Eugene Volokh's Blog, page 2703

Does the EPA Need $21 Billion to Hire 230,000 More Employees?

(Jonathan H. Adler)

A Daily Caller story claiming the Environmental Protection Agency is "asking for taxpayers to shoulder the burden of up to 230,000 new bureaucrats — at a cost of $21 billion" in order to regulate greenhouse gas emissions under the Clean Air Act has caused a bit of a stir on the internet (see, e.g., here, here, and here). The critics are correct that the Daily Caller flubbed the initial story. The numbers aren't new and the EPA isn't asking for billions of dollars for tens-of-thousands of new hires. But the critics miss the real significance of EPA's arguments, which is that treating greenhouse gases as "pollutants" under the Clean Air Act, as called for in Massachusetts v. EPA, leads to absurd results.

First, the EPA is not asking for additional resources. What the EPA is asking for is permission to ignore the plain text of the Clean Air Act so as to make the task of regulating greenhouse gases more manageable. The brief at issue is quite clear on this point. The specific figures are an illustration of how it is simply unmanageable to try and regulate such emissions, carbon dioxide in particular, under statutory provisions designed for traditional air pollutants that are emitted by far fewer facilities. The obvious answer to this problem would be to recognize that greenhouse gases are not what Congress had in mind when it told the EPA to regulate "pollutants" under the Clean Air Act, but this option is foreclosed by Massachusetts v. EPA.

Second, the EPA's claim that regulating greenhouse gases under the Clean Air Act would overwhelm the agency's existing resources and effectively require the hiring of thousands of new employees is not new. I detailed this problem in this Reason essay and HJLPP article. The Obama EPA noted this problem it first proposed the Tailoring Rule in 2009. The Bush EPA (and others) also made this point when arguing that the Act should not be interpreted to apply to greenhouse gases. The Supreme Court was not convinced, however. Indeed, the Massachusetts v. EPA majority briefly considered, and dismissed, the claim that regulating greenhouse gases under the Clean Air Act would be impractical.

Third, the real problem with the EPA's argument is that the agency is asking to ignore the plain text of the Clean Air Act. Specifically, the statutory provisions at issue require regulating facilities with the potential to admit more than 100 or 250 tons per year of regulated pollutants. As the EPA admits, this is impossible for the agency to do without increasing the agency's total budget more than ten-fold. But the EPA's solution is just as much of a problem, because what EPA wants to do is replace the Act's express numerical thresholds with new thresholds of its own invention, based on the EPA's judgment of what it wants to do when. Yet there is no precedent for administrative revision of statutory text in this fashion — and for good reason. It is one thing to allow an agency to twist potentially ambiguous language so as to avoid an absurd outcome, but quite another to allow an agency to rewrite clear statutory provisions, such as express numerical thresholds. Interpreting "pollutant" to mean only traditional air pollutants does far less violence to the Act's text and structure than replacing 100 and 250 with numbers the EPA finds more convenient. But the source of this problem is not EPA overreaching or overzealous regulators within the Obama Administration, but the Supreme Court's decision in Massachusetts v. EPA. If the Court had not misread the statute, we would not have to worry about bloggers and journalists misreading the EPA's briefs.

Why Do Banks "Need" to be "Too Big to Fail"?

(Todd Zywicki)

I was at a conference last week and Federal Reserve Governor Dan Tarullo asked a question that I've been wanting to know the answer to as well: Why do banks "need" to be so big that they are "too big to fail"?  More precisely, it is asserted (but, in my opinion has never been demonstrated) that banks above a certain size are so large and intertwined that we "have" to bail them out.  As a result of this bailout imperative and the supposed systemic risk, "too big to fail" banks create an externality on the economy by the implicit government guarantee.

In light of this externality, the relevant question is, "Why do banks need to be so big that they are considered 'too big to fail'?"  In other words, what economic value would be lost if banks were at a size just below the threshold of what is considered "too big to fail"?  What efficiencies or product offerings would be lost if banks were big, but not "too big"?

