The Regulatory Review

A Fintech Charter by Another Name

Mon, 30 Nov 2020 05:03:59 GMT

Picture your life without a bank account. Where would you store your money? How would you pay your bills? Who would give you a loan?

The COVID-19 pandemic has highlighted the struggle that one in four American households face every day when they cannot access basic banking services, such as checking accounts, payment services, and affordable loans.

Financial technology firms, or “fintechs,” help some of these consumers access vital services at lower cost and in remote areas where traditional banks do not operate. Banking regulation, however, has not kept up with these technological innovations in the industry.

Federal banking law does not currently provide a cohesive regulatory framework for fintechs. This has forced fintechs to seek licenses from a complex network of state banking regulators, increasing their costs and limiting their opportunities to provide consumers with better banking services.

In 2018, the Office of the Comptroller of the Currency (OCC)—the federal agency responsible for issuing charters to national banks and regulating their activities—took the first stab at addressing this problem when it created a “fintech charter.”

Unlike traditional banks, which provide one-stop shops for all banking services, fintechs typically offer only payments or lending services, not both. The fintech charter gives fintechs that provide such narrow banking services an option to receive a national bank charter that is tailored to their needs, rather than requiring fintechs to navigate the complex and burdensome web of state regulations. Although the fintech charter technically covers both payments and lending firms, the OCC primarily designed the charter for fintech lenders.

Since its creation, the OCC’s fintech charter has encountered significant legal roadblocks, discouraging fintechs from applying for one. In October 2019, a federal judge in New York struck down the charter for exceeding the OCC’s authority because it applies to firms that do not take deposits. The judge noted that the National Bank Act “unambiguously requires that … only depository institutions are eligible to receive national bank charters from the OCC.” The OCC’s appeal of the ruling is still pending.

Despite this litigation challenging the lawfulness of the fintech charter, Comptroller Brian Brooks—the head of the OCC—announced in June 2020 that the OCC intends to create a new payments charter designed exclusively for fintech payments firms, such as Venmo or MoneyGram, which hold users’ funds and transfer funds between accounts.

One important question is whether chartering payments firms is legally different from chartering lending firms.

State banking regulators—who led the charge against the fintech charter—have criticized the payments charter as “no different than the fintech charter” because both apply to non-depository firms. The OCC does not dispute this point. Instead, Comptroller Brooks claims that both charters are valid under the National Bank Act. He argues that existing regulation gives the OCC authority to issue charters to non-depository institutions involved in payments and lending.

If the OCC ultimately loses its appeal over the fintech charter, the payments charter—as proposed—will likely fail as well because it also applies to non-depository firms. If that happens, the OCC will need another way to charter fintech payments firms.

One option for the OCC is to offer payments firms traditional national bank charters, known as “full-service” charters, which allow firms to accept deposits, issue loans, and facilitate payments. The OCC recently granted Varo Money just such a full-service charter—the first national charter ever given to a fintech.

Full-service charters, however, take significant time to acquire and involve extensive regulation that is often not suitable to payments firms with narrow business models. In those cases, the OCC may still be able to offer its narrow payments charter by accepting applications from fintechs that take deposits.

The OCC designed the fintech charter for non-depository institutions because fintech lenders—the firms the OCC had in mind when designing the fintech charter—have no reason to take deposits. Fintech lenders use technology to facilitate loans but push the default risk onto the consumers and financial institutions providing the money. If a fintech lender were to take deposits and offer loans, it would become a traditional bank and require a full-service charter.

Payments firms are different. Some experts argue that cutting-edge payments companies, such as cryptocurrency firms, already take deposits. And those that do not take deposits could cut costs if they did, rather than paying third-party banks to hold their users’ funds.

If fintech payments firms take deposits, they may not require the same degree of oversight as fintech lenders or traditional banks. For decades, some scholars have argued that banks narrowly focused on payments should face less regulation because they merely transfer funds or invest deposits in low-risk assets. Comptroller Brooks echoed this argument when proposing the OCC’s payments charter, advocating that the OCC should tailor regulations to the narrow services offered by fintech payments firms.

Most payments firms do not hold deposits because they cannot obtain deposit insurance from the Federal Deposit Insurance Corporation and they want to avoid designation as a bank holding company. The OCC can address both of these issues.

The OCC has stated—in an unrelated context—that it has the authority to grant a specialized charter to depository institutions that do not have deposit insurance if they “can operate in a safe and sound manner.” Fintech lenders are unlikely to meet these qualifications because fintech lending involves significant risk to depositors, systemic risk to the economy, and potential predatory consumer practices.

Payments firms are less likely to incur financial risk because they merely transfer users’ funds between accounts or invest those funds in low-risk assets, such as U.S. Treasuries. They do not lend the money to borrowers who could default on a loan. Given this low degree of risk, the OCC could grant payments firms that take deposits a specialized charter, claiming they can operate in a safe and sound manner without deposit insurance.

In addition, many fintechs fear dealing with enhanced regulation as bank holding companies. Any institution that either has deposit insurance or accepts deposits and makes commercial loans could be deemed a bank holding company under the statute. If fintech lenders accept deposits, they will automatically qualify because they make commercial loans. Payments firms, however, can accept deposits without being bank holding companies because they do not offer loans or require deposit insurance. This difference means that, under federal banking law, the OCC could offer its payments charter to firms that exclusively accept deposits and facilitate payments.

The OCC has not yet explored the idea of offering a specialized charter to fintechs that accept deposits. It may ultimately decide that payments firms expose consumers to too much risk to accept deposits without insurance. In addition, even if payments firms take on less financial risk than traditional banks or fintech lenders, some commenters worry that payments firms are vulnerable to significant cyber-risk, fraud, and other operational risks that pose a systemic risk to the financial system. This is an important issue the agency must consider.

If the OCC loses its legal fight to charter non-depository institutions, it will need to rethink how it charters fintechs. In doing so, the OCC may have more options to charter fintech payments firms than fintech lenders.

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Fixing Student Loans

Sat, 28 Nov 2020 05:05:29 GMT

Politicians, educators, and financial experts agree—student loan debt in the United States is in a crisis. More than a third of U.S. adults under 30 have outstanding student loans, with a total of nearly $1.6 trillion owed by all Americans.

This number rose dramatically over the past decade and may continue to increase—especially because young adults are more likely to take out loans than were previous generations.

Although students and families can take out loans from private lenders, more than 90 percent of student loans come from the federal government. Schools consider these loans as better options for students than private loans because they have more favorable terms, such as a fixed interest rate and repayment plans that students can delay until after graduation.

Several factors have contributed to creating the modern student debt crisis. Today, more high school graduates attend college, and these new students are more likely to be from low- and middle-income families who may need loans. In addition, the U.S. Congress has lifted various limits on student lending since the 1980s, making loans more accessible to college students, graduate students, and parents.

Some politicians have also established barriers in the U.S. Bankruptcy Code to prevent student loan debt forgiveness. Although certain types of debt—such as mortgages and medical debt—can be discharged under bankruptcy, effectively cancelling their repayment, student loans presumptively remain with the borrower. To remove student loan debt, individuals declaring bankruptcy must meet a vague “undue hardship” standard that Congress has yet to define and that courts interpret differently.

Both Democrat and Republican policymakers continuously debate how to address the growing amount of student loan debt. Some politicians have proposed a variety of potential solutions, such as tying repayment to paychecks or cancelling large sums of outstanding loans.

As the Trump Administration enters its final weeks in office, and President-Elect Joe Biden prepares to enter the White House, the future of student loan debt remains uncertain. President Donald J. Trump froze student loans payments for 33 million borrowers earlier this year, a freeze that will expire on December 31 unless President Trump enacts a previously announced extension. Meanwhile, President-Elect Biden has said that he supports some sort of mass loan forgiveness as a way to kickstart the U.S. economy.

This week’s Saturday Seminar examines student loan debt in the United States and different approaches to addressing this crisis.

Courts should relax their interpretation of the Bankruptcy Code’s undue hardship standard for discharging student loan debt, attorney Alexander Gouzoules argues in an Emory Law Journal Online article. He proposes reevaluating this standard to include health insurance status—which is especially important during the COVID-19 pandemic as health care costs may rise and more Americans could become bankrupt if the economy continues to struggle. Gouzoules writes that “debtors without access to health care necessarily face an undue hardship warranting bankruptcy discharge of their student loans.”
In a recent Loyola Consumer Law Review article, Seth Frotman of the Student Borrower Protection Center claims that the Consumer Financial Protection Bureau (CFPB) should prioritize enacting regulations on student loan servicing to protect current borrowers. Student loan servicers—nine of which currently dominate the market—are companies that administer student loans on behalf of the U.S. Department of Education. According to Frotman, these companies often engage in disempowering or deceiving practices such as misrepresenting late fees or illegally raising interest rates for borrowers due to the absence of uniform industry standards. Since Congress created the CFPB to protect consumers from abusive practices, Frotman contends that the agency must enact regulations to prevent worsening the student debt crisis.
“Student debt is a civil rights issue,” Dalié Jiménez of the University of California, Irvine School of Law and Jonathan D. Glater of the University of California, Los Angeles School of Law argue in a recent Harvard Civil Rights-Civil Liberties Law Review article. Student debt disproportionately harms students of color, who are more likely to lack financial resources and take out larger student loans to attend for-profit universities that provide limited career opportunities, they claim. To bridge the gap in access to higher education, Jiménez and Glater propose cancelling student loans for current borrowers through debt forgiveness and making public universities tuition-free. These reforms, they contend, provide the federal government with a blueprint for refinancing higher education to lessen the burdens of student debt on communities of color.
The Education Department should not fight attempts to discharge student loan debt in bankruptcy when student-debtors would “clearly” meet the undue hardship standard “if forced to continue to attempt repayment,” legal scholars argue in a recent article published in the University of Colorado Law Review. Howard University’s Matthew Bruckner, the University of Missouri’s Brook E. Gotberg, the University of California, Irvine’s Dalié Jiménez, and Rutgers University’s Chrystin Ondersma encourage the Education Department to permit discharge in certain situations. Removing student loan debt could be justified, they argue, when the borrower earns less than 1.5 times the federal poverty level and has other serious limitations, such as being a lifetime respite or designated veteran caregiver, receiving Social Security Act disability benefits, or living solely on retirement benefits. Creating clear categories for allowing borrowers to cancel student loan debt will save taxpayer money and resolve “many of the grosser inequities currently associated with restrictions on student loan discharge in the Bankruptcy Code,” the authors contend.
In a recent Indiana Law Journal article, John P. Hunt of the University of California, Davis, School of Law criticizes the Education Department for its policy of only consenting to discharge student loan debt when collection would cost too much. Hunt argues that instead, the Education Department should introduce discharge consent guidance that aligns with “other student loan program goals,” such as “promoting equal access to education, creating a more educated population, safeguarding freedom of career choice, and benefiting borrowers generally.” This change, Hunt explains, would improve discharge rules, reflect congressional intent, and help student loan borrowers.
The U.S. student loan system should shift from its current debt framework to a taxation-like structure, Georgetown University Law Center’s John R. Brooks and Adam J. Levitin argue in a The Georgetown Law Journal article. Describing the student loan system as “a hybrid that falls between pure debt and pure tax,” Brooks and Levitin outline a series of changes to move away from a debt framework. For example, they suggest that student borrowers should only have the option of an income-based repayment model. In addition, they propose eliminating student loan forgiveness and interest charges, stating instead that linking unpaid grants to inflation would lower the total amount that students would have to pay back. These “targeted reforms,” among other changes, would create an affordable educational landscape, according to Brooks and Levitin.

