The Heritage Insider: The environmental costs of delaying Keystone, What does the strategic trade lit really say about the Export-Import Bank? Is administrative law running off the rails? and more
August 9, 2014
Latest Studies
34 studies, including a Pacific Research Institute handbook on tobacco taxation, and a Hudson Institute report on Iraq’s second Sunni insurgency
Notes on the Week
The environmental costs of delaying Keystone, What does the strategic trade lit really say about the Export-Import Bank? Is administrative law running off the rails?
To Do
Figure out what now for ObamaCare
Latest Studies
Budget & Taxation
• The Export-Import Bank: What the Scholarship Says – The Heritage Foundation
• Abolishing the Corporate Income Tax Could Be Good
for Everyone – National Center for Policy Analysis
• Handbook of Tobacco Taxation – Pacific Research Institute
• Sales Tax Holidays: Politically Expedient but Poor Tax Policy – Tax Foundation
The Constitution/Civil Liberties
• An Originalist Future – Federalist Society
• Repression in China and Its Consequences in Xinjiang – Hudson Institute
• Private Property Interrupted: Protecting Texas Property Owners from Regulatory Takings Abuse – Texas Public Policy Foundation
Crime, Justice & the Law
• Criminal Law and the Administrative State: The Problem with Criminal Regulations – The Heritage Foundation
Economic Growth
• The Long-Hours Luxury – American Enterprise Institute
• Misallocation, Property Rights, and Access to Finance – Cato Institute
• Do Labour Shortages Exist in Canada? Reconciling the Views of Employers and Economists – Fraser Institute
• “Middle-Out” Economics? – Hoover Institution
• How Many Jobs Does Intellectual Property Create? – Mercatus Center
• Thomas Piketty’s False Depiction of Wealth in America – Tax Foundation
Education
• Philadelphia School Trends, 2002-03 to 2012-13 – Commonwealth Foundation for Public Policy Alternatives
Foreign Policy/International Affairs
• Setting a Course for Obama’s Rudderless Africa Policy – The Heritage Foundation
• The Failure of the E.U. – Hoover Institution
• Iraq’s Second Sunni Insurgency – Hudson Institute
• The Collective Security Treaty Organization: Past Struggles and Future Prospects – Hudson Institute
Health Care
• Changing the Rules of Health Care: Mobile Health and Challenges for Regulation – American Enterprise Institute
• Direct Primary Care: An Innovative Alternative to Conventional Health Insurance – The Heritage Foundation
• How Obamacare Fuels Health Care Market Consolidation – The Heritage Foundation
• A Time for Reform: Close and Consolidate Texas’ State Supported Living Centers – Texas Public Policy Foundation
International Trade/Finance
• Sustaining the Economic Rise of Africa – Cato Institute
• Market Solutions Should Be Central to U.S.’s Taiwan Policy – The Heritage Foundation
Labor
• Asserting Influence and Power in the 21st Century: The NLRB Focuses on Assisting Non-Union Employees – Federalist Society
Monetary Policy/Financial Regulation
• “Choking Off” Disfavored Businesses and Their Clients: How Operation Choke Point Undermines the Rule of Law and Harms the
Economy – The Heritage Foundation
National Security
• Autonomous Military Technology: Opportunities and Challenges for Policy and Law – The Heritage Foundation
• Size Isn’t All that Matters – Hoover Institution
Natural Resources, Energy, Environment, & Science
• The Keystone Delay Is Costing us More than Jobs and Revenue – American Action Forum
• Who Watches the Watchmen? Global Warming in the Media – Capital Research Center
• Rethinking Energy: Supplying Competitive Electricity Rates – Center of the American Experiment
Retirement/Social Security
• A Guide to the 2014 Social Security Trustees Report – e21 – Economic Policies for the 21st Century
• Social Security Trustees Report: Unfunded Liability Increased $1.1 Trillion and Projected Insolvency in 2033 – The Heritage Foundation
The environmental costs of delaying Keystone: The delay in the Keystone pipeline costs more than jobs and income. There are also environmental consequences that come from shifting pipeline transport of oil to rail transport. Catrina Rorke extrapolates what the costs may be:
If the president had approved the Keystone XL pipeline, it would have prevented the release of an additional 2.7 to 7.4 million tons of CO2 to the atmosphere – the equivalent of taking 500,000 to 1.5 million passenger vehicles off the road or shutting down one coal facility. […]
From the State Department report, we know that the rail options emit 28-42 percent more during normal operations as compared to the Keystone XL pipeline. […]
Replacing the capacity of the Keystone XL pipeline with rail transport risks additional oil spills and the release of up to 23,318 additional barrels of oil – nearly a million gallons of useful fuel entering the environment instead of the economy. […]
The delay in building the Keystone XL pipeline risks up to 1,065 additional injuries and 159 additional fatalities.
