NBC’s Report on H-2A Abuses

The H-2A visa program exists to provide U.S. farmers with legal foreign workers when they cannot find U.S. workers as an alternative to illegal immigration and illegal employment. The government requires H-2A employers provide —among other benefits—high wages, free housing, free transportation, and three meals or a kitchen. Despite these requirements, a lengthy NBC News report released this week details a story of horrific abuse of a group of H-2A workers and concludes that “as the H-2A program has expanded, it has left more guest workers vulnerable to abuse.”

Unfortunately, while highlighting important issues and one person's dramatic criminal behavior, the report has several flaws and inaccuracies that incorrectly create the impression of widespread, systematic abuse of H-2A workers. In general, nearly all H-2A workers benefit greatly from working in the United States.

Problems with NBC’s reporting

This post will criticize the use of certain data in this reporting, but I want to be clear at the outset that the narrative component of the story has journalistic merit that does illustrate real issues that can arise with the H-2A program. However, the report grounds its narrative in a couple data points delivered at the top of the piece (along with the graphic) that are problematic:

Last year, the Labor Department closed 431 cases with confirmed H-2A violations — a 150 percent increase since 2014; the agency found about 12,000 violations under the program, with nearly 5,000 H-2A workers cheated out of their wages, according to federal data.

NBC Graphic
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July 31, 2020 2:38PM

How Strict Would “Strict Scrutiny” Be Online?

My last post set out the case that the International Covenant on Civil and Political Rights (ICCPR) offered strong protections to online speech on social media. Let's turn now to assessing that case. That case depended on Article 19 of the ICCPR which established both a broad right to free speech and a tripartite test for restrictions on speech by governments. Some have argued that the vagueness prong of the tripartite test would invalidate many “hate speech” restrictions. Let’s imagine social media companies adopt ICCPR in total. Would Article 19’s tripartite test in fact invalidate restrictions on speech rights online?

The “would” in my question reflects a subjunctive mood. I am assuming that ICCPR is not in fact now applied to speech on social media. But that may be a false assumption.

In 2019, the U.N.’s Special Rapporteur on the Promotion and Protection of the Right to Freedom of Opinion and Expression argued that social media companies should apply international human rights on their platform including the tripartite test. David Kaye, the Special Rapporteur in question, has extensive knowledge of social media content moderation; he has published a well-regarded book on the topic. His normative call for action to the companies suggests they have not in fact adopted the tripartite test in their internal moderation. The experience of social media cannot tell us much about the empirical success or failure of the tripartite test.

The Special Rapporteur also notes the tripartite test obligates states that ratified the ICCPR. Accordingly, governments should have extensive experience applying the tripartite test. Apparently they lack such experience since the Special Rapporteur and the UN Human Rights Committee continue to note failures by national governments to abide by international human rights. Indeed the Special Rapporteur and the UN Human Rights Committee evaluate how well governments follow international human rights law. But they are not courts enforcing rights against recalcitrant as well as compliant malefactors.

Perhaps we can find something similar to the tripartite test in an individual nation. The test does look somewhat like the “strict scrutiny” test in American constitutional law. Courts apply “strict scrutiny” when the government restricts speech based on its content. Such restrictions may be valid only if they further a “compelling government interest” and are narrowly tailored to achieve that end. Is that a stringent test? The renowned law professor Gerald Gunther once claimed strict scrutiny was “strict in theory, fatal in fact.” In other words, when judges applied the test, they had in effect decided to strike down a government law or action. Was Gunther right?

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July 31, 2020 1:07PM

No More State Aid

In response to the crisis, federal policymakers have passed a series of aid packages providing hundreds of billions of dollars to state and local governments. Legislation, here and here, has provided $150 billion in flexible aid to the states plus more than $280 billion in other state and local aid for health care, education, housing, transit, food stamps, and other programs.

Congress and the administration are working on yet another bailout package. The House plan includes $1.1 trillion further aid to the states, while the Senate plan includes $105 billion for schools and colleges.

Federal aid to the states is harmful for many reasons. When tax revenues fall during recessions, state governments should tap their rainy day funds, cut low‐​value programs, freeze salaries, furlough workers, postpone new initiatives, and sell assets. The federal government can help by repealing rules that block the states from cutting spending on activities that receive federal money. Millions of American businesses are tightening their belts, so why not governments? Today’s lean budget climate is an opportunity to improve efficiencies in state and local agencies.

Even if some crisis aid to the states made sense, further aid would be too much. The aid already passed would mainly cover budget gaps if states were allowed maximum flexibility with the funds.

