January 2012

Over at RealClearMarkets, I explain why the answer is a resounding no:

Rep. Phil Hare argues that “reckless deregulation” is one of the causes of the current economic crisis. That isn’t actually true. This year’s edition of the Competitive Enterprise Institute’s Ten Thousand Commandments report found that 3,830 new regulations came into effect in 2008 alone.

Over 30,000 total new rules passed during the Bush years. Hardly any were repealed. Businesses currently dole out the equivalent of Canada’s entire 2006 GDP – about $1.2 trillion – just to comply with federal regulations.

Where is the deregulation?

263,989 people make their living working for federal regulatory agencies, according to research from the Mercatus Center. That’s an all-time high.

12,190 of them regulate financial markets from Washington. More are based in New York and other financial centers. None of these figures include state and local rules and regulators. Those cost extra.

“Experts predict flu pandemic could be mildest on record” declares the Washington Post headline. Unless, that is, you use the old definition of pandemic before the World Health Organization made it so that severity no longer counts. In that case, this would be called not a “pandemic” but “an extremely mild flu strain.

Another shocking revelation? It turns out the Presidential Council of Advisors on Science and Technology “plausible scenario” of swine flu deaths wasn’t all that plausible. Rather than 30,000 – 90,000 Americans dead, a new study by Harvard epidemiologist Marc Lipsitch and others calculates “the virus might directly cause between 6,000 and 45,000 deaths by the end of the winter, with the final toll probably falling somewhere between 10,000 and 15,000.”

Insofar as according to the CDC’s estimate we already had about 4,000 deaths by mid-October, that means there may not be that many more fatalities. And mind you, those are not net deaths. In other words, it doesn’t take into account the protective effect we’ve seen in Australia and New Zealand whereby people are inoculated by the mild swine flu so they don’t die from the vastly more severe seasonal flu. In other words, expect a final toll from flu overall to be fewer cases this year – judging from the aforementioned cases far fewer.

Lipsitch, not incidentally, helped come up with that notorious 30,000 – 90,000 number.”Those were the best estimates we could make at the time based on the data available at the time,” Lipsitch told the Post. Really? Then how was non-epidemiologist Michael Fumento able to immediately show the figure was utterly absurd? Am I some sort of Nostradamus who prefers debunking government studies to making a killing at the race track. Or was the PCAST report clearly nonsense from the outset, designed not to inform but to panic?

[youtube:http://www.youtube.com/watch?v=GCmDmMbtSb0 285 234]

Your host Richard Morrison teams up with collaborators Jeremy Lott and William Yeatman to bring you Episode 72 of the LibertyWeek podcast. We begin with UN climate hypocrisy in Copenhagen, presidential arm-twisting on health care and a cloudy look at government transparency. We conclude with the end of the tobacco road in Virginia and scandal of banking and nepotism in Venezuela.

It is illegal to conduct an auction without a license in Alabama. Unlicensed auctioneers can be punished with fines of up to $500.

Applicants must pay nearly a thousand dollars for 85 hours of coursework. 8 additional hours are required every two years to keep the license.

It’s worth asking: Does this benefit anyone besides the people teaching the courses and the auctioneers who get to limit the amount of competition they have to face?

CEI’s Sam Kazman has a great quote on the PCAOB case in James Freeman’s article today in the Wall Street Journal. Although the case, being heard by the Supreme Court this morning,  may seem to deal with an esoteric Constitutional issue of appointments to the Public Company Accounting Oversight Board, Freeman points out the broad effects and costs of this board’s oversight, especially of Section 404 of the Sarbanes-Oxley Act.

The board is charged with making sure that Sarbox’s Section 404 rules on “internal controls” over bookkeeping are implemented. These rules are so onerous that companies have had to undertake exhaustive investigations of such minor issues as how many people should be required to authorize small customer refunds at a retail location.

Freeman concludes with Kazman’s quote and a succinct summary of the problem:

Is all this fuss about board appointments just legal hairsplitting? Sam Kazman, general counsel of the Competitive Enterprise Institute, one of the plaintiffs suing the PCAOB, doesn’t think so. He notes that “responsibility for bureaucrats was a fundamental issue for the Framers,” and that the appointments clause was created “as an essential check on overweening bureaucracy. As colonists of England, they had seen offices created by both the king and Parliament spawn more offices with no accountability, creating what the Declaration of Independence refers to as a ‘multitude of new offices’ and ‘swarms of officers to harass our people and eat out their substance.’”

Today, people who work at public companies-and their investors-understand this problem perfectly.

