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President Obama plans to raise the salary threshold at which employers must pay time-and-half for overtime hours (normally defined as those above 40 hours per week). Currently these rules apply to workers with annual salaries up to $23,660; the President’s proposal raises this threshold to $50,400.  The new rules will affect about 5 milllion workers according to administration estimates.

What impact will this expanded regulation have on the labor market?

In the very short run, employers affected by this expansion may have little choice but to pay their employees higher total compensation; in the very short run, employers have few ways to avoid this added cost.

But in the medium term, employers will invoke a host of methods to offset these costs: re-arranging employee work schedules so that fewer hit 40 hours; laying off employees who work more than 40 hours; or pushing such employees to work overtime hours off the books.

And in the longer term, employers can simply reduce the base wages they pay so that, even with overtime pay, total compensation for an employee working more than 40 hours is no different than before the overtime expansion.  

So, expanded overtime regulation will benefit some employees in the very short term; cost others their jobs or lower their compensation in the medium term; and have no meaningful impact on anything in the long term.

Is that a victory for middle class economics?

With the failure of the Greek government to make a scheduled payment to the International Monetary Fund (IMF), we have moved from high drama to low farce. The Marxists who are running the show in Athens have scored a first: Greece is the first so-called advanced economy to miss an IMF payment in the Fund’s 71-year history.

It was all so predictable. The Marxists in Athens did what Marxists do: they ramped up the rhetoric. Yes, the IMF became a “criminal syndicate,” certainly not the type of organization that the current Greek government would dare to pay.

As for the IMF, it drew a line in the sand after realizing that it had been way too lenient and generous with Greece. Under normal conditions, the IMF is supposed to be limited to lending up to 200% of a country’s quota (each country’s capital contribution made to the IMF) in a single year and 600% in cumulative total. However, under the IMF’s “exceptional access” policy there are, in principle, virtually no limits on lending. For example, the loan made to Greece in May 2010 was worth an astounding 3208% of Greece’s quota – by far the highest percentage recorded for a loan made to any member country.

So, the high drama of the past few months had to end in a farce – and it has.

The Export-Import Bank’s charter expired on June 30. What is commonly known as “Boeing’s Bank” is headed toward Washington’s trash bin.

When Congress returns, it could revive Ex-Im, which primarily subsidizes big business. But a proper burial for what candidate Barack Obama called “corporate welfare” would save Americans money, reduce economic injustice, and promote economic growth.

ExIm exists to borrow at government rates to provide credit at less than market rates for select exporters, mostly corporate behemoths. The bank claims to be friendly to small business, but cherchez the money: it goes to Big Business.

According to Veronique de Rugy of the Mercatus Center, the bank subsidized $66.7 billion in sales by Boeing between 2007 and 2013. In 2013, the top ten ExIm beneficiaries accounted for two-thirds of the bank’s total activities.

The bank charges fees and interest and claims to make a “profit”—more than $1.6 billion since 2008. But economists Jason Delisle and Christopher Papagianis explained that the bank’s “profits are almost surely an accounting illusion.” Most important, there is no calculation for market risk. CBO figures real losses over the coming decade are likely to exceed $2 billion.

Taxpayers also could get hit with a big default bill. Total outstanding credit is $110 billion, yet the agency’s own inspector general warned that bank practices create the risk of “severe portfolio losses.”

The agency is supposed to create jobs by throwing cheap money at purchasers of American products. However, the bank backs only about two percent of U.S. exports. There is plenty of private money available for such deals.

No one knows which contracts are sealed only with ExIm funding. Often, customers would have bought anyway; everyone in the process has an incentive to claim that ExIm assistance was vital.

The bank underwrites foreign companies which compete against U.S. concerns. That is almost always the case with Boeing aircraft sales, for instance.

The government can’t create wealth ex nihilo. The money comes from other Americans. Thus, someone else produces and sells fewer goods and services and creates fewer jobs.

The World Bank’s Heywood Fleisig and Catharine Hill warned that devoting scarce financial resources to export promotion cuts “domestic investment, consumption, or government expenditure.” Such subsidies only increase export-related employment “at the expense of employment elsewhere.”

The best argument for ExIm is that there are 59 foreign credit subsidy agencies like it, though most are smaller. But “everyone else does it” never is a good reason to do something stupid. Foreign subsidies play only a small role in global commerce.

A gaggle of former national security officials called the Bank a “critical element” of U.S. security. But the interests of particular exporters are not the same as of all Americans. My colleague Dan Ikenson warned Congress that ExIm penalizes newer, more dynamic firms in a process that “undermines the strength of the U.S. economy, which is crucial to reaching U.S. security and foreign policy goals going forward.”

Finally, export subsidies have a more basic, debilitating political effect: encouraging more companies to engage in what economists call “rent-seeking,” using government to extract rather than create wealth. The Chamber of Commerce and National Association of Manufacturers launched major lobbying campaigns for what can rightly be described as corporate welfare.

Should the United States help American exporters? As I answer in Forbes: “Encourage free trade. Roll back economic sanctions. Adopt responsible budget policies. Lower and simplify the corporate income tax. Cut regulations on business. Stop subsidizing the defense of prosperous trade competitors.”

Crony capitalism is running rampant in America, undermining confidence in a market economy. Although the bank’s Lazarus-like return can’t be ruled out, Boeing and the rest of America’s corporate elite now enjoy one less special privilege at everyone else’s expense. One down. Hundreds more special interest subsidies to go.

Part of Oregon’s Measure 91, passed in November and legally titled Control, Regulation, and Taxation of Marijuana and Industrial Hemp Act, goes into effect today. The new law allows men and women, 21 and older, to grow limited amounts of marijuana on their property and to possess a limited amount for personal, recreational use. Specifically, an Oregonian can possess up to eight ounces of marijuana and grow up to four marijuana plants in their homes. Each adult can possess up to an ounce in public, but one may not use marijuana in public.  §6 of Measure 91 lists all the guidelines that one would need to know about what is now legally permissible personal and household use under the new law.

The personal use and cultivation of marijuana will not be overseen by the Oregon Liquor Control Commission (OLCC). That agency will be tasked with overseeing the commercial use of marijuana, including licensing, taxing, and regulating. The review and acceptance of licenses will begin in January. Actual sale and purchasing of commercially grown marijuana will also begin sometime in 2016.

The fact that recreational use and private in-home ownership will now be legal has sparked some media interest. Particularly, the question has been asked: How can interested Oregonians begin their recreational use or home growing when there is no legal sale?  That’s a good question with respect to the lawful supply.  The underground market is fairly easy to find.

For related Cato work, go here and here.

