Category: reason

The White House and congressional Democrats are reportedly set to pass a short-term relief package to protect some politically favored industries from incurring financial losses due to the outbreak of coronavirus.

Just don’t call it a bailout, says Treasury Secretary Steve Mnuchin.

“This is not a bailout,” Mnuchin said, according to The Washington Post‘s Jeff Stein. “This is considering providing certain things for certain industries. Airlines, hotels, cruise lines.”

So you might say it’s a bailout.

The specifics of the package have not yet been released, but Mnuchin says the two sides have been talking about a smaller aid package aimed at “businesses and workers” that may be particularly hard-hit by the expected economic downturn triggered by the disease. He compared it to the type of disaster relief bill Congress might typically pass in the wake of a natural disaster like a hurricane.

There’s no price tag on the deal, which is still being negotiated, but The Wall Street Journal reports that lawmakers expect it to be “in the billions.”

And that’s just the start.

“This package isn’t going to include everything,” Mnuchin said Wednesday. “This is round one. We’ll be back for more.”

As foolish as a bailout for the leisure industry might be, it also might be the least bad option currently on the table. Politico reports that House Speaker Nancy Pelosi has squashed Trump’s initial coronavirus stimulus proposal: a payroll tax holiday that would extend through November.

Fiscally, a payroll tax cut would be utterly irresponsible. The payroll tax funds Social Security, Medicare, and Medicaid—all of which Trump has sworn to protect from cuts. That means his proposed payroll tax cut would only add to the shortfalls already facing those entitlement programs. According to the Tax Foundation, a nonpartisan tax policy center, Trump’s proposed payroll tax holiday would reduce revenues by $900 billion between April and November.

And it would probably fail as a way to stimulate an economy hobbled by a pandemic anyway. Because the economic shock from the coronavirus is likely to be a supply-side disruption, stimulating demand—and that’s what a tax cut would try to do—would be of limited use.

“Big tax cuts—such as the proposed employee payroll tax cut—seem an expensive blunt instrument for alleviating distress,” writes Ryan Bourne, an economist with the Cato Institute, a libertarian think tank. “If social distancing is necessary, we don’t want employees out spending more money because they have more in their pockets.”

The timing is also pretty convenient if you were, say, a president running for re-election who has been pushing for a payroll tax cut since well before the coronavirus outbreak began. Tax cuts are great, of course, but they have to be accompanied by spending cuts (which this wouldn’t be) and tax policy should not be dictated by how it will affect the president’s poll numbers.

There is one worthwhile tax policy idea under consideration, however. Mnuchin said Wednesday that the administration is considering a plan to postpone the April 15 income tax deadline. Not requiring Americans to pay their taxes on time would keep an estimated $200 billion in the economy—rather than having it vacuumed up by the government—and the fact that those tax bills would still be due at a later date means this approach wouldn’t add to the deficit.

Another good idea would be for the Trump administration to lift the tariffs it has imposed on steel, aluminum, and imports from China. Politico reported Wednesday that business and industry groups are lobbying Congress and the White House to include tariff relief in any coronavirus stimulus package. Some House Democrats have already climbed aboard the effort, according to a report from Inside Trade.

On one hand, yes, this is just another example of a politician or interest group using the coronavirus as an excuse to pass policies they already wanted. On the other, lifting the tariffs would be a big economic boost that comes without any of the downsides of cutting the payroll tax.

The only problem? The Office of the U.S. Trade Representative, Politico reports, “was not receptive” to the tariff-cutting plan. Of course.

But none of this should be a surprise. The Trump administration says China is paying for the tariffs, despite all available evidence to the contrary. They said the 2017 tax cuts would pay for themselves without spending cuts, but that didn’t happen.

Now Mnuchin says a bailout isn’t a bailout. Don’t buy that either.

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The order is here; key excerpts:

WHEREAS, COVID-19, a respiratory disease that spreads easily from person to person and may result in serious illness or death, has been confirmed in 9 counties of Washington State resulting in 24 deaths, with significant community spread in King, Pierce, and Snohomish counties; and

WHEREAS, to reduce spread of COVID-19, the United States Centers for Disease Control and Prevention and the Washington State Department of Health (DOH) recommend implementation of community mitigation strategies to increase containment of the virus, including cancellation of large gatherings and social distancing in smaller gatherings; and

WHEREAS, implementation of limitations on large gatherings and use of social distancing prevent initial exposure and secondary transmission to our most vulnerable populations, and are especially important for people who are over 60 years old and those with chronic health conditions due to the higher risk of severe illness and death from COVID-19; …

NOW, THEREFORE, I, Jay Inslee, Governor of the state of Washington, as a result of the above-noted situation, and under Chapters 38.08, 38.52 and 43.06 RCW, do hereby proclaim that … to help preserve and maintain life, health, property or the public peace, I hereby prohibit the following activities in King, Pierce and Snohomish counties related to social, spiritual, and recreational gatherings, which restrictions shall remain in effect until midnight on March 31, 2020, unless extended beyond that date:

Gatherings of 250 people or more for social, spiritual and recreational activities including, but not limited to, community, civic, public, leisure, faith-based, or sporting events; parades; concerts; festivals; conventions; fundraisers; and similar activities.

