Tag Archives: Federalism

Four More Years to MAGAA

28 Wednesday Oct 2020

Posted by in Big Government, Liberty, Politics

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As a “practical” libertarian, my primary test for any candidate for public office is whether he or she supports less government dominance over private decisions than the status quo. When it comes to Joe Biden and his pack of ventriloquists, the answer is a resounding NO! That should clinch it, right? Probably, but Donald Trump is more complicated….

I’ve always viewed Trump as a corporatist at heart, one who, as a private businessman, didn’t give a thought to free market integrity when he saw rent-seeking opportunities. Now, as a public servant, his laudable desire to “get things done” can also manifest to the advantage of cronyists, which he probably thinks is no big deal. Unfortunately, that is often the way of government, as the Biden family knows all too well. On balance, however, Trump generally stands against big government, as some of the points below will demonstrate.

Trump’s spoken “stream of consciousness” can be maddening. He tends to be inarticulate in discussing policy issues, but at times I enjoy hearing him wonder aloud about policy; at other times, it sounds like an exercise in self-rationalization. He seldom prevaricates when his mind is made up, however.

Not that Biden is such a great orator. He needs cheat sheets, and his cadence and pitch often sound like a weak, repeating loop. In fairness, however, he manages to break it up a bit with an occasional “C’mon, man!”, or “Here’s the deal.”

I have mixed feelings about Trump’s bumptiousness. For example, his verbal treatment of leftists is usually well-deserved and entertaining. Then there are his jokes and sarcasm, for which one apparently must have an ear. He can amuse me, but then he can grate on me. There are times when he’s far too defensive. He tweets just a bit too much. But he talks like a tough, New York working man, which is basically in his DNA. He keeps an insane schedule, and I believe this is true: nobody works harder.

With that mixed bag, I’ll now get on to policy:

Deregulation: Trump has sought to reduce federal regulation and has succeeded to an impressive extent, eliminating about five old regulations for every new federal rule-making. This ranges from rolling back the EPA’s authority to regulate certain “waters” under the Clean Water Act, to liberalized future mileage standards on car manufacturers, to ending destructive efforts to enforce so-called net neutrality. By minimizing opportunities for over-reach by federal regulators, resources can be conserved and managed more efficiently, paving the way for greater productivity and lower costs.

And now, look! Trump has signed a new executive order making federal workers employees-at-will! Yes, let’s “deconstruct the administrative state”. And another new executive order prohibits critical race theory training both in the federal bureaucracy and by federal contractors. End the ridiculous struggle sessions!

Judicial Appointments: Bravo! Neil Gorsuch, Brett Kavanaugh, Amy Coney Barrett, and over 200 federal judges have been placed on the bench by Trump in a single term. I like constitutional originalism and I believe a “living constitution” is a corrupt judicial philosophy. The founding document is as relevant today as it was at its original drafting and at the time of every amendment. I think Trump understands this.

Corporate Taxes: Trump’s reductions in corporate tax rates have promoted economic growth and higher labor income. In 2017, I noted that labor shares the burden of the corporate income tax, so a reversal of those cuts would be counterproductive for labor and capital.

At the same time, the 2017 tax package was a mixed blessing for many so-called “pass-through” businesses (proprietors, partnerships, and S corporations). It wasn’t exactly a simplification, nor was it uniformly a tax cut.

Individual Income Taxes: Rates were reduced for many taxpayers, but not for all, and taxes were certainly not simplified in a meaningful way. The link in the last paragraph provides a few more details.

I am not a big fan of Trump’s proposed payroll tax cut. Such a temporary move will not be of any direct help to those who are unemployed, and it’s unlikely to stimulate much spending from those who are employed. Moreover, without significant reform, payroll tax cuts will directly accelerate the coming insolvency of the Social Security and Medicare Trust Funds.

Nonetheless, I believe permanent tax cuts are stimulative to the economy in ways that increased government spending is not: they improve incentives for effort, capital investment, and innovation, thus increasing the nation’s productive capacity. Trump seems to agree.

Upward Mobility: Here’s Joel Kotkin on the gains enjoyed by minorities under the Trump Administration. The credit goes to strong private economic growth, pre-pandemic, as opposed to government aid programs.

Foreign Policy: Peace in the Middle East is shaping up as a real possibility under the Abraham Accords. While the issue of coexisting, sovereign Palestinian and Zionist homelands remains unsettled, it now seems achievable. Progress like this has eluded diplomatic efforts for well over five decades, and Trump deserves a peace prize for getting this far with it.

Iran is a thorn, and the regime is a terrorist actor. I support a tough approach with respect to the ayatollahs, which a Trump has delivered. He’s also pushed for troop withdrawals in various parts of the world. He has moved U.S. troops out of Germany and into Poland, where they represent a greater deterrent to Russian expansionism. Trump has pushed our NATO allies to take responsibility for more of their own defense needs, all to the better. Trump has successfully managed North Korean intransigence, though it is an ongoing problem. We are at odds with the leadership in mainland China, but the regime is adversarial, expansionist, and genocidal, so I believe it’s best to take a tough approach with them. At the UN, some of our international “partners” have successfully manipulated the organization in ways that make continued participation by the U.S. of questionable value. Like me, Trump is no fan of UN governance as it is currently practiced.

Gun Rights: Trump is far more likely to stand for Second Amendment rights than Joe Biden. Especially now, given the riots in many cities and calls to “defund police”, it is vitally important that people have a means of self-defense. See this excellent piece by David E. Bernstein on that point.

National Defense: a pure public good; I’m sympathetic to the argument that much of our “defense capital” has deteriorated. Therefore, Trump’s effort to rebuild was overdue. The improved deterrent value of these assets reduces the chance they will ever have to be used against adversaries. Of course, this investment makes budget balance a much more difficult proposition, but a strong national defense is a priority, as long as we avoid the role of the world’s policeman.

Energy Policy: The Trump Administration has made efforts to encourage U.S. energy independence with a series of deregulatory moves. This has succeeded to the extent the U.S. is now a net energy exporter. At the same time, Trump has sought to eliminate subsidies for wasteful renewable energy projects. Unfortunately, ethanol is still favored by energy policy, which might reflect Trump’s desire to assuage the farm lobby.

Climate Policy: Trump kept us out of the costly Paris Climate Accord, which would have cost the U.S. trillions of dollars in lost GDP and subsidies to other nations. Trump saw through the accord as a scam under which leading carbon-emitting nations (such as China) face few real obligations. Meanwhile, the U.S. has led the world in reductions in carbon emissions during Trump’s term, even pre-pandemic. That’s partly a consequence of increased reliance on natural gas relative to other fossil fuels. Trump has also supported efforts to develop more nuclear energy capacity, which is the ultimate green fuel.

COVID-19 Response: As I’ve written several times, in the midst of a distracting and fraudulent impeachment attempt, Trump took swift action to halt inbound flights from China. He marshaled resources to obtain PPE, equipment, and extra hospital space in hot spots, and he kick-started the rapid development of vaccines. He followed the advice of his sometimes fickle medical experts early in the pandemic, which was not always a good thing. In general, his policy stance honored federalist principles by allowing lower levels of government to address local pandemic conditions on appropriate terms. If the pandemic has you in economic straits, you probably have your governor or local officials to thank. As for the most recent efforts to pass federal COVID relief, Nancy Pelosi and House Democrats have insisted on loading up the legislation with non-COVID spending provisions. They have otherwise refused to negotiate pre-election, as if to blame the delay on Trump.

