What You Should Be Reading: September 2024

Welcome back to “What You Should Be Reading,” a monthly blog series in which the Taxpayers Protection Alliance seeks refuge from the news cycle in a stack of insightful public-policy papers.

September’s edition includes the floundering of environmental, social, and governance (ESG) practices, the goods on the history of the American labor supply, and the (potentially) landmark age verification case at the Supreme Court.

So, without further ado…

American Institute for Economic Freedom: “The Incoherence of ESG”

The ESG fad sweeping corporate America is floundering – economically and intellectually. In a new report, Paul Mueller, a senior research fellow at the American Institute for Economic Research, explores the cavernous contradictions and empirical failures plaguing the ESG movement.

A committed disbelief in tradeoffs underlies ESG-driven investing and management. ESG activists assure regulators that fiduciary duties will be met, and funds managers that socially conscious policies will yield superb returns. They say nothing to the consumers whose energy bills balloon or the working-class retirees whose pension payouts shrivel.

This ill-defined – and often conflicting – triad of progressive aspirations for investing and corporate governance “is not a coherent framework of analysis but rather an umbrella label for a host of often unrelated ideological causes,” Mueller argues. Moreover, judging ESG’s implementation generally involves feels and vibes more than scientific measurement. Hence, in one 2022 ESG ranking, Exxon Mobil outscored Tesla. Tesla, despite its status as the premier electric car brand, “was penalized for lacking an explicit low-carbon strategy document.” Mueller reports (the analytic rigor is palpable). And even by ESG-friendly standards, gaming the system often preempts real change. Quoting a 2022 study, Mueller notes that “high ESG scores correlate with ‘the existence and quantity of voluntary disclosure…but not with the actual content of such disclosures.’”

Clear-eyed analysts have long noted ESG’s false promise of parity with traditional, returns-driven investing. However, the harm extends beyond Americans who invest. “Although higher prices are on people’s minds because of the recent spike in inflation created by loose monetary policy in 2020 and 2021, ESG advocates rarely mention how many of their recommendations ultimately increase prices and, in doing so, disparately impact the poor – including many minority communities,” Mueller writes. “Implementing environmental policies like more stringent limits on vehicle or power plant emissions, reducing carbon footprints by purchasing carbon offsets, or mandating more renewable energy use, increases the cost of doing business.”

As Terrence Keeley, formerly of BlackRock, put it: ESG does neither well nor good. And as Mueller concludes:

“Ultimately, we should disaggregate the ESG label and jettison the Social category altogether. Governance and Environmental concerns can then be addressed directly without the ideological baggage of DEI, ‘license to operate,’ ‘intersectionality,’ and the like. Proposals to subsidize renewable energy, restrict greenhouse gas emissions, or set net-zero targets would have to stand or fall on their own merits without being rolled into a broader ideological agenda. Advocates would have to articulate how their criteria advance the interests of shareholders, pensioners, and investors.”

Read the full piece here.

Fusion: “America is Still Working”

The question of what, if anything, ails the American workforce roils modern politics. Even as unemployment craters, and intergenerational prosperity surges, many politicians and public intellectuals argue that something is rotten for the American worker. To many workers themselves, something feels profoundly out of joint. However, what the issue is exactly – and whether it is of an economic, social, or some other character – remains unclear.

In a tour de force published in FUSION, the American Enterprise Institute’s Scott Winship goes to the bottom of the proverbial Mariana Trench on American labor trends – it’s a deep, deep dive. Winship reports that for much of the 20th century, sharply spiking productivity shortened the American work week. As productivity flattened, however, employers and workers settled into the commonplace 40-hours-per-week, 9-to-5 model.

“[S]trong productivity growth (and its continuation through the mid-1960s) facilitated the transition of the economy to an eight-hour day and forty-hour week,” Winship writes. “Absent productivity growth, steadily falling hours must produce lower earnings for workers or lower profits for employers (or both). But if workers can produce the same amount of value in less time, both they and employers can absorb a scaling-back of work hours.”

The 1960s brought another shift, the growth of a soft and cuddly leviathan: the welfare state. Such programs as disability insurance and Social Security remove workers from work, shrinking the labor supply.

“The nation’s rising affluence made it possible to provide retirement pensions, disability insurance, and a safety net for low-income seniors, disabled adults, and families with children,” Winship argues. “Sometimes reducing work was the point of these policies (as in the case of retirement and, for the most part, disability benefits). In other cases, reduced work may have been an unintended consequence (as when able-bodied adults chose to replace earnings with federal assistance).”

America must contend with prosperity that – in a historical anomaly – frees some citizens simply…to not work. The blessings of liberty and free markets do not come without questions. These questions surely have answers – although those answers for the moment remain elusive. But Winship’s deep research casts light into the previously shadowed corners of the issue at hand.

Read the full piece here.

Amici in Brief: Age Verification at the Supreme Court

Soon, the Supreme Court will, at long last, consider online age verification mandates. The current – and distinctly originalist – First Amendment jurisprudence – which lower courts have applied, time after time – holds such mandates to be unconstitutional. But many conservatives have, in recent years, questioned these precedents – including the U.S. Circuit Court of Appeals for the 5th Circuit, which vacated a lower court’s preliminary injunction of the Texas age verification law in question.

The 5th Circuit applied unorthodox reasoning to the Texas law, which applies to websites hosting explicit content. The appeals court analogized online age verification to in-person ID checks common at liquor stores or pornography shops and, consequently, employed a relaxed standard of review. This theory leaned heavily on a 1968 case, Ginsberg v. New York, which upheld a New York law forbidding vendors of pornographic magazines to sell to minors.

The Ginsberg analogy cannot hold together, argues the Cato Institute in an amicus brief. “Simply put, the issue in Ginsberg was whether children have the same rights to view sexually explicit content as adults,” the brief reads. “In this case, by contrast, the question is whether a state can subject adults to significant First Amendment burdens in the name of child protection.”

Without its foundation in Ginsberg, the 5th Circuit’s reasoning crumbles completely. It seemed far more concerned with the Texas law’s purported motive – to keep age-inappropriate content from children – than with its effects. However, the founding generation believed the Bill of Rights necessary to bind lawmakers even as they pursue legitimate ends. In most applications, its protections narrow not the ends, but the means.

Nobody objects to efforts to protect children online – so long as such efforts recognize tradeoffs and adhere to the Constitution.

Read the full brief here.

Note: TPA highlights research projects that contribute meaningfully to important public-policy discussions. TPA does not necessarily endorse the policy recommendations the featured authors make.