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Archive for the ‘Regulation’ Category

Back in 2013, I did an assessment of economic policy changes that occurred during the Clinton Administration.

The bottom line was that the overall burden of government declined by a semi-significant amount. Which presumably helps to explain why the economy enjoyed good growth and job creation in the 1990s, especially in the last half of the decade when most of the pro-growth reforms were enacted.

The chart I prepared has been very helpful when speaking to audiences about what actually happened during the Clinton years, so I decided to do the same thing for other presidents.

A week ago, I put together my summary of economic policy changes during the Nixon years. At the risk of understatement, it was a very grim era for free markets.

A few days ago, I followed up with a look at overall economic policy during the Reagan years. That was a much better era, at least for those of us who favor economic liberty over statism.

Now it’s time to look at the record of George W. Bush. It’s not a pretty picture.

I think the TARP bailout was the low point of the Bush years, though he also deserves criticism for big spending hikes (especially the rapid rise of domestic spending), additional red tape, special-interest trade taxes, and more centralization of education.

On the plus side, there was a good tax cut in 2003 (the 2001 version was mostly Keynesian and thus didn’t help growth), as well as some targeted trade liberalization. Unfortunately, those good reforms were swamped by bad policy.

As has been the case for other presidents, my calculations are based solely on policy changes. Presidents don’t get credit or blame for policies they endorsed or opposed. So when fans of President Bush tell me he was better on policy than his record indicates, I shrug my shoulders (just like I don’t particularly care when Republicans on Capitol Hill tell me that Clinton’s good record was because of the post-1994 GOP Congress).

I simply want to show where policy improved and where it deteriorated when various presidents were in office. Other people can argue about the degree to which those presidents deserve credit or blame.

In the case of Bush, for what it’s worth, I think he does deserve blame. None of the bad laws I listed were enacted over his veto.

Incidentally, I was torn by how to handle monetary policy. The artificially low interest rates of the mid-2000s contributed to the housing bubble and subsequent financial meltdown. Should I have blamed Bush for that because of his Federal Reserve appointments?

On a related note, the affordable lending mandates of Fannie Mae and Freddie Mac were made more onerous during the Bush years, thus exacerbating perverse incentives in the financial sector to make unwise loans. Was that Bush’s fault, or were those regulations unavoidable because of legislation that was enacted before Bush became President?

Ultimately, I decided to omit any reference to the Fed, as well as Fannie and Freddie. But I double-weighted TARP, both because it was awful economic policy and because that was a way of partially dinging Bush for his acquiescence to bad monetary and housing policy.

If there’s a lesson to learn from this analysis of Bush policy, it is that party labels don’t necessarily have any meaning. The economy suffers just as much if a Republican expands the burden of government as it does when the same thing happens under a Democrat.

P.S. I haven’t decided whether to replicate this exercise for pre-World War II presidents. If I do, Calvin Coolidge and Grover Cleveland presumably would look very good.

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When writing about the Obamacare and its birth-control mandate, I’ve made a handful of observations.

President Trump recently announced that his Administration would relax the mandate. I think that is good news for the above reasons.

Critics are very upset. But rather than argue about the desirability of insurance coverage and the wisdom of Washington mandates, they’re actually claiming that the White House has launched some sort of war on birth control. I’m not joking.

Jeff Jacoby of the Boston Globe analyzes the issue. He starts by observing that nobody is proposing to ban birth control

…the Supreme Court ruled, in Griswold v. Connecticut, that government may not ban anyone from using contraceptives. …That freedom is a matter of settled law, and hasn’t been challenged in the slightest by President Trump or his administration.

He then points out that some folks on the left have gone ballistic.

Hillary Clinton accused Trump of showing “blatant disregard for medicine, science, & every woman’s right to make her own health decisions.” Elizabeth Warren, denouncing “this attack on basic health care,” claimed that the GOP’s top priority is to deprive women of birth control.

Their arguments, however, are utter nonsense. If Person A no longer has to subsidize Person B, that doesn’t mean Person B can’t buy things. It simply means there won’t be third-party payer.

Jacoby agrees.

News flash to Warren, et al.: There is no attack on health care, and no in America is being deprived of birth control. You are losing nothing but the power to force nuns to pay for your oral contraceptives. …As a matter of economics and public policy, the Affordable Care Act mandate that birth control be supplied for free is absurd. …Especially since birth control will remain as available and affordable as ever.

Indeed, the Trump Administration was actually far too timid. There should be no birth-control mandate for any insurance plan. It should be something negotiated by employers and employees.

…the new White House rule leaves the birth-control mandate in place. Trump’s “tweak won’t affect 99.9 percent of women,” observes the Wall Street Journal, “and that number could probably have a few more 9s at the end.” Washington will continue to compel virtually every employer and insurer in America to supply birth control to any woman who wants one at no out-of-pocket cost.

Jacoby closes his column with some very sensible observations and recommendations.

