Rise of the Occupational Licensing Cartel

February 5, 2016

Should only dentists be allowed to whiten people’s teeth? Or is this a service anyone should be allowed to offer?

This may sound like a silly question at first, but when the deeper question of occupational licensing is applied to the broader economy, it turns out that there are millions of jobs and hundreds of billions of dollars at stake.

Keep in mind that the Food and Drug Administration already regulates teeth-whitening products for safety and that virtually no one has ever been injured by someone administering these products.

But in a number of states throughout the country, dentists began losing teeth-whitening customers to non-dentists who had set up kiosks in shopping malls and were charging less money for the same teeth-whitening services.

These upset dentists then went to their state dental-licensing boards and urged those boards to add teeth whitening to the definition of “the practice of dentistry.” These state boards complied and sent letters to malls informing them that their teeth-whitening tenants (at least those who were not dentists) were in violation of state law and should be evicted. The malls did exactly that. The results were unemployed teeth whiteners, more expensive teeth whitening, and higher profits for the dentists.

This is textbook anticompetitive behavior. An organized cartel (the dentists) restrained competition (limiting teeth whitening to dentists) in a manner that deliberately reduced competition and raised prices. The only twist here is that they used the threat of government punishment to enforce their monopoly.

But dentists are not the only professionals using government power to harm consumers and line their pockets. A 2013 study found that 25% of today’s workforce is in an occupation licensed by a state entity, up from just 5% in 1950, including everything from security guards and personal trainers to manicurists, hair stylists, barbers, and florists.

Occupational licensing has grown not because consumers demanded it, but because lobbyists recognized a business opportunity where they could use government power to get rich at the public’s expense.

Everyone wins but the American public.

Consumers end up paying $200 billion in higher costs annually, prospective professionals lose an estimated three million jobs, and millions more Americans find it harder to live where they want due to licensing requirements that vary by state.

It doesn’t have to be this way.

President Abraham Lincoln said the role of government is “to lift artificial weights from all shoulders, to clear the paths of laudable pursuit for all, to afford all an unfettered start and a fair chance, in the race of life.”

Occupational licensing laws have become an artificial weight on far too many American shoulders.

This week, the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights held a hearing on state occupational licensing laws. There are certainly competing values at stake, and the important role of the States in enacting licensing requirements to protect public health – not to mention federalism and state sovereignty – is not to be gainsaid. But occupational licensing has become a major obstacle to economic mobility, and a boon to narrow special interests, that deserves attention from national lawmakers.

Leveling the Playing Field for Energy Producers

January 29, 2016

Experience teaches that the federal government does a poor job of picking winners and losers in the marketplace and in the public square. Nowhere is this lesson more evident than in our energy sector where the federal government has squandered hundreds of millions of taxpayer dollars betting on unviable technologies and unsound companies like Solyndra, the solar panel company that went bankrupt in 2011 shortly after receiving more than half a billion dollars in federal loans.

Unfortunately, Congress appears unwilling to learn from these past mistakes, preferring instead to repeat them again, and again, in the future. The case in point: in the 2016 omnibus spending bill passed at the end of last year Congress singled out certain industries for special treatment, regardless of their economic viability, by reviving and extending a number of tax credits for particular energy sources such as wind, solar, geothermal, biomass, alternative fuels, and oil.

These tax credits are not just exorbitantly expensive – they’re expected to cost American taxpayers more than $30 billion over the next ten years – but they’re also unfair. Targeted tax credits like the ones included in last year’s so-called “tax extenders” package unfairly advantage certain industries, not because those industries are more efficient or economically viable, but because the federal government favors them over others. This has major consequences for America’s energy sector. Targeted tax credits and energy subsidies distort incentives, encouraging businesses to invest in influence rather than innovation, and redirect capital according to the preferences of politicians instead of the needs of energy consumers. The upshot? Artificially inflated energy prices for American families.

The Energy Freedom and Economic Prosperity Act, which will soon be introduced in the Senate, gives Congress an opportunity to change course and level the playing field for our nation’s energy producers. This bill would restore fair, open, free-market competition in America’s energy sector, by eliminating all energy tax credits. And in order to offset the increased tax burden that would be imposed on energy providers, the Energy Freedom and Economic Prosperity Act permanently cuts the corporate tax rate, which will benefit all businesses, not just those the federal government favors.

