Nursing homes and other long-term care facilities have been devastated by the COVID-19 pandemic. Nearly one-third of coronavirus deaths in the United States have been residents and employees of these facilities. As of May 2021, confirmed cases in these facilities have reached over one million. The leading explanation for these high rates is that residents’ advanced age and comorbidities make them particularly at risk for severe illness and death from the virus. This risk is compounded by the communal nature of long-term facilities, which increases the likelihood of residents and staff spreading COVID-19. Still, some experts argue that regulatory failures and chronic underfunding are partly to blame for such tragic outcomes in one of America’s most vulnerable populations.

Although the challenges of the COVID-19 pandemic are new, the crisis in long-term care is not.  Long-term care facilities have a long history of low-quality care. In 1986, a study by the Institute of Medicine found that nursing home residents were routinely given inadequate care, neglected, or abused. In response, Congress passed the Nursing Home Reform Act, which set new care standards, upgraded staffing requirements, and established an enforcement mechanism for noncompliant facilities. Today, states enforce these standards through unannounced surveys conducted every 9 to 15 months, with variable penalties depending on the severity of the violation.

Most nursing home quality measures have improved over time under this law, but the majority of facilities still fall short of federal standards. In recent years, over 90 percent of nursing homes have received at least one citation per year for violating federal regulations. The pandemic only exposed and amplified these issues. Numerous nursing home residents have reported instances of severe neglect during lockdowns, including extreme weight loss and untreated bedsores.

Neglect for long-term care is also visible in its patchwork funding regime. The majority of long-term care is paid for by Medicaid, which only becomes available once individuals have exhausted their personal assets. Medicaid funding for long-term care also varies dramatically by state and is frequently under threat of budget cuts, especially during economic downturns. For individuals who look to private insurance to cover costs, they often find prohibitively high premiums. Fewer than 1 in 30 Americans own a long-term care insurance plan. Medicare, the primary insurer of Americans over 65 years old, does not cover long-term care beyond 100 days.

As a result of this patchwork system, nursing homes are chronically underfunded. The majority of nursing homes in the U.S. operate at a net loss, and hundreds of nursing homes have been forced to close in recent years. Thin or negative profit margins prompt facilities to cut corners in care quality and staffing levels, perpetuating low quality care. During the pandemic, increased costs have placed nursing homes on the brink of collapse, prompting billions of dollars of federal aid.

Today, approximately 12 million people in the U.S. need long-term care. By 2050, that number is expected to more than double. The challenges of the pandemic present a unique opportunity for policymakers to evaluate how the long-term care system is failing, so as to better prepare for increased demand going forward.

In this week’s Saturday Seminar, scholars explore how regulatory failures contributed to COVID-19 outbreaks in nursing homes and provide potential avenues for reform.

• A viable response to America’s post-COVID-19 nursing home crisis must include increased funding, more regulation, and a new framework supportive of a wide range of long-term care options, Rachel M. Werner, Allison K. Hoffman, and Norma B. Coe of the University of Pennsylvania’s Leonard Davis Institute of Health Economics argue. In a paper published in the New England Journal of Medicine, the authors contend that the coronavirus pandemic has illuminated decades of inadequate long-term care policy. Werner, Hoffman, and Coe call for transformation in funding long-term care and the expansion of alternatives to traditional, congregate-care settings.

• In a paper published in The Georgetown Law Journal Online, Nina A. Kohn of Syracuse University College of Law argues that the effects of COVID-19 on long-term care facilities highlighted long-standing gaps and enforcement failures in federal and state nursing home regulations. To close such regulatory gaps, Kohn recommends strengthening the enforcement of existing regulations, linking Medicaid funding to resident wellbeing, and requiring minimum investments in resident care. Kohn concludes that a stronger regulatory scheme could help end Medicaid’s preference for institutional treatment, rather than community-based treatment, thereby increasing equity for marginalized populations and decreasing structural ageism.

• Tara Sklar of the University of Arizona James E. Rogers College of Law attributes the high proportion of nursing home deaths during COVID-19 to facility mismanagement, including inadequate staffing and poor worker benefits. In a chapter for the COVID-19 Policy Playbook from the Public Health Law Watch, Sklar explains how many direct-care workers were unable to take paid sick leave despite having a right to do so under the federal Families First Coronavirus Response Act, leading to outbreaks in nursing homes. She argues long-term care reform must start with improvements for direct-care workers, including higher wages, better benefits, and stronger staff-to-resident ratios. She offers local, state, and federal recommendations to reduce COVID-19 exposure in long-term care facilities and urges that they be taken immediately.

• In a paper published in The Milbank Quarterly, Walter Dawson of Oregon Health & Science University and his coauthors attribute the COVID-19 crisis in nursing homes to a lack of coordination between the public health system and long-term care facilities. They argue that partnerships between local and state public health departments and long-term care providers occurred too late, leading to early and severe outbreaks in nursing homes. In order to better prepare for the next pandemic, Dawson and his team urge the creation of high-functioning lines of communication between long-term care providers and public health agencies. They also argue that public health agencies should supply resources and supplement staffing in long-term care facilities during public health emergencies.

• In a recent paper, Howard Gleckman and Melissa M. Favreault of the Urban Institute summarize the findings of an expert roundtable on long-term care reform. The roundtable participants generally concurred that Medicaid long-term care should receive more funding and that the current focus on nursing home care should be redirected to Home and Community Based Services. The experts expressed differing views, however, on whether and how switching the Medicaid default could be achieved. Many argued that Medicare was the more appropriate funding vehicle for long-term care, though others felt that the option was politically unrealistic.

• The outbreak of COVID-19 in nursing homes illuminates the market failures and funding gaps for long-term care, Nora Super of the Milken Institute and her coauthors argue. In a working paper with the Wharton Pension Research Council, Super and her team explore the failures of the private long-term care insurance market, which is plagued by low profitability and market shrinkage. Concerned by increasing costs and an aging population, Super and her team suggest expanding Medicare coverage for long-term care. They propose the creation of Medicare Part E (for “Extra”) which would provide a cash benefit to Medicare beneficiaries to use towards long-term care.

IN THE NEWS

• The U.S. Supreme Court, in a 6-3 decision, struck down a New York law that required individuals to provide a reason to qualify for a license to carry a concealed handgun outside the home. The Court held that the Second and Fourteenth Amendments protect the right of an individual to carry a handgun for self-defense both at home and in public. The Court reasoned that New York’s special need requirement infringed upon individuals’ Second Amendment right. Justice Breyer pointed to recent mass shootings as part of the U.S.’s “disproportionately high rate of firearm-related deaths and injuries” that motivated his dissent in part, while Justice Alito criticized Breyer’s reference in his concurrence as serving “no legitimate purpose”.
• The U.S. Food and Drug Administration (FDA) announced its intention to develop a proposed rule that would set a maximum nicotine level for cigarettes and other tobacco products. The plan is part of the Biden Administration’s efforts to reduce smoking-related deaths. The FDA projected in 2018 that a nicotine standard could result in 8 million fewer people dying from tobacco-related illnesses by 2100. Robert M. Califf, the FDA Commissioner, said that lowering nicotine levels “would decrease the likelihood that future generations of young people become addicted to cigarettes and help more currently addicted smokers to quit.”
• The U.S. Department of Education announced proposed changes to Title IX regulations. The proposed changes would prohibit discrimination against transgender students in schools receiving public funds, which would reverse Trump Administration regulations. The proposed changes would also amend rules governing how schools investigate and resolve claims of sexual assault and harassment. The Education Department, however, noted that the proposed changes do not address transgender students’ participation in athletics, but stated that it would do so in a separate rulemaking. Education Secretary Miguel Cardona said the proposed changes will further the “mission of creating educational environments free from sex discrimination and sexual violence.”
• FDA ordered e-cigarette manufacturer Juul to cease selling its e-cigarettes in the United States. Juul previously discontinued several fruit-flavored vaping pods in 2019 amid concerns that the flavored pods were attracting teenage users. FDA’s action is in response to an application that Juul filed two years ago to continue selling its e-cigarettes in the United States. FDA’s review involved analyzing the effectiveness of e-cigarettes in getting smokers to quit and determining whether these benefits outweigh the potential health consequences to new users, such as teenagers, who may be drawn to e-cigarettes.
• The Centers for Disease Control and Prevention (CDC) recommended that eligibility for COVID-19 vaccination be extended to children between six months old and five years old. This expansion allows young children to receive either the Pfizer-BioNTech or Moderna vaccines. CDC Director Rochelle P. Walensky stated that expanding eligibility is “another important step forward in our nation’s fight against COVID-19.”
• The U.S. Senate passed a gun safety bill that will strengthen background checks for young gun buyers by expanding access to juvenile criminal records, investing $7 billion in mental health services, and prohibiting any individual in a dating relationship who has committed domestic violence from owning a gun. Senator Chris Murphy (D-CT), a lead negotiator behind the bill, stated that the bill  “will be too little for many” and “too much for others” but he nevertheless celebrated that it “is going to save lives.”
• The U.S. Department of Justice issued a request for comments on a proposed rule that aims to confirm the CARES Act—legislation providing emergency aid during the pandemic—authorization of home confinement for inmates beyond the pandemic period. CARES Act authorization currently covers the emergency pandemic period and allows for inmates to be transferred out of prison and into their homes to serve the remainder of their sentences. The Justice Department is seeking to extend this authorization beyond an emergency pandemic period.  The Justice Department stated that home confinement reduced crowding in prisons, removed immunocompromised inmates from the prison environment, and allowed for ongoing monitoring of inmates.
• The U.S. Department of Health and Human Services (HHS) released a schedule of thirteen international flights that will transport infant formula to the United States to address the current shortage—all part of “Operation Fly Formula.” In total, Operation Fly Formula is expected to import 17 million 8-ounce bottles of formula by June 26. Many U.S. agencies, such as the U.S. Department of Agriculture and the U.S. Department of Defense, are partnering with other nations to increase the supply of infant formula in American stores.

WHAT WE’RE READING THIS WEEK

• In a Brookings Institution report, Rachel Sachs, a law professor at Washington University in St. Louis, Marta Wosińska, deputy director of policy at the Duke-Margolis Center for Health Policy, Richard G. Frank, a professor of health economics at Harvard Medical School, and Loren Adler, associate director at the USC-Brookings Schaeffer Initiative for Health Policy, discussed methods to increase generic pharmaceutical market entry and price competition through FDA authority. Sachs and her coauthors proposed that FDA penalize pharmaceutical companies that submit needless citizen petitions, which can delay a generic drug’s approval and release onto the market until further investigation is conducted. Sachs and her coauthors noted that this stalling tactic can reduce market competition for a drug while its pending generic version is not yet on the market. Sachs and her coauthors discussed means of promoting competition, including lowering the current standards for creating generic versions of drug-devices and encouraging manufacturers of generic products to market their drugs within six months of challenging an original drug’s patent.
• In an International Monetary Fund (IMF) working paper, Dimitri G. Demekas, visiting senior fellow at the London School of Economics, and senior IMF economist Pierpaolo Grippa, discussed the increased public support for a transition to a low-carbon economy. Demekas and Grippa argued that public support has fueled demand for central banks and financial regulators to take on a larger role in advancing the transition, but they warned that financial regulators’ ability to do so should not be overestimated. Demekas and Grippa argued that regulators have an important role in facilitating the market’s transition, but regulators and banks must be careful to avoid “unilaterally expanding their mandate” to achieve climate goals. Demakas and Grippa warned, however, that unilateral action may lead to regulators and banks “inadvertently fueling market volatility” rather than advancing “market integrity and stability.”
• In a Center for American Progress (CAP) report, Kevin DeGood, director of infrastructure policy at CAP, argued that the U.S. Congress should reform existing legislation to allow airports to use federal funding and other revenue programs to improve energy efficiency. DeGood explained that under current regulations, airports may only use these funds to improve energy efficiency if they are also enhancing the airport’s capacity. DeGood advocated reforming these rules to allow airports to pursue energy efficiency as a standalone goal. He also asserted that the U.S. Federal Aviation Administration should prioritize grants for airports that demonstrate progress in improving their energy efficiency.

EDITOR’S CHOICE

• In an essay in The Regulatory Review, Matthew Shudtz, formerly the executive director of the Center for Progressive Reform, and Jeff Hauser, executive director of the Revolving Door Project, described the story of an Office of Management and Budget (OMB) employee who often attended meetings with tobacco and e-cigarette executives but subsequently founded a consulting company that lobbied on behalf of the tobacco industry. Shudtz and Hauser explained that this lobbying helped curtail early FDA efforts to ban flavored vaping pods. Shudtz and Hauser argued that a loophole in federal ethics law, which allowed the former OMB employee to lobby for the tobacco industry, may be responsible for the sharp increases in vaping seen among teenagers.