…there is no legitimate rationale for such a mandate. Americans don’t expect to get aspirin, bandages, or cold medicine — or condoms — for free; by what logic should birth control pills or diaphragms be handed over at no cost? …By and large, birth control is inexpensive; as little as $20 a month without insurance. …access to birth control, as the Centers for Disease Control reported in 2010, was virtually universal before Obamacare. The White House is right to end the burden on religious objectors. But it is the birth-control mandate itself that should be scrapped. Contraception is legal, cheap, and available everywhere. Why are the feds meddling where they aren’t needed?

The last sentence is key. The federal government (heck, no level of government) should be involved with birth control. They shouldn’t ban it. And they shouldn’t mandate it, either.

P.S. About five years ago, Sandra Fluke got her 15 minutes of fame by asserting that she had a right to third-party-financed birth control. That led to some clever jokes, including this cartoon and this video.

For what it’s worth, I think this cartoon is the best summary of the issue.

P.P.S. Predictably, the United Nations supports a “right” to taxpayer-financed birth control.

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I’m lucky. When I think of how government regulation impacts my life, my list contains minor nuisances such as inferior light bulbs, substandard toiletssecond-rate dishwashers, weak-flow showerheads, and inadequate washing machines.

For my friend Matt Kibbe, by contrast, red tape could have been deadly. Literally.

Watch this powerful video and listen to him explain how he survived cancer. That’s the good part. The bad part is that he likely would have died if he got cancer during the 12 years it took before the Food and Drug Administration finally approved a life-saving drug.

Matt’s takeaway is that terminally ill patients should have the “right to try” drugs that aren’t approved by the FDA.

I wrote about this issue last year and shared two other videos on the topic. Today, I want to approach the issue from another direction by pointing out that “right to try” laws shouldn’t be controversial because tens of millions of patients already take drugs for purposes that aren’t approved by the FDA.

The only catch is that they can do this only with drugs that have been approved for some other purpose.

This is not a recent revelation. Daniel Klein wrote about this issue 17 years ago for the Foundation for Economic Education.

Once a drug is approved for any use, it may be used in any way doctors and users see fit. Approved drugs are often found to have other benefits, and doctors learn to prescribe those drugs for such “off-label” uses. Although off-label uses have absolutely no standing with or approval by the FDA, they are perfectly legal. Do patients and doctors shrink in fear from uses not certified by the FDA? Absolutely not! Off-label prescribing is pervasive and vital to the health of millions of Americans. As economist Alexander Tabarrok says, “most hospital patients are given drugs which are not FDA-approved for the prescribed use.” Off-label prescriptions are especially common for AIDS, cancer, and pediatric patients, but are standard practice throughout medicine. Doctors learn of off-label uses from extensive medical research, testing, newsletters, conferences, seminars, Internet sources, and trusted colleagues. Scientists and doctors, working through professional associations and organizations, make official determinations of “best practice” and certify off-label uses in standard reference compendia such as AMA Drug Evaluations, American Hospital Formulary Service Drug Information, and US Pharmacopoeia Drug Information—all without FDA meddling or restriction.

Think about what this means. Countless Americans are taking medications and benefiting from those drugs, yet the FDA bureaucracy has never given its stamp of approval.

Which raises an interesting issue.

No one would be foolish enough to suggest that the FDA prohibit off-label prescribing. But…there is a logical inconsistency in allowing off-label prescribing and requiring proof of efficacy for the drug’s initial use. Logical consistency would require that one either oppose off-label uses and favor initial proof of efficacy, or favor off-label prescribing and oppose initial proof-of-efficacy.

By the way, just in case you think an old FEE article somehow isn’t enough proof, check out some of the research that is cited on the Wikipedia page for off-label use as of this morning.

Off-label use is very common. …Up to one-fifth of all drugs are prescribed off-label and amongst psychiatric drugs, off-label use rises to 31%. …A 2009 study found that 62% of U.S. pediatric office visits from 2001-2004 included off-label prescribing, with younger children having a higher chance of receiving off-label prescriptions. Specialist physicians also prescribed off-label more frequently than general pediatricians. …Some drugs are used more frequently off-label than for their original, approved indications. A 1991 study by the U.S. General Accounting Office found that one-third of all drug administrations to cancer patients were off-label, and more than half of cancer patients received at least one drug for an off-label indication. A 1997 survey of 200 cancer physicians by the American Enterprise Institute and the American Cancer Society found that 60% of them prescribed drugs off-label.

The bottom line is that we have rampant and pervasive drug use that is outside the FDA’s control. Yet that isn’t leading to horrible consequences. Or even bad consequences.

Instead, it’s teaching us that risk-averse bureaucrats are putting millions of lives at risk by delaying the approval of new drugs. Not just at risk. Don’t forget the research I cited last year estimating that deadly impact of FDA regulation.

I’ll close by noting that the FDA also does other bone-headed things. I’ve previously written about the bureaucracy’s war against unpasteurized milk (including military-style raids on dairies!). I suppose I also should mention that FDA red tape is responsible for the fact that Americans have a much more limited selection of condoms than Europeans.

P.S. While the regulatory burden in the United States is stifling and there are some really inane examples of silly rules such as the ones cited above, as well as the FDA’s war on vaping, I think Greece and Japan win the record if you want to identify the most absurd specific examples of red tape.

