Month: January 2023

On January 26, economists Lawrence H. White and Frederic Mishkin debated the resolution, “Replacing the Federal Reserve with free market institutions would significantly improve the economy’s money, banking, and financial systems.” The debate was held at New York City’s Sheen Center and hosted by The Soho Forum, which receives fiscal sponsorship from Reason Foundation, the nonprofit that publishes Reason.

Arguing the affirmative was White, a professor of economics at George Mason University. His forthcoming book Better Money: Gold, Fiat, or Bitcoin? (Cambridge University Press, 2023) compares and contrasts alternative monetary standards. Best known for his work on market-based monetary systems, White is the author of Free Banking in Britain (1984), Competition and Currency (1989), and The Theory of Monetary Institutions (1999), and co-editor of Renewing the Search for a Monetary Constitution (2015). His research has appeared in the American Economic Review, the Journal of Money, Credit, and Banking, The Economic History Review, and other leading economics journals. He’s also a senior fellow at the Cato Institute and a distinguished senior fellow at the Mercatus Center.

Mishkin, who argued the negative, is the Alfred Lerner professor of banking and financial institutions at Columbia University’s Graduate School of Business and a research associate at the National Bureau of Economic Research. From September 2006 to August 2008, he served on the Board of Governors of the Federal Reserve System. He was previously a senior fellow at the FDIC Center for Banking Research and president of the Eastern Economic Association. From 1994 to 1997, he was executive vice president and director of research at the Federal Reserve Bank of New York, as well as an associate economist of the Federal Open Market Committee of the Federal Reserve System. Mishkin’s research focuses on monetary policy and its impact on financial markets and the aggregate economy.

The post Should We Abolish the Federal Reserve? appeared first on Reason.com.

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This week, a federal judge said California’s definition of COVID-19 “misinformation” that can trigger disciplinary action against physicians is unconstitutionally vague. But in another case involving the same law last month, a different federal judge rejected that claim. That stark disagreement highlights the California State Legislature’s carelessness in drafting this statute and the speech-chilling puzzle that doctors would face in trying to comply with it.

Under A.B. 2098, which took effect on January 1, “it shall constitute unprofessional conduct for a physician and surgeon to disseminate misinformation or disinformation related to COVID-19, including false or misleading information” about “the nature and risks of the virus,” “its prevention and treatment,” and “the development, safety, and effectiveness of COVID-19 vaccines.” The law defines “misinformation” as “false information that is contradicted by contemporary scientific consensus contrary to the standard of care.”

That language, New York Times reporter Steven Lee Myers avers in what is supposedly an evenhanded news story, was “narrowly tailored” to “address the waves of misinformation that have churned through the course of the pandemic.” Leaving aside the point that “address[ing]” misinformation by prohibiting it seems blatantly inconsistent with the First Amendment, is Myers right to describe A.B. 2098 as “narrowly tailored”?

William B. Shubb, a judge on the U.S. District Court for the Eastern District of California, did not think so. In Høeg v. Newsom, Shubb issued a preliminary injunction against enforcement of A.B. 2098 on Wednesday. He said the state’s definition of misinformation violates the right to due process because it “fails to provide a person of ordinary intelligence fair notice of what is prohibited” and “is so standardless that it authorizes or encourages seriously discriminatory enforcement.”

Fred W. Slaughter, a judge on the U.S. District Court for the Central District of California, reached a strikingly different conclusion in McDonald v. Lawson on December 28. Rejecting a motion for a preliminary injunction, Slaughter said the law was clear enough to give physicians fair notice of what they can say to patients without jeopardizing their licenses.

As Shubb saw it, California’s definition of misinformation is “grammatically incoherent” and unintelligible. The central problem, he said, is that the phrase “contemporary scientific consensus” has no clear meaning, especially in the context of COVID-19, a new disease that has generated conflicting and evolving scientific opinions. “Because the term ‘scientific consensus’ is so ill-defined,” he wrote, “physician plaintiffs are unable to determine if their intended conduct contradicts the scientific consensus, and accordingly ‘what is prohibited by the law.'”

Shubb rejected the state’s preferred interpretation of A.B. 2098, which reads the law  as requiring that misinformation include three elements: It is 1) “false information” that is 2) “contradicted by contemporary scientific consensus” and 3) “contrary to the standard of care.” There are several problems with that interpretation.