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Week in Review

Fri, 27 Nov 2020 05:05:05 GMT

IN THE NEWS

Administrator of the U.S. General Services Administration Emily Murphy sent a letter to President-Elect Joe Biden announcing plans to “make resources and services available in connection with a presidential transition.” Murphy’s change in position will provide President-Elect Biden with funds to aid in the transition of power, including hiring and training a transition team. Murphy noted that she was not instructed by any White House or executive branch officials to delay the funding for the transition team. President Trump tweeted that Murphy should “do what needs to be done with regard to initial protocols.” Despite his acceptance of aiding Biden’s transition team, President Trump did not concede the election and instead reiterated his commitment to fighting election results.
Pfizer Inc. and BioNTech requested an emergency use authorization from the U.S. Food and Drug Administration (FDA) for their coronavirus vaccine—purportedly the first of its kind ready for public dissemination. Clinical trials showed that the vaccine is 95 percent effective at preventing COVID-19 and safe to administer. The companies also requested authorization for distribution in several other countries and announced that they expect to produce as many as 50 million doses by the end of 2020 and 1.3 billion doses by the end of 2021. FDA will hold a public meeting on December 10 to discuss their findings, but noted that any approval would be temporary until the agency can fully investigate the safety of the vaccine.
The Federal Communications Commission (FCC) rejected a petition by Chinese telecommunications company ZTE that sought to overturn the company’s designation as a threat to U.S. national security. This summer, the agency found that China’s National Intelligence Law permits the Chinese government to demand that private telecommunications companies such as ZTE comply with requests for sensitive information such as customer and network data. FCC Chairman Ajit Pai called on Congress to “appropriate funds so that our communications networks are protected from vendors that threaten our national security.”
The U.S. Army Corps of Engineers rejected the Pebble Limited Partnership’s application for a permit to construct a large gold and copper mine in southwest Alaska. The agency reportedly said the pipe did not comply with the Clean Water Act’s guidelines and was “contrary to the public interest.” The decision contradicted an earlier analysis by the agency that found the pipeline would have no “measurable” impact on certain fish populations or the nearby Bristol Watershed. Shortly after this decision, the Environmental Investigation Agency released secret recordings that captured a conversation between Pebble Mine executives discussing plans to expand the mine beyond the proposed size and downplaying environmental concerns. In response to the agency’s decision, Adam Kolton of the Alaska Wilderness League said that “the tribes, fisherman and communities that depend on a healthy Bristol Bay can breathe a sigh of relief.”
President Donald J. Trump, joined by the U.S. Secretary of Health and Human Services Alex Azar and the Centers for Medicare and Medicaid Services Administrator Seema Verma, announced the finalization of regulations intended to reduce prescription drug prices “dramatically.” One regulation would reduce drug prices by prohibiting manufacturers from giving rebates to pharmacies on prescription drugs as incentives to sell their drugs. Another regulation prohibits Medicare from paying more for a drug than the lowest price charged to other countries. Because these rules were finalized at the end of the Trump presidency, the rules may not survive if the Biden Administration seeks to quickly override them.
The Trump campaign requested a recount of Georgia’s presidential election results. The campaign filed the petition a day after Georgia Secretary of State Brad Raffensperger verified the results of the hand-counted audit that cemented President-Elect Joseph Biden’s victory in Georgia. Although Raffensperger found no sign of foul-play in the hand recount and then certified the election results, the Trump campaign petitioned for a recount based on Georgia election law that permits a recount for races with margins of victory under 0.5 percent. The vote will be recounted by the same electronic scanners used to count votes on Election Day. According to Georgia Public Broadcasting reporter Stephen Fowler, the recount is unlikely to change the outcome of the election.
The U.S. Department of State proposed a rule to amend requirements for intercountry adoptions. The rule would provide “long-awaited” revisions that make it easier for relatives of children living abroad to adopt the related child. The rule would simplify the requirements for intercountry adoptions to allow for a faster process. The new regulation would also reduce the number of services that the adoption agency must provide because the relative would provide the services instead. The relative, for example, would now identify the child for adoption and obtain consent to terminate parental rights.
The Office of the Comptroller of the Currency proposed a rule that would prevent banks from refusing to lend to entire categories of lawful businesses, most notably ensuring that fossil fuel companies may not be denied financing solely on the basis of their business category. The agency emphasized in a press release that the proposed rule would advance the principle of “fair access to financial services” enshrined in the Dodd-Frank Wall Street Reform and Consumer Protection Act. Ben Cushing, senior campaign representative at the Sierra Club, reportedly rejoined that the Dodd-Frank Act was “not designed to force banks to invest in projects they deem to be overly risky and not good investments.”
The National Highway Traffic Safety Administration (NHTSA) ordered the recall of approximately 7 million vehicles manufactured by General Motors to replace airbag inflators that have been known to explode after prolonged exposure to heat. The decision is the latest in a series of recalls targeting over 60 million airbag inflators, which have already resulted in 18 deaths and hundreds of injuries across the country according to NHTSA. General Motors reportedly estimated that the recalls would cost the company $1.2 billion.

WHAT WE’RE READING THIS WEEK

Richard J. Pierce, Jr., professor at George Washington University Law School, published a working paper arguing that President-Elect Joe Biden will successfully restore the pre-Trump Administration “regulatory environment” shortly after taking office. Pierce emphasized, however, that a progressive congressional agenda will not succeed if Republicans control the U.S. Senate. Pierce also cautioned that new rules made by administrative agencies must survive heightened judicial review because of the number of conservative judges appointed by President Trump.
In a Brookings Institution report, researchers Caitlin Chin and Mishaela Robison found that the common practice of assigning female voices to artificial intelligence bots and voice assistance can perpetuate harmful gender stereotypes. Specifically, Chin and Robinson found that users may develop gender stereotypes by hearing a feminine voice respond to demand-like requests. They emphasized the need to establish industry standards for the humanization of artificial intelligence, require companies to publish available data on gender diversity on their teams, and reduce barriers to the STEM field to prevent artificial intelligence from perpetuating gender stereotypes.
A group of researchers and military personnel at the Palm Center released a report examining how the Trump Administration’s ban on transgender troops has impacted U.S. military readiness. The group found that the ban has harmed the U.S. military across a broad spectrum of areas, including recruitment, reputation, and morale, concluding that the policy has been a net cost to the military and should be reconsidered.

FLASHBACK FRIDAY

In an essay, members of The Regulatory Review’s editorial board charted the history of regulatory efforts to protect the wild turkey population in the United States. In the early 20th century, the wild turkey population fell to a historic low of only 30,000 turkeys nationwide, with 18 of the 39 states that had been home to wild turkeys reporting that their populations were completely gone. A combination of land management and hunting regulations, however, has restored the wild turkey population, representing one of the great success stories of American wildlife conservation.

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Thankful, From a Distance

Thu, 26 Nov 2020 05:01:26 GMT

For many Americans, Thanksgiving weekend is a time filled with large family gatherings, joyful parties, and moments to reconnect with old friends and distant relatives. But this year, this cherished holiday in the United States will look different amid the ongoing coronavirus pandemic.

As COVID-19 cases rise in nearly every state, hospitals remain overwhelmed with patients, and many Americans continue their battle against the virus, federal and state governments have issued new guidance to help Americans celebrate Thanksgiving safely.

The safest way to spend Thanksgiving is by staying home with those in your household and celebrating virtually with others, according to the Centers for Disease Control and Prevention (CDC). With 1 million U.S. cases reported over the past week, the CDC warns that attending dinners or gatherings with individuals outside of one’s own household increases the chance of disease spread and transmission.

Despite these calls from public health experts at the CDC to stay home this Thanksgiving, nearly 50 million Americans are expected to travel for the holiday. Although the number of travelers making their journey by air is anticipated to fall by nearly 50 percent compared to last year, the number of guests making their way to a Thanksgiving celebration by car is expected to fall by only four points.

In its guidance, the CDC advises against travel by individuals in high-risk populations, such as people with cancer, who may become extremely ill if they contract the virus. The CDC also urges prospective travelers to consider the number of cases in their communities and destinations, whether hospitals in these areas are flooded with COVID-19 patients, and if state and local authorities have put in place any travel restrictions.

For Americans who still decide to travel over the holiday, the CDC emphasizes several ways to reduce risk of COVID-19 exposure, including wearing a mask in public places, maintaining six feet of social distance whenever possible, and practicing good hand hygiene, among other strategies.

No matter how far they may travel, Americans should also follow these same measures whenever attending gatherings with others outside of their immediate household. In addition to wearing a mask when not eating or drinking, the agency also recommends that guests bring their own food, plates, and cutlery, refrain from entering areas where food is prepared, and use disposable items such as single-use condiments.

For hosts, the CDC suggests having an outdoor meal—or, if weather prohibits outdoor dining, an indoor meal with fresh air circulation. Gatherings should also remain small and, ideally, among people who live in the same community. Hosts should regularly disinfect high-touch surfaces and items.

Throughout the country, state agencies have also issued similar guidance about gatherings.

Earlier this month, California’s Department of Public Health issued guidance that applies to any gathering, which the Department defined as “social situations that bring together people from different households at the same time in a single space or place.” Noting that the risk of COVID-19 transmission is higher at gatherings, the Department issued both recommendations and requirements for gatherings. For example, the Department recommends capping gatherings at two hours and it prohibits gatherings of four or more households. The two-hour guideline may fall squarely in line with a popular lifestyle blog’s recommendations for the length of the Thanksgiving meal. But those who treat Thanksgiving as “a day of feasting” may find this recommendation harder to follow.

Meanwhile, on the East Coast, the Connecticut Department of Public Health issued guidance on holiday gatherings tailored to both guests and hosts. According to the guidance, guests should avoid traveling long distances and bring personal protective equipment such as masks and tissues. Hosts should reduce the size of their guest lists as much as possible, and, in line with CDC guidance, they should use disposable items such as single-use plates and prioritize the use of outdoor spaces for the meal and other activities. Although Thanksgiving in Connecticut is expected to be warm, rain across the East Coast could thwart plans for outdoor meals, increasing the chance of disease spread.

After months of quarantining and social distancing, many Americans long for connection. Still, public health officials call on everyone in the United States to “hang in there and adhere to these public health measures” to ensure a safe holiday.

For our readers who celebrate Thanksgiving, we wish you a happy, and safe and healthy, holiday—no matter how or where you choose to spend it.

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How Land Use Reform Led to More Housing in Houston

Wed, 25 Nov 2020 05:06:24 GMT

For Houston residents, 1998 was a year of both trial and opportunity. A historic tropical storm made landfall in September of that year, dumping 17 inches of rain and causing extensive damage to over 1,400 homes and businesses.

Yet even as this Texas city struggled to recover from the wreckage, the Houston City Council prepared to pass a sweeping set of land-use reforms whose benefits in the long-term would far outweigh the damage from the storm. These reforms targeted the city’s subdivision ordinances that stipulated the minimum square footage for every residential parcel in the city.

By reducing its subdivision requirements, Houston’s land-use reforms enabled housing development to flourish in areas that would have otherwise been constrained by the pre-1998 subdivision rules, two land-use scholars show in a new paper. Nolan Gray and Adam Millsap, both affiliates of the Mercatus Center, argue that Houston’s subdivision regulations offer a model for other cities struggling with housing affordability. Not only did Houston’s housing revisions ultimately result in an increase in housing, but they also successfully overcame homeowner opposition, one of the single greatest obstacles to the development of new housing today.

Before it passed the 1998 reforms, Houston was already unique among major American cities because it was—and still is—the only large municipality that does not follow a system of Euclidean zoning.

Taking its name from the 1926 U.S. Supreme Court decision in Village of Euclid v. Ambler Realty Company, which officially recognized zoning as constitutional, Euclidean zoning regulates urban land use by separating a city into discrete areas where specific categories of development—residential or commercial, for example—are permitted. After the Supreme Court handed down the decision, Euclidean zoning quickly became ubiquitous in cities across America.

True to the spirit of the Lone Star State, Houston took the road less traveled, declining to adopt zoning even when proposed in three different public referenda.

Despite Houston’s repudiation of traditional zoning, Gray and Millsap explain that it nonetheless employs a system of land-use controls that operate like zoning regulation. Private deed restrictions, for example, are agreements that stipulate how a property may or may not be used and that allow individual property owners to dictate everything from land use to architectural design.

Houston’s subdivision regulations are another such form of informal zoning, as they effectively bar development on any parcel that does not meet the minimum lot size standard.

Before 1998, Houston mandated minimum lot sizes for detached single-family homes of a whopping 5,000 square feet. This requirement meant that only one house was permitted to be built for every 5,000 square-foot parcel, resulting in a uniform standard of suburban-style homes and preventing the development of smaller, denser housing more within reach of the city’s lower-income homebuyers.

As Houston’s population grew, however, so too did the demand for density, causing the city to soften its onerous minimum lot size standards. The 1998 subdivision reforms aimed to do just that.

When Houston’s reforms took effect in 1999, the default minimum lot size for all single-family homes dropped from 5,000 to 3,500 square feet. Moreover, homeowners and developers could even receive permission to build on lots as small as 1,400 square feet provided that they met certain additional lot coverage requirements.

Although these changes may appear technical, Gray and Millsap quantify just how pervasive their effects have been on Houston’s residential housing market.

Using data from the Harris County Appraisal District, Gray and Millsap reveal that the reforms unleashed a housing boom among residential parcels between 1,400 and 5,000 square feet. Comparing new development in 1997 to the peak building year in 2005, Gray and Millsap show that building activity rose more than 300 percent.

This dramatic increase was the logical consequence of the city’s subdivision reforms, Gray and Millsap argue. The same parcel that before 1998 could only accommodate a single house could now see the development of as many as three individual townhomes.

Moreover, Gray and Millsap point out that the post-1998 housing development was remarkable not only for the sheer quantity of new homes built, but also for the neighborhoods in which they were concentrated.

Analyzing the areas that saw the greatest development after 1998, Gray and Millsap found that new housing clustered in tracts with a high concentration of middle-income residents and underdeveloped or vacant land. The significance of this trend, they explain, is that it stands in contrast to development patterns in other housing-strapped cities, where real estate development is frequently linked to the gentrification of low-income neighborhoods and resident displacement.

Gray and Millsap contend that the success of Houston’s land-use reform was a product not only of the reform’s substantive merits, but also of its appeal to one of the greatest opponents of new housing development: homeowners.

The revised ordinance permitted groups of property owners to stipulate that their area be subject to a higher minimum lot size than the citywide default. Gray and Millsap refer to this special designation as the ordinance’s “opt out” provision because it provided an exemption for homeowners who opposed the default minimum.

Gray and Millsap argue that the opt out provision, coupled with the city’s system of private deed restrictions, placated property owners who, without such a provision, likely would have prevented the reforms from passing at all.

