Richard Epstein Archives - Shopfloor

Gearing Up for the Health Care Vote

By | Briefly Legal, Health Care | No Comments

Megan McCardle, Atlantic Online, “CBO: Democrats Double-Counting Medicare Savings“:

The notion that the health care reform bill would make Medicare more solvent and also expand benefits never made any sense.  The health care reform bill makes cuts to Medicare, and uses them to pay for new spending; to the extent that we think we need to pay for, um, Medicare with cuts to Medicare, this bill actually weakens either the program, or our future budgets.

McCardle does a good job of explaining the complicated budget juggling involving trust funds. Bottom line, as per CBO: “To describe the full amount of HI trust fund savings as both improving the government’s ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings and thus overstate the improvement in the government’s fiscal position.”

University of Chicago law professor Richard Epstein at PointofLaw.com, “Impermissible Ratemaking in Health-Insurance Reform: Why the Reid Bill is Unconstitutional“:

In effect, the onerous obligations under the Reid Bill would convert private health insurance companies into virtual public utilities. This action is not only a source of real anxiety but also a decision of constitutional proportions, for it systematically strips the regulated health-insurance issuers of their constitutional entitlement to earn a reasonable rate of return on the massive amounts of capital that they have already invested in building out their businesses.

Unconstitutional and full of budgetary flim-flam. Thank goodness the Senate votes early Wednesday. Otherwise Christmas would be ruined.

UPDATE (7:10 p.m.): Sure, hurry up and vote. “WH putting health-care off until …February?

Attacking Preemption, the Opposite of Health Care Reform

By | Briefly Legal, Health Care | No Comments

A Forbes column by noted Chicago law professor Richard Epstein, writing about H.R. 1346 and S. 540, the Medical Device Safety Act, “A Sickly Medical Device Safety Act.” Epstein analyzes both Wyeth v. Levine and Riegel v. Medtronic as basically malpractice cases that were exploited and turned into cash-seeking legislation against the drug and medical device industries, respectively.

Judges constantly state that product liability law is supposed to make manufacturers bear the full costs of their product defects. But they have crafted bizarre, upside-down rules that make drug companies and device makers bear the full costs of the mistakes of downstream actors whose actions take place outside of their control. Fix state tort law, and you can forget about federal preemption. But with loopy tort law a fixture at the state level, Congress has to act. It should let the MDSA die. And it should restore parity by offering the same statutory protection to drug manufacturers that it now supplies to device manufacturers.

Elsewhere in the world of preemption, the Heritage Foundation has posted the video of its panel discussion last week, “Hurting or Helping Consumers? Destroying Federal Preemption One Industry at a Time.

Card Check: Small Employers, Big Employers Agree

By | Labor Unions | One Comment

Mickey Kaus, a reform-minded Democrat, is one of the few almost-mainstream-media giving the Employee Free Choice Act an extended, serious examination. After attending a public discussion on the legislation, he writes at Kausfiles, “Card Check” Not as Bad as Thought! It’s Worse.”

The arbitration parts of the card check bill are so vaguely drawn that nobody knows who the arbitrators will be. The job appears to be delegated entirely to the Federal Mediation Service. The FMS might decide to use its own employees. It might decide to use arbitrators from the private sector selected along more traditional lines. The two breakfast debaters (Prof. Richard Epstein and attorney Anthony Segall) did seem to agree that, since thousands of arbitrators might quickly be needed for the expected explosion of mandatory arbitration, it’s unlikely they would all be newly hired GS-12s. But they don’t know.


I have been worried that big business would sell out small business in the coming negotiations on a “compromise,” watered-down “card check” bill that everyone expects. Prof. Epstein suggested that, if anything, big business is more terrified of the arbitration provisions than small business–simply because big businesses are more complicated and therefore they have a lot more to lose if an unfamiliar arbitrator suddenly steps in and starts messing around and running things. … P.S.: But doesn’t that suggest another possible sell out, in which the arbitration provisions of “card check” get dropped while the more notorious anti-secret ballot provisions stay in? I don’t know. If you are Wal-Mart or Toyota I would think you’d be threatened by both provisions.