Every year, the fashion sector emits 1.2 billion tons of greenhouse gases.

Fast fashion, which is a common business model for modern fashion retailers, emphasizes quick turnaround times for clothing manufacturing, low production costs, and high-volume outputs to keep up with current trends.

In a recent article, Meital Peleg Mizrachi and Alon Tal of Tel Aviv University call for regulatory action to achieve a more sustainable fashion industry. Mizrachi and Tal encourage policy changes to reshape fashion companies’ production schemes and economic business models.

Mizrachi and Tal describe a model for a more sustainable approach to fashion known as the circular economy. At its essence, a circular economy designs products in such a way that “supports sustainable development, social justice, and economic wellbeing.” This model promotes sustainability and equity by cutting down on waste and producing items that prioritize longevity of use and potential for reuse.

Mizrachi and Tal contrast a sustainable fashion industry with the current industry emphasis on fast fashion.

According to Mizrachi and Tal, critics of the industry express concern with brands’ use of sustainability in their marketing materials. Often, companies that claim to be sustainable are frequently “all style and no substance,” explain Mizrachi and Tal, meaning they do not implement circular solutions into their business models.

To demonstrate how sustainable efforts could work, Mizrachi and Tal underscore a 2021 United Kingdom initiative that was headed by 17 top fashion companies called “Textiles 2030.” This initiative commits these companies, which make up half of the UK’s clothing sales, to lowering emissions of greenhouses gases by 50 percent and water usage by 30 percent. The Textiles 2010 initiative achieves these goals by incorporating “new approaches of circular economy into their business model by 2030.”

At its core, the Textiles 230 initiative urges the industry to produce clothes that have the ability to be long-lasting and recyclable, providing a paradigm for putting the circular economic model into practice.

In seeking out the best alternatives to fast fashion, Mizrachi and Tal evaluate the feasibility of various policy interventions that would encourage sustainable fashion outcomes.

Mizrachi and Tal emphasize “pay-as-you-throw” community initiatives as a possible pathway to sustainable goals, in which residents have to pay a fee based on how much solid waste they dispose. According to Mizrachi and Tal, this program functions as a monetary incentive for individuals to accumulate less waste and would be highly effective for boosting sustainability.

Mizrachi and Tal also target the fashion industry’s use of outsourcing as a culprit for inhibiting sustainability. Because an overwhelming majority of clothing manufacturers outsource labor, Mizrachi and Tal propose holding corporations legally liable for working conditions. According to Mizrachi and Tal, this liability will both protect outsourced workers from subpar treatment and curtail environmental damage in the industry at large. Mizrachi and Tal acknowledge, however, that this alternative will likely garner political pushback.

Next, because Mizrachi and Tal argue that overconsumption contributes substantially to the unsustainable fashion predicament, they advocate educational solutions as an answer. They indicate that making consumers aware of the harmful environmental and social impacts of the fashion industry through programs such as collaborative community education can reduce harm. Mizrachi and Tal recognize, however, that this solution is long-term—the effects of educational initiatives will not be seen for years to come.

In addition, Mizrachi and Tal consider a carbon tax—imposed directly on fashion companies that emit greenhouse gases during production—as a potential way to curb environmental harms. Mizrachi and Tal bring to the fore a weakness of this solution: it will be very difficult to pinpoint where emissions are happening in companies’ production processes to be able to assess the taxes effectively.

As an alternative, Mizrachi and Tal suggest that governments impose higher taxes on fashion products that lack sustainable characteristics.

At the same time, Mizrachi and Tal argue, governments should actively provide support for sustainable fashion enterprises, including favorable loan terms for progressive firms.

Moreover, Mizrachi and Tal support a standardized certification program as a potential stop on the road to sustainable fashion. Mizrachi and Tal envision a system in which fashion companies would be ranked based on their performance across sustainable categories, such as environmental waste, emissions, and workers’ rights. According to Mizrachi and Tal, this kind of certification system would make it easier for consumers to shop in a sustainable manner. On the other hand, Mizrachi and Tal appreciate that differing definitions of “sustainable fashion” could make this solution controversial in creating the criteria for certification.

Regardless of the chosen approach to sustainability in the fashion industry, Mizrachi and Tal recommend consumers should remain at the core of regulatory decisions.

Over 1.3 million patients reside in America’s 15,600 nursing homes. States bear the responsibility of ensuring the safety of the vulnerable living in these facilities; however, states have fallen short in their monitoring of nursing home quality, according to a recent report issued by the Department of Health and Human Service’s Office of the Inspector General (OIG).

Even though the Centers for Medicare & Medicaid Services (CMS) oversees nursing homes, states have agreed to monitor nursing home compliance under the Social Security Act. To do so, states conduct a standard survey of each nursing home every 15 months and conduct complaint surveys investigating potential noncompliance with requirements protecting the health, safety, and welfare of nursing home residents.

To determine if states fulfill their surveying requirements, the OIG reviewed state data collected between 2015 and 2018. For these years, the OIG analyzed the frequency of surveys conducted by states, the quality of their surveys, and the effectiveness of state responses following any identified deficiencies.

The OIG found varying degrees of state compliance and performance. One state, Louisiana, scored perfectly on every performance measure during the analyzed time period; however, most states failed at least one performance measure and 28 states missed the same measure or measures for multiple consecutive years.

Of the states’ failings, 41 percent arose because the state failed to survey within the required timeframe for either a high priority claim or standard survey. States cite staffing shortages as the root cause of their timeliness failures. Surveying positions in the private sector offer higher salaries and less demanding hours which, according to states, leaves the states unable to compete for additional staff.

In response to the OIG’s report, CMS claimed that reporting failures do not necessarily indicate poor state performance overall. If a state misses a single survey, the OIG’s results show it has failed on the timeliness measure, but one late survey does not show a “systematic failure,” CMS argued. This defense seems logical, but it runs contrary to the OIG’s report which shows states having serious and persistent problems meeting timeliness requirements.

To monitor and ensure state performance, the OIG made five recommendations: monitor state correction plans, establish enforcement actions, engage with state officials, revise the CMS state operations manual, and disseminate state performance surveys more broadly.

When a state fails a performance measure, CMS requires the state to submit a corrective action plan, however, the OIG found that ten percent of plans were missing and the submitted plans often lacked any details as to how the state would correct the problem. The OIG urged CMS to require “outcome oriented” state action plans and for CMS to monitor the implementation of these plans. CMS concurred with this recommendation.

Even though CMS could use remedies and sanctions, including financial penalties, to enforce state compliance, CMS has rarely used these tools. The OIG recommended that CMS establish guidelines to inform states when CMS will sanction performance problems. The OIG stated that such guidelines should include a principle to determine when CMS will use its last resort sanction: terminating all Medicare and Medicaid funding.

CMS concurred with this recommendation, but CMS also expressed hesitancy to further the use of sanctions. Considering that states cited staffing as the root cause of their timeliness failures, CMS feared that sanctioning the states might only exacerbate the staffing issue.

The OIG found that even in the 28 states that failed survey performance measures for consecutive years, CMS only reached out on three occasions to senior state officials, such as Department of Health Directors or governors. CMS reported that seeking the attention of senior state officials on these occasions was effective as it resulted in performance improvements. Although CMS stated that it only engages with senior state officials as a last resort, CMS consented to do so earlier and more frequently to address persisting state survey issues.

Regional CMS offices use the agency’s state operations manual to determine what actions are appropriate in the event of state non-performance of surveys. The OIG recommended that CMS update the manual to reflect its recommendations, and CMS concurred.

Due to the importance of nursing home surveys to elderly residents and their families, the OIG encouraged CMS to disseminate these performance reports more broadly. CMS currently publishes these reports online; however, parties such as patient advocacy groups and nursing home providers could benefit from direct distribution. CMS responded that it would not follow this recommendation, as its current dissemination follows existing requirements.

Vulnerable members of the U.S. population rely on CMS to ensure that nursing homes are safe. CMS, in turn, relies on states to survey and monitor nursing homes. The OIG report encourages CMS to do more to ensure states fulfill their part of this arrangement, and CMS agreed with four of OIG’s five recommendations for how to make these improvements happen.

Following the outbreak of war in Ukraine, gas prices in the United States hit an all-time high at the beginning of March. U.S. House Minority Leader Kevin McCarthy (R-Calif.) and other Republican politicians blamed the soaring prices on President Joseph R. Biden’s energy policies. McCarthy criticized the Biden Administration’s failure to issue sufficient “oil and gas leases on federal lands and waters” and called for politicians who would “get out of the way” of U.S. oil and gas development.

But the impact of the Biden Administration’s policies on gas prices is far more complicated than McCarthy’s criticism suggests.

Although legal battles surrounding the Biden Administration’s oil and gas leasing and permitting may have caused some impacts on production, industry analysts suggest market forces have had a much larger impact on current production and prices.

Following his inauguration, President Biden issued an executive order that temporarily paused the issuance of new leases on federal lands and waters until the U.S. Department of the Interior completed a review of the leasing and permitting program. The Interior Department released its report reviewing the program at the end of November.

Before the Administration released the report and lifted the pause, however, the state attorneys general for Louisiana and several other states challenged the leasing pause in court. The court sided with the states and issued an order preventing the Biden Administration from continuing the leasing program pause.

To comply with the court, the Bureau of Ocean Energy Management (BOEM)—an agency within the Interior Department that manages leases for drilling on federal lands—auctioned off leases covering 1.7 million acres in the Gulf of Mexico. The auction was the “largest offshore oil and gas lease sale in U.S. history.”

Shortly after the sale, however, a federal judge in Washington, D.C. invalidated the sale in a suit brought against the Biden Administration by Friends of the Earth, an environmental nonprofit. The judge reasoned that the lease sale was unlawful because BOEM used a flawed analysis of the sale’s greenhouse gas emissions and the resulting climate impacts.

The plot thickened when states sued the Biden Administration for a second time in a Louisiana district court.

The district judge barred the Biden Administration from using a particular methodology to estimate the impacts of greenhouse gas emissions, known as the social cost of carbon. The states claimed that the Administration’s social cost of carbon calculation was unlawful. They argued that using the social cost of carbon would cause the Administration to issue fewer drilling leases and permits, which would harm the states’ oil and gas development.

Following the judge’s order preventing the calculation of the social cost of carbon, the Biden Administration announced that all “work surrounding public-facing rules, grants, leases, permits and other projects has been delayed or stopped altogether” while the agency assesses how to move forward. Several weeks later, however, the U.S. Court of Appeals for the Fifth Circuit lifted the lower court’s ruling.

In the interim the states had merely achieved a pyrrhic victory. They succeeded in temporarily stopping the Biden Administration from limiting oil and gas development based on the social cost of carbon. Yet, the states’ suits resulted in the Biden Administration pausing all leasing and permitting while it determined how to make sense of all the court rulings. And even then, the circuit court shortly afterward granted the Administration a victory.

Although the legal morass facing the leasing and permitting processes may have had some impact on oil production, experts suggest that market forces are the real culprit driving current oil production and pricing trends.

Many oil producers and financiers are wary of investing too heavily during the profitable periods, only to see their investments wiped out when prices turn lower. The rapid collapse of oil prices in 2014 and then again in 2020 resulted in a large number of bankruptcies. That has led investors and oil companies alike to be far more disciplined in deploying capital in the face of the current rise in oil prices.

One of the country’s biggest fracking companies, Devon Energy, has no plans to increase production in spite of the recent rise in oil prices. Instead, the company will focus on returning capital to shareholders. This appears to be the course many oil producers are taking—who are seemingly unphased by the prospect of $100-per-barrel prices.

In addition to long-term pricing concerns, producers are also facing the same COVID-19-related supply chain and employment issues plaguing other sectors of the economy.

As evidence of these non-regulatory forces, one spokesperson for the Interior Department reportedly noted that a significant number of drilling permits and 60 percent of leased land currently “sits unused.” In fact, the Biden Administration approved more drilling permits in its first year than the Trump Administration, but oil developers are currently using their permits at lower rates.

These considerations paint a more complicated picture than just an Administration hostile to oil and gas. Even if drilling and leasing policies were not tied up in court battles, the lack of drilling seems to be influenced by producers and investors’ concern of decreasing oil prices. There simply is no magic regulatory wand the Biden Administration can wave to increase oil production.

Earlier this month, the U.S. Department of Agriculture (USDA) issued proposed revisions to its rules under the 1921 Packers and Stockyards (P&S) Act. The proposal would require chicken processors to provide current and prospective growers with more information about the financial risks inherent in contract chicken production.

The adoption of the P&S Act, which applies to meatpackers and poultry dealers, followed debates over antitrust and trade regulation that resulted in the passage of the Clayton Act and Federal Trade Commission Act. Incorporating and expanding on antitrust language from those acts, the P&S Act noted restrictions on trade that are hallmarks of monopoly power. It also incorporated tort language concerning trade regulations, unfair or deceptive conduct, unjust discrimination, and undue preference.