Gray and Millsap urge other cities to take cues from Houston in how it successfully overcame homeowner opposition to new housing. They suggest that rather than choose between vilifying or pandering to homeowners, cities should negotiate with them head on, offering meaningful concessions to obtain homeowner support for new housing policies.

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Having a Happy, Humane Thanksgiving Dinner?

Wed, 25 Nov 2020 05:03:24 GMT

As households across the country begin preparing their Thanksgiving feasts, a substantial number of Americans know little about the life—or death—of the animal who will serve as their table centerpiece.

The National Turkey Federation estimates that each year as many as 90 percent of U.S. consumers collectively eat about 46 million turkeys. Another 22 million turkeys are killed for Christmas dinner.

Investigations reveal that most turkeys found on supermarket shelves in North America were raised by the thousands in overcrowded, industrial facilities without access to fresh air or the outdoors—a miserable life no living being would be thankful for.

A world of difference exists in how individual turkey brands raise and slaughter birds. Fortunately, for those consumers interested in an alternative to traditionally raised turkeys, more options than ever exist. While a vast majority of turkeys are still raised on factory farms, specialty products such as “free range” and “organic” turkeys are increasing.

But buyers should beware. A slew of misleading turkey labels—effectively sanctioned by the U.S. Department of Agriculture (USDA)—hinder consumers from properly evaluating animal welfare and environmental claims.

For example, consumers might assume they are getting a higher-welfare product if they choose a turkey labeled “USDA Certified Organic.” USDA certification, however, does not include robust standards for animal welfare. USDA-certified organic standards contain only vague welfare criteria, and in 2018 USDA withdrew an Obama-era rule meant to raise the standard of care for chickens and turkeys under this program.

Another popular claim on turkey products—“free range”—similarly does not guarantee better animal welfare. The USDA defines this claim “as the animal having access to the outdoors,” yet this characterization comes with neither independent verification nor requirements concerning a range’s quality and quantity. In reality, the “range” may be no more than a small stretch of gravel or dirt.

In industrial systems, turkeys that may reach 20 pounds or more are packed tightly together, each limited to only a few feet of space. Producers perform painful mutilations—such as cutting off the ends of a bird’s beak, toes, and waddle—to stop aggressive behaviors that result from these over-crowded, stressful conditions. They typically confine turkeys to windowless sheds to minimize aggression and encourage weight gain.

Turkeys in industrial systems are also exposed to high levels of toxins such as ammonia from waste and suffer from a variety of health and welfare issues due to selective breeding for faster growth and higher meat production. Heritage breeds raised in traditional range-based systems that prioritize longer lifespans outdoors take about 28 weeks to reach market weight. In contrast, today’s commercial male turkey reaches market weight in just 18 weeks. Modern turkeys grow so abnormally fast that their bodies cannot keep up—they often suffer from skeletal deformities and lameness and are too large to mate naturally.

Inhumane conditions continue during transport from the farm and at the slaughterhouse. Every year, government inspectors document the suffering of tens of thousands of chickens and turkeys from suffocation, blunt force trauma, and heat or cold stress—much of it occurring before the birds even reach the slaughter line. Among the recent incidents:

Inspectors cited the Moroni Norbest brand turkey processing plant in Utah approximately 20 times over a two-year period for holding birds on trucks without food, water, or proper protection from extreme temperatures for a day or more.
Inspectors cited the Butterball turkey plant in North Carolina for keeping truckloads of hens crammed in small cages on the premises without food or water for 31 hours. Inspectors noted that the birds showed evidence of attacking one another. Blood was visible on some birds’ beaks, and numerous birds had large, exposed wounds.
Inspectors cited a Jennie-O slaughter plant in Minnesota nine times within a four-month period for severe injuries to turkeys, including large areas of “torn skin, hemorrhage, and muscle mutilation” due to malfunctioning equipment.

In August, the Animal Welfare Institute and Farm Sanctuary sued USDA “for failing to require humane handling of poultry at slaughter,” which can compromise food safety and meat quality.

Consumers committed to purchasing higher-welfare turkey and other meat products should seek out producers whose practices are verified by independent auditing programs. Animal welfare standards can vary greatly, however, even among third-party food certifications. Some programs reflect only marginal improvement over conventional industry practices.

To help consumers make more informed food choices, the Animal Welfare Institute publishes a comprehensive guide to animal-raising claims commonly found on meat, egg, and dairy products. The guide identifies labels that consumers can trust, such as the “Certified Animal Welfare Approved” label (administered by A Greener World) and Global Animal Partnership (Steps 4, 5, and 5+), along with claims that are too vague or subjective to have any bearing on animal welfare, such as “natural,” “thoughtfully raised,” and “ethically raised.”

Although consumers can identify turkey products that come from birds experiencing a life worth living, some research and investigation is required to navigate the maze of competing brands and confusing labels.

A more surefire alternative that would ensure a holiday dinner is cruelty-free is simply to leave turkey off the plate. Indeed, a growing number of Americans are celebrating life and compassion during the holiday season by choosing to serve delicious, plant-based protein options.

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Injecting Ethics Into Vaccine Mandates

Tue, 24 Nov 2020 05:06:54 GMT

As he sat in church one Sunday morning, observing how a place of worship is the perfect petri dish for measles to spread, pediatrician Joshua Williams thought to himself that “a church is no sanctuary for measles”—nor is it one for COVID-19.

Amid forecasts that a coronavirus vaccine could be available by the end of 2020, some health policy experts argue that vaccine mandates are necessary to support public health, research, and confidence in government. Although over half of Americans say they would get vaccinated against COVID-19, 12 percent of Americans still do not trust vaccines even though vaccines have been shown to be safe and effective. Among the vaccine skeptics are those Americans who offer religious reasons for their concerns.

In a paper published last year, Williams uses the 2019 measles outbreak as a case study to propose three ways that state laws can balance religious concerns about vaccines with the health threats that communities face from the spread of communicable diseases and viruses.

According to the latest data, the annual number of measles cases in the United States has reached its highest level in nearly three decades. The rise in measles and now spread of COVID-19 reveals the challenges that local, state, and federal officials face in their efforts to promote vaccination.

In response to the recent measles outbreak, some states ended religious exemptions to mandatory vaccination laws or imposed school attendance bans for unvaccinated children. These actions, state officials argued, were necessary to protect public health and combat the spread of measles.

But Williams, a proponent of vaccines, contends that states can do a better job of balancing competing values in vaccine enforcement. He argues that state policies should respond to religious objections to vaccination by expanding education on the benefits of vaccination while demonstrating respect for religious autonomy.

Enforcing vaccination mandates with criminal sanctions on noncompliant families, as some states already do for measles, only stigmatizes certain religious groups, Williams argues. Instead, he suggests that vaccine regulation should rely on principles of an ethical concept known as Beloved Community.

Beloved Community articulates a vision of society where conflict is inevitable, but laws promote dialogue and justice instead of fear of differences. Although some Beloved Community principles, such as avoiding retribution, could conflict with vaccine policy, Williams asserts that Beloved Community’s general concept can and should inform states’ regulatory approaches to an issue that is fraught with ethical dilemmas. Williams offers three proposals for states to adopt when developing their public health strategies on vaccinations to prevent the spread of communicable diseases.

First, he urges policymakers to assess the ease with which individuals can obtain religious exemptions under current regulations.

The United States does not have a federal vaccination law, but all states have laws that condition school attendance on whether students have received certain vaccines. Most states, however, provide exemptions for families who assert that vaccination conflicts with their religious beliefs.

The majority of exemption laws require parents or guardians only to sign a form to opt out of vaccines. Although such laws provide a great degree of religious autonomy, Williams argues that policymakers should consider the potential costs of exemptions that are too easy to obtain, as vaccine-preventable diseases can have life-threatening implications.

Instead, Williams advocates the adoption of exemptions that would require a written statement articulating parents’ religious beliefs, stating the reasons for their objections to vaccines, and providing a signature of a religious leader from their faith. Such a rule would take individuals’ religious beliefs seriously while providing a heightened standard for exemption qualification. In fact, states that have imposed such requirements on exemptions have fewer guardians and parents claiming exemptions and fewer cases of vaccine-preventable diseases, explains Williams.

Second, Williams advises state public health officials to enforce vaccination requirements consistently across public schools.

In North Dakota, for example, inconsistencies in enforcement at different schools resulted in disparate vaccination rates across the state. In response, North Dakota implemented a rule that allows the state to refrain from funding schools with lax enforcement. That same rule also established local compliance programs and instructed school officials to send letters to families of unvaccinated children. Together, these strategies raised vaccination rates across the state while engaging families at a local level by first promoting vaccination instead of imposing immediate penalties.

Finally, Williams encourages officials to enact rules that specifically respond to noncompliant religious communities prior to and during vaccine-preventable disease outbreaks.

For example, educational modules for parents before the school year could encourage vaccination while fostering dialogue—a key principle of Beloved Community—Williams asserts. Although parents of certain faiths may never agree to vaccination, Williams advises state officials to engage with religious leaders to attempt proactive measures, such as partnering with state departments of health to identify best practices for outbreak prevention within noncompliant communities.

Laws may even need to target specific religious communities that remain largely unvaccinated and therefore experience higher rates of a vaccine-preventable disease, Williams suggests.

In New York City, unvaccinated children in Orthodox Jewish communities accounted for most of the cases in the state’s most recent measles outbreak. To curtail the spread of the disease, the New York City Department of Health and Mental Hygiene issued an emergency order in April 2019 mandating unvaccinated residents of neighborhoods with a high Orthodox Jewish population to receive a measles vaccine. The government imposed a violation and a fine on noncompliant individuals and those who could not show evidence of immunity to measles.

Williams notes that disease outbreaks can create enduring “cracks” among diverse communities if officials respond with policies that fail to respect religious differences. But he nevertheless expresses support for New York City’s emergency order since, despite its targeting of a specific religious community, the city still tried to adhere to principles of Beloved Community.

For example, during the emergency order, city officials collaborated directly with Hasidic leaders to educate Orthodox Jewish communities on the benefits of vaccination and to combat misinformation campaigns. Through partnerships with local leaders and residents, the city eventually rescinded its emergency order and declared an end to the measles epidemic.

Williams concludes that inclusive efforts such as New York City’s reveal how Beloved Community concepts can balance ethical conflicts when implementing vaccine regulations—a lesson that may prove valuable today as the world nears an available vaccine against the deadly coronavirus.

The post Injecting Ethics Into Vaccine Mandates first appeared on The Regulatory Review.

Turning the Senate Blue and the Cabinet Red

Tue, 24 Nov 2020 05:03:39 GMT

With former Vice President Joseph Biden the clear victor of the 2020 presidential election, attention can turn to the U.S. Senate. President-Elect Biden’s ability to pass significant legislation and implement his agenda rests largely on Democratic control of the Senate.

Unfortunately, we will be left waiting to know which political party will control the Senate until at least January 5, 2021, when Georgia will hold two runoff elections.

Al Gross’s loss in Alaska and Cal Cunningham’s loss in North Carolina dashed Democratic hopes for a true Senate majority. At best, Democrats can hope for 50 seats in the Senate, with Vice President-Elect Kamala Harris as a tie-breaker.

That outcome would oust Senator Mitch McConnell (R-Ky.) from his current position as majority leader. McConnell has indicated that, if he remains majority leader, he does not plan to support President-Elect Biden’s policy agenda. And he has promised that he will not only oppose Democratic legislation but also resist President-Elect Biden’s nominees for Cabinet and administrative appointments.

The appointment process for cabinet positions has not historically been a partisan power grab. Throughout the entirety of U.S. history, the Senate has only rejected a President’s nominee nine times. Past Presidents have successfully appointed cabinet members from opposing parties. Both President Barack Obama and President George W. Bush appointed Secretaries of Transportation from the other party. President Obama nominated and the Senate confirmed Republican Robert Gates and later Republican Chuck Hagel as Secretaries of Defense.

But under Senator McConnell’s lead, it seems likely that a Republican Senate majority would prevent President-Elect Biden from appointing permanent cabinet members. If the Senate is controlled by Republicans, will President-Elect Biden be able to get anything done?

One answer can be found in a tweet from comedian Wenzler Powers. He has jokingly suggested that President-Elect Biden nominate Senator Susan Collins (R-Maine) as Secretary of State so that Democratic Governor of Maine Janet Mills would get to choose who should replace Senator Collins. Governor Mills would presumably choose someone from the Democratic Party, which would give Democrats control of the Senate even if the Democrats lose one of the Senate bids in Georgia.

But even if Democrats win both Georgia runoffs, creating an evenly split Senate, President-Elect Biden will not have an easy time legislating. He will not enjoy the 60-seat Senate majority that President Obama had near the start of his first term that enabled Democrats to end debate on legislation and ensured the passage of the Affordable Care Act.

If President-Elect Biden wants to try to stack the deck in his favor at least a little more, he might try to nominate Republican senators to his Cabinet.

President-Elect Biden has already indicated that his transition team is vetting Republicans for cabinet positions. Nominating a current Republican Senator could help with both the Senate confirmation process and with President-Elect Biden’s reputation for bipartisanship. As icing on the cake, it could also help him win potentially several more votes in the Senate.