P.P.S. Here’s what would happen if Noah tried to comply with today’s level of red tape when building an ark. And here’s some clever anti-libertarian humor about deregulated breakfast cereal.

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I like France, in part because it’s a nice place to visit, but also because I’ve been able to use the country as an example of bad public policy.

It’s hard to pick which policy does the most damage. As a fiscal policy wonk, I’m tempted to blame France’s woes on high taxes and wasteful spending.

However, there’s a strong case that labor law is the worst feature of economic policy. France has all sorts of rules that “protect” employees, but the net effect is that workers suffer because these laws discourage entrepreneurs from creating jobs.

And even though I get a lot of mileage out of making France a bad example, I actually hope that the nation’s new government will move policy in the right direction. Indeed, this is why I wanted France’s current President, Emmanuel Macron, to get elected.

Yes, he used to be part of the previous socialist government that sought to make things worse rather than better. But I figured he was most likely to enact some pro-market reforms. And it appears my hopes may be realized, at least with regard to labor policy.

The BBC reports on why Macron wants reform, what he wants to do, and what likely will happen.

President Emmanuel Macron’s government has begun its drive to overhaul France’s rigid labour laws, vowing to “free up the energy of the workforce”. …France has an unemployment rate of 9.5%, double that of the other big European economies and Mr Macron has vowed to cut it to 7% by 2022.

Here’s what he is proposing.

The reforms aim to make it easier for bosses to hire and fire. …France’s labour code is some 3,000 pages long and is seen by many as a straitjacket for business. Among the biggest reforms, individual firms are to be offered more flexibility in negotiating wages and conditions. …If a business reached a deal with the majority of its workforce on working hours and pay that agreement would trump any agreement in the wider industry. …The government wants to facilitate deals at local level by encouraging companies with fewer than 50 employees to set up workers’ committees that can bypass unions. One of the thorniest problems for the government is how to make it easier for companies to dismiss staff. There is to be a cap on damages that can be awarded to workers for unfair dismissal. However, after months of consultations, ministers have agreed to increase the cap from their original proposal. The cap would be limited to three months’ pay for two years of work and 20 months’ pay for 30 years. Until now the minimum pay-out for two years’ employment was six months of salary.

And he’ll probably get what he wants, both because some of the bigger unions have decided to play ball and also because he’s been granted authority to unilaterally make changes.

Protests against the plan are expected next month, but two of the biggest unions say they will not take part. Jean-Claude Mailly, the leader of Force Ouvrière (FO), said that while the reforms were far from perfect, the government had carried out “real consultation” and FO would play no role in demonstrations on 12 September. The union with the biggest presence in the private sector, CFDT, said its members would not take to the streets either, although it was ultimately disappointed that its position was not reflected in the final text. …Mr Macron has already won parliamentary backing to push these reforms through by decree. An opinion poll on Wednesday showed that nine out of 10 French people agreed that their country’s labour code had to be reformed.

Dalibor Rohac of the American Enterprise Institute has some analysis of what’s been proposed.

…the National Assembly and Senate…authorized France’s government to amend the country’s byzantine labor code by executive orders… Prime Minister Édouard Philippe unveiled the details of the reform, divided into five decrees, on Thursday. So what exactly are they seeking to achieve? Perhaps most important is the introduction of caps on redundancy pay to those whose employment has been terminated without a just cause…stricter caps are introduced for small companies, for which large redundancy payments can be ruinous. It will also become easier for multinational companies to justify termination of employment on economic grounds. …it will be possible to downsize or close down French operations without having to subsidize them first from profits made overseas. …Companies with fewer than 20 employees will not have to rely on labor union representatives for their collective contracts. Subsidiaries of companies will have more freedom to offer temporary work contracts.

Dalibor is not overly impressed by this collection of changes.

…measured by the standards of what France needs, it is not much… The extent to which the reform elicits a strong reaction reflects purely the overregulated status quo, rather than the revolutionary nature of the proposed measures. …the government is doing something right, however timid.

The Wall Street Journal‘s editorial is a bit more optimistic.

French voters this spring gave themselves their best shot in a generation at reviving their moribund economy, and President Emmanuel Macron is now taking advantage of the opportunity. …the labor-market reforms he unveiled Thursday could remake the eurozone’s second-largest economy. …Mr. Macron will limit the severance payouts courts can mandate for fired workers. He will free small companies with nonunion workers from the straitjacket of national collective-bargaining agreements covering working hours, overtime pay, vacation benefits and the like. Companies will have more scope to negotiate labor deals at the firm level rather than being forced to abide by national agreements.

By reducing the potential cost of employing workers, the reforms will lead to more employment.

The severance overhaul will go a long way toward inducing businesses to hire more workers. Small- and medium-size French companies report pervasive fear of expanding their workforce lest they be stuck with problem employees or face ruinous expenses to lay off workers if economic conditions change.

And France desperately needs reform.

