Blog — Government

Posted 1/31/12 by Common Good

Bloomberg View: Buck the Farm Subsidies

Bloomberg View illustration

Yesterday, Bloomberg's editors joined the chorus calling for an end to wasteful farm subsidies. The industry doesn't need them, the editorial argues, and we can't afford them. Every five years Congress writes a new farm bill, and every five years the subsidies are preserved, in one form or another. Now, Bloomberg says, the price tag is $25 billion a year.

Despite bipartisan support for scaling back the federal subsidies (including calls by President Obama and Senator Tom Coburn), special interests ensure that any decreases in one subsidy are balanced by increases in a different subsidy:

With direct payments at risk, the agriculture industry last year began pressing for more federal support for crop insurance. It’s already one of the fastest-growing benefits for the agriculture industry, with subsidies for insurance premiums rising to more than $7 billion in 2011 from a little more than a $1 billion in 2000.

It's like a multi-billion-dollar game of Whack-A-Mole. And Bloomberg's editors aren't too optimistic about the prospect of eliminating the subsidies altogether:

Eliminating agricultural subsidies altogether isn’t realistic, given how much sway the industry has in Washington. Spending on research and development is crucial, as are programs to encourage people to take up farming. But whatever Congress decides in the next farm bill, it should resist swapping one farming gravy train for another.

We can only hope that a bipartisan spirit of fiscal responsibility is enough to cut back on this particular waste.

Posted 1/26/12 by Common Good

Missouri House Tackles Outdated Regulations

Obsolete law and regulation plague our federal and state governments, preventing progress by gumming up the works with legal detritus. It’s a problem not often addressed, in part because every outdated law has a special interest behind it. But there’s good news this week from Missouri, where the state House has called for regular reexamination of state regulations:

Seeking to help the state's small businesses, the Missouri House voted Wednesday to require periodic reviews of certain state regulations.

State agencies would need to evaluate whether a new administrative rule is necessary, obsolete, duplicative and could be more narrowly tailored while accomplishing the same purpose. Existing rules would expire on a rolling schedule that starts in 2015, and a similar calculus would be required if a state agency wants to renew its expiring regulations. Every state administrative rule would need to be examined at least once per decade.

In addition, state agencies now be required to respond within 60 days when someone requests a rule be adopted, altered or repealed. State departments would have to explain how the rule complies with the new requirements.

State Republicans, who support the bill, present it as a boon for small business, while Democrats worry about the potential for uncertainty and protracted debate around regulations. We can’t say for certain how effective the bill would be if adopted, but we’re glad to see a real commitment to fighting outdated regulation.

Posted 1/25/12 by Common Good

State of the Regulatory Union

The State of the Union address is a long speech that covers many topics. Nevertheless, we were excited when one of the topics President Obama tackled last night was the outgrowth of outdated regulations. The President sketched (albeit briefly) a regulatory philosophy that resonates with Common Good themes—up-to-date, simple rules that serve a clear public benefit:

There is no question that some regulations are outdated, unnecessary, or too costly. In fact, I've approved fewer regulations in the first three years of my presidency than my Republican predecessor did in his. I've ordered every federal agency to eliminate rules that don't make sense. We've already announced over 500 reforms, and just a fraction of them will save business and citizens more than $10 billion over the next five years. We got rid of one rule from 40 years ago that could have forced some dairy farmers to spend $10,000 a year proving that they could contain a spill - because milk was somehow classified as an oil. With a rule like that, I guess it was worth crying over spilled milk.

I'm confident a farmer can contain a milk spill without a federal agency looking over his shoulder. But I will not back down from making sure an oil company can contain the kind of oil spill we saw in the Gulf two years ago. I will not back down from protecting our kids from mercury pollution, or making sure that our food is safe and our water is clean. I will not go back to the days when health insurance companies had unchecked power to cancel your policy, deny you coverage, or charge women differently from men.

Posted 1/20/12 by Benjamin Miller

A Better Model for Dodd-Frank

The basic message Common Good is trying to spread with our Start Over campaign is simple: People, not rules, make things happen.

The regulatory philosophy of the U.S. makes the flawed assumption that more specific rules lead to better results. That’s why our country now has 140 million words of federal law, or thirty thousand words for every word in the Constitution.

In reality, more specificity leads to more loopholes, unintended consequences, and most importantly, the elimination of human judgment. Instead of entrusting individuals with the responsibility to make prudent decisions based on principles established by law, our legal and regulatory system expects bureaucrats to follow the letter of the law without deviation. And lawmakers are likely to step on their own toes by creating inflexible regulatory structures that can’t keep up with changing times.