Congress provided the Secretary of Agriculture with the authority to develop rules, orders, and regulations to carry out the provisions of the P&S Act. Disclosure has been one staple of enforcement, aimed at deterring unfair or deceptive conduct, as well as unjust discrimination and undue preference that damages livestock producers. With its recently proposed revisions, USDA aims to provide growers with more detailed information on certain subtle financial risks associated with poultry production contracts to assist them in making significant investment decisions.

The chicken industry features a unique organizational structure. Almost all chickens are raised by growers under contract, with about 25 large processors that provide growers with feed, chicks, and veterinary services. Because feed and live chickens are costly to transport, processors contract with farms near their feed mills and plants. Markets for growers are therefore quite localized: 90 percent of contract growers are located within 60 miles of their processing plant, and most growers report no more than 3 processors within their region.

Growers provide housing, utilities, and labor. A single modern chicken house, capable of holding 60,000 birds at a time, costs about $350,000 to $400,000. A prospective grower will therefore need to invest $1.5 million or more, exclusive of land costs, in an efficient four-house facility. Most of these facilities are debt-financed and, with a 20 percent down payment, prospective growers can borrow well over $1 million on a 15-year mortgage.

Grower compensation is based on a “tournament” system. When the grower’s chickens are delivered to the processor, the total live weight of the delivered flock is recorded. The processor then calculates the grower’s “settlement cost,” or the processor’s total costs of feed and chicks delivered to the grower, divided by the total live-weight pounds of chicken returned to the processor. The grower’s settlement cost—feed and chick expenses per pound of delivered chicken—is then compared to an “average settlement cost” across all flocks delivered to the plant by all growers during a week.

Chicken contracts set a base pay per pound delivered, with premiums or deductions based on the grower’s settlement cost, relative to weekly average settlement costs. Those growers with relatively low settlement costs receive premiums over the base, while those with relatively high costs receive deductions. In turn, performance varies with flock mortality, with higher mortality implying fewer live-weight pounds delivered for any given placement of chicks. Performance also varies with feed absorption because calm and healthy chicks convert more feed to meat than stressed chicks.

The contracts used in chicken production significantly alter the mix of financial risks that farmers face. They shift the price risks associated with feed and mature chickens from growers to processors, since grower payments are independent of feed or chicken prices. Common production risks—arising from disease or weather that affect the performance of all growers—are also borne by processors since growers’ pay is based on their relative, not absolute, production performance. Growers understand these well-known risks.

Contracts, however, introduce new risks that growers may not perceive.

For example, a grower’s significant long-term capital investment can tie it to a specific processor via a short-term incomplete contract with few or no alternative contractors. Once growers make housing investments and commit to a processor, they face counterparty risks: the processor may go bankrupt or fail to deliver as many flocks in a year as the grower expects.

The processor may also demand further capital investment by growers as a condition of contract renewal.

Finally, the tournament method of compensation ensures that grower pay will vary widely around the average pay estimates that processors and extension agents provide, in part due to circumstances outside the grower’s control—the performance of other growers.  Even though contracts shift price and common production risks to processors, the presence of other less well-known risks assures that chicken grower incomes vary quite widely compared to other farm households and to all U.S. households.

In the proposed rule, USDA aims to ensure that growers are better informed about counterparty risks and about pay variations in tournaments. Processors would be required to provide each grower with a disclosure document specifying the minimum number of flocks to be placed on the grower’s facility during a year, as well as the minimum stocking density of those flocks. The document would also need to note any bankruptcies declared by the processor in the previous six years and any litigation between the processor and any of its growers in the same time period. Processors would be further required to provide growers with expanded financial information in the form of tables showing distributions of grower pay over the previous year and measured according to revenue per square foot of housing. The distributions would include averages as well as quintile values, sorted by production complex and housing types.

USDA seeks comment on grower financial risks, their sources, the impact of contract design on those risks, and the efficacy of the proposed regulation. It uses a series of specific questions to elicit informed comments on the proposed rule and seeks to use that dialogue to develop a final rule.

Consumers are increasingly turning to alternatives to traditional meat. The sale of plant-based meat has more than doubled in the United States in recent years, rising by 148 percent from 2019 to 2020 alone. Some experts project that the plant-based meat industry will grow into a $252 billion market by the end of the decade. Unlike older market alternatives such as veggie burgers, plant-based meat is specifically designed to taste and feel like real meat.

Yet another booming industry is not merely a meat-like alternative—it is real meat. Cultured meat is meat grown in a laboratory from cells taken from living animals. It does not require any animal slaughter, and some researchers find that it could have a significantly smaller carbon footprint than traditional meat. Although cultured meat is not yet commercially available in the United States, experts project that this cell-based meat industry will achieve price parity with conventional meat by 2025. Cell-based meat may “significantly disrupt” the traditional meat market as it provides real animal meat with fewer environmental harms

In this uncharted territory of neither plant-based meat alternatives nor traditional meat, policymakers must create a regulatory framework for the soon-to-be booming cell-based meat industry.

In 2019, the U.S. Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA) reached an agreement to regulate cell-based meat jointly to ensure that, when it comes to market, cell-based meat is “safe and properly labeled.” FDA will oversee cell collection, banking, and growth, while USDA will conduct safety inspections and develop labeling for cell-based meat.

In this week’s Saturday Seminar, experts discuss regulatory issues to expect with an emerging alternative meat industry.

• In an article in the Maryland Law Review, Deepti A. Kulkarni of Georgetown Law argues that a “turf war” over statutory authority has hindered attempts to regulate food grown using emerging technologies, such as cultured meat. Kulkarni explains that FDA, USDA, and the U.S. Environmental Protection Agency (EPA) share statutory authority to regulate foods created through the use of biotechnology. According to Kulkarni, these agencies are only just beginning to use their authority to implement science-based policies to address cultured meat in a coordinated, efficient, predictable, and scalable way.

• The United States needs a strategy to regulate cell-based meat, argues Jennifer Penn in a UCLA Journal of Law and Policy article. Penn argues that the FDA Commissioner should introduce new regulations that define and set standards for cultured meat, rather than trying to fit it into existing categories of FDA-covered products. Once FDA certifies that cultured meat is safe, USDA should oversee the day-to-day regulations, Penn argues. She suggests that USDA should hold cultured meat to the exact same dietary regulations and quality assessments as regular meat.
• In an article in the Kentucky Journal of Equine, Agriculture, and Natural Resources Law, Brian P. Sylvester, Nathan A. Beaver, Kara Schoonover, and Jonathan I. Tietz argue that regulators should look to the examples of cloned meat and bioengineered meat when deciding the best path forward for cell-based meat. When regulating cloned meat—meat “from cloned animals or their offspring”—FDA has applied a “probabilistic and pragmatic” safety-assessment approach that relies heavily on peer-reviewed scientific data and emphasized risk-based regulations. Similarly, the approach for bioengineered meat, or meat that has been genetically modified in vitro, includes a premarket consultation process. Sylvester and his coauthors argue that a similar consultation process would foster innovation and improve consumer confidence if applied to cell-based meat. Sylvester and his coauthors urge regulators to provide proactive guidance for this new market.
• State laws prohibiting manufacturers of plant-based foods from labeling their products as “meat” violate the U.S. Constitution, according to Jareb A. Glekel of Verdict and Sherry S. Colb of the Cornell University School of Law. Gekel and Colb claim these so-called tag-gag laws violate several constitutional provisions, including the Supremacy Clause and the First Amendment. They suggest several innovative ways to challenge these restrictions, including claiming marketing materials are a form of political speech subject to heightened protection by courts. Free speech provisions in state constitutions provide another avenue for challenging restrictions on plant-based food labeling, according to Gekel and Colb.
• The U.S. Congress can and should confer additional intellectual property protections on cell-based meat using the Hatch-Waxman Act, argues attorney Sean A. Grafton in an article published in the Catholic University Journal of Law and Technology. The Hatch-Waxman Act currently allows manufacturers of generic drugs to obtain patents on their products if the brand-name version of a drug has already been proven safe. Grafton explains that cell-based meat could benefit from similar protections, given that it will likely take an extended period of time for many cell-based meat products to gain FDA approval. Granting cell-based meat products patent protection under the Hatch-Waxman Act would allow immediate competition in this rapidly growing market by speeding up the usually cumbersome patent approval process without compromising safety, Grafton argues.
• In a Frontiers for Sustainable Food Systems article, Raychel E. Santo of the John Hopkins Bloomberg School of Public Health and several coauthors outline policy issues surrounding plant-based meat, including an opaque approval process, a lack of funding for oversight, unclear labeling standards, and confusion over which agency should regulate the product. Santo and her coauthors discuss consumer advocacy concerns about the FDA approval procedure for plant-based meat, which allows manufacturers to self-certify that their products comply with safety standards. They also suggest that the current lack of congressionally appropriated funding for regulation of plant-based meat constrains FDA and USDA by limiting their ability to hire additional personnel. In addition, Santo and her coauthors note the possibility of federal legislation that could limit the marketing of plant-based products as “meat.” They claim such legislation could provide greater clarity over how the USDA and FDA should divide regulation of plant-based meat and address issues such as labeling and transparency standards.

IN THE NEWS

• The U.S. Supreme Court unanimously held that the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 does not preclude judicial review of annual reimbursement rates for outpatient drugs. A group of hospitals challenged the 2017 decision by the U.S. Department of Health and Human Services (HHS) to cut reimbursement rates for specific drugs, a decision that the Court noted cost affected hospitals approximately $1.6 billion annually. The Court held that because HHS failed to conduct a required survey of hospitals’ acquisition costs, it was not permitted to change these reimbursement rates.
• The Centers for Disease Control and Prevention (CDC) lifted its COVID-19 testing requirement for international travelers entering the United States. Although most non-U.S. citizen nonimmigrants still must be fully vaccinated to enter the United States, the CDC rescinded its prior requirement that all air passengers aged 2 or above show a negative COVID-19 test result or documentation of recovery from COVID-19 before boarding a flight to the United States. The CDC stated that it made its decision in light of available and effective treatment and prevention measures and because of a reduction in severe COVID-19 cases.
• The Federal Reserve raised interest rates by three-quarters of a point, the largest rate increase since 1994. The Federal Reserve, by raising interest rates, aimed to reduce demand and combat inflation, which reached 8.6 percent in May, the largest 12-month increase since 1981. The U.S. Bureau of Labor Statistics estimated that energy, groceries, and shelter costs all contributed to the high inflation rates, and the Federal Reserve noted that Russia’s invasion of Ukraine and COVID-19-related supply chain issues in China have also contributed to the heightened rates. The Federal Reserve also stated that it hopes this increase will help it achieve its goals of promoting maximum employment and bringing inflation to the rate of 2 percent in the long run.
• An advisory committee of the U.S. Food and Drug Administration (FDA) unanimously recommended the approval of the Moderna coronavirus vaccine for children and adolescents ages 6 to 17.
• Ohio Governor Mike DeWine signed a bill into law that will allow teachers and other school employees to carry guns in school safety zones if they completed up to 24 hours of training and receive the relevant permit by the school board. Ohio’s legislators wrote that they intend the law will “expressly overrule” Gabbard v. Madison, an Ohio Supreme Court decision that required basic police-officer training or 20 years of experience as a peace officer to carry firearms in school safety zones, a situation in which Governor DeWine called “impractical” for schools. The law also appropriated funds to establish an Ohio school safety crisis center and mobile training teams, which will assist with development and implementation of security protocols, training, and tactical emergency medical services. The law passed despite opposition from groups such as the Ohio Federation of Teachers and the Ohio Education Association, as well as a former commander for the Columbus Division of Police.
• The U.S. Department of Labor issued guidance to prevent abuses of prospective temporary migrant workers. The Labor Department explained that its guidance is part of a multi-agency effort to increase participation in visa programs that authorize employment for temporary and seasonal agricultural workers and “mitigate vulnerabilities” that these visa programs create for workers. The guidance provided standards to govern all stages of the recruitment process, respect collective bargaining efforts, and ensure working conditions are outlined in a language the workers understand.
• The U.S. Environmental Protection Agency (EPA) announced $6.5 billion in funding for its Water Infrastructure Finance and Innovation Act and State Infrastructure Financing Authority programs. The funding, which will be distributed as loans, is part of EPA’s $13 billion effort to improve water infrastructure nationwide, which the EPA projected will create 40,000 jobs. Radhika Fox, assistant administrator for EPA’s Office of Water, said the programs “can help revitalize our water systems while creating good paying jobs and delivering significant economic benefits, especially in underserved and overburdened communities.”
• The U.S. Department of Transportation opened applications for states to apply for funding from its Bridge Investment Program. The U.S. Congress established the program through the Bipartisan Infrastructure Law to invest billions in bridge replacements, preservation, and rehabilitations nationwide. Transportation Secretary Pete Buttigieg called the program “one of the most significant investments in our bridges in decades.” The Transportation Department projected that the increased funding will support the national economy and revitalize regional and local communities.