Tarullo asked this question more concretely in a recent speech:

Well before the financial crisis and my arrival at the Federal Reserve, I had found that the relative dearth of empirical work on the nature of economies of scale and scope in large financial firms hindered the development and execution of optimal regulatory and supervisory policies. Some regulatory features added by the Dodd-Frank Act only increase the importance of more such work to fill out our understanding of the social utility of the largest, most complex financial firms. Ultimately, we want to understand what these scale or scope economies imply for the degree to which large size or functional reach across many types of financial activities is essential for the efficient allocation of capital and liquidity and for the international competitiveness of domestic firms....

But I am getting ahead of things here. Returning to my starting point, I reiterate that the importance of this research agenda lies precisely in determining how significant these trade-offs might be. The events of the past few years make brutally clear the potential for societal damage associated with systemic risk. Considerable work has already been done by academics and policymakers to develop systemic risk metrics, and thus to lay the groundwork for sound macroprudential regulatory measures. As we and our counterparts in other countries move forward with the implementation of these measures, a complementary stream of work on scale and scope would substantially enhance these efforts.

I recognize that studying scale and scope economies in large financial conglomerates presents some practical challenges. The small number of very large and diversified financial firms, the difficulties delineating specific activities of interest, and the problems in measuring economic costs all complicate the undertaking. So too, disentangling real economies from the funding advantages associated with moral hazard, or the supra-competitive profits associated with a concentrated industry structure, may not be easy. Perhaps, then, in the short term, the research community and regulators may benefit from case studies that inform the direction of future research.

Given the absence of any explanation to date as to why banks need to be so big, one is left for now with the only apparent explanation still left: precisely because being so big gives them an implicit government guarantee, which allows them to access capital markets more cheaply and gain a competitive advantage that their rivals lack.  If anyone has any empirical evidence that justifies the size of banks that are too big to fail, I'd like to see it.

Kudos to Governor Tarullo for asking the right question.

Are Motorcycles "Greener" Than Cars?

(Jonathan H. Adler)

The LA Times reports on a Mythbusters investigation into whether motorcycles are a more environmentally friendly mode of transportation than cars, at least with regard to their fuel consumption and emissions. The investigation involved road-testing vehicles of each type from the 1980s, 1990s, and 2000s while monitoring the vehicles' fuel consumption and emissions. The results:

Motorcycles were indeed more fuel-efficient than cars and emitted less of the greenhouse gas carbon dioxide, but they emitted far more smog-forming hydrocarbons and oxides of nitrogen, as well as the toxic air pollutant carbon monoxide. For the most recent model year vehicles tested — from the '00s — the motorcycle used 28% less fuel than the comparable decade car and emitted 30% fewer carbon dioxide emissions, but it emitted 416% more hydrocarbons, 3,220% more oxides of nitrogen and 8,065% more carbon monoxide.

So, if you're primarily concerned about greenhouse gas emissions — and don't need to transport passengers or much luggage — motorcycles might reduce your environmental impact. But if you're concerned about traditional air pollutants — the kind that can affect people's health here and now — motorcycles are far worse. This should not surprise, as automobiles are subject to far more stringent emission control requirements — and it's that much easier to add emission controls to a car than a bike as well.

Breaking: Government files petition for cert in Eleventh Circuit case

(Randy Barnett)

Minutes ago, the Solicitor General filed its petition for cert in the Florida v. HHS case from the Eleventh Circuit. Earlier this morning, the state Attorneys General filed their cert petition with some very interesting claims, including a request that the Court reconsider its 1985 decision in Garcia v. San Antonio Metropolitan Transit Authority. Just when you thought this case could not get any bigger, it does!

[Links to briefs on ACALitigation Blog added.]

With the government joining the challengers in asking the Court to review the Eleventh Circuit Case, a prompt grant of cert now seems likely, with oral argument in January or February, and a final decision on the last day of the term in mid-June 2012. This has been a momentous day. Here is the DOJ's Press Office statement:

The Department has consistently and successfully defended this law in several court of appeals, and only the 11th Circuit Court of Appeals has ruled it unconstitutional. We believe the question is appropriate for review by the Supreme Court.

Throughout history, there have been similar challenges to other landmark legislation such as the Social Security Act, the Civil Rights Act, and the Voting Rights Act, and all of those challenges failed. We believe the challenges to Affordable Care Act — like the one in the 11th Circuit — will also ultimately fail and that the Supreme Court will uphold the law.