French unemployment is still 9.5% even at its five-year low. That’s double the rate in Germany, and French unemployment has become a social crisis, especially for young people frozen out of the job market. The jobless rate for French between age 15 and 24 is 25%—for those who haven’t moved to London or the U.S.

Though the WSJ does recognize that the reforms are merely a modest step in the right direction.

France isn’t becoming a laissez-faire paradise. Even if Mr. Macron’s labor overhaul takes effect, the French workplace will still be considerably more regulated than America’s.

Let’s close with some excerpts from a story in the New York Times.

…the government announced sweeping changes on Thursday with the potential to radically shift the balance of power from workers to employers. …an invigorated France is considered critical to the survival of a European Union that is finally showing signs of revival after a lost decade. …Economists in France and across Europe expressed optimism about the new law… France has stagnated for years under chronically elevated unemployment and slow growth. The country’s strong worker protections and expensive benefits have been blamed by some for being at least partly at the root of the problem.

Wow, it must be bad if even the NYT is acknowledging that government is causing the economy to stutter.

Amazingly, the story even admits that economic liberalization is the right way to get more job creation.

Germany crossed that Rubicon in the 1990s under Chancellor Gerhard Schröder. …Roughly 15 years ago, “France and Germany had economies that were more or less comparable, and that ceased to be the case because the Germans wisely did micro-reforms and the French did not,” said Sebastian Mallaby, senior fellow for international economics at the Council on Foreign Relations. So the French ended up with “high unemployment, which fed populism, and getting out of that trap is vital

For what it’s worth, I think the reference to German reforms is key.

Under a left-leaning government, Germany liberalized labor markets. The so-called Hartz reforms were a huge success, slashing the jobless rate by more than 50 percent.

I don’t know whether Macron’s reforms are as bold as what happened in Germany, but any movement in the right direction will create more employment.

P.S. If Macron wants to save France, he better deal with the tax system as well. The problems are nicely captured by two videos, one about how young people are fleeing the nation and another showing a Hollywood celebrity reacting when told about the tax burden.

P.P.S. Whenever I give a speech in France, I ask the audience whether their government (which consumes for the half of economic output) gives them more and better services than the Swiss government (which consumes about one-third of economic output). The answer is always an overwhelmingly no.

P.P.P.S. I (sort of) agreed with Paul Krugman in 2013 that there is a plot against France.

P.P.P.P.S. Last but not least, the French people occasionally do support good policy (and they’re willing to escape to America if things don’t get better).

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Trump has been President for more than 200 days and those of us who want more economic liberty don’t have many reasons to be happy.

Obamacare hasn’t been repealed, the tax code hasn’t been reformed, and wasteful spending hasn’t been cut.

The only glimmer of hope is that Trump has eased up on the regulatory burden. More should be happening, of course, but we are seeing some small steps in the right direction.

Let’s share one positive development.

Professor Tony Lima of California State University opined back in January in the Wall Street Journal that Trump could unilaterally boost growth by ending a reprehensible policy known as “Operation Choke Point.”

…the Trump administration could shut down Operation Choke Point. This program, enforced by the Federal Deposit Insurance Corp., targets “risky” banking customers and pressures banks to deny them credit. It’s unnecessary: If these industries are really risky, banks would not want their business. The real purpose of Operation Choke Point is to target industries that are out of favor…, among them: Coin dealers, money-transfer networks and payday lenders. Sales of ammunition and firearms (Second Amendment, anyone?) and fireworks (legal in some states). …Other legal goods and services such as surveillance equipment, telemarketing, tobacco and dating services. …Denying credit hampers an industry’s growth. Eliminating Operation Choke Point would encourage growth. It costs nothing. And someday it may reduce enforcement spending.

And Professor Charles Calomiris from Columbia University echoed those views a few weeks later.

Imagine you have a thriving business and one morning you get a call from your banker explaining that he can no longer service your accounts. …That’s what happened to many business owners as the result of an Obama administration policy called Operation Choke Point. In 2011 the Federal Deposit Insurance Corp. warned banks of heightened regulatory risks from doing business with certain merchants. A total of 30 undesirable merchant categories were affected…the FDIC explained that banks with such clients were putting themselves at risk of “unsatisfactory Community Reinvestment Act ratings, compliance rating downgrades, restitution to consumers, and the pursuit of civil money penalties.” Other FDIC regulatory guidelines pointed to difficulties banks with high “reputation risk” could have receiving approval for acquisitions.

Keep in mind, by the way, that Congress didn’t pass a law mandating discrimination against and harassment of these merchants.

The Washington bureaucracy, along with ideologues in the Obama Administration, simply decided to impose an onerous new policy.

In effect, the paper pushers were telling financial institutions “nice business, shame if anything happened to it.”

But at least when mobsters engage in that kind of a shakedown, there’s no illusion about what’s happening.

Professor Calomiris explained that this regulatory initiative of the Obama Administration made no sense economically.

It is rather comical that regulators would use the excuse of regulatory risk management to punish banks. Banks are in the business of gauging risk and have every incentive to avoid customer relationships that could hurt their reputation. Regulators, on the other hand, have shown themselves unwilling or unable to acknowledge risk, the most obvious example being the subprime mortgage crisis in 2008.