Eighteen months ago, President Obama signed the Dodd-Frank Act, a statute of some 2,300 pages intended to prevent financial sector abuses of the kind that led to the 2008 crisis. Its core strategy is to empower federal regulators to control the promulgation of risky financial instruments like derivatives. But, as David Skeel wrote last year, “the legislation merely provides a framework for achieving these objectives. It leaves nearly all of the details to financial regulators, who will be required to promulgate more than five hundred new rules.” And New York Times columnist Joe Nocera recently warned against “complexity risk,” arguing that “contradictory regulations, however well meaning, simply don’t make the system safer.”

The Dodd-Frank approach presents an opportunity and a risk. The opportunity is to show that individuals entrusted with regulating the financial sector can work most effectively when the law gives them a broad objective and the proper tools. The risk is that the law expects these regulators to achieve the objective not through careful deliberation and analysis, but by writing hundreds of new, specific rules.

Skeel observes that the new rules will work best if they are “simple and straightforward.” Let’s hope the regulators take note. But it’s hard to imagine a scheme of five hundred new rules being truly simple and adaptable. Contrast that with Britain’s Financial Services Authority, which sets out seven basic principles to guide regulators’ decisions. The principles are succinct, clear, and intuitive, and they establish a basic philosophical approach that regulators and businesses can easily understand and apply. For example, one of the principles, “Proportionality,” reads in its entirety:

The burdens or restrictions we impose on the industry should be proportionate to the benefits that are expected to result from those burdens or restrictions.

In making judgements in this area, we take into account the costs to firms and consumers. One of the main techniques we use is cost-benefit analysis of proposed regulatory requirements. This approach is shown, in particular, in the different regulatory requirements we apply to wholesale and retail markets.

Similarly, the FSA lays out eleven principles of proper business conduct in the financial sector. They include:

• “Integrity: A firm must conduct its business with integrity,”
• “Financial prudence: A firm must maintain adequate financial resources,” and
• “Relations with regulators: A firm must deal with its regulators in an open and cooperative way, and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice.”

Sometimes more specific rules are necessary, but for the FSA, maximizing granularity is not the default. Does that make it more difficult for the agency to ensure fairness? Well, as Clive Briault, FSA’s former managing director of retail markets, put it: “Our Principles are rules. We can take enforcement action on the basis of them; we have already done so; and we intend increasingly to do so where it is appropriate to do so.”

It’s hard to imagine those words coming from an American bureaucrat. Yet at a time when Americans are all too accustomed to regulatory failure, surely we ought to think about regulatory approaches that serve individuals and the economy instead of chasing after subsections and clauses.

Posted 1/18/12 by Matt Brown

Summary Judgment: Should Judges Be Gatekeepers?

There’s a tempest brewing in Tennessee, as the state’s judicial and legislative branches battle over the rules governing civil court proceedings. It’s an interesting state constitutional issue that highlights both a flaw in America’s civil justice system and the inability of policymakers to address it.

In 2008 the Tennessee Supreme Court, in a decision captioned Hannan v. Alltel, narrowed the ability of defendants to pursue “summary judgment,” a procedural device allowing judges to dismiss cases at early stages in the proceedings if certain requirements are met. Hannan clarified the previously very confusing standard. In Tennessee, to succeed on a motion for summary judgment, a defendant must now produce some affirmative evidence that contradicts the plaintiff’s claim. One cannot rely on the more defendant-friendly “put up or shut up” system in place in most other jurisdictions (including the federal courts), under which the defendant need only show that the plaintiff does not have any evidence supporting their claim. The difference is stark. For claims in which evidence on both sides is flimsy, this system limits defendants’ ability to avoid significant litigation costs.

Hannan infuriated Tennessee’s business community, which feared that a tightened summary judgment standard would allow more frivolous cases to proceed to costly trials. Tennessee legislators have now attempted to overturn Hannan via legislation, which passed easily, leading to the current showdown over whether this maneuver is even constitutional.

This brouhaha stems from a common refrain in American politics: the need to reform our civil justice system to lower the costs (both monetary and social) of frivolous lawsuits. But it also reveals how no one seems to understand what’s really at stake, or how to improve the system we currently have. In Tennessee and elsewhere, the battle is about the character of the rules: who needs to produce what evidence when, what sorts of caps can be placed on damages. But rules, by their very nature, can never perfectly conform to social expectations. No matter where the summary judgment line is drawn, some meritorious cases will get dismissed and some frivolous cases will proceed to trial—and tort reform only shifts stakes, not costs.

