Tag Archives: regulation

About That “Abundance” Agenda

My middle son lived in Manhattan for ten years before relocating to Amsterdam, and during his tenure in the Big Apple he sprinkled numerous conversations with complaints (okay, rants) about the excessive costs of the city’s infrastructure. He couldn’t understand why other countries could extend their subway systems and railways at a fraction of America’s cost, and could complete projects far more rapidly.  He loved New York, but the glaring and costly inefficiency offended him.

I had no wisdom to impart. I didn’t know–and was unable to speculate– why a subway extension in the U.S. cost so much more–and took so much longer– than similar projects in other countries.

Until very recently, I was equally unaware of the policy war centered on something called  the abundance agenda, which turned out–despite what I still consider a weird label–to be an argument over that same question: why can’t America build things anymore?

As an article from The Atlantic explained:

The abundance agenda is a collection of policy reforms designed to make it easier to build housing and infrastructure and for government bureaucracy to work. Despite its cheerful name and earnest intention to find win-win solutions, the abundance agenda contains a radical critique of the past half century of American government. On top of that—and this is what has set off clanging alarms on the left—it is a direct attack on the constellation of activist organizations, often called “the groups,” that control progressive politics and have significant influence over the Democratic Party.

The article documented national examples that dovetailed with my son’s complaints. For example, the amount of time that elapsed between Biden’s signing of his infrastructure bill and actual construction meant that voters hadn’t seen the effects of that legislation by the next election.

A massive law had been enacted, yet Americans did not notice any difference, because indeed, very little had changed. Biden had anticipated, after quickly signing his infrastructure bill and then two more big laws pumping hundreds of billions of dollars into manufacturing and energy, that he would spend the rest of his presidency cutting ribbons at gleaming new bridges and plants. But only a fraction of the funds Biden had authorized were spent before he began his reelection campaign, and of those, hardly any yielded concrete results.

Only 58 of the “nationwide” electric-vehicle-charging stations were in service; completion dates for most road projects was mid-2027. Rural broadband access to had connected zero customers.

Policy wonks began to ask the same questions my son had asked. What was going on? American government used to construct engineering miracles like the Hoover Dam and the Golden Gate Bridge ahead of schedule and under budget– Medicare had become available less than a year after it passed, but the Affordable Care Act’s exchange took nearly four years. And an embarrassing question: Why was everything slower, more expensive, and more dysfunctional in states and cities controlled by Democrats?

The policy wonks concluded that, over the years, a web of laws and regulations has turned any attempt to build public infrastructure into an expensive, agonizing nightmare. But removing excess regulations is highly controversial, because the limitations on building and government were largely imposed by interest groups that believed them necessary– interest groups that have dominated the Democratic Party for the last half century, and who saw their task as preventing an alliance of government, Big Business and Big Labor from subordinating the needs of citizens. They wanted to prevent the government from doing harm– but too often, they ended up preventing it from doing anything at all.

The National Environmental Policy Act, or NEPA, is an example. Passed in 1969, the law required the government to undertake environmental-impact studies before authorizing major projects and created elaborate legal hurdles to navigate.

Activist groups such as the Environmental Defense Fund saw NEPA as a potent tool to stop Washington (and, through state-level copycat laws, state and local governments) from building harmful projects. They pursued an energetic legal strategy to expand the law’s reach, turning it into a suffocating weapon against development. Over time, the environmental-impact statements required to start a project have ballooned from about 10 pages to hundreds; the process now takes more than four years on average to complete.

The article has many more examples, but the issue is so contentious because it isn’t “either/or”–it requires policymakers to find the mean between extremes. How much regulation is needed to safeguard the environment, or protect against government overreach–and how much is too much?

If and when we elect lawmakers who actually care about governing, it’s an issue they need to address.

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And So It Begins…..

As predicted, it’s beginning. “It” is the regulatory dismantling that became inevitable when our rogue Supreme Court overruled “Chevron deference” and held that judges, rather than subject-matter experts, should decide regulatory policies.

A court has now struck down Net Neutrality.

If you are unfamiliar with this policy, or unsure why it matters, Vox had a comprehensive explanation back in 2016, when the Trump administration attacked it. Basically, Net Neutrality prohibits Internet Service Providers (ISPs) from discriminating among users.

Trump’s prior assault on Internet equality was just one of his efforts to make America “great” for the powerful and wealthy. Now, Trump’s remade Court has super-charged the fight against the government’s ability to impose fair “rules of the road.”

