Archive for July, 2011
EPA Gives Millions to Enviro Groups That Sue it
It’s all a happy circle of funding, as John Merline reports at Investor’s Business Daily: the Environmental Protection Agency gives millions in grants to green organizations that perennially sue it demanding that it regulate more things. When the EPA settles or loses those suits, it then awards the groups millions more in attorneys’ fees under the federal Equal Access to Justice Act and other “one-way” attorney’s fee provisions (called “one-way” because they allow winning plaintiffs to collect fees from defendants, but not vice versa).
“The EPA isn’t harmed by these suits,” said Jeffrey Holmstead, who was an EPA official during the Bush administration. “Often the suits involve things the EPA wants to do anyway. By inviting a lawsuit and then signing a consent decree, the agency gets legal cover from political heat.”
Holmstead called this kind of litigation “sweetheart suits.”
As blogger Coyote puts it, “Our rulers are pretty good at finding tricky ways to expand their power.”
I go into much more detail on collusive public-sector litigation in chapter 8 of my new book Schools for Misrule. Other government agencies, much like the EPA, use settlements of pressure-group lawsuits as a way to go along with desired expansions of power; corrections and foster-care systems commit to step up program offerings and (no! anything but that!) seek higher funding to accomplish their missions; union-allied public-sector managers give away the store on employee benefits disputes, and so forth (scroll to “Consent of the Governors”). From New York to Alabama, state education departments have covertly or even openly assisted lawsuits against themselves intended to force spending expansion. And once sweetheart negotiations result in an adverse consent decree, with little or no formal input from taxpayers, parents, or other affected constituencies, the locked-in big-government policies can be nearly impossible to unlock later on, should voters’ moods change.
With a few exceptions, as with Prof. Ross Sandler and David Schoenbrod’s superb critique Democracy by Decree, these methods of agency governance are virtually uncontroversial and indeed highly popular in legal academia — and no wonder, since they transfer much power over public policy to a corps of “public-interest” litigation professionals who tend to be products of the finer law schools. But others, particularly Western land activists and Republicans in Congress, are skeptical. Rep. Cynthia Lummis (R-Wyo.) points out that since a rules revamp in 1995 the federal government no longer even tracks EAJA fee payouts in any organized manner, which makes it harder to catch double payments as well as suggestive patterns in which (critics have charged) certain environmental groups have filed hundreds of suits, assembly-line style, and cashed them in for fees. Lummis and home-state colleague Sen. John Barrasso (R-Wyo.) have introduced a bill called the Government Litigation Savings Act that would, among other provisions, reinstitute data collection regarding EAJA outlays, limit the size of awards to $200,000 per case and the number of annual awards to a given group to three, and cap hourly attorneys’ fee awards at an inflation-indexed $175/hour. (Sen. Orrin Hatch, another co-sponsor, summarizes the provisions here.) Whatever the merits of individual details, the bill furnishes a jumping-off point for a public debate that’s long overdue.
Demonization vs. the Constitution
Yesterday, Rep. John Kline (R-MN), chairman of the House Education and the Workforce Committee, introduced the first new legislation aimed at breaking down the prescriptiveness of the No Child Left Behind Act. It’s a small step in the right direction, but there are two serious problems with it:
- It doesn’t come nearly close enough to the reform we need.
- Democratic reaction to it illustrates why it is so hard for politicians to obey the Constitution.
First the insufficiency of the bill. The State and Local Funding Flexibility Act would, essentially, allow states and districts to take federal funding that comes through numerous streams and apply it to different streams. For instance, if a state wanted to take dollars slated for the 21st Century Community Learning Centers program and apply them to Teacher Quality Grants, it could do so without seeking Washington’s permission.
That’s good as far as it goes; it makes sense, at least in theory, to let state and local authorities manage money according to their superior understanding of the needs of their communities. But that’s in theory.
The first serious problem is that, ultimately, Washington would still be dictating outcomes to states and districts. As the summary for Kline’s bill states:
The State and Local Funding Flexibility Act will maintain monitoring, reporting, and accountability requirements for states and school districts under existing ESEA programs.
That suggests, at least as far as this bill goes (Kline has promised more legislation to come), that states will still have to meet all of NCLB’s rigid standards, testing, and “adequate yearly progress” requirements.
The next big failure of the bill is that it trusts state and local bureaucrats to do what’s best for kids and handle taxpayer funds efficiently. As many people have pointed out, that’s about as likely to happen as your winning the Powerball.