It’s time to get the federal government out of the business of picking winners and losers in the energy sector. The Energy Freedom and Economic Prosperity Act will ensure that energy providers are rewarded based on their ability to provide American consumers with affordable and reliable energy, not their ability to extract special favors from government.

Utah Public Lands Initiative

January 22, 2016

On September 19, 1996, a mere seven weeks before the presidential election, President Bill Clinton stood in Arizona’s Grand Canyon National Park and declared that, with the stroke of his pen, 1.8 million acres of land in Utah would be off limits to economic development.

President Clinton did not consult with Congress on the matter. Nor did he give the Utah congressional delegation, Democrats and Republicans alike, more than 24 hours notice.

President Clinton’s use of the Antiquities Act in 1996 to unilaterally create the Grand Staircase-Escalante National Monument was one of the driving forces behind the Public Lands Initiative unveiled by Representatives Rob Bishop (R-UT) and Jason Chaffetz (R-UT) this week.

Once again we are in an election year and once again a Democratic president is threatening to use unilateral executive power to take millions of acres away from the people of Utah.

Reps. Bishop and Chaffetz are trying to head off a new monument designation by working with local, state, federal, and tribal leaders to reach a mutual agreement that will bring some much needed certainty to the region.

Over the past two years, 120 different stakeholders have met more than 1,200 times, producing more than 65 proposals. The deal that was struck, called the Public Lands Initiative (PLI), would officially set aside more than 4 million acres of land for conservation, much of it already managed as wilderness study areas.

Another 1 million acres will be made available for much needed economic development and recreation, including lucrative transfers to Utah’s School and Institutional Trust Lands (SITLA), which will help fund public education for decades to come.

But most importantly the PLI includes language that will protect the participating counties from a unilateral designation by President Obama, or any future president. Under the PLI, the president would be restrained.

This compromise is a huge win for Utah. Rarely does the federal government return power to the states. And other western states, like Wyoming and Arizona, are already moving to copy this model.

More work needs to be done to reform how the federal government manages the more than 60 percent of federal land held in Utah. But the PLI is a good start.

Restoring Democratic Accountability to the Federal Reserve

January 15, 2016

This week the Senate considered a bill that would eliminate the barriers currently standing in the way of a full and fair audit of the Federal Reserve System (what’s commonly called “the Fed”) and the way it conducts the United States' monetary policy.

Currently, unelected officials at the Fed determine how to manage the flow of money and credit through our economy. These same individuals claim that the new levels of transparency contemplated in this bill would threaten the independent nature of the institution.

It’s true that the Federal Reserve was created, in 1913, to be an independent regulatory agency. However, Article I Section 8 of the Constitution empowers Congress to regulate the value of money in our country, a grant of authority that certainly includes the power to investigate monetary policy decisions made by the Fed’s Chairman and Board of Governors.

Yet, as it currently stands, the Fed is unaccountable to Congress and, therefore, to the American people. The bill we voted on this week, introduced by Sen. Rand Paul (R-KY), would bring a modest level of democratic accountability to the institution, by requiring an audit of its transactions with foreign central banks, foreign governments, and international financing organizations.

It would also evaluate deliberations, decisions, or actions by the Fed on monetary policy. While the Government Accountability Office, the Fed’s own Inspector General and an outside auditor, currently engage in periodic audits of the Fed, they are subject to severe restrictions that leave foreign transactions and monetary policy deliberations mostly in the dark.

It is certainly time for the Fed to be more transparent, and it is critical for Congress to assert its constitutional role in oversight of monetary policy.

USA Freedom Act and the Balance of Security and Privacy

December 18, 2015

In the ongoing debate over how best to protect the nation from security threats like terrorism, while also protecting individuals’ civil liberties there has been a great deal of confusion about the USA Freedom Act, a bill that Congress passed and the president signed into law earlier this year. As one of the lead sponsors of the USA Freedom Act in the Senate, I’d like to clarify what exactly the law does and how it affects the delicate balance between security and privacy.

Before the USA Freedom Act became law, the National Security Agency (NSA) collected all the metadata (a business record of who called who and for how long) for almost every domestic landline phone call made in America. And they did it without a warrant.

For most of the metadata program’s life, intelligence officials could search the NSA’s massive database whenever they wanted. But for the last few years, any agency that wanted access to the NSA’s database had to get a court order from a special intelligence court to do so.

Under the USA Freedom Act, the NSA is no longer allowed to vacuum up all that metadata, a practice that violates the Fourth Amendment rights of all Americans, according to a federal court’s recent ruling.