And he also explained why Operation Choke Point was such a reprehensible violation of the rule of law.

The FDIC’s regulators never engaged in formal rule-making or announced penalties for banks serving undesirable clients. Such rule-making likely would have been defeated in congressional debate or under the Administrative Procedures Act. Instead, regulators chose to rely on informal decrees called “guidance.” …Financial regulators find regulatory guidance particularly expedient because it spares them the burden of soliciting comments, holding hearings, defining violations, setting forth procedures for ascertaining violations, and defining penalties for ignoring the guidance. Regulators prefer this veil of secrecy because it maximizes their discretionary power and places the unpredictable and discriminatory costs on banks and their customers.

Well, we have some good news.

The Trump Administration has just reversed this terrible Obama policy. Politico has some of the details.

The Justice Department has committed to ending a controversial Obama-era program that discourages banks from doing business with a range of companies, from payday lenders to gun retailers. The move hands a big victory to Republican lawmakers who charged that the initiative — dubbed “Operation Choke Point” — was hurting legitimate businesses. …House Judiciary Chairman Bob Goodlatte…and House Financial Services Chairman Jeb Hensarling (R-Texas), along with Reps. Tom Marino (R-Pa.), Blaine Luetkemeyer (R-Mo.) and Darrell Issa (R-Calif.) praised the department in a joint statement. “We applaud the Trump Justice Department for decisively ending Operation Choke Point,” they said. “The Obama Administration created this ill-advised program to suffocate legitimate businesses to which it was ideologically opposed by intimidating financial institutions into denying banking services to those businesses.”

And Eric Boehm of Reason is pleased by this development.

A financial dragnet that ensnared porn stars, gun dealers, payday lenders, and other politically disfavored small businesses has been shut down. Operation Choke Point launched in 2012… It quickly morphed into a questionably constitutional attack on a wide range of entrepreneurs who found their assets frozen or their bank accounts closed because they were considered “high-risk” for fraud. …Assistant Attorney General Stephen Boyd called Operation Choke Point “a misguided initiative” and confirmed that DOJ was closing those investigations… “Law abiding businesses should not be targeted simply for operating in an industry that a particular administration might disfavor,” Boyd wrote. …The repudiation of Operation Choke Point is a welcome development, says Walter Olson, a senior fellow at the libertarian Cato Institute.

I shared a video last year that explained Operation Choke Point in just one minute. But that just scratched the surface, so here’s a video from Reason that explains in greater detail why Operation Choke Point was so repulsive.

Kudos to the Trump Administration for reversing this awful policy.

But hopefully this is just the first step. Regulators are still squeezing financial institutions in an attempt to discourage them from doing business with low-tax jurisdictions. This policy of “de-risking” exists even though so-called tax havens generally have tighter laws against dirty money than the United States.

Trump should put an end to that misguided policy.

Ultimately, what’s really needed is a complete rethink of money-laundering laws and regulations.

Amazingly, some politicians actually want to make these laws even worse. Ideally, Trump will move completely in the other direction.

P.S. While it’s good that Trump has reversed Operation Choke Point, his Administration has moved in the wrong direction on civil forfeiture policy. One step forward and one step backwards is not a recipe for more growth and prosperity.

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When I write about the actions of state governments, it’s usually to highlight a specific bad policy. As you can imagine, states like California, Connecticut, Illinois, New York, and New Jersey give me a never-ending amount of material.

But I frequently run across things that are happening in the states that don’t really merit an entire column, but they nonetheless are worthy of attention since they symbolize the venality and incompetence of politicians.

So I’ve decided that it’s time for a series on “great moments in state government” to augment my already well-developed series on “great moments in local government.”

Let’s start by looking at a truly bizarre example of occupational licensing from Tennessee.

A decade ago, Martha Stowe founded True Equine, an equine-services company, a few miles south of Nashville, Tenn., in Williamson County. After earning a certificate in equine myofascial release, a massage technique that releases tension and pain in a horse’s body, Martha soon acquired a large clientele. …In April 2016, however, Stowe’s well-established business was upended when she received a threatening letter from the Board of Veterinary Medical Examiners, a board within Tennessee’s Department of Health. Only licensed veterinarians are permitted to massage horses, the board’s attorney explained, and if Stowe continued to practice myofascial release, she could be fined up to $500 and receive a six-month jail sentence. …The board also sent the letter to fellow Williamson County resident Laurie Wheeler, a professional jazz musician and licensed massage therapist who, like Stowe, is certified in equine myofascial release. …Upon receiving the veterinary board’s letter, Wheeler was stunned — after all, she was certified, and not only that, she had never even accepted money for her services. But, she says, the government threatened to “fine me and put me in jail for voluntarily working on animals.” For Wheeler, helping horses is more than a volunteer position or an occupation; it’s a call to duty.

But there is some good news.

A pro-market think tank is helping the women fight back.

