Evaluating the free market by comparing it to the alternatives (We don't need more regulations, We don't need more price controls, No Socialism in the courtroom, Hey, White House, leave us all alone)
"While federal regulatory reform is critical, it’s equally important
that existing oversight laws be followed. Unfortunately, many of these
laws are routinely disregarded, with little consequence.
We at CEI often point to the fact that no one really knows how many
federal agencies exist. A new report from the Government Accountability
Office (GAO) emphasizes a related problem: we also don’t know how many
federal spending programs exist either, despite a 2011 law requiring a
comprehensive inventory from the Office of Management and Budget (OMB).
Recent national defense authorization legislation, GAO notes, has given
OMB until January 2025 to comply.
We also often point
to a growing fusion between spending and regulation, so this lapse by
OMB is troublesome to say the least. Unfortunately, skepticism is
warranted with respect to the thoroughness of OMB’s upcoming inventory.
OMB’s track record on compliance with regulatory oversight laws is also
poor, as I detail in a new column at Forbes, and Congress has been largely indifferent to holding them accountable. Consider the following:
The Regulatory Right-to-Know Act mandates an annual
report to Congress on the benefits and costs of major rules. However,
these reports are consistently overdue and incomplete. The most recent,
covering fiscal years 2020-22, was published in early 2024. Most
glaringly, the requirement for an aggregate cost estimate for
federal regulations have been ignored since the early 2000s, leaving
little transparency about the cumulative burden of the administrative
state.
The Paperwork Reduction Act also suffers from neglect. The Information Collection Budget
(ICB) required by the Act has been sporadically published in recent
years, with several delayed editions appearing in 2023. The latest ICB shifts focus away
from reducing paperwork burdens toward increasing access to government
benefits (of the very sort OMB neglects to thoroughly inventory,
conveniently enough)—neglecting its original purpose. Additionally, the
annual “Paperwork Burden Accounting” roundup, which traditionally
documented over 10 billion hours of paperwork, is conspicuously absent
from the latest edition. We did inquire, but it remains unaddressed:
The Regulatory Flexibility Act (RFA), intended to ease small business burdens, is also often ignored. A 2024 report
from the House Small Business Committee found that agencies frequently
misclassify rules to bypass RFA analysis and underestimate the impact on
small businesses. They also fail to assess whether new rules duplicate
existing regulations, resulting in unnecessary burdens.
The Congressional Review Act, designed to give
Congress a window to review and disapprove major rules, is also
underutilized. Despite thousands of rules being issued since its
passage, fewer than two dozen have been overturned. But elements of it
are also unlawfully disregarded. Some major rules are not properly
submitted to GAO and to both houses of Congress, which raises questions about their validity.
There are a couple recent laws that could improve matters that I discuss in the Forbes article, such a 2023 law that Biden signed requiring 100-word summaries to accompany rules in the Federal Register,
and one just signed this month (the GAO Database Modernization Act, to
supplement GAO’s database by requiring agencies to notify GAO whenever a
rule is revoked, suspended, replaced, amended, or otherwise made
ineffective.
These two developments represent a silver lining on a dark regulatory
cloud. Congress needs to remain vigilant that they do not lapse in the
manner of their predecessors. Addressing widespread noncompliance with
regulatory oversight laws should be a priority in the coming months and
years as the 118th Congress enters its final weeks.
"Coal consumption in 2030 is now estimated 6% higher
than only a year ago. That may sound small, but it amounts to adding the
equivalent of the consumption of Japan, the world’s fourth-largest coal
burner. By 2030, the IEA now believes coal consumption will remain
higher than it was back in 2010…
One notable statistic: Two-thirds of the total increase in energy demand in 2023 was met by fossil fuels, according to the IEA.
"The minimum wage law
is a snare and a delusion. It preys upon the weakest economic actors in
the land. Before the advent of this pernicious law way back in the
1930s, the unemployment rate of whites and blacks, young and old, was
about the same. There were no marked differences regarding joblessness
for any of these categories. Nowadays, the unemployment rate of teenaged
blacks is quadruple, yes, quadruple, that of middle aged whites.
Why is this?
The law is an unemployment
law, not an employment law. It mandates that anyone with a productivity
level below that stipulated by law will be unemployable. If the law
requires a wage of $10 per hour, and your productivity is only $7
hourly, then any firm foolish enough to hire you will effectively lose
$3 every 60 minutes. Either they will not hire you, or, they will go
broke if they do that once too often. Raising the level from $10 to $15
will just mean that those with a productivity of $13, who could have
worked with a law requiring salaries of $10, can no longer do so.
The minimum wage law is thus not a floor
which when raised boosts compensation to labor. No, rather, it is a high
jump bar that the worker needs to exceed in order to get a job in the
first place. The higher is it raised, the harder it is to jump over,
into employment. If it really were floor, undergirding wages, why not
boost it to $100 per hour, or better yet $1000? Then, we’d all be rich.
Why not cut off all foreign aid to poor countries, and tell them,
instead, to institute a minimum wage law, and keep raising its level
until national poverty were ended?
Bernie Sanders wants to raise the minimum
wage level to $17 per hour. That is more than double the present federal
level of $7.25. Does he want to move black teen unemployment rates up
from quadruple that of middle aged whites to quintuple? To sextuple? To
septuple levels? (True confession: I had to look up these words).
Presumably not. What, then, is the explanation for his stance? Economic
illiteracy.
All too often, research on this matter
focuses on increases in the minimum wage level. Who cares about mere
increases? The entire rotten law ought to be repealed, and salt sown
where once it stood. For at any level, it makes it impossible for those
whose productivity is below the level stipulated by law. Card and
Krueger [1] would disagree. They found that a slight increase in its
level in New Jersey did not lead to more unemployment of the unskilled
than in neighboring Pennsylvania, which did not raise its mandated legal
wage. But their statistics were proven to be unreliable, and, in any
case, we should be comparing the law with its absence, not with a slightly higher or lower level.
Fire burns people. It does so at 150
degrees Fahrenheit, as well as at 152 degrees. Suppose a chemist cannot
discern much of a difference between these two temperatures, and then
concludes that there is nothing wrong with burning people. What should
we say to him? We should aver that there is something seriously wrong
with his analysis. We should respond to the Cards and Kruegers of the
world in much the same manner.
[1] Notable supporters of minimum wage
legislation are Card and Krueger, 1994, 2000. For critiques, see Block,
2001; Burkhauser, Couch and Wittenburg, David, 1996; Burkhauser and
Finnegan, 1989; Gallaway and Adie, 1995; Hamermesh and Welch, 1995;
Neumark and Wascher, 2000."
"States with more-restrictive childcare regulations have lower
fertility rates than states with less-restrictive ones in part because
stricter regulations drive up the cost of childcare, according to a
recent study from West Virginia University’s (WVU) Knee Regulatory Research Center.
“Childcare
workers and parents bear the weight of licensing regulations and
administrative costs,” study co-author Anna Claire Flowers, a PhD fellow
at George Mason University’s Mercatus Center, said in a statement to
the Daily Caller. “High-quality care is the goal, but some measures have been shown to boost prices much more than quality.”
The
Daily Caller reported that “childcare costs rose nationally by 32% from
2019 to 2023, outpacing the 20% rise in overall prices within that same
time frame.”
For this reason, many consider childcare “a
‘classic’ example of market failure,” the report explains, and thus
demand “greater intervention in the form of subsidies” to offset the
higher costs. “However,” continues the report,
a
subsidy approach misses the key role that the regulatory environment of
the childcare market plays in raising costs. Though well-intended, the
regulatory framework cripples progress towards affordability,
availability, flexibility, and quality for American families seeking
childcare solutions.