Under the USA Freedom Act, U.S. intelligence agencies must now go to that same special intelligence court, get a court order for a specific target to be searched, and then present that order to U.S. phone companies. The phone companies are then obligated to help agencies locate all relevant metadata for the suspected target, including new types of metadata, like cell phone records, which companies were not obligated to provide prior to the USA Freedom Act becoming law.

Now it is true that phone companies don’t always keep their customers’ metadata as long as the NSA kept their warrantless collection. Whereas the NSA kept their landline phone data for five years, most phone companies keep it for two years (though phone companies are required by the Federal Communications Commission to keep their data for only 18 months).

So before USA Freedom, intelligence officials did have access to three additional years of metadata. But we know from press reports that the NSA’s metadata was limited mostly to domestic landline calls, data that is of limited value, according to recent congressional testimony from intelligence officials.

In fact, when the NSA was forced to stop its warrantless collection program, the federal government did not even ask for access to the old data, even though nothing in the USA Freedom Act prevented the agency from getting it.

The proponents of the NSA’s warrantless metadata collection program also vastly exaggerate its effectiveness. The program had expired just four days before the San Bernardino attacks, so if it was so essential why did it not stop this attack?

The USA Freedom Act is what the Patriot Act was supposed to be, and while it’s not perfect, it rectifies the Administration’s heavy-handed application of our surveillance apparatus.

Defund Housing Rule through Spending Bill

December 11, 2015

Who should make local zoning decisions for a community, choosing what should be built, where, and who should pay for it: the residents of the neighborhoods that are affected and their local representatives or distant, unfamiliar, and unelected bureaucrats in Washington, D.C.?

This is one of the questions that will be settled in the government spending bill that the House and Senate are scheduled to vote on next week. It is also one of the most important, and overlooked, policy questions of the Obama presidency – one that will have sweeping, long-lasting consequences for every community in America.

For now, the outcome is still up in the air. The text of the bill funding the government through next fiscal year – the “omnibus,” in Capitol Hill parlance – has not yet been released to the public or to members of Congress. But the choices facing the Republican leaders who are writing the legislation are clear: either they include a provision in the text of the omnibus that prohibits the Department of Housing and Urban Development (HUD) from implementing their imperiously named Affirmatively Furthering Fair Housing (AFFH) Rule, or they don’t.

Choosing not to restrict the implementation of the AFFH rule would be bad policy and bad politics. Allowing the AFFH to continue unabated would empower HUD regulators to carve up the country, block by block, reengineering the character of our communities according to their preferences and priorities. It could also make it more difficult for Republican leaders to garner the support they need to pass the omnibus, especially if

By their very nature, omnibus bills must include compromises. They are extensive legislative instruments that authorize, in one fell swoop, the funding for every single program within the federal government’s vast jurisdiction. And they are often rushed through Congress, at the last minute before an urgent deadline, which leaves members of the House and Senate with few, if any, opportunities to amend the legislation.

But we should not compromise local control over zoning decisions and the distinctive, homegrown character of communities across the country. The diversity of America’s neighborhoods, and the right of every community to make its own zoning decisions, based on the preferences and priorities of its residents, is a treasure that we must preserve, not a bargaining chip to be used in backroom horse-trading.

Should the authors of the omnibus fail to restrict funding for the implementation of HUD’s Affirmatively Furthering Fair Housing Rule, they ought to provide individual members of Congress the opportunity to enact such a prohibition through the amendment process. The fate of our communities and local self-government may well depend on it.

Two Steps Forward and One Step Back

December 4, 2015

The Senate this week took two steps forward and one step back.

On Thursday evening, a Republican majority passed an historic budget reconciliation package designed to relieve American families, workers, and businesses from the most onerous and costly provisions of Obamacare. Shortly thereafter, a bipartisan majority passed a federal highway bill designed to satisfy the demands of K Street lobbyists and federal regulators, while imposing on the rest of America the same ineffective, overpriced federal highway policy that has failed to meet our infrastructure needs for decades.

Just as objectionable as the discredited substance of the legislation are the bill’s irresponsible and unsustainable funding mechanisms and the cynical process that produced it.

Of the $70 billion this bill uses to bailout the Highway Trust Fund over the next five years, more than $50 billion comes from an accounting gimmick that steals money from the rest of the Treasury’s general fund. The bill also purports to raises $6.2 billion in revenue for transportation and infrastructure projects by selling oil from the Strategic Petroleum Reserve – assuming a price of $93 for a barrel of oil, even though it’s currently selling for less than $40 per barrel.