As the New York Times reported,

A federal appeals court struck down the Federal Communications Commission’s landmark net neutrality rules on Thursday, ending a nearly two-decade effort to regulate broadband internet providers as utilities.

The U.S. Court of Appeals for the Sixth Circuit, in Cincinnati, said the F.C.C. lacked the authority to reinstate rules that prevented broadband providers from slowing or blocking access to internet content. In its opinion, a three-judge panel pointed to a Supreme Court decision in June, known as Loper Bright, that overturned a 1984 legal precedent that gave deference to government agencies on regulations….

The F.C.C. had voted in April to restore net neutrality regulations, which expand government oversight of broadband providers and aim to protect consumer access to the internet. The regulations were first put in place nearly a decade ago under the Obama administration and were aimed at preventing internet service providers like Verizon or Comcast from blocking or degrading the delivery of services from competitors like Netflix and YouTube. The rules were repealed under President-elect Donald J. Trump in his first administration.

I have previously explained why the Loper Bright decision was so wrongheaded–and another stunning departure from longstanding precedent.

Robert Hubbell has addressed the ruling with his usual common sense explanation.

One of the major controversies of the Court’s 2024 term was the termination of the Chevron doctrine that afforded deference to federal experts charged with rulemaking pursuant to congressional regulation. The reactionary majority on the Supreme Court concluded that federal judges—with crushing caseloads—are better equipped to make discretionary policy judgments about rules authorized by Congress to regulate industries as varied and complex as nuclear energy, general aviation, drug testing, coal mine safety, and deep-water oil drilling. See Loper Bright Enterprises v. Raimondo,

In short, the Roberts’ Court substituted itself for tens of thousands of subject-matter experts with hundreds of thousands of years of experience regulating complex industries.

The first significant casualty of the Court’s hubris in Loper Bright was the “net neutrality” doctrine. A three-judge panel of the Sixth Circuit overruled the FCC’s interpretation of whether broadband internet service is “an information service” or a “telecommunications service for purposes of the Telecommunications Act of 1996.” 

Hubbell goes on to quote Chris Geidner’s Substack.

In the relatively brief, 26-page decision, [Judge] Griffin declared that three judges sitting on an appeals court representing four states in the middle of the country were better suited to decide what a law in place since the mid-1990s means than the experts or political appointees at the FCC.

Instead of the executive branch issuing its interpretation, subject to electoral constraints and judicial review (and with the benefit of those subject experts on the agency’s staff), a man who has been a judge since the 1980s wrote the Sixth Circuit’s opinion deciding the matter on Thursday . . . .

Welcome to the brave new world of federal judges overruling experts charged with rulemaking by Congress.

As I have previously explained, Chevron deference was a well-considered judicial doctrine that had been applied for 40 years in over 18,000 decisions. It applied to the multiple situations in which Congress sends “ambiguous” directions to executive agencies staffed with people who are experts in the particular area. That ambiguity is intentional and necessary; Congress isn’t equipped to determine the proper levels of contaminants in water or to identify carcinogenic chemicals–and even if such specifics were part of the legislation, they would be incredibly difficult to monitor and/or update as technical knowledge advances.

Under Chevron, technocrats didn’t have the last word–if a plaintiff could show that a regulation was unreasonable, courts could and did overrule it. The rule simply recognized the complexity of the world we inhabit–and the importance of specialized expertise–an importance this arrogant Court dismisses.

As Tom Nichols has amply documented, in the age of MAGA, education, knowledge and expertise have become unacceptably “woke”–and certainly not entitled to respect.

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Is The Internet A Common Carrier?

When we think of enterprises categorized as common carriers, we tend to think of those that transport–that “carry” passengers or goods for a fee, and that serve the general public. But the term applies to services other than transportation.

Pointing out that the Internet is a common carrier is critical to discussions of net neutrality, as Tom Wheeler–a former head of the FCC–has written in an article for the Brookings Institution.

As far back as England’s emergence from feudalism around 1500, there has been a common law concept that essential services have a “duty to deal.” The operator of the ferry across the river, for instance, could not favor one lord’s traffic over another’s; everyone had access, and everyone had to pay. When the telegraph was introduced in the United States 350 years later, the concept was applied to that new essential service. The Pacific Telegraph Act of 1860 provided, “messages received from any individual, company, or corporation, or from any telegraph lines connecting with this line at either of its termini, shall be impartially transmitted in the order of their reception.” When the telephone came along, the same concept was applied to it as a common carrier.

The Communications Act of 1934, under which the FCC operates today, established in Title II’s statutory language, “It shall be the duty of every common carrier engaged in interstate or foreign communication by wire or radio to furnish such communication service upon reasonable request therefor.” The Communications Act also established the concept that the actions of Title II carriers must be “just and reasonable.”