Judging from the reaction of NAM members, there’s nothing in the when-will-it-be-introduced? bill to invite compromise of any sort, but small businesses are especially concerned about the card check provisions. If you’re a company with 10 or 20 employees, union organizers could hit the softball team’s game on Wednesday and you could be facing a new union by Monday — with pressure on to get that new contract in place within four months or have an arbitrator set your wages and benefits for two years. In a highly competitive industry, the increased costs could simply kill the company.

Card Check: On Legal and Economic Grounds, a Bad Idea

By | Labor Unions | No Comments

Richard Epstein of the University of Chicago Law School has completed the book-length analysis, “The Case Against the Employee Free Choice Act,” available as the “U of Chicago Law & Economics, Olin Working Paper No. 452

This monograph offers a comprehensive critique of the Employee Free Choice Act (EFCA) now before Congress. EFCA would fundamentally alter the current labor law in three ways. The first of these is to allow unions to opt for recognition through a card check instead of the secret ballot currently required under the National Labor Relations Act. The second would institute a regime, if the parties do not reach an agreement within 130 days after the union is recognized, of compulsory arbitration and arbitrator-imposed requirements and restrictions, binding for a two-year period. The third would increase the current sanctions for unfair labor practices committed by employers during an organizational campaign. My major thesis is that all of these changes are unwise deviations from the status quo that will introduce unwise dislocations in labor markets that are not justified by the current union claim that the decline of unionization in the private sector is largely attributable to improper employer intransigence. The better explanations focus on structural changes in ordinary labor markets in an increasingly globalized economy, which shows similar downturns in union representation in developed nations, often operating under different legal regimes.

Epstein’s work received financial support from Alliance to Save Main Street Jobs headed by the HR Policy Association and including the Retail Industry Leaders Association, the Real Estate Roundtable, the American Hotel and Lodging Association, the U.S. Chamber of Commerce, the International Council of Shopping Centers, and the Associated Builders and Contractors. So thanks to those groups for helping spread the word.

Card Check: Special Report, Waning Support

By | Economy, Labor Unions | No Comments

Interesting chat yesterday on FoxNews Special Report among Fox commentators: Fred Barnes, executive editor of The Weekly Standard, Mara Liasson, national political correspondent of National Public Radio, and Mort Kondracke, executive editor of Roll Call.

The No. 1 topic, the Employee Free Choice Act.

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: Well, there was a reason for this rally today by the union people, and that’s because they have been losing ground. They need to make up for lost ground.

In the last congress, they had something like 230 cosponsors for the card check bill. This time they’re having trouble getting to 200 cosponsors in the House, even though there are more Democrats in the House than there were in the last congress.

And now you have five or six senators, most of them Democrats, who are now kind of queasy on it who weren’t before, and are talking about well, maybe there’s some alternative to it. So organized labor is trying to make up for lost ground.

There was a very interesting paper that was brought to my attention just the other day by a very, very prominent economist, who found that the higher rate of unionization is in a state — in other words, if the state has a fairly highly unionized state, the higher the unemployment rate.

The same thing happened during the New Deal, of course. It was great if you had a job, but a lot more people didn’t have jobs.

We’ll make a leap and assume Barnes is referring to “The Case Against the Employee Free Choice Act,” by University of Chicago Professor Richard Epstein. (Go here.)

The panel also talks about the difficulties Rep. Hilda Solis (D-CA) has encountered in being confirmed for Secretary of Labor. The Senate HELP Committee was supposed to vote her out at a 2 p.m. meeting, but the session has been proposed.

UPDATE (2:30 p.m.): Ah. That explains the rumors about more troubles. From USA Today, “Husband of Rep. Solis, Labor nominee, settles tax liens

Card Check and the Constitution: Now This is Rich

By | Briefly Legal, Labor Unions | One Comment

(Correction: We misidentified Connell as a man in the original post and have now corrected the gender-specific references. I apologize for the mistake. All the other points stand.)