Each of those laws enjoyed bipartisan support when enacted; none were passed on a straight-line party vote. In fact, enacting so massive a social-welfare measure that affects every man, woman, and child in the United States in so partisan a manner was ... wait for it ... unprecedented.

"Turkish Cartoonist to Be Put on Trial for Renouncing God"

(Eugene Volokh)

So reports a prominent Turkish newspaper (thanks to Ed Grinberg for the pointer):

Baruter's caricature depicted an imam and believers praying in a mosque. One of the characters is talking to God on his cellphone and asking to be pardoned from the last part of the prayer because he has errands to run.

Within the wall decorations of the mosque, Baruter hid the words, "There is no Allah, religion is a lie." The cartoon was published in the weekly "Penguen" humor magazine.

The cartoon is available at the linked-to site; I would have included it, but its message isn't understandable to people who don't know Turkish.

Illegal Article About Aborigines by Australian Journalist

(Eugene Volokh)

An Australian court just held today, in Eatock v. Bolt, that Australian journalist Andrew Bolt and the newspaper The Herald and Weekly Times violated the law by publishing newspaper articles arguing that

fair-skinned Australians "with some Aboriginal descent" "are not genuinely Aboriginal persons but ... motivated by career opportunities available to Aboriginal people or by political activism, have chosen to falsely identify as Aboriginal," and"[f]air skin colour indicates a person who is not sufficiently Aboriginal to be genuinely identifying as an Aboriginal person."

(The quotations are from the court opinion's paraphrase of the articles; the full articles are available at the end of the opinion.) This, the judge held, violated the Racial Discrimination Act:

[I]n seeking to promote tolerance and protect against intolerance in a multicultural society, the Racial Discrimination Act must be taken to include in its objectives tolerance for and acceptance of racial and ethnic diversity. At the core of multiculturalism is the idea that people may identify with and express their racial or ethnic heritage free from pressure not to do so. People should be free to fully identify with their race without fear of public disdain or loss of esteem for so identifying. Disparagement directed at the legitimacy of the racial identification of a group of people is likely to be destructive of racial tolerance, just as disparagement directed at the real or imagined practices or traits of those people is also destructive of racial tolerance.

The judge stressed that "nothing in the orders I make should suggest that it is unlawful for a publication to deal with racial identification, including by challenging the genuineness of the identification of a group of people," and that Bolt and the Herald & Weekly Times violated the law "because of the manner in which that subject matter was dealt with." (The judge concluded that the fair comment exception to the law doesn't apply because the publication "was not done reasonably and in good faith in the making or publishing of a fair comment" or "done reasonably and in good faith in the course of any statement, publication or discussion, made or held for a genuine purpose in the public interest.") But the fact remains that, under this decision, it is illegal in Australia to publish what the journalist and newspaper published.

The judge said that he "will make orders prohibiting the republication of the newspaper articles," and "[i]n the absence of the publication of an apology, I will consider making an order for the publication in the Herald Sun of a corrective notice." A pretty appalling result in a democracy, it seems to me.

Bleg: Bogota and Lima

(David Bernstein)

If any of our readers have recently lived in either Bogota, Colombia, or Lima, Peru and would be willing to chat for a few minutes, please email me at deliotb [at] aol [dot] com.

NFIB Cert Petition and the Anti-Injunction Act

(Randy Barnett)

This morning, the National Federation of Independent Business filed with the Supreme Court a petition for a writ of certiorari to reverse the Eleventh Circuit's ruling that the individual insurance mandate it held to be unconstitutional could be severed from the rest of the Affordable Care Act. With regard to severability, the legal issue is whether Congress would have passed the Affordable Care Act without the individual mandate. Even the government concedes that the individual insurance mandate is essential to the costly restrictions being imposed on insurance companies and therefore is not severable. It is inconceivable that Congress would have enacted the ACA without the insurance regulations that comprise the very heart of the scheme.