Nanny States
The
authors created a childcare regulation index that ranks states on a
zero-to-10 scale on the basis of their childcare regulations, with zero
being the most restrictive and 10 being the least restrictive. The
states with the lowest rankings are, not surprisingly, clustered
primarily in liberal New England, though a few Great Lakes-area states
including Tim Walz’s Minnesota also have highly restrictive childcare
regulations. The states with the greatest childcare freedom are mostly
in the South and the West. The freest state for childcare is Louisiana,
with an index of 9.08, while Massachusetts came in dead last at just
1.73.
The rankings considered 17 variables in four major
categories of regulation: “group size and staff-child ratios by age
range” and “training hours and educational requirements by position.”
New York, for example, requires childcare facilities to have one staff
member for every eight pre-kindergarten children, while North Carolina,
at the other end of the spectrum, allows up to 20 kids per instructor.
“Illinois requires preschool teachers to have a high school diploma and
60 college credit hours, plus additional training and experience to
become licensed, whereas other states only require a GED,” notes the
study. Virginia, meanwhile, mandates “75 square feet of outdoor space
per child,” a third of which “must be shaded playground space with
shock-absorbent surfacing.”
According to the authors:
These
indicators … are also poor indicators of true quality. Rather, they are
the only “proxies” that regulators can objectively set. In contrast,
through repeated interactions, parents are generally able to determine
the value and level of quality on harder to evaluate metrics. However,
these easy-to-observe metrics for regulators that do not correlate well
with actual quality drive up cost[s] considerably. Childcare providers
must invest in meeting the regulatory standards, which can involve
hiring more staff, obtaining certifications, upgrading facilities, or
purchasing specialized equipment. These compliance costs are typically
passed on to parents through higher fees…. In other words, regulation[s]
tighten the supply of services in ways that drive up prices[,] which
fuels the affordability concerns.
Expensive? No Kidding!
Faced
with higher costs for childcare, it is only natural that couples should
curtail their childbearing. The authors found this to be the case by
comparing each state’s ranking to its “fertility gap,” the difference
between the “replacement rate” of 2.1 births per woman and the state’s
actual fertility rate:
The
inverse relationship between regulation and fertility can be observed …
in some states. The New England region generally demonstrates low index
scores (most restrictive regulation) and above average fertility gaps.
In our work, we find that a one-point increase in the childcare
regulation index (toward more childcare freedom) is associated with a
reduction of the fertility gap by 0.025 to 0.029 children.
If
Massachusetts’ childcare regulations were to become as loose as
Louisiana’s, its fertility rate would increase by 14 percent, the
authors assert. And, they add, if all states became as free as Louisiana
with regard to childcare, 14 states’ fertility rates would exceed 1.9
births per woman, and two would even exceed the replacement rate.
“While
not the only major player, childcare regulation is one piece of the
policy puzzle that can make it more or less difficult for families to
find compatibility between work responsibilities and raising children,”
Flowers told the Daily Caller.
That, in turn, has a direct bearing on how many children are born. Another study cited by the authors concluded:
Where
the two [career and family] are easy to combine, many women have both a
career and multiple children, resulting in high fertility and high
female labor force participation. When career and family goals are in
conflict, fewer women work and fewer babies are born.
Vance Virtually Vindicated
By implication, the WVU study vindicates Ohio Senator J.D. Vance’s much-mocked suggestion that car-seat regulations
are to some degree responsible for America’s falling birthrate. The
more rules that manufacturers must follow — and thus the more they must
charge for their products — and the more advanced the age at which
children are forced to ride in car seats, the more expensive having
children becomes. The more expensive having children becomes, the less
of it there will be. As with childcare regulations, car-seat regulations
don’t explain the entire birthrate decline, but they undoubtedly play a part in it."
"The International Energy Agency (IEA) has released its 2024 World Energy Outlook,
an annual market forecast regarded as the authoritative standard for
global energy analysis. This year's report predicts that fossil fuel
demand will peak by 2030, that clean energy sources will generate more
than half of the world's energy by the end of the decade, and that
global energy prices will decline as traditional energy use phases out.
As many cheered the IEA's report, the U.S. Department of Energy (DOE) quickly tempered expectations with its own study
identifying natural gas as the cheapest residential energy source
available. Electricity (energy derived from an electrical current rather
than a pipeline) was the most expensive, costing 3.5 times more than
natural gas. In real-world terms, households that heat their homes with
electricity this winter will pay 75 percent more than those that use natural gas.
The DOE's report tells an
inconvenient truth that many governments, including the Biden
administration, want to ignore: Fossil fuels are cheap, abundant, and
critical to meeting the world's energy needs. Restricting access to
these sources will increase costs for consumers, stifle global economic
development, and do little to curb greenhouse gas emissions.
Fossil
fuels meet more than 80 percent of global energy demand, a dominant
position that they will likely hold as emerging economies become more
industrialized. As people become more prosperous, they will be able to
transition away from heating and cooking with dung, which is estimated
to prematurely kill 3.7 million people per year
through indoor air pollution. Higher levels of wealth allow societies
to focus on basic needs, such as sanitation and infrastructure.
Forcing countries to use more expensive forms of energy will keep poor nations poor and hurt industrialized ones too.
In
the U.S., consumers are beginning to feel the impacts of state and
federal policies that favor certain technologies over cost and
reliability. In July, PJM Interconnection, the organization that
regulates electricity in the Midwest and Mid-Atlantic regions, announced
it was increasing its rates by more than 800 percent.
Dwindling supply is driving these cost increases: Baseload power
sources have been forced to close because of state-implemented green
energy mandates and steep demand forecasts from electric vehicles and
data centers.
The U.S. electric grid is not the
only one experiencing supply shortfalls. The European Union (E.U.) is
expecting total electricity consumption to rise by 60 percent
through 2030. To meet demand, the E.U. says it needs to invest 584
billion euros ($632 billion) by the end of the decade. The IEA,
meanwhile, projects global consumption will increase by as much as 34 percent. Without access to abundant and affordable energy, consumers will be left paying more for less reliable electricity.
The
steep cost of government preferences for renewable energy sources will
come with negligible environmental benefits. European countries whose
penchant for solar and wind led to the forced closure of nuclear power
plants are increasingly turning to coal to provide backup generation when the sun isn't shining and wind isn't blowing.
While
the IEA's utopian world may seem nice, the DOE's report shows that
natural gas is still the most affordable energy source available. A
rushed transition to renewable sources will increase energy costs while
hurting grid reliability and economic mobility."
"Most students must take at least one class addressing “racial and ethnic
intolerance and resulting inequality.” Doctoral students in educational
studies must take an “equity lab” and a racial-justice seminar.
Computer-science students are quizzed on microaggressions."
"Michigan’s largest division trains professors in “antiracist pedagogy” and dispenses handouts
on “Identifying and Addressing Characteristics of White Supremacy
Culture,” like “worship of the written word.” The engineering school
promises a “pervasive education around issues of race, ethnicity,
unconscious bias and inclusion.”
At
the art museum, captions for an exhibit of American and European art
attest to histories of oppression “even in works that may not appear to
have any direct relation to these histories.” The English department has
adopted a 245-word land acknowledgment, describing its core subject as
“a language brought by colonizers to North America.” Even Michigan’s
business school, according to its D.E.I. web page, is committed to
fighting “all forms of oppression.”"
"Michigan has poured roughly a quarter of a billion dollars into D.E.I. since 2016"
"Tens of thousands of undergraduates have completed bias training.