In 37 states, the governor appoints someone to fill Senate vacancies, and the governor’s appointee serves until the next already scheduled, statewide general election. Of these 37 states, six require that the governor’s appointee shares the political party of the vacating senator. These states include Arizona, Hawaii, Maryland, North Carolina, Utah, and Wyoming. In the other 31 states, with a few exceptions, governors have discretion as to whom to appoint to fill the vacancy.

Based on state law, Democratic governors would appoint replacements for the following senators should they be confirmed to a cabinet position: Senator Jerry Moran (R-Kan.), Senator-Elect Roger Marshall (R-Kan.), Senator McConnell, Senator Rand Paul (R-Ky.), Senator Collins, and Senator Pat Toomey (R-Pa.).

Senator Collins and Senator Toomey are the best prospects for President-Elect Biden to nominate to cabinet positions.

Senator Collins ran for re-election this year based on her contrarian streak. She began to close in on the Democratic candidate’s lead and saved her Senate seat due to her vote against confirming Justice Amy Coney Barrett to the U.S. Supreme Court. As the only Republican Senator that voted against Justice Barrett and as one of only five Republican senators, including Senator Toomey, that congratulated President-Elect Biden’s victory, she may be more likely to accept a cabinet position.

Senator Toomey has said that he will retire from politics at the end of his term in 2022, which makes him another potential target for a cabinet position, since he already plans on leaving the Senate. Nominating Senator Toomey or Senator Collins would force Senator McConnell to refuse to confirm his own colleagues—members of his own party—to keep control of the Senate.

Of course, this idea is a longshot. President-Elect Biden would have to get Senator Collins and Senator Toomey to agree to accept the nomination, with both senators knowing that their departures would likely give Democrats control of the Senate. And McConnell would need to overlook the major political ramifications of these confirmations—which seems unlikely.

President-Elect Biden might also face opposition from the left for these nominations because many progressives are disappointed with his consideration of members of the Republican Party for cabinet positions. But if President-Elect Biden can promise progressives greater Democratic control of the Senate by nominating a member of the Republican Party, perhaps he will endure less criticism.

Much may depend on the outcome of Georgia’s runoff elections in January. If only one Democrat wins, then appointing Senator Collins and Senator Toomey could be President-Elect Biden’s Hail Mary pass if he hopes to have any chance of accomplishing his ambitious legislative agenda during a time of crisis. If the Senate remains in obstructionist hands, his best bet will be to try to take control of the Senate by sacrificing a couple of positions in his Cabinet to the Republican Party.

The post Turning the Senate Blue and the Cabinet Red first appeared on The Regulatory Review.

Encouraging Efficient Errors in AI Technologies

Mon, 23 Nov 2020 05:05:01 GMT

Artificial intelligence (AI) is ushering in a brave new world. Critics decry computer vision as “killer robots,” denounce autonomous vehicles as unethical, and accuse AI innovations at large of “summoning the demon.” Restrictive regulations are often lauded as a logical line of defense against consumer harms.

But strict liability—de facto responsibility for manufacturers—is the wrong regime to regulate this growing sector. In a new research paper, I examine the shortcomings of the current tort regime and propose a new framework to fit public policy objectives of innovation incentives, manufacturer responsibility, and consumer protection.

Strict liability penalizes manufacturers for consumer harms regardless of knowledge or precautions, which stifles innovation. Furthermore, existing literature overlooks the reality that many of these mistakes—which I call “efficient errors”—are beneficial to innovation and benign to consumers. Classifying all errors as per se inefficient is problematic: This logic is noneconomic, depriving consumers of incredible advances in financial literacy, labor, digital pathology, fraud detection, business management, medical care, and analyses of large datasets across industries.

In many cases, efficient errors are tolerable because AI performance nonetheless surpasses human baselines. AI lacks the biological limitations and psychological fallacies of its human counterparts—an AI surgeon will never forget a sponge in a patient’s body, and an AI doctor will more accurately identify patients at high risk of fatal heart attacks. If underlying data used to train AI are inherently rife with human errors, subsequent remedial measures should focus on fixing the root of the bias—humans—instead of merely the symptoms—AI.

For other cases, efficient errors are unavoidable because game theory—where one’s gain entails another’s loss—plagues alternative courses of action. AI technologies must make decisions that compromise between individually and systemically rational choices, which are often at odds. For instance, an autonomous driving system may have to choose between the good of the community, such as avoiding pedestrians, and the good of the individual, such as protecting the driver. Because even human subjects find these choices difficult, such cases should be left to a jury.

In addition, some errors are necessary for AI technologies to learn and improve. According to the exploration-exploitation theory, all decision-making involves a fundamental choice at each step: “exploit” by making the best decision given current information, or “explore” by gathering more information. The choice to explore may result in an immediate outcome that is worse than the current best outcome yet provides invaluable advancements for the technology.

Lastly, some AI errors pose no harms but are misclassified due to outdated legal frameworks meant for old technologies. For instance, the National Highway Traffic Safety Administration’s pre-1980s regulations still require all vehicles, including autonomous ones, to be equipped with side-view mirrors—no matter that an autonomous vehicle does not need such additions. Manufacturers should not incur penalties for surface violations of outdated regulations.

Regulating AI manufacturers under the negligence rule likewise proves inadequate, rendering recouping damages impossibly difficult for consumers. Negligence may fit traditional products, where a plaintiff can simply trace causation back to the negligent individual who caused the error, but for AI technologies, the “black box” of AI algorithms obscures the vectors of causation. Under a negligence regime, although proving causation by the AI generally is simple, proving causation by the human agent behind the AI is difficult, and as a result, consumers will be unable to meet the outdated causation burden—the linchpin of the case.

An effective tort regime must navigate a middle ground. The current system deals out rough justice—strict liability for some AI products and the negligence rule for other AI services—both of which fail to account for the unique characteristics of AI that ultimately create commercial value.

Instead, I propose a new framework to regulate AI technologies: bestowing corporate personhood. Under this proposal, AI systems would themselves be incorporated as a limited liability corporation subject to direct liability, while their human members or managers would face limited liability for harms resulting from the technology.

Corporate limited liability strikes an optimal balance between manufacturer liability and consumer compensation. Manufacturers are relieved from absolute liability, which enables experimentation and innovation. The AI black box transforms from an insurmountable impediment to an accessible compensation target through an easier causation burden, mandatory corporate insurance, and accountability mechanisms such as “piercing the corporate veil,” whereby limited liability of human members, managers, and shareholders is lifted to hold these agents responsible for egregiously wrongful acts.

Many critics have resisted reevaluating the tort regime for AI technologies, arguing that calling AI “persons” is “highly counterintuitive” when they lack “additional qualities typically associated with human persons, such as freedom of will, intentionality, self-consciousness, moral agency, or a sense of personal identity.”

Such arguments are non sequiturs. The issue is a legal matter of policy innovation and consumer protection, not philosophical intuition. Corporate personhood does not require proof that AI is equivalent to a natural person. Corporate divisibility permits the grant of “more, fewer, overlapping,” or disjointed sets of rights and obligations, which circumvents the philosophical criticisms of giving AI the complete set of rights of full legal personhood. The current tort system needs urgent renovation that equally considers consumers and manufacturers alike.

The post Encouraging Efficient Errors in AI Technologies first appeared on The Regulatory Review.

Reforming Federal Income Tax

Sat, 21 Nov 2020 05:05:35 GMT

$750.

That is how much President Donald J. Trump reportedly paid in federal income taxes each year in 2016 and 2017. Americans with adjusted gross income—the amount of money an individual earns through wages, dividends, capital gains, and other sources minus certain deductions—of around $25,000 typically pay more in federal income taxes than President Trump did in those two years.

How can someone who claims to be worth $8.7 billion pay only $750 in federal income taxes?

Taxation occurs when an authorized entity, typically the government, imposes an involuntary fee as a means of raising money. Taxation exists in the United States at the federal, state, and municipal level. As one tax policy organization states, taxes generally fall into three categories: “taxes on what you earn, taxes on what you buy, and taxes on what you own.”

Federal income tax, as the name suggests, is a federal tax on the income that individuals earn. The federal government derives its general power to tax from Article 1, Section 8 of the U.S. Constitution, which states that “Congress shall have power to lay and collect taxes.” The 16th Amendment, ratified in 1913, further establishes the power to tax income by giving Congress the “power to lay and collect taxes on incomes, from whatever source derived.”

Congress has delegated much of its authority to administer the tax laws to the Internal Revenue Service (IRS). Congress founded the government office that Americans know today as the IRS in 1862 to raise funds to help finance the American Civil War. Since then, income tax rates have fluctuated with different administrations. The Tax Cuts and Jobs Act of 2017, the latest in a litany of American tax legislation, has “helped push the tax rate on the 400 wealthiest households below the rates for almost everyone else.”

This recent tax cut, along with numerous loopholes that allow for the exemption of what might otherwise be taxable income, has allowed individuals such as President Trump to reduce their tax obligations significantly.

Critics point to this seeming inequality as another failure in America’s broken tax system. Although certain taxpayers might continue to boast about being “smart” by exploiting tax laws, some economists urge that a more progressive tax system—a system where higher earners pay a higher tax rate—along with increased enforcement of tax violations, can help “fix tax injustice.”

In this week’s Saturday Seminar, scholars discuss income tax law and proposals to change an imperfect system.

“America taxes wages, not wealth,” Edward McCaffery of the University of Southern California Gould School of Law writes in the Indiana Law Journal. McCaffery notes that this distinction between wages and wealth has allowed the savvy rich who technically generate little to no annual income to avoid paying income taxes. New tax law proposals from politicians such as U.S. Representative Alexandria Ocasio-Cortez (D-N.Y.) and U.S. Senator Elizabeth Warren (D-Mass.) represent steps in the right direction but still do not fully erase the wages and wealth distinction, he argues. Instead, McCaffery pushes to replace the current income tax structure with a spending tax that “would tax people on what they spend, whether financed by wages or wealth.”
A wealth tax would apply to an individual’s entire net worth, including bank accounts, stocks, and luxury goods. Some critics argue that such a tax would be unconstitutional because it is a direct tax. All non-income direct taxes must be apportioned based on state population; the federal government cannot collect them directly from the taxpayer. The University of Texas at Austin School of Law’s Calvin H. Johnson, however, argues that wealth taxes are not direct taxes and are exempt from the apportionment requirement. He explains that “wealth taxes were once considered direct taxes” because wealth was “presumed to be equal among the states.” Because that assumption no longer holds, Johnson argues that the founders’ definition of a direct tax does not cover a modern wealth tax. Like an import tax, the Constitution allows the federal government to levy a wealth tax without apportionment, Johnson suggests.
The tax reform debate focuses too much on economic efficiency and too little on promoting equity, argues James R. Repetti of Boston College Law School in an article published in the Florida Tax Review. Repetti advocates progressive tax structures, which institute a higher tax rate on wealthier individuals and a lower tax rate on poorer individuals, to address wealth inequality. Progressive tax systems promote democracy by “ensuring that the voice of the poor is not entirely eclipsed by the wealthy,” Repetti claims.
In an article published in the Houston Law Review, Heather M. Field of the University of California Hastings College of Law claims that the term “tax loophole” describes a wide and disparate range of provisions. Field fears that the term’s lack of precision muddies discourse about tax policy. Instead of trying to define the term more precisely, Field argues that the true meaning of “tax loophole” might be uncovered by identifying the normative policy objection and the persons blamed for the issue. Identifying the contextual meaning of “tax loophole” can facilitate meaningful conversations about tax reform, Field claims.
Most major regulations undergo centralized review by the Office of Management and Budget (OMB) before implementation. Tax regulations, however, do not undergo this review, explains Clinton G. Wallace of the University of South Carolina School of Law. In an article published in the Alabama Law Review, he argues for requiring OMB review for certain categories of tax regulations. For example, when a regulation would allocate private tax revenue for public use, Wallace recommends that OMB review the agency’s estimate of how much revenue the regulation would generate. This review, he claims, would ensure that the agency properly carries out what Congress intended when it gave the agency power to enact the regulation.
Taxpayers use IRS Form 1040 for personal income tax returns. Jay Soled, tax professor at Rutgers University, and Kathleen Thomas, director of the UNC School of Law Tax Institute, discuss in a Boston College Law Review article how Form 1040s are almost always filled out by tax return preparers or software companies. Both operate under “little regulatory oversight,” according to the authors, which allows tax preparation services to exploit the gap between Congress’s goal of maximizing its tax revenue and tax preparers’ attempts to minimize their clients’ tax obligations. To close this tax gap and increase tax compliance, Soled and Thomas argue, Congress should increase oversight of both kinds of tax preparers.

The post Reforming Federal Income Tax first appeared on The Regulatory Review.

Reigning in Immigration Adjudicators

Fri, 20 Nov 2020 05:06:30 GMT

For decades, immigration officials have interpreted the law with the understanding that courts would rarely question their decisions. Now, two scholars challenge the logic behind having courts afford immigration officials such broad deference when reviewing their decisions.

The court’s deference to immigration officials derives from a U.S. Supreme Court decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council. In Chevron, the Supreme Court established that agency interpretations of ambiguous statutory language should receive substantial deference when subject to judicial review. The Court justified this deference using a theory of delegation —that Congress intended to delegate to executive agencies the responsibility of resolving statutory ambiguity.