By virtue of serving urbanized areas, railroads carry a certain risk to the public. A July 2013 train derailment in Lac-Mégantic, Quebec devastated the downtown and caused 47 deaths. Though this tragedy is unique in size, the paths of railways intersect frequently with population centers. The Keystone XL pipeline is designed to minimize this risk, routed to avoid sensitive, sacred, and historic sites, as well as densely populated areas. [American Action Forum, August 6]
Rewarding work: “One factor that is often overlooked in the debate over causes of income inequality is a shift in the distribution of working hours,” writes Tino Sanandaji: “The rich now work more than the poor.”
Between 1979 and 2006, the share of low-wage earners who worked long hours declined from 22 percent to 13 percent. In the same time period the share of high-wage earners who worked long hours increased from 15 to 27 percent. Results were similar when education rather than income is used to segment the labor market. Most of the change is driven by changes in hours worked per employee, not by changes in employment rates. For men lacking high-school education, one-third of the decline in hours is driven by reduced employment rates, while the rest is driven by decline in hours among the employed. Among college-educated men, the entire increase in the long hours is driven by those with employment working more hours.
And the decline of work among the poor is a tragedy, he writes:
In simple economic models, working less and having more leisure increases well-being. A common but mistaken view of this reversal in work inequality is that it has benefited the low skilled because they can consume as much as before without having to work as hard. This ignores the complexity of human psychology.
Humanist theories of happiness, starting with Aristotle, have long argued that the key to life satisfaction is living a purpose-driven life and aiming for higher goals. Modern psychology similarly emphasizes work and purpose for a full life. Abraham Maslow viewed fulfilling one’s potential or “self-actualization” as the pinnacle level of happiness. Mihaly Csikszentmihalyi argued that people are happiest when they are in a state of “flow,” or a complete absorption in a challenging and intrinsically motivated activity. [The American, August 4]
What does a gas company have to do with ObamaCare? If you’ve been following the debate about whether ObamaCare creates tax credits in just the state exchanges or in both the federal and state exchanges, you may have heard the word “Chevron.” What’s that all about?
“Chevron” refers to Chevron v. Natural Resources Defense Council a Supreme Court decision from 1984. Randolph May, observing the 30th anniversary of the decision, describes Chevron’s central holding this way: “When a statutory provision is ambiguous, if the agency’s interpretation is ‘based on a permissible construction of the statute,’ then the agency’s interpretation is to be given ‘controlling weight.’”
When there is ambiguity, why not defer to the agencies? May explains the problem:
Chevron, by virtue of giving agency interpretations of ambiguous statutory provisions “controlling weight,” has facilitated the steady growth of the regulatory state. This certainly is a likely result because of the natural bureaucratic imperative for agencies, granted leeway to do so, to interpret delegations of authority in a way that expands, rather than contracts, their own authority. […]
To the extent that the Chevron doctrine—the counter-Marbury—in fact facilitates aggrandizement of power by government officials all too eager to expand administrative authority, there is a ready remedy. Congress can choose to legislate in a way that makes its intent unmistakably clear. Remember, absent ambiguity in the statute, a reviewing court never reaches the question of how much deference is due the agency’s own interpretation.
Congress legislating with unmistakable clarity? I understand that in the legislative sausage-making process this is an ideal infrequently realized. In many instances, Congress actually intends, whether or not it says so explicitly, to leave “gap-filling” for the agencies. That way, when an agency’s action rouses the public’s ire, Congress can blame the bureaucrats for overreaching. [The Hill, August 8
In King v. Burwell, the Fourth Circuit relied on Chevron analysis to find that tax credits were permissible in the federal exchanges; in Halbig v. Burwell, the D.C. Circuit decided that the meaning of “an Exchange established by the State,” was plain enough that there was no gap for the IRS to fill. Thus, there was no Chevron analysis needed.