First, the law says prohibited advice includes “false or misleading information,” which means it is not limited to statements that are demonstrably wrong. Second, while it is not clear what “contemporary scientific consensus” means, it is hard to imagine a situation in which the state medical board would conclude that a physician’s statements contradicted that consensus but were nevertheless true. Third, if “misinformation” is limited to advice that is contrary to a “standard of care” that the medical board already was applying, the law is superfluous, adding nothing to pre-existing regulations. Fourth, the law’s sloppy language makes it unclear how these supposedly distinct elements interact.

If legislators meant to prohibit medical advice that meets three separate criteria, Shubb noted, they could have said that. But they did not bother to insert the word and, or even a comma, between “contradicted by contemporary scientific consensus” and “contrary to the standard of care.” Did they mean to say that medical advice is contrary to “the standard of care” whenever it contradicts a state-defined “scientific consensus”? Or did they mean that advice can contradict the “scientific consensus” but nevertheless be consistent with “the standard of care”?

Under the first interpretation, A.B. 2098 would be redefining the standard of care. Under the latter interpretation, the one favored by the state, the law would accomplish nothing. As long as doctors adhered to the standard of care they were already supposed to follow, they would not have to worry that they could get into trouble for candidly expressing their opinions about “the nature and risks” of COVID-19, its “prevention and treatment,” or vaccines aimed at reducing its severity.

Despite all of these problems, Slaughter accepted the state’s reading of A.B. 2098 (citations omitted):

The measure’s definition of “misinformation” is comprised of three components: (1) demonstrably false information; (2) contradicted by contemporary scientific consensus; and (3) contrary to the standard of care. Though “contrary to the standard of care” immediately follows “contradicted by contemporary scientific consensus” without a conjunction, construing the statute in light of California law’s established definition of “standard of care” as the skill, knowledge, and care exercised by practitioners under similar circumstances, it is apparent from the statute that the “contrary to the standard of care” requirement imposes a burden on the state to demonstrate that treatment or advice which would otherwise qualify as “false” and “contradicted by contemporary scientific consensus” must be additionally violative of that familiar standard. Moreover, as Defendants concede, to the extent a scientific consensus is unclear, AB 2098 would not impose liability because there is nothing to contradict. In other words, to be “misinformation” under AB 2098, the state must show that a scientific consensus exists, the information provided by a surgeon or physician both runs contrary to it and is demonstrably false, and providing that information in the context of treatment or advice to a patient would be contrary to the skill, knowledge, and care exercised by a like colleague in similar circumstances. Accordingly, the court finds “misinformation” is not impermissibly vague, in that it requires, by its statutory text, a false statement of information that is contradicted by contemporary scientific consensus, which further runs afoul of the applicable standard of care.

Under this reading, physicians who dissent from whatever the medical board deems to be the “scientific consensus” need not worry about disciplinary action unless they tell patients something that is “demonstrably false” and also violate the “standard of care.” To put it another way, a doctor would be in the clear if he contradicted the “scientific consensus,” even if his statements were “demonstrably false,” as long as his services were consistent with “the skill, knowledge, and care exercised by practitioners under similar circumstances.” But since physicians already were subject to “that familiar standard,” A.B. 2098 does not impose any new requirements on them, which makes you wonder why the legislature bothered to pass it.

Despite the state’s claim that A.B. 2098 ultimately changes nothing, regulators charged with enforcing the law can be expected to scrutinize the speech of doctors who dare to depart from the “scientific consensus.” That transgression might amount to expressing skepticism about ever-shifting advice from public health agencies such as the Centers for Disease Control and Prevention (CDC) on contentious issues such as the merits of universal masking, the utility of cloth masks, the effectiveness of vaccines in preventing the spread of COVID-19, and the benefits of vaccination for young, healthy patients who face a very low risk of life-threatening COVID-19 symptoms.

Under the state’s interpretation of A.B. 2098, the medical board could decide that a doctor’s advice contradicted the “contemporary scientific consensus,” which it might equate with the CDC’s latest recommendations. The board might also conclude that the doctor’s advice was “false or misleading.” It nevertheless could decide that the doctor’s treatment practices met the pre-existing “standard of care,” which according to the state was not changed by A.B. 2098. Even if the doctor ultimately kept his license, he would still suffer the embarrassment, cost, inconvenience, and anxiety that such an inquiry entails.

Physicians who want to avoid that ordeal would have to think twice before offering patients their honest opinions. That is how a “chilling effect” works.