More than rules, what really should be at issue is the effect of civil litigation on American life—and the role judges should play in a free society. For years, Common Good has argued that judges should see their role not as some neutral arbiter between two opposing sides—to simply call balls and strikes, if you will—but rather as a gatekeeper who makes value judgments on behalf of society about whether a particular claim should proceed. As Philip K. Howard has written:

America needs a new judicial philosophy. Instead of focusing on enforcing ‘rights’ and avoiding ‘activism,’ judges should look to the effects of lawsuits on the functioning of society, and see their job as drawing ‘boundaries’ and achieving a ‘balance’ between competing interests of freedom and individual grievances. Judicial rulings that keep claims and defenses reasonable should be encouraged, not avoided. . . . Only by judges continually asserting reasonable community values can citizens enjoy the protection of the rule of law.

Changes in summary judgment rules are meaningless if technically meritorious suits can shut down playgrounds while negligent defendants can hide behind procedural devices. To ensure that the interests and expectations of society at large are served, judges must be empowered to consider and protect them as appropriate. Tennesseans are right to be concerned about the state of their civil courts, but if it’s true justice they want, they’d be better off throwing out the rule book and starting over.

Posted 1/18/12 by Common Good

Obsolete Law Forum: February 7, Washington, D.C.

Obsolete Law: Does Government Need a Spring Cleaning?

Common Good and the Bipartisan Policy Center invite you to attend a morning forum on the problem of obsolete law on Tuesday, February 7 in Washington, DC.

(Click to download the agenda and flyer as pdfs.)

Agenda:

8:30 – 9:00 AM:  REGISTRATION AND BREAKFAST

9:00 – 9:05 AM:  WELCOME

Philip K. Howard, Common Good

9:05 – 9:35 AM: MODERATED DISCUSSION

Senator Mark Warner, D-Virginia

John C. Fortier, Bipartisan Policy Center (moderator)

Stuart Taylor, Jr., author and journalist (moderator)

9:40 – 10:40 AM:  PANEL ONE

Julie Barnes, Bipartisan Policy Center

Richard R. Buery, Jr., The Children’s Aid Society

Philip K. Howard, Common Good

Maya MacGuineas, Committee for a Responsible Federal Budget

Alan B. Morrison, The George Washington University Law School

Andrew J. Rotherham, Bellwether Education Partners

John C. Fortier, Bipartisan Policy Center (moderator)

10:45 – 11:30 AM:  MODERATED DISCUSSION

Representative Kevin Brady, R-Texas

Representative Jim Cooper, D-Tennessee

William A. Galston, The Brookings Institution (moderator)

11:35 – 12:15 PM:  PANEL TWO

E. Donald Elliott, Yale Law School

William A. Galston, The Brookings Institution 

James R. Maxeiner, University of Baltimore School of Law

Ryan McConaghy, Third Way

Philip K. Howard, Common Good (moderator)

As government officials and candidates in the 2012 election talk about ways to cut government spending, trim deficits, create jobs, control healthcare costs, and improve education and infrastructure, the role played by obsolete law needs to be addressed.  Forum participants will discuss how laws, regulations, and mandates from years past prevent officials and everyday Americans from making choices for today.  Panelists will also consider proposals for reform, including sunset provisions. 

When:

Tuesday, February 7, 2012

8:30 AM to 12:00 PM

Discussion begins promptly at 9:00 AM.

A continental breakfast will be provided.  

Where:

Carnegie Endowment for International Peace

1779 Massachusetts Avenue, NW

Washington, DC 20036

To RSVP, please e-mail your name, position, affiliation, and contact information to rsvp@commongood.org. If you have any questions, please contact Andrew Park of Common Good at apark@commongood.org.

This event is the first in a Common Good series titled: “Start Over 2012: A Bipartisan Forum Series”

Posted 1/17/12 by Common Good

Today’s Read: Joe Nocera on Financial Regulation

Joe Nocera is not anti-regulation. But in today's New York Times, he recognizes that regulation only works if it's simple enough to be understood and implemented. In the real world, it's impossible to anticipate and write rules for every future scenario and every possible problem. Regulation only works effectively when it empowers individuals to use their discretion, enabling them to address both foreseen and unforeseen challenges. In the financial sector, it's especially important that we keep the rules simple, precisely because the system is so complex:

Why does complexity risk matter? One reason is that the more complex the rules are, the greater the likelihood that smart bankers will find ways to game them. Another is that contradictory regulations, however well meaning, simply don’t make the system safer.

...

[Karen] Petrou [managing partner of Federal Financial Analytics] offers a series of solutions, revolving around simpler regulations, a reliance on market discipline and transparency. She also calls for the regulators themselves to be held accountable, something that is nowhere to be found in Dodd-Frank, despite their obvious shortcomings in the years leading to the financial crisis.