Wheeler says that today’s Internet Service Providers, or ISPs, want to be allowed to make their own rules– without any review as to whether those rules or their actions are “just and reasonable.”

The ongoing debate about net neutrality is usually focused on specific behaviors by ISPs–behaviors that privilege the delivery of messages that are financially beneficial to them, while slowing or even blocking those that aren’t.

As Wheeler reminds us, the term “net neutrality”– coined in 2003 by Columbia professor Tim Wu–should be understood as more expansive.

It was an innovative nomenclature that picked up on the ability of the ISPs to discriminate for their own economic advantage. Net neutrality became commonly described as whether the companies could create “fast lanes” and “slow lanes” for internet traffic. That such a problem was not hypothetical was demonstrated five years later when the Republican FCC fined Comcast for slowing the delivery of video content that could compete with cable channels.

But as Wheeler argues, limiting the conversation to blocking, throttling, and paid prioritization is misleading. The real issue pending before the FCC is “whether those that run the most powerful and pervasive platform in the history of the planet will be accountable for behaving in a “just and reasonable” manner.”

It is the conduct of the ISPs that is in question here. Because telephone companies were Title II common carriers, their behavior had to be just and reasonable. Those companies prospered under such responsibilities; as they have morphed into wired and wireless ISPs, there is no reasonable argument why they, as well as their new competitors from the cable companies, should not continue to have public interest obligations.

Don’t be misled by the all-too-convenient framing that net neutrality is all about blocking and throttling. The real issue is why such an important pathway on which so many Americans rely should be without a public interest requirement and appropriate oversight.

The public interest and the common good are two concepts that have lost considerable ground over the past few decades–and nowhere is the absence of those considerations more harmful than in the Wild West that is the current Internet. We can trace a majority of the political and social problems we face to the fragmented and un-policed  nature of the global information environment we inhabit. It’s ironic–and incredibly worrisome– that a platform invented to facilitate communication has morphed into a primary source of misinformation, conspiracy theories and algorithmic sorting.

The Communications Act of 1934–still in effect–established the  duty of “every common carrier engaged in interstate or foreign communication by wire or radio” to serve all comers “upon reasonable request.” The Act also established the rule cited by Wheeler, obliging such common carriers to act in ways that are “just and reasonable.”

According to Wheeler, the ISPs  want to continue to make their own rules without any review as to whether their actions pass the “just and reasonable” test.

Given the disproportionate impact on society of social media and internet platforms, imposing some oversight would seem to be “just and reasonable.”

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About Those Banks…

News of the recent failure of two significant banks was enough to send chills down the spines of lots of Americans–especially those of us who are retired and dependent upon funds invested in the market. No matter how conservative our investment choices may have been, it’s like being on an ocean liner: if the entire vessel sinks, we’ll all go down, prudent stateroom choices or not.

As usual, Heather Cox Richardson could be counted on to produce the clearest explanation of the situation–not just the event itself, but the government’s (thankfully competent) response.

At 6:15 this evening, Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and Federal Deposit Insurance Corporation (FDIC) Chairman Martin J. Gruenberg announced that Secretary Yellen has signed off on measures to enable the FDIC to fully protect everyone who had money in Silicon Valley Bank, Santa Clara, California, and Signature Bank, New York. They will have access to all of their money starting Monday, March 13. None of the losses associated with this resolution, the statement said, “will be borne by the taxpayer.”

But, it continued, “Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”

The statement ended by assuring Americans that “the U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.”

My immediate reaction was to give thanks that the challenge posed by these bank failures was being handled by the knowledgable and competent people in the Biden Administration, rather than by the Keystone Kops assembled by Trump.

Of course, the obvious next question was: how did this happen?

Most of us think of bank failures as harbingers of Depression, so I was surprised to read that a few banks fail every year, although Richardson reports that these are the first two  during  Biden’s presidency. (There were sixteen during Trump’s four years in office, eight of which preceded the pandemic).

Silicon Valley was the go-to bank for tech start-ups, which typically begin with a lot of cash from investors and IPO’s, and don’t need much in the way of loans.

So, rather than balancing deposits with loans that fluctuate with interest rates and thus keep a bank on an even keel, SVB’s directors took a gamble that the Federal Reserve would not raise interest rates. They invested in long-term Treasury bonds that paid better interest rates than short-term securities. But when, in fact, interest rates went up, the value of those long-term bonds sank.