What can seem more appealing than a cafeteria worker giving out free lunches? Or an education official writing-off school loans?

Yet, in both cases, those acting as beneficent philanthropists weren’t paying the cost. The taxpayers were. Public officials should learn that the money is not theirs to give.

Della Curry recently was dismissed as kitchen manager from an elementary school in Aurora, Colorado for, she admitted, “giving food to children that did not have money.” Doing so was legally wrong, she said, but “I do not feel bad about it and would do it again in a heartbeat.”

Although posing as a great humanitarian while denouncing this rich nation for failing to “provide lunch for its children,” she didn’t pay for any children’s lunch. Rather, she gave them a full lunch at public expense.

Indeed, contrary to her claim, the school district was no collective Scrooge. Many children were on official school lunch plans and received free or cheap meals. In fact, a family of four could earn $44,000 annually and still receive a federal subsidy.

Any other student without money received free meals three times. After that, cashless children received a cheese sandwich.

Far bigger bucks are involved in federal Education Secretary Arne Duncan’s giveaway. The for-profit Corinthian College chain has collapsed, leaving some heavily-indebted students in limbo. Students from these schools are thought to carry about $3.6 billion in publicly backed loans.

It’s a tragic situation with multiple offenders:  apparently mismanaged and perhaps fraudulently run educational institutions, predictably expansive and expensive federal education subsidies, and possibly inattentive, careless students. The most obvious victims are the taxpayers. Now Secretary Duncan has promised to forgive loans for potentially tens of thousands of students if they can prove “fraud” by the schools.

Secretary Duncan explained: “You’d have to be made of stone not to feel for these students.” True. Just as one has to sympathize with students without lunch money. But someone also should feel for taxpayers who had no choice in the matter.

Surely the first responsibility of any student is to investigate the school he or she is considering attending. Making a bad choice is no reason for relieving someone of responsibility for an obligation they voluntarily assumed—especially at someone else’s expense.

Unfortunately, Duncan said the department intended to create a process that would apply far beyond Corinthian College students. Forty million Americans owe a total of $1.2 trillion in student loans. Imagine how many might believe that they deserve a debt write-off.

There was a time when Americans would not have expected government to provide free lunches or subsidized university educations. Even elected officials once stood against public giveaways.

Rep. Davy Crockett famously opposed an appropriation for the widow of a naval officer. He explained that “we must not permit our respect for the dead or our sympathy for a part of the living to lead us into an act of injustice to the balance of the living.”

Decades later, President Grover Cleveland blocked a drought relief bill: “I do not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering, which is in no manner properly related to the public service or benefit.”

Imagine a president today taking such an action and making such a statement.

As I point out in the Freeman: “Years ago compassion meant to ‘suffer with.’ It eventually morphed into writing a check. Today politicians claim to be compassionate when they make other people write checks.”

But whatever the perceived need, the public’s money should not be government’s to give. Politicians are doing wrong.

Alas, the bigger problem is that many of their constituents want them to do wrong. Until people understand that Uncle Sam should not be an all-season Santa Claus, public officials will continue to act like Delia Curry and Arne Duncan. 

Chris Christie joins the Republican field for president with an announcement at his former high school. Christie, the current governor of New Jersey, has worked to improve New Jersey’s fiscal situation. Christie earned a respectable grade of “B” on both the 2012 and 2014 Cato’s Fiscal Policy Report Cards, partly due to his repeated vetoes of the legislature’s tax increases.

Christie has vetoed personal income tax increases five times in six years, including just last week. The 2015 version of the tax increase would have raised the top personal income tax bracket from 8.97 percent to 10.75 percent on income over $1 million. It was coupled with a 15 percent surcharge on corporate income taxes. Together, these two tax increases would have raised $1.1 billion, an enormous tax hike.

Christie has tried to lower taxes on New Jersey residents several times. In 2012, he proposed a 10 percent cut to personal income taxes. He also has signed into law some business tax cuts, including a large package in 2011 that featured  an energy tax cut.

However, Christie has promoted misguided tax policies as well. This year, he pushed to increase the state’s Earned Income Tax Credit to 30 percent, up from 20 percent. He pushed to increase taxes on e-cigarettes in 2014. He supported a number of targeted tax credits to encourage companies to stay in New Jersey. He created the “Grow New Jersey” tax credit which provides $5,000 to companies for each job created or retained in the state. Such tax provisions made the code more complex and do not generate broad-based growth.

Christie used his brash personal persona to garner support for spending cuts. In 2010 and 2011, he had a number of public debates with union officials over pay and benefits for state workers. It culminated in reforms to the state pension system in 2011. The plan raised the retirement age, eliminated cost of living adjustments, and required state employees to contribute more to the system. 

Despite the pension reform, the state’s budget has increased during Christie’s tenure, growing 15 percent from fiscal year 2011 to fiscal year 2015. New Jersey also has the fifth-highest debt and unfunded pension liabilities per capita in the nation. And it has spent $5 billion in economic development subsidies since Christie took office.

Chris Christie has been an important check on the Democrat-controlled legislature in New Jersey by limiting tax increases and forcing through pension reform. However, he has supported economic development subsidies and several poor tax policies.

Note: Chris Christie joins a large presidential field comprised of a number of current and former Governors. Analysis of each governor’s fiscal record is available via the links below:


American news stories about the Greek financial collapse frequently echo complaints of government employees and their supplicants about “budget cuts.”  In reality, Greek government spending rose from 44.6 percent of GDP in early 2006 to 54 percent in 2010 and 59.2 percent in 2014 (although this is partly because private GDP fell even faster than government spending).  Military spending is particularly lavish in Greece, second only to the United States within NATO as a percentage of GDP.  

What is rarely mentioned in all the one-sided confusion about “austerity” is the other side of the budget–namely, taxes. 

As if Greece didn’t have enough troubles, the Troika (International Monetary Fund, European Commission and European Central Bank) has promoted capital flight and a brain drain (exodus of skill and talent) by offering more and more loans to Greece in exchange for an increasingly suicidal blend of brutal taxes on both labor and capital.  The table shows what happened to key Greek tax rates in the past few years. 

  Current Previous Corporate Tax Rate 26.00 20.00 Personal Income Tax Rate 46.00 40.00 Sales Tax Rate (VAT) 23.00 18.00 Social Security Rate 42.01 29.05

Looked at separately, each of these higher tax rates might appear reasonable to fans of big government.  Looked at together, they are totally unreasonable.  To offer a Greek employee an extra 100 euros requires that 42 euros be subtracted for Social Security tax and then up to 46 more subtracted for income tax.  Out of the original 100 euros of marginal labor cost, the remaining 14 euros of after-tax income going to the skilled worker can only buy about 10 euros worth of goods after the value-added tax is paid.  