WHAT WE’RE READING THIS WEEK

• In an article in the Administrative Law Review, Richard J. Pierce, professor at The George Washington University Law School, argued that the Supreme Court should stop using its shadow docket—referring to the Supreme Court’s ability to allow or block the government from taking action without providing any explanation or reason for its decision. Pierce explained that the Supreme Court uses the shadow docket to provide emergency rulings with minimal, if any, briefing and without a hearing. Those lower court decisions, Pierce continued, usually remain in effect until the courts decide the legality of the government action. But Pierce contended that the Supreme Court has been using the shadow docket by taking actions “that have a wide variety of permanent, major effects without ever providing any explanation for its actions.” Pierce, however, identified recent examples of Court actions that he found “encouraging” and that potentially indicate that the Court may reduce or discontinue its use of the shadow docket.
• In a study published in Regulation & Governance, Alberto Asquer, senior lecturer at SOAS University of London and Inna Krachkovskaya, research associate at SOAS University London, compared the European Union’s and the United States’ regulatory responses to CRISPR gene editing and proposed a new model for regulatory development. Asquer and Krachkovskaya presented a cyclical model of technology and regulation as a feedback loop in which regulations are created and adjusted in response to new technologies, which in turn stimulates the production of more technology. Asquer and Krachkovskaya posited that, on one hand, emerging technologies should not be held back by existing frameworks of regulation, but on the other hand regulations themselves should change to anticipate emerging technologies and their impacts.
• In an article in the Yale Journal on Regulation, Daniel Richman, a law professor at Columbia Law School, argued that a critique of administrative agency-defined crimes, also known as “administrative crimes,” contending that such crimes are unconstitutional delegations of congressional authority does not carry over neatly to other areas of federal criminal law. Richman explained that a small subset of federal criminal prosecutions are for offenses defined by administrative agencies. Richman noted that in Gundy v. United States, some Supreme Court Justices expressed a willingness to reshape long-standing principles about when Congress can delegate authority to administrative agencies. In the context of federal criminal law, however, Richman argued that Congress often delegates crime-definition powers to government institutions, including courts and state governments, in addition to agencies. Richman discussed how eliminating this particular delegation to agencies would have only a limited effect on criminal justice. Richman concluded that the judiciary is not necessarily the most competent institutional actor for policing congressional delegations of crime-definition authority, because such delegations involve highly contested values, including liberty, federalism, and accountability.

EDITOR’S CHOICE

• In an essay in The Regulatory Review, Eric Cervone, a lawyer and podcaster who writes about free speech issues, discussed Justice Thomas’s concurrence in the U.S. Supreme Court’s ruling in Biden v. Knight First Amendment Institute. Writing alone, Justice Thomas argued that social media platforms have unprecedented private control over speech, including speech by government actors. Cervone noted that states’ responses vary as to the implications of a social media platform’s level of control on viewpoint discrimination. Cervone argued that this debate will be resolved in the courts unless changes occur in the state of political discourse or in how social media companies operate. Cervone concluded that the Supreme Court is unlikely in the foreseeable future to limit the independence of these social media platforms.

The federal agency central to developing the modern internet and other life-changing technologies is unique in structure, with an impressive record of advancements. But does its entrepreneurial mission and nimble decision-making expose the agency to a greater risk of ethical issues than other, more traditionally designed agencies?

DARPA—the Defense Advanced Research Projects Agency—is a research and development agency within the U.S. Department of Defense. Known as the “Pentagon’s Brain,” it is responsible for a host of defense-focused inventions that have seeped into everyday life. Aside from the internet, DARPA can be credited with the early development of GPS, Siri, the computer mouse, and a host of other technologies.

 The agency’s history mirrors its innovative mission. In the midst of the space race of the 1950s, President Dwight D. Eisenhower formed what was then called ARPA. Much of the agency’s initial functions were later transferred to the National Aeronautics and Space Administration. But Eisenhower’s creation retained its key purpose of developing advanced technology in the name of national security. To reflect this defense-focused purpose, ARPA changed its name to DARPA in the mid-1970s.

Perhaps the ingenuity of DARPA lies not just in its inventions, but also its governmental setup.

Because DARPA is an independent agency, the President has limited power to remove the agency head. DARPA’s director and deputy director approve programs and report to the Defense Department. Below the directors, 220 government employees span six technical offices, including around 100 program managers.

This “flat” organizational model gives program managers the power to explore innovative project ideas without many bureaucratic delays. To further its technological expertise, DARPA collaborates with a range of experts in academia, government, and the private sector. Importantly, although DARPA receives consistent funding from Congress and is subject to general oversight from government officials, it functions without extensive overhead supervision.

Such a model came about by design. DARPA administrators enjoy distinctive hiring abilities, including “special statutory hiring authorities and alternative contracting vehicles” that allow the agency to advance projects quickly. DARPA hires program managers for limited tenure, usually three to five years, to ensure they work at the agency “to get something done, not build a career.” Although this hiring policy results in quick turnover, managers have more flexibility than those in other U.S. research agencies.

These features, not enjoyed by other federal agencies, give DARPA its entrepreneurial style of management. Indeed, DARPA prides itself on “pushing the frontiers of what is possible.” This creative spirit has resulted in projects that test technological boundaries.

But therein lies the rub. Jeffrey Mervis of Science notes that critics of DARPA claim that the agency’s autonomy-driven nature can create ethical pitfalls. Other commentators also suggest that the limitless mentality of DARPA officials allows ethical discussions to fall by the wayside.

For example, the agency has proposed developing neurotechnology that alters the brains of soldiers. To create a stronger combatant—or even an invincible “super-soldier”—DARPA has explored human enhancements, such as implanted memory chips and a brain-machine interface. Although these ideas are aspirational and even hard to imagine, they illustrate just how far the agency is willing to push its technology.

Currently, DARPA is attempting to create fighter planes that operate only with artificial intelligence (AI), rather than human pilots. As the Pentagon plans to invest almost a billion dollars on technology driven by AI, critics oppose the use of AI technology to make “life-taking decisions” in the wartime effort. Hundreds of scholars and tech companies have called for regulations prohibiting these types of lethal autonomous weapons.

DARPA does recognize the ethical, legal, and social implications of its work. In response to growing concerns, the agency has developed procedures that assess these implications throughout the development of any given project. Skeptics worry that these measures are not enough.

Still, the U.S. government and others continue to think the DARPA design has promise. Countries such as Japan and Germany have launched DARPA-inspired programs. Moreover, the United Kingdom and the Liberal Party of Canada seek to emulate the DARPA model with similar agencies. And within the United States, President Biden has proposed the creation of two DARPA-like agencies for health and climate initiatives.

It remains to be seen whether future renditions of DARPA’s “high-risk, high-reward” model will face ethical and moral questions similar to those that critics, and DARPA itself, have acknowledged. As shown by DARPA’s valuable work, cutting through red tape and expediting output can yield unrivaled results. But the ultimate consequences of technological innovations developed through DARPA may be harder to discern.

When the COVID-19 pandemic first hit, some pundits feared the worst for the global financial system. Stocks took a record-breaking plunge. Millions of jobs evaporated seemingly overnight. And investors rushed to sell long-term investments for cash— a warning sign of economic collapse last seen before the 2008 financial crisis.

But two years after the outbreak of COVID-19, the global financial system has not collapsed. Instead, the stock market hit record heights in January and the global economy is rebounding quickly from the effects of the pandemic.

In a recent article, two economists argue that this economic resiliency vindicates the international financial reforms enacted after the 2008 financial crisis. Julia Giese and Andy Haldane of the Bank of England claim that the post-2008 reforms have allowed financial institutions to act as a “shock absorber” rather than a “shock transmitter” over the last two years.

Giese and Haldane credit much of the shock absorption to the Basel III Accords, which were signed in 2011 by 45 countries, including the world’s leading economies. Basel III obligates signatory countries to set standards for financial institutions to ensure they can better weather financial crises.

Basel III has improved the strength of the financial system in two main ways, according to Giese and Haldane.

First, Basel III requires countries to implement micro-prudential regulations—those that improve the financial stability of individual financial institutions. Two micro-prudential regulations that Giese and Haldane highlight from Basel III are higher leverage ratios and liquidity requirements.

Increasing the required leverage ratio means banks need to maintain a higher reserve of their own money relative to the amount they lend out. A higher liquidity requirement requires more of a bank’s assets to be “liquid,” or easily convertible to cash. These requirements ensure that, if many of a bank’s borrowers cannot repay their loans (as occurred during the 2008 financial crisis), banks still have cash on hand to lend out.

Second, Basel III requires countries to implement macro-prudential regulations, which are designed to preserve the stability of the financial system as a whole. Prior to the 2008 crisis, regulators generally looked only at the risk of individual banks failing. Giese and Haldane contend that this approach created a domino effect that caused otherwise healthy banks to fail in 2008 when institutions they traded with went under.

Basel III’s macro-prudential regulations mitigate this risk by ensuring banks have enough money to guard against this falling domino scenario, Giese and Haldane argue. They identify two key macroprudential regulations imposed by Basel III: countercyclical capital buffers and systemic risk buffers.

A countercyclical capital buffer means that banks are required to hold more money—rather than lending it out—during times of economic growth. If a recession hits, authorities can lower this buffer, allowing banks to lend out the money they held onto.

A systemic risk buffer requires larger banks with a higher importance to the financial system to keep more money on hand. Ensuring the stability of these banks will help prevent a cascading bank failure like the 2008 financial crisis, according to Giese and Haldane.

The COVID-19 pandemic tested these requirements for the first time—and they worked as intended, Giese and Haldane contend. Many countries cut their countercyclical capital buffers, which gave banks sudden access to large reserves of money to lend out–the opposite of the situation in 2008, when banks hoarded cash.

Although the Basel III system arguably passed its first test, Giese and Haldane point to several improvements regulators could make to protect against future threats. They argue that regulators should impose similar requirements on institutions such as hedge funds and asset managers, which make up an increasing share of assets globally.

They also contend that regulators should closely monitor the rise of FinTech companies. Although these companies offer similar services to banks, they oftentimes face looser regulation.

In addition, Giese and Haldane argue that banks should face increased “stress testing,” where regulators simulate whether the institution would survive financial crises of varying levels. Stress tests have served as an important post-financial crisis tool for regulators, and their results largely held up during the COVID-19 pandemic. But Giese and Haldane argue that regulators should account for scenarios potentially even more damaging to the global economy, including increasing natural disasters and cyber-threats.

As memories of the financial crisis and COVID-19 fade, regulators will face pressure to relax regulations, Giese and Haldane predict. But the resiliency of the financial system during the pandemic demonstrates to them the essential role that regulation plays in protecting the global economy of the future.

Virtual bank branches are opening in the metaverse. Digital images of cartoon monkeys are selling for $2.8 million. A couple was arrested for laundering over $3.6 billion in Bitcoin.

New financial technologies are worth big bucks—but are regulators doing enough to oversee the massive risks posed by these new services and platforms while allowing for flexible innovation?

In a recent study, Jillian Grennan, a finance professor at Duke University’s Fuqua School of Business, surveys the U.S. regulatory landscape surrounding so-called fintech, such as digital payments, blockchain, cryptocurrencies, and financial applications of artificial intelligence (AI). Because fintech represents “the birth of a new technology, a new tool for entrepreneurship, a new investable asset class, and a new way of controlling financial decisions,” Grennan argues that financial regulation has been unable to keep up with this rare area of innovation.

To understand the regulatory needs and challenges of fintech, Grennan urges regulators to understand first the economic goals underlying financial innovations.

AI, for example, reduces the costs associated with making predictions and decisions, explains Grennan. But AI’s dependence on data to make predictions also comes with costs—data privacy and integrity concerns, as well as stifled innovation as AI focuses on near-term incremental solutions rather than more human-focused innovation and new ideas.

On the other hand, blockchain—a type of digital shared storage database—allows for users to make secure transactions without the need for a third party, such as a bank. Grennan explains that financial services and institutions can most benefit from blockchain’s cost-reduction characteristics because finance is a highly centralized industry. Financial services’ adoption of blockchain and non-fungible tokens—digital certificates that reflect a unique right to ownership—could ultimately reduce customer fees and the costs of verifying authenticity, according to Grennan.

But transactions supported by blockchain, if widely adopted, could also serve as an alternative to government-backed currencies, which could derail the ability for countries to implement monetary policy and stabilize economies, Grennan warns. Widespread adoption could also give the players who launch these currencies, such as Facebook, too much control over markets and central banks.