At the AFL-CIO blog today, labor gal Tula Connell reacts to the arguments by University of Chicago law professor Richard Epstein (published recently in the Wall Street Journal) that the Employee Free Choice Act is unconstitutional. Connell doesn’t really respond or argue against Epstein’s legal case, she insults and then changes the subject. And then there’s this:

Some opponents of workers’ freedom to form unions seem to have forgotten that forming groups outside government—and corporate—purview is critical to a free nation. In Big Brother-speak, these corporate hacks are attacking the proposed Employee Free Choice Act—which would enable more workers to have the freedom to form unions—as unconstitutional.

“Big Brother-speak?” Snort. That term comes from a proponent of the Employee Free Choice Act, a bill designed to DEPRIVE workers of the free choice made possible by a secret ballot.

Connell’s basic message is war is peace, and now she’s accusing opponents of using Orwellian rhetoric!  

It’s as if she believes ignorance is strength.

Connell also calls Richard Epstein a “corporate hack.” Richard Epstein? Principled disagreement based on law and philosophy is apparently impossible in Connell’s world. But as we’ve said before, organized labor often goes too far, prefering to bully and shout instead of engage. Well, in the case of the Employee Free Choice Act that approach makes political sense, because labor can’t win on the merits. Better change the subject.

Which explains why Connell all but ignores the constitutional arguments made by Epstein. If we read it right, she suggests that freedom of association always trumps all other constitutional considerations, including freedom of speech. That’s not how we understand the law. But then, in Connell’s Oceanic world, freedom is slavery, so maybe there it does.

UPDATE (11:30 p.m.): Michael Janson, who recently earned a Ph.D. from the University of Pennsylvania School of Law, disagrees with Epstein, arguing on the merits in this letter to the editor in the Wall Street Journal.

Card Check: A Constitutional Challenge

By | Labor Unions | No Comments

A welcome examination appears in today’s Wall Street Journal of the legal and constitutional considerations involved in the Employee Free Choice Act. Richard Epstein, a professor of law at the University of Chicago, addresses the issues in the op-ed, “The Employee Free Choice Act Is Unconstitutional.”

Epstein’s critique of the card check provisions as abridging free speech rights is intriguing and of particular importance to small businesses. A card check campaign can be conducted clandestinely — think of how you could organize a shop of 20 people over a weekend just by going door to door — depriving an employer of his rights to make the case against unionization.

But Epstein’s analysis is even more persuasive when applied to the binding arbitration provisions. Under the Employee Free Choice Act, both employer and the newly recognized union would have to agree on a first contract within 120 days. If not, then a government arbitrator — an arbitration panel — imposes a two-year contract on both parties. Epstein:

The government-chosen panel could well impose terms that might cripple the firm competitively. Consider that the takings clause surely prevents the government from forcing any person to buy real estate for twice its market value from a seller. That same principle applies to this labor law: No government should be able to force a firm to hire labor at $50 per hour when the company is not willing to pay half that much.

Worse, the EFCA also permits the government arbitrator to strip the employer of all its standard management prerogatives on everything from subcontracting out to promotion policy. By flatly denying the employer any option to walk away, mandatory arbitration under the EFCA runs smack into the takings clause.

Arguments in the 2007 Congressional debate against the Employee Free Choice Act focused primarily on the card check provisions and their destruction of secret-ballot elections in the workplace. The anti-democratic nature of those provisions gave — and still gives — opponents a powerful political weapon, a campaign issue. People want to vote in private, period.

But as time passes, the forced arbitration provisions are coming to the fore. Employers recognize that an imposed contract eliminates the ability to operate a business the way they see fit, and a flawed contract could put them out of business, period. That practical threat, now combined with Epstein’s legal analysis, reveals the Employee Free Choice Act to be a serious, even existential threat to American businesses and a competitive economy. And it means the bill is not one that can be compromised, but only killed.