Immigration: My libertarian leanings often put me at odds with nationalists, but I do believe in national sovereignty and the obligation of the federal government to control our borders. Trump is obviously on board with that. My qualms with the border wall are its cost and the availability of cheaper alternatives leveraging technological surveillance. I might differ with Trump in my belief in liberalizing legal immigration. I more strongly differ with his opposition to granting permanent legal residency to so-called Dreamers, individuals who arrived in the U.S. as minors with parents who entered illegally. However, Trump did offer a legal path to citizenship for Dreamers in exchange for funding of the border wall, a deal refused by congressional Democrats.

Health Care: No more penalty (tax?) to enforce the individual mandate, and the mandate itself is likely to be struck down by the Supreme Court as beyond legislative intent. Trump also oversaw a liberalization of insurance offerings and competition by authorizing short-term coverage of up to a year and enabling small businesses to pool their employees with others in order to obtain better rates, among other reforms. Trump seems to have deferred work on a full-fledged plan to replace the Affordable Care Act because there’s been little chance of an acceptable deal with congressional Democrats. That’s unfortunate, but I count it as a concession to political reality.

Foreign Trade: I’m generally a free-trader, so I’m not wholeheartedly behind Trump’s approach to trade. However, our trade deals of the past have hardly constituted “free trade” in action, so tough negotiation has its place. It’s also true that foreign governments regularly apply tariffs and subsidize their home industries to place them at a competitive advantage vis-a-vis the U.S. As the COVID pandemic has shown, there are valid national security arguments to be made for protecting domestic industries. But make no mistake: ultimately consumers pay the price of tariffs and quotas on foreign goods. I cut Trump some slack here, but this is an area about which I have concerns.

Executive Action: Barack Obama boasted that he had a pen and a phone, his euphemism for exercising authority over the executive branch within the scope of existing law. Trump is taking full advantage of his authority when he deems it necessary. It’s unfortunate that legislation must be so general as to allow significant leeway for executive-branch interpretation and rule-making. But there are times when the proper boundaries for these executive actions are debatable.

Presidents have increasingly pressed their authority to extremes over the years, and sometimes Trump seems eager to push the limits. Part of this is born out of his frustration with the legislative process, but I’m uncomfortable with the notion of unchecked executive authority.

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Of course I’ll vote for Trump! I had greater misgivings about voting for him in 2016, when I couldn’t be sure what we’d get once he took office. After all, his politics had been all over the map over preceding decades. But in many ways I’ve been pleasantly surprised. I’m much more confident now that he is our best presidential bet for peace, prosperity, and liberty.

COVID, Trump, and Tyrants

11 Sunday Oct 2020

Posted by in Pandemic, Public Health, Trump Administration

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I’ve said this before, but it bears repeating: allegations of the White House’s “poor leadership” and preparedness for COVID-19 (C19) are a matter of selective memory. At the link above, I “graded” Trump’s pandemic job performance through May. Among other things, I said:

“Many have criticized the Trump Administration for not being ‘ready’ for a pandemic. I assign no grade on that basis because absolutely no one was ready, at least not in the West, so there is no sound premise for judgement. I also view the very general charge that Trump did not provide “leadership” as code for either ‘I don’t like him’, or ‘he refused to impose more authoritarian measures’, like a full-scale nationwide lockdown. Such is the over-prescriptive instinct of the Left.”

The President of the United States does not have the constitutional authority to impose a national lockdown, though Trump himself seemed confused at times as to whether he had that power. However, on this basis at least, the ad nauseam denigration of his “leadership” is vapid. At this point, the course of the pandemic in the U.S. is less severe than in several other industrialized countries who didn’t even have Andrew Cuomo around to exacerbate the toll, and it’s still not as deadly in per capita terms as the Asian Flu of 1957-58.

Who exactly was “ready” for C19? Perhaps critics are thinking of South Korea, or parts of South Asia. Those countries might have been “ready” to the extent that they had significant prior exposure to SARS viruses. There was already some degree of immunological protection. Those countries also were exposed to an earlier genetic variant of C19 that was much less severe than the strain that hit most of the western world. These are hardly reasons to blame Trump for a lack of “readiness”.

A related charge I hear all the time is that Trump “ignored the advice of medical experts“, or that he “ignored the science“. Presumably, those “experts” include the darling of the Prescriptive Class, Dr. Anthony Fauci. On February 28, Dr Fauci said:

“Right now, at this moment, there’s no need to change anything you’re doing on a day by day basis.“

All-righty then! So this was the advice Trump “should” have followed. Oh, wait… he did! And Fauci, on March 9, said there was no reason for young, healthy people to avoid cruise ships.

Likewise, Dr. Robert Redfield, Director of the Centers for Disease Control, said the following on February 27:

“The risk to the American public is low. We have an aggressive containment strategy that really has worked up to this time, 15 cases in the United States. Until the last case that we just had in Sacramento we hadn’t had a new case in two weeks.”

Then there is the World Health Organization, which downplayed the virus in January and February, and giving a convincing impression that it servied as a mouthpiece for the CCP.

In fact, the American people were badly harmed by wrongheaded decisions made by the “experts” at the CDC in January and February, when the agency insisted that testing could not proceed until a test of their own design was ready. Then, the first version it approved was discovered to be flawed! This set the testing effort back by well over a month, a delay that proved critical. It’s no exaggeration to say this bureaucratic overreach denied the whole country, and Trump, the information needed to properly assess the spread of the virus.

But let’s think about actual policy once it became clear that the virus was getting to be a serious matter in parts of the U.S. Here’s another excerpt from my post in May:

“Trump cannot be accused of ignoring expert advice through the episode. He was obviously on-board with Fauci, Dr. Deborah Birx, Dr. Robert Redfield, and other health care advisors on the ‘15 Days to Slow the Spread‘ guidelines issued on March 16. His messaging wavered during those 15 days, expressing a desire to fully reopen the nation by Easter, which Vice President Michael Pence later described as “aspirational”. Before the end of March, however, Trump went along with a 30-day extension of the guidelines. Finally, by mid-April, the White House released guidelines for ‘Opening Up America Again‘, which was a collaboration between Trump’s health care experts and the economic team. Trump agreed that the timeline for reopening should be governed by ‘the data’.” 

We should give Trump credit for shutting down flights into the U.S. from China, where the virus originated, late in January. That was an undeniably prescient move. Let’s also not forget that the original intent of the “15 Days” was to prevent hospitals and other medical resources from being overwhelmed. Today, the data show a strong seasonal tendency to the spread of the virus, but medical resources are not close to being overwhelmed, our ability to treat the virus has vastly improved, and its consequences are much less deadly than in the spring. That’s good progress, whatever the President’s detractors may say.

More than anything else, what Trump’s COVID critics fail to understand is that the executive leader of a republic is not possessed of monarchical powers. And in the U.S., the Constitution provides an additional layer of sovereignty for member states of the Union, a manifestation of the federalist principals without which the Union would not have been possible. The 15-day guidelines produced by the White House, and the guidelines for reopening, were consistent with this framework. The states have adapted their own policies to actual conditions and, if their leaders haven’t worn out their goodwill among voters, internal political realities. Those adaptations were often bad from my perspective, or even tyrannical, but sometimes good. That is exactly how our federalist system was designed to work.