Both women disregarded the veterinary board’s warnings and subsequently looked to the Beacon Center of Tennessee, a free-market think tank, for legal representation. According to Braden Boucek, director of litigation for the Beacon Center, the board’s decision to allow only licensed veterinarians to massage horses is a violation of the U.S. Constitution’s equal-protection clause. Moreover, because the Constitution protects private property, which in turn protects the right to acquire property and the right to earn a living, the board’s decision violates the 14th Amendment. …Threatening to jail an individual for massaging a horse is absurd. These women aren’t giving medical advice to owners, or surgically operating on horses, or doing anything that only a licensed veterinarian could do. Remember, this kind of massage is not even taught in veterinary school. Under Tennessee’s logic, why shouldn’t massage therapists who practice exclusively on people be required to hold a medical degree? The veterinary board ought to take the necessary steps to begin updating this illogical statute. If it doesn’t, it will need to explain in court why it’s permissible to deprive Stowe and Wheeler of their fundamental constitutional rights.

Amen. I admire Tennessee for not having an income tax. It’s time, though, for the Volunteer State to extend economic freedom to horse masseurs.

Now let’s shift to Wisconsin, where we have another example of cronyism.

State lawmakers may be brave when it comes to curtailing special privileges for government employees, but they like special protections for private industry.

Wisconsin state regulators…[are]…banning state grocery stores from selling one of the Emerald Isle’s most popular (and tasty) products: Kerrygold butter. Never mind that Wisconsinites have been buying Kerrygold for years with no problems. Or that it remains legal in the 49 other states. Badger State bureaucrats, trying to protect the state dairy industry, are suddenly enforcing a 1970 law that requires all butter sold in the state to go through a complicated evaluation by a state panel. This is the same state that once banned margarine because it was a competitive threat to local dairies. …as a result of the ban, Kerrygold-loving Wisconsinites have been forced to make butter runs across the state border, bringing back suitcases stuffed with the import. In Ireland, meanwhile, the ban is leading to headlines such as this in the Irish Mirror: “Shopkeepers in Wisconsin could face JAIL if they sell Kerrygold butter.”

Maybe butter consumers in Wisconsin can fly to Norway and learn how to get around misguided policies that make butter a black-market commodity.

Remember, if you outlaw butter, only outlaws will have butter.

Now let’s look at some onerous government intervention in my state of Virginia. And this one is personal since I don’t like the hassle of annual vehicle inspections.

…my annual Virginia motor vehicle safety inspection was due in a month. I knew my car wouldn’t pass and that I wouldn’t be allowed to stay on the road with that light on. Never mind that the light has nothing to do with the safe operation of the vehicle. And also never mind that in a 2015 study the Government Accountability Office “examined the effect of inspection programs on crash rates related to vehicle component failure, but showed no clear influence.” AAA Public Affairs Vice President Mike Wright said, “Nobody can prove with any degree of certainty that spending the money, suffering the inconvenience of getting your vehicle inspected, actually produces desired results.” …Virginia has a personal vehicle safety program overseen by the state police that cannot be shown to enhance public safety. The people who perform inspections are often the same people who fix any identified deficiencies. …A government program that requires the purchase of a good or service in return for a nonexistent public benefit is illiberal and anti-consumer. Two-thirds of states see no need to impose the burden of annual personal vehicle safety inspections on their citizens; Virginia should end its inspection requirement.

For what it’s worth, the People’s Republic of the District of Columbia doesn’t have this requirement. Kind of embarrassing that Virginia is more interventionist.

Our final example come from Illinois, where a local newspaper has a superb editorial on a sordid example of wasteful sleaze in the state budget.

Let’s eliminate the Illinois Arts Council Agency from the state budget. They must have taken lessons on government efficiency from our local townships, spending $1 million on staff and overhead in 2016 to hand out $834,900 in grants. The council is chaired by Shirley Madigan, who has been in that position since 1983. Funny, her husband, Mike, has been Illinois House Speaker since then, too. …guess who gets the money? Their well-heeled friends. Madigan’s alma mater received $95,100, another board member’s employer received $165,650 and yet another board member’s pet opera company received $503,000. Surprise! …Illinois Gov. Bruce Rauner has an opportunity to let someone else be a matron of the arts and appoint a majority of board members dedicated to either eliminating the council or at least making it a transparent organization that helps local artists rather than makes your taxes a minor revenue source for well-connected, large arts institutions.

Needless to say, the first option (eliminating the council) is the superior choice, just like we should shut down the National Endowment for the Arts in D.C.

But let’s set that aside. I’m still scratching my head about a bureaucracy that spends $1 million to give away $834.9 thousand. Though that’s actually efficient if you compare it with the German tax that resulted in €30 euros of government expense for every €1 collected.

To conclude, there’s a common thread in these four stories. In each case, politicians at the state level have policies to enable unearned wealth to flow to the pockets of their friends and allies.

In other words, the First Theorem of Government doesn’t just apply to what’s happening in Washington.

P.S. I’ve only had a few previous “great moments” for state governments. One from Florida involved a felony arrest of some luckless guy who was simply trying to impress his girlfriend by releasing some balloons, and the other from Virginia involved three misdemeanors for the horrid crime of rescuing a wounded deer.