Finally, the bill fails because it keeps the same basic, unconstitutional model we’ve had for decades: federal funding of education — and associated rules — despite Washington having no constitutional authority to do so. That’s why the LEARN Act, sponsored by Rep. Scott Garrett (R-NJ), is superior to both what Kline has proposed and the A-PLUS Act that continues to make the rounds. LEARN would simply allow states to declare that they will not be dictated to by Washington, and let their taxpaying citizens, not education bureaucrats, reap the rewards by getting back the “education” dollars Washington took from them.
New Paternalist Surprises
The front pages of Thursday’s Wall Street Journal and Washington Post (links below) both featured stories on the unexpected consequences of the sort of “nudging” policies recommended by so-called “libertarian paternalists.” Mario Rizzo, an economist at New York University who often blogs at ThinkMarkets, sent along this commentary to share with C@L readers:
As Glen Whitman and I have repeatedly argued, new paternalism faces a knowledge problem similar to that uncovered by F.A. Hayek in his critique of socialist calculation. In our view, paternalists cannot acquire the knowledge they need to implement policies that are effective according to their own standards.
The new paternalism purports to nudge people toward the better satisfaction of their own preferences than people can achieve themselves. We are too ignorant, too weak-willed, and computationally too incompetent to satisfy our real or underlying preferences. We save too little for our retirement because we are overly impatient and cannot postpone spending. We eat too many calories because we underweight the costs of future illness due to obesity.
The new paternalists thought they had at least a partial solution to the first problem of undersaving. For those people who have employer-sponsored retirement savings programs we can use a common “defect” in decisionmaking to help them out. People are prone to status-quo bias, that is, they tend to leave in place whatever situation they may find themselves in. So when employees are automatically enrolled in retirement savings unless they opt out, more people are enrolled than when the default is non-enrollment unless they opt in. What could be simpler? Make the default automatic enrollment, and voila more retirement savings!
Now comes the annoying data.
According to a recent study commissioned by the Wall Street Journal more people are indeed enrolled in 401k programs as predicted. However, those who would have chosen enrollment under the old opt-in system (around 40% of new workers) tended to remain in a lower salary allocation in the default (frequently 3%) than they would have chosen on their own. So instead of using the status-quo bias to increase savings it turned out that the automatic enrollment decreased savings among this group.
Conservatives, Tea Partisans Still Really, Really Angry about ObamaCare
Or at least, that’s what The Daily Caller says a Republican pollster says:
A year may have passed since Obamacare passed, but conservatives are still angry as hell about it.
Expect the legislation to play a large role in the 2012 elections, according to John McLaughlin, who recently conducted a series of focus groups for the research group Resurgent Republic. The group is run by some of the country’s best-known Republicans.
“My guess it it’s going to be a big election issue next year,” McLaughlin said in an interview…
When it comes to President Obama’s health care law among these voters, the perception of these voters has hardly changed: the intensity remains strong and they still want it repealed, McLaughlin said.
ObamaCare‘s overall numbers don’t look any better, either.
Free-Market Beer
The new issue of Mid-Atlantic Brewing News has a nice article about the District of Columbia’s laissez-faire rules for beer distribution. (See page 8 in the “digital edition“).
Columnist George Rivers explains that the D.C. rules encourage entrepreneurship, bring jobs and economic activity to the city, and are a big plus for consumers:
While most jurisdictions in the U.S. erect regulatory barriers to limit the sale and consumption of alcohol, DC’s legal framework encourages retailers and wholesalers to compete for consumers’ dollars through increased selection and lower prices.
Rivers notes that beer consumers flee Maryland’s red tape and higher tax burden to enjoy the lower prices in D.C. At the same time, entrepreneurial beer retailers choose D.C. to do business because they don’t have to deal with a burdensome and monopolistic wholesaling industry.
Perhaps the most celebrated beneficiary of DC’s liberal liquor laws was the legendary Brickskeller, once holder of the Guiness World Record for the largest selection of beer.
D.C.’s free-market beer environment also stimulates broader economic activity.
The District’s flexible liquor laws have helped facilitate the logistical challenges behind the pairing of 144 craft beers and food at SAVOR, the nation’s premier beer-and-food event, now in its fourth year.
So up with deregulation, up with jobs and investment, and down the chute with the beer!
Bacon, Duct Tape, and the Free Market
It’s hard to imagine how we would get through life without necessities like bacon and duct tape. But have you ever thought about how the free market gives you so much for so little?
