Tuesday, June 27, 2017

Repeal First, Explain Later: The Trump Administration and the Clean Water Rule

EPA and the Army Corps of Engineers just released a proposal to repeal the Clean Water Rule and to return to previous regulations.  The Clean Water Rule (also known as the WOTUS Rule) would have clarified the scope of federal regulatory jurisdiction under the Clean Water Act.  It was one of the Obama Administration’s signature environmental initiatives, and it was one of candidate and then President Trump’s signature targets.  So the emergence of this proposal is no surprise.  Nevertheless, the contents of the new document are surprising in several ways.

First, I’m not sure I have ever seen a notice of proposed rulemaking that makes so little effort to justify the rule it proposes.  EPA and the Corps seem to have offered two, and only two, justifications for switching from the newer regulations to the old ones:

  • First, they want to think a little bit more about the implications of Clean Water Act section 101(b), which affirms the importance of state involvement in water quality protection;
  • Second, they worry that keeping the new rule could cause confusion if, as I think is likely to happen, the Supreme Court rules that the Sixth Circuit Court of Appeals does not have jurisdiction over challenges to the old rule.

The first rationale isn’t really a justification at all; one could do that thinking with the new or the old regulations in place, and the notice of proposed rulemaking does not even try to explain why the old regulations are more consistent with section 101(b).  The second rationale is only slightly less sketchy.  In the most confusing possible scenario, the Sixth Circuit would lose jurisdiction over the challenges, the federal district court cases would not be consolidated, and those district court cases would lead to conflicting results, so that some parts of the country are working under the new regulations and others under the old ones.  But that still means just two systems in place, and they really aren’t very different.  Whether that’s more confusing than operating under the old regulations—which were widely, if somewhat unfairly, lambasted for being confusing—is a tricky question, and a question the notice does not even try to answer.

In short, the agencies’ basic proposal is to repeal now and think and explain later; not once do they try to explain why the old regulations, which they would put back in force until they come up with a new approach, are worth readopting.  To put it kindly, that is a fairly novel approach to administrative law.  It also is an impossible approach to reconcile with the basic administrative law principles that agencies must offer reasonable explanations for the legal rules they adopt.

Later on, the notice offers a few more gems.  It claims that this change “will not have a significant economic impact on a substantial number of small entities.”  I think that might actually be true, but it’s completely inconsistent with the overheated rhetoric previously coming from the Clean Water Rule’s opponents, who argued, in then-Speaker John Boehner’s fairly typical words, that the Clean Water Rule would “place[] landowners, small businesses, farmers, and manufacturers on the road to a regulatory and economic hell.”  In their defense, the agencies might try to say that the lack of impact arises because the rule is already stayed, but it’s hard to reconcile that claim with their argument that the repeal is necessary largely because the stay might be lifted.  

Next comes the claim that “[t]his action does not have federalism implications.”  So much, then, for the other justification of the rule: if the other key purpose of this repeal is to think about the federalism implications of Clean Water Act jurisdiction, how can the repeal be completely lacking in federalism implications?  Either these claims are false, or the stated justifications are smokescreens (or both).

For months, this administration has suggested, in its rhetoric, that it had little respect for the rules of administrative law.  Today’s action suggests, probably to the surprise of no one, that the rhetoric wasn’t just bluster.

- Dave Owen

June 27, 2017 | Permalink | Comments (0)

Monday, June 5, 2017

Water is the New Carbon

How do we tax water consumption?  And how should we?  These aren’t questions that either water lawyers or tax lawyers are accustomed to thinking about.  Water lawyers do think, sometimes, about using economic incentives to adjust water use patterns, but they typically assume that those incentives would arise through water trading or through pricing by utilities.  Tax lawyers and law-and-econ types, meanwhile, have put quite a lot of thought into carbon taxes, but water rarely seems to enter their discussions.

One might think that mutual lack of interest arises because the fields are completely disconnected.  But they’re not.  A variety of tax code provisions do affect water consumption.  Some do so directly—there’s a production tax credit for drinking water, for example—and some, like the mortgage interest deduction, do so indirectly.  All of the interconnections may not amount to much, at least when viewed in comparison to aggregate tax revenues or aggregate water consumption, but they do exist.

And it’s interesting to consider whether more connections should exist.  After all, many of the arguments that have made carbon taxes a popular idea (in some circles, at least) also apply to water consumption.  In an era of water scarcity and conflict, we would do well to use less water, and economic studies suggest that the persistent pressure of tax liability could promote more water conservation.  Taxation also would generate revenues, which could serve a variety of important ends—reducing other taxes, for example, or funding badly-needed upgrades to water infrastructure.  The devil, of course, would be in the details, but the basic concept of water consumption taxation is sound.

Or, at least, that’s the argument I make in a recent paper.  The paper identifies ways existing tax laws intersect with water law and then makes a broad argument for more ambitious reform.  That argument is grounded in law and policy, not politics, and I realize that water taxation would be a tough political sell.  But if taxes are, as Justice Oliver Wendell Holmes once put it, “what we pay for civilized society,” then taxing water consumption might be a good way to pay part of that price.