Violators of this of this order may be subject to criminal penalties pursuant to RCW 43.06.220(5).

I’m inclined to say that this is constitutional; it does restrict various activities protected by the Free Speech Clause and the Assembly Clause, but it does so in a content-neutral way, it generally leaves open ample alternative channels for communication, and passes the intermediate scrutiny applicable to such restrictions.

What about religious events, and especially worship services? The Washington Supreme Court has read the Washington Constitution as mandating strict scrutiny of laws that substantially burden religious practice. It’s possible that the federal Free Exercise Clause would do the same, even after Employment Division v. Smith, as to restrictions that interfere with religious gatherings are treated as “hybrid situations,”  including when “the Free Exercise Clause [is implicated] in conjunction with other constitutional protections, such as freedom of speech and of the press.”

But I’m inclined that, for many religious people, the law won’t impose a substantial burden, because their religious beliefs don’t preclude worshiping in groups of 250 people or fewer (e.g., by splitting up worship services). And even if the members of the organization feel a religious obligation to gather as one group, it may well be that the restriction will pass strict scrutiny, on the grounds that it’s narrowly tailored to a compelling interest in preventing the transmission of a potentially deadly disease.

Note that Seattle and King County are also imposing certain obligations, though not total bans, on gatherings of under 250 people.

Thanks to Mark Leen for the pointer.

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Coronavirus isn’t just a threat to your health, it’s also a threat to the economy. As infection numbers ticked up, the stock market had its worst day in 12 years. 

So it’s probably not surprising that President Donald Trump has touted “very dramatic” plans to help keep the economy up and running, with ideas ranging from tax breaks for individuals to writing everyone checks to industry-specific bailouts. 

But that just raises new questions: Can you solve a public health problem with economic policy? Is a new stimulus package the right response to a pandemic?  

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University and a frequent contributor to Reason magazine. She spoke with Reason Features Editor Peter Suderman about the coronavirus economy, and what government officials should do to fend off its economic effects.

Interview by Peter Suderman, edited by Ian Keyser, cameras by Austin and Meredith Bragg

Music: “Somnolence” by Kai Engel is licensed under CC BY 4.0

Photo credits: Traders on the floor of the New York Stock Exchange, MONIKA GRAFF/UPI/Newscom; President Trump tours the Viral Pathogenesis Laboratory, SplashNews/Newscom; President Trump, SplashNews/Newscom; Three large U.S. flags hang on the New York Stock Exchange, Jürgen Schwenkenbecher/picture alliance/Newscom; Pile of Cash, Digitalstormcinema | Dreamstime.com; Coronavirus Visualization, CDC

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Joe Biden, the former vice president who last night basically cemented his front-runner status for the Democratic presidential nomination, has thrown his support behind Assembly Bill 5 (A.B. 5), the disastrous gig economy law in California that has even drawn the ire of many progressives.

I support #AB5 in California, which will give workers the dignity they deserve in the workplace. I agree with @transportworker that we can't let corporations undermine basic rights by adding these exemptions to ground-breaking legislation. https://t.co/bouzgRLBU7

— Joe Biden (Text Join to 30330) (@JoeBiden) March 7, 2020

His announcement, made over the weekend, is another reminder that the career politician has often expressed unequivocal support for the liberal issue of the moment, no matter what types of unintended consequences it might create. 

At the core of A.B. 5 is an attempt to force companies to classify contractors as employees. It enshrines into law the “ABC” standard—affirmed in Dynamex Operations West, Inc. v. Superior Court of Los Angeles—which makes it a near-impossible feat for companies to keep contractors on the payroll. According to A.B. 5, a contractor must control their workload, perform duties outside of the company’s primary scope, and be “customarily engaged” in an independent trade or profession.

While well-intentioned, the measure upended several sectors of California’s gig economy before A.B. 5 became law on January 1 of this year. Freelancers—from transcribers and translators to journalists and content creators—were initially prohibited from completing more than 35 individual assignments for a single outfit without being hired as an employee, a cap that Assemblywoman Lorena Gonzalez (D–San Diego) said was somewhat “arbitrary” in nature. It sparked a massive outcry, with many of those workers complaining that the law had decimated their livelihoods.

“Companies can simply blacklist California writers and work with writers in other states, and that’s exactly what’s happening,” Alisha Grauso, an entertainment writer and the co-leader of California Freelance Writers United (CAFWU), told Reason in December. “I don’t blame them.”

Gonzalez disagreed. “These were never good jobs,” she wrote in a now-deleted tweet. “No one has ever suggested that, even freelancers.”