Here’s a video that should be mandatory viewing in Washington. Too bad politicians didn’t watch it before imposing government-run health care.
And since we’re contemplating the big-picture issue of whether markets are better than statism, here’s some very sobering polling data from EurActiv:
A recent survey has found deep pessimism among European Commission staff on a wide range of issues, including the course of European integration over the past decade and the likelihood of success of the EU’s strategy for economic growth. Some 63% partially or totally agreed that “the European model has entered into a lasting crisis.”
This is remarkable. Even the statist über-bureaucrats of the European Commission realize the big-government house of cards is collapsing, yet politicians in Washington still want to make America more like Europe.
How Concentrated Was Investment Banking?
In the fall of 2008 a considerable amount of ink was spilt arguing that we needed to save the then big-five investment banks, or else our financial markets would come to a halt. One could easily get the impression from the debate that these five firms were the entire industry. At the time these five included Goldman Sachs, JP Morgan, Merrill Lynch, Lehman and Bear Stearns. Before we go around rescuing companies, it would seem reasonable to ask if the rest of the industry could pick up their capacity. Of course, if there is no “rest of the industry” then that question is easily answered.
So what exactly did the investment banking industry look like in 2008? The best source of public information we have is the 2007 Economic Census, conducted by the U..S. Census Bureau. According to the Economic Census, there were a little over 3000 individual investment banking firms. The vast majority had only one office with often no employees (just a few partners). Only about 400 firms had more than one office location (or establishment, as the Census calls them). Only about 20 firms had more than 10 offices and really could be considered significant players in the industry.
Another way of measuring the importance of the largest firms is to look at market share. The four largest firms were just over half the industry, in terms of investment banking sales/receipts. Of course that also means that the rest of industry was also half. The top 8 firms held about three-fourths of the market. Top 20 firms gets you to 90 percent of the market.
So what does this tell us? Yes, the industry had a high level of concentration (even higher now), but it also seem likely that no one company was large enough to bring down the industry. There were, and still are, a handful of mid-sized players that could have absorb the market share of either a Bear or Lehman, or at least some part of their business. Either way, the lesson we should learn is that policy should be encouraging more competition and depth in the investment banking field, so that the market is not left largely in the hands of a few companies.
More on Over-Interpreting the Oregon Medicaid Study
Matt Yglesias writes:
a new rigorous study from Oregon confirms that Medicaid does, indeed, save lives
As The Atlantic‘s Megan McArdle writes: “This is exactly what the study does not find.” Like McArdle, I read the study, and can confirm this. Or perhaps Yglesias can direct us to the part of the study where he read that….
If Yglesias could see in this rigorous study something that isn’t actually there, does that mean there’s a chance that the motivations he assigns to ObamaCare opponents — they “want to deny life-saving medical care to the poor” — may not comport to reality either?
Yet More U.S. Trade Policy Incoherence
In hailing this week’s ruling by a World Trade Organization dispute settlement panel that certain Chinese government restrictions on raw material exports violate China’s WTO commitments, U.S. Trade Representative Ron Kirk made the point that such restrictions hurt U.S. manufacturers who rely on those imported raw materials.
Today’s panel report represents a significant victory for manufacturers and workers in the United States and the rest of the world. The panel’s findings are also an important confirmation of fundamental principles underlying the global trading system. All WTO Members – whether developed or developing – need non-discriminatory access to raw material supplies in order to grow and thrive.
And, simultaneously, by artificially increasing domestic supply, the same export restrictions advantage Chinese manufacturing consumers of those materials.
China’s extensive use of export restraints for protectionist economic gain is deeply troubling. China’s policies provide substantial competitive advantages for downstream Chinese industries at the expense of non-Chinese users of these materials.
And here’s how the USTR website described the central issues of the case:
China maintains a number of measures that restrain exports of raw material inputs for which it is the top, or near top, world producer. These measures skew the playing field against the United States and other countries by creating substantial competitive benefits for downstream Chinese producers that use the inputs in the production and export of numerous processed steel, aluminum and chemical products and a wide range of further processed products…These raw material inputs are used to make many processed products in a number of primary manufacturing industries, including steel, aluminum and various chemical industries. These products, in turn become essential components in even more numerous downstream products.
I agree.