The Constitution doesn’t exist for the convenience of the government. For the past century or so, the federal government has been using its spending and regulatory powers to “turn states into mere field offices of the federal government,” write Richard Epstein and Mario Loyola. Their article in The Atlantic explains not only how we got here but why we should care:
A common justification for federal overreach is that it allows for administrative convenience, but the Constitution doesn’t exist for the convenience of the government. Its purpose is to protect the people from government abuse. By leaving most government spending and regulation within the exclusive domain of states, the original Constitution created a dynamic framework of interstate regulatory competition. Citizens and businesses could choose to live in whatever state they wanted, a choice they could make with increasing ease as the nation’s communications and transportation dramatically improved, and states competed to offer an attractive package of services and taxation.
Just like cable-TV providers offer premium channels in pricy packages and basic cable at a cut rate, some states and municipalities offered lots of services and benefits—and higher taxes—while others offered smaller government and a lower tax bill. That larger menu meant more choices.
This interstate regulatory competition could accommodate a wide diversity of approaches, from the progressive safety blanket of Wisconsin to the frontier freedom of Texas. Vigorous interstate competition tended to punish excessive government, leading for example to higher growth rates in states with less restrictive labor laws. It also made it more difficult for special interests to wield government as a tool for extracting benefits from the rest of society in the form of hidden subsidies, cartels, and monopolies. Where special interests reign, market efficiency is lost, leaving everyone worse off.
Even today, states with high taxes, tough zoning laws, and restrictive labor laws tend to lose out to those with a lighter footprint—witness the tens of thousands of people—especially poor people—moving to Texas every year. The easier it is for people to choose between state options, the weaker the case for federal control of markets.
That leaves heavily regulated and highly taxed states at a disadvantage in the competition for people and businesses. Those states have cleverly solved much of their problem by using the federal government to impose higher taxes and regulation across the states. Burdened by often-costly progressive policies, states such as California, Massachusetts, and New York form coalitions in Congress to neutralize the advantage of states like Wyoming, Texas, and Florida. Protection from competition is the strongest impetus for the integration of federal and state governments under an umbrella of overall federal control.
That process undercuts one of the great advantages of a modern economy: the choice that mobility offers to families and businesses. It hastens the erosion of one of our most essential constitutional protections, the separate domains of federal and state governments, each confined to its proper sphere of authority. [The Atlantic, July 31]
The courts aren’t on board with the plan for unrestrained executive power—at least not all of them, yet. To hear liberals tell the story, the most important thing to know about Halbig v. Burwell is that the D.C. Circuit Court denied ObamaCare subsidies to millions of people in the 36 states that chose not to establish an exchange. The detail that the law says the subsidies are available “through an Exchange established by the State” gets second billing if it shows up at all. Liberals thus blame the court for striking down that which Congress failed to create. What an odd way of looking at judicial decisions. As Michael Greve notes, the acceptance of the government’s arguments as at all plausible is a signal that administrative law is coming apart at the seams. He writes:
[W]ould we actually be having this overwrought discussion over a perfectly straightforward Administrative Law and statutory interpretation question—and a perfectly conventional judicial resolution—if Halbig were about something other than Obamacare? Hardly.
By way of illustration, take a look at Sierra Club v. EPA, 536 F.3d 673 (D.C. Cir. 2008), a case over Title V permitting under the Clean Air Act. In defense of a regulation that took some liberty with the language of Title V, the EPA argued that (1) the statutory language (“each” permit) didn’t quite mean what it said, when read in connection with other provisions; (2) the statutory context warranted a more latitudinarian reading; and (3) EPA’s “programmatic” reading would better serve congressional purposes. In substance, that’s the government’s Halbig defense. Sierra Club rejected all three arguments; and you can clip entire paragraphs from the opinion and paste them into Halbig without anyone noticing. (Judge Griffith wrote both opinions.) No, it’s not a conservative cabal: in Sierra Club, the enviros won. And no, it’s not an outlier: some Administrative Law textbooks excerpt Sierra Club as an example of how Chevron(Step I) analysis works.