Virus Visuals and Non-Pharmaceutical Interventions

19 Saturday Sep 2020

Posted by in Government Failure, Pandemic

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There are a bunch of nice graphs below summarizing the course of the coronavirus (C19) pandemic in different countries, as well as their policy responses. The charts are courtesy of Kyle Lamb, who has been an unlikely (in my mind…) but forceful voice regarding the pandemic over the past few months. I’m sorry if the resolution in some of the charts is poor, but I hope you can click on them for a better view.

The data reported in the charts goes through September 12. The first few charts below are “mirror charts”: they show newly diagnosed C19 cases by day on top, right-side up; on the bottom of each chart are C19-attributed deaths, but the vertical axis is inverted to create the “mirror effect”. The scales on the bottom are heavily stretched compared to the top (deaths are much smaller than cases), and the scales for different countries aren’t comparable. The patterns are informative nevertheless, and I’ll provide per capita deaths separately.

Let’s start with the U.S., where the early part of the pandemic in the spring was quite deadly, while the second, geographically distinct “wave” of the pandemic was less deadly. It looks bad, but the high number of deaths in the spring was partly a consequence of mismanagement by a few prominent government officials in the Northeast, most glaringly Governor Andrew Cuomo of New York. The full pattern for the U.S. combines different waves in different regions. The overall outcome to-date is 622 deaths per million of population.

Then we have charts for (deaths/mil in parens): the UK (628), Italy (591), Spain (653), France (467), Germany (114), the Netherlands (364), and Switzerland (240), which all have had second waves in cases, of but hardly any noticeable second wave in deaths, at least not yet:

And finally, we have Sweden (576), which had many deaths during the first wave, but very few now. Overall, to-date, Sweden has faired better than the U.S., Spain, the UK, and Italy — not to mention Belgium (870), for which I don’t have mirror charts.

There are several points to make about the charts:

First, the so-called second wave this summer has not been as deadly as the virus was in the spring. The U.S. is not an exception in that regard, though it did have more C19 deaths than the other countries. The count of U.S. deaths in the summer was partly due to C19 false positives under a much heavier testing regime, as well as “death laundering” by public health authorities that looks suspiciously like a politicization of the attribution process: C19 deaths over the summer have been well in excess of what would be expected from C19 hospitalizations and ICU admissions. It’s also evident that deaths are being reallocated to C19 from other natural causes, as this chart from The Ethical Skeptic shows (compare the bright line for 2020 to the (very) dim but tightly clustered baselines from prior years):

Second, most of the charts for Europe (not Sweden) show a late summer escalation in cases, though cases in Spain and Germany appear to have crested already. If an uptrend in deaths is to follow, it should become noticeable soon. Thus far, the wave certainly looks less threatening. 

Finally, it’s noteworthy that Sweden’s early experience, which was plagued by mismanagement of the virus’ threat to the nursing home population, later transitioned to a dramatic fading of cases and deaths. There has been no late summer wave in Sweden as we’ve seen elsewhere. This despite Sweden’s far less stringent non-pharmaceutical interventions (NPIs). Sweden’s deaths per million of population are now less than in the US, the UK, Italy, Spain, and Belgium, and most of those differences are growing.

All of the other countries discussed above have had far more stringent lockdown policies than Sweden, and at far greater economic cost. The following charts show some cross-country comparisons of an Oxford University index of NPI stringency over time. It combines a number of different dimensions of NPIs, such as mask mandates, restrictions on public gatherings, and school closures. The first chart below shows the U.S. and the UK contrasted with Sweden. The other countries discussed above are shown in separate charts that follow. 

In the U.S., there has been tremendous variation across states in terms of stringency due to the federalist approach required by the U.S. Constitution, but overall, the Oxford measure for the U.S. has been broadly similar to the UK over time, with the largest departures from one another at the start of the pandemic.   

   

The stringency of NPIs over the full pandemic depends on their day-by-day strength as well as their duration at various levels. One could measure stringency indices and deaths at various points in time and produce all kinds of conflicting results as to the efficacy of NPIs. On the whole, however, these charts suggest that stringent NPIs hold no particular advantage except perhaps as a way to temporarily avoid overwhelming the health care system. Even the original “flatten the curve” argument acknowledged that the virus could not be avoided indefinitely at a reasonable cost via NPIs, especially in an otherwise free society.

Note that most of these countries eased their NPIs after the initial wave in the spring, but several remained far more stringent than Sweden’s policies. That did not prevent the second wave of cases, though again, those were far less deadly.

As Jacob Sullum writes, and what is increasingly clear to honest observers: lockdowns tend to be ineffective and even destructive over lengthy periods.

A working paper from the National Bureau of Economic Research finds that four different “stylized facts” about the growth in C19 deaths are consistent across countries and states having different policy responses to the virus. The authors say:

“… failing to account for these four stylized facts may result in overstating the importance of policy mandated [non-pharmaceutical interventions] for shaping the progression of this deadly pandemic.“

Here’s Bill Blain’s discussion of the inefficacy of lockdowns. And here is Donald Luskin’s summary of his firm’s research that appeared in the WSJ, which likewise casts extreme doubt on the wisdom of stringent NPIs.

The virus is far from gone, but this summer’s wave has been much more docile in both Europe and the U.S. There are reasons to think that subsequent waves will be dampened in many areas via the cumulative immunity gained from exposure thus far, not to mention improvements in treatment and knowledge regarding prophylaxis such as Vitamin D supplements. Government authorities and their public health advisors should dispense with the pretense that stringent NPIs can mitigate the impact of the virus at a reasonable cost. These measures are constitutionally flawed, impinge on basic freedoms, and look increasingly like government failure. Risk mitigation should be practiced by those who are either vulnerable or fearful, but for most people, particularly children and people of working age, those risks no longer appear to be much worse than a bad year for influenza.  

Joe’s Moronic Outdoor Mask Mandate

15 Saturday Aug 2020

Posted by in Pandemic, Public Health

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Do you wear a mask whenever you step outside? In your yard? At the beach? In the park? On an empty sidewalk? Then congratulations! You are a colossal imbecile, like all the others in the mandatory mask crowd. Now, Joe Biden, in an attempt to prove either dementia or a full-fledged alliance with irredeemably lefty Karens, is demanding a three-month nationwide mandate for masks to be worn by everyone … OUTDOORS!

Really, what kind of moron believes there is any real danger of contracting coronavirus outside short of close and prolonged exposure to an infected individual? We know outdoor transmission is extremely rare. Nearly 100% of cases are contracted indoors, almost always in tight, poorly ventilated spaces.

It’s not hard to fathom why outdoor environments are of such low risk. Outdoors, air is of such enormous volume that virus particles are quickly diluted, dramatically reducing any viral load one might encounter. Air circulation is much better outdoors as well, driven by differences in temperatures across lateral and vertical space. Any breeze effectively disperses the particles. And those small loads drifting through open air won’t survive long: the ultraviolet waves in direct sunlight tend to kill it very quickly. Humidity is also associated with more rapid deactivation of the virus. Air tends to be more humid outdoors whenever forced air heating or air conditioning are used without sufficient humidification.

Cloth masks, in any case, may be effective against transmission by droplets expelled from coughs or sneezes, but they are of questionable value against transmission by aerosols from exhaled air. Outside, if you are distanced, you really have only aerosols to worry about. Under those circumstances, cloth masks are more for show than anything else.