The members of the Public Company Accounting Oversight Board (PCAOB), an agency being challenged in the Supreme Court on December 7, aren’t appointed by the president, nor can he remove them. The General Accounting Office describes the PCAOB as “an independent board with sweeping powers and authority;” its rules and red tape cost the economy billions of dollars every year (with an long-term cost of perhaps $1 trillion).

Yet the government suggests in its brief that the president has “fully effective control” over the PCAOB (see pg. 46 of that brief). That’s not the only peculiar claim made in the PCAOB’s defense.

The case raises the issue of whether members of an agency — the PCAOB — picked by the members of yet another independent agency — the five Commissioners of the Securities and Exchange Commission (SEC) acting as a group — are, in light of their broad policy making role, actually “principal officers” who thus should have been picked instead by the president under the Constitution’s Appointments Clause. Alternatively, assuming that PCAOB members are mere “inferior” officers, the case raises the issue of whether they should have been picked, as the Appointments Clause requires for inferior officers, by the “Head” of a “Department,” rather than the SEC Commissioners acting collectively (the SEC has a Chairman who manages it and supervises its staff).

Government lawyers argue that the PCAOB is so controlled by the SEC that its members are mere inferior officers, and claim that the SEC is headed by all its Commissioners, not its Chairman. But as Jonathan Moore has noted, a long-time SEC commissioner debunked these claims on December 3. Former SEC Commissioner Paul Atkins took the exact opposite view, in a panel discussion at the American Enterprise Institute, which one can view and listen to here (Atkins was the fifth speaker; I also spoke at the event, and Jonathan Moore, who was in the audience, questioned the panel).

Atkins spoke at length about the PCAOB and how difficult it was for the SEC to influence the PCAOB. He noted that the PCAOB had enough autonomy to frustrate the SEC’s attempts at oversight. When the SEC sought a business plan from the PCAOB, the PCAOB Chairman said that “the statute was his business plan” and more or less failed to comply. It took five years to get something akin to a business plan from the PCAOB. Atkins said that PCAOB’s “Audit Standard 2” “has a very checkered history” and illustrated the “limits” of SEC oversight. The 400 pages of requirements from Auditing Standard No. 2 made compliance with Sarbanes-Oxley “very difficult” and “very costly.”

Atkins noted that “All five commissioners” were in favor of “radical” changes to it, yet it took years for them to obtain merely “some” changes to that audit standard, owing to the need for consensus and PCAOB foot dragging. He recounted how the PCAOB adopts “staff-driven” rules through “informal rulemaking” that apply without being approved by the SEC, regardless of Sarbanes-Oxley’s formal approval process for rules. Atkins says, for example, that its guidance regarding “stock options” was “not subject to any rule at all,” despite functioning in practice as a rule. While the SEC has to approve formal rules, the PCAOB functions heavily through informal rules never approved by the SEC. He said that “Peekaboo does have real power,” “investigative power,” and “prosecutorial power.” Although the SEC theoretically reviews the PCAOB’s budget, Atkins noted that “staff at Peekaboo were not telling the truth” about the PCAOB’s budget system to the SEC, making evaluation of its budget and spending difficult. He noted that on the SEC’s website, there is video footage of his concerns over this at the last budget meeting. He noted that because of the PCAOB’s separate status and the SEC’s lack of control over PCAOB staff, the “SEC found it didn’t really have the authority” to control the PCAOB’s budget that it supposedly did.

Atkins noted that the SEC’s “power is not plenary” over the PCAOB, that it was difficult to get a group consensus focused on oversight over the PCAOB, and that oversight of the PCAOB was “like pushing on a string.” He said that the current set-up under Sarbanes-Oxley is a “very difficult way for the SEC to oversee a separate board.” He cited “flawed implementation of [SOX Section] 404” from 2002 to 2006 as an example, and noted the “incredible amount of attention diverted” to accounting issues that were not important as a result of the PCAOB’s internal-controls rules.

He addressed the question of whether the SEC’s chairman is its head for appointments clause purposes. He said that the Founders realized the “committee structure” or the “committee system was not a very effective decision making type of body” for things like appointments, and cited the 1950 Reorganization Plan 10 that vested “authority over the budget” and “HR decisions” in the SEC’s chairman. Although he noted that “consensus” is desired for key posts like the General Counsel, when push comes to shove, “in reality, he [the Chairman] can still appoint who he wants.” He said that the idea that PCAOB members – or even SEC members – were really accountable to the president was silly, and that the SEC’s own history “illustrates how difficult it is for the President to assert authority” over the SEC, much less the PCAOB.