If we’re going to start selling federal assets at fantasy prices, there is no limit to the number of things we can pretend to pay for.

But as bad as the bill’s funding schemes are, the cynical process used to secure votes in its favor is even more troubling.

For instance, this bill adds back $3.5 billion in crop-subsidy spending that we cut just last week in the budget deal. Is this really how we do business in the United States Senate? Reduce spending one week in order to appear fiscally responsible, only to reverse course the very next week when nobody is expecting it? You don’t need to oppose crop subsidies to see the dishonesty and cynicism of this maneuver.

Even worse, this bill would not have a chance of passing the Senate were it not for a deal to include a renewal of the Export-Import Bank.

There’s little need to revisit the mountain of evidence proving that the Export-Import Bank is one of the most egregious, indefensible cases of crony capitalism in Washington, D.C. But it is worth highlighting some of the so-called “reforms” that Ex-Im’s supporters included in the bill.

First, there’s the new “Office of Ethics” created within the Bank. Presumably this is supposed to help the Bank’s management reduce the rate at which Ex-Im employees and beneficiaries are indicted for fraud, bribery, and other wrongdoings. Since 2009, there have been 85 such indictments – or about 14 per year.

The bill also creates a new position – called the “Chief Risk Officer” – and requires the Bank to go through an independent audit of its portfolio.

Only in Washington will you find people who believe that an organization’s systemic ethical failings can be overcome by creating a new “ethics” bureaucracy… or that hiring a new a risk-management bureaucrat is a suitable replacement for market discipline… or that giving another multi-million-dollar contract to a well connected accounting firm will substitute for real political accountability.

Finally, this bill does nothing to fix our fundamentally broken highway financing system, which makes it harder and more expensive for state and local policymakers to meet the transportation needs of their communities.

Under the status quo system, federal bureaucrats divert at least 25 percent the states’ gas tax dollars to non-highway projects, including mass transit, bike paths, and other boondoggles like “vegetation management.” Federal Davis Bacon price-fixing regulations artificially inflate construction costs by at least 10 percent. And federal environmental regulations, like those issued under the National Environmental Policy Act, add an average of 6.1 years in planning delays to any federally funded project.

We can have honest disagreements over policy, but we must not continue to tolerate the kind of corrupt process that produced this bill – the backroom deals, the about-face on crop subsidies and the Export-Import Bank.

The American people deserve better than this. And it’s up to the Republican majority in Congress to ensure that we will do better than this in the future.

Our Forests are an Asset, Not a Liability

November 20, 2015

Too often the federal government’s efforts to manage national forests and protect communities from the destruction of wildfires are impeded by unnecessary regulatory red tape, prolonged legal challenges, and a lack of coordination between federal agencies and state and local fire units.

The Catastrophic Wildfire Prevention Act of 2015, recently introduced in the Senate, contains several common-sense reforms aimed at resolving these problems plaguing our forest-management system.

The bill serves three primary purposes.

The first is to reduce the chances of wildfire on federal land by expediting wildfire prevention projects. The Forest Service recently determined that 58 million acres, or nearly one-third, of national forests are at high or very high risk of severe wildfire. Yet the Forest Service expects to thin less than three percent of that acreage in 2015, due, in part, to increasingly drawn-out regulatory processes. The Catastrophic Wildfire Prevention Act would expedite the process by cutting inefficient red tape and establishing firm deadlines for agencies to propose and finalize wildfire prevention projects.

The second objective of the bill is to enhance protections for endangered species. Currently, the Endangered Species Act constrains active forest management in many areas. This has proven to be counterproductive and dangerous, resulting in overcrowding and overgrowth that pose significant threats to the very wildlife the Endangered Species Act is meant to protect. The Catastrophic Wildfire Prevention Act would authorize federal agencies to undertake wildfire prevention projects with the express purpose of protecting the habitat of threatened and endangered species.

Finally, the bill would provide federal agencies with more operational flexibility by permitting and expediting the use of livestock grazing and timber harvesting as part of authorized wildfire prevention projects. These are effective tools that not only promote forest health and reduce wildfire risks, but also benefit local livestock owners and generate revenues from timber sales.

The premise of this bill is simple: our forests are an asset, not a liability. We cannot expect to solve our wildfire problem by simply throwing more money at it. We must rethink the outdated laws and regulations that have led to dangerous forest conditions and overgrowth.