Thousands of instructors have been trained in inclusive teaching."
"some of Michigan’s peer institutions have soured on aspects of D.E.I.
Last spring, both the Massachusetts Institute of Technology and
Harvard’s Faculty of Arts and Sciences said they would no longer require
job candidates to submit diversity statements; such “compelled
statements,” M.I.T.’s president said, “impinge on freedom of
expression.”"
"Michigan hasn’t joined the retreat. Instead, it has redoubled its efforts"
"the number of employees who work in D.E.I.-related offices or have
“diversity,” “equity” or “inclusion” in their job titles increased by 70
percent, reaching 241, according to figures compiled by Mark J. Perry"
"I found a different kind of backlash building, one that emanated not
from Washington or right-wing think tanks but from inside the
university’s own dorms and faculty lounges. On Michigan’s largely
left-leaning campus, few of the people I met questioned the broad ideals
of diversity or social justice. Yet the most common attitude I
encountered about D.E.I. during my visits to Ann Arbor was a kind of
wary disdain."
"many Black students today regard the school’s expansive program as a
well-meaning failure. The university now has a greater proportion of
Hispanic, Asian and first-generation students and a more racially
diverse staff. But in a state where 14 percent of residents are Black,
the school’s Black undergraduate enrollment has long hovered stubbornly
at around 4 percent"
"On campus, I met students with a wide range of backgrounds and
perspectives. Not one expressed any particular enthusiasm for Michigan’s
D.E.I. initiative. Where some found it shallow, others found it
stifling. They rolled their eyes at the profusion of course offerings
that revolve around identity and oppression, the D.E.I.-themed emails
they frequently received but rarely read."
"the school has also become less inclusive: In a survey
released in late 2022, students and faculty members reported a less
positive campus climate than at the program’s start and less of a sense
of belonging. Students were less likely to interact with people of a
different race or religion or with different politics"
"Everyday campus complaints and academic disagreements, professors and
students told me, were now cast as crises of inclusion and harm, each
demanding some further administrative intervention or expansion."
"As the “diversity rationale” spread throughout academia and business,
according to the scholar Frederick R. Lynch, the notion of diversity as a
form of reparations began to broaden and blur. Schools now needed
diversity to prepare citizens for America’s multicultural future;
corporations needed diversity to serve an increasingly global customer
base."
"Drawing on a growing body of post-Bakke research, school experts argued
that students not only learned “in deeper, more complex ways” in a
diverse setting but also emerged better equipped to thrive in a
multiracial democracy"
"D.E.I. research flourished throughout academia, making the case that
schools could harvest the benefits of diversity only if they intervened
decisively in campus life and the classroom."
"Over the four decades following Bakke, according to a recent study
from the Progressive Policy Institute, the ranks of full-time college
administrators increased more than twice as fast as student enrollment.
Their primary job was to enhance “student life” — and attract more
customers."
"The Ann Arbor campus grew to have nearly 16,000 nonfaculty employees, more than twice the number of full-time faculty members."
"These growing bureaucracies represented a major — and profoundly
left-leaning — reshuffling of campus power. Administrators were even
more politically liberal than faculty members"
"They promulgated what Lyell Asher, a professor of English at Lewis &
Clark College in Oregon, has called “an alternate curriculum,” taught
not in classrooms but in dorms, disciplinary hearings and orientation
programs."
"The former president of one top research institution recalled for me how
students once came to his office with demands, presented in a kind of
theatrical performance, to enhance the university’s D.E.I. program. The
former president, who asked for anonymity for fear of risking his
present job, later learned that some of the program’s senior staff
members had worked with and encouraged the students to pressure the
administration on their behalf."
[D.E.I. 1.0] "The initial planning ultimately yielded nearly 2,000 “action items”
across campus — a tribute to Michigan’s belief in the power of
bureaucratic process to promote change. “It’s important to focus on our
standard operating procedures and worry less about attitudes,” said
Sellers [psychologist Robert M. Sellers], who was appointed Michigan’s first chief diversity officer.
“Attitudes will follow.”"
"In the year or so after Trump took office, the school’s Bias Response
Team examined more than 150 student complaints, sometimes confronting
students or faculty members over supposedly offensive classroom comments
or social media posts. It was unclear if Michigan was, in fact,
becoming a more hateful place. A lawsuit
filed by Speech First, a conservative advocacy group, charged that
Michigan was subjecting students to expansive, subjective definitions of
harassment and bias"
"Other administrators and D.E.I. leads,
however, found Sellers’s program a distraction from such work. Some felt
that the monthly meetings Sellers’s office convened were overly focused
on the process of writing plans and reports. One-on-one discussion with
his deputies could have the feel of a box-checking exercise. “I would
put on a good show,” said one former dean, herself a woman of color. “I
would say, ‘We had meetings with students, we did this, we did that, we
made posters.’ We were jumping through hoops, and that’s what they
wanted to see.” Like other current and former deans, she asked to remain
anonymous because, as she put it, “no one can criticize the D.E.&I.
program — not its scale, its dominance.”
On
their private text-messaging group, deans across the university
grumbled about the mountains of data they were required to submit each
year. Their public progress reports and D.E.I. strategic plans were
heavily vetted by the university counsel’s office and Sellers’s team;
the resulting public documents, though meant to ensure accountability,
were often both lengthy and vague. “No one knew what they were supposed
to be doing,” the former dean said. “And no one would tell us. But we
had to show that we were doing something.”
At
the same time, Sellers and his allies began building what amounted to a
parallel hiring system, giving them a more direct role in reshaping
Michigan’s faculty. Proposal 2 expressly prohibited racial or gender
preferences in hiring. But in 2016, Michigan began a new program called
the Collegiate Fellows, reserved for postdoctoral scholars “in all
liberal-arts fields who are committed to diversity in the academy.”
Based at the College of Literature, Science and the Arts, Michigan’s
largest division, the program provided additional budget dollars with
each fellow hired, a further incentive to department chairs."
"out of the 49 new faculty members subsequently hired through the
program, 80 percent were people of color, according to a university
spokeswoman. (In an interview last year, Chavous put the total even higher.) Their research interests included “the epistemic exclusion
of diverse practitioners within the academy,” critical food studies and
how Indian transgender activists “appropriate normative U.S.-centric
conceptions of gender rights as human rights.”"
"it was almost universally understood among professors I spoke with that
these programs were intended to generate racial and gender diversity
without explicitly using affirmative action"
"Professors across the university described to me how, in faculty
meetings and on search committees, they had resigned themselves to a
pervasive double-think around hiring."
"By the spring of 2020,
Michigan was reaching the final stage of its first 5-year D.E.I. plan.
But in the wake of George Floyd’s murder by a white Minneapolis police
officer that May, as protests erupted around the country and demands to
root out racism echoed from campuses to corporate offices, none of the
training and programming — the money and new hires and promises — seemed
to matter."
"At the law school, which had a longstanding policy of not commenting on
events “outside the Quad,” students demanded a public statement about
Floyd’s murder. The Black Law Students Association issued further
demands, including mandatory antiracism training, more mental health
counseling and the hiring of a professor in critical race theory."
"D.E.I. consultants, Jerry Kang and Devon Carbado . . . invited students and faculty to share their experiences of racism and
discrimination at the university. Yet for all the heated public
rhetoric, people with knowledge of the discussions told me, some of the
examples seemed to them relatively minor."
"a professor had asked a white student to read aloud from the landmark
Supreme Court decision Cooper v. Aaron, which forced the desegregation
of public schools in Little Rock, Ark. The 1958 decision contained the
term “Negro,” which some students said was offensive."