During the last recession, state tax revenues fell 10 percent from the 2008 peak and then began bouncing back. Recent projections suggest a decline this recession of no more than that. Tax Foundation surveyed current forecasts for a dozen states, and found that tax revenues are expected to fall about 4 percent in fiscal 2020 and 7 percent in fiscal 2021 from the fiscal 2019 peak. Tax Policy Center recently surveyed 27 states and found similar estimated declines, as did a recent study by economists Christos Makridris and Robert McNab. The budget gaps were larger when compared to a no‐​recession baseline of rising revenues.

In the chart, the red line is Census data showing state tax revenues rising for a decade and peaking at $1.09 trillion in calendar 2019. Then the red dashed line assumes a 10 percent drop in 2020 and recovery in 2021 and 2022. Tax revenues would be down $109 billion in 2020 and $55 billion in 2021 compared to the 2019 level, for a two‐​year loss of $164 billion. The losses would be somewhat larger measured against a no‐​recession growth baseline. But either way, the aid handed out already would mainly fill state budget gaps if states were allowed to use the money flexibly.

The blue line in the chart shows total federal aid to state governments. The projection, 2020 to 2022, is based on regular aid growing per the pre‐​virus federal budget, plus the $150 billion in flexible crisis aid already provided. The media has focused on how much state tax revenues might fall, but even if the federal government provided no crisis aid, the large part of state budgets funded by federal dollars would chug along with steady increases.

Lastly, note that while state‐​level tax revenues may fall 10 percent this year, local government tax revenues may not fall much, if at all. During the last recession, overall local tax revenues were flat for a while and then began rising again.

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July 31, 2020 11:18AM

“Delay the Election???”

As if America 2020 didn’t already have enough of a banana‐​republic feel to it, lately President Trump has seemed unusually focused on adding to the lingering pall of dysfunctional authoritarianism. First there was his attempt in Portland to use federal law enforcement as a sort of ad hoc internal security force. Now there’s yesterday’s suggestion—on Twitter, naturally—that maybe we should “Delay the Election until people can properly, securely, and safely vote???” I recall a lot of paranoid chatter on the Right a few years back about President Obama building a “civilian national security force” and refusing to leave office; over the last two weeks, Trump’s flirted with both ideas more than Obama did over two terms. 

There he goes again

Because the phrasing’s cute enough for plausible deniability, it’s not clear from Trump’s tweet if he’s suggesting he could postpone the November elections himself via executive edict. What is clear, as Walter Olson noted yesterday, is that the president has no such power. Under the Constitution, Congress sets the date for presidential elections; unless Congress changes the law, that election will be held this November 3rd, “whether the president likes it or not.”

During similarly paranoid times 16 years ago, in the run‐​up to the first post‐​9/​11 presidential vote, the Congressional Research Service examined the question of “Executive Branch Power to Postpone Elections,” concluding there was none. Even the broadest possible use—or abuse—of presidential emergency powers “would not appear to have the legal effect of delaying an election, nor would it vest the Executive Branch with the authority to reschedule the election.” And since, per the 20th Amendment, Trump’s term ends at noon on the 20th of January, even if he somehow managed to cancel the election entirely, at that point, under the Presidential Succession Act, Speaker Nancy Pelosi would take the helm. It’s possible Trump hasn’t really thought this through.

In any event, if Trump’s tweet was a veiled threat to postpone the election, it joins a long list of crackpot authoritarian fancies he’s let fly since his inauguration. In just the last two years, this president has (an incomplete list):

Of course, Trump never followed through on any of those threats. Likewise, it’s a pretty sure bet “Delay[ing] the Election???” will never make the transition from idiotic tweet to nefarious plan. (I might, however, put even money on a presidential self‐​pardon attempt before January 20.)

The fact that the 45th president lacks the competence, self‐​discipline, and functional attention span to bring his worst autocratic impulses to fruition is, I suppose, something of a blessing. That doesn’t mean Trump’s authoritarian bluster is harmless. When half of the political class feels driven by partisan loyalty to defend or downplay the president’s open contempt for constitutional limits, it’s likely to make genuine assaults on those limits by future presidents that much easier to execute.

We’ll no doubt hear from the president’s allies that it’s just a tweet, he didn’t mean what you thought he meant, and/​or he was just being “sarcastic.” Trump doesn’t think he misspoke: look at what’s now his “pinned tweet,” with pride of place atop his feed. The guy’s an attention vampire, and all press is good press.

It’s tiresome, if not exhausting. Joe Biden has come in for a fair amount of criticism over his “invisible campaign,” but being unseen and rarely heard may turn out to be a welcome contrast and a campaign strategy with the broadest possible appeal.