Critics have called to eliminate Chevron deference throughout the past decade. Many academics and judges, including Supreme Court Justice Neil Gorsuch, argue that deferring to agencies on statutory interpretation is an “abdication of the judicial duty” to construe the law. Although the doctrine remains intact, some predict that it is in imminent danger, especially in light of Justice Amy Coney Barrett’s confirmation to the Supreme Court.

In a recent paper, law professors Shoba Sivaprasad Wadhia and Christopher J. Walker join the call to eliminate Chevron deference—but only in a narrow sense. They urge the “surgical” removal of Chevron deference for agency interpretations made in immigration adjudications, while preserving it for courts’ review of immigration rulemaking. Under their proposal, courts would more closely scrutinize immigration decisions made by the Board of Immigration Appeals (BIA) and the Attorney General—the two main immigration adjudicators.

To frame their critique, the authors identify the four primary rationales for delegation that justify Chevron deference: the comparative expertise of agencies, the flexible deliberative process agencies employ, political accountability of agencies; and national uniformity of law. Three of these rationales, however, “collapse” in the immigration adjudication context.

The primary rationale that Wadhia and Walker argue underlies the delegation theory is that federal agencies possess expertise—both technical and legislative—that the courts do not. Agencies often fill statutory gaps that demand “scientific, technical, economic, or other subject-matter expertise,” which fall outside a judge’s traditional skillset.

Immigration adjudication requires no such expertise. Rather, it demands that adjudicators employ rigorous legal interpretation of complex statutes and regulation, which is “precisely the sort of expertise that federal courts have.” Even more, the hiring requirements for the BIA—the primary immigration adjudicators—do not require substantive experience, much less any subject-matter expertise.

As for legislative expertise, agencies frequently possess “special insight” into the goals behind legislation, which weighs in favor of deferring to their interpretation. Although this may be true in rulemaking, it is less so in agency adjudication. Indeed, neither the BIA nor the Attorney General—another key immigration adjudicator—consults with agency legislative experts when interpreting statutes in adjudication.

The second rationale underlying the delegation theory that Wadhia and Walker suggest is that agencies engage in a wide-ranging deliberative process that “incorporates all stakeholders,” but courts can only consider the cases before them. Because of this process, the argument goes, agencies should be entitled to substantial deference when their decisions are reviewed. That unique deliberative process, however, is only apparent in agency rulemaking, a process that proceeds entirely in the public eye and welcomes input from relevant stakeholders.

Immigration adjudication stands in stark contrast. For one, immigration adjudication offers few procedural protections for immigrants. In addition, politics have overtaken the immigration adjudication system. As a former BIA chair explained, “the BIA is not a court anymore. It’s an enforcement mechanism.” These are hardly the features of a deliberative process deserving of the substantial deference afforded by Chevron, Wadhia and Walker conclude.

The third reason Wadhia and Walker pose for delegation is the comparative political accountability of agencies relative to courts. Conventional wisdom assumes that agencies are more politically accountable than a federal court, so deferring to agencies reduces partisanship in judicial decision-making. Although it may not be their most powerful point, Wadhia and Walker argue that such wisdom applies more forcefully to rulemaking than it does to adjudication. Indeed, immigration adjudication often “lacks the hallmarks of public engagement and transparency that is commonplace in rulemaking.”

Finally, Wadhia and Walker propose that a desire to promote national uniformity in federal law partly motivates Chevron deference. Here, agency adjudication may better promote this goal than the judiciary, but this preference for legal uniformity is only one of four factors. When considering the other three, “the case against Chevron deference in immigration adjudication becomes so clear as to justify some course correction to narrow Chevron’s domain.”

In turn, Wadhia and Walker identify three potential institutions that could bring about this reform: the Supreme Court, Congress, and the executive branch itself. The Supreme Court, for its part, could simply decide to exclude immigration adjudication from Chevron deference. Alternatively, Congress could pass legislation that requires courts to review immigration decisions with less deference, which Congress has done in another context. By requiring a more exacting review of immigration adjudication, “the BIA and Attorney General will face greater incentives to exercise expertise and engage in reasoned decision-making.”

Finally, the executive branch could unilaterally implement this change by affirmatively seeking less deference from courts reviewing immigration decisions. In fact, the U.S. Department of Justice has recently taken similar action in the context of agency guidance. Whether an agency can unilaterally waive Chevron deference is unsettled, but an agency should at least adjudicate as if it will face minimal deference.

Several lawmakers have warned that restricting the scope of Chevron deference will have “titanic real-world implications.” From Wadhia and Walker’s perspective, however, narrowing Chevron is “more consistent with Chevron’s theoretical foundations.” But perhaps even more importantly, requiring courts to scrutinize the decisions of immigration adjudicators could result in fairer outcomes for immigrants to the United States.

The post Reigning in Immigration Adjudicators first appeared on The Regulatory Review.

Improving Consumer Finance by Regulation

Fri, 20 Nov 2020 05:05:25 GMT

To financial regulations, banks often say “Bah! Humbug!”—as the fictional money lender Ebenezer Scrooge said to Christmas traditions.

According to a recent paper by Professor Natasha Sarin, this is exactly how financial institutions reacted to legislative efforts to mitigate the subprime mortgage crisis effects of 2008. In her paper, she revisits the banking activity with the “ghosts of the past, present and yet to come”, as Scrooge faced in his journey, to instigate change in financial institutions operating in the consumer finance market.

In this saga of consumer finance redemption, Sarin offers empirical contribution on the leading reforms to the financial services sector enacted after the crisis. Sarin uses the available data, produced in the 10 years following the recession, to provide advice on how to improve the consumer finance market.

Sarin demonstrates that, of the three major regulations in this market, only two worked as intended. The Durbin Amendment failed in meeting its goal—and in fact harmed a considerable number of consumers. The other two rules—the CARD Act and overdraft policy changes—effectively corrected the aimed market problems and benefited consumers.

The Durbin Amendment required the Federal Reserve System to establish rules limiting debit interchange fees by capping the rates, intending to lower the consumer prices, by decreasing products’ final presented costs. Interchange fees are fees that banks collect from a merchant for processing card transactions. These fees used to be so high that they were the “second-highest cost of operating after labor,” Sarin states.

Sarin argues that the outcome of this well-intended regulation was twofold. First, the interchange fee dropped substantially after the amendment came into effect—as expected. Nevertheless, by increasing other consumer fees, such as reducing free checking accounts offered to consumers, banks managed to recover almost all of the loss due to the regulation—an unexpected substitution of revenue, Sarin argues.

Second, Sarin contends that, contrary to what defenders of the amendment expected, the regulation did not enable small businesses to lower product costs offered to consumers. This frustration occurred because small merchants that already had deals with low interchange fee rates, saw their bank agreements change as banks had to comply with a new rate cap, with a higher floor of what they used to pay.

By contrast with the failure of the Durbin Amendment to achieve its goals, the CARD Act and overdraft policies generally succeeded, as Sarin shows.

The CARD Act banned abusive contract terms that charged clients high credit back-end fees without their knowledge or permitted banks to increase clients’ interest rates without their consent. Sarin contends that this regulation reformed the fundamentals of credit card business by guaranteeing consumer security when engaging in credit purchases, limiting bank’s offerings of inconspicuous contract terms by restricting repricing policies.

In effect, Sarin demonstrates that, since the enactment of this regulation, interest rates for these bank services did not increase, demonstrating the satisfaction of the intended regulatory goal. Sarin shows, however, that banks increased other unregulated fees less salient to consumers, as a direct response to the CARD Act. But even with these increases, rates were not as high as before.

The overdraft policy changes aimed to protect low-income consumers from constantly incurring overdraft fees. Overdrafting occurs when individuals withdraw amounts exceeding the available funds in their bank accounts, incurring high penalties if the amount is not replenished in a determined timeframe.

According to Sarin, overdrafting typically occurs with low-income consumers, who then suffer a greater impact from the exorbitant default fees. This type of consumer is also usually less financially savvy, and almost all consumers who overdraft were unaware about their financial condition, writes Sarin.

The overdraft regulation adopted an opt-in policy, in which banks can only charge overdraft fees if consumers actively opt into overdraft transactions. The default plan blocks any exceeding transaction from being completed. As a result, Sarin indicates that banks’ overdraft revenue decreased substantially after the enactment of the regulation. The institutions seem not to have yet recovered these losses, suggesting a permanent positive outcome for consumers.

Considering the outcome of these major regulations that sought to mitigate consumer financial issues, Sarin offers some guidance to financial regulators on how to improve their rules in the “yet to come.”

First, regulators should target hidden prices and non-salient terms of bank services, as consumers tend to ignore less obvious fees, incurring exorbitant penalties for simply not paying attention, as Sarin explains.

Second, Sarin argues that regulators should intervene to prohibit “inequitable cross-subsidization,” the economic phenomenon in which low-income consumers pay higher values in services so that banks may lower prices for high-income consumers. Sarin explains that all three regulations analyzed featured cross-subsidization in some measure.

Finally, Sarin contends that regulators and scholars should pay more attention to what banks and financial institutions do, instead of what they say or demand. The influence of big banks in the regulatory process tends to impact negatively the efficacy of regulations. Too often scholars simply accept unrealistic claims made by financial institutions, she notes.

Sarin believes that valuable lessons may be gained from studying how regulation has worked in the debit, credit and overdraft markets. Such experience should be taken into account to pave the way for regulation that better protects consumer welfare in winters to come.

The post Improving Consumer Finance by Regulation first appeared on The Regulatory Review.

Week in Review

Fri, 20 Nov 2020 05:05:02 GMT

IN THE NEWS

The Pennsylvania Supreme Court ruled that Philadelphia’s protocol for letting election observers watch ballot counting followed state law. The Philadelphia Board of Elections maintained at least 15 feet of separation between observers and the workers counting ballots, which the Trump campaign argued was a violation of election law. The court held that separation between poll workers and observers complied with Pennsylvania law because the law requires that observers must be allowed “in the room” where ballots are counted but does not set any further requirements for the distance between observers and the counting tables. Jenna Ellis, a Trump campaign senior legal adviser, reportedly called the ruling “contrary to the clear purpose of the law.” Justice Debra Todd wrote the opinion and argued that “it would be improper for this Court to judicially rewrite the statute by imposing distance requirements where the legislature has, in the exercise of its policy judgment, seen fit not to do so.”
The Federal Aviation Administration (FAA) rescinded a grounding order for the Boeing 737 Max passenger airplane following an investigation of two crashes that killed 346 people in 2018 and 2019. Along with its rescission of the grounding order, the agency also issued an airworthiness directive that instructs Boeing to work with airlines to revise flight procedures and to implement updated flight control systems. One day before the FAA issued the order, the U.S. House of Representatives enacted a law that requires the FAA to reform its safety certification process for new aircraft and requires aircraft manufacturers to adopt safety management procedures according to international standards. The law follows an investigative report by the House Committee on Transportation and Infrastructure that revealed that the crashes were caused in part by Boeing’s faulty design and “culture of concealment” in addition to the FAA’s failure to exercise proper oversight.
Acting Secretary of Defense Christopher Miller announced President Donald J. Trump’s decision to withdraw troops from Afghanistan and Iraq. Miller stressed that there would be 2,500 troops in Afghanistan and 2,500 troops in Iraq by January 15, 2021, five days before President Trump is expected to leave office. A senior defense official reportedly expressed confidence in the ability of the remaining troops to accomplish U.S. Department of Defense goals. Top Defense Department officials, however, have reportedly advised against reducing troops for months because the situation has not improved enough for troops to be withdrawn. U.S. Representative Mac Thornberry (R-Texas), ranking member of the House Armed Services Committee, reportedly called the withdrawal “a mistake.”
U.S. Secretary of State Mike Pompeo issued guidelines to label goods produced in West Bank settlements as “Product of Israel” or “Made in Israel” to promote consistency with United States foreign policy. Secretary Pompeo also directed an office in the U.S. Department of State to identify organizations that support the Global BDS Campaign—which calls for divestment from companies and organizations that support Israel—and reconsider funding to those organizations. On the same day that he issued these announcements, Secretary Pompeo became the first top U.S. diplomat to visit an Israeli settlement in the West Bank region.
The U.S. Food and Drug Administration granted emergency use authorization for a COVID-19 test that can be administered without sending samples to a lab. The $50 test is a single-use, nasal swab that can deliver results in as little as 30 minutes. The clinical study supporting the authorization showed that the at-home test is as reliable as the most accurate lab-based test in 94 percent of cases, although some physicians reportedly expressed concern that the study was not large enough to be conclusive. Valerie Fitzhugh-Kull, a professor of pathology at Rutgers New Jersey Medical School, reportedly warned that a person who tests negative at home but shows symptoms of COVID-19 should go to a physician to be tested again.
The Federal Railroad Administration finalized a rule that establishes new standards for measuring the performance of Amtrak passenger trains. The agency issued the new rule in response to a ruling by the U.S. Court of Appeals for the District of Columbia Circuit that found that Amtrak’s previous performance metrics had violated the Due Process Clause of the U.S. Constitution. The new rule will affect enforcement of the Passenger Rail Investment and Improvement Act of 2008, which grants the agency authority to investigate whether freight railroad carriers are at fault in causing delays and poor performance of Amtrak passenger trains. Federal Railroad Administration Administrator Ronald Batory said in a statement that the rule will also make coordination between freight and passenger rail companies easier, which will result in “a huge victory for the traveling public.”
The U.S. Senate blocked President Trump’s nomination of Judy Shelton to the Federal Reserve Board of Governors through a procedural vote that stopped the confirmation process from moving forward. The Senate vote to confirm Shelton failed because of bipartisan opposition to her nomination and absences due to the pandemic. Senators Mitt Romney (R-Utah) and Susan Collins (R-Maine) had expressed opposition to Shelton’s nomination and Senators Chuck Grassley (R-Iowa) and Rick Scott (R-Fla.) were in quarantine due to coronavirus exposure. Senator Sherrod Brown (D-Ohio) called the vote “a victory for workers, their families, and the economic stability Americans voted for.”
The U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton announced that he would leave his position at the end of 2020, with 18 months left in his term. Clayton’s departure gives President Trump a short window to appoint a replacement, or else President-Elect Joe Biden will have the opportunity to fill the key financial regulatory position. In his departing statement, Clayton celebrated the accomplishments of his “diverse and inclusive SEC team” that “improved investor protections, promoted capital formation for small and larger businesses, and enabled our markets to function more transparently and efficiently.”
Iowa Governor Kim Reynolds signed a proclamation requiring, with some exceptions, people over the age of 2 to wear masks in indoor public spaces. The proclamation also limited indoor social, community, business, and leisure gatherings to 15 people and limited outdoor gatherings to 30 people. The proclamation represented a shift for Reynolds, who had previously stated that she would not to implement a mask mandate. Announcing the proclamation, Governor Reynolds said that “no one wants to do this. I do not want to do this,” but that “if Iowans do not buy into this, we will lose.”