And on what pretext do officials, or your nitwitted neighbors, get the idea that mandatory masks OUTSIDE is in the interest of public health? I mean, besides buying-in to a ridiculous nanny-state narrative promoted by the media? Well, there is also some crap “research” to consider. Here is a good example: a study on masks from the Kansas Department of Health and Environment (KDHE). Take a look at what these guys tried to pull off…  Here’s what KDHE hoped would serve as “proof” of the dramatic efficacy of masks:

Wow! Notice two things in this chart: 1) the two lines are plotted with respect to different vertical axes; and 2) the chart begins on July 12th. Now take a look at a longer history in which the lines are plotted against the same axis.

It certainly doesn’t appear that the mandate beginning on July 3 had a favorable impact on new cases. What KDHE did here was incredibly dishonest, and I applaud the Kansas Policy Institute and it’s publication The Sentinel (linked above) for calling out KDHE for their dishonest piece of crap.

Other studies have exaggerated the general efficacy of masks as well. It’s also noteworthy that Europe’s medical establishment is unimpressed with masks. And after all, to my knowledge there have been no randomized control trials supporting the efficacy of masks — the only acceptable form of test according to Anthony Fauci! Now, none of that means masks don’t reduce COVID transmission. I happily wear a mask when I enter public buildings. What’s at issue here is whether masks should be required outdoors. Furthermore, I dispute the notion that a nationwide mask mandate is needed, because not all localities are at equal risk. I’m an advocate of the federalist principle that the best state and local solutions are crafted at the state and local levels. And at a personal level, I say ignore the intrusive bastards. Get outside in the fresh air, and forget the mask if you have some space.

Trump and Coronavirus

26 Tuesday May 2020

Posted by in Pandemic, Public Health, Risk Management, Stimulus, Trump Administration

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It’s a bit early to fully evaluate President Trump’s performance in dealing with the coronavirus pandemic, but there are a number of criteria on which I might assign marks. I’ll address some of those below, but in so doing I’m reminded of Jerry Garcia’s quip that he was “shopping around for something no one will like.” That might be how this goes. Of course, many of the sub-topics are worthy of lengthier treatment. The focus here is on the pandemic and not more general aspects of his performance in office, though there is some unavoidable overlap.

General “Readiness”

Many have criticized the Trump Administration for not being “ready” for a pandemic. I assign no grade on that basis because absolutely no one was ready, at least not in the West, so there is no sound premise for judgement. I also view the very general charge that Trump did not provide “leadership” as code for either “I don’t like him”, or “he refused to impose more authoritarian measures”, like a full-scale nationwide lockdown. Such is the over-prescriptive instinct of the Left.

Equally misleading is the allegation that Trump had “disbanded” the White House pandemic response team, and I have addressed that here. First, while the NSC would play a coordinating role, pandemic response is supposed to be the CDC’s job, when it isn’t too busy with diseases of social injustice to get it done. Second, it was John Bolton who executed a reorganization at the NSC. There were two high profile departures from the team in question at the time, and one one was a resignation. Most of the team’s staff remained with the NSC with the same duties as before the reirganization.

Finally, there was the matter of a distracting impeachment on false charges. This effort lasted through the first three years of Trump’s administration, finally culminating in January 2020. Perhaps the Administration would have had more time to focus on what was happening in China without the histrionics from the opposition party. So whatever else I might say below, these factors weigh toward leniency in my appraisal of Trump’s handing of the virus.

Messaging: C

As usual, Trump’s messaging during the pandemic was often boorish and inarticulate. His appearances at coronavirus briefings were no exception, often cringeworthy and sometimes featuring misinterpretations of what his team of experts was saying. He was inconsistent in signaling optimism and pessimism, as were many others such as New York Governor Andrew Cuomo and New York City Mayor Bill De Blasio. It shifted from “the virus is about like the flu” in February to a more sober assessment by mid-March. This was, however, quite consistent with the messaging from Dr. Anthony Fauci over the same time frame, as well as the World Health Organization (WHO). Again, no one really knew what to expect, so it’s understandable. A great deal of that can be ascribed to “the fog of war”.

Delegation and Deference: B

Trump cannot be accused of ignoring expert advice through the episode. He was obviously on-board with Fauci, Dr. Deborah Birx, Dr. Robert Redfield, and other health care advisors on the “15 Days to Slow the Spread” guidelines issued on March 16. His messaging wavered during those 15 days, expressing a desire to fully reopen the nation by Easter, which Vice President Michael Pence later described as “aspirational”. Before the end of March, however, Trump went along with a 30-day extension of the guidelines. Finally, by mid-April, the White House released guidelines for “Opening Up America Again“, which was a collaboration between Trump’s health care experts and the economic team. Trump agreed that the timeline for reopening should be governed by “the data”. There is no question, however, that Trump was chomping at the bit for reopening at several stages of this process. I see value in that positioning, as it conveys an intent to reopen asap and that people should have confidence in progress toward that goal.  

International Travel Bans: A

If anyone wonders why the world was so thoroughly blindsided by the coronavirus, look no further than China’s failure to deliver a proper warning as 2019 drew to a close. Wuhan, China was ground zero; the virus spread to the rest of the world with travelers out of Wuhan and other Chinese cities. The White House announced severe restrictions on flights from China on January 31, including a two-week quarantine for returning U.S. citizens. In retrospect, it wasn’t a minute too soon, yet for that precaution, Trump was attacked as a racist by the Left. In early February, WHO actually said travel bans were unnecessary, among other missteps. Other bans were instituted on entry from Iran and Brazil, as well as entry from Europe in early March, as countries around the globe closed their borders. Trump’s actions on incoming travelers were prescient, so I’ll score this one for Trump. Some of these travel restrictions can and should be eased now, and certainly that is expected in coming months, so we’ll see how well that process is managed.

Deference to States: A-

As a federalist, I was pleased that Trump and his team left most of the specifics on closures and bans on public gatherings up to state and local governments. That allowed more targeted mitigation efforts as dictated by local conditions and, to some extent, public opinion. This is a classic case of “laboratory federalism” whereby the most effective policies can be identified, though as we’ve seen, there’s no guarantee less successful states will emulate them. I grade Trump well on this one.

On reopening, too, Trump has been a consistent advocate of allowing flexility where local conditions permit, though he wrongly claimed he had “total authority” over ending social distancing rules. It’s hard to square that remark with his general stand on the issue of autonomy except as a tactic to strong-arm certain governors on other points.   

CDC/FDA Snafus: D

I applaud the Administration for its emphasis on the salutary effects of deregulation, but Trump went along with some major pieces of “expert advice” that were not only poor from regulatory perspective, but an affront to federalism. One was a directive issued by the CDC to delay “all elective surgeries, non-essential medical, surgical, and dental procedures during the 2019 Novel Coronavirus (COVID-19) outbreak“. (See my post “Suspending Medical Care in the Name of Public Health“.)

This is exactly the kind of “one size fits all” regulatory policy that has proven so costly, sacrificing not just economic activity but lives and care for the sick, creating avoidable illnesses and complications. The idea was to assure that adequate health care resources were available to treat an onslaught of coronavirus patients, but that was unneeded in most jurisdictions. And while the contagion was in it’s early “exponential” phase at the time, a more nuanced approach could have been adopted to allow different geographic areas and facilities more discretion, especially for different kinds of patients, or perhaps something less than a complete suspension of care. In any case, the extensions into May were excessive. I must grade Trump poorly for allowing this to happen, despite what must have been extreme pressure to follow “expert advice” on the point and the others discussed earlier.