However you feel about banks — and I know that many people harbor enormous, justifiable anger at what they did — our economy can’t function without them. And they needed to be regulated. But three years ago, overly complex securities were one of the root causes of the crisis. So why, then, do we have faith that overly complex regulations will prevent the next crisis? Sad but true: they won’t.

It's good to see writers across the political spectrum recognizing the point Common Good has long made: In order for law and regulation to be effective, it needs to be understood. Read Nocera's full column here.

Posted 1/10/12 by Common Good

David Brooks on Clearing the Legal Thicket

It’s hard to imagine a world where government works efficiently—or where officials work to restore faith in governmental institutions. But in today's New York Times, David Brooks suggests how we might achieve just that:

Life is unfair. Republican venality unintentionally reinforces the conservative argument that government is corrupt. Democratic venality undermines the Democratic argument that Washington can be trusted to do good.

Liberalism has not expanded because it has not had a Martin Luther, a leader committed to stripping away the corruptions, complexities and indulgences that have grown up over the years.

If you’ll forgive some outside advice, President Obama might consider running for re-election as Luther. It’s not enough to pick a series of small squabbles and then win as the least ugly man in the room. He might run as someone who believes in government but sees how much it needs to be cleansed and purified.

Make the tax code simple. Make job training simple. Make Medicare simple. Every week choose a rent-seeker to hold up for ridicule and renunciation. Change the Congressional rules. Simplify the legal thickets that undermine responsibility.

Brooks understands that in order to restore trust in government, reform efforts need to focus on how government operates, not just on what government does. Effective governance depends on restoring responsibility to individuals—but that’s impossible within the complex and convoluted “legal thicket” we’ve created.

Posted 12/20/11 by Common Good

Howard on Havel

Writing on his blog on TheAtlantic.com, Common Good Chair Philip K. Howard draws from a series of speeches Vaclav Havel gave in the 1990s to relate the former activist and Czech president’s critique of western bureaucratic structures:

Western governments, he said, are organized on a flawed premise not far removed from the Soviet system that had just collapsed. 'The modern era has been dominated by the culminating belief,' he said, 'that the world ... is a wholly knowable system governed by finite number of universal laws that man can grasp and rationally direct ... objectively describing, explaining, and controlling everything.'

These bureaucratic structures are profoundly dehumanizing, Havel believed, striving to control choices that should be left to human judgment and values. This 'era of systems, institutions, mechanisms and statistical averages' is doomed to failure because 'there is too much to know' and it cannot 'be fully grasped.' The drive towards standardization is fatally flawed, Havel believed: 'life is nonstandard.'

…

In a society where authority is embodied in complex bureaucratic systems, no one can take responsibility to do what seems right. Modern societies are suffering what he called a 'profound crisis of authority and resulting general decay of order.' What does that mean? 'Politicians seem to have turned into puppets that only look human and move in a giant, rather inhuman theatre; they appear to have become merely cogs in a huge machine, objects of a major automatism of civilization which has gotten out of control and for which no one is responsible.'

The solution, Havel believed, is to reclaim human control over daily choices. We must 'get to the heart of reality through personal experience ... in short, human uniqueness, human action, and the human spirit must be rehabilitated.' Let communities too be different: 'There is no need at all for different people, religions and cultures to adapt or conform to one another. ... I think we help one another best if we make no pretenses, remain ourselves, and simply respect and honor one another, just as we are.'

Havel’s analysis of western governments, Howard notes, is as relevant today as when it was written—and it also aligns well with the message of Common Good's Start Over campaign. Read Howard’s essay in full and leave your feedback in the comments section below.

Posted 12/19/11 by Common Good

Today’s Read: Jeb Bush Calls for Results-Based Regulation and Sunsets

In an op-ed for the Wall Street Journal, Common Good Advisory Board member and former Florida governor Jeb Bush makes the argument that “results-based regulation” (or “outcome-oriented rules”) and sunsets are necessary for Americans’ economic freedom:

We have to make it easier for people to do the things that allow them to rise. We have to let them compete. We need to let people fight for business. We need to let people take risks. We need to let people fail. We need to let people suffer the consequences of bad decisions. And we need to let people enjoy the fruits of good decisions, even good luck.

…

The right to rise does not require a libertarian utopia to exist. Rather, it requires fewer, simpler and more outcome-oriented rules. Rules for which an honest cost-benefit analysis is done before their imposition. Rules that sunset so they can be eliminated or adjusted as conditions change. Rules that have disputes resolved faster and less expensively through arbitration than litigation.

In Washington, D.C., rules are going in the opposite direction. They are exploding in reach and complexity. They are created under a cloud of uncertainty, and years after their passage nobody really knows how they will work.

Read Gov. Bush’s op-ed in full (subscription required) and leave your feedback in the comments section below.