Little wonder that Greece has been suffering a massive brain drain –with hundreds of thousands of the best and brightest emigrating in recent years, including many doctors. At least a fourth of the remaining Greek economy survived by going underground, but that “shadow economy” ran on cash and banks are now sternly rationing cash withdrawals.

People, firms, or countries faced with an unbearable ratio of debt to income do not need more debt or less income (after taxes).  Yet this is precisely what has been repeatedly prescribed for Greece –with the IMF and others demanding ever-increasing taxes to shrink private incomes so that the dwindling number of remaining Greek taxpayers can be saddled with ever-increasing debts.  Amazingly, the latest “deals” with the Troika propose even higher tax rates, particularly on corporate profits and salaries above 30,000 euros. 

In 1377, Ibn Khaldun published his introduction to history, The Muquaddimah, in Cairo.  In that famed opus, Khaldun explained, about as well as anyone has, what happens to a country when the tax collectors get too greedy:

“Eventually, the taxes will weigh heavily upon the subjects and overburden them…The result is that the interests of the subjects in enterprises disappears, since when they compare expenditures and taxes with their income and gain and see the little profit they make, they lose all hope. Therefore, many of them refrain from all [economic] activity.  The result is that the total tax revenue goes down….Attacks on people’s property remove the incentive to acquire and gain property….It is the state that suffers from all these acts, inasmuch as civilization…is ruined when people have lost all incentive”.

Last week, taxi drivers in France protested the Uber ride-sharing service by blocking access to airports and train stations, erecting barricades, destroying vehicles, and assaulting rival drivers in confrontations that led to injuries. American celebrity Courtney Love Cobain, caught up in the chaos, tweeted: “they’ve ambushed our car and are holding our driver hostage. they’re beating the cars with metal bats. this is France?? I’m safer in Baghdad.”

The government of France then responded to the violence in oh-so-French fashion: it arrested Uber’s executives

My Cato colleague Matthew Feeney wrote the whole story up and you should go read his Forbes piece now. My humbler role is to set the episode to music, by way of a tune you may have found hard to get out of your head if you’ve ever seen Les Miserables

Do you hear the drivers honk
Smashing the heads of random chaps
It is the music of a people
Who will not give way to apps

When the tapping of a screen
Summons a ride with just their thumbs
It is the future we are fighting
When Uber comes

When technology disrupts
The cozy pasture where we graze
We’ll challenge it with fisticuffs
And self-serving Luddite cliches

[repeat chorus:]

When the tapping of a screen
Summons a ride with just their thumbs
It is the future we are fighting
When Uber comes.

[thanks to Rogers T. and John S. for suggestions on the lyrics]

It was long overdue. After over half a century of unsuccessfully trying to bring about regime change in Cuba through isolation, President Obama announced today that Washington has reached a deal with Havana to reopen embassies on July 20th.

There was a lot of posturing in the process, particularly from Cuba. At some point, the island’s dictator even said that restoring diplomatic ties would not be possible unless, among other things the United States returns Guantanamo and pays economic reparations for 50 years of embargo. In the end, it came down to the removal of Cuba from the U.S. list of states that sponsor terrorism and an agreement about the movement of U.S. diplomatic personnel around the island.

By restoring diplomatic ties, removing Cuba from the terrorist-sponsor list, and relaxing some elements of the embargo and the travel ban, the Obama administration has gone as far as it can using its executive authority. Lifting the outstanding elements of the embargo and travel ban is a prerogative of Congress. As it is, it looks unlikely that a bill in that regard will reach Obama’s desk for the remainder of his term.

Polls show not only considerable bipartisan support for Obama’s policy toward Cuba, but also a majority of Cuban Americans favoring rapprochement. Sooner rather than later, Congress–and the Republican presidential field–will realize the futility of sticking with the status quo.

Under no circumstances should we deceive ourselves on the current nature of the Cuban regime. It remains a Stalinist dictatorship. Dissidents are still harassed and arbitrarily arrested. The much-hyped economic reforms announced by Raúl Castro eight years ago have been too timid and seem more aimed at allowing Cubans to survive in the private sector without becoming prosperous.

However, political and economic isolation failed at weakening the Castro regime. American policy actually strengthened the Cuban government by providing itself as a scapegoat for Cuba’s disastrous economic policies and as a victim of U.S. aggression, thereby rallying support from all over the world.

Despite the embargo and travel ban still remaining in place, this is a historic move by the Obama administration.

After several blockbuster terms, this year was supposed to give a bit of a breather to Supreme Court watchers – but of course all that changed in November, when RobertsCare and same-sex marriage landed back on the justices’ laps. Looking back on the term, we see a few trends: fewer unanimous rulings than the last few years; more results that experts classify as “liberal” than “conservative” (though that’s a function of the vagaries of the docket); the lockstep voting of the liberal bloc contrasted against the inscrutability of Chief Justice Roberts and Justice Kennedy.

But despite the highs and lows of the last few decision days, when the dust cleared, there was one aspect of continuity that’s particularly gratifying to me: Cato continued its winning streak in cases in which we filed amicus briefs. While not as dominating as last term, we still managed to pull off an 8-7 record. I’m also proud to note that we were the only organization in the country to support the challenges to both the IRS rule on the ACA and state marriage laws.

Here’s the breakdown, in the order the opinions arrived:

Winning side (8): North Carolina Board of Dental Examiners v. FTCYates v. United StatesElonis v. United StatesCity of Los Angeles v. PatelHorne v. U.S. Dept. of AgricultureJohnson v. United StatesObergefell v. HodgesMichigan v. EPA.

Losing side (7): Heien v. North CarolinaPerez v. Mortgage Bankers Assoc.; U.S. Dept. of Transportation v. Assoc. of American RailroadsEEOC v. Abercrombie & FitchWalker v. Sons of Confederate VeteransTexas Dept. of Housing v. Inclusive Communities ProjectKing v. Burwell

So it was a decent year for liberty, but obviously not without its disappointments – even beyond King v. Burwell. Still, we fared way better than the U.S. government, which compiled a 9.5-12.5 record (I split one case that was partially affirmed/reversed, which is more generous than some pundits). Curiously, for the first time ever, both Cato and the feds found ourselves on the winning side of one case: North Carolina Dental Examiners – but that was against a state government, so some Leviathan had to lose there.