Except that was patently untrue. The assemblywoman eventually carved out an exception for the industry—one of many—after upset freelancers shared a slew of stories about how A.B. 5 posed an imminent threat to their way of life. For many, the carveout came too late, with thousands of dollars in contracts already lost.

Other professions that have been granted exemptions include doctors, lawyers, architects, engineers, accountants, insurance brokers, hairstylists, and real estate agents.

With the laundry list of exempted workers, the legislation is nothing short of cronyism, granting favors to some while targeting others. It’s no secret that A.B. 5 primarily zeroed in on the gig economy tech behemoths—Uber, Lyft, DoorDash, and the like—whose flexible business models have vexed left-leaning lawmakers. Those companies are hoping that voters will save them in November with a ballot measure for which they have reportedly collected more than one million signatures. 

If they fail, the sharing economy in the Golden State will cease to exist in its current form. Businesses would be legally obligated to provide every contractor-turned-employee with a slate of benefits, such as a minimum wage, compensation for expenses, paid time off, and health care—an untenable change for a business model that is open to nearly anyone who wants to participate and relies on empowering workers to log on whenever they please. Labor costs are estimated to increase from 20 to 30 percent. As I reported last month: 

Under a 40-hour workweek, Lyft expects to kick 300,673 drivers to the curb if it experiences the more modest 20 percent increase in expenses, according to a Beacon Economics LLC study commissioned by the ridesharing company. 

But with all these problems, Biden still supports the legislation, tweeting that a victory for the gig economy in November would be a loss for its workers. That logic is difficult to square with reality when considering that gig economy work contains fewer barriers to entry than other occupations. Accordingly, it allows more vulnerable populations—like immigrants and those who may have recently lost a job—to set their own hours and make decent income.

Biden’s love for A.B. 5 shouldn’t come as a surprise. The former vice president has a track record of propping up problematic policies without giving full consideration to how they will impact people in real-time. In some instances, he’s had to distance himself from those very ideas decades later. Take the 1994 crime bill, for instance, which implemented the controversial “three-strikes” rule and sent many people to prison for life if they were convicted of a violent felony after two other past offenses (including drug crimes).

That legislation has been lampooned by Republicans and Democrats alike, but it’s worth remembering that Biden was a driving force behind it—something that would come back to haunt him for years as he attempted to dodge accountability. Earlier this year, he admitted it was a “big mistake.”

Should Biden ascend to the Oval Office and fight for gig economy measures like A.B. 5, one wonders if he’ll be issuing similar mea culpas in a few years after witnessing their awful consequences.

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Yesterday, I blogged about a law review article by Judge Lynn Adelman. My post drove a news cycle. Judge Adelman was praised on Slate and Above the Law. Law 360 and the ABA Journal rounded up other coverage.

And the Washington Post actually got Judge Adelman on the phone. Judges should never answer calls from reporters about matters of public concern. Alas, Judge Adelman has already demonstrated his lack of discretion. Here is an excerpt:

RULE 2.1

Giving Precedence to the Duties of Judicial Office

The duties of judicial office, as prescribed by law,* shall take precedence over all of a judge’s personal and extrajudicial activities.

COMMENT

[1] To ensure that judges are available to fulfill their judicial duties, judges must conduct their personal and extrajudicial activities to minimize the risk of conflicts that would result in frequent disqualification. See Canon 3.

[2] Although it is not a duty of judicial office unless prescribed by law, judges are encouraged to participate in activities that promote public understanding of and confidence in the justice system.

Judge Adelman is mistaken. A judge’s first duty is to be a judge. And that duty takes “precedence” over all extrajudicial activities–including talking to the Washington Post or publishing in the Harvard Law & Policy Review. Comment [1] explains that judges should try to minimize potential conflicts of interest. Judge Adelman expressly acknowledges that he created conflicts! But don’t worry about it, he says, because there is no-Trump related litigation in Wisconsin.

Asked if the journal article might prompt some lawyer to seek his recusal in a case, Adelman said he didn’t see that happening. He said he had been a judge for two decades and “all the parties that have ever appeared before me think I’m fair.

“Maybe someone could make an argument [for recusal] in some high-profile case about the Trump administration,” he said. “But I don’t get any of those. They’re all brought in D.C. and California.”

Judge Adelman doesn’t even see the risk for recusal right in front of his eyes. We have a presidential election coming up. Wisconsin very well may be a swing state, with the potential for election disputes. I trust Judge Adelman will recuse from any election litigation involving Trump, and perhaps others in the Republican party. His article was equally harsh on the GOP.

Comment [2] says judges are “encouraged” to engage in public commentary to “promote . . . confidence in the justice system.” Judge Adelman is doing quite the opposite. He writes that the Chief Justice perjured himself, and the Supreme Court is subverting democracy. These arguments would be perfectly valid if made by anyone else in our polity. But not judges. His comments undermine confidence in our judiciary–quite deliberately so.

Moreover, his remarks about President Trump can in no sense fit within the scope of Comment [2]. Indeed, Judge Adelman doubled down on his comments about President Trump.

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