Archives for the 'Economic Liberty' Category
Using regulation to undo what regulation caused?
Welcome to OpenMarket.org! Please consider Subscribing to our RSS feed, so you don’t miss any of the news and analysis brought to you by CEI’s policy experts.
Humane Society of the US just released another expose video on animal cruelty in the meat industry. They argue for more regulation so that the responsibility for downer cattle is firmly placed on someone’s shoulder.
Their ultimate goal is to eliminate factory farming, where cattle are raised one place, transported to a feedlot where they pack on a lot of weight, and then transported to a meat packing plant where they are finally slaughtered. It is meat production by bussing, and it is part of the reason why we have downer cattle, which HSUS are so concerned about.
HSUS, which is not related to your local Humane Society in any way, shape, or form, is arguing for more regulation. They want regulation that says who is responsible for downer cattle at the meat packing plant, at the auction houses, and anywhere else. No one seem to take care of them when the truck driver cannot hand off a walking animal to the next link in the chain that takes the cattle from the farmers pastures to your dinner table.
I propose that the regulation caused the factory farming in the first place. There are two reasons for why I make that argument:
1. Regulation cost money; small slaughterhouses cannot afford the excessive cost of following USDA’s detailed guidelines and reporting routines.
2. USDA has been pushing for larger slaughterhouses, because it cost them more to supervise small operations.
The number of meatpacking plants in the U.S. has reduced drastically from almost 2,500 in 1974, to about 900 today. This has in part been a result of the cost and efficiency of using new technology, but there is another component to the story, which is not told very often. Reason started telling the story with a brief list of how regulation prevents Virginia farmer Joel Salatin to do what he wants with the products from his farm. Salatin has published several books on how to make organic, local food systems profitable. His most recent book Everything I Want To Do Is Illegal: War Stories From the Local Food Front is a tale of how his battle with USDA.
Salatin also has impeccable credentials from the organic food movement, and food snob Michael Pollan’s recent book the Omnivore’s Dilemma featured several chapter of Salatin’s farming methods and thoughts on supplying food for people. Salatin has been trying to establish a slaughterhouse because he does not want to ship is cattle offsite for slaughter. The USDA will have nothing of it. USDA do not mind that he slaughters onsite, they do not mind that he gives away the beef he slaughtered on the farm, but they will not let him sell it.
Salatin tried to establish a slaughterhouse with an acquaintance. After much ado, the USDA finally issued the permits. Once the plant was in operation, the USDA pulled the inspector because he was not processing animals fast enough. I was not aware that the USDA’s mission was to increase productivity in individual slaughterhouses, they only have to verify that it is done right, and even that is something that other organizations seems to do better.
The other story I have about misguided regulation of the meat supply is a story from the New York Times. Animal rights activists are pushing to ban the slaughter of horses all together, and have already succeeded in doing so in Illinois and in Texas. The result is that horses are now transported all the way to Canada for slaughter. Regulation is causing more industrialized farming, instead of achieving the activists goals of a
President Threatens to Veto Bloated Housing Bill
President Bush has threatened to veto the bloated federal housing bill pushed by House leaders, saying it would reward special interests As John Berlau has noted, the bill could cost middle-class investors billions (such as people whose retirement accounts or mutual funds contain mortgage-backed securities). (The companies that issued risky mortgages typically don’t still possess them). That’s above and beyond the billions of dollars that its bailout of subprime borrowers will likely cost taxpayers.
The architect of the bill, Congressman Barney Frank, calls his own bill the payment of an economic ”ransom,” admitting that it rewards irresponsible people by bailing them out. His excuses for paying this ransom are decidedly lame. Moreover, his bill contains political pork for left-wing special interest groups like La Raza and the National Urban League.
Why the GINA “Genetic Discrimination” Law Is Bad
At Slate, Eric Posner explains why the Genetic Information Non-Discrimination Act is a bad idea as a basic concept. The law nevertheless recently passed the Senate 95-to-0 and the House 414-to-1 because politicians’ thinking is controlled by labels, not logic or substance, and no one (especially not sanctimonious people) wants to be labeled as being in favor of “discrimination,” as Richard Ford notes.
