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OpenMarket: June 2013

  • Another Federal Appeals Court Rules against Obama Administration's Contraceptive Mandate

    June 28, 2013 5:27 PM

    Contraceptives are easy to obtain, and forcing employers to include a broad array of contraceptives in employee health insurance makes as little sense as forcing an auto insurer to cover routine oil changes. Actually, it makes much less sense, since without an oil change, your car will eventually break down, but some people have no desire to ever use any contraceptive (and get by just fine without them).

    But that did not stop the Obama administration from imposing a contraceptive mandate on employee health insurance, requiring even religious employers (with the exception of churches) to provide them (and not just contraceptives, but -- more controversially -- certain abortifacients). Some objectors, like Bishop Lori, have likened the administration's demand that Catholic institutions provide contraceptive and abortifacient coverage to forcing a kosher deli to serve ham.

    HHS Secretary Sebelius admits that she did not even seek a legal opinion about the legality of this mandate before imposing it, even though many legal scholars have since criticized it, and it created a political firestorm in 2012.

    Now, the Tenth Circuit Court of Appeals has revived a legal challenge to the contraceptive mandate, ruling in favor of an appeal by the religious employer Hobby Lobby. The court ruled that Hobby Lobby has shown that it will likely succeed on its challenge to the mandate under the Religious Freedom Restoration Act, and is probably entitled to a preliminary injunction against it. As Judge Tymkovich put it in his opinion for the court:

    This case requires us to determine whether the Religious Freedom Restoration Act and the Free Exercise Clause protect the plaintiffs—two companies and their owners who run their businesses to reflect their religious values. The companies are Hobby Lobby, a craft store chain, and Mardel, a Christian bookstore chain. Their owners, the Greens, run both companies as closely held family businesses and operate them according to a set of Christian principles. . . the plaintiffs brought an action challenging a regulation that requires them, beginning July 1, 2013, to provide certain contraceptive services as a part of their employer-sponsored health care plan. Among these services are drugs and devices that the plaintiffs believe to be abortifacients, the use of which is contrary to their faith.

    We hold that Hobby Lobby and Mardel are entitled to bring claims under RFRA, have established a likelihood of success that their rights under this statute are substantially burdened by the contraceptive-coverage requirement, and have established an irreparable harm. But we remand the case to the district court for further proceedings on two of the remaining factors governing the grant or denial of a preliminary injunction.

    More specifically, the court rules as follows:

    As to jurisdictional matters, the court unanimously holds that Hobby Lobby and Mardel have Article III standing to sue and that the Anti-Injunction Act does not apply to this case. Three judges (Kelly, Tymkovich, and Gorsuch, JJ.) would also find that the Anti-Injunction Act is not jurisdictional and the government has forfeited reliance on this statute. These three judges would also hold that the Greens have standing to bring RFRA and Free Exercise claims and that a preliminary injunction should be granted on their RFRA claim. A fourth judge (Matheson, J.) would hold that the Greens have standing and would remand for further consideration of their request for a preliminary injunction on their RFRA claim.

    Concerning the merits, a majority of five judges (Kelly, Hartz, Tymkovich, Gorsuch, and Bacharach, JJ.) holds that the district court erred in concluding Hobby Lobby and Mardel had not demonstrated a likelihood of success on their RFRA claim [and] further holds that Hobby Lobby and Mardel satisfy the irreparable harm prong of the preliminary injunction standard. A four-judge plurality (Kelly, Hartz, Tymkovich, Gorsuch, JJ.) would resolve the other two preliminary injunction factors (balance of equities and public interest) in Hobby Lobby and Mardel’s favor and remand with instructions to enter a preliminary injunction, but the court lacks a majority to do so. Instead, the court remands to the district court for further evaluation of the two remaining preliminary injunction factors. . . .Accordingly, for the reasons set forth below and exercising jurisdiction under 28 U.S.C. § 1292(a)(1), we reverse the district court’s denial of the plaintiffs’ motion for a preliminary injunction and remand with instructions that the district court address the remaining two preliminary injunction factors and then assess whether to grant or deny the plaintiffs’ motion.