June 5, 2017 | Permalink | Comments (0)

Thursday, June 1, 2017

Jobs, Consumption, and the “Angry” Trump Voter

This post first appeared on The Rural Environment on May 31, 2017 (you can subscribe to posts from The Rural Environment here: https://ruralenvironment.net)


In President Trump’s inaugural address, he stated: “We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs.” Trump blames job loss on “bad” trade deals, like NAFTA, and economists have expressed great concern regarding Trump’s persistent threats to companies that might do business outside the United States. Trump voters—and particularly those who have been characterized as “angry” rural conservatives that increasingly vote Republican—are not likely comforted by the fact that it is unclear if American job loss is attributable to trade or technology or some combination of the two. They just care that the jobs have gone away. I know these areas. I am from there. Grove Hill, Alabama (Clarke County), has a population of 1,200 people in the poorest and most rural part of the state. But it is difficult for me to fully empathize with rural anger on jobs, primarily because our material-obsessed society has led to overconsumption that has undermined the ability of rural Americans to set aside income and grow household wealth. The failure of conservatives to adhere to the long-standing conservative tenant of fiscal responsibility at least partially explains the rural American plight. It is a failure in personal responsibility.

Both Democrats and Republicans have supported liberalized trade policies over the last thirty years, and these policies have given Americans one thing that they all seem to want—cheaper goods. As the price of goods has dropped dramatically in recent decades, per-capita consumption has risen. Prices of most goods have fallen almost every year since NAFTA, and “clothes now cost the same as they did in 1986; furnishing a house is as cheap as it was 35 years ago.” With cheaper goods in supply, Americans have increased demand. While many residents of Grove Hill may be “angry,” when I visit I see many people of otherwise limited means with flat-screen TVs, new Ford F-150s, smartphones, or many other items that have come to symbolize American prosperity. I doubt rural parts of key electoral states like Michigan, Wisconsin, and Pennsylvania are much different.

The consumptive patterns of Americans, in turn, have significant environmental consequences. By some estimates, if everyone on the planet consumed as much as the average American, we would need about 4 earth’s worth of resources to sustain demand. Consumption directly contributes to water pollution, air pollution, habitat destruction for species upon which we depend (for medicines and other ecosystem services, like pollination), hazardous wastes, and a host of other environmental problems. The environmental strain from overconsumption causes American taxpayers to turn around and expend even more income to fund basic environmental regulatory programs aimed at cleaning up the mess. So, overconsumption results in a double tax—we overspend on unessential items, undermining household wealth, and then must expend even more income to keep consumptive behaviors from harming human health and welfare.

But we should ask: has rural America capitalized on access to cheaper goods, padding household savings accounts to absorb a job loss until families can make a suitable transition to a new job or a new location? Most have not. Consider that at the time of the first Reagan administration, the bottom 90% of households saved 10% of their income. By 2006, their savings rate dropped to nearly negative 10% (though it has since rebounded to slightly above 0%). While rural areas may not be as poor as the narrative Trump used to stoke “rural anger,” rural counties often have even lower savings rates than average American homes. Blaming low savings rates on income stagnation or a host of other prevailing theories is insufficient (in the 1990’s income grew even as savings continued to plummet). So rural America should turn its anger into introspection and consider how personal decisions have contributed to its plight. And voters of all stripes are now primed to better understand the choice society faces between jobs and cheap goods.

U.S. goods are cheap because they can be made more cheaply elsewhere. One result is job loss, and it is difficult to have both the cheapest goods and lots of jobs down the street. Soon after NAFTA was passed, Camptown Togs, a textile mill in Grove Hill, closed. Walmart moved in, and two Walmart Supercenters are now located in Clarke County (total population, 25,000). Jobs were lost. Many other “mom and pop” stores disappeared from Grove Hill city streets. The fabric of the community was damaged, leading not only to job and resident losses but also increases in crime and substance abuse. Southwest Alabama is the poorest region of one of the poorest states in the country. But what do I see in abundance when I visit there? Flat-screen TVs, new Ford F-150s, and smartphones.

In recent decades there have been some fairly visible instances of disdain for the French arising from conservative circles (who can forget “freedom fries“?). Nonetheless, when teaching in France a few years ago I was struck by how proud the country is to protect local shops and to combat Walmart and Amazon from putting the mom and pop retailers out of business. As I discovered, a bag of potato chips may cost 3 times as much in France as it does at a U.S. Walmart, but local shops abound. Perhaps we don’t need to eat all those potato chips after all. And pricing can be a useful tool to signal what products we truly need versus those we merely want. In the end, there is a trade-off between local jobs and cheap goods, and Americans need to carefully consider their options—to be more protectionist for the sake of maintaining jobs and (perhaps?) the fabric of rural communities or to change consumption and saving patterns to capitalize on access to cheaper goods to grow household wealth. Conservative America in particular needs to look inward, since it has elected a man whose rhetoric is the antithesis of the free-market principles conservatives have touted the last few decades.

Ultimately, rural Americans cannot have their potato chips and eat them too. They should exercise the personal responsibility long-touted by conservatives and not place a disproportionate degree of blame on trade and job loss for their plight. They must question whether they really want to turn to a Trump government to interfere with free markets to save them, because that sounds a lot like a stereotypical liberal platform (mirroring a general take home from the New York Times best seller Hillbilly Elegy). Excess consumption harms both household wealth and what was once a fundamental tenant of conservative philosophy—conservation. Jason Clay of the World Wildlife Fund has noted that humans currently consume 1.33 earth’s worth of resources, and that “if we were farmers, we’d be eating our seed. If we were bankers, we’d be living off the principal, not the interest.” Do American consumption and saving patterns mirror foundational principles of conservative philosophy? Not exactly. Rural conservatives have chosen to consume, and not to conserve. The job loss resulting from trade policies that make goods cheap, and the reduced household wealth resulting from reckless excess consumption, have made many of them angry. But by blaming their plight on trade, rural Americans may be unwittingly making their lives even more expensive, rejecting longstanding principles of conservatism, and harming the environment in the process.

– Blake Hudson

June 1, 2017 | Permalink | Comments (0)