Prior to its passage, I criticized GINA’s ban on employment discrimination in the National Law Journal for lacking a “direct threat” exception for public safety. The Economist’s blog suggested its ban on insurance discrimination could fundamentally undermine insurance markets and the availability of private health insurance in the long run.
Job-Killing Sugar Quotas Continue, Milking Consumers
Say bye bye to more American manufacturing jobs. The Washington Post editorialized today about sugar import quotas and price supports contained in the bloated federal farm bill, which have ”driven some U.S. candy producers either out of business or overseas” by increasing U.S. sugar prices. It costs consumers a bundle in higher prices to benefit a handful of subsidized American sugar producers, while antagonizing and impoverishing poor countries in the Caribbean and Latin America. The President has criticized the bloated farm bill, but may not do anything to block it, given his weak political position and other priorities. In Reason, Ronald Bailey describes the many ways that the current farm bill wastes taxpayer money and takes from the poor to give to the rich. In the National Review, Fran Smith earlier wrote about “the outrageous U.S. sugar regime,” which has cost taxpayers billions to benefit “a small number of large sugar-cane and sugar-beet producers.”
Congress Messes With Insurance
Eli Lehrer has an editorial in today’s Washington Examiner about how ill-considered legislation to create federal “national catastrophe insurance” could lead to American taxpayers shelling out more than $100 billion, on par with Hurricane Katrina. Earlier, he described how the legislation could cause serious financial problems for the country as a whole.
Last month, Congress created a long-run threat to the insurance industry by passing the Genetic Information Non-Discrimination Act (GINA). GINA also regulates employers in ways that I criticized in 2005 in the National Law Journal.
Housing Bill Contains Left-Wing Pork: Subsidies for La Raza
Earlier, we wrote about how the economic “stimulus package” passed by Congress contained pork for left-wing groups like “La Raza” (Spanish for “the race”). Now, House banking committee chairman Barney Frank is including a $10 annual million earmark specifically for La Raza in the federal housing bill. La Raza also gets money from consumer class action settlements, even though its ideological activities — like suing employers over remarks that offend their illegal alien employees — don’t have anything to do with consumers. (Class action money ends up being diverted to political causes irrelevant to most consumers, like lobbying for affirmative action). We wrote earlier about Barney Frank’s terrible mortgage bailout bill and how it would harm the economy and rip off taxpayers.
Abrogating Peter’s Contract to Pay Paul — Mortgage Bailout’s Billion-Dollar Hit to Retirement Savings
Many commentators, such as Open Market’s Hans Bader, have done a diligent job tracking the costs to taxpayers of the mortgage bailout scheduled to be voted on this week. The Congressional Budget Office just came out with an estimate of $2.7 billion for H.R. 5830, the so-called FHA Houshing Stabilization and Homeownership Retention Act of 2008.
But there could be an even greater cost from the bill to millions of middle-class investors saving for their retirement or the education of their children. The bill has the Federal Housing Administration guarantee the refinancing of a mortgage in return from a “haircut” from the owners of the loan. The bill requires loans to be guranteed at no more than 90 percent of the value, meaning a 10 percent loss for investors. But this haircut will “shave” billions of dollars off from funds saved for retirement or education.
This bill not only “robs Peter to Pay Paul,” through taxpayers bailout of bad loans by banks and borrowers. It can also be said to “abrogate Paul’s contract to Peter.” This is because many of the mortgages often aren’t owned by the banks that service them, but frequently by millions of middle class investors through their interests in entitities that have mortgage-backed securities (MBS).
Many middle-class folks who have 401(k) accounts, mutual funds, money market funds or defined-benefit pensions are indirect holders of MBS. In fact, according to investment bank Credit Suisse, 14 percent of MBS are owned by pensions and mutual funds that serve middle-class savers.
So, let’s do some math. The bill authorizes the FHA to guarantee up to $300 billion in mortgages. With the 10 percent haircut, the loans were originally worth $333 billion. So $33 billion represents the potential lost savings by the private sector. Now assume a random 14 percent of the loans in this program represent those owned by pensions and mutual funds. 14 percent of $33 billion is $4.6 billion.
The bottom line is that middle-class savers and investors could be left with almost $5 billion less for retirement and education of their children. Another compelling reason this bailout is not worth the cost.