  • What the Senate Immigration Bill Got Right

    June 28, 2013 1:24 PM

    The Senate’s passage of its immigration reform bill is a meaningful victory for free markets. Free markets ought to extend beyond borders. As has been seen clearly by economists since Adam Smith, exchange in both goods, services, and ideas make the world a richer and freer place.

    Legalization: The bill would legalize the statuses of roughly 11 million immigrants here illegally, so long as they arrived before last year and were not a felon. Protecting the rights of immigrants to live and work freely also protects Americans’ rights to associate, contract, and trade with those immigrants. A first principle of U.S. immigration policy is that it should not violate the rights of U.S. citizens.

    Those who recommend that we “just enforce the law,” as it is currently written, rarely understand the implications of that suggestion for Americans. Not only would tens of thousands of business owners dependent on these immigrants be bankrupted due to labor shortages, not only would thousands of employers be subject to massive fines or imprisonment, but millions of U.S. citizens would also be imprisoned under current law—for “harboring” them or for “aiding” them through charity or other means. These statutes, which entail long prison sentences, would clearly cover U.S. citizen families and friends of immigrants here illegally.

    Violating the rights of U.S. citizens to engage in commerce with these immigrants ultimately has negative economic effects.  For example, a team of economists led by Steven Zahniser and Thomas Hertz at the Economic Research Service estimated for the Department of Agriculture the effect of losing 5.8 million unauthorized immigrants. “In the long run,” they concluded, “overall gross national product accruing to the U.S.-born and to foreign-born, permanent residents would fall by about 1 percent, compared with the base forecast.”

    In other words, removing these workers would be like losing $150 billion—and that’s just from losing half of everyone here illegally. Conversely, legalizing the statuses of these immigrants will result in huge economic gains. Legalization increases the productivity of immigrants by creating an incentive to gain new skills and learn English. In 2012, Berkeley econ professor Raúl Hinojosa-Ojeda found that GDP would likely rise by $1.5 trillion over ten years.

  • DOMA Decision: Win for the Rights of U.S. Citizens to Freely Associate with Foreigners

    June 27, 2013 7:34 PM

    Gay marriage“We received a cold, brief letter from the Immigration Service notifying us that our petition had been denied. Why? Because we’re both men.” That was Brandon Melchiorre, explaining late last year his failed-attempt to get a green card for his spouse, Luke. “The denial letter from Immigration Services clearly stated in an unapologetic, discriminatory tone that we are still, in fact, second-class citizens.”

    Under the Defense of Marriage Act (DOMA), gay Americans cannot sponsor their partners to enter and reside in the United States. But thanks to the Supreme Court decision in U.S. v. Windsor yesterday, that fact will change. The case involved a New York woman, Thea Spyer, who was legally married to another woman, Edith Windsor. After Spyer died, Windsor sought an exemption from the Death Tax, which would have cost her $363,000.

    "The federal statute is invalid, for no legitimate purpose overcomes the purpose and effect to disparage and to injure those whom the State, by its marriage laws, sought to protect in personhood and dignity,” Justice Anthony Kennedy wrote for the majority. "By seeking to displace this protection and treating those persons as living in marriages less respected than others, the federal statute is in violation of the Fifth Amendment."

  • CEI Podcast for June 26, 2013: TSA Full-Body Scanner Transparency

    June 26, 2013 3:49 PM

    Fellow in Land-use and Transportation Studies Marc Scribner discusses the TSA's lack of transparency and the scanners' ineffectiveness in deterring terrorism.

  • Border Security Doesn't Require "Invading" the Border

    June 26, 2013 11:51 AM

    When President Bush left office in January 2009, there were about 30,000 U.S. troops in Afghanistan. If the Senate immigration bill (S. 744) passes, this military-style mobilization will come to the U.S.-Mexico border -- and then some.

    Under the Hoeven-Corker border security amendment, approved Monday, the bill would now pour in at least 38,405 Border Patrol personnel along America’s Southern border -- more than double the original amount. At the same time, it would increase total border security funding more than five-fold -- from $8.3 billion to $46.3 billion.

    These funds will go to finish a 700-mile border fence and add hundreds of new surveillance towers, thousands of camera systems, and tens of thousands of ground sensors -- not to mention fiber-optic tank inspection scopes, thermal imaging systems, and “portable contraband detectors.” It will send 17 UH-1n helicopters, five Blackhawk helicopters, eight AS-350 light enforcement helicopters, and enough drones to log 130,000 hours of flight time each year.

