Economic freedom is good for you. | Michael Novak, R.I.P. | Law-made rights are trumping constitutional rights. | How to rein in regulation. | What happens if Dodd-Frank isn't repealed?
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February 18, 2017 |
| Countries that are economically freer, are also healthier, wealthier, and wiser. Michael Novak identified the moral goods produced by capitalism. How did anti-discrimination laws come to trump constitutional rights? If the regulatory state is the Death Star, the Congressional Review Act may be its thermal exhaust port. Dodd-Frank has set us up for an even bigger crisis in the future. |
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Does economic freedom matter? Yes. Here are two charts from the just released 2017 Index of Economic Freedom: You can explore the data further at http://www.heritage.org/index/.
Michael Novak, R.I.P. Michael Novak, who examined the moral dimensions of capitalist society in The Spirit of Democratic Capitalism and many other books, died on Thursday at the age of 83. Brian Anderson writes: “Novak’s writings on democratic capitalism fought socialism not just on the level of economic efficiency, but on moral terrain, too. Socialists have long attacked market-based economies for their inequalities and consumerist frenzies, but, as Novak argued, their arguments invariably compared luminous socialist ideals with the often prosaic realities of capitalist societies. Had socialists looked instead at the socialist world as it actually existed, they would have found truncheon-enforced political conformity, economic ruin, and spiritual decay. “Novak showed that democratic-capitalist societies did promise—and often instantiate—moral goods. Respect for the individual conscience, the rule of law, the ignition of creativity and entrepreneurialism, general prosperity—these were remarkable achievements by any historical standards. Novak’s social thought proved hugely influential, cited by Margaret Thatcher and Poland’s Solidarity activists, who read it in Samizdat editions. Many believe that Novak even helped Pope John Paul II change his mind about free markets.” [City Journal]
Anti-discrimination laws are consuming constitutional protections. On Thursday, the Washington State Supreme Court upheld fines that had been levied against a florist for refusing the provide flowers for a same-sex wedding. The florist, Baronelle Stutzman, contended that her right to refuse service was protected by the First Amendment’s protection of free speech and association. Roger Pilon writes: “We have here yet another striking example of how modern state statutory anti-discrimination law has come to trump a host of federal constitutional rights, including speech, association, and religious free exercise. It’s not too much to say that the Constitution’s Faustian accommodation of slavery is today consuming the Constitution itself. “Consider simply the freedom of association right. That liberty in a free society ensures the right of private parties to associate, as against third parties, and the right not to associate as well—that is, the right to discriminate for any reason, good or bad, or no reason at all. […] “Slavery, of course, was a flat-out violation of freedom of association—indeed, it was the very essence of forced association. But Jim Crow was little better since it amounted to forced dis-association. It was finally ended, legally, by the 1964 Civil Rights Act. But that Act prohibited not simply public but private discrimination as well in a range of contexts and on a range of grounds, both of which have expanded over the years. The prohibition of private discrimination was probably necessary at the time to break the back of institutionalized racism in the South, but its legacy has brought us to today’s decision, where florists, bakers, caterers, and even religious organizations can be forced to participate in events that offend their religious beliefs. […] As I concluded a Wall Street Journal piece on this subject a while ago: ‘No one enjoys the sting of discrimination or rejection. But neither does anyone like to be forced into uncomfortable situations, especially those that offend deeply held religious beliefs. In the end, who here is forcing whom? A society that cannot tolerate differing views—and respect the live-and-let-live principle—will not long be free.’” [Cato Institute]
What can Congress do to reclaim control of the regulatory state? Paul Larkin Jr. has an idea: “Passed into law in 1996, the Congressional Review Act allows Congress to invalidate an agency rule by passing a joint resolution of disapproval, not subject to a Senate filibuster, that the president signs into law. Under the Congressional Review Act, Congress is given 60 legislative days to disapprove a rule and receive the president’s signature, after which the rule goes into effect. But the review act also sets forth a specific procedure for submitting new rules to Congress that executive agencies must carefully follow. If they fail to follow these specific steps, Congress can vote to disapprove the rule even if it has long been accepted as part of the Federal Register. In other words, if the agency failed to follow its obligations under the Congressional Review Act, the 60-day legislative window never officially started, and the rule remains subject to congressional disapproval. The legal basis for this becomes clear when we read the text of the Congressional Review Act. According to the statute, the period that Congress has to review a rule does not commence until the later of two events: either (1) the date when an agency publishes the rule in the Federal Register, or (2) the date when the agency submits the rule to Congress. This means that if a currently published rule was never submitted to Congress, then the nonexistent ‘submission’ qualifies as “the later” event, and the rule remains subject to congressional review. This places dozens of rules going back to 1996 in the congressional crosshairs.” [The Daily Signal]
Dodd-Frank ensures that the next financial crisis will be worse. Hester Peirce writes: “Dodd-Frank not only embraces more prescriptive microprudential regulation for individual financial institutions, but it also adds another regulatory layer designed to target ill-defined and elusive ‘systemic risk.’ […] This form of regulation turns regulators into allocators of credit: regulators decide who gets financed and who does not, which, in turn, affects how the economy develops, which consumer and business needs are met, and where innovation occurs. Regulators, driven by an evolving understanding of the inscrutable ‘systemic risk,’ override the clear market signals through which consumers and Main Street businesses communicate their needs to financial service providers. Macroprudential regulation also displaces the market mechanisms that signal impending trouble at a financial company or in a financial sector. […] “The next crisis is likely to be worse than the last because Dodd-Frank concentrates so much power in the hands of a few regulators. If these powerful regulators make mistakes, exercise poor judgment, or miss a key market development (all of which are inevitable because they are human), the consequences will be far-reaching. Every firm that has reordered its business to satisfy a regulatory directive will find itself in trouble if that directive proves unsound. And once a crisis happens, widely applicable regulatory mandates, such as liquidity rules, could intensify it. By contrast, if firms and individuals retain decision-making authority, their errors will be contained and firms will not walk in lockstep with one another.” Peirce concludes: “Substantively, the complexity of Dodd-Frank should give way to simple, well-enforced rules that lower barriers to competition, accommodate innovation, and eliminate both the expectation and possibility of bailouts. Only then will the financial system effectively and safely serve consumers, businesses, investors, and the economy.” [Mercatus Center] |
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