By updating our regulatory framework and engaging local stakeholders, the Catastrophic Wildfire Prevention Act will improve forest health and provide federal agencies the flexibility they need to protect wildlife habitats and local communities

The Highway Bill

November 13, 2015

Next week Senate and House conferees will begin meeting to hash out the differences between the two chambers’ highway bills. Unfortunately, the expected result will likely be a travesty of both policy and process.

The Senate’s Developing a Reliable and Innovative Vision for the Economy Act (DRIVE Act), passed in July of this year, promises six years of highway spending, but only manages to pay for the first three. And it does so not with structural reforms that produce real savings, but with budgetary gimmicks, including the selling of a portion of the United States’ Strategic Petroleum Reserve, on the assumption that oil prices will increase from $50 per barrel, where they are today, to $89 per barrel.

The House’s Surface Transportation Reauthorization and Reform Act is no better. Like the Senate bill, the House legislation pays for only three of the six years of highway funding it authorizes, using similarly misleading budget trickery with the Strategic Petroleum Reserve. It would also redirect Federal Reserve payments that are supposed to go to the Treasury’s general fund, in order to help patch up the perennial gaps in highway funding. Former Fed Chairman Ben Bernanke described this kind of rearranging of the Highway Trust Fund deck chairs as a “budgetary sleight of hand,” pointing out that “paying for highway spending with Fed capital is not paying for it at all in any economically meaningful sense.”

Worse, neither bill takes any steps to reform our nation’s broken infrastructure financing system. Under both of these bills, and their likely conference report, the Highway Trust Fund will still be on a fast-track to bankruptcy. Gas taxes collected at the pump will still be diverted away from projects that could fix our nation’s roads, bridges, and highways. And states will still be forced to comply with costly federal labor and environmental regulations that only delay and drive up the costs of critical infrastructure projects.

Congress can do better than this. We should not be authorizing six years of spending while only paying for the first three. We should not be using phony pay-fors to artificially prop up a failed infrastructure financing system.

The House is under new leadership. The White House will soon be too. There’s no reason we need to wait for this highway bill’s authorization to expire in order to pass real transportation infrastructure financing reform.

Planning for the Paris Protocol

November 6, 2015

In a few weeks Paris will host the latest round of climate-change negotiations – what’s called the “Conference of Parties” – under the United Nations Framework Convention on Climate Change.

Paris will be the twenty-first Conference of Parties in twenty-three years, but this summer the European Union’s commissioner for climate action said there is no “plan B” for Paris. He confidently declared, “[These are] not just ongoing U.N. discussions. Paris is final.”

And in at least one important respect, Paris will be final. It will be President Obama’s last, best hope to continue his pursuit of that infamously lofty ambition from 2008 – his goal of “fundamentally transforming the United States of America.”

In addition to trying to use a new climate-change agreement to fundamentally transform America’s energy and transportation sectors, the unilateral process by which President Obama plans to commit the United States to such a deal – a process designed explicitly to bypass the Senate and avoid seeking its advice and consent – would be another step in the fundamental transformation of the way we make international commitments.

Pursuing a deal in Paris as an executive agreement instead of a treaty would not only violate the plain meaning of the U.N. Convention; it would also defy the historical understanding of the constitutional limitations on the executive in foreign affairs – limitations that exist to safeguard the sovereignty of the American people.

Congress has several options to preempt President Obama’s unprecedented and reckless unilateralism in Paris.

First, the House and Senate should take up and pass a joint resolution expressing the sense of Congress that an agreement of the cost and legal character contemplated by the Obama administration in Paris should be submitted to the Senate for its advice and consent.

Next, Congress needs to wield its most potent tool — the power of the purse.

Members of both chambers and from both parties have a constitutional duty to assert with one voice – to the Obama administration and more importantly to the foreign governments attending the Paris negotiations – that Congress will not send a dime of taxpayer money to the implementation of any agreement to which the Senate has not provided its advice and consent.

That goes for the billions of dollars that President Obama has pledged to send to the so-called “Green Climate Fund.” And it goes for any other funds that the Paris agreement would expect the United States to give to developing countries for clean-energy adaptation.

Finally, we need to start thinking more broadly – beyond the Paris talks and beyond January 2017 – about how we can repair the institutional damage wrought by Obama’s will-to-power approach to the presidency, and how to reform the laws and bad habits that have facilitated the accumulation of power in the executive.