    This is not simple “border security” -- personnel-wise, it's a mobilization proportional to the one in Afghanistan (it's already being called "the surge"). But unlike that adventure, it was not provoked by any foreign aggression. Instead, this offensive is a response to hundreds of thousands of peaceful people moving to the United States to work -- such a reaction is without even the slightest rationale.

    Not to be misunderstood, border “security” is a legitimate and necessary function of government—border “invasions” are not. Border security would require immigrants and travelers to enter within legal avenues through which they could be processed and checked. Security’s role is to protect and aid movement between countries, which allows free markets to extend beyond legal jurisdictions.

  • Tracking the Cultural Exception, Part One: How Does One Exempt a Culture?

    June 25, 2013 12:54 PM

    On June 14, the European Union’s Council of Foreign Affairs adopted a mandate for negotiation on the Transatlantic Trade and Investment Partnership (TTIP). It includes a “cultural exception” so obviously protectionist that it’s hard to understand how it got through. Many European leaders made a good show of opposing the exception, but French ministers didn’t have to twist too many arms. The French Culture Ministry released a letter documenting support for the cultural exemption from across Europe, and mentions a pro-exception petition by filmmakers that has gathered 5,000 signatures. In light of all this, the reassurance from European Commissioner for Trade Karel de Gucht that this industry could always be brought back onto the table falls flat.

    There have been many predictions about the effects of the cultural exception carve-out. Will it ruin the chances of the treaty moving forward? Probably not. Will it lead to other exemptions by the U.S. or some European nations? Probably. But, assuming the exception does stay in, it will impact how both sides fare post-negotiation. To get an idea how, we can look to how this sort of exemption has fared in other trade agreements and what effects this has had.

    This certainly isn’t the first time the “culture” sector was taken off the table in a trade deal. From discussions surrounding the General Agreement on Tariffs and Trade (GATT, the predecessor to the World Trade Organization) to regional treaties like the North American Free Trade Agreement (NAFTA), Mercosur, and some of the EU’s founding documents, audiovisual goods are widely protected against foreign competition. One interesting feature of these protection regimes is which nations insisted on carve outs and which ones didn’t. It wasn’t, for instance, Mexico’s large conglomerates that sought to exempt themselves from the NAFTA negotiations; it was Canada’s small niche players.

    Interestingly, NAFTA also exempts retaliatory action where “cultural” products are concerned. As a report prepared for Canada’s Parliament noted: “[I]f one of the parties uses it to establish measures that would otherwise have been inconsistent with the Agreement, the other party may retaliate with measures of equivalent commercial effect.”

    Yet it’s not just about protecting small markets like Canada’s. During Mercosur negotiations, it was the Brazilian market (Spanish link) that got protection while the tiny Argentine market left its fate to market forces. In Europe it was more complicated. The EU’s conflicting internal policies are driving some of the confusion today and are of concern for how TTIP could look in the end.

  • Federal Regulations Make Americans 75 Percent Poorer

    June 25, 2013 12:49 PM

    "Federal regulations have made you 75 percent poorer," and as a result, "U.S. GDP is just $16 trillion instead of $54 trillion," says an article in Reason magazine. It cites a study that finds that as a result of growing regulation,

    the average American household receives about $277,000 less annually than it would have gotten in the absence of six decades of accumulated regulations—a median household income of $330,000 instead of the $53,000 we get now.

    The researchers, economists John Dawson of Appalachian State University and John Seater of North Carolina State, constructed an index of federal regulations by tracking the growth in the number of pages in the Code of Federal Regulations since 1949. The number of pages, they note, has increased six-fold from 19,335 in 1949 to 134,261 in 2005. (As of 2011, the number of pages had risen to 169,301.) They devise a pretty standard endogenous growth theory model . . . to calculate how federal regulations have affected economic growth.

    Annual output in 2005, they conclude, "is 28 percent of what it would have been had regulation remained at its 1949 level.". . .Regulations also affect the allocation of labor and capital—by, say, raising the costs of new hires . . .Overall, they calculate, if regulation had remained at the same level as in 1949, current GDP would have been $53.9 trillion instead of $15.1 in 2011. In other words, current U.S. GDP in 2011 was $38.8 trillion less than it might have been.