Atkins’ observations debunk the government’s suggestion that the president has “fully effective control” over the SEC – and the lower court ruling upholding the PCAOB, which claimed that the SEC was not headed by its Chairman, but by SEC Commissioners as a group – a claim based on that court’s inconsistent reasoning. Law professor Donna Nagy similarly debunks claims that the PCAOB is “heavily controlled” by the SEC in a forthcoming article in the Pittsburgh Law Review, noting that PCAOB members are “principal officers” “acting with significant discretion and autonomy outside the SEC’s control” who constitutionally must be appointed by the president — not, as is currently the case, by the SEC Commissioners as a group.

Also available online is the text of SEC Commissioner Paul Atkins’s earlier 2006 speech noting the SEC’s limited ability to control the PCAOB (such as the PCAOB’s unapproved guidance on subjects like “options grants” and the PCAOB chair’s view that the PCAOB is more like the SEC’s “cousin” than its subordinate).

Courts sometimes take judicial notice of such statements. See Nebraska v. EPA, 331 F.3d 995, 998 n.3 (D.C. Cir. 2003) (taking judicial notice of statements on web site); Cf. Parents Involved in Community Schools v. Seattle School District No. 1, 551 U.S. 701, 780 n. 30 (2006) (Thomas, J., concurring) (quoting from web site); id. at 730, n.14 (plurality) (citing news articles about website’s earlier content).

Press coverage of the Supreme Court is sometimes marred by ideological bias.  Liberal court reporters sometimes distort what Supreme Court justices say, or the facts of Supreme Court rulings, in order to make justices look bad.  One example is the blatantly false claim by an Arizona reporter that Justice Scalia criticized court desegregation rulings (a claim the reporter belatedly admitted was false).

Another is the extremely inaccurate press coverage of the Supreme Court’s 2007 decision in Ledbetter v. Goodyear. The New York Times has peddled fables about that decision that persist in the media despite being debunked by journalists like James Taranto, legal scholars like David Copus, legal commentators like Stuart Taylor of the National Journal, and lawyers like Paul Mirengoff.

Plaintiff Lilly Ledbetter lost her pay discrimination case because she filed her complaint to the Equal Employment Opportunity Commission (EEOC) too late. The Court said that, in most cases, employees should file an EEOC complaint within 180 days of their first discriminatory paycheck, if they want to sue under Title VII of the Civil Rights Act.

But the Court also specifically left open the possibility that employees could sue later simply because they didn’t know of the discrimination at the time — a situation it said did not apply to Ledbetter’s case (she testified in her deposition that she knew of the pay disparity in 1992, but only filed her complaint with the EEOC in 1998, around the time she retired). The Court pointedly noted that the plaintiff could have pressed her claim instead under the Equal Pay Act, which has a longer deadline for suing. (Moreover, as lawyer Paul Mirengoff notes, the Supreme Court has long allowed hoodwinked employees to rely on equitable tolling, waiver, and estoppel to sue beyond the deadline, when employer deception keeps them from suing within 180 days, as it made clear in its Zipes decision).

But newspapers like The New York Times did not report any of this. Instead, Times reporters like Linda Greenhouse caricatured the Supreme Court’s decision, falsely claiming Ledbetter never knew of the pay disparity until she retired, and that the Supreme Court created a rigid rule that employees must always sue within 180 days of their first discriminatory paycheck, regardless of whether they knew or could have known of the pay disparity.

As Stuart Taylor notes, this false claim ended up in literally “hundreds of media reports.” But it was completely untrue. As Taylor notes:

Ledbetter admitted in her sworn deposition that “different people that I worked for along the way had always told me that my pay was extremely low” compared to her peers. She testified specifically that a superior had told her in 1992 that her pay was lower than that of other area managers, and that she had learned the amount of the difference by 1994 or 1995. She added that she had told her supervisor in 1995 that “I needed to earn an increase in pay” because “I wanted to get in line with where my peers were, because… at that time I knew definitely that they were all making a thousand [dollars] at least more per month than I was.”

When The Tampa Tribune inadvertently repeated this fable — that Ledbetter never knew of the pay disparity she sued over until she retired, and that the Supreme Court threw out her claim solely because her complaint was not within 180 days of her first paycheck — it eventually corrected its error, at least in the online version.