UCLA law professor Adam Winkler, writing at Slate, attributes the government’s poor performance to its “conservative” positions on criminal justice. I don’t buy the ideological characterization – Justice Scalia often votes against the prosecution, so does that mean he’s a “liberal,” in contrast to “law-and-order conservative” Justice Kagan? – but the analysis is correct: many of the government losses, including a couple of unanimous ones, were in criminal cases. (Overcriminalization, anyone?)

But regardless – and regardless of its two victories on RobertsCare – this administration is easily the worst performer of any president before the Court in modern times (and probably ever, though it’s more relevant to compare Obama to Bush, Reagan, and Kennedy than, say, Benjamin Harrison). There are three basic reasons for this: expansive executive action (including overzealous prosecution), envelope-pushing legal theories, and Justice Kennedy acting like a libertarian on close cases.

I’m sure I’ll have more to say on this in future commentary, but if you’d like to learn more about all these cases/trends and the views of Cato-friendly scholars and lawyers, register for our 14th Annual Constitution Day Symposium, which will be held September 17 to review the term and look ahead to next year. That’s also when we’ll be releasing the latest volume of the Cato Supreme Court Review, the editing of which will consume much of my summer.

It’s hard to find anything written or spoken about Greece that doesn’t contain a great deal of hand wringing about the alleged austerity – brutal fiscal austerity – that the Greek government has been forced to endure at the hands of the so-called troika. This is Alice in Wonderland economics. It supports my 95% rule: 95% of what you read about economics and finance is either wrong or irrelevant.

The following chart contains the facts courtesy of Eurostat. The central government in Greece is clearly bloated relative to the average European Union country. The comparison is even starker if you only consider the 16 countries that joined the EU after the Maastricht Treaty was signed in 1993. To bring the government in Athens into line with Europe, a serious diet would be necessary – much more serious than anything prescribed by the troika.

At midnight tonight, the gears of crony capitalism will grind to a halt at 811 Vermont Avenue, NW, Washington, D.C. After 81 years of funneling taxpayer dollars to favored companies, projects, and geopolitical outcomes under the guise of advancing some vague conception of the “U.S. economic interest,” the Export-Import Bank of the United States will end its financing operations at midnight tonight. No more subsidies to Fortune 100 businesses. No more siphoning revenues from unwitting U.S. firms and industries. No more loan guarantees to wealthy, autocratic foreign governments. No more crowding out of private lending. No more taxpayer exposure to a Fannie Mae-like fiasco. No more bribery and corruption scandals. No more collaboration and lending to China’s Export-Import Bank – you know, the entity whose support for Chinese companies is alleged to threaten U.S. exporters and jobs, and is the most frequently cited imperative for reauthorizing Ex-Im. No more of any of this…for now.

Champions of small government and market capitalism should savor this rare victory. It was won with solid arguments, including over 20 years of analyses from Cato Institute scholars including Ian Vasquez, Aaron Lukas, Steve Slivinsky, Chris Edwards, Doug Bandow, Sallie James, and – perhaps most comprehensively and tirelessly – Veronique de Rugy. 

It was won because of columnist/scholar Tim Carney’s persistence in focusing the public’s attention on the corruption bred of corporate welfare and because of the analytical contributions of Heritage’s Diane Katz, the Competitive Enterprise Institute’s Ryan Young, and others who continued to make compelling arguments for shuttering the Bank, despite steep odds against that outcome.

It was won because certain libertarian groups and conservative activists made the issue a priority, recognizing that corporate welfare is as great a threat to liberty as is the Welfare State, and that reining it in should be a priority because success there would lend greater credibility to the effort to rein in the Welfare State.

It was won against great odds, including vast political expenditures and arm-twisting by U.S. business interests on Capitol Hill, a mainstream media that is reflexively unsympathetic to any cause associated with “Tea Party Types,” and a general aversion among establishment organizations to any challenges to the status-quo. Radical and reckless, excessive and extreme, ideological and idiotic have been the characterizations assigned by media, politicians, and Boeing lobbyists in their attempts to discredit legitimate efforts to purge “crony” and make “market” the new brand of capitalism.

And it was won because House Financial Services Committee Chairman Jeb Hensarling and Senate Banking Committee Chairman Richard Shelby, knowing the case against Ex-Im reauthorization was more substantive than the New York Times would allow, made good gatekeepers by putting the onus on Ex-Im proponents to answer the critics – a task at which they failed.

So, tonight at midnight, the Export-Import Bank will cease in its capacity to issue new financing. That is something to cheer. It may also be short-lived.  Proponents of the Bank have been regrouping and strategizing to move legislation to reauthorize the Bank at the soonest possible chance. In fact the White House is hosting a conference call this afternoon for the purpose of advancing that outcome. Here’s the text of the email:

Dear Friend,

Please join us for a conference call on Tuesday, June 30th, at 2:35 PM with President Barack Obama, Senior Advisor to the President, Valerie Jarrett, and Director of the National Economic Council, Jeff Zients, to discuss the importance of reauthorizing the Export-Import Bank of the United States. The Export-Import Bank is a critical tool to help U.S. businesses and workers succeed in global markets and grow their exports – it supports high-quality jobs, is a vital tool for small businesses, and doesn’t cost taxpayers a penny.  Its reauthorization is vital to U.S. competitiveness and leveling the playing field for American small business owners and workers.

To participate in this conversation, please find details below:

•            Date: Tuesday, June 30th, 2015

•            Time: 2:35PM EDT

To receive the call-in information, please RSVP here:

For those who wish to access live captioning of our call, please access the link here.

This call is off the record and is not for press purposes nor amplification on social media.

Thank you,

The White House Business Council

The battle may be over but the war continues.  Given the sway that conservatives have had on this issue, it will be interesting to see whether and how Speaker Boehner tries to circumvent Hensarling’s committee to get a reauthorization bill to the floor.  Majority Leader McConnell believes there’s enough support in the Senate for reauthorization, but most of the Republican presidential hopefuls have expressed opposition to reauthorization.  It seems to me that if Ex-Im reauthorization resurfaces in the weeks and months ahead, it will be an issue that provides Republicans with yet another opportunity to demonstrate commitment to limited government, free market principles. Maybe this time they’ll see the value in reclaiming that brand.

Today, the U.S. Supreme Court announced that it would hear Friedrichs v. California Teachers Association, which asks the court to consider whether compulsory public-sector union dues violate the First Amendment right to free speech–which includes the right to be free from compulsory speech. The Cato Institute filed an amicus brief supporting the petitioners’ request that SCOTUS hear the case.