But what you won’t find in the USTR’s statements is any acknowledgement that the U.S. government, in defiance of Ambassador Kirk’s logic, maintains import restrictions on three of the nine raw materials at issue in the China WTO case. That’s right! While arguing correctly that Chinese restrictions on exports of magnesium, silicon metal, and coke raise production costs and subsequently reduce U.S. manufacturing competitiveness, the U.S. government maintains antidumping restrictions on the same inputs, which raises U.S. production costs and reduces U.S. manufacturing competitiveness. (See pages 14-17 of this new Cato paper to learn what happened to certain U.S. industrial consumers of these raw materials)
How can such dissonance persist, you ask? Under the U.S. antidumping law, manufacturing consumers of subject imports have no legal standing to participate in the proceedings. In fact, the U.S. administering agencies are forbidden by statute from even considering the impact of antidumping duties on the downstream, consuming industries. Nor is an assessment of the costs of prospective antidumping restrictions on the broader economy permitted to carry any weight under the statute.
Even the New York Times Wants to Cut Medicaid
From their editorial the other day:
There is no doubt that Medicaid… has to be cut substantially in future decades to help curb federal deficits. For cash-strapped states, program cuts may be necessary right now. But in reducing spending, government needs to ensure any changes will not cause undue harm to millions.
How would the Times cut Medicaid spending? The magic of central planning!
The best route to savings — already embodied in the reform law — is to make the health care system more efficient over all so that costs are reduced for Medicaid, Medicare and private insurers as well. Various pilot programs to reduce costs might be speeded up….
And if government were smart, rather than stupid, that would work.
I’ve got a better idea for cutting Medicaid that meets the Times‘s criterion of not causing undue harm to millions.
Standards Garbage In, Standards Garbage Out
Over at Jay Greene’s blog, Sandra Stotsky riffs off an Education Week report about educators around the country not seeing the difference between their old state standards and new, “Common Core” standards. Stotsky offers a theory for why this is: Common Core — as far as anyone can tell because the standards-drafting process was so opaque — was put together largely by the same people responsible for the bad old state standards. As a result, maybe they really aren’t all that different.
The general ignorance about the standards brings up an important point. As Mike Petrilli at the Fordham Institute has pointed out, yes, the $4.35-billion federal Race to the Top pushed a lot of states to adopt the Common Core standards, but that doesn’t explain states adopting the standards after RTTT had concluded. It’s a reasonable point. So what else is at play?
Likely one part of the explanation is that many state education officials really don’t know much about either the Common Core or their state’s standards, so they’ve seen no big problem with switching over. This general ignorance has likely been exacerbated by Common Core advocates’ strategy of keeping the whole national-standardizing process out of the public eye, whether it’s been secretive drafting of the standards, or supporters’ constant mantra of “don’t worry, it’s all voluntary” while petitioning for federal adoption “incentives.” And let’s face it: Just going with the flow and adopting national standards furnishes one less thing state officials have to take responsbility for. If the standards turn out to be a disaster — or simply gutted by special interests in Washington – all that state officials have to say is ”sorry, the whole nation was adopting them. Heck, the feds were practically forcing us to adopt them. It’s not our fault.” Add to all this that No Child Left Behind likely had much of the public thinking we already had national standards, and it’s little wonder that the Common Core was able to worm its way into so many states.
Whether it’s been adoption in response to bribery, passing the buck, or just keeping everything under the radar, the national-standards drive has been a troubling affair. But there is still hope: Washington hasn’t cemented national standards and testing by attaching them to the big federal dollars flowing through the Elementary and Secondary Education Act, aka, No Child Left Behind. But efforts to revise the law are underway, and if the final version contains any connection between national standards and eligibility for federal taxpayer dough, then there will be no escape.
The Casey Anthony Verdict and the Criminal Justice System
The Casey Anthony case is all over the news this week. I did not follow the case closely, but Harvard law professor Alan Dershowitz has a good article about the case and the criminal law in today’s Wall Street Journal. One thing I do know is that this highly-publicized trial will reinforce a commonly held view about criminal justice in America–that juries weigh evidence and decide whether the accused is guilty or not. As I note in the July issue of Reason magazine, trials are infrequent events in our legal system.
Most Americans are under the mistaken impression that when the government accuses someone of a crime, the case typically proceeds to trial, where a jury of laypeople hears arguments from the prosecution and the defense, then deliberates over the evidence before deciding on the defendant’s guilt or innocence. This image of American justice is wildly off the mark.
Read the whole thing. The July issue of Reason is chock full of good articles about various aspects of criminal injustice.
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