WHAT WE’RE READING THIS WEEK

The Massachusetts Institute of Technology’s Task Force on Work of the Future released a report finding that outdated labor and employment policies—not automation and artificial intelligence—have caused unemployment and low wages in the United States. The task force compared the United States with countries such as Canada and Germany that have shared similar technological change and growth patterns, finding that U.S. workers have lower wages and fewer employment opportunities by comparison. The task force recommended wide-ranging regulatory changes to support balanced economic growth, including a more flexible unemployment system, minimum wage increases, and increased funding for training programs that transition workers away from industries affected by changing technology.
In a recent paper, Martin Andersen, professor at the University of North Carolina at Greensboro, along with Sylvia Bryan and David Slusky, respectively a student and a professor at the University of Kansas, examined the effect of COVID-19 elective medical procedure restrictions on abortion access. Although there was a substantial decrease in abortion clinic visits across the country, Andersen, Bryan, and Slusky found that there was an additional 23 percent decrease in abortion clinic visits in states that had banned elective medical procedures. Andersen, Bryan, and Slusky did not find, however, a significant additional decrease in abortion clinic visits in states that implemented laws explicitly targeting abortion.
In a Pew Research Center report, Samirah Majumdar and Virginia Villa found that, in 2018, government restrictions on religion reached an all-time high since Pew Research Center began tracking these trends in 2007. The report government restrictions on religion rated 198 countries and territories. According to the report, these findings correlated with an increase in the number of governments controlling religious groups through force.

FLASHBACK FRIDAY

In an essay in The Regulatory Review, Luke Herrine, Ph.D. candidate at Yale Law School, argued that the U.S. Department of Education has the power to cancel student loan debt. Because the Education Department has the authority to “compromise, waive, or release any right” to issue and collect student loans, Herrine argued that the Department can use this power more broadly to forgive all student loan debt or cancel a significant portion of that debt. Herrine concluded that the main barrier to cancelling student debt is political will.

The post Week in Review first appeared on The Regulatory Review.

Climate Change, Migration, and Immigration Law

Thu, 19 Nov 2020 05:06:15 GMT

President Donald J. Trump has ordered his Administration to build a border wall to prevent immigrants from entering the United States illegally. His decision to withdraw the U.S. from the Paris Agreement took effect earlier this month. These two policy actions are more closely linked than they might seem at first glance.

The World Bank predicts that climate change could displace over 140 million people by 2050. Will the United States have a responsibility to provide relief to some of these victims of climate change?

Recent law graduate Shea Flanagan argues that it will. Indeed, she says that Congress should expand the Immigration and Nationality Act (INA) to allow the federal government to grant asylum to people forced to leave their home countries due to climate disasters and altered climate conditions.

The United States currently offers Temporary Protected Status (TPS) to people fleeing an “environmental disaster” such as an “earthquake, flood, drought, or epidemic.” The Attorney General must determine that the disaster resulted in a “substantial, but temporary, disruption of living conditions.” Flanagan argues that TPS would not provide adequate protection to so-called “climate migrants.”

The problem with TPS is that it is designed, as its name suggests, to be temporary, Flanagan explains. TPS can be revoked by the United States government if the protected person fails to register with the Attorney General annually, if the protected person fails to remain in the United States continuously since TPS status was granted, or if the state the protected person emigrated from no longer meets the conditions to qualify for TPS. TPS also does not provide a path to legal residence.

Flanagan instead proposes granting asylum for climate migrants. Asylum is available for people who are either fleeing their home country due to past persecution or who are fearful that that there is a “reasonable possibility” of being persecuted in the future. People granted asylum in the United States can bring their families with them, work, and apply for a green card after one year of United States residence.

Under the current law, refugees can only obtain asylum in the United States if they meet certain requirements. For example, the refugee must be fleeing persecution based on “race, religion, nationality, membership in a particular social group, or political opinion.” In addition, the refugee must be unwilling or unable to appeal to his nation for protection.

Flanagan proposes two ways to extend asylum requirements to include climate migrants. One option would be to expand the definition of “membership in a particular social group” to include people suffering the consequences of climate change. Flanagan suggests that the benefit of this option is that it would not require any substantive changes to the law. Flanagan acknowledges, though, that the interpretation of this category of protection has “significantly narrowed” in the past few years, raising a question of whether judges would accept an expanded definition.

Second, Congress could add a new category of asylum to the INA based on “environmental grounds,” Flanagan argues. The challenge, Flanagan concedes, would be to create a category that is sufficiently narrow to provide appropriate assistance to climate change refugees, but not too broad that it sweeps in non-climate environmental harms.

Flanagan argues that an appropriate definition would include “people who are forced to flee across national borders due to climate change-related forces that render their home country uninhabitable.”

Some climate migrant advocates argue against “reducing” the issue of climate migration to a “climate refugee” status. The International Organization for Migration’s Dina Ionesco explains that many climate migrants move within a single country and do not cross international borders. Furthermore, Ionesco argues that creating a climate refugee status could result in complicated legal procedures that force people into overly restrictive categories, take too much time, and inevitably leave out people in need that do not fall within a given category.

Similar concerns arose in New Zealand several years ago when the government created “humanitarian visas” aimed at assisting Pacific Islanders displaced by the consequences of climate change. New Zealand revoked these visas six months later, because “Pacific Islanders did not want them,” says one report. Instead, Pacific Islanders reportedly wanted New Zealand to “reduce emissions, support adaptation efforts, and provide legal migration pathways,” arguing that refugee status is a “last resort.”

Other critics of a special climate refugee status argue that countries responsible for the majority of carbon emissions should provide assistance to countries affected by climate change by paying into the “Green Climate Fund” created by 194 sovereign nations that participated in the United Nations Framework Convention on Climate Change. The fund could then be used for climate adaptation and mitigation. The United States pledged $3 billion to this fund, but it only delivered $1 billion because President Trump withdrew the U.S. pledge in 2017.

President Trump argued that the Green Climate Fund was costing the United States “a vast fortune.” That same year, the United States was deemed to be “historically responsible for more emissions than any other country.”

The United States has a moral duty to “mitigate the harm of its global emissions,” and offering climate migrants a “safe haven” through asylum is one way the United States can help to fulfill this moral responsibility, Flanagan concludes.

The post Climate Change, Migration, and Immigration Law first appeared on The Regulatory Review.

Regulatory Solutions to Climate Risk

Thu, 19 Nov 2020 05:03:02 GMT

In the final weeks of summer, severe weather wreaked havoc across the United States. Wildfires burned through the West Coast. A massive windstorm tore up the Midwest. Hurricanes flooded the Gulf Coast.

These kinds of disasters not only lead to massive disruptions and deaths, they also threaten to destabilize the U.S. financial system, according to a recent report commissioned by the Commodity Futures Trading Commission (CFTC). A CFTC subcommittee concluded that forestalling major economic destabilization from climate change will require “significant action” from the federal government.

The report highlights a range of possible climate-related scenarios that could occur all over the country, from excess flooding of the Mississippi River delaying agricultural shipments to increasingly frequent wildfires causing a decline in real estate prices in the West. Furthermore, as the COVID-19 pandemic has revealed, the U.S. health care system may not be ready to handle the major challenges that climate change will bring.

Although the CFTC report outlines a wide range of policies designed to combat climate change and secure U.S. financial markets, its authors present one key recommendation: Congress should adopt an economy-wide price on carbon to encourage industry members to reduce harmful gas emissions.

Under a “carbon pricing” scheme, the government attaches a price to greenhouse gas emissions. The costs can be imposed by collecting a “carbon tax” from the owners of emissions sources based on their total output. Another option is to cap potential pollution and provide entities with allowances equal to their emissions. Both methods encourage industry members to save money by reducing emissions.

The monetary value of carbon pricing would need to be linked to what the World Bank describes as “the external costs of carbon emissions.” These are the “costs that the public pays for in other ways,” such as crops that are damaged or properties that are destroyed due to climate change. Federal regulations do not currently attach an extra price to carbon emissions, the CFTC report notes, essentially treating the environmental costs of potentially harmful activities “as if they were ‘free.’” The authors directly link this failure to the growing risk of climate change.

If Congress maintains this course and does not enact carbon pricing, they warn, “financial markets will operate sub-optimally, and capital will continue to flow in the wrong direction.”

Passing legislation to establish a system of carbon pricing, however, “creates an economic incentive” to invest in the development of new technology to lower emissions.

Carbon pricing policies are gaining momentum in the United States and worldwide. Eleven U.S. states currently have an emissions trading system, and carbon taxes have been implemented in countries such as the United Kingdom, Canada, and Mexico. Even so, the Trump Administration has moved away from using carbon pricing as a guiding metric, and it seems the United States is still far from establishing a national climate policy. By calling for Congress to enact carbon pricing, one economist argues that the independent authors of the recent CFTC report advocate “a far stronger position than those taken by either the Republican or Democratic parties during the current election cycle.”

The CFTC subcommittee repeatedly stresses that carbon pricing needs to come from Congress, not regulators. That does not mean, however, that financial regulators are powerless to push back against the risks of climate change.

Federal and state agencies are already armed with an array of tools that could quickly be adapted to combat climate change. For example, just as the U.S. Federal Reserve routinely examines the capabilities of large banks, the CFTC report advises regulators to conduct climate risk stress tests for financial institutions using scenarios informed by the latest climate science.

In addition, the CFTC report contradicts at least one Trump Administration policy. Although the U.S. Department of Labor has proposed preventing environmentally conscious investing for retirement plans, the CFTC report recommends that regulators “confirm the appropriateness of making investment decisions using climate-related factors.”

The CFTC’s Climate-Related Market Risk Subcommittee is made up of business executives, academics, and environmental experts. Its report, released in September, “is the first wide-ranging federal government study focused on the specific impacts of climate change on Wall Street.” It remains unclear what, if any, government response will follow—the Trump Administration has reportedly disavowed the report, and President-Elect Joe Biden’s climate plan does not address carbon pricing.

The post Regulatory Solutions to Climate Risk first appeared on The Regulatory Review.

Are Confederate Monuments Set in Stone?

Wed, 18 Nov 2020 05:05:22 GMT

After hearing a proclamation of the newly adopted Declaration of Independence, a group of revolutionaries snuck into Bowling Green Park in Manhattan, threw ropes over a statue of King George III, and tore it from its pedestal. Two and a half centuries later, a group of protestors gathered on Monument Avenue in Richmond, Virginia, threw ropes over a statue of Confederate President Jefferson Davis, and brought it down to street level.

As public sentiment against Confederate monuments strengthens, local governments looking to remove statues are faced with a legal conundrum—historic preservation laws can make that task difficult.

A recent panel hosted by the University of Pennsylvania Cultural Heritage Center discussed the future of Richmond’s Confederate monuments following a summer of civil unrest and movements for racial justice. Until the protests in June, five monuments to Confederate leaders stood on Monument Avenue. Now, pending an appeal of recent court decision, only a monument to Robert E. Lee still stands.

More than 1,700 Confederate symbols, including 718 monuments, still remained in public spaces in 2018. Most symbols take the form of names of public schools, streets, and cities based on figures in the Confederate army. Statues, however, are a focus for activists and policymakers.

Much legal protection of Confederate statues stems from the state level. Richard C. Schragger and C. Alex Retzloff describe state-level laws as “statue statutes” that are created by legislatures to rein in recent attempts by progressive localities to remove Confederate symbols.