In 26 states, public-sector unions can force non-members to pay dues anyway. As I noted last year: 

The unions contend that these compulsory dues are necessary to overcome the free rider problem (non-union members may benefit from the collectively-bargained wages and benefits without contributing to the union), but plaintiffs in Friedrichs v. California Teachers Association point out that numerous organizations engage in activities (e.g. – lobbying) that benefit members and non-members alike without giving such organizations the right to coerce non-members to pay. That’s especially true when the individuals who supposedly benefit actually disagree with the position of the organization. 

But even if unions could demonstrate that the dues were necessary to prevent freeriding, the U.S. Supreme Court held in Harris v. Quinn last year that “preventing nonmembers from freeriding on the union’s efforts” is a rationale “generally insufficient to overcome First Amendment objections.” Federal law allows dues-payers to opt out of the portion dedicated to express political activities (e.g. - lobbying), but the petitioners argue that public-sector collective bargaining itself is inherently political. As the Cato Institute’s legal eagles explain:

Ever since the 1977 case of Abood v. Detroit Board of Education, it has been unconstitutional for unions to spend nonmembers’ compulsory dues on blatant political activity such as political ads. But unions can still collect so-called “agency fees” from nonmembers in order to fund activities “germane to [the union’s] functions as exclusive bargaining representative” such as the costs of collective bargaining to secure “advantages in wages, hours, and other conditions of employment.” Every year, public-sector unions must separate their political spending from their “agency fees” and give nonmembers an opportunity to opt-out of the political spending.

Yet, when it comes to public-sector unions, it is somewhat bizarre to say that some of the spending is “political” and some isn’t. A teachers union may run political ads advocating for particular public policy positions, but it also collectively bargains in order to fight for similarly “political” gains, such as class size, school year length, and teacher qualifications. In a sense, a teachers union is just another political party that lobbies the government for preferred policies, and, whether it is spending on political ads or collectively bargaining, both are “political.” 

In Harris v. Quinn, the majority appeared to signal that they agree with the petitioners’ assertion and they cast a gimlet eye on Abood:

The Abood Court’s analysis is questionable on several grounds. Some of these were noted or apparent at or before the time of the decision, but several have become more evident and troubling in the years since then. […]

Abood failed to appreciate the difference between the core union speech involuntarily subsidized by dissenting public-sector employees and the core union speech involuntarily funded by their counterparts in the private sector. In the public sector, core issues such as wages, pensions, and benefits are important political issues, but that is generally not so in the private sector. 

In other words, at least five justices appear inclined to hold that public sector collective bargaining is inherently political and that forcing someone to contribute toward it would violate the First Amendment right to be free from compulsory speech. If so, it would be a major blow to the teachers unions–significantly reducing their revenue and their political clout–and therefore a major victory for education reform. 

The New York Times has some wonderful Room for Debate pieces debating whether the American electorate is getting more liberal.  From Molly Worthen bemoaning the rise of secular libertarianism to Robert Reich repeating the mantra of the New Deal to Kay Hymowitz arguing that Millennials are not so liberal, all are worth reading. 

If the U.S. government does adopt more liberal economic policies over the next few decade, immigrants and their descendants will not be to blame.  There are four pieces of research that lend support to this view.

First, according to a working paper authored by Zac Gochenour at Western Carolina University and myself, the number of immigrants and their descendants has not affected the size of welfare benefits or spending on the state level from 1970 to 2010.  States have the power to set the benefit levels for numerous means-tested welfare programs and also have radically different flows of immigrants into or out of their borders - producing an ideal environment to test how immigrants and growing ethnic diversity affect the size of welfare benefits.  Although immigrants don’t shrink the welfare state, they don’t grow it either.  For every state like California and New York with many immigrants and a large welfare state, there is a state like Texas or Florida with many immigrants and a small welfare state.   

Second, according to an academic paper I co-authored with economists J.R. Clark, Robert Lawson, Benjamin Powell, and Ryan Murphy, increasing levels of immigration in the past predict more economic freedom in the future – both in the United States and internationally.  The story is slightly negative when looking at American states but the negative effect there is more than counter-balanced by the positive shift on the national level.  Although we can’t say that immigration caused that improvement in policy, we can say that immigration didn’t cause the economy to become less free.

Third, throughout American history the size of the federal government grows most rapidly when immigration is closed off.  The federal government grows much more slowly when the borders are more open, prior to 1930 and after 1970, than when they are closed during the 1930 to 1970 period.  What happened from 1930 to 1970?  Besides immigration being closed off, the New Deal, the Great Society, and a whole panoply of expensive government programs were initiated that were only possible because immigration was closed off.  Don’t believe that closing the borders was politically necessary to gain broad public support for those programs?  Paul Krugman and Vernon M. Briggs Jr. of the anti-immigration Center for Immigration Studies disagree with you (pg. 81-82).

Fourth, immigrants and their children have political opinions very similar to native-born Americans going back several generations.  In order to change public policy, immigrants and their descendants must first have significant differences of opinion with natives over these policies.  As Sam Wilson of George Mason University and myself found when we examined the General Social Survey data, immigrants have political and ideological opinions virtually indistinguishable from those of Americans.  Where small differences exist, they are entirely gone by the second-generation.  If immigrants and their children don’t differ from Americans very much, they won’t change public policy either.

One political party may gain more than another because of immigration but that doesn’t mean that national policy will shift.  Policy, not the partisan identity of politicians, is what interests us.  American public opinion on economic and other policy matter might change in the near future but that change won’t come from the differing opinions of immigrants or their children - unless something big changes.    

Relations between the United States and Russia continue to deteriorate, with the U.S.-led NATO alliance planning to station troops and heavy weaponry on Russia’s border.  At the same time that U.S.-Russian relations are reaching frosty levels not seen since the days of the Cold War, ties between China and Russia are growing noticeably closer.  Symbolizing that trend was a powerful visual seen on television sets around the world in early May.  Chinese president Xi Jinping not only attended the celebration in Moscow marking the 70th anniversary of the end of World War II, he occupied the position of honor at the side of Russian president Vladimir Putin.  The image was especially powerful because the United States and several other major Western powers pointedly refused to attend the gathering to show their continuing displeasure with Russia’s annexation of Crimea and aid to rebel forces in eastern Ukraine. 

As I point out in a recent article in Aspenia Online, the events in Moscow were only one signal of a Russian-Chinese rapprochement that seems  motivated by a joint desire to curb America’s global dominance.  Bilateral economic agreements between Moscow and Beijing are on the rise, including a May 2015 $400 billion deal to sell Russian natural gas to the voracious Chinese economy.  In addition, Russia has now replaced Saudi Arabia as China’s principal source of oil.