Because Shubb concluded that A.B. 2098 is unconstitutionally vague, he did not directly address the claim that it violates the First Amendment. But he noted that “vague statutes are particularly objectionable when they ‘involve sensitive areas of First Amendment freedoms’ because ‘they operate to inhibit the exercise of those freedoms.'” To show standing in this context, he said, “a plaintiff ‘need only demonstrate that a threat of potential enforcement will cause him to self-censor.'”

Two California chapters of the American Civil Liberties Union filed a brief in McDonald v. Lawson that raised similar concerns. “AB 2098 undoubtedly reaches speech protected by the First Amendment,” they said. “It expressly limits the ability of physicians to speak about certain topics to their patients and thereby restricts their ability to communicate.”

In the 2002 case Conant v. Walters, the U.S. Court of Appeals for the 9th Circuit, which includes California, held that the federal government violated the First Amendment when it threatened to revoke the prescribing privileges of doctors who recommended medical marijuana to their patients—advice that was contrary to the “scientific consensus” as federal officials defined it. “An integral component of the practice of medicine is the communication between a doctor and a patient,” the appeals court said. “Physicians must be able to speak frankly and openly to patients.” That decision, the ACLU brief said, “plainly forecloses the State from censoring physicians’ discussion, medical advice, and recommendations related to COVID-19 unless the content-based regulation can meet strict scrutiny.”

In Slaughter’s view, A.B. 2098 is consistent with the First Amendment because it “incidentally burdens speech as a regulation of professional conduct.” He said the law “only requires that, while administering medical treatment or advice to a COVID-19 patient, a doctor avoid providing demonstrably false information that is contradicted by the prevailing scientific consensus in [a] manner violative of the standard of care.”

That conclusion hinges on accepting the state’s implausible reading of A.B. 2098. But Shubb thought that interpretation was “hard to justify” based on the text of the law. And even if it were accepted, he said, it would not clarify what “scientific consensus” means in this context.

Two federal judges considered this statute and arrived at diametrically opposed conclusions about what it means. Slaughter, who was appointed by President Joe Biden last April after serving as a state judge in Orange County for eight years, thought the law’s definition of misinformation was clear. Shubb, who was appointed by President George H.W. Bush in 1990, saw a hopeless muddle. Yet physicians without legal degrees or judicial experience are expected to figure out what the law requires, knowing that they are risking their licenses and livelihoods if they guess wrong. In those circumstances, self-censorship is both prudent and consistent with what California legislators apparently were trying to achieve.

The post How Does California Define COVID-19 'Misinformation'? Judges Disagree, but Doctors Are Expected To Know. appeared first on Reason.com.

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The first major test for the new Republican majority in the House is the looming crisis involving the debt ceiling, which GOP lawmakers say they won’t vote to raise unless Democrats, including President Joe Biden, agree to cut spending.

And the first major test of whether Republicans are serious about cutting spending is their ability to identify anything they’d actually be willing to cut.

So far, that part has been the problem.

Case in point, here’s Rep. Marjorie Taylor Greene (R–Ga.) explaining the House GOP’s demands to NBC News earlier this week: “There’s gotta be cuts in spending. That has to happen.” So far, so good. But when a reporter followed up by asking what cuts Taylor Greene would support, the congresswoman responded by saying “I haven’t really formulated an exact list.”

OK, maybe that’s somewhat unfair. Taylor Greene is, after all, known more for her willingness to engage in ridiculous conspiracy theories and culture warring than for her policy chops. But the same conundrum seems to afflict a wide swath of Republicans, who have so far done a better job of identifying what they refuse to cut—Social Security, Medicare, or military spending—than specifying what they’d be willing to put on the chopping block.

“Republicans have Very Serious budget demands. Unfortunately, they can’t identify what any of those demands are,” summarizes The Washington Post‘s Catherine Rampell. “Republicans say they want lower deficits—in fact, they have pledged to balance the budget (that is, no deficit at all) within seven or 10 years. But they have not laid out any plausible mathematical path for arriving at that destination.”

The closest thing there is to an actual plan is a one-page document published by the Republican Study Committee. It promises to balance the federal budget by the end of the decade by making “common-sense reforms to reduce spending & the associated inflation.”

What are those reforms? ¯\_(ツ)_/¯

The fundamental problem for Republicans is that it’s virtually impossible to balance the budget without cutting entitlements or the military. In fact, you’d have to cut 85 percent of the rest of the federal budget, according to an analysis by the Committee for a Responsible Federal Budget, which advocates for lower deficits.