That’s not the only point on which I blame Trump for caving to the CDC. In a case of massive regulatory failure, the CDC and FDA put the U.S. well over a month behind on testing when the first signs of the virus appeared here. Not only did they prohibit private labs and universities from getting testing underway, insisting on exclusive use of the CDC’s own tests, they also distributed faulty tests in early February that took over a month to replace. The FDA also enforced barriers to imported N95-type masks during the pandemic. Trump tends to have a visceral understanding of the calcifying dangers of regulation, but he let the so-called “experts” call the shots here. Big mistake, and Trump shares the blame with these agencies.  

Health Resources: B-

Managing the emergency distribution of PPE and ventilators to states did not go as smoothly as might have been hoped. The shortage itself left FEMA with the unenviable task of allocating quantities that could never satisfy all demands. A few states were thought to have especially acute needs, but there was also an obligation to hold stockpiles against potential requests from other states. In fact, a situation of this kind creates an incentive for states to overstate their real needs, and there are indications that such was the case. Trump sparred with a few governors over these allocations. There is certainly blame to be shared, but I won’t grade Trump down for this.

Vaccines and Treatments: C+

 

The push to develop vaccines might not achieve success soon, if ever, but a huge effort is underway. Trump gets some of the credit for that, as well as the investment in capacity now to produce future vaccine candidates in large quantities. As for treatments, he was very excited about the promise of hydroxychloraquine, going so far as to take it himself with zinc, a combination for which no fully randomized trial results have been reported (the recent study appearing in the Lancet on HCQ taken by itself has been called into question). Trump also committed an unfortunate gaffe when the DHS announced the results of a study showing that sunlight kills coronavirus in a matter of minutes, as do bleach and other disinfectants. Trump mused that perhaps sunlight or some form of disinfectant could be used as a treatment for coronavirus patients. He might have been thinking about an old and controversial practice whereby blood is exposed to UV light and then returned to the body. Later, he said he used the term “disinfectant” sarcastically, but he probably meant to say “euphemistically” …. I’m not sure he knows the difference. In any case, his habit of speculating on such matters is often unhelpful, and he loses points for that.

Fiscal Policy: B

The several phases of the economic stimulus program were a collaboration between the Trump Administration and Congress. A reasonably good summary appears here. The major parts were the $2.3 trillion CARES Act in late March and a nearly $500 billion supplemental package in late April. These packages were unprecedented in size. Major provisions were direct cash payments and the Paycheck Protection Program (PPP), which provides loans and grants to small businesses. The execution of both was a bit clunky, especially PPP, which placed a burden on private banks to extend the loans but was sketchy in terms of qualifications. The extension of unemployment compensation left some workers with more benefits than they earned in their former jobs, which could be an impediment to reopening. There were a number of other reasonable measures in these packages and the two smaller bills that preceded them in March. A number of these measures were well-targeted and inventive, such as waiving early withdrawal penalties from IRA and 401(k) balances. The Trump Administration deserves credit for helping to shape these efforts as well as others taken independently by the executive branch. 

Trump’s proposal to suspend payroll taxes did not fly, at least not yet. The idea is to reduce the cost of hiring and increase the return to work, if only temporarily. This is not a particularly appealing idea because so much of the benefits would flow to those who haven’t lost their jobs. It could be improved if targeted at new hires and rehires, however.

Trump’s proposal to grant liability waivers to reopened private businesses is extremely contentious, but one I support. Lockdowns are being eased under the weight of often heavy public and private regulation of conduct. As John Cochrane says in “Get Ready for the Careful Economy“: 

“One worry on regulation is that it will provide a recipe for a wave of lawsuits. That may have been a reason the Administration tried to hold back CDC guidance. A long, expensive, and impractical list of things you must do to reopen is catnip when someone gets sick and wants to blame a business. Show us the records that you wiped down the bathrooms every half hour. A legal system that can sue over talcum powder is not above this.”

Indeed, potential liability might represent a staggering cost to many businesses, one that might not be insurable. Accusations of negligence, true or false, can carry significant legal costs. Customers and employees, not just businesses, must accept some of the burden of risks of doing business. I give Trump good marks for this one, but we’ll see if it goes anywhere.

Some of the proposals for new stimulus legislation from democrats are much worse, including diversity initiatives, massive subsidies for “green” technologies, and bailouts for state and local government for unfunded pension liabilities. None of these has anything to do with the virus. The burden of pension shortfalls in some states should not fall on taxpayers nationwide, but on the states that incurred them. The Trump Administration and congressional Republicans should continue resisting these opportunistic proposals.

The Grade

Without assigning weights to the sub-topics covered above, I’d put the overall grade for Trump and his Administration’s handling of matters during the pandemic at about a B-, thus far. When it comes to politics, it’s often unfair to credit or blame one side for the promulgation of an overall set of policies. Nevertheless, I think it’s fair to say that Trump, could have done much better and could have done much worse. We will learn more with the passage of time, the continued evolution of the virus, the development of treatments or vaccines, and the course of the economy.

 

 

 

 

 

 

 

Living Constitution, Dying Liberty

14 Saturday Mar 2020

Posted by in Living Constitution, Originalism

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What would a “living Constitution” mean if the right wing “gave it life”, as it were? Your answer ought to reveal a truth you’ve probably overlooked if you’re a “living constitutionalist”.

The U.S. Constitution protects the rights of individuals against the coercive power of the state. It offers a thorough bulwark against that power not only by enumerating certain rights, such as the rights to free speech and free association, but also by recognizing the existence and sanctity of a complementary set of unenumerated rights. The Ninth Amendment states:

“The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.” 

The nearly 250 years since the nation’s founding have seen a debate in judicial case law about whether the Constitution should be interpreted based on its original language, or whether modern social and technological realities should change the way it is interpreted. This pits constitutional “originalists” against advocates of a so-called “living Constitution”.

Antiquated? Or Inconvenient?

For example, there is disagreement about whether the Second Amendment right to bear arms is broad, or limited to certain very small arms, or whether it should permit no private ownership of arms at all. Another example: do modern sensitivities men that constitutionally unprotected “fighting words” now encompass opinions that are merely controversial? Do expressions of support for such policies as flexible wages really fall under the rubric of racism, “hate speech”, or fighting words? Here’s one more: does the (unenumerated) right to life allow the state (and so the law) to claim a greater interest in protecting the contentment of a healthy, but reluctant, prospective mother than in the life of her unborn child?

Three years ago, Randy Barnett asked a question about the living constitution amid the debate over the confirmation of Justice Neal Gorsuch, an avowed originalist. Barnett asked:

“Why would you possibly want a nonoriginalist ‘living constitutionalist’ conservative judge or justice who can bend the meaning of the text to make it evolve to conform to conservative political principles and ends? However much you disagree with it, wouldn’t you rather a conservative justice consider himself constrained by the text of the Constitution like, say, the Emoluments Clause?”

That question was followed-up recently by Glenn Reynolds: his thought experiment asks how a right-wing majority might fashion a “living Constitution”, an exercise that should chasten “living constitutionalists” on the Left. He first notes that efforts to fight terrorism can become a real threat to civil liberties. As such, they represent a form of living constitutionalism. Will your on-line behavior and your phone calls be closely monitored, perhaps searching for various keywords? Will formerly unreasonable searches and seizures be sanctioned by an anti-terror, living Constitution? We haven’t gone very far in that direction, even in the immediate aftermath of 9/11, but it’s easy to imagine a wave of support for such a revision under certain circumstances.