Wealth is created one person at a time
Many people I know are passionate about eradicating poverty. Out of all the ailments that humans suffer from, poverty is one of the cruelest and dehumanizing situations that one can find one self in. Poverty is not defined by how many dollars you have to live on every day, it is not defined by what percentage of income you are below. Poverty is lack of options; it is that simple.
The problem with our political class today is that they build these amazing projects to help poor people, organizations like the UN, the Worldbank, and countless NGO’s create these projects that supposedly will help the people with the fewest options in the world. They are spending millions and millions of dollars and failing miserably.
The Grameen Foundation, with their micro loans and micro utility systems has understood that wealth is created at the individual level. If you help people get credit, so they can do the investments needed to expand their livelihood, their lives will change. Grameen got the Nobel Prize in 2007 for this insight.
Someone else who has understood this is a guy named Paul Polak. After years of being a psychologist, he found that alleviating financial troubles had a profound effect on alleviating their mental illnesses. A trip to Bangladesh inspired him to start up International Development Enterprises, a non-profit that helps adapt modern farming technologies to small rural farms and helps build micro economies and local markets.
In the last 25 years, Paul Polak has helped individuals in the poorest rural communities around the world increase their income by $200 million. No government-to-government program can claim such a success. Polak wrote about his work and his method in a book called Out of Poverty, that was published recently, and you can also learn more about his work by listening to the NPR interview with him.
Suing Over What Your Co-Workers Listen To
Should you be able to sue your employer because your co-workers listen to raunchy radio programs? The Eleventh Circuit Court of Appeals’ decision in Reeves v. C.H. Robinson Worldwide says you should, under the dubious theory that it is “sexual harassment” that’s “based on” your sex. U.C.L.A. Law Professor Eugene Volokh criticizes the decision on First Amendment grounds, while I criticize the decision as being inconsistent with the language of the discrimination laws and the Eleventh Circuit’s own past rulings, and a threat to the media and freedom of the press in the long run.
Courts frequently engage in flagrantly inconsistent legal reasoning in order to first impose liability on employers and then maximize and collect damages in sexual harassment cases, and they often disregard the statutory requirements that harassment plaintiffs seeking compensatory damages show that they were harassed based on their sex, and subjected to intentional discrimination.
I don’t like raunchy radio programs, but that doesn’t mean the government should ban listening to them, much less do so under the weak argument that they constitute sex discrimination.
Fed Cuts Interest Rates, Triggering More Inflationary Pressures
The Fed has cut interest rates again, reducing its key rate to 2 percent — a real interest rate of less than zero, after taking into account inflation. It will be about as ineffective (in stimulating the economy) as pushing on a string. But it will trigger renewed inflationary pressures. International investors are already disgusted with the Fed’s inflationary attempts to bail out borrowers by chopping interest rates, and this will make them even more reluctant to invest in the U.S.
Law Limiting Gun Suits Upheld
The Second Circuit Court of Appeals has upheld the federal law (PLCAA) limiting lawsuits against gun manufacturers over acts committed by criminals with guns, overturning a ruling by radical judge Jack Weinstein gutting the law. (I earlier discussed how judicial case assignment procedures are manipulated so that the lion’s share of landmark cases in New York’s Eastern District mysteriously end up being decided by Judge Weinstein rather than his more moderate colleagues).
The Brady Center to Prevent Gun Violence has claimed that the law violates “separation of powers” by changing the outcome of pending court cases (an argument that, if taken to its logical conclusion, would require invalidating the 1964 Civil Rights Act because it legislatively overturned trespass convictions of civil-rights demonstrators who engaged in sit-ins). I earlier commented on the Brady Center’s hypocrisy in claiming that it is “judicial activism” for judges to strike down gun bans based on the Second Amendment, but not judicial activism for judges to strike down the democratically-enacted PLCAA based on unwritten separation-of-powers principles.
Drill for Oil to Save the Environment
In the Washington Post, Robert Samuelson’s column “Start Drilling“ points out that ethanol production is far worse for the environment than drilling for oil in Alaska’s Arctic tundra, yet Congress promotes ethanol subsidies to reduce our reliance on foreign oil, even as it blocks drilling in the Arctic and ”the Atlantic and Pacific coasts” that would do far more to reduce our reliance on foreign oil. “What keeps these areas closed are exaggerated environmental fears, strong prejudice against oil companies and sheer stupidity,” he writes.