"In early 2021, the entire law faculty was invited to a session provided
through Michigan’s Spectrum Center, which serves the school’s L.G.B.T.Q.
community. Many professors joined the Zoom, desperate for help
navigating classroom moments that had become dangerously charged.
Instead, the session was devoted to gender terminology, pronoun usage
and sexual identity. The facilitator urged them to require students to
declare their preferred pronouns and furnished a list of dozens of
sexual orientations, some of which professors told me they had never
heard of. Instead of asking students about their sexuality, they were
advised, faculty should ask students to specify their “attractionality.”"
"That September, the department convened a workshop led by Whitney
Peoples, then the coordinator for critical race pedagogies at Michigan’s
in-house teaching consultancy, known as the Center for Research on
Learning & Teaching. The workshop was titled “Teaching Texts That
Contain Racist Language,” but according to one person who attended,
Peoples argued that literary works containing slurs should almost never
be assigned in the first place."
"In 2015, the university office charged with enforcing federal civil
rights mandates like Title IX received about 200 complaints of sex- or
gender-based misconduct on Michigan’s campus. By 2020, that number had
more than doubled. Last year, it surpassed 500. Complaints involving
race, religion or national origin increased to almost 400 from a few
dozen during roughly the same period."
"in November 2022, the B.S.U. issued a scathing attack on D.E.I. 1.0
titled “More Than Four.” Despite the many millions spent on D.E.I. 1.0, the report noted, the percentage of Black students — then around 4 percent — was nearly as low as it was in 1970."
"Michigan’s all-embracing D.E.I. program was, in a sense, too inclusive.
It suffered from “structural flaws” that caused it to “systematically
neglect” Black students — the very people who inspired D.E.I. 1.0 in the
first place. The university “actively perpetuates systemic racism and
oppression,” the B.S.U. charged, by “failing to directly denounce and
combat anti-Blackness.”"
"That same year [2022], Chavous was promoted to chief diversity officer,
succeeding her husband, who remains a professor at Michigan. In 2023,
the university announced that it would expand Chavous’s Collegiate
Fellows program. It would hire even more scholars “committed to
diversity in the academy.” When I asked her how many of the fellows
hired so far advanced right-leaning arguments about diversity or
inequity, Chavous responded that the program favored “a commitment to
broadening access, to engaging in equity in one’s discipline and field.
So we’re not asking about any particular ideological or political
stance.”
In practice, of course, those commitments
can themselves be ideological stances. In a dissenting report to the
committee urging Michigan to continue requiring diversity statements in
hiring, Chandra Sripada, a professor of philosophy and psychiatry,
argued that asking candidates to detail how they would advance equity
inevitably required them to take particular positions about contested
social issues. When Sripada asked Michigan colleagues to evaluate a
hypothetical diversity statement that called for de-emphasizing “the
axes of identity on which we differ” in classrooms and to make
admissions a “level playing field,” one of them called it “career
suicide.”
Officially, Michigan’s D.E.I. plan includes a pledge to increase political diversity
on campus. When I asked Chavous if there were any programs aimed at
achieving that goal, she described an effort by the new dean of the Ford
School for public policy to ensure that its curriculum exposed students
to a range of political perspectives. By most accounts, conservatives
remain a small minority at Michigan, perhaps 10 or 15
percent of all students. There had always been social pressure to
conform to the prevailing liberalism there, faculty members and students
told me. But it seemed to intensify as D.E.I. expanded, as if the peer
pressure had a kind of institutional sanction.
In
2022, after the Supreme Court struck down Roe v. Wade, students at the
medical school demanded that administrators cancel a speech by Kristin
M. Collier, an internist and clinical professor there, at a ceremony
welcoming new medical students. Collier directs the school’s program on
health, spirituality and religion. She is also a Christian who has publicly discussed her opposition to abortion — a viewpoint the students considered disqualifying. A petition
demanded that Collier, who was selected by student and faculty members
of a school honor society, be replaced with someone who would inspire
students “to be courageous advocates for patient autonomy and our
communities.”
Though her speech went forward, Michigan assigned her a bodyguard.
Security was heightened at the clinic where she delivered care."
"Michigan, she noted, had many programs that explored racial and ethnic identity, but few on religious identity, like hers."
"For a large swath of
students and professors, Michigan’s D.E.I. initiatives have become
simply background noise, like the rote incantations of a state religion."
"Even within the academy, though, some long-accepted precepts of D.E.I. are coming under closer scrutiny. Some researchers argue
that teaching students to view the world chiefly through the lens of
identity and oppression can leave them vulnerable instead of empowered.
Psychologists have questioned
whether implicit bias can be accurately measured or reduced through
training. The notion that microaggressions are not only real but
ubiquitous in interracial encounters is widespread in D.E.I. programs; a
2021 review of the microaggressions literature, however, judged it “without adequate scientific basis.”"
"Many faculty members I spoke to worried that Michigan’s press to ingrain
D.E.I. into their scholarship — the diversity statements, the special
fellowships, the clamor for research into contemporary social-justice
issues — had narrowed its departments rather than broadening them.
Disciplines and historical eras that couldn’t be jammed into an equity
framework were being left to wither; even academics from minority
backgrounds felt they had to present themselves as scholars of equity in
order to advance."
"One recent analysis by the political scientist Kevin Wallsten found
that the larger the D.E.I. bureaucracy at a university, the more
discomfort students felt expressing their views on social media and in
informal conversations with other students."
"even some liberal scholars believe D.E.I. looms too large.Amna
Khalid, a historian at Carleton College in Minnesota, argues that
modern D.E.I. is not, as some on the right hold, a triumph of critical
theory or postcolonialism but of the corporatization of higher
education, in which universities have tried to turn moral and political
ideals into a system of formulas and dashboards. “They want a managerial
approach to difference,” Khalid said. “They want no friction. But
diversity inherently means friction.”"
"in the tumult that followed the Oct. 7 attacks in Israel. A spate of
unsettling events unfolded in Ann Arbor, eerily echoing the racist
provocations at the dawn of D.E.I. 1.0. Someone painted a red X through a
Star of David on the Rock; one Jewish student found “Yall R Jewish”
scrawled on her dorm whiteboard, near the mezuza affixed to her doorway.
Another Star of David was scrawled on benches outside the campus
Hillel, this time with an equal sign and a swastika."
"The school’s formidable bureaucracy seemed both paralyzed and
heavy-handed, scorned by many students and divided against itself."
"Many Jewish students and alumni were astonished when, in January, a
committee of Michigan D.E.I. leaders gave the school’s Martin Luther
King Jr. Spirit Award to a pro-Palestine student group and its leader, a
senior named Salma Hamamy: The group had issued a statement on Oct. 7 justifying the murder of Israeli civilians."
"This June, civil rights officials at the federal Department of Education found that Michigan had systematically mishandled
student complaints over the 18-month period ending in February. Out of
67 complaints of harassment or discrimination based on national origin
or ancestry that the officials reviewed — an overwhelming majority
involving allegations of antisemitism, according to a tally I obtained —
Michigan had investigated and made findings in just one."
"At the school of social work, some students complained that instructors
were not talking enough about the unfolding war; others wanted them to
weigh in less. Few felt safe talking to one another. Daicia Price, the
school’s D.E.I. director and a clinical professor, was pressed to weigh
in on behalf of the school. At one point, she recalled, a student
lectured her that there was “a place in hell” for people who remained
neutral about the war."