Jess R. Phelps and Jessica Owley explain that state historic preservation laws in the South are usually facially content-neutral, but there is no doubt that their real purpose is to protect Confederate monuments. Seven southern states have passed laws that fit that description, although Virginia recently amended their law to allow statue removal. Most of these laws were enacted in the last 20 years; three states enacted laws in just the last five years.

The Alabama Memorial Preservation Act, for example, was passed three years ago after the city of Birmingham, which is more than 70 percent Black, attempted to remove a Confederate monument. Because of penalties imposed under the Alabama Memorial Preservation Act, the city was ordered to pay a $25,000 fine for concealing the statue in 2017. The state attorney general promised to impose another fine if the statue were removed. Birmingham’s mayor ordered its removal in June of this year.

Federal laws, Phelps and Owley argue, are also major impediments because they mandate a costly and time-consuming consultation process to remove statues. Objects listed on the National Register of Historic Places are granted protection from government interference and alteration. Over 100 symbols listed in the National Register database in 2019 include the word “Confederate” in the title.

J. Peter Byrne claims that Phelps and Owley overstate the difficulties that historic preservation laws pose to monument removal. Byrne resists characterizing state-level statutes as preservation laws at all because true preservation laws value historic expertise and exist to document historic context. Federal laws, Byrne argues, add substantial social value through the consultation process, which requires a removal proposal that considers research, community input, and alternative measures.

Byrne argues that these laws do not seriously impede removal efforts, but that preservation laws allow for a context in which differing, complicated views of heritage play out.

Advocates for preservation laws contend that Confederate monuments should not be removed because they express grief for fallen soldiers and honor the sacrifice of ancestors. If statues are dismantled, the country would lose an important educational tool about the Civil War and its effects, according to author Sophia A. Nelson.

Scholars who take the opposing view argue that the true purpose of Confederate monuments is not to honor the dead, but to subjugate the living. Not only do people now view monuments as symbols of white supremacy, but they increasingly acknowledge that white supremacy was the aim of those who erected monuments. Phelps and Owley say that the meaning behind monuments is often complicated, but they also note that the implementation of Confederate symbols historically increases when Black people achieve greater equality.

Monument Avenue in Richmond was developed during an effort to push Black leadership from city government post Reconstruction. Many monuments were not established until the late 19th century, well after the Civil War. One historian describes a “mail order” monument boom during that period in which statues were mass produced for private groups—these statues do not constitute carefully crafted works of art that now need special legal preservation.

Toppling Confederate monuments is a step to correct myths about how and why they were put there in the first place.

Going forward, one scholar proposes that monuments should be excepted from preservation laws when they celebrate human rights violations. Objectors state that removing statues is akin to neglecting history. In response, some historians propose photographing and cataloging Confederate symbols before removing them from public view.

The removal of cultural symbols of oppression can signal the rejection of values honored in the works. Statues solidify a point of view. The conscious decision to reject that cultural history indicates public desire to change the narrative. That is why King George no longer towers over Bowling Green Park and Jefferson Davis no longer casts a dark shadow over the city of Richmond.

The post Are Confederate Monuments Set in Stone? first appeared on The Regulatory Review.

Preserving Community and Neighborhood Choice?

Tue, 17 Nov 2020 05:05:10 GMT

President Donald J. Trump tweeted this past summer that “all of the people living their Suburban Lifestyle Dream … will no longer be bothered or financially hurt by having low income housing built in your neighborhood.”

But critics claim that, in boasting about a new so-called fair housing regulation, President Trump’s tweet panders to “racist fears.” Housing advocates and civil rights groups largely denounce the new rule, raising concerns that it does not fulfill the mandate of the Fair Housing Act.

The new rule, recently adopted by the U.S. Department of Housing and Urban Development (HUD), narrowly interprets a mandate that local and state housing authorities “affirmatively further fair housing.” Under the new rule, grantees will receive funding if they take any steps that HUD finds “rationally related to promoting fair housing.” Fair housing means that all people can rent or buy a home, secure a mortgage, and seek housing assistance free from discrimination due to race, color, national origin, religion, sex, familial status, or disability.

The Trump Administration revoked nearly 25 years of rulemaking by repealing both a 2015 rule and a 1994 rule issued during the Clinton Administration. The 2015 rule sought to remedy the disproportionate housing needs of individuals based on race, religion, sex, national origin, disability, and familial status—tackling the 1994 rule’s attempt and failure to reduce racial segregation in housing by requiring grantees to identify key “impediments” to fair housing. The Obama-era rule strengthened the mandate to further fair housing by requiring local and state housing authorities to engage in more robust goal setting, provide additional data on housing discrimination, and meet heightened reporting requirements. It did not, however, impose quotas or force low-income housing, as President Trump has claimed.

The new Trump Administration rule clears previous regulations and returns to the “original understanding” of what it means to affirmatively further fair housing set before the 1994 Clinton Administration rule. HUD now interprets the statute’s mandate as “flexible and unspecified” but still requires the grantee to “take an active role” in promoting fair housing. The Trump Administration argues that by removing cumbersome reporting requirements, it preserves federalism principles by giving “local communities maximum flexibility in designing and implementing sound policies responsive to unique local needs.”

President Trump and HUD Secretary Ben Carson tout the new rule as protecting America’s suburbs. They argue that the Obama-era rule encouraged localities “to abolish single-family zoning, compel the construction of high-density ‘stack and pack’ apartment buildings … and forcibly transform neighborhoods across America so they look and feel the way far-left ideologues and technocratic bureaucrats think they should.”

But outside experts cast doubt on the Trump Administration’s view of the suburbs as already diverse. Elizabeth Kneebone, senior fellow at the Brookings Institution, questions the accuracy of President Trump and Secretary Carson’s understanding of the suburbs. Kneebone affirms their assertion that the suburbs overall are diverse. Yet, she calls attention to the long history of exclusionary zoning practices, such as redlining, that created unequal suburban areas for different races—people of different races live in different suburbs.

Housing advocates and civil rights groups largely criticize the Trump Administration’s new rule. Lisa Rice, president and CEO of the National Fair Housing Alliance, condemned HUD’s new rule by calling it a “cynical ploy to win over suburban white voters.” Rice argues that the rule will “weaken the suburbs” because it does not promote anti-discriminatory housing policy.

Advocates also raise concerns about the lack of requirements in the new rule. Jesse Van Tol, CEO of the National Community Reinvestment Coalition, explains that because the new rule imposes no requirements to further fair housing, local governments can “do nothing but talk … and claim they furthered fair housing.” As a result, Van Tol argues that the rule will not address the “persistent patterns of racial segregation that continue to create unfair and unjust life outcomes for people based on their zip codes.” Heather Abraham, professor at University of Buffalo School of Law, similarly argues that the new rule is “profoundly inadequate to meaningfully reduce segregation” because there are no compliance and accountability tools.

Perhaps, as the Trump Administration asserts, the new rule will reduce reporting burdens on localities and allow them to develop more resources to ensure equity. Conversely, as housing advocates argue, revoking the Obama-era rule may constitute a “dramatic step backwards.”

The post Preserving Community and Neighborhood Choice? first appeared on The Regulatory Review.

Thinking Harder and Smarter About Wildland Fire

Mon, 16 Nov 2020 05:05:00 GMT

The West Coast is on fire, quite literally. From the dry chaparral scrublands of Southern California to the grass and oak woodlands of California’s Wine Country to the lush coniferous forests of Oregon, Washington, and Colorado, late summer and early fall wildfires are setting records for their scale, intensity, and destructiveness. In California alone, some 4 million acres—more than twice the all-time record set in 2018—had burned by the start of October, only partway through the traditional “fire season.” And the fire season itself is lasting longer.

The region is no stranger to wildfire. Long before humans altered the landscape, western lands were adapted to a seasonal fire regime. But changing climate patterns are making these ecosystems hotter, drier, and increasingly vulnerable to wildland fire.

Stir in a power line mishap, a careless campfire, or a rare summer electrical storm, and, voilà, a recipe for disaster emerges, especially at the urban edge where human development meets wildland vegetation. Year after year, Americans collectively wring their hands as lives are lost, property is destroyed, and communities are fractured. With this changing climate here to stay, sadly, what can and should America be doing?

The first thing to understand is that wildfire poses different challenges in different places. The most problematic wildfires occur where manmade structures border, or intermix with, wildland vegetation—commonly called the wildland-urban interface. Most of the lives and property lost to western wildfires in recent years occurred at the wildland-urban interface. Wildland fire in remote forests, on the other hand, generally poses little direct risk to society, although it can have incidental impacts on local air and water quality. A one-size-fits-all prescription is not the answer.

Start with the easier problem: forestlands. The most resilient forests are those with a mosaic of different age-class trees and open spaces. Natural fire regimes maintain this resilience by periodically burning through understory vegetation, opening up the forest floor and fostering new seedling growth. Anyone who has ever tried to burn a freshly fallen tree branch in a campfire knows that the bark of pines, firs, and sequoia is quite fire resistant. This thick bark and the high canopy of mature trees allow them to survive these periodic ground fires. And these surviving large trees, in turn, are critical to keeping the forest cool and moist.

Widespread scientific consensus indicates that poor management over the last century has made remote forests more vulnerable to wildfire. Historic fire suppression and unsustainable logging practices have resulted in too much vegetative understory, too many even-aged stands, and too few resilient old-growth trees that protect forests from catastrophic wildfire.

Climate change has only exacerbated these vulnerabilities: As the climate becomes hotter and drier, heat- and water-stressed trees more easily succumb to pests such as bark beetle and more readily burn during a wildfire event. The result is what climate scientists call a positive feedback loop—a vicious cycle where high-intensity fire in climate-stressed forests releases carbon stored in living trees to the atmosphere, thereby hastening even more global warming.

To bring these remote forestlands back to health, America needs to change the way it manages them. Historically, management of both public and private forests has been driven primarily by logging of the large, mature trees that are most profitable to the timber industry. Today, such traditional logging will only worsen the problem in most forests. Alternative approaches such as controlled burns—which indigenous people have used with great success—and manual clearing of overly dense understory can reduce fuel loads in a way that promotes forest mosaics.

But such labor-intensive activities are expensive. Realistically, resource-constrained forest management agencies lack the capacity to implement purely science-driven forest health initiatives at a scale of over tens or hundreds of millions of acres of public forestlands—nor is doing so necessary. Public foresters should prioritize the riskiest areas for intervention—for example, those parklands that support significant public use or built infrastructure—and leave other remote forests to burn when wildfire strikes and then heal and recover on their own. That means a significant change in the way state and federal forest agencies and the public think about fire suppression.

The harder nut to crack is fire at the wildland-urban interface. Many communities are looking closely at their options, but no silver bullets exist. A top priority is “hardening” structures against wildfire—using fire-resistant materials, designs, and placements for roofing, walls, windows, decks, vents, and propane tanks, among other resources. Local building codes should be upgraded to require these well-established practices for new development; retrofitting existing structures, on the other hand, can be prohibitively expensive or impossible.

Another best management practice is routine clearing of vegetation around homes and around vulnerable communities at the wildland-urban interface. This practice, too, takes resources that smaller communities may lack and diligent upkeep that rural residents may resist.

Even if the United States implements such measures across the board, however, they cannot, standing alone, ameliorate the wildfire threat that many urban-edge communities face today. Tile roofs, stucco siding, and dual-paned windows will not avoid tragedy when a wildfire roars over the hill into a subdivision carved from the coastal shrub or embedded in a pine forest.

The longer-term solution is to move—and keep—people out of harm’s way. The market could help drive this solution as fire insurance becomes unavailable or housing prices drop to reflect fire risk. But as a society, the United States has a history of bailing out those on the losing end of these market forces. When private insurers decline to renew earthquake or flood policies in high-risk areas, the federal government or states often step into the breach with public safety net programs. These governmental responses feel morally right, but they create the “moral hazard” that homeowners will simply rebuild in the same fire-prone location.

One emergent idea in California is to allow homeowners to port the tax base in their high-risk properties over to new homes in a safer location. In a state where property taxes are essentially frozen in place at the time of purchase—with a small annual increase thereafter—and property values appreciate significantly over time, the ability to rebuild elsewhere without incurring a new, higher property tax base could be a substantial incentive.

Proposition 19, an initiative on California’s November 2020 ballot, made a start at developing this idea, but it had a number of flaws—not least of which is that the same exemption would apply to anyone, in any community, over the age of 55. In that sense, wildfire victims are really a small tail wagging the big dog of a longstanding state tax policy dispute.

But the kernel of the idea behind Proposition 19 is intriguing. How might California and other western states build on this concept? States can certainly play with the tax laws to encourage retrofitting in fire-prone communities. But can we do more? How can public policies encourage those who have not yet been the victims of wildfire to move away from the riskiest areas? Can we restructure tax laws to write off sunk infrastructure costs in fire-prone rural communities without bankrupting state and local coffers?

On the flip side, should these vulnerable communities face much higher fees or taxes to offset the disproportionate burden they place on public fire services? Maybe a combination of carrots and sticks—high fire-service fees, no government backstop for a failing private-insurance market, and relocation tax incentives—could move the needle.