We’ve certainly witnessed erosions of civil liberties under the so-called “War on Drugs”. The courts have not always stood in the way of extra-Constitutional actions by law enforcement. A right-wing living Constitution might sanction certain searches, seizures, and confiscation of private property, to say nothing of the intrusion into the choices of individuals to use drugs privately. The same is true of the “War on Prostitution”.

Imagine a right-wing judiciary interpreting various forms of audio, video, and virtual reality content as violations of standards of “decency”. Imagine a case involving a restrictive FCC ruling of this nature, and the Court finding the FCC’s censorship constitutional at the federal level, not merely at a community’s level.

Imagine state legislation that forces the Court to weigh-in on whether federalism and states’ rights outlined in the Tenth Amendment outweigh the federal regulatory powers conferred by Article I’s Interstate Commerce Clause. Crazy? Maybe, but a conservative Court could decide that such an interpretation could permit state taxes, pollutants, or other restrictions on residents or businesses domiciled in other states.

Originalism? Or “Stretch” Originalism?

Reynolds mentions a few other possibilities, but without more detail, some of these examples seem muddled because the hypothetical interpretations could, conceivably, represent sound originalism, as opposed to conservative distortions of original intent. But perhaps these are all matters of degree, rather than kind. This includes the possibility of a conservative Court rolling back New Deal Court decisions related to price supports, wage supports, labor practices, and Social Security.

The same ambiguity applies to Reynolds’ brief discussion “one-man, one-vote” decisions of the 1960s, which leaned upon the Fourteenth Amendment’s Equal Protection Clause to effectively prohibit states from apportioning either congressional districts or state legislative districts in any way other than proportional representation. This can result in discrimination against certain interests in states having diverse geographies with dissimilar economies or cultures. A conservative court might well chip away at the one-man, one-vote principle out of deference to original intent. This might not be an unreasonable interpretation of the unenumerated powers of states contemplated by the Tenth Amendment.

Then there are so-called reproductive rights. The pro-abortion Left would be aghast, but not surprised, to see a conservative court reverse key decisions that have been made in their favor. The rights to “life, liberty and the pursuit of happiness” are mentioned explicitly in the Declaration of Independence, but not the Constitution. Nevertheless, they are presumed to be among those unenumerated rights recognized by the Ninth Amendment. Thus, with respect to abortion, the dividing line between original intent and living-constitutional overreach by a conservative Court is somewhat muddy. But in the view of the Left, a conservative Court might well reach radical decisions regarding the right to life.

Conclusion

The Constitution exists as a set of governing principles, but the founders’ intent was to  shield rights from fickle waves of majoritarianism, or even would-be despots. You might despise conservatism or statism, but this recognition should serve as a warning to heed the original text and its intent, not to view it as a mere nuisance to the interests of one’s agenda and fellow travelers.

I’ll close with Reynolds’ admonition to “living constitutionalists” of the Left:

“All of these [decisions] would be catastrophic for the left, and I’m sure I could come up with many more examples given time and space. Fortunately for the left, Judge Gorsuch appears to be devoted to interpreting the Constitution as it was understood by the Framers (in terms of its ‘original public meaning,’ to use the law professor definition), and not to embracing a living Constitution. … But my advice to those on the left attacking originalist approaches is this: Be careful what you ask for, because you won’t like it if you get it.”

EPA Concedes Puddles, Ditches to Owners

30 Thursday Jan 2020

Posted by in Environment, Federalism, Regulation

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Those who like their government served-up intrusive are reacting hysterically to the Environmental Protection Agency’s new Navigable Waters Protection Rule, which forbids the federal government from regulating waters that are not interstate waters or waters that aren’t or cannot be used in any way related to interstate commerce. The federal government will no longer have jurisdiction over normally dry, “ephemeral”  creek beds, private lakes and ponds unconnected to interstate waters, and most ground areas where rainwater pools, such as ditches on private property. This is a very good thing!

The emphasis of the new rule on interstate waters hews more closely to the constitutional limits of federal power than did the rescinded rule that had been imposed by the Obama Administration in 2015, which some called the Waters of the United States (WOTUS) rule (really an interpretation of “navigable waters”, or WOTUS as defined by the 1972 Clean Water Act). Christian Britschgi writes at Reason.com:

“The Obama-era rule was controversial from the get-go, with multiple Red states filing legal challenges claiming it exceeded the federal government’s authority to regulate water pollution. A slew of federal court rulings stayed the implementation of the rule in over half the states.”

Some of the straightforward differences between the new rule and WOTUS were mentioned above, but Anthony K. Francois of the Property and Environment Research Center gets into a bit more detail in his nice summary of these changes in federal authority.

In many cases, state and local governments already have regulatory authority over waters placed off-limits to the EPA. In fact, as Jonathan Adler wrote last summer, some of those state regulations are more stringent than the federal oversight now rescinded. That flies in the face of assertions by activists that states will be patsies in their dealings with property owners (the activists would call them “polluters”). So those who claim that the new rule will cause damage to the environment are really saying they only trust the EPA’s authority in these matters. They are also saying that no private citizen who owns property should be presumed to have rights over the industrial, commercial, or residential use of that property without review by the federal government. Under WOTUS, this represented such a severe abrogation of rights that it interfered with both productive activity and private enjoyment, not to mention the considerable confusion and costly litigation it prompted.

Weighing the costs and benefits of regulatory actions is a difficult undertaking. However, it is far too easy for regulators, with an imbalance of coercive power in their favor, to impose costly standards in locales where there may be little or no net benefit, and where individual property owners have no recourse. Regulators get no reward for protecting individual liberty and property rights, which skews their view of the tradeoff against potential environmental damage. Federal regulatory power is best kept within strict limits. The same goes for state and local regulatory power, but authority at those levels is at least more accountable to local interests on behalf of consumer, business and environmental concerns.

Central Planning Fails to Scale, Unlike Spontaneous Order

05 Tuesday Jun 2018

Posted by in Central Planning, Markets, Price Controls

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The proposition that mankind is capable of creating a successful “planned” society is at least as old as the Bronze Age. Of course it’s been tried. The effort necessarily involves a realignment of the economic and political landscape and always requires a high degree of coercion. But putting that aside, such planning can never be successful relative to spontaneous order of the kind that dominates private affairs in a free society. The task of advancing human well-being given available resources has never been achieved under central planning. It always fails miserably in this regard, and it always will fail to match the success of decentralized decision-making and private markets.

There are various ways to explain this fact, but I recently came across an interesting take on the subject having to do with the notion of scalability. Francis Turner offers this note on the topic at the Liberty.me blog. To begin, he gives a lengthy quote from a software developer who relates the problems of social and economic planning to the complexity of managing a network. On the topic of scale, the developer notes that the number of relationships in a network increases with the square of the number of its “nodes”, or members:

“2 nodes have 1 potential relationship. 4 nodes (twice as many) has 6 potential relationships (6 times as many). 8 nodes (twice again) has 28 potential relationships. 100 nodes => [4,950] relationships; 1,000 nodes => 499,500 relationships—nearly half a million.“

Actually, the formula for the number of potential relationships or connections in a network is n*(n-1)/2, where n is the number of network nodes. The developer Turner  quotes discusses this in the context of two competing network management structures: client-server and peer-to-peer. Under the former, the network is managed centrally by a server, which communicates with all nodes, makes various decisions, and routes communications traffic between nodes. In a peer-to-peer network, the work of network management is distributed — each computer manages its own relationships. The developer says, at first, “the idea of hooking together thousands of computers was science fiction.” But as larger networks were built-out in the 1990s, the client-server framework was more or less rejected by the industry because it required such massive resources to manage large networks. In fact, as new nodes are added to a peer-to-peer network, its capacity to manage itself actually increases! In other words, client-server networks are not as scalable as peer-to-peer networks:

“Even if it were perfectly designed and never broke down, there was some number of nodes that would crash the server. It was mathematically unavoidable. You HAVE TO distribute the management as close as possible to the nodes, or the system fails.