"It’d be one thing to ask for sacrifices that could save the planet. But
even at a whopping official price tag of $369 billion over 10 years,
the Inflation Reduction Act’s climate measures as written were likely to
lower the projected global temperature in 2100 by less than 0.03 degree Fahrenheit."
"The cost has rapidly ballooned to somewhere north of $3 trillion over 30 to 40 years, even as emission cuts have been slower and smaller than predicted. No wonder Ms. Harris isn’t trumpeting it."
"The truth of the matter is that nothing Ms. Harris does to cut carbon
can stop climate change. It’s developing nations that are driving
emissions in this century. Even if the U.S. achieved net-zero carbon
emissions overnight and stayed that way for the rest of the
century—basically destroying its economy and much of American quality of
life—the 2100 projected global temperature would only drop 0.3 degree Fahrenheit based on the United Nations’ climate model."
"Elon Musk on Thursday became billions of dollars richer after a strong earnings report caused Tesla
Motors’ stock to pop. Congratulations to Democrats, whose green-energy
subsidies and mandates are enriching the man they hate most after Donald Trump.
Tesla
beat forecasts with a $2.2 billion profit in the third quarter, a 17%
increase from a year earlier. Look under the hood, and you’ll find
subsidies are driving its profits. Auto sales increased by a mere 1%
compared to the same quarter last year while “regulatory credits” grew
33%. Such credits accounted for a third of its profit.
If
auto makers fail to meet California’s electric-vehicle quotas or the
Environmental Protection Agency’s greenhouse gas emissions standards,
they must buy compliance credits from manufacturers with a
surplus—namely, Tesla. More auto makers are struggling to meet these EV
mandates amid slowing demand and an EV market glut.
They
are scaling back EV production plans and instead buying credits from
Tesla because this is less expensive than making cars at a hefty loss.
Tesla says it is booking more regulatory credit sales “as other
automobile manufacturers scale back on their battery electric vehicle
plans.” Their EV woes are Tesla’s gain.
As
EV mandates ratchet up—California requires that they [EVs] make up 68% of
auto maker sales by 2030—the value of Tesla’s regulatory credits will
increase. Could this be one reason Tesla is trading at two to three
times the forward earnings multiple of high-flying tech stocks?
Investors may be betting on rising government mandates and subsidies.
Tesla
also benefits from the Inflation Reduction Act’s $7,500 per EV tax
credit, which we calculate amounted to about $1.25 billion this past
quarter, and consumer EV rebates in some states. Tesla says it was owed
$315 million in rebates at the end of the last quarter. And don’t forget
the IRA’s manufacturing tax credits for solar panels and batteries,
which is Tesla’s fastest-growing and most profitable business.
These
credits can offset more than a third of the cost of producing batteries
for EVs and power storage units. California and other states are using
Tesla batteries to back up their grids as they strive to meet climate
mandates. Tesla says IRA manufacturing credits boosted its energy
generation and storage margins and that it expects this business to more
than double this year.
It’s
amusing to hear Democrats now howl that Mr. Musk is benefiting from
their government largesse. Here’s a novel idea: Scrap all climate
mandates and subsidies. That way Tesla can succeed or fail on its own
merit."
"In the socialist and healthcare paradise that is Cuba, the regime can’t
keep the lights on. Another failure of the electricity grid struck
Saturday evening and continued into Sunday, blacking out much of the
island including the capital of Havana.
The
country has been enduring weeks of periodic blackouts that can last for
10 to 20 hours at a time, as the Communist government struggles to
provide even basic services. The regime blames deteriorating equipment,
fuel shortages and rising electricity demand. It also blames the U.S.
trade embargo, as it always does for every ill on the island.
But
nothing stops Cuba from importing the parts it needs from the rest of
the world. The real problem is a regime that can’t make much of anything
work except exporting its people. Russia and Venezuela have reduced
fuel sales to the island, which can’t pay its bills. Shortages of food
and medicine are rampant.
Cuba’s
dictatorship is a human tragedy and its people deserve much better. But
they won’t get it as long as Communists run the place and enrich
themselves at the expense of the people they impoverish."
"Donald Trump
said recently that “tariff” is the most beautiful word in the
dictionary, except “faith” or “love,” and in this belief he seems
consistent. So it’s worth taking seriously Mr. Trump’s campaign promise
to impose a universal baseline tariff of 10% or 20% on all imports to
the U.S., plus 60% on China.
A first
question is whether Mr. Trump really would do this, since it would dwarf
his last tariffs. The average tariff rate on all U.S. imports is
currently about 2%, the Tax Foundation says, and Mr. Trump’s plan could
raise it to “highs not seen since the Great Depression.” That was under
the infamous 1930 Smoot-Hawley tariff.
Mr.
Trump started his first term with pro-growth deregulation and tax
reform. He began his tariff wave in 2018, with targeted levies on steel,
aluminum, washing machines, solar cells, and a variety of goods from
China. He held off adding a tax of up to 35% on foreign autos, even as
his Commerce Department wrote a report calling them a national-security threat.
The
evidence is clear that the tariffs had real costs and reduced the
growth spurred by his other policies. Other countries retaliated,
hitting U.S. producers of everything from apples to whiskey. The
government paid farmers billions in compensation. Harley-Davidson had to shift production for its overseas customers to Thailand to stay competitive.
There was no great boom
in manufacturing employment. More jobs involve using steel than making
it, and one study said higher steel prices led to 75,000 lost
manufacturing jobs. Consumers paid more for many products, as companies
passed on tariff costs. The economic studies on these points are
copious, and it’s worrisome that Mr. Trump and his advisers dismiss
them.
The
next question is whether Mr. Trump has the power to impose a universal
tariff. The Constitution grants Congress, not the President, authority
over trade. It’s unlikely that Congress would pass a new broad-based
tariff on all imports, though protectionism has been gaining support in
the Trump era.
But
Congress has already ceded considerable power to the President,
especially provisions against “unfair” trade practices (Section 301) and
“national security” threats (Section 232). Mr. Trump used these powers
in his first term, and he was aggressive in exploiting 232 in
particular, as he no doubt would be again.
The
bigger danger is that Mr. Trump might use the International Emergency
Economic Powers Act (IEEPA). This law gives the President broad
authority, after declaring an emergency, “to deal with any unusual and
extraordinary threat” from abroad. IEEPA has been used to freeze
Venezuelan assets and stop exports to Iran. It has never been used to
impose tariffs. Mr. Trump threatened Mexico with it in 2019 but stood
down amid a deal to expand the “Remain in Mexico” migrant policy.
Yet
it’s hard to believe Mr. Trump could legally get away with declaring
all imports from everywhere an emergency to impose a tariff. That would
transform IEEPA from a sanctions law into a grant of limitless
presidential power over trade. Progressives love the idea of a carbon
tariff. Could President Biden impose one unilaterally by declaring
foreign emissions to be an emergency?
If
Mr. Trump tries it, he may find himself in court, perhaps the Supreme
Court. The current Justices have struck down similar efforts to abuse
presidential power, such as Mr. Biden’s $400 billion student-loan
forgiveness.
Mr.
Trump sometimes says he sees tariffs merely as a means to gain trade
reciprocity: If Japan had zero tariffs on U.S. goods, the U.S. would do
the same. But the process of getting to zero is likely to be messy if it
is even achievable. Once imposed, tariffs build business and union
constituencies that won’t easily give them up. The current 25% U.S.
tariff on foreign trucks was imposed in 1964.
Yet
at other times Mr. Trump sounds like a true believer in high tariff
walls for their own sake—as the way to return manufacturing to the U.S.
and protect it from foreign competition. This seems to be the view of
his chief trade adviser, Robert Lighthizer, and perhaps running mate JD Vance.