Combining the advances driving AI and blockchain, Grennan explains, is decentralized finance—also known as DeFi—which also reduces costs by removing intermediaries or managers traditionally involved in financial transactions. Rather, DeFi transactions allow parties to create complicated financial transactions that are executed without the need for an intermediary and are then securely recorded in the blockchain. This allows for “headless” financial organizations that are more transparent and more generative of parties’ trust, a structure that Grennan says produces more customized and complex services for individual consumers.

DeFi’s cost savings do not overcome the fact that it is not a perfect substitute for traditional financial intermediation, Grennan notes, citing numerous problems with DeFi, including lack of deposit insurance, volatile prices, cyber risk, and coding issues.

Because of the new methods and risks posed by FinTech, Grennan urges that these services “do not fit well within existing regulatory frameworks.”

Grennan explains one such challenge that can arise when the government tries to regulate AI applications. In the early days of AI, the United States focused on sector-specific regulation. Self-driving cars, for example, were regulated by the Department of Transportation, whereas the Food and Drug Administrative oversaw health related AI, leading to calls for a more comprehensive approach. Since, broad AI regulation has developed but has been largely relegated to defense departments, and financial applications have not been a priority. Within finance, the U.S. Securities and Exchange Commission (SEC) has brought enforcement actions to clean up and clarify the use of customer data in AI. In addition to these enforcement actions, Grennan describes general disclosure provisions and encouraged self-governance approaches, such as internal assessments of the way an algorithm impacts consumers, as alternative regulatory tools of bias and harm reduction.

In contrast to the way AI has been regulated, Grennan describes blockchain and DeFi regulation as “targeted and specific” as regulators seek to target bad actors but encourage innovation. Consequently, the SEC has adopted the “Howey test” to determine if a digital asset is a security within the SEC’s regulatory purview, bringing many digital assets under the agency’s enforcement power.

But many DeFi platforms can avoid SEC oversight by showing sufficient decentralization, Grennan explains, which can lead to regulatory uncertainty. Grennan discusses a safe harbor plan that would allow new issuers of crypto assets three years to build a platform that is sufficiently decentralized to evade security classification and regulatory oversight during early phases, encouraging growth in the industry while allowing for oversight in the right circumstances.

Legal disputes between those who enter into smart contracts on blockchain platforms, however, present very traditional contract law and consumer protection legal challenges as consumers attempt to litigate unmet user expectations, according to Grennan. But complications arise when courts and regulators need to determine if the creators of decentralized protocols are liable when issues arise between users on their platforms. Grennan further outlines the difficulties inherent in holding developers liable, presenting additional regulatory challenges.

Grennan concludes by discussing potential avenues for FinTech regulation, such as advocating safe harbor provisions, regulatory sandboxes that allow for experimentation of new technology in collaboration with regulators, and selective enforcement actions as ways of punishing bad actors while encouraging economic growth.

Regulators cannot stand alone, however. Grennan urges developers and fintech industry players to do their part in achieving regulatory balance, encouraging trade associations and increased lobbying activity to make their interests known.

At the same time that the U.S. Supreme Court seems poised to overturn its nearly fifty-year-old precedent on abortion rights, it may also be ready this month to overturn or retreat from another of its longstanding precedents: Chevron v. Natural Resources Defense Council.

Although far less known than Roe v. Wade, the Court’s Chevron decision has for almost forty years governed the relationship between Congress, regulatory agencies, and the courts. It has come to be one of the most widely cited decisions by lower courts in the Supreme Court’s history—certainly more than Roe.

Yet, despite Chevron’s longstanding acceptance, a conservative majority on the Court appears ready to repudiate Chevron. In several cases likely to be handed down soon, including American Hospital Association v. Becerra and West Virginia v. U.S. Environmental Protection Agency, the Court has before it questions over which Chevron’s fate could be sealed.

If the Court overturns or abandons Chevron, the postmortems will commence, asking what doomed Chevron. The most immediate answer to come to mind will be the recently changed composition of the Court. After all, two of the newest members of the Court—Justices Neil Gorsuch and Brett Kavanaugh—criticized Chevron as lower court judges.

But beyond the politics of the Court, lawyers and scholars may have themselves unintentionally played a role in its demise in recent decades by deploying the language of what has come to be known as “Chevron Step Zero.”

Chevron emerged in 1984 out of a dispute between environmental groups and the Reagan Administration over a market-style regulation adopted by the U.S. Environmental Protection Agency (EPA). Although environmentalists had argued that EPA’s policy conflicted with the Clean Air Act, the Court upheld the policy, concluding that it needed to give deference to the agency’s interpretation of the Clean Air Act.

In deciding the case, the Court articulated a two-step process that has come to be known by lawyers as the Chevron doctrine or framework: Judges should ask whether the statute at issue is clear and apply it if it is (Step One); but if it is not clear, then judges are to defer to the agency’s interpretation of the statute, provided the agency’s interpretation is reasonable (Step Two).

A unanimous decision of eight justices, Chevron raised no conservative eyebrows at the time it was handed down. For many years, even the late Justice Antonin Scalia ranked among its supporters on the bench. And yet today, antipathy to Chevron is strongest among justices appointed by Republican presidents.

Craig Green at Temple University’s law school has argued that conservatives’ antipathy toward Chevron seemed to emerge around the time President Barack Obama entered the White House. Coincidence? From the perspective of politics, deference to agencies surely holds differing levels of appeal depending on which political party occupies the White House and oversees the executive branch.

Yet another set of possible factors undermining Chevron might derive from how the doctrine has evolved over the years. Judges and scholars found confusing, for example, the Court’s 2001 decision in United States v. Mead. The Court in Mead held that Chevron deference is limited to instances where the agency had exercised its authority to make binding law, such as when an agency articulated its interpretation of a statute in a rulemaking, just as EPA had done in Chevron

Following Mead, scholars started to write and teach that Chevron no longer had just two steps; it had three. That was sensible, as Mead did articulate three requirements to be met before a court needs to defer to an agency. Not only did the statute need to be ambiguous and the agency’s interpretation reasonable, but now the agency’s interpretation also needed to derive from the agency’s authority to make binding law.

Legal scholars, lawyers, and judges came to treat this third requirement as an initial step in a logical progression. Instead of seeing it as an add-on to Chevron’s second step—or even as a step just prior to Step Two—the new initial step came, in creative fashion, to be known as Chevron Step Zero.

In addition to the third requirement articulated in Mead, Step Zero came to encompass other elements. The Supreme Court, for example, has articulated a so-called major-questions test that precludes deference in disputes over statutory meaning that hold “deep ‘economic and political significance.’” Cass Sunstein has written that this test presents “a separate Step Zero question by suggesting the possibility that deference will be reduced, or even nonexistent, if a fundamental issue is involved.”

But by inserting a step prior to Step One, might lawyers and scholars have unintentionally helped contribute to Chevron’s demise? To be sure, Step Zero has not expressly figured into contemporary critiques of Chevron. But then again, Step Zero hardly allays concerns that Chevron implicitly encourages judges to abdicate their responsibilities to apply the law—a common criticism leveled by Chevron’s critics.

After all, Step One lays out a foundational rule-of-law test: If a statute is clear, a judge must apply that clear meaning and the agency must follow it. As the Chevron Court explained, at this first step, “if the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.”

If some other step precedes Step One, and if each step must be cleared to reach the next, then the existence of a Step Zero logically means that in some cases a judge might never reach Step One—and therefore would presumably never need to treat the clear meaning of a statute as “the end of the matter”!

No doubt that was never the intention behind Step Zero. Nor was another way that Step Zero may have added to critics’ concerns that Chevron leads to judicial abdication. Critics of Chevron worry that it encourages judges almost automatically to defer to agencies’ legal positions, rather than conducting their own independent judicial analysis. They point to the Administrative Procedure Act’s requirement that only the “court shall decide all relevant questions of law”—not the agency.

How does Step Zero tacitly, even if unintentionally, accept this critique? It does so by treating the entire Chevron doctrine or framework as equivalent to Chevron deference. An opinion issued by the U.S. Court of Appeals for the Ninth Circuit, for example, has noted that “at Chevron step zero, we ask whether the Chevron framework applies at all.”

The Chevron framework, though, entails two steps—or, after Mead, several requirements—each of which presents “relevant questions of law” for judges to decide. By contrast, deference is only what occurs at the end of Step Two. Chevron made deference the end point reached after a sequential process of judicial analysis and interpretation.

By inserting a step before this sequential process, and then lumping together all the parts of the process with the outcome that the process sometimes yields, Step Zero seems almost to accept that the entire Chevron framework is risky. It suggests that the framework overall needs to be avoided, at least at times, because it seems too easily or automatically to lead judges toward “overdoing deference,” to borrow a phrase from Michael Herz at the Cardozo School of Law.

I have elsewhere explained why the more faithful reading of Chevron would have been to acknowledge steps between Step One and Step Two—not to insert a step before Step One. Seeing Chevron as a staircase with interstitial steps also would have better shown how much judges do still bear full responsibility for deciding all the “relevant questions of law.”

Such an approach also basically aligns with what the Court recently adopted in a related case—Kisor v. Wilkie—with respect to agencies’ interpretations not of statutes (as with Chevron) but of their own regulations. In the weeks leading up to the Kisor decision in 2019, speculation abounded that the Court might overturn its earlier decision in Auer v. Robbins, a case with clear parallels to Chevron. That the Court in Kisor did not overturn Auer but instead clarified its structure has given some observers reason to think that, in the end, the Court might not overturn Chevron.

But if Chevron does see its demise—whether by being overturned with fanfare this month or perhaps simply through silent abandonment in the coming years—scholars will undoubtedly ask what doomed the case. Multiple possible explanations will be explored. Politics will be among them, but perhaps so too should be the way Chevron may have been undermined by scholars themselves.

Faced with the suspension of in-person behavioral and cognitive therapies, the inaccessibility of virtual learning platforms such as Zoom, and parent burnout, schoolchildren with disabilities and their families have dealt with many challenges during the COVID-19 pandemic. As public schools nationwide transitioned to remote learning at the start of the pandemic, less than half of all states published remote learning plans with information about the remote provision of services to students with disabilities. As a result, many states looked to federal special education law for answers.

Under the Individuals with Disabilities Education Act (IDEA), students with disabilities must receive a free and appropriate public education. In addition, all public-school students receiving special education services under the IDEA must have an Individualized Education Plan (IEP). In a previous Saturday Seminar, The Regulatory Review highlighted the successes and shortcomings of the IDEA. This week’s Seminar explores COVID-19’s impact on students affected by the IDEA.

All students have struggled to adjust to online and hybrid learning during the pandemic. Students with disabilities, however, face unique barriers not felt by other student populations. These barriers make the IDEA’s shortcomings especially prevalent in light of the pandemic.

The Coronavirus Aid, Relief, and Security (CARES) Act, signed into law in March 2020, gave the U.S. Secretary of Education the right to appeal Congress for waivers that would relax some of the IDEA’s core requirements as schools transitioned to remote learning. In April, however, former Secretary Betsey DeVos issued recommendations declining to seek such flexibility for certain IDEA provisions.

Although DeVos’s choice not to waive certain IDEA mandates encouraged parents and advocates of students with disabilities, local education agencies worried about the legal challenges they would face without any leniency to deliver remote special education services as best they could. By the end of the 2019-2020 school year, parents of students with disabilities brought several lawsuits against school districts and state education agencies. The parents argued that their children’s IEPs had been breached by schools not providing adequate accommodations.

Prior to the lawsuits, the Education Department issued nonbinding guidance implying that if a school did not provide education to its general student population due to COVID-19, it could avoid providing services to students with disabilities. According to the guidance, “the IDEA … does not specifically address a situation in which elementary and secondary schools are closed for an extended period of time.” The guidance seemed to promote the idea that all students are served equally if no students are served at all. Educators responded that such directives contradicted the IDEA’s promise that all students with disabilities should have access to an adequate education. The Education Department later clarified that schools should not avoid offering virtual education altogether to evade the legal consequences of failing to serve adequately students with disabilities.

Amid the Education Department’s contradictory advice and its refusal to grant the IDEA waivers, some disability rights advocates felt that translating IEP supports and other accommodations to an online learning environment would be impossible. Nonetheless, states adopted various measures for educating children with disabilities in remote and hybrid settings.

This week’s Saturday Seminar highlights how COVID-19’s effects on in-person classroom instruction have disproportionately impacted students with disabilities.