The prevailing assumption in the West that Russia and China would become geopolitical competitors, if not outright adversaries, in Central Asia also apparently needs to be reassessed.  Following the May 8 Putin-Xi summit in Moscow, the two leaders signed a new declaration announcing the coordinated development of the so-called Silk Road Economic Belt in Central Asia.  Although Russian and Chinese ambitions in that region are still in conflict over the long run, it appears that both governments have declared a truce in their rivalry.

Significant bilateral arms sales agreements are creating yet another dimension to the relationship.  That point is apparent with Moscow’s recent commitment to sell the sophisticated S-400 air defense system to China.  Talks between leaders of the two militaries are also on the rise.

These diverse developments have one feature in common.  Moscow and Beijing now seem to worry more about Washington than they do about each other, and that shared apprehension is driving them to cooperate against the United States and its allies.  That trend should greatly concern U.S. policymakers.   Secretary of State Henry Kissinger once argued that it should be an important objective of the United States to make certain that its relations with both Russia and China are closer than their relations are to each other. 

That remains wise counsel.  The last thing that American officials should want is to drive two major powers that are natural adversaries into an alliance of convenience directed against the United States.  Yet Washington’s uncompromising policy regarding the Ukraine issue and the increasingly transparent U.S. containment policy directed against China are creating the possibility of such a nightmare.  A reassessment of the Obama administration’s strategy on both fronts is badly needed.

Give Rand Paul points for trying: His opinion piece about marriage policy in the wake of Obergefell did better than many other Republicans have done. He did not call for resurrecting the dead – and politically toxic – Federal Marriage Amendment. He would appear to be actually considering the issues at stake, which is a good start.

But contrary to the promise of the headline (which he probably didn’t write anyway), the measures that Senator Paul recommends would not get government “out of the marriage business altogether.” Judging by what he actually wrote, local government would still control entry and exit from civil marriage, and civil marriage itself would apparently still continue to exist. Many federal consequences, like Social Security survivorship and the ability to sponsor an immigrant spouse, would presumably continue to flow from marital status - and they’d still be unavailable in any other way.

This isn’t such a terrible thing, necessarily. Marriage policy is really, really complicated. As long as we have a government, and as long as it’s making important decisions about our families and property, at least some parts of civil marriage may actually be worth saving. Marriage can serve as a protection against the state, one that (among lots of other things) keeps families together and makes the Social Security system run marginally more justly: If anyone deserves to recoup some of what the government takes by way of the payroll tax, it’s the widow of the worker who “contributed.” And if anyone is competent to sponsor a new citizen, it must be that new citizen’s spouse.

Meanwhile, leaving the entry conditions of marriage to the states would have been neither crazy nor unprecedented. It’s what has very often happened throughout our country’s history, and if the Supreme Court had gone that route, we’d likely have had ubiquitous gay marriage soon enough anyway. Historically speaking, states have commonly set very diverse requirements to enter into a marriage. These state-level requirements have included blood tests, waiting periods, and varying limits on consanguinity and age, to name just the big ones. (Also, notoriously, some states formerly set racial requirements, which I obviously deplore.)

Although the Supreme Court has repeatedly called marriage a fundamental right – including in Obergefell – the Court has also historically left the entry conditions of civil marriage to the states. It has intervened only seldom in this area. Interventions have included permitting interracial marriage, forbidding polygamy, allowing convicts to marry, and now permitting same-sex marriage, a decision I certainly approve of. If the state is to extend civil marriage, it ought to do so without respect to gender.

Not that I approve of everything that the civil aspect of marriage does. Far from it.

Contrary to what Senator Paul seems to claim, I am not aware that government has ever taxed marriage per se. The reality is a lot more complicated than that. There’s a marriage penalty to the income tax, but there’s also a marriage bonus. Which one you get depends on your income, your spouse’s income, and the distribution between them, as this baffling chart from the Tax Foundation shows.

As if the perverse incentives of the above chart were not enough, there’s a deeper problem: The weird income tax effects of marriage can’t be eliminated until we either scrap the graduated income tax or cease to levy it on anything other than an individual basis. (Neither of those would be a bad idea, necessarily, though the latter would leave households of equal incomes taxed unequally if their income distributions were unequal. I’m not sure why we’d want to do that, but when you make the tax rates progressive, that’s what you’re stuck with. It’s that or a marriage penalty and/or bonus. Mathematically, it just can’t be any other way.) Ultimately the tax effects of marriage are one of those areas where marriage policy would better off if we hit the reset button - on the tax system.

A good deal of the confusion about the meaning of marriage could also be remedied by admitting that there are in fact two kinds of marriage in the United States, private and civil. They usually happen at the same time, but they are quite distinct, legally. Private marriages can and should be recognized (or not) by individuals, churches, and families, freely and on a case-by-case basis. This is a matter of religious and associational liberty, and as such it should remain fully protected by the First Amendment. “Marriage” in this sense is not a government matter at all.

This private sort of marriage is a fundamental and negative right; it doesn’t need the government’s help to come into being. On this Rand Paul is absolutely correct, and I share his concern that churches and religiously observant businesses will be compelled to celebrate marriages that they find unconscionable. This they should not be forced to accept. (It hardly matters that these are scruples that have only lately appeared: Same-sex marriage itself has only lately appeared.)

The supporters of same-sex civil marriage, myself included, need to be magnanimous in victory, and we should now strive to protect those who are not inclined to celebrate our civil marriages in their private associations. We gays and lesbians in particular have felt the sting that can come from being in a politically powerless minority, and we ought not to inflict it on others.

So much for the private aspects of marriage, which are matters of natural (and negative) right. Civil marriage, meanwhile, is a civil right, like the right to vote, or the right to a trial by jury. Civil rights wouldn’t exist in the state of nature, but in a governed state they can, and many of them clearly should. Our current implementation of civil marriage is tied up with welfare and tax policy in ways that libertarians correctly find troubling, as discussed above. But civil marriage also helps to clean up a lot of otherwise serious disputes in property and child custody law, and in matters of medical care and legal representation. Having marriage settles many questions and closes off many avenues by which the government might otherwise make itself troublesome.

All of this is to say that civil marriage is a bundle, and not all of it in my opinion is bad. Some of it can make our family lives more orderly and more predictable, more stable and actually less governed by judges and lawyers (and nosy relatives) – and more governed by ourselves, in exactly the ways that we see fit.

That’s a thing that libertarians perhaps should want after all: If the government ever got out of the marriage business, we might suddenly find it much more in all of our family lives.

To avoid clock drift, the world’s computer clocks will gain an extra second at midnight Greenwich Mean Time, as June turns to July. This adjustment is necessary so that computer clocks can remain synchronized to Universal Time and to the time it takes the earth to rotate around the sun. Don’t worry, you probably won’t notice anything. But, since it takes milliseconds to make a flash trade, the one-second adjustment allows for enough time for problems to arise.