… in an instant, I realized that the same is true of governments. … And suddenly my coworker’s small government rantings weren’t crazy…”

This developer’s epiphany captures a few truths about the relative efficacy of decentralized decision-making. It’s not just for computer networks! But in fact, when it comes to network management, the task is comparatively simple: meet the computing and communication needs of users. A central server faces dynamic capacity demands and the need to route changing flows of traffic between nodes. Software requirements change as well, which may necessitate discrete alterations in capacity and rules from time-to-time.

But consider the management of a network of individual economic units. Let’s start with individuals who produce something… like widgets. There are likely to be real economies achieved when a few individual widgeteers band together to produce as a team. Some specialization into different functions can take place, like purchasing materials, fabrication, and distribution. Perhaps administrative tasks can be centralized for greater efficiency. Economies of scale may dictate an even larger organization, and at some point the firm might find additional economies in producing widget-complementary products and services. But eventually, if the decision-making is centralized and hierarchical, the sheer weight of organizational complexity will begin to take a toll, driving up costs and/or diminishing the firm’s ability to deal with changes in technology or the market environment. In other words, centralized control becomes difficult to scale in an efficient way, and there may be some “optimal” size for a firm beyond which it struggles.

Now consider individual consumers, each of whom faces an income constraint and has a set of tastes spanning innumerable goods. These tastes vary across time scales like hour-of-day, day-of-week, seasons, life-stage, and technology cycles. The volume of information is even more daunting when you consider that preferences vary across possible price vectors and potential income levels as well.

Can the interactions between all of these consumer and producer “nodes” be coordinated by a central economic authority so as to optimize their well-being dynamically, subject to resource constraints? As we’ve seen, the job requires massive amounts of information and a crushing number of continually evolving decisions. It is really impossible for any central authority or computer to “know” all of the information needed. Secondly, to the software developer’s point, the number of potential relationships increases with the square of the number of consumers and producers, as does the required volume of information and number of decisions. The scalability problem should be obvious.

This kind of planning is a task with which no central authority can keep up. Will the central authority always get milk, eggs and produce to the store when people need it, at a price they are willing to pay, and with minimal spoilage? Will fuel be available such that a light always turns on whenever they flip the switch? Will adequate supplies of medicines always be available for the sick? Will the central authority be able to guarantee a range of good-quality clothing from which to choose?

There has never been a central authority that successfully performed the job just described. Yet that job gets done every day in free, capitalistic societies, and we tend to take it for granted. The massive process of information transmission and coordination takes place spontaneously with spectacularly good results via private discovery and decision-making, secure property rights, markets, and a functioning price mechanism. Individual economic units are endowed with decision-making power and the authority to manage their own relationships. And the spontaneous order that takes shape remains effective even as networks of economic units expand. In other words, markets are highly scalable at solving the eternal problem of allocating scarce resources.

But thus far I’ve set up something of a straw man by presuming that the central authority must monitor all individual economic units to know and translate their demands and supplies of goods into the ongoing, myriad decisions about production, distribution and consumption. Suppose the central authority takes a less ambitious approach. For example, it might attempt to enforce a set of prices that its experts believe to be fair to both consumers and producers. This is a much simpler task of central management. What could go wrong?

These prices will be wrong immediately, to one degree or another, without tailoring them to detailed knowledge of the individual tastes, preferences, talents, productivities, price sensitivities, and resource endowments of individual economic units. It would be sheer luck to hit on the correct prices at the start, but even then they would not be correct for long. Conditions change continuously, and the new information is simply not available to the central authority. Various shortages and surpluses will appear without the corrective mechanism usually provided by markets. Queues will form here and inventories will accumulate there without any self-correcting mechanism. Consumers will be angry, producers will quit, goods will rot, and stocks of physical capital will sit idle and go to waste.

Other forms of planning attempt to set quantities of goods produced and are subject to errors similar to those arising from price controls. Even worse is an attempt to plan both price and quantity. Perhaps more subtle is the case of industrial policy, in which planners attempt to encourage the development of certain industries and discourage activity in those deemed “undesirable”. While often borne out of good intentions, these planners do not know enough about the future of technology, resource supplies, and consumer preferences to arrogate these kinds of decisions to themselves. They will invariably commit resources to inferior technologies, misjudge future conditions, and abridge the freedoms of those whose work or consumption is out-of-favor and those who are taxed to pay for the artificial incentives. To the extent that industrial policies become more pervasive, scalability will become an obstacle to the planners because they simply lack the information required to perform their jobs of steering investment wisely.

Here is Turner’s verdict on central planning:

“No central planner, or even a board of them, can accurately set prices across any nation larger than, maybe, Liechtenstein and quite likely even at the level of Liechtenstein it won’t work well. After all how can a central planner tell that Farmer X’s vegetables taste better and are less rotten than Farmer Y’s and that people therefore are prepared to pay more for a tomato from Farmer X than they are one from Farmer Y.”

I will go further than Turner: planning can only work well in small settings and only when the affected units do the planning. For example, the determination of contract terms between two parties requires planning, as does the coordination of activities within a firm. But then these plans are not really “central” and the planners are not “public”. These activities are actually parts of a larger market process. Otherwise, the paradigm of central planning is not merely unscalable, it is unworkable without negative consequences.

Finally, the notion of scalability applies broadly to governance, not merely economic planning. The following quote from Turner, for example, is a ringing endorsement for federalism:

“It is worth noting that almost all successful nations have different levels of government. You have the local town council, the state/province/county government, possibly a regional government and then finally the national one. Moreover richer countries tend to do better when they push more down to the lower levels. This is a classic way to solve a scalability problem – instead of having a single central power you devolve powers and responsibilities with some framework such that they follow the general desires of the higher levels of government but have freedom to implement their own solutions and adapt policies to local conditions.” 

Secession and Other Remedies for Intrastate Revolt

14 Monday May 2018

Posted by in Federalism, Regulation, Tyranny, Uncategorized

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How many states will we have in the Union in twenty years? Probably 50, but there’s an outside chance that the number will be 55 plus. That could include a split of upstate New York from New York City, downstate Illinois from Chicagoland, eastern from western Washington State, eastern from western Oregon (or eastern Oregon combining with Idaho), and a division of California into as many as six states, as one proposal has it. There are secessionist movements alive in all of those states and it has happened before, as Glenn Reynolds notes in his recent paper “Splitsylvania: State Secession and What to Do About It“.

The origins of state boundaries and state governments were probably based on combinations of natural geographic features and confluent economic and political interests existing at the time. It would be surprising if those factors remained in static alignment over time, however. For various reasons, West Virginia seceded from Virginia many years ago, and Tennessee was once part of North Carolina. But to the extent that interests diverge within states, would a series of secessions promote better representative government? Reynolds’ approach to this question is fairly even-handed, though he apparently leans toward less disruptive solutions to the kinds of grievances voiced by secessionists.