Then, because SVB concentrated on start-ups, they had another problem. As interest rates go up, investors want faster returns than most start-ups can deliver. That meant that SVB’s depositors began to withdraw their money.

So SVB sold securities at a loss to cover those deposits. Other investors panicked as they saw SVB selling at a loss and losing deposits, and they, too, started yanking their money out of the bank, collapsing it. Banks that have a more diverse client base are less likely to lose everyone all at once.

There is–as you have probably guessed–a larger lesson here. The “libertarians” (I’m looking at you, Peter Thiel!) who have been vocal opponents of government regulation of the banking industry and  government relief for student loans–or really, pretty much anything government does that doesn’t benefit them personally– immediately insisted that in this case, the banks should be bailed out.

Richardson points out that in 2018, under Trump, Congress “weakened government regulations for banks like SVB and that SVB’s president had been a leading advocate for weakening those regulations.” Had those regulations been in place,  SVB would probably have remained solvent.

The Biden administration had been considering tightening the banking regulations that were loosened under Trump, and it seems likely that the need for the federal government to step in to protect the depositors at SVB and Signature Bank will make it much harder for those opposed to regulation to keep that from happening.

Was this a “bail out”? There’s an argument that making depositors whole while letting the shareholders eat their losses isn’t a bailout. The intervention was clearly needed to contain the potential for an economic collapse that would hurt everyone. Whether this is considered a bailout or not, at least the banks, and not the  taxpayers, are on the hook.

Getting rid of the hypocrisy is probably an unattainable goal….

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The End Of Free Markets?

Last month, Time Magazine published an article asserting that the “free market” was effectively dead. The author then went on to speculate over what might replace.it. (For the record, I’m pretty skeptical of definitive pronouncements of this sort–as I used to tell my students, the real world is considerably more complicated than that.)

Time’s conclusion was evidently prompted by a recent meeting in the White House between President Biden and the CEOs of some of America’s largest companies, attended by the head of the U.S. Chamber of Commerce (whose “presence was enough to rock the political landscape” according to the article.)

“Washington’s most powerful trade group is having a political identity crisis,” wrote Politico. Two weeks later, a group of 150 CEOs, unaffiliated with the Chamber, followed suit, throwing their weight behind Biden’s COVID relief bill, which sailed through Congress. They have been similarly supportive of the additional $2 trillion the administration has now proposed for infrastructure spending – but they unsurprisingly don’t want corporate tax rates to be the means for paying for it.

The article went on to say that corporate America’s support for public investment is not a new or temporary phenomenon–rather, it’s evidence of the “most profound realignment in American political economy in nearly forty years,” and it cites the rise of ethno-nationalism on the right and democratic socialism on the left as evidence of a widespread disillusionment with conventional economic wisdom.

For the record, the “conventional economic wisdom” being undermined has only been conventional for some 40 years.

The article traces the evolution of free market absolutism, and acknowledges that prior to the 1970s, most economists had advocated fairly robust government action—countercyclical fiscal spending, management of the currency, tactical protectionism—to create long-term prosperity. The emergence and influence of what the article calls “free market apostles” changed that, and led to what we now call Reaganomics–the notion that virtually any government regulation of the market is unhelpful, if not illegitimate. (This required some cherrypicking of Adam Smith, but hey…)

Interestingly, in what may be the most insightful portion of the article, it connected this shift to an anti-government “free market” philosophy to racial politics. The need for government to take a “hands off” approach coincided with federal efforts to ameliorate some of the most egregious economic effects of state-sanctioned racism.

In any event, while the article argues that public and expert opinion have swung against what it labels “free-market orthodoxy,” what is actually happening–at least among people who are concerned with such things– is a return to a much more nuanced understanding of market economics.

Virtually all rich countries today have mixed economies, in which certain services are “socialized”–i.e., provided communally by government–and others are left to a market subject to reasonable regulation. Americans love “either/or” politics–it’s either capitalism or socialism, freedom or tyranny. That makes for great sloganeering, but bad politics.

The issue isn’t free markets versus socialism. The actual issues confronting policymakers are much more nuanced, and fall into two broad categories: 1) which services ought to be provided by government, and which should be left to the market? and 2) what regulations are needed to ensure the proper operation of that market and which are counterproductive? Just how “free” should markets be?

People of good will will have different answers to those questions, and it would be nice if the ensuing arguments were evidence based–although I’m not holding my breath.

I do know that those evidence-based conversations are not encouraged by headlines suggesting that a new emphasis on anti-trust enforcement or other regulatory activity is tantamount to the end of the free market.

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