• Legal accountability for special education is even more important during times of emergency, Jasmine Harris of the University of Pennsylvania Law School argues. In an essay for the University of Pennsylvania Law Review Online, Harris describes the rollbacks of disability rights in the classroom as school districts have enacted virtual learning during the pandemic. She explains that numerous school districts have requested statutory immunity from disability discrimination lawsuits, contending that it is impossible to comply with the requirements of the IDEA during a pandemic. Harris disagrees. She argues that previous national emergencies have prepared school districts to serve students with disabilities during a crisis and that the unique challenges experienced by these students necessitate legal oversight.
• In a paper for the San Diego Law Review, Margaret A. Dalton of the University of San Diego School of Law and Jessica K. Heldman and Robert C. Fellmeth of the University of San Diego School of Law and UCSD’s Children’s Advocacy Institute discuss how the procedural safeguards of the IDEA can be adapted to fit remote learning. The authors highlight a Council of Parent Attorneys and Advocates statement that aims to ensure that the rights of students with disabilities under the IDEA are included in plans to reopen schools. The statement includes three main principles: “(1) plan with equity and individualization in mind, (2) collaborate and communicate with families, and (3) review and, if necessary, revise IEPs and 504 plans to be responsive to the child’s needs.”
• Crystal Grant of the Duke Children’s Law Clinic explores the impact of COVID-19 on students with disabilities in low-income school districts and communities of color in an essay for Fordham Urban Law Journal. She explains that students in schools that lacked the technology and resources to transition smoothly to remote learning experienced educational loss that disproportionately affected students with disabilities and Black and Latinx students. Grant ties this educational loss to inequitable funding of under-resourced schools. She urges the Education Department to set aside funds and guidance, or “recovery services,” to account for the educational loss and additional mental-health needs as schools return to in-person learning.
• During the pandemic, special education in rural settings was especially challenging, J. Matt Jameson of the University of Utah and his coauthors argue. In a paper for the Rural Special Education Quarterly, Jameson and his coauthors explore how the “digital divide” between rural and nonrural communities made it difficult to provide remote educational experiences for rural students with disabilities. Due to low internet access, some rural educators provided lessons over telephone or distributed hardcopy packets. Jameson and his coauthors argue that these technological failures placed an increased strain on parents of students with disabilities, as they became responsible for finding ways to present instructional materials effectively for their children.
• In a paper for the Southern California Review of Law and Justice, Thomas Mayes of the Iowa Department of Education writes that the Education Department’s nonbinding guidance about the education of students with disabilities led to confusion about how schools should educate such children during the COVID-19 pandemic. Mayes urges against forcing school districts to conduct mass IEP revisions during the pandemic as a means of mere compliance with pre-existing regulatory and statutory requirements. He does suggest, however, that districts begin preparing now to go beyond the inputs-focused mandates of the IDEA, focusing instead on how best to measure progress and remediate learning loss post-COVID-19.
• New York City was not only the COVID-19 epicenter in the United States; it has also been a hub for several budding lawsuits challenging the inadequacy of remote special education provisions, Natalie Gomez-Velez of CUNY School of Law argues. In a paper for the Fordham Urban Law Journal, she explains that two hundred families across several states have signed onto a class action complaint, J.T. v. De Blasio, alleging that school districts violated students’ IDEA rights. The litigation, Gomez-Velez argues, highlights the challenges school leaders confront in attempting to comply simultaneously with special education regulations and public health mandates.

IN THE NEWS

• By a 223-204 vote, the U.S. House of Representatives passed gun control legislation in response to the mass shootings in Uvalde, Texas and Buffalo, New York. The legislation would prohibit the sale of semi-automatic guns to individuals under the age of 21, ban the sale of large-capacity magazines, and compensate people who give up such magazines under a buyback program. Passage of the bill took place after a House of Representatives hearing at which lawmakers and victims of gun violence pleaded for stricter gun control. Experts do not expect the legislation to pass in the U.S. Senate, but claim that a group of Senators are negotiating a narrower gun-control package focused on strengthening background checks and mental health assessments.
• The U.S. Supreme Court held that workers involved in loading and unloading airplane cargo are a “class of workers engaged in foreign or interstate commerce” exempted from the Federal Arbitration Act, which otherwise requires courts to enforce arbitration agreements. Many large corporations implement such agreements, which require arbitration as an alternative to adjudication in court. Although the Court ruled in favor of cargo workers, it rejected their argument that the exemption applies to “virtually all employees of major transportation providers.” Rather, the Court reasoned that cargo workers were unlike employees in an airline’s accounting department because handling cargo is intrinsic to “interstate commerce.” The Court noted that to determine whether an employee falls under the exemption “will not always be so plain,” when job duties do not relate directly to the transport of goods across borders.
• President Joseph R. Biden announced new executive actions in support of U.S. clean energy manufacturing. The President invoked the Defense Production Act to authorize the U.S. Department of Energy to expand domestic manufacturing of clean energy technologies by accelerating the production of solar panel parts. The President also outlined new federal procurement measures intended to stimulate the domestic solar manufacturing industry. In addition, the President initiated a two-year period during which solar modules from Cambodia, Malaysia, Thailand, and Vietnam can be imported free of certain duties. The President announced a pause on new solar tariffs amid an ongoing U.S. Department of Commerce investigation into whether Chinese solar manufacturers have avoided tariffs by moving their operations into Southeast Asia. The President stated that his latest measures are intended to ensure that the United States will have an adequate supply of solar modules until domestic manufacturing can expand to meet the country’s needs.
• The U.S. Department of Health and Human Services (HHS) launched a review of the U.S. Food and Drug Administration’s (FDA) inspection of Abbott Laboratories’ Michigan manufacturing plant and the agency’s handling of Abbott’s infant formula recall. HHS announced that it aims to determine whether FDA followed appropriate policies and procedures in inspecting the manufacturing facilities and overseeing Abbott’s voluntary recall. FDA Commissioner Robert Califf testified before a U.S. Senate committee that FDA was “too slow” in inspecting the Abbott facility after reports of possible bacteria contamination.
• The Chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, gave a speech previewing forthcoming updates to SEC market rules governing the purchase and sale of stocks. Gensler noted that the new rules will target six key areas, including “payment for order flow,” which is a form of monetary incentive that allows retail trading platforms, such as Robinhood, to make money for executing stock trades. This practice, Gensler explained, can distort the market and hurt customers by creating stock price variability based on the size of the incentive. Robinhood Financial’s chief legal officer, Dan Gallagher argued that SEC regulation of payment for order could make it harder for inexperienced investors, who often opt for commission-free services such as Robinhood, to start trading stocks.
• New York Governor Kathy Hochul signed a ten-bill legislative package to strengthen the state’s gun-control laws. The legislative package includes bills that prohibit individuals under the age of 21 from purchasing semiautomatic rifles and require social media networks to outline how they will respond to credible threats of gun violence. The legislative package also amends the state’s existing firearm licensing statute to ensure that county officials consider risk reports provided by mental health professionals before issuing an individual a firearm license.
• A federal judge in Oklahoma ruled that the state’s lethal injection method is constitutional. The ruling followed an eight-year-old lawsuit in which inmates argued that the sedative midazolam—a component of Oklahoma’s three-drug execution method—does not adequately anesthetize inmates and creates a risk of severe suffering in violation of the Eighth Amendment. The judge reasoned that the plaintiffs had “fallen well short of clearing the bar set by the Supreme Court” for lethal injection challenges and that midazolam renders inmates largely insensitive to pain. Oklahoma Attorney General John O’Connor plans to seek execution dates for the 43 inmates on Oklahoma’s death row.
• HHS extended the American Rescue Plan Act spending deadline for states to expand home and community-based services, such as home health care, meal deliveries, and case management services, for people receiving Medicaid. States originally had a three-year period, from April 1, 2021 through March 31, 2024, to use American Rescue Plan funds to strengthen and enhance home and community-based services under Medicaid. The extended deadline will allow Medicaid beneficiaries to continue to receive high-quality care in the setting of their choice for an additional year. Centers for Medicare & Medicaid Services Administrator Chiquita Brooks-LaSure stated that the extension provides states with “the time and resources to strengthen connections to care at home and in communities.”

WHAT WE’RE READING THIS WEEK

• In an article issued by the Center for American Progress, Mia Ives-Rublee, director for the Disability Justice Initiative, Rose Khattar, associate director for rapid response and analysis, and Lily Roberts, managing director for economic policy, argued that the federal government must take steps to remove employment obstacles faced by disabled individuals. Ives-Rublee, Khattar, and Roberts noted that the 2021 unemployment rate among Americans with a physical, mental, or emotional disability was 10.1 percent, compared to 5.1 percent among those without such a disability. Given this disparity, Ives-Rublee, Khattar, and Roberts proposed that policy measures removing employment obstacles could increase overall economic growth and achieve more equitable employment outcomes. They called upon the federal government to increase funding for the Equal Employment Opportunity Commission and to eliminate Section 14(c) of the Fair Labor Standards Act (FLSA), which permits employers to pay disabled employees less than the federal minimum wage.
• In an article in the Stanford Law Review, Alexandra Klass, a professor at the University of Minnesota Law School, and several coauthors considered how clean energy can support a more stable, low-carbon electric grid. They argued that disjointed regulatory and governance schemes result in energy policy that fails to achieve environmental and reliability goals, despite technological feasibility. To address disaggregation, Klass and her coauthors emphasized the need for energy transmission grid planning and expansion coordinated across regions at the federal level.
• In a Brookings Institution report, Kenneth Wong, a professor at Brown University, and Coral Flanagan, a doctoral student at Vanderbilt University, compared federal regulation of education policy during the Trump and Biden presidencies. Wong and Flanagan found that President Biden was more likely than President Donald Trump to take unilateral executive action in education, particularly on equity issues. Wong and Flanagan also argued that when Trump took executive action in education, he revoked protections for historically marginalized students, such as non-discriminatory discipline and investigations into civil rights violations, while advocating for protections for private school and religious students, including the right to pray in schools. Wong and Flanagan suggested that, although both President Biden and President Trump used executive and administrative actions to impact education policy, states often resisted these acts when they pertained to issues such as requiring vaccine mandates and teaching critical race theory.

EDITOR’S CHOICE

• In an essay for The Regulatory Review, Paul Stephan, an associate at Cohen Milstein, argued that to limit the executive branch’s emergency powers, a clear definition of what constitutes an emergency is needed. Stephan explained that, although an emergency may seem sudden, many emergent events are the result of longstanding problems. Stephan cautioned that ignoring a problem can result in an emergency, which can allow executives to ignore problems so as to capitalize on emergencies to remake policy.

Fear of Sharks? So passé. The new underwater terror is far less sexy, and far more ferocious than its top-of-the-food-chain friend.

That terror is the invasive carp. These fish are now considered the “poster child” for invasive species because of the devastating effects they pose for the ecosystems they inhabit.

Invasive carp first entered the United States during the 1970s. Owners of fisheries in the South imported three species of carp from China—bighead, silver, and black—to clean southern aquaculture ponds of parasites, algae, and other weeds. Large floods, however, swept these fish from their controlled habitats into the wide-open Mississippi river basin.

More than 50 years later, invasive carp have become a parasite in U.S. waterways far beyond those they were brought in to fix. They threaten ecosystems because they “out-compete other fish for food and space.” In some rivers, these fish have even killed off all other native species. And some experts think they also lower water quality.

The invasive carp’s invasive presence is felt above the water too. Invasive carp typically weigh between 40 and 60 pounds and are known to jump high into the air, causing injuries to passing boats and water skiers.

For many years, invasive carp have mightily travelled from the Mississippi River toward the Great Lakes basin. As the media has largely ignored the fish’s northern movements, environmental advocates, policymakers, and members of the fishing industry have looked on with fear. These stakeholders understand a bitter reality: if invasive carp make it into the Great Lakes, the region’s $7 billion fishing industry is at risk of an “ecological disaster.”

And without further action, this “if” is about to become a “when.”

In 2019, a few invasive carp were found in the Chicago River just nine miles from Lake Michigan. The U.S. Army Corps of Engineers confirmed through environmental genetic testing that some of the fish had broken through man-made electric barriers set up on a Chicago waterway.

Regulatory interventions have fallen short of stopping the carp from creeping closer to the Great Lakes. Some of these well-intentioned interventions have been reactionary in nature, and others stalled by cost or held up by terminology.

For example, the Lacey Act recognizes all three species of invasive carp as “injurious” species prohibited from interstate transport. But, as some scholars have noted, the Lacey Act contains no sections aimed at proactively containing the fish’s spread. Instead, the law merely labels and raises awareness of the carp’s problematic qualities.

More ambitious proposals to stop the spread of invasive carp have also stalled. In 2004, for example, the U.S. Army Corps of Engineers called for the restoration of the natural divide between Lake Michigan and the Mississippi River. This divide was destroyed in the early 1900s to direct the flow of Chicago’s sewage toward the Mississippi River. Although restoration of the divide would be effective, the idea has yet to be implemented because critics have expressed alarm at its $15 billion price tag.