    CEI's Wayne Crews says that "Obama's record-setting red tape costs Americans $14,000 annually." Crews recently released "the latest edition of Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State, which surveys the big picture federal regulatory state by numbers and costs." For example, he notes, the EPA "added 223 rules in 2012," with an "estimated compliance cost" of "$353 billion." The costs measured in Crews' report will likely be dwarfed by additional regulatory costs in the future resulting from laws backed by Obama, such as the 2010 healthcare law, and the Dodd-Frank Act. It will take years for agencies to issue the regulations called for by these laws, especially the Dodd-Frank Act, a 2,315-page measure whose massive costs are just starting to be felt and have yet to be tallied. Just one of its rules is expected to “cost American businesses $315 billion and increase annual borrowing costs by $43 billion," according to the Financial Services Roundtable. The Dodd-Frank Act has already wiped out thousands of jobs and harmed the poor. Similarly, Obamacare is causing layoffs in the medical device industry, and will wipe out many jobs. It is also replacing full-time jobs with meager part-time jobs in community colleges, restaurants, and other sectors.

  • Time for Splitting the Farm Bill?

    June 24, 2013 3:44 PM

    The Chicago Tribune this morning had an excellent editorial about the House of Representatives’ defeat of the 2013 Farm Bill last Thursday. (See Tony Traina’s post in OpenMarket on that defeat.) The editorial pointed to the crux of the problem with bloated farm bills -- the fact that agricultural support programs and nutrition and food stamp programs are in the same bill, which leads to an unholy alliance of urban and rural policy makers. The Tribune urged that the current legislation be thrown out in favor of splitting the bill:

    Here's an opportunity for Congress to do something revolutionary: Break up the farm bill. Debate and vote on food stamp policy and farm policy as entirely separate matters.

    Although Rep. Marlin Stutzman (R-Ind.) had offered an amendment to do just that, it didn’t make it on the House floor. For such an approach to succeed, a lot of advance work would need to be done. Farmers, used to horse-trading with their rural colleagues on their special farm programs and with their city counterparts on food stamps, aren’t likely to give up that advantage, which almost always is touted as a fine example of bipartisanship.

    For years, most major newspapers have called for reining in the farm subsidy and support programs that go mainly to the largest farms and the richest farmers. Few, however, have called for making even small cuts on the food and nutrition side.

    But those days could come to an end, as many of those new to Congress think that more should be done to cut back on farm subsidy programs and on the rapidly escalating costs of the food stamp program. Even some commentators are shocked at the skyrocketing costs of the food stamp program as eligibility has expanded. As the Tribune noted:

  • CEI's Battered Business Bureau: The Week in Regulation

    June 24, 2013 11:14 AM

    96 new regulations, from fireworks shows near water to handling FOIA requests.

  • E-Verify: A Boon for Lawyers, Bad for Employers

    June 24, 2013 11:13 AM

    I have written extensively about the threats to Americans’ civil liberties from E-Verify, the employment verification system contained within the Senate’s comprehensive immigration reform (CIR) bill.[i] I have also written a study outlining the costs of E-Verify to the economy—at least $8.5 billion per year.[ii] But the problems from E-Verify go far beyond what can be estimated in a simple study. Regulatory complications will ultimately make the system much more costly than anyone can predict now.

    The most recent evidence for this fact comes from a report by Immigration Daily (, the largest immigration attorney website in the country. “The reaction of the large law firms is a little different than the conventional wisdom—apparently legalization is not where they see the opportunity,” its editors wrote this Friday. “The smart money is not on legalization as a source of business, it is instead on EVerify as a major source of business for the bar.”[iii]

    The ILW lawyers cite the fact that many of the 250 largest law firms in the country, ranked by the National Law Journal (NLJ), are searching for new employment law attorneys. “The NLJ250 firms apparently prefer these employment-based practices to family-based practices since the primary opportunity they see in CIR is EVerify,” the Daily’s editors conclude. “Since vast quantities of employers will have to rush into EVerify… the firms seek to add meaningful capability (not just a lawyer or two) in-house to service their clients post-CIR EVerify needs.”


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