Known
as import substitution, this model of economic growth kept India
globally uncompetitive for decades. It would guarantee higher consumer
prices and the slow erosion of U.S. business competitiveness. Our guess
is that financial markets would signal their disapproval if Mr. Trump
goes this far.
Another
risk, and a special case, is trade with China. Mr. Trump’s first-term
tariffs didn’t change Chinese behavior, but he seems more determined
than ever to raise the stakes. China’s mercantilism and IP theft have
caused foreign firms to reduce their investment in China, which is the
prudent move. Strategic economic decoupling is warranted. But an all-out
trade war with China would have significant costs for America too.
Mr.
Trump’s overall economic agenda is superior to Kamala Harris’s model of
tax, spend, mandate and regulate. But his tariff agenda is an
anti-growth wild card that poses considerable economic risk in a second
term. We’d have to hope financial markets and Congress deter the worst."
"Washington gas prices hovering at around $3.91 a gallon"
"Under
the law, the state auctions off greenhouse gas emissions allowances to
polluting companies. The plan has generated more than $2 billion in
revenue for the state, but the rollout also coincided with
higher-than-expected increases in prices at the pump, leading to
concerns about its impact on household wallets.
Estimates
of the impact of the state law on gas prices vary, but some put it as
high as 60 cents a gallon. Washington gas prices routinely exceed the
U.S. average, which recently was $3.17 a gallon."
Washington’s
cap-and-invest law applies to businesses that operate in the state and
are responsible for the equivalent of at least 25,000 tons of carbon
dioxide a year, such as fuel suppliers and utilities. It covers an
estimated 75% of statewide emissions.
Each
quarter, the state offers a set number of emissions allowances through
an auction system. Companies bid for allowances, which give them the
right to emit a certain amount of greenhouse gas. Over time, the state
will auction off fewer allowances each quarter, and by 2050, the idea is
that the program will reduce emissions by 95%.
Cap-and-invest
programs are designed to ensure that businesses reduce carbon where it
is most efficient, and the auction system helps set a market price for
carbon. In 2023, the prices landed between $48.50 and $63.03. Companies
that can slash emissions for less are motivated to do so, and others may
opt to purchase allowances rather than adjust their operations. The
allowances can be bought and sold on a secondary market.
The state has used the proceeds from the auctions on decarbonization initiatives like public transportation infrastructure.
Before the law rolled out, the state’s Department of Ecology estimated
it might boost gas prices about 4 to 12 cents a gallon. Instead, they
went up by 20 to 60 cents. Economic analyses attempting to quantify
exactly how much of this increase was the result of the cap-and-invest
law have varied widely, in part because the names of companies
participating in the cap-and-invest program are confidential, so
independent analyses are difficult to execute."
"Chinese Finance Minister Lan Foan disappointed investors in a press
conference last Saturday that offered few details about a fiscal
stimulus for the sputtering economy. We’ll discuss the merits of such a
plan when details emerge, but meanwhile a startling line caught our eye
concerning the consequences of the country’s former one-child policy.
Mr. Foan
said in particular the package “will respond to the changing situation
of China’s population development” (according to a translation prepared
by state media journalist Fred Gao). This is consistent with a Reuters
report that Beijing is considering a monthly subsidy of around 800 yuan
per child for a family’s second and third children.
What
a stunning reversal. For decades Beijing enforced a one-child policy
that was ghastly in the way only an authoritarian regime can achieve.
The human cost was incalculable, particularly on Chinese parents subject
to forced abortions or sterilizations. The social consequences have
been catastrophic as sex-selective abortions skewed the population in
favor of males and successive generations of Chinese have grown up
without siblings, aunts or uncles.
Communist
Party leaders will never admit to any of that, but even they recognize
the policy has been an economic disaster. Intended to prevent the
population from expanding beyond what a developing economy could
support, the effect has been nearer the opposite. China’s aging and
soon-to-be shrinking population is now an impediment to economic growth.
President Xi Jinping
abandoned the one-child policy in 2016, and in 2021 the Party allowed
parents to have up to three children. Apparently this isn’t having the
desired effect, so now Beijing may attempt natalist subsidies. The
problem for Beijing is that these subsidies haven’t worked anywhere
they’ve been tried.
Prosperity
has reduced child-bearing across the developed world, but democracies
let nature and individual choice take their course. China’s Communist
Party chose brutal coercion, with damaging consequences that are likely
to persist for the foreseeable future. Chalk up another defeat for
central planning—and for Western intellectuals who wished we could be
more like China."
Union and equity rules bog down the $5 billion program
By Judge Glock. He is director of research at the Manhattan Institute.
"regulations and lavish handouts to favored groups have turned the EV
charger program into another ineffective part of Mr. Biden’s equity and
social-services agenda."
"Congress [in 2021] provided $5 billion over five years to fund a national network
of EV charging ports. Almost three years later, the program has created
69 ports"
"The delays are due in part to regulations encouraging unionization, as
well as the administration’s goal that at least 40% of clean-energy
investments benefit “disadvantaged communities,” the areas that need EV
chargers the least."
"To receive full subsidies, companies must abide by prevailing-wage and
apprenticeship standards. But the IRS says companies can avoid penalties
for violating these standards if they sign “project labor agreements,”
which favor union workers and include “monitoring and administration by
union officials.”"
"Last month the government proposed new accessibility standards for EV
charging stations, requiring special communications features and lighter
cables. The government estimates the regulation would cost almost $1
billion over the next seven years."
"This year, the Biden administration announced another $1.3 billion in grants for alternative fuel stations"
"Grant applicants are evaluated on whether they use project labor
agreements, whether they use a “Climate and Economic Justice Screening
Tool,” and whether they give priority to “minority-owned businesses” for
contracts and “people of color” for hiring."
"newly installed federally funded chargers must be made domestically."
Long before the founding of the Soviet Union, communist thinkers became convinced that without violence they would never achieve power
By Nicholas Clairmont. He reviewed the book To Overthrow the World: The Rise and Fall and Rise of Communism by Sean McMeekin.
Mr. Clairmont is the Life and Arts editor of the Washington Examiner Magazine. Excerpts:
"In 1797, as the revolution in France cooled down following the Reign of
Terror, François-Noël “Gracchus” Babeuf stood trial for organizing a
putsch against the governing directorate running Paris at the time."
"what he had in fact done—recruit insurrectionists from the ranks of the
police and military units to join his so-called Conspiracy of the
Equals, with the intent to seize weapons and food stores, take control
of Paris neighborhood by neighborhood, and execute France’s new rulers,
along with any foreigners, royalists and other named enemies."
"he introduces us to some nonviolent utopian socialists. Robert Owen, for
instance, sought to set up a planned community in 1820s Indiana that
would have abolished all private possession, including marriage. It
failed."
"“communists nowhere came to power through the ballot box.”"
"there were other, earlier revolutions, notably those across many parts
of Europe in 1848 and in Russia in 1905, that, while not ending in
successful communist takeovers, revealed to Europe’s communist thinkers
that without violence they would never achieve power."
"“The real secret of Marxism-Leninism,” he tells us, “was not that Marx
and Lenin had discovered an immutable law of history driven by
ever-intensifying ‘class struggle,’ but that Lenin had shown how
Communist revolutionaries could exploit the devastation of war” to seize
and maintain power. Here the death count becomes eye-watering: Hundreds
of thousands of kulaks—a
name coined to scapegoat those peasants who had failed to turn over
enough grain—are killed; a famine beginning in 1921, exacerbated by poor
central planning, leaves so many dead that it is impossible to
accurately calculate the toll to the nearest million. All this before
Stalin takes over."