Moreover, the proposed restoration of the divide has also run into regulatory roadblocks. Due to requirements under the Clean Water Act, the restoration project would require an elaborate waste treatment process to ensure that Chicago’s sewage plants flowing into Lake Michigan would not create health risks.

Some lawyers have found this application of water pollution regulation to be ironic. They argue that invasive carp should also be considered a pollutant with an even more direct effect on the environment than the wastewater treatment

Despite the funding and regulatory hurdles, in November 2021, all 16 U.S. Senators from the Great Lakes demanded that the proposal move forward expeditiously. To date, though, no further action has been taken to advance this proposal.

In its place, a more straightforward solution has taken root. In December 2021, Congress authorized the construction of the Brandon Road Interbasin Project. This project seeks to restrict the invasive carp from entering Lake Michigan where the Des Plaines River ends.

The Illinois and Michigan Departments of Natural Resources have formed an intergovernmental agreement to fund this project. And in January 2022, the federal Infrastructure Investment and Jobs Act allocated $225.8 million to support the effort.

The Brandon Road Interbasin Project is not a perfect substitute for the restoration of the Chicago River divide. The divide would completely sever the fish’s ability to enter the open waters of Lake Michigan while the Project requires the construction of a multitude of technologies to curb the fish’s route to Lake Michigan.

Despite the complexities of construction, interested parties are hopeful about its prospects. But it remains an open question whether construction will finish before the invasive carp reach the open water.

Half of American adults—more than 117 million people—have identifying information recorded in law enforcement facial recognition databases.

Other pervasive surveillance technologies include mass surveillance drones, digital location tracking, and “predictive policing,” which aggregates and analyzes crime data to predict future crimes.

How might society determine the appropriate roles for these technologies that balance their beneficial uses with accompanying harms? In a recent article, Andrew Guthrie Ferguson, a professor of law at the American University Washington College of Law, offers an approach to regulating new surveillance technologies based on Fourth Amendment principles.

Ferguson seeks to “reset the starting point for the debate on policing technologies.” He groups past approaches to policing technologies into three categories: the trust lens; the trap lens; and the technocratic lens. Finding them all lacking, he advocates a new approach—the tyrant lens, which assesses new technologies under a legal framework of checks and balances borrowed from the Fourth Amendment.

The trust lens—as the name says—trusts law enforcement to use surveillance technology responsibly and effectively. Ferguson labels this as the standard operating assumption for much of the last century. He argues that use of surveillance technology by police departments remains “mostly unregulated, unfettered, and unexamined” even amid larger institutional criticisms.

Absolute trust in law enforcement, however, contributes to over-policing and discriminatory enforcement and imperils constitutional rights to privacy and free association, according to Ferguson. For example, the Los Angeles Police Department (LAPD) initiated a predictive policing strategy called the Los Angeles Strategic Extraction and Restoration (LASER) program. LAPD designed LASER to collect information on criminal groups and violent offenders and invested in “a host of digital tracking technologies.” The program operated without any regulatory constraints, and Ferguson argues that LAPD pursued its mission autonomously and independently overall.

The LASER program received intense public backlash, which led to an audit by the LAPD Inspector General. The audit revealed that the LASER program “encouraged unconstitutional stops, had few rules, no training protocols, and reified existing racial disparities.”

On the other side of the philosophical spectrum from the trust lens is the trap lens. Ferguson describes the trap lens as an abolitionist approach that absolutely distrusts law enforcement’s use of surveillance technology. He explains that, considering the historical track record, surveillance technology is often viewed as a trap to exert political, cultural, and economic oppression over minority groups.

The trap lens is intellectually consistent and advocates for unambiguous policy, which can provide a mobilizing force for reform, Ferguson explains. For example, community leaders in Boston, Massachusetts successfully pushed the city council to pass an outright ban on facial recognition technology. Ferguson counts this as one “of the clearest legislative wins on any surveillance technology anywhere.”

Still, the ultimate result of the trap lens—a complete regulatory ban on all surveillance technology—is neither desirable nor feasible, argues Ferguson. So long as crime exists, there needs to be a response to crime, and surveillance technologies play a necessary role in that response.

Ferguson argues that between absolute trust and absolute distrust is a third approach—the technocratic lens— which he describes as a pragmatic middle-ground that “emphasizes democratic accountability, external transparency, and internal front-end evaluations to cabin the use of new policing technologies.”

The best example of the technocratic approach, Ferguson suggests, is the adoption of Community Control of Police Surveillance (CCOPS) ordinances by several cities. The American Civil Liberties Union (ACLU) drafted CCOPS as a model bill to provide localities more insight into and control over law enforcement’s use of surveillance technology. Among other things, the legislation requires “surveillance impact reports, use policies, annual audits, public hearings, and whistleblower protections.”

Although Ferguson says that the technocratic approach offers improvements over the trust and trap lenses, he also argues that it suffers from many administrative and enforcement problems. First, it takes considerable time, energy, and money to create impact reports, draft policies, and conduct hearings and audits. Second, the penalties for failing to follow the policies are limited. Ferguson argues the technocratic approach “shows gains in transparency but not necessarily a limitation on police power.”

Given the insufficiencies of these three approaches, Ferguson advocates for an alternative: the tyrant lens. The tyrant lens draws on Fourth Amendment principles and considers surveillance technologies with reference to the metaphorical threat of tyrannical power. The tyrant lens also offers a middle-ground between the trust lens and trap lens, but it focuses on power, unlike the technocratic lens, which focuses on plans and policy.

Following this approach, Ferguson proposes the “tyrant test” as “a first principles framing-theory” for assessing new surveillance technologies. The tyrant test focuses on structural protections and substantive limitations to reduce the threat of tyrannical abuse.

As a structural matter, the Fourth Amendment limits legislative and executive authority over government searches and seizures. It forces judicial involvement by requiring a neutral magistrate to sign a search warrant based on probable cause when a person’s property or privacy interest is affected.

To pass the tyrant test, any new surveillance technologies must “establish these structural checks on power.” For example, the government would need to secure a search warrant before searching a facial recognition database. Ferguson notes that investigators also follow this approach in other instances, such as when requesting cell site location information from carriers.

As a substantive matter, the Fourth Amendment originally barred certain private areas from government monitoring. Private papers understood as “physical manifestations of the author’s thoughts” remained in a zone of privacy that the government could not intrude. Ferguson suggests that certain digital information, such as data pulled from smart home devices, should also fit into this zone of privacy.

In the end, Ferguson proposes the tyrant test as a starting point and framework for constructive regulatory debate about the “future power balance between the police and the people.”

Credit scores can control housing decisions, the cost of taking out a loan, and even employment. The advent of artificial intelligence (AI) in financial services poses a unique opportunity to improve fairness in the important arena of credit scoring—but it can also deepen the impact of bias.

In a recent working paper, legal scholar Nydia Remolina argues that financial regulators should step in to fill the gaps in areas where algorithms and data used in credit metrics fail to protect consumers.

These gaps arise out of the technologies used to advance AI in credit reporting. Companies that employ credit scoring models use proprietary algorithms protected by trade secret laws, obscuring the methods used to obtain these scores.

Remolina also describes how algorithms and data sourcing have become more complicated as technology has advanced, increasing—and obfuscating—the factors that enter into creditworthiness calculations. And machine learning is also often employed in these models, resulting in a “black box” that even algorithm owners cannot fully interpret.

Failure to address these gaps, Remolina explains, has led to demonstrated unfairness in assessing creditworthiness. Although discrimination in lending is not a new phenomenon, Remolina cautions that algorithms prevent potential discrimination claimants from knowing that they have been discriminated against in the first place.

Remolina further argues that the current approach taken by regulators—one that promotes, but does not mandate, transparency—fails to give consumers the tools to combat unfairness caused by algorithmic assessments. Although consumers in many jurisdictions are entitled to receive a report of their credit metrics, Remolina notes that the underlying process is often not disclosed, leaving consumers unable to learn from the data how to improve their scores.

Some consumers are further disadvantaged not just by algorithms but by data inequality. “Financially excluded groups,” or those who are classified as minorities or low-income, often have less credit data available for AI-based analysis, posing another problem that Remolina argues has not been addressed by regulators. And the boundaries determining what data are defined as financial data, and the use of what Remolina terms as “alternative data,” such as information derived from social media, has stymied regulators.

Other concerns generated by the use of AI in credit scoring are rooted in the financial service providers themselves. New competitors in these markets often fall outside of the purview of traditional regulatory authorities, which Remolina explains can negate the benefits consumers traditionally receive when competition increases, as these competitors can use their extensive data networks to identify and target at-risk consumers.

Remolina warns that current regulatory approaches are unable to address these challenges and she urges that financial regulators intervene in various ways to address problems with algorithmic credit scores.

One such solution she advocates would be to mandate that lenders test their algorithms periodically for discriminatory results. She notes that regulators currently focus on the inputs, rather than the results, of these algorithms, leading to unchecked biases. In addition to testing, Remolina urges providing consumers with data protections rights and the right to know the results of algorithms in the credit reporting space.

Remolina also argues that it is crucial to close the regulatory gaps created by new, nontraditional competitors in lending markets, such as digital lenders. She posits that all lenders should be required to provide information to borrowers about the credit reporting information shared with credit bureaus, providing consumers with greater transparency.

Remolina advocates the use of supervisory sandboxes—or experiments—in which lenders “approve loans to people with relatively low credit scores” to improve data and increase learning. These sandboxes would enable both regulators and companies engaged in assessing creditworthiness the tools to design better solutions.

Finally, Remolina contends that algorithmic accuracy and fairness could be improved by encouraging open data sharing between banking platforms and credit scoring agencies. She urges that this “open banking” approach allows for greater flexibility and consumer insight. As opposed to areas with new competitors and technologies, Remolina notes that data sharing in the banking arena receives traditional financial regulatory oversight, allowing for better control.

Although Remolina is unsatisfied with current regulatory approaches, she notes that steps have been taken in this area. In proposed legislation, the European Commission has classified AI credit scoring as high-risk, leading to the implementation of penalties and compliance guidelines.

These steps are “common globally,” says Remolina, but they fall short of providing a comprehensive response. Remolina concludes by urging regulators to implement her recommended proposals and “change their role in the governance of algorithmic credit scoring.”

An undocumented pregnant woman arrives at a health clinic for prenatal care and sees Immigration and Customs Enforcement (ICE) officers in the parking lot. Does she go inside?

Too often, the answer is “no,” according to Medha D. Makhlouf of Penn State Dickinson Law. In a recent article, Makhlouf argues that fear of immigration enforcement deters noncitizens from seeking necessary medical care. This threat of surveillance harms the health care system, the health of individual noncitizens, and the health of the public.

Makhlouf attributes fears of immigration surveillance within the health care system to gaps and uncertainties in existing legal protections.

One such protection comes in the form of ICE and U.S. Customs and Border Protection (CBP) policies that limit enforcement activities at “sensitive locations,” such as hospitals and urgent care facilities. Makhlouf warns, however, that the scope of these policies remains unclear. Pharmacies, health fairs, and COVID-19 testing sites may not be covered. Moreover, immigration enforcement actions can also still occur near sensitive locations. In one instance, ICE officials arrested an undocumented teenager at a bus stop just outside a hospital after watching him leave the facility.

The ICE and CBP policies also contain multiple exceptions, subject to the discretion of immigration officers. Neither policy applies when officers determine “exigent circumstances” exist. In addition, the CBP policy does not apply to sensitive locations that “bear nexus to” the U.S. border, potentially excepting thousands of miles from coverage. And when local law enforcement officers partner with ICE to act as immigration enforcement agents, their actions are not subject to the same restrictions.

Because the sensitive location policies are contained in guidance documents, noncitizens who are arrested in violation of the policies have no legal recourse. The agencies can also modify or rescind the policies at any time without notice. With such shoddy protections, Makhlouf contends that undocumented persons’ fear of immigration surveillance within the health care system is justified.

Still, in other contexts, fears are greater than warranted, Makhlouf argues. She explains that many noncitizens worry that their health care provider will disclose their immigration status to legal authorities. Makhlouf contends, however, that the Health Insurance Portability and Accountability Act protects immigration status contained in medical records. Even when health care providers receive subpoenas from ICE officers, they have no obligation to disclose protected patient information.

Similar concerns about publicly funded health care programs are also misplaced, Makhlouf claims. Both Medicaid and the Children’s Health Insurance Program require applicants to provide their citizenship or immigration status, but federal law prohibits the agencies that administer these programs from sharing an applicant’s information for any reason outside program administration.

These privacy protections do not mean, however, that participation in publicly funded health care programs is without risk for undocumented individuals. Noncitizens seeking to secure lawful permanent resident status may be denied if they are considered a “public charge”—meaning someone who is dependent on the U.S. government for support.