And speaking of time, let’s go beyond the leap second adjustments, and consider meaningful time reform. Since January 2012, my Johns Hopkins colleague Prof. Richard Conn Henry and I have advocated abolition of all time zones, as well as of daylight saving time, and the adoption of atomic time — in particular, Greenwich Mean Time, or Universal Time (UTC), as it is called today. The embrace of UTC would be beneficial.

For example, the adoption of UTC would give new flexibility to economic management in the vast east-west expanse of Russia, for example: everyone would know exactly what time it is everywhere, at every moment. Opening and closing times of businesses could be specified for every class of business and activity. If thought desirable, banks and financial institutions throughout the country could be required to open and to close each day at the same hour by the UTC. This would mean that bank employees in the far east of Russia would start work with the sun well up in the sky, while bank employees in the far west of Russia would be at their desks before the sun has risen. But, across the country, they could conduct business with one another, all the working day. This would have a second benefit: at least in the far east and far west, the banks would be open either early, or late, convenient for those who are working “sunlight hours,” such as farmers.

With UTC, agricultural workers, critically dependent on the position of the sun, could rise with the sun, without producing any impact on other aspects of cultural and economic life. The readings on the clocks would be the same for all. But, times of work would be attuned with precision to Russia’s local and national needs. China already has adopted a single time zone for the same purposes. And all aircraft pilots, worldwide, use UTC exclusively, for exactly the same reason that we are advocating its broad adoption, as well as for obvious safety reasons.

Earlier today, the Colorado Supreme Court ruled that Douglas County’s school voucher program violates the state constitution. 

The Douglas County Board of Education unanimously voted to enact the Choice Scholarship Pilot (CSP) Program in 2011, making it the first district-level school voucher program in the nation. The program granted 500 school vouchers worth up to 75 percent of the district schools’ per-pupil revenue, which was approximately $6,100 in the last academic year. Students could use the $4,575 vouchers at the private school of their choice and the district retained the remaining 25 percent of the funding ($1,525 per voucher student).

However, the ACLU, Americans United for Separation of Church and State, and several local organizations that wanted to protect district schools from competition filed a legal challenge almost immediately. Although they won an injunction from a trial court, it was later overturned on appeal in 2013. Plaintiffs then appealed to the state supreme court.

In a narrow 4-3 decision*, the Colorado Supreme Court held that the voucher law ran afoul of the state constitution’s historically anti-Catholic Blaine Amendment, which says:

Neither the general assembly, nor any county, city, town, township, school district or other public corporation, shall ever make any appropriation, or pay from any public fund or moneys whatever, anything in aid of any church or sectarian society, or for any sectarian purpose, or to help support or sustain any school, academy, seminary, college, university or other literary or scientific institution, controlled by any church or sectarian denomination whatsoever…

The court held that “aiding religious schools is exactly what the CSP does.” Even though “CSP does not explicitly funnel money directly religious schools, instead providing financial aid to student,” the court ruled that the Blaine Amendment’s prohibitions “are not limited to direct funding.”

The dissenting justices argued that the majority’s “interpretation barring indirect funding is so broad that it would invalidate the use of public funds to build roads, bridges, and sidewalks adjacent to such schools.” Rather, the dissent favored following state precedent that tracked with the U.S. Supreme Court’s decision in Zelman v. Simmons-Harris (2002), which held that a voucher program that was neutral with respect to religion and funded students directly was constitutional regardless of whether “the funds indirectly or incidentally benefit church or sectarian schools.”

The Douglas County Board of Education has vowed to appeal the decision to the U.S. Supreme Court:

While we are disappointed in the court’s decision today, we are not surprised,” said Douglas County Board of Education president Kevin Larsen. ” We have always believed that the ultimate legality of our Choice Scholarship Program would be decided by the federal courts under the United States Constitution. This could very well be simply a case of delayed gratification.”

Although a state supreme court has the final word on how to interpret its state constitution, the U.S. Supreme Court could rule that a provision of a state constitution (or a state court’s interpretation of that provision) is itself unconstitutional under the U.S. Constitution. In this case, defenders of the program believe the Blaine Amendment entails unconstitutional discrimination against religious schools. Though the Colorado Supreme Court held that “pervasively sectarian” schools must be excluded from public funding, the Institute for Justice points out that the U.S. Supreme Court has not only ruled that “pervasively sectarian” options may be included in an otherwise neutral student aid program, but it also “strongly suggest[ed] that excluding such options would itself be unconstitutional” in Mitchell v. Helms (1999):

[A] focus on whether a school is pervasively sectarian is not only unnecessary but also offensive… . [T]he application of the ‘pervasively sectarian’ factor collides with our decisions that have prohibited governments from discriminating in the distribution of public benefits based upon religious status or sincerity. 

In addition, the dissenting justices in Colorado argued that the majority made “a more serious error” in refusing to consider whether the Blaine Amendment “is unenforceable due to possible anti-Catholic bias.” While the majority held that it was sufficient that the “plain language” of the provision is not biased, the dissenters note that they “the U.S. Supreme Court has made it clear that allegations of such animus must be considered, even where the ‘plain language’ does not invoke religion.” 

It is likely that litigation over the DougCo voucher law will continue for quite some time. For now, the Douglas County Board of Education should consider an alternative means to expand educational choice that rests on much firmer constitutional ground: a scholarship tax credit law.

To learn more about why scholarship tax credit laws withstand constitutional scrutiny, watch this short film by the Cato Institute:

Live Free and Learn: Scholarship Tax Credits in New Hampshire

* Technically, the decision was a 3-1-3 split, with six justices holding that the plaintiffs lacked standing to challenge the law on statutory grounds, and three justices holding that the voucher law was unconstitutional on the merits, and one justice holding that the plaintiffs had standing to challenge the law on statutory grounds and that the voucher law violated the statute in question. Throughout this post I’ve referred to “the majority” with regard to the merits, though only a plurality actually held that the law was unconstitutional.

This morning I was on the steps of the Supreme Court, as I have been each of the decision days starting last Monday. It’s a real spectacle, with protestors and counter-protestors, interns running from the Court’s press office to give their media principals slip opinions, and phalanxes of TV cameras, bright lights, screens, and assorted technical accoutrements. For someone whose job includes digesting and commenting on legal opinions, this last week of the high court’s term is pretty much the Super Bowl.

Except today didn’t feel that way. After Obamacare on Thursday and same-sex marriage on Friday, today was the most anticlimactic “last day of school” since I’ve begun doing this.