"nearly 23,000 Polish elites and military officers purged, their bodies
deposited in a Russian forest; more than 34,000 Latvians killed or
disappeared by the Soviet secret police."
"“Many famous Soviet ‘public works’ projects,” Mr. McMeekin points out,
“were built by conscripted, unpaid workers—that is, slave laborers.
Children worked, too, particularly on the collective farms, where the
twelve-hour day was common for farmhands under fourteen"
"The story of communism is more accurately read as a history of violence than as a history of ideas."
Imagine a country that produces two kinds of goods, public goods and private goods.
Public goods are things like national defense. They benefit everyone and
it is hard to stop non-payers from getting it (it would be hard to stop
a non-payer from getting defended).
Private goods are those that only one person can enjoy and you can keep
non-payers from getting it. A Big Mac for example. If you don't pay, you
don't get it and if I eat a particular Big Mac, no one else can eat it.
What I am going to show is that as
government gets bigger, it will actually get more expensive in terms of
what we have to give up in the private sector. The bigger government
gets, the more costly it is.
Now also imagine that this country has 5 workers. Some are better at
making private goods (their skills are more entrepreneurial) and some
are better at making public goods (their skills are more bureaucratic).
The table below shows how much of each good each worker can make in a
day if they only produced that good.
Notice that worker I is very good at making private goods, but not so
good at making public goods (so he is more entrepreneurial and not so
bureaucratic). Worker V is the opposite.
These kinds of numbers make sense-we know in the real world people don't
all have the same abilities. There is a best plumber, a best doctor,
etc. The best doctor is not likely to be a good plumber and vice-versa.
The next table will show all the combinations of private goods and
public goods that we can produce if we are at full-employment. That is,
if we use all workers.
If we started with all workers making private goods, we make 25 (and 0
public goods). But if we want to make some public goods, we need to move
a worker. The best move is to have worker V start making public goods.
We give up only 3 private goods and we gain 7 public goods.
If we want more public goods, we would then move worker IV, then worker III and so on.
But each time we do this, we give up a different and increasing number
of private goods for each public good gained. The next table shows this.
At first, the cost of each public good is .429 private goods (3/7). We
lose the 3 private goods that worker V makes and gain the 7 public goods
he can make. But then when we move worker IV, we give up 4 to get 6. So
that cost .667.
The more public goods we produce, the more costly they will be in terms
of the private goods we have to give up. This is what makes the growing
size of government so alarming. We can't see this so easily in the real
world. Notice that the last public good costs 2.333 private goods, much
more than the first one.
Here are some basic terms that economists use to discuss this issue:
Opportunity Cost-The value of
the best foregone alternative. There is no such thing as a free lunch.
If we want to build one more skyscraper, we may have to give up one
submarine, since there may not be enough steel to go around (steel is
scarce!).
The law of increasing opportunity cost-As
more of a particular good is produced, the opportunity cost of its
production rises.
Why is the law of increasing opportunity cost true? Different resources
are better suited to different productive activities. This is just about
the same as saying people have different abilities, like some are more
entrepreneurial and some are more bureaucratic.
"I don’t like to brag, but I got a decent haircut last week from a
competent barber. Not bad eh? That very same week I was also landed
safely in a $375 million jetliner by a competent pilot. From a basic
common-sense standpoint, the two services could hardly be more
different, but from a regulatory and licensing standpoint they are
oddly, ridiculously similar.
The minimum number of pilot-in-command (PIC) hours required to gain a
commercial pilot rating as an Airline Transport Pilot is 1,500 hours —
this includes things like cross-country flight hours, night flying,
instrument ratings, multi-engine time and so forth. This all seems
sensible enough — most of us would hardly object if the people entrusted
with our lives had some minimum qualifications.
Curiously enough, however, the other profession that requires 1,500
hours of rigorous training time is hairdresser. And no, I am not making this up.
The Institute for Justice
has been highlighting the nation’s comically onerous license
environment for years, pointing out that cosmetologists, for example,
have to undergo approximately ten times the training time that Emergency
Medical Technicians must undertake. They point out that, “given that
there is no reason to believe EMTs are underregulated, this suggests these other occupations are overregulated.” Indeed.
But why? Who exactly stands to gain from such a patently
hyper-regulated system? Is it government bureaucracy, bent on protecting
fat licensing fees and the staffed departments that come with them?
Possibly that’s some of it, but it seems to be more invidious than that.
In this instance, it is the industry itself which provides the basic
impetus for this kind of absurdity. According to an industry mouthpiece
in Missouri (a perfectly middle-of-the-pack state in terms of licensing requirements),
it is practitioners themselves who are the most motivated to maintain
these extreme licensing requirements. Last year they crowed of their
success at the state capitol:
“Legislators proposed House Bill 590, which would eliminate the
license requirement for cosmetologists in Missouri. Professionals fought
back, stating that cosmetology is a science and its practitioners need
specialized training in the use of chemicals and sanitation. The public
hearing on the bill was held in 2013 and no more hearings are scheduled
at this time.”
Needless to say, the legislation did not pass, and Missouri’s
licensing requirements remain rigidly enforced. Artificially erected
barriers to entry, especially within relatively low-wage professions,
are common. Their primary purpose is to keep out competitors from
industries which are relatively broad and which require relatively low
technical skill. Excessive licensing requirements are an attempt to put a
veneer of difficulty on an otherwise easily-done profession in a rather
naked effort to minimize competition. Preschool teachers, for example,
are even more heavily licensed than hairdressers: a prospective
candidate must undergo 2, 927 days
(more than eight years) before they can purchase their license and be
unleashed upon the state’s youngsters. If you care to be a gaming
inspector (presumably checking slot machines), you don’t need many
training hours but need to cough up the cool grand needed for a license.
And so on. Excessive licensing requirements are everywhere and tend to
cluster around the lowest-paid professions. It’s not a coincidence.
Schools and licensing programs, it turns out, are often the primary
beneficiaries of this kind of market manipulation. “Z” Hair Academy, for
instance, charges their students over $18,000 in tuition to earn
certification through their training programs. Never fear, they assure
prospective students, there are “scholarships” and Federal Financial Aid packages
available. According to the Institute for Justice, the average student
takes out $7,793 in federal student loans, and since most Missouri
cosmetologists make less than $24,000 a year, it would require another three years of semi-indentured servitude just to pay back the tuition loans.
As if it weren’t bad enough, some of these academies open their
services to the public, allowing their unlicensed students to practice
their trade at discount rates. I got my perfectly good haircut from a
trainee for $12 — about a third of the going rate. These academies
therefore manage a double trick: two revenue streams under the
convenient protection of government licensing requirements. All told,
according to the Institute for Justice, Missouri’s licensing
requirements cost the state’s economy $3.55 billion and lead to 38,500
fewer jobs each year by artificially stifling the supply of ready
applicants to the field. It’s a racket.
While it’s tempting to place the blame on the coiffure-industrial
complex, it’s important to remember that they can only operate this way
by the effective manipulation of state control. It is a perfect case
study for the phenomenon of regulatory capture: regulatory agencies
created to protect the interests of consumers work instead to safeguard
the commercial interests of the industries they are expected to be
regulating.
Hairdressers are clearly not alone in this, and many a trade has
circled its wagons against efforts to deregulate highly entrenched,
disproportionally advantageous licensing schemes. In the end, however,
these kinds of artificial barriers to the free market-directed flow of
supplies and demands only tend to waste resources and diminish the
public’s benefits. One thousand five hundred hours squandered in the
repeated performance of a basic task like hair care doesn’t only waste
the learner’s time, but also promotes a dependency mindset — a perception that the state is best positioned to authorize entrepreneurial activities.