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Thanks to decades of experience and research, we now know several things about so-called anti-money laundering (AML) laws.

It’s not that the theory behind these laws is without merit. The original notion was that perhaps we could reduce crime by figuring out ways to prevent crooks from utilizing the banking system. That’s a worthy goal. But it turns out that it doesn’t work.

For all intents and purposes, AML laws are a misallocation of law-enforcement resources.

So you would think that policy makers would be endeavoring to repeal these counterproductive rules and regulations, right?

But you would be wrong. Some of them actually want to double down on failure. To be more specific, four senators have introduced a bill to make these laws more intrusive and onerous.

Senate Judiciary Committee Chairman Chuck Grassley and Ranking Member Dianne Feinstein, along with Senators John Cornyn and Sheldon Whitehouse, today introduced legislation that modernizes and strengthens criminal laws against money laundering – a critical source of funding for terrorist organizations, drug cartels and other organized crime syndicates.  The Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017 updates criminal money laundering and counterfeiting statutes, and promotes transparency in the U.S. financial system.

It’s quite possible that these politicians actually think this new law will somehow reduce all the bad things they put in the bill’s title (I’m surprised they didn’t add tooth decay and cancer to the list).

But if past experience is any guide, the real-world result will be more abuse of law-abiding citizens.

Writing for the Blaze, Justin Haskins warns how the new legislation can endanger innocent people.

Four U.S. senators have proposed legislation that would significantly expand the power of the federal government to seize citizens’ money when traveling in or out of the United States. …several troubling provisions in the law could put law-abiding American citizens at risk of losing tens of thousands of dollars for doing nothing more than failing to fill out a government form. Under current federal law, travelers transporting $10,000 or more in cash or other monetary instruments are required to report those funds to U.S. Customs and Border Protection. Failure to report funds, even if unintentional, can lead to the seizure of the money and criminal or civil penalties.

That approach already produces horrible abuses of innocent people.

And imagine what will happen if this new law is enacted.

The Combating Money Laundering, Terrorist Financing and Counterfeiting Act would expand “monetary instruments” covered under current law to include “prepaid access devices, stored value cards, digital currencies, and other similar instruments.” This is particularly problematic because digital currencies, such as Bitcoin, are theoretically always transported by the owner of the digital currency account wherever he or she goes, which means digital currency owners with accounts valued at $10,000 or more must always report their funds or risk having them seized. Even more troubling is the law treats all blank checks as though they are financial instruments valued in excess of $10,000 if the checking account contains at least $10,000, which means if a traveler accidently fails to report a blank check floating around in his or her luggage, the account holder could face stiff penalties — even if there is no suspicion of criminal activity.

Some of you may be thinking that it’s okay to subject innocent people to abuse if it achieves a very important goal of stopping terrorists.

But that’s not happening. In a must-read article for Foreign Affairs, Peter Neumann points out that AML laws are grossly ineffective in the fight against Islamo-fascism.

…the war on terrorist financing has failed. Today, there are more terrorist organizations, with more money, than ever before. …Driven by the assumption that terrorism costs money, governments have for years sought to cut off terrorists’ access to the global financial system. They have introduced blacklists, frozen assets, and imposed countless regulations designed to prevent terrorist financing, costing the public and private sectors billions of dollars.

And what’s the result of all this expense?

It hasn’t stopped terrorism.

…there is no evidence that it has ever thwarted a terrorist campaign. Most attacks require very little money, and terrorists tend to use a wide range of money-transfer and fundraising methods, many of which avoid the international financial system. …Terrorist operations are cheap, and according to a 2015 study by the Norwegian Defense Research Establishment, over 90 percent of the jihadist cells in Europe between 1994 and 2013 were “self-funded,” typically through savings, welfare payments, personal loans, or the proceeds of petty crime. …many jihadists have used their own savings and welfare payments or taken out small loans; others have borrowed money from their friends or family. …Financial tools cannot stop lone attackers from driving cars into crowds.

But it has imposed major burdens on innocent parties.

…the focus on the financial sector proved ineffective; it has also harmed innocent people and businesses. To address policymakers’ demands, financial institutions have “de-risked” their portfolios, shedding investments and clients that might be linked to terrorist financing. …De-risking, moreover, has resulted in the de facto exclusion of entire countries, mostly poor ones such as Afghanistan and Somalia, from the global financial system. The bank accounts of refugees, charities that operate in regions torn apart by civil war, and even Western citizens with family links to so-called risk countries have been closed. Practically no Western bank now offers cash transfers to Somalia, for example, although 40 percent of the population depends on remittances from abroad.

And what is the author’s bottom line?

Simply stated, the current system is a failure.

Instead of continuing to look for needles in a haystack, governments should overhaul their approach to countering terrorist funding… Otherwise, they will waste time and money on a strategy that cannot deliver security for many more years to come. .. Policymakers need to acknowledge that the war on terrorist financing, as it has been conducted since 2001, has often been costly and counterproductive, harming innocent people and companies without significantly constraining terrorist groups’ ability to operate.

I agree.

