**Written by Doug Powers
Today in stories that will come as a total shock to progressive economists gives us this study just released by Captain Obvious:
When Seattle officials voted three years ago to incrementally boost the city’s minimum wage up to $15 an hour, they’d hoped to improve the lives of low-income workers. Yet according to a major new study that could force economists to reassess past research on the issue, the hike has had the opposite effect.
The city is gradually increasing the hourly minimum to $15 over several years. Already, though, some employers have not been able to afford the increased minimums. They’ve cut their payrolls, putting off new hiring, reducing hours or letting their workers go, the study found.
The costs to low-wage workers in Seattle outweighed the benefits by a ratio of three to one, according to the study, conducted by a group of economists at the University of Washington who were commissioned by the city. T
On the whole, the study estimates, the average low-wage worker in the city lost $125 a month because of the hike in the minimum.
The fact that the city needed to shell out taxpayer money to commission a study about that speaks volumes. You just know the city’s response to the study will to raise the minimum wage even more to try and make up the difference.
**Written by Doug Powers
A question no one’s asked out loud with regard to the ongoing Illinois state budget negotiations is what happens if — or when — the state becomes unable or unwilling to pay its bills a few years down the road.
It’s clearly on the minds of investors who own Illinois debt: The price of the state’s bonds has been falling and the rating agencies recently downgraded its debt to just one step above junk. Both of these are proximate responses to the state’s budget impasse, which is entering its third year.
But another reason for the growing wariness of investors toward Illinois debt emanates from developments in Puerto Rico, which asked for and received legislation from the federal government to assist with its debt burden.
The recent budget put together by the island’s government- — with the blessing of the congressionally appointed Fiscal Oversight Board — revealed that the commonwealth’s plan to reform its finances is to simply stiff its bondholders. The island’s pensioners are largely held harmless and all other expenditures actually increase.
While bondholders fear — and Illinois’ pensioners would presumably welcome — a similar resolution should Illinois go bust, the more important precedent established by Puerto Rico is that when the federal government gets involved, the state’s constitution will get tossed aside. And that should worry both pensioners and taxpayers.
Its residents had better hope not.
Puerto Rico’s constitution explicitly declares that its general-obligation bondholders are to be paid ahead of all other obligations. This seemingly iron-clad promise was one reason why it could borrow money for so long at such low rates despite its deteriorating fiscal health. However, more than $2 billion in annual interest payments — 80 percent of what’s due in 2017 — will now be forgone for at least the next five years, constitution be damned.
Illinois’ constitution does not have such a promise to its bondholders, presumably because there is no mechanism for a state to default on its bonds, and none has done so since the Depression. However, Illinois’ constitution does expressly prohibit the state from impairing promised benefits to either current or future pensioners.
If the federal government were to intervene in an Illinois budget crisis, it’s likely that its bondholders will take a hit, but it is also likely that its rigid state pension protections and prohibition of progressive taxation would be on the table as well — both of which the state constitution expressly protects.
Such a scenario may not be too far away: The next recession-cum-stock market correction will cause the state’s tax revenues — as well as its pension fund value — to fall precipitously, the latter probably to a point where no achievable rate of return on the remaining pension funds could achieve solvency. Such a development could make it impossible for the state to borrow money at any rate, and the federal government would be forced to intervene. Should that occur, it’s a safe bet that everyone will share in the pain — taxpayers, bondholders, and public pensioners alike.
The best case for current and former state workers in such a scenario would be the pension reform bill invalidated by the State Supreme Court in 2015, which ended automatic cost of living increases, increased the retirement age and changed the determination of a worker’s final salary for determining pension benefits. But it is easy to see pension adjustments going much further — perhaps via an ex post reduction of benefits of those who spiked their final salaries to boost pensions or a diminution of benefits for those with two or more state pensions.
And once the feds jettison the prohibition on progressive tax rates, Illinois will doubtless come to resemble New Jersey, with top marginal income tax rates approaching 10 percent.
Investors are right to be wary of holding Illinois bonds, but the real lesson from Puerto Rico’s fiscal crisis is that constitutional promises mean nothing once the federal government intercedes. The state’s pensioners and taxpayers should be as worried as the state’s bondholders.Ike Brannon is a visiting fellow at the Cato Institute and president of Capital Policy Analytics.
Even if President Trump manages to get his health reform through Congress, there is no guarantee it will survive the courts. Though the bill is still far from passage, the groundwork is already being laid to challenge its constitutionality. New York attorney general Eric Schneiderman has pledged to challenge the reductions in funding for reproductive-health services. Other Democrats have challenged the constitutionality of the bill’s Medicaid provisions. Some have suggested that the “lapsed coverage” surcharge for the uninsured might be unconstitutional.