The next time you step off a commercial airliner, take a look at the
pilot’s hair — chances are, the hairdresser underwent more training.
It’s a ridiculous waste and licensing requirements need to be thoroughly
cleaned up."
The EPA rule, which we call CPP 2.0 because it’s the second attempt
at a CPP under section 111 of the Clean Air Act, hurts the reliability
and affordability of electricity when both are already at risk. The EPA
now requires existing coal and new natural gas power plants to
significantly change their operations or shut them down entirely. CPP
2.0 is a costly and unlawful mandate for the unproven technology of
carbon capture and sequestration/storage (CCS).
The fate of CPP 2.0 will be the same when the Supreme Court reviews
it on the merits—it will be overturned because it plainly violates the
statute it cites as authority from Congress. But it will hurt many more
Americans than it needs to because the Supreme Court took a narrow view
of “irreparable harm.”
The irreparable harm ignored by the Supreme Court is that demand for electricity in the United States is growing again
in exceptional ways (in part due to unforeseen growth in computing
load), and CPP 2.0 is preventing economic growth—and possibly causing
electricity shortages—by mandating impossible standards for existing and
new electricity supplies.
The CPP 2.0 Mandate
In its most basic form, CPP 2.0 requires existing coal and new
natural gas power plants to implement CCS on an unprecedented scale. For
existing coal-fired power plants, CPP 2.0 requires the owners of any
plant that might remain operational after 2039 to capture and store 90
percent of its carbon dioxide emissions by 2032. (Some less stringent
options are available for coal plants that will be closed by 2032 or
2040.)
Likewise, the rule requires any new combined-cycle natural gas–fired
power plants operating above “baseload” levels (at an annual capacity
factor above 40 percent) to reduce their carbon emissions by 90 percent
by 2032 by implementing CCS.
How did the EPA come up with this rule? Dating back to the 1970 Clean
Air Act amendments, Congress authorized the EPA to issue nationally
binding emissions standards for stationary sources like power plants
through section 111 using proven technology as a baseline.
Specifically, EPA’s standards of performance under section 111 must
be based on “the best system of emission reduction which (taking into
account the cost of achieving such reduction and any nonair quality
health and environmental impact and energy requirements) the
Administrator determines has been adequately demonstrated.” (emphasis added)
In CPP 2.0, the EPA claimed CCS at a 90 percent capture rate had been
adequately demonstrated, which is a patently false account of the facts
on the ground. This is the key issue of statutory interpretation
relevant to CPP 2.0, and we believe the rule will fail on EPA’s
fundamental misreading of the statute and/or its misreading of the
facts in the record.
The short version of the merits argument is this: CCS depends on
a mind-bogglingly large set of new infrastructure (rivaling the existing
network of fossil fuel infrastructure itself), including CO2 pipelines
to carry enormous amounts of CO2 from power plants to injection sites.
Such infrastructure may be impossible to build and certainly has not
been “adequately demonstrated.” For more detailed legal and technical
arguments, see comments on the proposed rule.
The only power plant in the United States that captures anywhere near 90 percent of CO2 emissions is perhaps the Petra Nova
plant in Texas, which has not operated continuously and does not
technically sequester CO2 at all—it injects CO2 into oil wells in a
process known as enhanced oil recovery. Another power plant often cited by proponents of CCS (and explicitly cited by the EPA) is the Boundary Dam project in Canada, which has consistently underperformed on its CCS goal of—you guessed it—90 percent.
Thus, EPA’s emissions standard is far too stringent because it is
based on plants that are located near profitable CO2 injection and
storage sites or are falling woefully short of the EPA’s goal. A rule
mandating 90 percent CCS nationwide is therefore at odds with the part
of the statute that says the “best system of emission reduction” must be
“adequately demonstrated.”
CPP 2.0’s Irreparable Harm
The mandate to close existing coal plants and prevent the building of
new “baseload” natural gas plants is a recipe for electricity
shortages, skyrocketing electricity prices, or a mix of both. The lack
of certainty regarding which set of rules a power plant owner is likely
to face in the coming years is itself a deterrent to building or
retaining needed supplies.
In practice, the much-needed new electricity supplies
are likely to come from less efficient simple-cycle natural gas power
plants—essentially methane-fueled jet engines—which will increase costs
and preclude more efficient investments until CPP 2.0 is finally
overturned.
At the wholesale level, prices will be set
more often by these less efficient units with higher marginal costs,
meaning wholesale electricity prices will be higher than necessary.
Further, the US Energy Information Administration
(EIA) estimates only 2.6 gigawatts of new natural gas–fired power
plants will come online in 2024, while 3.8 GW will be retired.
Coal plant closures will also reduce power supplies. PJM
Interconnection Inc., the largest electricity market in North America by
revenue and volume, has issued stark warnings
about the collision course we are on between growing demand and falling
supply, stating that there is a “timing mismatch between resource
retirements, load growth and the pace of new generation entry.” CPP 2.0
exacerbates such a mismatch because it would force the retirement of
coal units, which produced 16 percent of the electricity in the United States last year.
To be clear, we don’t expect anyone at the EPA, the Supreme Court, or
any government agency to accurately predict the timing and scale of
Americans’ future electricity needs. Efforts to centrally plan electricity markets
are likely to lead to supply shortages, increased costs, top-down
rationing, and rolling blackouts. But that is precisely why CPP 2.0 is
so harmful—it allows the EPA to be the national gatekeeper for new
electricity supplies, which will have disastrous consequences.
The Court’s Mistake
In his statement about the denial of applications for stay, Justice Brett Kavanaugh argued
that applicants “are unlikely to suffer irreparable harm before the
Court of Appeals for the DC Circuit decides the merits” because
“applicants need not start compliance work until June 2025.”
Unfortunately, that is untrue. For would-be builders of new natural gas
power plants, the irreparable harm likely began in May 2023 (the date of
the proposed rule) and was cemented in the final version of CPP 2.0,
which featured an effective date of July 8, 2024.
While Justice Kavanaugh’s approach may make sense in the legal
compliance world, it ignores economic decisions that predate compliance.
As Frederic Bastiat might say, the court focused on what is seen—the
compliance measures undertaken by plants that are already built—and
failed to recognize the unseen harms.
We cannot see, for example, the business activities or consumer savings
that might have occurred if the Supreme Court had granted the motions
for stay. In other words, CPP 2.0 is already causing irreparable harm
because it’s preventing much-needed electricity supplies that would be
built in its absence. (We note that Justice Clarence Thomas would have
granted the applications for stay, and Justice Samuel Alito did not
participate.)
PJM and other grid operators articulated this harm in their amicus brief,
stating that the EPA has “failed to adequately consider the impact of
premature retirements driven by the Rule’s compliance timelines.” They
also highlighted how investments in the grid, particularly large power
plants, are based on “the expected revenues associated with continuing
operation of the unit. Unit owners may decide to retire units early
rather than incur additional expense and risk.” Premature power plant
closures—and the stalling of new supplies in an era of demand growth—are
the irreparable harm the Court failed to see.
Conclusion
Supreme Court justices clearly understand the law. However, the order
in this case demonstrated that many of them do not understand market
processes and fall into the knowledge problem
trap of attempting to assume the unknowable. By denying the motions to
stay CPP 2.0, the Supreme Court squandered a perfect opportunity to
limit executive branch overreach in the new post-Chevron era and protect millions of Americans from government-induced harm."