Indeed, I wrote an article for Pace Law Review, published back in 2005, that made many of the same points, including a lot of attention on theoretical role of cost-benefit analysis.

Law enforcement policy should include cost/benefit analysis so that resources are best allocated to protect life, liberty, and property. This should not be a controversial proposition. Cost-benefit analysis…already is part of the public policy process. For instance, few people would think it is acceptable for a city of 10 million to have just one police officer. Yet it is also true that few would want that city to have five million police officers. In other words, there is a point where additional law enforcement expenditures – both public and private – exceed the likely benefits. Every government makes such decisions. Cost-benefit analysis applies to aggregate resource allocation choices, such as how many police officers to employ in a city, but also to how a given level of resources are utilized. In other words, since there are not unlimited resources, it makes sense to allocate those resources in ways that yield the greatest benefit. On a practical level, city officials must decide how many officers to put on each shift, how many officers to assign to different neighborhoods, and how many officers to allocate to each type of crime. The same issues apply in the war against terrorism. Officials must decide not only on the level of resources devoted to fighting terrorism, but they also must make allocation decisions between, say, human intelligence and electronic surveillance.

Now let’s shift from theory to evidence.

I argued AML laws didn’t pass the test.

…while anti-money laundering laws theoretically help the war against terror, this does not mean that they necessarily are justified by cost-benefit analysis. A…book from the Institute for International Economics…strongly supports anti-money laundering laws and advocates their expansion. But the authors admit that these laws imposed costs of $7 billion in 2003, yet they admitted that, “While the number of suspicious activity reports filed has risen rapidly in recent years…total seizures and forfeitures amount to an extremely small sum (approximately $700 million annually in the United States) when compared with the crude estimates of the total amounts laundered. Moreover, there has not been an increase in the number of federal convictions for money laundering.” The private sector bears most of the cost of anti-money laundering laws, but the authors also note that, “Budgetary costs for AML laws have tripled in the last 20 years for prevention and quadrupled for enforcement.” The key question, of course, is whether these costs are matched by concomitant benefits. The answer almost certainly is no. …the government seizes very little dirty money. There are only about 2,000 convictions for federal money laundering offenses each year, and that number falls by more than 50 percent not counting cases where money laundering was an add-on charge to another offense.

Let’s close with passages from a couple of additional articles.

First, Richard Rahn explains why all anti-money laundering laws are misguided in a very recent column for the Washington Times.

…what is even more shocking is the extent to which various government organizations monitor and, in many cases, restrict financial freedom, and seize assets without criminal conviction. …The government argues that it must collect financial data and then share it with many domestic and foreign government organizations in order to stop tax evasion, money laundering, drug dealing, other assorted criminality, and terrorist finance — all of which sounds good at first glance, until one looks at what really happens. If you think that the war on drugs has been a failure, look at the war on money laundering, tax evasion and terrorist finance for an even bigger failure. …money laundering is a crime of intent, rather than actions, in which two different people can engage in the same set of financial transactions, but if one has criminal intent he or she can be charged while the other person is home free. Such vague law is both ripe with abuse and difficult to prove. …The financial information that government agencies now routinely collect is widely shared, not only with other domestic government agencies, but increasingly with foreign governments — many of which do not protect individual liberty and other basic rights.

And here are some excerpts from a column in Reason by Elizabeth Nolan Brown.

American and British banks are monitoring customers’ contraception purchases, DVD-rental frequency, dining-out habits, and more in a misguided attempt to detect human traffickers… Their intrusive and ineffective efforts come at the behest of government agencies, who have been eager to use asset-forfeiture powers… The U.S. and U.K. banks RUSI researchers interviewed said they were happy to help law enforcement prosecute human traffickers and had little problems turning over financial records for people already arrested or under investigation. But proactively finding potential traffickers themselves proved more difficult. As RUSI explains, “the often unremarkable nature of transactions related to” human trafficking made finding criminals or victims via transaction monitoring a time-consuming and unfruitful endeavor. Yet financial institutions are boxed in by regulations that threaten to punish them severely should they participate in the flow of illegally begotten money, however unwittingly. The bind leaves banks and other financial services eager to cast as wide a net as possible, terminating relationships with “suspicious” customers, monitoring the bank accounts of people they know, or turning their records over to law enforcement rather than risk allegations of not doing enough to comply.

In other words, these laws are a costly – but ineffective – burden.

Which is what I said in this video for the Center for Freedom and Prosperity.

P.S. In closing, I should point out that statists frequently demagogue against so-called tax havens for supposedly being hotbeds of dirty money, but take a look at this map put together by the Institute of Governance and you’ll find only one low-tax jurisdiction among the 28 nations listed.

Even the State Department’s most recent list of vulnerable jurisdictions shows only a handful of international financial centers.

Yes, places Cayman and Bermuda are on the list, but so are countries such as Canada, China, India, Italy, Netherlands, Russia, and the United Kingdom. In other words, it’s basically a random list of jurisdictions rather than a helpful guide.

P.P.S. You probably didn’t realize you could make a joke involving money laundering, but here’s one starring President Obama.

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