In its petition, the NFIB also addresses the issue of the Anti-Injunction Act (AIA) that was ignored as judge after judge rejected this theory–and the government too–until the Fourth Circuit sua sponte (on its own) concluded (2–1) that the AIA barred it from reaching the merits of the constitutional challenge. Because the AIA is the legal theory du jour, I thought it would be useful to reproduce this portion of the petition (with many citations omitted so readers can more easily get the the flow of the argument):

1. The Anti-Injunction Act provides, with a few exceptions, that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court." 26 U.S.C. § 7421. . . . . [The Act] is clearly inapposite here, due to the critical distinction between the mandate and its penalty. The mandate itself is simply a free-standing legal "[r]equirement" that every "applicable individual shall … ensure that [he or she] … is covered under minimum essential coverage." 26 U.S.C. § 5000A(a), (d). By contrast, the "penalty" is simply a means of enforcing compliance with that legal command, which is imposed on all "taxpayer[s]" who unlawfully "fail[] to meet th[at] requirement," unless they are separately "except[ed]" from the "penalty." Id. § 5000A(b), (e). [This was the position Judge Silberman appeared to take in the Seven-Sky oral argument last week—RB] Given this relationship between the mandate and the penalty, there are three fundamental reasons why Petitioners' challenge to the mandate cannot possibly be foreclosed by the Anti-Injunction Act, which bars "suit[s] for the purpose of restraining the assessment or collection of any tax." 26 U.S.C. § 7421(a) (emphases added).

First, the monetary sanction for non-compliance with the mandate is not even "a[] tax" under § 7421(a). The sanction is not "an enforced contribution to provide for the support of government," but simply "an exaction imposed by statute as punishment for an unlawful act," which is the quintessential definition of a non-tax "penalty." [citations omitted]

Second, even if the monetary sanction for noncompliance with the mandate were a "tax" as a statutory matter, under §7421(a), the "purpose" behind Petitioners' "suit" is not to "restrain[]" that so-called "tax." Rather, Petitioners' "purpose" is to "restrain" the mandate's free-standing legal requirement that they must buy costly insurance, which itself is not a "tax" in any way, shape, or form. Petitioners' "purpose" here obviously has nothing to do with "restraining" the sanction for non-compliance with the mandate: as law-abiding citizens, they are completely indifferent to a so-called "tax" that they will never incur. [citations omitted]

Third, Petitioners would have no lawful means of challenging Congress' command that they purchase insurance if the Anti-Injunction Act truly required them to violate the mandate simply to incur the socalled "tax" that authorizes suit. Indeed, the dilemma would be even worse for the millions of lawabiding individuals who are subject to the mandate but exempt from the penalty, because they could never incur the so-called "tax" that is the supposed predicate to bringing a challenge. Not only would the complete absence of judicial review for all law-abiding individuals subject to the mandate underscore why the Anti-Injunction Act should not be interpreted to bar suits brought for the "purpose" of eliminating a substantive legal requirement, but the absence of such redress also reveals that there would be grave Due Process concerns with the contrary interpretation. [citations omitted]

IJ on "The Myth of Judicial Activism"

(Jonathan H. Adler)

The Institute for Justice has a new report examining the rate at which the Supreme Court overturns laws and regulations. Clark Neily summarizes in the WSJ:

Over the 50-year period from 1954 to 2003, Congress enacted 16,015 laws, of which the Supreme Court struck down 104—just two-thirds of 1%. The court struck down an even smaller proportion of federal administrative regulations—about 0.5%—and a still smaller proportion of state laws: 455 out of one million laws passed, or less than one-twentieth of 1%.

In fact, on an annual basis, the Supreme Court struck down only three out of every 5,000 state and federal laws passed. Compared with the explosive growth of government, the Supreme Court's efforts to impose constitutional limits on the legislative and executive branches are barely blips on the radar screen. . . .

Our Constitution imposes significant limits on government power—limits that are not being properly enforced because too many judges have adopted an ethic of reflexive deference toward the other branches of government. What America needs instead is a properly engaged judiciary that understands the importance of constitutionally limited government and refuses to be cowed by empirically baseless accusations of judicial activism.

Wyoming Appellate Lawyers?

(Eugene Volokh)

I have a question about the Wyoming Supreme Court's amicus procedure, and I was wondering whether any of our readers might be familiar with it. If you are, any chance you might chat with me briefly about it? You can reach me at volokh at law.ucla.edu. Many thanks!