That’s not to say that the three cases decided today were unimportant, either legally or politically. Indeed, until the Court took up King v. Burwell and Obergefell v. Hodges, each of them would’ve been considered among the “big ones” for what was, to that point, a low-key term. After all, we’re talking about the death penalty, redistricting, and major environmental regulations. (And also the Court announced that it will again take up Fisher v. UT-Austin, the racial-preferences case that is set to become one of next term’s blockbusters.)

Let’s take the cases in the order they came:

  1. In Glossip v. Gross, the Court rejected a challenge to one of the drugs used by Oklahoma in administering lethal injections, arguing that its use violated the Eighth Amendment’s prohibition on “cruel and unusual punishment.” Justice Alito wrote a fairly technical opinion for the 5-justice majority based on two grounds: (1) the death-row inmates failed to identify an alternative method of execution that entails a lesser risk of pain; and (2) the district court didn’t clearly err in finding that they hadn’t established that the challenged drug was ineffective in rendering the executee unable to feel pain. Standard stuff, with which the four liberal justices – acting in lockstep as they always do in big cases – disagreed. But then Justice Breyer, joined by Justice Ginsburg alone, took issue with the constitutionality of the death penalty altogether, to which Justices Scalia and Thomas each wrote rejoinders. “Welcome to Groundhog Day,” Scalia begins before stating that Breyer’s opinion is “full of internal contradictions and (it must be said) gobbledy-gook” and concluding that Breyer “does not just reject the death penalty, he rejects the Enlightenment.” Suffice it to say, read the whole thing.
  2. Next, in Arizona State Legislature v. Arizona Independent Redistricting Commission, the Court rejected a challenge to an Arizona voter initiative that, to combat political gerrymandering, took the redistricting process out of the state legislature and gave it to a new (and supposedly independent) commission. The lawsuit claimed that this independent commission violated the U.S. Constitution’s Elections Clause, which gives authority to regulate the times, places, and manner, of congressional elections to the “Legislature” of each state. Justice Ginsburg, again for a 5-justice majority, found that the law-making power was shared by the people and the legislature. Chief Justice Roberts authored the principal dissent and noted on its first page that the majority’s position “has no basis in the text, structure, or history of the Constitution, and it contradicts precedents from both Congress and this Court.” Well, then: tell us what you really think! Justices Scalia and Thomas then each dissent (and join each other’s opinions) to take issue with the legislature’s standing to bring this case in the first – a pair of opinions that will be studied thoroughly given the increasing inter-branch lawsuits being brought at both the state and federal levels.
  3. Finally, in Michigan v. EPA, Justice Scalia gets to write a majority opinion (as he did on Friday, it must be said – in the Armed Career Criminal Act case that was eclipsed by Obergefell). Put simply, the EPA cannot impose billions of dollars of regulatory costs on energy production without considering those costs at all in deciding whether to promulgate the challenged rule. This ruling stops the Obama climate-change regulatory agenda in its tracks, as my colleague Andrew Grossman describes more fully in a just-posted statement. The four liberals, through the witty pen of Justice Kagan, dissent. More interestingly, Justice Thomas writes a separate concurring opinion to question the wisdom of Chevron deference – deferring to agency interpretations of statutes – which dovetails with the one small silver lining of Chief Justice Roberts’s King opinion.

In short, even if the last day of term was overshadowed by its penultimate days, it still produced high drama: each of the three rulings split on 5-4 lines with Justice Kennedy as the swing vote, and each produced memorable concurrences/dissents, particularly by Justice Scalia. 

That also means that Chief Justice Roberts, as he did on marriage and disparate-impact in housing – the “undercard” to King on Thursday – returned to the conservative fold. (Those who think that John Roberts is “liberal” or has “evolved” while on the bench, like Justice David Souter and other Republican appointees, are simply wrong.)

Finally, the ruling in the EPA case clinched a winning record for Cato in briefs we filed in merits cases this term. We went 8-7, which is down from the previous two years but still a heckuva lot better than the government, which went 9.5-12.5 (it won part of one complicated case). In other words, even if the term will be remembered for King v. Burwell – and Obergefell, where the government wasn’t a party – it wasn’t a bad year for liberty.

In a 5-4 decision today, the Supreme Court struck down the Obama Administration EPA’s signature “Mercury and Air Toxic Rule,” which regulates emissions by fossil-fuel-fired power plants. Before regulating, EPA was obligated to decide whether regulation under one the Act’s most burdensome programs was “appropriate and necessary.” EPA interpreted that language to preclude it from considering the costs of regulation—some $10 billion per year, in exchange for $4 million or so in direct benefits. That interpretation, the Court decided, was ludicrous.

The decision may well leave the Obama climate agenda in tatters. Why that is requires a bit of explanation. In the usual case when the Court finds a rule to be unlawful, it vacates the offending action—in other words, deprives it of legal force. But that’s not what the Court did here. Instead, it sent the case back down to the D.C. Circuit for further proceedings, knowing full well that that court will follow its usual practice of “remand without vacatur”—in other words, let the agency fix any flaws in its rule while leaving the rule in place.

This is a very big deal. The centerpiece of the Obama Administration’s climate agenda is EPA’s so-called “Clean Power Plan,” which aims to cut power plants’ carbon-dioxide emissions by around 30 percent and force the phase-out of coal-fired generation. But the statutory authority that EPA claims supports this effort explicitly carves out any regulation of facilities that are already subject to regulations like the Mercury Rule. So if the rule remains in place—as seems likely—then the Clean Power Plan should be dead in the water.

But there’s a more subtle, and perhaps more important, reason to expect trouble ahead for the Clean Power Plan. The Supreme Court’s failure to vacate the Mercury Rule reflects its recognition that the bulk of the rule’s costs—and it was one of the most expensive government regulations ever—has already been borne by industry. So there’s no urgency, at this point, to putting the rule on hold; to the contrary, doing so would be disruptive. But the flip side is that this means utilities and their customers spent tens of billions of dollars complying with a regulation that was always unlawful. One can imagine that the Court won’t be eager for that to happen again. And one can also imagine that the Court’s decision today is a shot across the bow of the D.C. Circuit: when the next billion-dollar rule comes up, and there’s any legal question about EPA’s authority, put the rule on hold so the courts have a chance to do their business. More reading-between-the-lines: if you don’t, we will.

The Clean Power Plan is expected to be finalized in late August, and challengers will ask the D.C. Circuit for a stay just as soon as they can. If that happens, the rule most likely won’t go into effect during the Obama Administration and, depending on the results of the next election, may never go forward.

And that’s why today may be the beginning of the end of the Obama Administration’s climate agenda.