As much fun as that might be to watch, it’s simply not politically possible.

Which means there is only one way forward, a way outlined on Wednesday by Sen. Rand Paul (R–Ky.).

“We have an opportunity here. It could be done. But it would take compromise between both parties,” Paul said during a brief press conference held by a group of Senate Republicans. “Republicans would have to give up the sacred cow that says we will never touch a dollar in military [spending], and the Democrats would have to give up the sacred cow that they will never touch a dollar in welfare.”

Yes, Republicans. The time has come to admit that budget cuts will have to hit the Pentagon too.

As well they should. If any other department of the government couldn’t account for billions of dollars in assets and had never successfully passed an audit, it would be placed right at the top of the list of wasteful spending that Republicans wanted to cut. And they’d be right to do that!

Dress a welfare program in camouflage,  however, and it suddenly becomes an untouchable asset. It’s unpatriotic to even suggest that perhaps military contractors shouldn’t get to attach 3,800 percent markups on spare parts or that the nation will still be secure if we don’t blow $1.7 trillion on new fighter jets that might never work.

Remember how we finally ended the war in Afghanistan in 2021? You wouldn’t know it by looking at the military budget, which has continued increasing even as the war on terror winds down. “The Congressional Budget Office has determined that, if current trends continue, the Pentagon could receive a monumental $7.3 trillion-plus over the next decade, more than was spent during the peak decade of the Afghan and Iraq wars, when there were up to 190,000 American troops in those two countries alone,” wrote William Hurtung, a senior research fellow at the Quincy Institute, which advocates for a more realistic U.S. foreign policy, last year.

Republicans need a plan to cut spending? Here’s one. The Center for International Policy, a foreign policy think tank, has outlined how the military budget could be trimmed by $1.2 trillion over the next 10 years by doing stuff conservative Republicans say they want, like avoiding foreign wars and cutting bureaucracy.

These aren’t radical ideas. They should be a necessary part of any discussion about reducing the deficit and managing the bloated national debt. And, unlike changes to Social Security—which should also be on the table—they wouldn’t significantly impact the working-class voters that Republicans are increasingly trying to court. No one in western Pennsylvania or eastern Kentucky is going to get upset about military-industrial contractors living in Fairfax County McMansions getting slightly less wealthy over the next decade.

“Everything would have to be looked at across the board. No one has a sacred area that would be immune,” Paul said. “It’s a responsible thing to do.”

He’s right. But it can only happen if Republicans admit that protecting the military budget from possible cuts makes little fiscal or political sense.

The post If Republicans Want To Cut Spending, They Should Start With the Pentagon appeared first on Reason.com.

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Federal housing regulators are flirting with the idea of imposing nationwide rent control via executive action, although any attempt to implement their plan would run into some serious practical and legal hurdles.

On Wednesday, the White House released a Blueprint for a Renters Bill of Rights that lists a wide range of actions federal agencies are taking or considering to “strengthen tenant protections and encourage rental affordability.”

The most eye-catching proposal is an announcement that the Federal Housing Finance Agency (FHFA)—the independent regulator and conservator of Freddie Mac and Fannie Mae—would explore ways it could “limit egregious rent increases” going forward at properties with a Fannie- or Freddie-backed mortgage.

Since the campaign trail, President Joe Biden has promised to create a “renters bill of rights” of federal tenant protection. In recent months, he’s also been pressured by congressional Democrats and affordable housing advocates to use his executive powers to more strictly regulate “corporate landlords” and their ability to charge market prices for housing.

Both have suggested in letters to the White House that the FHFA use its powers to cap rent increases at properties with a Freddie- or Fannie-backed mortgage.

Wednesday’s announcement doesn’t commit the Biden administration or the FHFA to actually enacting rent control. But it does say that the independent agency will “launch a process” to consider it.

Former housing regulators and housing industry stakeholders have criticized the idea for being both counterproductive and likely illegal.

Government-sponsored enterprises (GSEs) like Fannie and Freddie “loan in places where it’s often really hard to get a loan, like a small multifamily building in St. Louis,” says Jim Lapides of the National Multifamily Housing Council (NMHC), a trade association.

Lapides says developers would generally just avoid taking loans that come with a rent control requirement. That means that GSEs would see their multifamily business shrink substantially. Developers in more marginal markets where GSEs are a major source of financing would struggle to get capital at all, he says.