Originally, the Tribune story, entitled “Equal pay crusader says she’ll always be ‘second-class citizen,’” wrote that the Court’s “majority said that by law she should have filed her case earlier — within 180 days of her first paycheck. It failed to recognize Ledbetter didn’t know about the pay discrepancy until just before she retired in the late 1990s.” Now, it has corrected that paragraph to more accurately read:

The majority said that by law, she should have filed her case within 180 days of her first paycheck – or at least 180 days after she learned of the pay discrepancy. Ledbetter retired from Goodyear in the late 1990s, after 20 years with the company. She learned of the pay discrepancy before she retired, but more than 180 days passed before she filed her case.

By contrast, The New York Times‘s staff not only refused to correct its erroneous reporting, but also refused even to read the portions of the Supreme Court’s Ledbetter decision (like footnote 10) that proved my point about its inaccurate reporting, choosing instead to rely on Ledbetter’s self-serving, unsubstantiated claims to Congress contradicting the Supreme Court. The Times chose instead to claim that Ledbetter never knew of the discrimination until around the time she retired, and that the Supreme Court threw out Ledbetter’s claim regardless of whether she knew or could have known of the discrimination, simply because she did not complain within 180 days of her first paycheck.

But the Supreme Court did not create any such rigid deadline, and expressly left open the possibility that plaintiffs can wait to sue until after learning of discrimination, under the so-called “discovery rule.” It noted in footnote 10 of its opinion:

[W]we have previously declined to address whether Title VII suits are amenable to a discovery rule. . . .Because Ledbetter does not argue that such a rule would change the outcome in her case, we have no occasion to address this issue.

In short, since Ledbetter didn’t even claim that a lack of knowledge had prevented her from suing in time, relaxing the deadline for her would have done her no good. (Moreover, if she had lacked knowledge as a result of being hoodwinked by her employer, she could have had the deadline extended under the Supreme Court’s doctrine of equitable tolling, which applies somewhat more narrowly than the discovery rule).

After she lost her case, Ledbetter claimed to Congress that she had not learned of the discrimination until the end of her career — a claim parroted by gullible politicians and the press. But in Ledbetter’s deposition, she admitted she knew by 1992 – years earlier — that she was paid less than her male peers, notes David Copus in page 8 of the online version of his October 2008 law journal article “Pay Discrimination Claims After Ledbetter.” Similarly, Washington lawyer Paul Mirengoff notes that:

Ledbetter testified that she knew by 1992 that her pay was out of line with her peers. In 1995, she spoke to her supervisor about the problem, telling him that “I knew definitely that they were all making a thousand at least more per month than I was and that I would like to get in line.” Yet Ledbetter waited until 1998 to file her EEOC complaint.

Moreover, although the Supreme Court dismissed Ledbetter’s claim under Title VII, the discrimination law with the shortest deadline, it pointed out that the plaintiff could easily have pressed her claim instead under the Equal Pay Act, which has a longer deadline for suing. As it noted, “Petitioner, having abandoned her claim under the Equal Pay Act, asks us to deviate from our prior decisions in order to permit her to assert her claim under Title VII.” She might have won her case had she simply appealed based on the Equal Pay Act.

The folks who dubbed the swine flu piglet a pandemic, the World Health Organization (WHO), just won’t let up.

“It is too early to say whether there has yet been a peak in infections in the northern hemisphere,” Reuters paraphrased the WHO as saying, “and it will be some weeks before there is a downward trend in the numbers of those catching the virus.”

Wrong across the board for both Canada and the U.S.

In the U.S., flu deaths and hospitalizations have declined for the third straight week, according to the Centers for Disease Control and Prevention (CDC). Regarding Canada specifically, the WHO claims “influenza activity remains similar but [the] number of hospitalizations and deaths is increasing.” But Health Canada’s FluWatch website, updated weekly, begs to differ.

Yes, all indicators have been dropping in Canada, as well. Just what part of “all” doesn’t the WHO understand? Read more in my National Post article.

Here’s a letter I sent recently to the New York Daily News:

December 3, 2009

Editor, New York Daily News
450 W. 33rd Street
New York, NY 10001

Washington, D.C.: In his December 3 column, “On jobs front, President Obama needs to show a little audacity,” Errol Louis worries about America’s trade deficit. He shouldn’t.

I run an ongoing trade deficit with my local grocery store. I import food from them every week. They have never purchased a thing from me in return. Even so, we both benefit. I’d rather have their food than my money, and they’d rather have my money than the food on their shelves. This is true even if an international border separates us.

If Mr. Louis is as worried about trade deficits as he says he is, he would never again set foot in a grocery store, start growing his own food, and engage only in barter transactions. If he doesn’t, he is either misinformed, or else he doesn’t really believe what he writes.

Ryan Young
Warren T. Brookes Journalism Fellow
Competitive Enterprise Institute
Washington, D.C.