If this bill is enacted — and that is a big if — opponents will locate every conceivable basis to contest the law, so it will be held up in litigation, potentially, until after the next election. While no one can predict how the Supreme Court will act, President Trump and Congress can take steps to minimize that uncertainty, and ensure a smoother implementation. Specifically, they can take a page out of President Clinton’s failed health-care reform, and channel all litigation through a single three-judge panel, with a direct appeal to the Supreme Court. This approach would, as a Clinton-administration official noted two decades ago, bring “swift answers to the general constitutional challenges to the plan.”
Today, virtually all federal constitutional litigation begins before a single district-court judge, with an appeal to a three-judge panel. However, for much of the 20th century, Congress let litigants cut to the chase. Under the Three-Judge Court Act of 1910 and other contemporary bills, constitutional challenges would begin before a three-judge panel. As the practice developed, each panel would consist of two district-court judges and a single appeals-court judge. Within this framework, litigants would bypass any intermediate review, and there would be a mandatory review by the Supreme Court. In 1976, however, Congress severely curtailed their usage, retaining them only for challenges to apportionment maps.
If this bill is enacted - and that is a big if - opponents will locate every conceivable basis to contest the law, so it will be held up in litigation, potentially, until after the next election.
This approach nearly made a comeback two decades later. In September 1993, the New York Times reported that the Clinton administration was “just beginning to understand the potential wave of legal challenges” to its soon-to-be introduced health-care bill. Walter Dellinger, who headed the Justice Department’s Office of Legal Counsel, wrote that the Times article was “unnecessarily alarming.” Indeed, the executive branch had already prepared a plan for “channeling attacks on the legislation as a whole” through a narrow path to the Supreme Court. Specifically, the bill would reinvigorate the old model.
Constitutional challenges to the Health Security Act could be filed only in the federal court in the District of Columbia (Section 5241). Critically, this three-judge panel would not be able to issue nationwide injunctions that halted the implementation of the law. Moreover, all challenges to the law from the country would have been consolidated before the same jurists, and must be filed within one year. After the initial trio ruled, the case would be appealed directlyto the high court. This approach allowed a quick, seamless review of the bill, which ensured a smooth implementation during that process. A decade later, the McCain-Feingold Bipartisan Campaign Reform Act employed a similar review process (Section 403), which urged the Supreme Court to “expedite [the appeal] to the greatest possible extent.”
Republicans should adopt the same amendment that was developed by the Clinton administration two decades ago: channel all constitutional challenges to the health-care bill to a three-judge panel, with a mandatory appeal to the Supreme Court. This approach would have three primary benefits. First, consolidating the appeals would eliminate duplicative, time-consuming, and expensive litigation. (These cost savings could allow such an amendment to survive the rules of the budget-reconciliation process.) During debates over the Affordable Care Act in 2009, Senate Democrats rejected a proposed amendment that would have allowed an expedited review of that health-care legislation. As a result of this decision, more than a dozen separate constitutional challenges were litigated in parallel for two years until the Supreme Court interceded. Regardless of what those lower courts did, the case would have ultimately wound its way to the terminus: With the vote of Chief Justice Roberts, the health-care law survived constitutional scrutiny.
Second, restricting the jurisdiction to a three-judge panel would eliminate the latest fad in federal litigation: the nationwide injunction. As illustrated with the travel-ban litigation, when different courts issue different injunctions with different scopes, there is often widespread confusion about what the state of the law is at any given time. Under this proposal, the three-judge panel could quickly resolve any constitutional questions, and allow the Supreme Court to opine on it. Preliminary injunctions, before a final resolution, would be unnecessary.
Third, this approach would eliminate the incentives for forum shopping. It is no coincidence that the constitutional challenges to President Trump’s executive actions have been filed in federal courts with a majority of Democratic-appointed jurists. Rather than dealing with dueling decisions from Hawaii, Seattle, or Brooklyn, litigants under this plan would face only judges in the District of Columbia. (In a twist of fate, the role of appointing two out of the three judges on the panel would fall to none other than Merrick B. Garland, the chief judge of the D.C. Circuit Court of Appeals.) The final call will be made by the Supreme Court — and it is better that we have the answer sooner, rather than later.Josh Blackman is a constitutional-law professor at the South Texas College of Law in Houston, an adjunct scholar at the Cato Institute, and the author of Unraveled: Obamacare, Religious Liberty, and Executive Power.