July 30, 2020 4:35PM

The WTO and Beef Labelling

Yesterday, the Senate Finance Committee held a hearing on World Trade Organization (WTO) reform. There were a number of big picture points discussed, such as the role of WTO dispute settlement and the failure to negotiate new WTO agreements in recent years, but there’s a narrower point that I want to discuss here. Some people seem to think there was a WTO dispute settlement ruling that says one of the following two things: (1) U.S. beef can’t be labelled with its country of origin when it is for sale in stores, or (2) that the U.S. government can’t require beef to be labelled with its country of origin. Sometimes it can be hard to sort out which point they are making, but it doesn’t matter because neither one of those things is true. (This issue comes up every few months on Twitter, and I figure if I explain it thoroughly here, I can just point people to this blog post in the future.)

The issue arose yesterday when Senator Thune stated the following (1:21:16 and then 1:24:39 of the linked video):

In many parts of my home state of South Dakota, and probably some in your home state of Iowa Mr. Chairman, WTO is a bad word.

That’s because South Dakota ranchers feel like the WTO isn’t with them. And I would say, who can blame them, when the WTO has ruled against them in major disputes impacting their livelihoods like the country of origin labelling case.

Still to this day, it makes no sense to most South Dakotans why the t‐​shirt they wear can say made in country Y but in most instances the beef that they eat cannot.

It is very hard to explain why some products that come into the United States are labelled accordingly, but for something that we consume, that we eat, we can’t seem to get a ruling that recognizes that people in this country would like to know where in the world their beef is coming from.

I can see why that would be hard to explain, but it’s not what happened in the WTO disputes brought by Canada and Mexico over country of origin labelling. Let me explain what actually happened.

After failed attempts by the U.S. industry to get anti‐​dumping and countervailing duties imposed on live cattle imports from Canada and Mexico, the industry was able to convince Congress to pass a country of origin labelling statute that was written in such a way that it could serve the purpose of discriminating against those imports. Under the statute, retailers (e.g. grocery stores) would have to include information on the product label about where the cattle was born, raised, and slaughtered (the statute also applied to pork products, but I’m going to focus on beef here). In order to fulfill this requirement, the stores needed the relevant information on origin from the upstream producers, which was costly for the producers to gather when part of their production relied on imports (if they only used U.S. cattle, the record‐​keeping was much easier). The statute itself was worded vaguely enough that it was not completely clear how it would apply, but when the regulations were developed and implemented, it was clear that there would be an extra cost involved where imports made up part of the production. Sometimes that cost was so high that it made financial sense to shift to using only domestic products.

In response to this, Canada and Mexico brought a complaint at the WTO, basically arguing that the measure discriminated against their products through the extra costs it imposed on the use of their (imported) products. On the basis of the evidence presented, when the panel hearing the case looked at the part of the U.S. statute/​regulation dealing with muscle cuts of beef, it found that discrimination existed. On appeal, the WTO’s Appellate Body agreed.

The U.S. then amended the regulation, but not enough to change the impact. The new regulation was also found to be in violation by the panel and then also by the Appellate Body, for the same reasons.

At that point, Canada and Mexico obtained authorization, through a WTO arbitration, to retaliate with trade sanctions. In response, Congress repealed the statute. (The United States could have just accepted the retaliation as a way to rebalance the obligations under the WTO agreements while leaving the statute in place, but it decided that repeal was the better option.)

Now let me mention a couple key takeaways. First, the WTO panel/​Appellate Body rulings do not say that labelling requirements always violate the rules. They simply looked at this particular requirement, carefully considered its design, and found that it violates the rules because of the way it discriminates against imports. There were plenty of ways to structure such a labelling requirement so that it didn’t discriminate against imports. In fact, the first panel looking at the issues here found that the labelling requirement that applies to ground beef (as opposed to muscle cuts of beef) does not violate the rules.

Second, depending on where you shop, you are probably well aware that labelling on beef products is common. A store like Whole Foods indicates the origin of its products, and often does so in more useful ways than the statute here required. “Product of the United States” was one of the categories under the statute, but that is pretty broad and I’m not sure how valuable it is. Whole Foods sometimes tells you the specific farm the beef comes from, which seems much more useful if you really want to know something about how the product has been made.

Summing up, the explanation to Senator Thune and any others is, companies are always free to put origin labels on beef if they want to. That was not at issue at all in the WTO dispute. And the WTO does not prohibit governments from requiring such labels (although it’s not at all clear to me how many people want such labels to be required if it means they have to pay more for the beef, which they will!). What the WTO does prohibit is using domestic regulations as a disguised way of protecting your domestic industry from foreign competition.

July 30, 2020 12:44PM

Mission Accomplished?

“When net exports are negative, that is, when a country runs a trade deficit by importing more than it exports, this subtracts from growth.” — White House senior adviser Peter Navarro and Commerce Secretary Wilbur Ross, 2016

Hmm:

net exports and GDP

(For further insights on the trade deficit and GDP, see my Cato colleague Dan Ikenson’s work here and here.)