That wouldn’t necessarily be a bad outcome for people who would like to see Fannie and Freddie play a smaller role in the housing market. But enforcing rent control via the FHFA would face some serious legal hurdles.

It’s “legally dubious” that the FHFA has the power to enforce rent limits, says Mark Calabria, a senior advisor to the Cato Institute and former FHFA director during the Trump administration.

Calabria says that during his tenure, the FHFA had performed a legal analysis of whether it could modify existing contracts with landlords to include additional tenant protections and rent caps, and “the conclusion was certainly you can’t really do it.”

The blueprint released by the White House suggests imposing limits on “egregious” rent increases on future loans only. That mirrors the demand by affordable housing groups in an August 2022 letter to the Biden administration. (In contrast, a letter authored by Sen. Elizabeth Warren (D–Mass.) and Rep. Jamaal Bowman (D–N.Y.) from earlier this month does not limit its request for FHFA-enforced rent caps to new loans.)

Calabria says that the FHFA only enforcing rent caps on new loans would remove one legal obstacle. But the policy would still have to be reconciled with the agency’s statutory mission to minimize Fannie and Freddie’s losses, which would be a huge stretch.

He also says that any rent control rule would face extreme internal resistance from the FHFA, Fannie, and Freddie, which would be unhappy to see their market share shrink because of the rule.

In addition to the rent control, the White House’s blueprint also directs federal agencies to explore stricter regulation of tenant background checks, put more limits on evictions at public housing, restrict landlords’ ability to reject federal housing vouchers, and guarantee military housing tenants’ right to organize tenant unions.

The plan landed with a thud with housing providers generally. The NMHC and National Apartment Association both released statements expressing their disappointment with the plan and their opposition to an increased federal regulatory role in rental housing.

On the other side, National Low Income Housing Coalition criticized the administration for not going further in adopting its own sweeping recommendations for more tenant protections, calling the blueprint “a missed opportunity.”

For all the novel regulatory interventions it’s considering, the Biden administration is pretty candid that the root of renters’ problems is a lack of housing supply.

“Limited housing supply has created more competition for fewer available units, which gives owners even more leverage in deciding to whom to rent to, what lease terms to offer, and whether and how much to raise rents,” reads the White House’s blueprint.

Rent control has a history of constricting the supply of rental housing and reducing housing quality.

By pursuing it and other policies that would raise the costs or limit the returns of providing rental housing, the White House’s blueprint is likely to limit supply further and exacerbate many of the problems it’s trying to fix.

The post The Biden Administration Flirts With Imposing Nationwide Rent Control Via Executive Action appeared first on Reason.com.

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On January 26, economists Lawrence H. White and Frederic Mishkin debated the resolution, “Replacing the Federal Reserve with free market institutions would significantly improve the economy’s money, banking, and financial systems.” The debate was held at New York City’s Sheen Center and hosted by The Soho Forum, which receives fiscal sponsorship from Reason Foundation, the nonprofit that publishes Reason.

Arguing the affirmative was White, a professor of economics at George Mason University. His forthcoming book Better Money: Gold, Fiat, or Bitcoin? (Cambridge University Press, 2023) compares and contrasts alternative monetary standards. Best known for his work on market-based monetary systems, White is the author of Free Banking in Britain (1984), Competition and Currency (1989), and The Theory of Monetary Institutions (1999), and co-editor of Renewing the Search for a Monetary Constitution (2015). His research has appeared in the American Economic Review, the Journal of Money, Credit, and Banking, The Economic History Review, and other leading economics journals. He’s also a senior fellow at the Cato Institute and a distinguished senior fellow at the Mercatus Center.

Mishkin, who argued the negative, is the Alfred Lerner professor of banking and financial institutions at Columbia University’s Graduate School of Business and a research associate at the National Bureau of Economic Research. From September 2006 to August 2008, he served on the Board of Governors of the Federal Reserve System. He was previously a senior fellow at the FDIC Center for Banking Research and president of the Eastern Economic Association. From 1994 to 1997, he was executive vice president and director of research at the Federal Reserve Bank of New York, as well as an associate economist of the Federal Open Market Committee of the Federal Reserve System. Mishkin’s research focuses on monetary policy and its impact on financial markets and the aggregate economy.

The post End the Fed? A Soho Forum Debate appeared first on Reason.com.

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