A news story today in the Post describes how ethanol production is devouring our food supply, even though a study shows that “greenhouse-gas emissions from corn and even cellulosic ethanol ‘exceed or match those from fossil fuels and therefore produce no greenhouse benefits.’ By encouraging an expansion of acreage, the study added, the use of U.S. cropland for ethanol could make climate conditions dramatically worse. And the runoff from increased use of fertilizers on expanded acreage would compound damage to waterways all the way to the Gulf of Mexico.”
In the American Spectator, Iain Murray notes that ethanol production has caused “food shortages and massive increases in food prices around the world. There have been food riots in Indonesia, Mexico, Egypt, and most recently, Haiti — where the poor have been reduced to eating cakes made with bleach and are on the verge of bringing the government down. Even in America, some grocery stores have begun to institute a form of rationing. Meanwhile, massive tracts of rainforest are being cleared in Indonesia to produce biodiesel, threatening the orangutan and other magnificent animals with extinction. In Brazil, the growth of sugar cultivation for ethanol is forcing food producers into the Amazon.”
By contrast, one of the Audubon Society’s chief bird sanctuaries (the Paul J. Rainey Wildlife Refuge in Louisiana), has 37 oil wells on site, and has produced natural gas for 50 years without harming the environment. Drilling for oil hasn’t harmed the birds a bit. But ethanol production causes environmental destruction, mass hunger, starvation, and rioting worldwide.
Disclosure: like many Americans, I have a retirement plan (both a 401(K) and an IRA). Like most retirement plans, it contains mutual funds. And most of those mutual funds own some stock in oil companies. So when politicians demand that the government impose a “windfall profits tax” on oil companies, what they are really trying to do is take money from my retirement plan — and your retirement plan, too, if you have one. That’s not going to encourage exploration for new sources of oil, or reduce our dependence on foreign oil.
GMU Law School Should Sue ABA Over Racial-Quota Mandates
The American Bar Association is continually threatening to pull the accreditation of George Mason University Law School for failing to adopt illegal racial quotas in admissions. That’s what San Diego law professor (and member of the U.S. Civil Rights Commission) Gail Heriot notes in the Wall Street Journal. The ABA first forced GMU — one of the few law schools without a marked liberal bias — to use what the ABA itself refers to as “preferential affirmative action admissions program” to radically increase its minority percentage from 6.5 percent to 19 percent. But the ABA still wasn’t happy with the results, which were insufficiently extreme for the ABA’s quota-mongers (never mind that the qualified applicant pool for a law school of GMU’s caliber is lower than 19 percent minority, as is the percentage of non-white lawyers even in heavily-minority states like California, so it’s not as if having 19 percent minorities is a sign of discrimination. Indeed, the ABA conceded that GMU has long had a “very active effort to recruit minorities,” even before adopting racial preferences in admissions). So now the ABA is demanding what are in essence racial quotas.
The ABA’s actions violate 42 U.S.C. 1981 and the Supreme Court’s ruling in Gratz v. Bollinger (2003), which held in footnote 23 that racial quotas violate 42 U.S.C. 1981 (which bans both private and public discrimination) as well as the Fourteenth Amendment (which bans only governmental discrimination). Moreover, the ABA and its accreditors are liable for pressuring GMU to engage in racial discrimination under 42 U.S.C. 1981, which allows not only employers and other institutions to be held liable for racial discrimination, but also individual discriminators. And GMU and its president and law school dean, who were personally summoned to appear before the ABA in order for them to be pressured to maximize GMU’s racial quotas, have standing to sue over those quota mandates under Lutheran Church-Missouri Synod v. FCC, 141 F.3d 344 (D.C. Cir. 1998), which held that the Lutheran Church had standing to sue the FCC to keep the FCC from pressuring it to take race into account in hiring employees for its religious radio stations in order to satisfy a ”diversity” mandate. (Note that GMU is a state university).