In 2019, the Trump Administration expanded the scope of the public charge analysis to include participation in Medicaid, which led to a sharp decline in immigrant enrollment in this major health care program. Makhlouf explains that confusion about the new rule was widespread, leading to a lack of clarity on who was subject to the rule and which benefits were considered. Noncitizen enrollment in the Children’s Health Insurance Program—which was not added to the public charge analysis—also decreased in the wake of the new rule

Although the Biden Administration has since rescinded the Trump Administration’s public charge rule, depressed enrollment among noncitizens is expected to linger.

Makhlouf warns that decreased use of health care services and programs by noncitizens can have serious consequences. When noncitizens choose to delay or forgo necessary care due to fears of immigration enforcement, they risk severe illness and injury. These decisions can be life or death; Makhlouf recounts the story of one noncitizen who declined life-saving cancer treatment due to fears of deportation.

Moreover, the consequences from fear of seeking medical care can go beyond those suffered by individual noncitizens. Makhlouf contends that the immigration threats surrounding health care have deterred many noncitizens from seeking out COVID-19 testing and vaccination, hindering attempts to reach herd immunity. She warns that public health responses to other infectious diseases, such as measles, may similarly be frustrated.

In addition, when noncitizens forgo preventative care, severe illnesses can go undetected. The delayed treatment is often less successful and more expensive, driving up health care costs across the entire system.

Given these consequences, Makhlouf calls on federal legislators to create what she refers to as “health care sanctuaries” that would limit immigration surveillance in health care. She urges the U.S. Congress to pass the Protecting Sensitive Locations Act, which would codify and strengthen limits on immigration enforcement at health care facilities. She also recommends that the Biden Administration create an immigrant health task force to coordinate actions between multiple agencies and balance competing immigration and health policy concerns.

Makhlouf warns that it might take years to rebuild trust with noncitizen communities following the Trump Administration’s heightened immigration enforcement efforts. Creating durable protections against immigration surveillance within the health care system would be an important first step, she concludes.

The experience of perusing a toy aisle today often involves seeing shelves filled with toys that can listen and respond to their child owners—blurring the lines between reality and the movie Toy Story.

As the technology in toys becomes more sophisticated, children become increasingly vulnerable to cyber home invasion via their internet-connected smart toys. In this brave new toy world, parents and guardians show concern about the privacy and safety of their children. Smart toys typically can connect to the internet, link to an app, and communicate using a microphone and speaker. For many parents and guardians, purchasing smart toys for their children causes some level of caution or apprehension.

Mainstream smart toys such as Hello Barbie––a doll brought to life by artificial intelligence software and hooked up to an app––risk being hacked. Because smart toys connect directly to the internet, these intelligent toys can endanger kids by involuntarily disclosing their private information.

The Federal Bureau of Investigation (FBI) released a public service announcement warning of the security risks that accompany smart toys, including the collection of sensitive data. The FBI encourages owners of these devices to take their own protective measures, which include researching the toy manufacturer’s policies prior to purchase.

The Children’s Online Privacy Protection Act of 1998 (COPPA), enforced by the Federal Trade Commission (FTC), regulates online services for children under 13 years old, including those that garner personal information from kids. COPPA requires providers to obtain parental consent before collecting data and if data are collected from a child user, to keep data secure.

The FTC first cracked down on a smart toy COPPA violation in 2018 when an electronic toy company accumulated data from children without parental consent. Since then, many advocates for privacy have pushed for more transparency from companies manufacturing smart toys, particularly when it comes to what kind of data manufacturers collect and whether users can delete that accrued data later. Because smart toys are here to stay, there is room for significant regulatory action to protect children at play.

In this week’s Saturday Seminar, scholars explore how privacy regulations around children’s smart toys intersect with company responsibility, user vulnerability, data sharing, and ethics.

• In an article published in The IEEE Ethics Journal, Meg Leta Jones of Georgetown University and Natalie Meurer of Planatir argue that companies must construct smart toys carefully at each stage of development to ensure data protection and privacy. The design of some smart toys such as “Hello Barbie,” a doll that initiates and records conversations with children, values parental control over children’s privacy. Jones and Meuer argue that in the future, smart toy companies should create a higher standard of user data protection and integrate privacy values in their product design through strict regulation of company data sharing practices.
• In a paper in The Journal of Cyber Policy discussing the intricacies of consumer trust and smart toys Esther Keymolen of Tilburg University and Simone van der Hof of Leiden University explain the defenseless position of smart toy users. Unlike other toys, smart toys permanently remain in the control of the manufacturing company, and parents must trust the company to act responsibly, according to Keymolen and van der Hof. They argue that users must trust that companies have complied with regulations in terms of privacy protections and safety measures alike. Because of young users’ vulnerability, Keymolen and van der Hof suggest that both stricter federal privacy regulations and greater transparency on the company’s end are in order.
• In a report about the ethical issues facing smart toys, Victor Chang and Zhongying Li of International Business School Suzhou and Muthu Ramachandran of Leeds Beckett University argue that the government should regulate the development of internet-connected toys. Chang and his coauthors urge that parental guidance and toy safety rules should include privacy considerations. They explain five guiding principles to avoid ethical issues with smart toys: authentication, encryption, updates, disclosure, and control. For this framework to succeed, policymakers, consumers, and vendors all need to follow these guiding principles, Chang, Li, and Ramachandran suggest.
• In a paper in the University of Illinois Law Review, Eldar Haber of the University of Haifa recommends that policymakers stop regulating privacy by sector, and adopt an omnibus approach to protect children’s privacy. Haber predicts an “always-on” era in which daily life––from smart homes to smart infrastructure––will depend on internet-connected devices that continuously listen and collect data. Haber explains that COPPA alone is not enough to protect children’s privacy because children may be surrounded by always-on devices that lie outside of COPPA’s terms. Within the current sectoral approach, Haber advises policymakers to expand the scope of COPPA.
• COPPA falls short of protecting children’s privacy from smart toys, Eldar Haber of the University of Haifa argues in a paper in the Ohio State Law Journal. Although the FTC classifies connected toys as online services under COPPA, Haber suggests that smart toys present greater privacy risks than websites because companies can gain more data, more types of data, and more access to data from children. Haber recommends that companies limit data collection to what is required for the toy to function, as well as limit data retention and data sharing.
• In a study analyzing parents’ privacy norms with existing regulations, Noah Apthorpe of Colgate University, Sarah Varghese of McKinsey & Company, and Nick Feamster of the University of Chicago found that the regulations set forth by COPPA broadly align with parents’ expectations of privacy for their children’s toys. But the authors warn that the existence of COPPA may give parents a false sense of security that the FTC adequately protects their children’s data. The toy market still contains toys that violate COPPA, so Apthorpe and his coauthors recommend that both regulators and parents remain on high alert.

IN THE NEWS.

• The U.S. Supreme Court temporarily blocked a Texas law that restricted the ability of social media companies to remove posts based on a user’s political speech. Texas’s law would also have required companies with more than 50 million active monthly users to disclose their methodology for moderating content. In dissent, Justice Alito argued that the temporary injunction blocking the law represented a “significant intrusion on state sovereignty.” The case will now return to the 5th Circuit Court of Appeals for a full ruling on the merits of the law.
• The U.S. Department of Justice announced that the Department’s Office of Community Oriented Policing Services will conduct a “critical incident review” of law enforcement’s response to the school shooting in Uvalde, Texas. Don McLaughlin, Mayor of Uvalde, requested the review, which can be expected to produce a conclusory report of the events to inform future law enforcement how to improve responses to active shooter incidents. The Office of Community Oriented Policing has conducted and published critical incident reviews for mass shootings in the past, such as for the 2016 Pulse nightclub attack in Orlando and the 2015 Inland Regional Center shooting in San Bernardino.
• The Biden-Harris Administration announced an initiative to modernize building codes to lower energy costs and combat climate impacts on housing. The initiative directs $225 million in funding to the U.S. Department of Energy to support implementation of its resilient and efficient codes program. Through this program, the Energy Department plans to track state compliance and address barriers to compliance with commercial and residential modern energy codes. The Administration’s announcement of the initiative follows a previous announcement from the Administration in May about a new collaboration between the U.S. Environmental Protection Agency (EPA), the Energy Department, the White House Council on Environmental Quality, and the U.S. General Services Administration to develop federal building efficiency standards aimed at helping reach net zero federal carbon emissions by 2045.
• The U.S. Department of Health and Human Services (HHS) announced the creation of an Office of Environmental Justice to protect vulnerable populations from the health effects of pollution and other environmental health concerns. In its announcement, HHS elaborated that it intends the Office of Environmental Justice to lead initiatives to improve the health of disadvantaged U.S. communities. Commenting on the new office, HHS Secretary Xavier Becerra stated that “many communities across our nation — particularly low-income communities and communities of color — continue to bear the brunt of pollution from industrial development.”
• The U.S. Department of the Interior announced a rate reduction policy to increase renewable energy production on public lands managed by the Bureau of Land Management. The announcement projected that the policy—through the creation of new renewable energy coordination offices—should increase BLM’s processing capacity of renewable energy proposals. Secretary of the Interior Deb Haaland noted that “clean energy projects on public lands have an important role to play in reducing our nation’s greenhouse gas emissions.”
• HHS issued a final rule withdrawing an earlier rule that would have required HHS to review all of its 18,000 existing regulations before they expired in 2026. The earlier rule was previously finalized on the last day of former President Donald Trump’s Administration. In its withdrawal notice, the Department argued the automatic expirations could have impeded its “ability to fulfill its public health and human services missions, promote national priorities, and confront the challenges facing the nation.”
• EPA announced $97 million of loans under the Water Infrastructure Finance and Innovation Act to the Medford Water Commission to modernize water infrastructure in Medford, Oregon. The commission plans to use the loans to ensure access to safe and reliable drinking water by establishing infrastructure that is resilient to natural disasters. The commission expects that the loans will save Medford $12 million and create 600 jobs. According to EPA, loans under the Water Infrastructure Finance and Innovation Act have thus far financed over $32 billion in water infrastructure upgrades, created nearly 97,000 jobs nationally, and saved ratepayers more than $5 billion.
• The Justice Department and the U.S. Department of Homeland Security (DHS) issued an interim final rule concerning asylum seekers. Under the rule, if DHS determines that asylum seekers have a credible fear of persecution or torture, DHS must, within 45 days, refer asylum seekers to the U.S. Citizenship and Immigration Services for an asylum merits interview. Following an interview, DHS may either grant asylum seekers benefits or refer them to an expedited removal process. DHS stated that the new rule is expected to quicken the hearing and removal processes for asylum seekers, which previously have taken years to conclude.

WHAT WE’RE READING THIS WEEK

• In a National Bureau of Economic Research (NBER) working paper, Markus Gehrsitz, senior lecturer at the University of Strathclyde, and NBER research associates Henry Saffer and Michael Grossman, argued that alcohol excise taxes cause heavy drinkers to reduce their alcohol purchases but also leave low-income drinkers purchasing less alcohol and paying more for it. Gehrsitz, Saffer, and Grossman noted, however, that low-income drinkers make up only 22 percent of all heavy drinkers. Accordingly, Gehrsitz, Saffer, and Grossman concluded that the negative impacts of alcohol excise taxes on low-income drinkers may be justified by these overall reductions in heavy drinking.
• In a brief published by the Urban Institute, Michael Karpman, senior research associate at the Urban Institute, Kassandra Martinchek, a research associate at the Institute, and Breno Braga, a research affiliate at the Institute of Labor Economics, assessed the decline of medical debt following the COVID-19 pandemic. Karpman, Martinchek, and Braga theorized that the decline may have resulted from people’s decreased use of healthcare services during the pandemic, federal pandemic stimulus payments, and federal pandemic legislation which increased enrollment in Medicaid. To sustain the decline in medical debt after pandemic relief subsides, Karpman, Martinchek, and Braga suggested that health insurance reforms may be part of the solution by addressing the Medicaid coverage gap, extending the American Rescue Plan Act’s premium reducing provisions, and enforcing medical provider compliance.

EDITOR’S CHOICE

• In a forthcoming article in the Journal of Accounting and Public Policy, Dichu Bao, professor at Deakin University, and Hong Kong Polytechnic University professors Lixin (Nancy) Su and Yong Zhang described the results of their study of the effects of a 2006 U.S. Securities and Exchange Commission rule mandating chief financial officer (CFO) compensation disclosures. Bao, Su, and Zhang compared CFO job performance by contrasting a control group of firms that already disclosed CFO compensation before 2006 with those that implemented disclosure after the rule took effect, using the metrics of accounting misstatements and unexplained audit fees. Bao, Su, and Zhang indicated that their study found positive improvement in CFO performance substantiating “the SEC’s intended benefits” of increasing executive officer accountability and increasing transparency.