And:
Why isn’t the supposed error precisely a case for a “we-messed-up-and-here-is-what-we-meant” statutory override, of the sort that Congress has enacted time and again for civil rights laws, Medicaid, Medicare, and any number of other entitlement statutes? In short, why isn’t Halbig obviously right? And why isn’t that answer congenial to liberals who, from the New Deal to infinity and beyond, have extolled statutory and even constitutional litigation as a “dialogue” between the Court and the political branches, especially the Congress?
Because they no longer believe it. Obamacare was no inartful compromise; it was a brutal cramdown. There’s no kicking this back to Congress; the judges’ rulings, Obamacare supporters wail, spell the life or death of the statute. And when in doubt, the liberals say (for once), choose life. [Library of Law and Liberty, August 6]
Video of the week: Economics is everywhere, including between the goalposts. The start of football season is less than a month away. From Steve Horwitz and Learn Liberty, here’s a look at how the game’s concussion crisis reveals an important lesson about public policy:
Pulling back the curtain on Healthcare.gov: Remember the fiasco that was the launch of Healthcare.gov? The Government Accountability Office has looked into the matter and the agency recently told Congress that, indeed, there was a fiasco. Peter Suderman reports some of the details of the GAO’s testimony:
One of the big problems was that federal health bureaucrats kept changing their minds during the development process. The Centers for Medicaid and Medicare Services (CMS), which was charged with building the exchange system, “incurred significant cost increases, schedule slips, and delayed system functionality.” These delays were largely due to “changing requirements that were exacerbated by inconsistent oversight.” The dithering cost time, and it also cost money. Between September 2011 and February 2014, development cost estimates blew up, from about $56 million to $209 million for the federal marketplace. Costs for the data hub, another key part of the exchange, went from $30 million to $85 million.
It was a classic bureaucratic circus. No one knew who actually had the authority to tell contractors what to do, so contractors got jerked around and sent on fruitless tasks, or asked to do work that they shouldn’t have been doing. The GAO report says that CMS improperly spent $30 million on bonus features that it didn’t technically have the authority to order.
Delays and costs piled up, with some held off until weeks before launch, and when it came time to flip the switch, no one knew if it would work. “CMS launched Healthcare.gov without verification that it met performance requirements.”
But don’t think all the problems are in the past:
CMS Deputy Administrator Andy Slavitt said this morning that "there will clearly be bumps" when the exchanges open for all business again in November, according to a report in Politico.
Slavitt also confirmed that the exchange still isn’t built yet, with key backend payment systems that have already been delayed multiple times still incomplete. Slavitt said that the administration doesn’t expect work to be finished on those systems until next year—after the second open enrollment period is over.
[Reason, July 31]
To Do: Figure Out What Now for ObamaCare
• Assess how the legal challenges to ObamaCare’s subsidies and mandates will unfold now that two federal courts have issued contrary rulings. The Cato Institute’s Michael Cannon and Case Western Reserve University’s Jonathan Adler—the guys who noticed that ObamaCare doesn’t allow subsidies in
federal exchanges—will discuss the Halbig and King decisions. The discussion will begin at noon on August 12 in Room B-354 of the Rayburn House Office Building in Washington, D.C.
• Experience one young man’s harrowing journey to secure his life and liberty in a repressive future society. The Heritage Foundation will host a private advance screening of The Giver, starring Jeff Bridges and Meryl Streep, at 7:00 p.m. on August 12. To attend, RSVP to enoren@crcpublicrelations.com.
• Shoot guns, eat BBQ, and smoke cigars. The second annual Northwest Freedom Shootout is a fun afternoon event where you’ll meet other fans of the Second Amendment. The Shootout will begin at noon on August 16, at the Evergreen Sportsmen’s Club in Littlerock, Wash.
• Make your own declaration for Think Freely Media’s Great Communicators Tournament. Shoot a video in which you describe a policy issue using moral arguments to support a free enterprise or limited government. Submit it by August 15. The prize for first place is $10,000!
• Get an update on the right-to-work movement. The Heritage Foundation will host a panel featuring two teachers and a home healthcare provider grappling with union power in California, Michigan, and Minnesota. The event will begin at noon on August 12.
• Save the dates: Americans for Prosperity’s 8th Annual Defending the American Dream Summit will take place on August 29 at the Omni Dallas Hotel. The Mont Pelerin Society will meet August 31 at the Kowloon Shangri-La Hong Kong Hotel to discuss the future prospects for liberal reform in Asia.
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