Nothing Fair About the “Fair Pay Act”
The proposed “Lilly Ledbetter Fair Pay Act” would get rid of the short 180-day deadline for bringing pay discrimination claims that applies under some federal laws, like Title VII. As I point out in today’s New York Times, that’s unnecessary, since another law, the Equal Pay Act, has a longer 3-year deadline for bringing claims (and other discrimination laws like 42 USC 1981 often have even longer deadlines, like 4 years). My letter disagreeing with the New York Times’ editorial in support of the law also points out that the proposed “Fair Pay Act” would allow not just employees, but certain third parties, to sue over alleged pay discrimination, making it harder to negotiate settlements. (The EEOC can sue even if an employee chooses alternative means to settle the dispute, like arbitration. The bill would change current law to allow even some third parties other than the EEOC to sue).
In the Washington Post, David Drachsler, Vice Chair of the Virginia Council on Human Rights, debunks the Washington Post’s mistaken endorsement of the bill, noting that it would “permit an employee to file a pay discrimination lawsuit years after the pay decision was made, even if the employee was aware of that decision. Indeed, in Lilly Ledbetter’s case, her lower pay, compared with that of men doing similar work, was caused by low performance evaluations of which she was aware years before she filed her charge” of discrimination.
Effectively, the Fair Pay Act would abolish the statute of limitations, by potentially allowing an employee to sue forever as long as she receives a paycheck or pension payment that is supposedly affected by an alleged act of discrimination that occurred decades earlier. That would allow stale claims of discrimination to be brought long after the alleged discriminator has died, leaving the employer unable to defend itself through exculpatory evidence or rebuttal testimony.
I earlier discussed the bill, which has 56 supporters in the Senate, here, and the dishonest and sensationalistic way that reporters and editorial cartoonists are covering the issue here.
Fat Discrimination Bills Lumber Forward
A Chicago Tribune story notes that a few jurisdictions now ban discrimination against fat people (generally as part of general bans on discrimination based on physical appearance), and that Massachusetts is now considering specifically banning discrimination against fat people (as some municipalities do). (The only federal law touching on the subject is the Americans with Disabilities Act, which some courts have said may cover “morbid obesity” (see Cook v. Rhode Island), but which does not cover ordinary fatness; moreover, some courts say that obesity is not a disability because it is a correctable condition, i.e., you can lose the weight if you try).
Quite apart from the fact that such legislation interferes with employers’ freedom of contract (is it really so unreasonable for a movie studio to cast a thin person rather than a fat person in certain roles, or for an airline to want a thin flight attendant who can move easily up and down the aisle and allow passengers to pass by rather than a fat flight attendant who will block the aisle?), it’s also not clear why such legislation should focus on fat people, who can often control their condition, rather than other people disadvantaged by mother nature, like short people. (I became fat in 1993, but then lost the weight by eliminating alcohol, butter, and extremely fatty foods from my diet. But short people cannot change the fact that they are short).
After all, most Americans are overweight, so it’s not as if fat people are a tiny minority. And being fat is not as disadvantageous (at least for men) as being short. For example, fat people of both sexes are more likely to get married than short men, and short people are less likely to get promotions than people of average height like me.
A women’s studies professor quoted in the article supports fat discrimination legislation as a way of destigmatizing fatness. (Some colleges now have “fat studies” programs, whose professors are often drawn from existing women’s studies programs). But even if that were truly possible, destigmatizing fatness might do more harm than good to public health. In my wife’s native France, obesity rates are lower than in the U.S., and lifespans are longer (despite all the cheese, foie gras, and red meat they eat). Part of the reason is that they simply eat less (not healthier). Why do they eat less? Partly due to the shame factor. My French-born wife’s (thin) best friend told me, with disapproval, that in France, “it is a shame to be fat.” Shame is not a pleasant emotion, but maybe it’s better to be shamed into losing weight than to be dead from obesity-related conditions, like diabetes, heart diseases, and weight-related cancers. Those obesity-related conditions are a legitimate cause for concern for the insurers and employers who end up paying for them.
-
About Us
OpenMarket.org is the staff blog of the Competitive Enterprise Institute. We believe that people improve their lives not through government regulation, but by making their own choices in a free marketplace. -
Search
-
Categories
Agriculture
Bureaucrash
CEI in the City
Culture
Economic Liberty
Energy
Environment
Global Warming
Healthcare Reform
Insurance
Intellectual Property
International
Legal
Mobility
Nanny State
Nano & Biotech
Odds & Ends
Personal Liberty
Politics as Usual
Precaution & Risk
Privacy
Sanctimony
Tech & Telecom
Trade
-
RSS Center
