What You Should Be Reading: June 2024

Welcome to “What You Should Be Reading,” a monthly series in which the Taxpayers Protection Alliance finally surfaces after a frantic Supreme Court season to deliver an evergreen – albeit slightly tardy – roundup of compelling new public-policy research.

June’s edition (yes, we know it’s July) includes the origins and future of the executive branch’s incursions on congressional power, the latest on the American broadband ecosystem, and the Securities and Exchange Commission’s (SEC) imposition of vast compliance costs for…no discernable benefit.

So, without further ado…

American Enterprise Institute: “How Congress Lost, Part III: Hamiltonian Energy and the Washington Administration”

Conservatives have spent quite a bit of time in recent years advocating a revitalization of the Constitution’s separation of powers. Primarily, their efforts seek to drain legislative power from the executive branch and to return it to its rightful vessel, Congress.

The story of the accumulating executive power – usually amassed at Congress’s expense – begins with the First Congress. In the latest paper in a series on diminishing congressional power, American Enterprise Institute (AEI) scholar and historian Jay Cost examines these earliest power shifts from Article I to Article II.

James Madison believed the legislature inherently to be by far the most powerful branch and, therefore, the most likely to encroach on the others’ rightful constitutional powers, Cost writes. Consequently, Madison underestimated the executive branch’s potential for overreach. Writing to fellow Virginian Edmund Pendleton, he wrote, “if the federal Government should lose its proper equilibrium within itself, I am persuaded that the effect will proceed from the Encroachments of the Legislative department.”

Enter Alexander Hamilton, the first Treasury secretary and the architect of the early republic’s economic policy. As Cost relates, Hamilton leveraged his own personal vigor and the executive branch’s institutional advantages to exert immense influence – entirely unanticipated by Madison – on Congress and national policymaking. Hamilton found such success that, by 1791, Madison feared the rise of monarchy.

Cost’s account suggests a particularly apt antidote to today’s congressional lethargy. He writes:

“Hamilton leveraged the executive branch’s superior information-gathering power to influence Congress. The reports he released on public finance and taxation between 1790 and 1792 were incredibly detailed, based in no small part on the information collected through the various executive agents spread across the entire country. If members of the legislature wanted to challenge Hamilton on the specifics, they struggled to do so effectively. The facts on the ground, reported to the executive from multiple agents, were released through Hamilton. Many skeptics of his policies, including Madison, doubted Hamilton’s estimates of the cost of assuming state debts, but there was no alternative standard that had as much credibility as Hamilton’s estimate.”

Today, Congress struggles with a similar problem. It lacks the expert staff found at such regulators as the FCC or the Environmental Protection Agency. This dearth incents members of Congress to provide sweeping, quasi-legislative discretion to bureaucrats. In 1795, Cost notes, Congress established its first committee – House Ways and Means – to retrieve political influence lost to Hamilton. So, too, could a modern Congress increase its own technical heft and create the needed institutional capacity to, well, actually legislate.

Read the full piece here.

International Center for Law & Economics: “Dynamic Competition in Broadband Markets”

The state of the American broadband industry is strong. That is the finding of a new paper from the indominable International Center for Law & Economics (ICLE), authored by Eric Fruits, Geoffrey A. Manne, Ben Sperry, and Kristian Stout. However, this strength may prove fleeting. The “state of vibrant competition is at risk from recent and forthcoming regulations,” ICLE reports. “Without a course correction, we are likely to see slowing or shrinking broadband investment, reduced innovation, and the exit of small and rural providers.”

In recent years, internet speeds and availability have improved continuously, accompanied by price disinflation. “The median fixed-broadband connection in the United States delivers more than 207 Mbps download service, an 80% increase over pre-pandemic median speeds,” ICLE writes. 97.6 percent of American households can access home internet, 93.8 percent of locations can access speeds of at least 25/3 Mbps, and 88.5 percent of locations can access speeds of 200/25 Mbps. Further, Americans enjoy ever-increasing choice between different providers.

Bad regulation, which distorts incentives and slows investment, can hamstring these substantial ongoing gains. The Federal Communications Commission’s (FCC) attempts to micromanage broadband markets through its Title II and Digital Discrimination orders will hamstring both private and public-sector efforts to accelerate deployment. Among other issues, these policies, as well as the National Telecommunications and Information Administration’s guidelines for federal broadband subsidies, include de facto price controls.  And as Econ 101 shows, price controls tend to constrain supply and dampen innovation.

“[T]he United States is at risk of slowing or shrinking broadband investment – thereby reducing innovation and harming the very consumers that policymakers claim they seek to help,” ICLE writes.

Read the full piece here.

Amici in Brief: More SEC Overreach

In March, the SEC finalized a long-awaited rule requiring covered businesses to disclose extensive data relating to carbon emissions. While the rule’s finalized text improved notably from its draft, the financial regulator’s ill-conceived foray into climate policy all but invited legal challenges. Several plaintiffs filed suit, and the Eighth U.S. Circuit Court of Appeals received the consolidated case.

Benjamin Zycher, a senior fellow at AEI, filed an amicus brief siding with the plaintiffs, urging the Eighth Circuit to rule the disclosure rule arbitrary and capricious. While the regulation will impose substantial compliance costs he writes, the disclosures will not (in practice) provide helpful material information concerning industry’s impact on the climate.

“[A] given firm’s GHG emissions pose no such risks because the future climate effects of those emissions are effectively zero as a theoretical matter, and do not differ from zero as a matter of statistical significance,” writes Zycher. A disclosure of this less-than-nugatory impact hardly qualifies as “material.” Even the “elimination of all GHG emissions from all U.S. natural gas and petroleum systems by 2050 would reduce global temperatures in 2100 by 0.0076°C,” which “[b]ecause the standard deviation of the surface temperature record is 0.11°C…would not be detectable,” he states.

Any disclosure regime will require businesses to choose between various methods of emissions calculations – a task for which they lack competence. This would likely encourage wide adoption of whatever strategy minimizes regulatory risks, subordinating scientific rigor to compliance concerns. Moreover, “Because climate science is massively complex, analysis of such risks for public companies would be highly speculative,” Zycher notes. “This means that conclusions drawn from such analysis would not provide information material for investment decisions.”

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.