This much is clear: As the impacts of a changing climate become visible everywhere, managing wildfire risks at the urban edge differs little from managing coastal retreat in the face of rising sea levels or the repeat flooding that places such as Miami, Houston, and Norfolk, Virginia, are experiencing. All of these enormous socio-environmental challenges demand the best and most innovative thinking.

The post Thinking Harder and Smarter About Wildland Fire first appeared on The Regulatory Review.

Fair Family Planning

Sat, 14 Nov 2020 05:05:06 GMT

For nearly 50 years, Title X of the Public Health Service Act has been the sole federal program devoted to funding family planning services for low-income and underinsured communities. The Trump Administration’s changes to Title X regulations, however, could restrict access to vital family planning services for communities that need them the most.

Title X has funded counseling on a variety of family planning care and alternatives, including abortion. Since the program’s inception, however, clinics have been prohibited from using federal funds they receive from Title X for performing abortions. In addition to counseling, Title X-funded clinics also offer contraceptives, STI testing, and some primary care services.

The Trump Administration’s regulations require Title X clinics to maintain “a physical and financial separation” between abortion procedures and Title X-funded services. To remain compliant with these changes while continuing to offer abortion counseling and procedures, clinics would need an additional space physically separate from where they offer existing Title X family planning services. In practice, however, the cost of creating such a space is prohibitive. Clinics instead face an impossible choice: Providers must either limit the scope of their services or continue to offer abortion services but decline further funding from Title X.

The regulations also impose what critics describe as a “gag rule” that bars clinicians from providing referrals to abortion clinics or mentioning abortion—even when the patient requests the information. Physicians from groups such as the American Medical Association criticize the gag rule because it “restricts them from providing complete information to patients about all of their health care options and providing appropriate referrals for care.”

Although pro-life advocates celebrate the Trump Administration for diverting funds from clinics that provide abortion services, critics argue that the regulations deprive patients of access to the full range of reproductive care. Critics also claim that the Administration’s changes shrink the network of available providers for communities that rely on Title X for family planning services.

Because of the economic, practical, and ethical burdens that these regulations impose, several Title X clinics have announced plans to exit the program. This exodus could leave millions of patients without access to essential health care under Title X.

Though the incoming Biden Administration may alter Title X and moot the present controversies, 23 states’ attorneys general, multiple family planning organizations, and several individual physicians have filed lawsuits challenging the Trump Administration’s regulations.

This week’s Saturday Seminar explores the role of Title X and potential consequences of the Trump Administration’s regulations on access to family planning services.

In a working paper with the National Bureau of Economic Research, Martha J. Bailey of the University of California Los Angeles, Olga Malkova of the University of Kentucky, and Zoe M. McLaren of the University of Maryland, Baltimore County argue that access to federal family planning programs allows parents to provide better economic opportunities for their children. Children born after the introduction of family planning programs, Bailey, Malkova, and McLaren found, possessed more economic advantages than those born before these programs. These improvements in socioeconomic stability, they suggest, result from family planning programs such as Title X that encouraged young parents to build strong educational and professional foundations before starting their families.
Policymakers must reverse attempts to cut Title X funding to ensure access to basic health care, Rachel Benson Gold, formerly of the Guttmacher Institute, and Enterprise Community Partners’s Kinsey Hasstedt argue in an American Journal of Public Health article. “Eliminating Title X would deal a devastating blow to safety-net family planning providers and the communities who rely on them,” according to Gold and Hasstedt. Citing statistics from 2015, the authors claim that Title X’s family planning services prevented 278,000 abortions that year by helping avoid 822,000 unintended pregnancies. Gold and Hasstedt also highlight the financial benefits of Title X and suggest that cutting the program is “short-sighted.”
Why should Title X clinics offer patients comprehensive pregnancy counseling and services? Harvard University’s Elizabeth Janiak, Wellesley College’s Jennifer O’Donnell, and University of California San Francisco’s Kelsey Holt argue that “patients who rely on Title X-funded services deserve the same standard of care as their wealthier neighbors with private insurance coverage.” They argue that the Trump Administration’s changes to Title X impose obstacles on patients seeking high quality, patient-centered care because these changes prevent providers from offering “full-spectrum pregnancy options counseling” and referrals for prenatal or abortion services. Instead, the authors advocate federal policy that effectively responds to all patient preferences, including abortion.
The Trump Administration’s changes to Title X could prevent adolescent patients from receiving confidential reproductive services without their parents’ permission, Naomi Schapiro of the University of California San Francisco School of Nursing argues. In a recent Journal of Pediatric Health Care article, Schapiro claims that requiring parental notification for contraceptives does not deter adolescents from engaging in sexual activity—instead, it makes them less likely to seek out reproductive care. Schapiro suggests that the regulations could place minors at greater risk for STDs and unintended pregnancies.
In a working paper, economists Andrea Kelly of Grinnell College, Jason Lindo of Texas A&M University, and Analisa Packham of Vanderbilt University analyze the effects of an effort to fund Title X clinics to make long-acting reversible contraceptives (LARCs) “available to low-income women for free or at reduced costs.” LARCs, such as the intrauterine device and the contraceptive implant, are more than 99 percent effective at preventing pregnancy, provide protection for years, and require no action from the patient after implantation. Kelly, Lindo, and Packham found that among teenagers that lived within seven miles of a Title X clinic taking part in the initiative, births fell by about 20 percent. The authors encourage policymakers to expand access to free and reduced-cost LARCs through Title X, because reducing unintended pregnancies improves patients’ “ability to invest in their high school and post-high-school education” as well as their economic circumstances later in life.
Because Title X restricts access to abortion, primary care physicians not associated with the Title X program should offer medication abortion, University of California San Francisco’s Jessica Beaman and Dean Schillinger claim in a New England Journal of Medicine article. Medication abortion, also known as the “abortion pill,” is a non-surgical procedure that ends a pregnancy through oral medicine rather than a surgical procedure. Beaman and Schillinger note that although the U.S. Food and Drug Administration approved the medical abortion pill mifepristone for consumers in 2000, the United States lags behind several European countries in the percentage of first trimester medication abortions. This difference may be due to the popularity of medication abortion in rural European communities and the higher cost of medication abortion compared to surgical abortion in the United States.

The post Fair Family Planning first appeared on The Regulatory Review.

Week in Review

Fri, 13 Nov 2020 05:05:33 GMT

IN THE NEWS

Major media outlets declared former Vice President Joe Biden the winner of the 2020 presidential election, beating incumbent President Donald J. Trump after winning 290 electoral college votes. U.S. Senator Kamala Harris (D-Calif.) will become the first Black, Asian, and woman Vice President of the United States because of the historic win. President Trump, however, has refused to concede victory to President-elect Biden. Although President Trump’s campaign filed a series of lawsuits challenging the results of the election, many of these suits have been dismissed because the campaign failed to provide credible evidence of fraudulent results. December 8 is the deadline to resolve election disputes, and the Electoral College will cast their votes to confirm former Vice President Joe Biden as the President-elect on December 14.
President Trump fired U.S. Department of Defense Secretary Mark Esper, replacing him with Acting Defense Secretary Christopher Miller. President Trump reportedly fired Esper because Esper publicly announced his opposition to President Trump’s threats to use active-duty troops to quell racial justice protests. Congressional Democrats warned that the decision could threaten national security during a presidential transition of power. In a letter to the President, Esper wrote that he accepts President Trump’s decision to replace him because he serves the country “in deference to the Constitution,” and that he has “never been prouder” to serve the United States.
The U.S. Food and Drug Administration (FDA) authorized the use of bamlanivimab, a COVID-19 antibody treatment developed by pharmaceutical company Eli Lilly. The emergency authorization will permit use of the drug on patients who are newly infected with mild to moderate COVID-19 and at high risk of progressing to severe disease or hospitalization. FDA noted that the treatment will not benefit patients who are already hospitalized due to severe infection. Rather, the antibody may worsen the condition of hospitalized patients who require high flow oxygen or mechanical ventilation. Eli Lilly expects to make up to one million doses of the treatment by the end of the year.
The U.S. Federal Trade Commission (FTC) approved a settlement with Zoom Video Communications, Inc. over allegations that the video conferencing platform misrepresented the level of call privacy that users could expect on the platform. As part of the settlement, Zoom will be required to implement a data security program that better protects sensitive user information such as health and financial data. In his dissenting statement, FTC Commissioner Rohit Chopra criticized the settlement, writing that it “includes no help for affected parties, no money, and no other meaningful accountability.”
Georgia Secretary of State Brad Raffensperger announced that his office will begin a hand-counted audit of the state’s presidential election results. President-elect Joe Biden currently leads President Trump by over 14,000 votes, but the Trump campaign and the Georgia Republican Party requested a recount. Senators Kelly Loeffler (R-Ga.) and David Perdue (R-Ga.) called for Raffensperger’s resignation, citing unspecified election “mismanagement and lack of transparency.” Raffensperger set a November 20 deadline to complete the recount. Poll workers from each county will count the ballots with observers from both campaigns present. Raffensberger said the audit was because of the “national significance” of the election and the “closeness of the race,” and was not motivated by President Trump’s demands for a recount.
The European Union (EU) announced plans to impose a tariff on $45 billion worth of goods imported from the United States. Earlier this month, the World Trade Organization (WTO) issued a decision, holding that the United States violated international rules in providing subsidies to Boeing and permitting the EU to levy a tariff on Boeing model imports. The EU’s new tariff comes after the United States imposed a $7.5 billion tariff on some imported European products last year. EU Commissioner Valdis Dombrovskis reportedly said that “as soon as the United States is willing to drop their tariffs, we are willing to drop our tariff.”
The United Kingdom’s Department for Transport issued a ban on travelers from Denmark after the discovery of a new mutation of the coronavirus in Denmark’s farmed mink population. Secretary of State for Transport Grant Shapps tweeted that all British citizens returning from Denmark would be required to self-isolate for two weeks without exception. Three days before the British agency issued the travel ban, government officials in Denmark announced that it would order the culling of the country’s entire mink population, totaling over 15 million minks, to contain the outbreak of the mutated virus. The mutated coronavirus has infected 214 people in Denmark as of November 5.
The National People’s Congress of the People’s Republic of China issued a directive that disqualifies any individual, who officials deem to be disloyal to Beijing, from holding office in Hong Kong’s Legislative Council. Shortly after the announcement, officials in Beijing ousted four pro-democracy legislators from Hong Kong’s government, prompting the remainder of the opposition party to resign. Wu Chi-wai, one of the lawmakers who vowed to step down in protest, remained hopeful that the city would regain its autonomy, reportedly saying that “under authoritarianism, the road to democracy will be extremely long and arduous, but we will absolutely not be defeated by its pressures.” In a statement, U.K. Foreign Secretary Dominic Raab announced that China’s directive was in breach of the Sino-British Joint Declaration, a treaty between the two countries designed to protect Hong Kong’s political autonomy, opening the door to possible sanctions.
The Centers for Disease Control and Prevention (CDC) issued guidance on how to engage safely in Thanksgiving activities during the coronavirus pandemic. The CDC emphasized that the guidance is intended to supplement, not replace, local regulations. The CDC recommended limiting travel and large family gatherings as much as possible. If people must gather, however, the CDC advised people to limit the length of the gathering, allow ample air flow, ensure everyone wears masks, and encourage guests to regularly sanitize their hands.

WHAT WE’RE READING THIS WEEK

In a white paper for the Brookings Institution, Peter Conti-Brown and Brian Feinstein, professors at the Wharton School, explored how the Board of Governors of the Federal Reserve System uses Twitter to communicate policies and respond to criticisms by others, especially President Trump. Conti-Brown and Feinstein discovered that discussions about the Federal Reserve on Twitter trend toward criticism, perhaps harming the Federal Reserve’s objectives. Conti-Brown and Feinstein concluded that the Federal Reserve can use these results to inform how it communicates key policies to the public.
The U.S. Government Accountability Office (GAO) released a report evaluating the U.S. Department of Defense’s efforts to reform its business operations, which, according to GAO, is at high risk of waste, fraud, and abuse. GAO found that the agency’s efforts have been largely successful, resulting in savings of $37 billion from fiscal years 2017 through 2021. GAO recommended that the agency keep better documentation of cost savings to reduce possible areas for waste in the long term.
In a report for the Center for American Progress, Simon Clark, Karuna Nandkumar, and James Lamond present four short-term legislative efforts that the U.S. Congress should adopt to address the threat of violent white supremacists. Clark and his coauthors recommended that Congress increase criminal penalties for lynching through an anti-lynching bill, strengthen the U.S. Department of State’s mechanisms to counter violent white supremacy abroad, identify and remove violent white supremacists in the military and law enforcement, and improve data collection and analysis of domestic terror threats.

FLASHBACK FRIDAY

In an essay in The Regulatory Review, Richard J. Pierce, Jr., professor at the George Washington University Law School, emphasized that the U.S. Congress must figure out how to govern in an increasingly polarized electorate. First, Pierce argued that to promote governance in a divided society, primary elections should be eliminated and party leaders should select who best represents their party in an election. Second, Pierce proposed eliminating congressional caucus rules that give the majority party the power to select agenda items. Pierce concluded that these reforms would help the U.S. Congress “learn to work—and compromise—again.”

The post Week in Review first appeared on The Regulatory Review.