Secession is a complex process; it obviously involves a major task in establishing a new state governmental apparatus. Also, legislative roadblocks to secession movements exist at both the state and federal levels. Nevertheless, there is great disaffection among rural interests in the states mentioned above for the policies they say are forced upon them by “urban elites”, as Reynolds calls them. At present, the secession of rural areas would tend to benefit republicans at the federal level, as two new Senate seats would be created to offset the seats held by democrats elected in more urban areas. Conceivably, however, the same process could work in reverse in other states, such as Texas. Even the proposal for six Californias seems designed to at least neutralize any possible negative impact on democrats in national politics.

Reynolds’ paper outline a few ways in which interests represented by legislative minorities, such as rural populations, could be better served without a step so drastic as secession. State regulation is often what rankles secessionists. To add fuel to the fire, states are free to adopt rules that are more strict than rules established under federal legislation, if they so choose, but never rules that are less strict. Today this applies to wages, working conditions, gun regulation, and environmental law. Reynolds suggests turning this on its head:

“The federal government’s legislative role has traditionally been the opposite: To use (as in the case of the 1964 Civil Rights Act) a national majority to ensure that local majorities can’t oppress local minorities. I thus suggest that federal laws regulating these key subject-matter areas be recast to pre-empt more restrictive state laws, meaning that urban regions would be unable to impose stricter laws on less- powerful rural areas. If this seems too inflexible, perhaps that pre-emption should in some cases be defeasible at the county level; if the government of a county affirmatively wants to accept stricter state regulations, then it may do so, but if not, then the federal regulations are a ceiling, as well as a floor.”

Reynolds contends that this approach would be relatively easy to defend against state challenges. The idea that federal rules provide minimum standards of regulation is only one interpretation of the Supremacy Clause of Article VI of the Constitution. There is no reason why federal legislation cannot be written in the way Reynolds describes. Moreover, Reynolds asserts that the Guarantee Clause of Article IV, which assures that mandates are to be established according to republican principles, could be used to buttress this argument. But he offers another remedy to curb secessionism among rural voters that states could exercise:

“There is nothing to stop a state from being mindful of the differences between urban and rural areas when crafting legislation or regulations, after all. States could adopt a local-option regulatory scheme relating to key subject areas on their own, and by doing so would lighten their footprint in rural areas and lessen the likelihood of festering resentments.”

Perhaps that’s hoping for too much. State majorities are unlikely to cede power to rural minorities, but it’s nice to imagine that sort of cooperation. There is no question that this sort of state regulatory approach would protect local interests from the tyranny of one-size-fits-all state regulation, but it wouldn’t eliminate the burdens created by the standard interpretation of federal supremacy.

In general, federal preemption of stricter state laws is no less consistent with the principles of federalism than federal pre-emption of more lenient state laws. One could even argue that the best way to apply federal supremacy depends on the issue, so there is some symmetry in Reynolds’ proposal. In terms of representative democracy, it is less an evil than federal preemption of less restrictive laws. It does what a democratic republic is supposed to do: protect minorities from the tyranny of a majority.

Secession from states is an intriguing possibility. Perhaps it is even the best approach in some cases. Nevertheless, Reynolds’ suggestions for revising federal and state regulatory approaches would be less costly and would avoid a nationwide race to subdivide states in order to gain a federal political advantage.

Benefit Mandates Bar Interstate Competition

30 Thursday Mar 2017

Posted by in competition, Health Care

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The lack of interstate competition in health insurance does not benefit consumers, but promoting that kind of competition requires steps that are not widely appreciated. Most of those steps must take place at the state level. In fact, it is not well known that it is already legal for states to jointly create interstate “compacts” under Obamacare, though none have done so.

The chief problem is that states regulate insurance carriers and the policies they offer in a variety of ways. Coverage mandates vary from state to state, as do rules governing the coverage of pre-existing conditions, renewability, dependents, costs, and risk rating. John Seiler, writing at the Foundation for Economic Education, offers a great perspective on the fractured character of state regulations. Incumbent insurers within a state have natural advantages due to their existing relationships with local providers. Between the difficulty of forming a new network and the costs of customizing policies and obtaining approval in multiple states, there are significant barriers to entry at state lines.

Federalism is a principle I often support, but state benefit mandates and other regulations are perverse examples because they restrict the otherwise voluntary and victimless choices available to a state’s consumers. Well, victimless except perhaps for in-state monopolists and their cronyist protectors in state government. Many powers are reserved to states under the Constitution, while the powers of the federal government are strictly limited. That’s well and good unless state governments infringe on the rights of individuals protected by the Constitution. In particular, the Commerce Clause prohibits state governments from obstructing the flow of interstate commerce.

Here is a bit of history surrounding the evolution of state versus federal control over insurance markets, as told by Pennsylvania Insurance Commissioner Teresa Miller (as quoted by reporter Steve Esack):

“Since the 1800s, the U.S. Supreme Court held individual states, not Congress, had the power to regulate insurance companies. The high court overturned that precedent, however, in a 1944 ruling, United States v. South-Eastern Underwriters, that said insurance sales constituted interstate trade and Congress could regulate insurance under the U.S. Constitution’s Commerce Clause.

But states cried foul. In response, Congress passed and President Harry S. Truman in 1945 signed the McCarran-Ferguson Act to grant a limited anti-trust provision so states could keep regulating insurance carriers. The law does not preclude cross-border sales. It means insurance companies must abide by different sets of rules and regulations and laws in 50 states.“

Congress obviously recognized that state regulation of health insurance would create monopoly power and restrain trade, even if states place bridles on insurers and impose ostensible consumer protections. The solution was to exempt health insurers from broad federal regulation and anti-trust prosecution by the Department of Justice.

Last week, the House of Representatives passed a bill that would repeal McCarran-Ferguson for health insurers. However, that would do little to encourage cross-border competition as long as the tangle of state mandates and other regulations remain in place. The regulatory landscape would have to change under this kind of federal legislation, but how that would happen is an open question. Could court challenges be brought against state regulators and coverage mandates as anti-competitive? Would anti-trust actions be brought against incumbent carriers?

Robert Laszewski has strong objections to any new law that would allow interstate sales of health insurance as long as state benefit mandates remain in place for “local legacy” carriers. In particular, he believes it would encourage “cherry picking” of the best risks by market entrants who would be free of the mandates. Many of the healthiest individuals would jump at the chance to purchase stripped down, catastrophic coverage. That would leave the legacy carriers under the burden of mandates and deteriorating risk pools. Would states do this to their incumbent insurers without prodding by the courts? Would they simply drop the mandates? I doubt it.

No matter the end-state, there is likely to be a contentious transition. Promoting interstate competition in the health insurance market is a laudable goal, but it is not as simple as some health-care reformers would have us believe. Real competition requires action by states to eliminate or liberalize regulations on benefit mandates, risk-rating and pre-existing conditions. Ultimately, the cost of coverage for high-risk individuals might have to be subsidized, whether means-tested or not, through a combination of support from the states, the federal government, and private charities. And of course, interstate competition really does requires repeal of the health insurance provisions of McCarran-Ferguson.

Governments at any level can act against the well-being of consumers, despite the acknowledged benefits of decentralized governance over central control. Benefit mandates, whether imposed at the federal or state levels, are inimical to consumer choice, competition, efficient pricing, and often to the very concept of insurance. Those aren’t the sort of purposes federalism was intended to serve.