EPA Building

TL;DR: Ending Sue And Settle, Taxation Without Legislation, And Dividers Gonna Divide?

Ending Sue And Settle, Taxation Without Legislation, And Dividers Gonna Divide?

EPA Building

Here’s what you need to know…

Last week, Environmental Protection Agency (EPA) Administrator Scott Pruitt issued a directive to end so-called “sue and settle” practices within the agency. Hailed by business interests and conservatives as a “victory for democratic consent over legal extortion,” and lamented by environmental activists, this move will have a profound impact on energy and environmental policy battles well into the future.

So what is “sue and settle,” and how will Pruitt’s move to limit the practice change the strategies and tactics of environmental activists going forward?

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  • What Is Sue And Settle? Special interest groups use this strategy to file lawsuits in order to force federal executive agencies to adopt regulations that advance their interests and priorities. Rather than go to court, the groups reach a settlement with the agency that furthers their interests. In doing so, sue and settle circumvents the regulatory process set by Congress, avoids the transparency that comes with legislating, and allows for changes that otherwise would not be implemented to be enacted on a quicker timetable. Between 2009 and 2012, the Obama Administration’s EPA chose not to defend itself in at least 60 lawsuits brought against it by special interest advocacy groups, resulting in settlements that created 100 new regulations – including the Clean Power Plan – that are estimated to cost tens of millions, and even billions, of dollars in compliance costs.
  • So What About The Money? In addition to policy incentives, sue and settle also provides a major profit incentive for special interest groups. A 2011 Government Accountability Office report stated that millions of dollars were awarded to environmental organizations for litigation against the EPA between 1995 and 2010, including Earthjustice, Sierra Club, and the Natural Resources Defense Council. The practice is not uncommon among different interest groups, targeting different agencies. For example, the nonprofit Center for Food Safety, which files lawsuits over genetically-modified foods and farming practices, received more than half of its 2012 revenue from legal fees collected through successful litigation. The settling agency also covers attorneys’ fees for the groups, millions of dollars in the case of the Center for Food Safety. This is because the groups are considered to be the “prevailing party” in a settlement with an agency.
  • How Is The EPA Limiting This Practice? Administrator Pruitt’s directive limits sue and settle in several ways. To increase transparency and accountability, the agency is now required to make public any notices received from groups that intend to sue it; any complaints or petitions received about an environmental law, rule, or regulation it oversees which is before the courts; and provide time to receive and consider public comment on pending settlement agreements. Notably, the directive also calls for the EPA to publish attorneys’ fees and no longer automatically pays them when the Agency settles out of court. This will immediately save taxpayer dollars while simultaneously increase the cost for special interest groups to sue.
  • How Will Green Activists Respond? Environmental groups, like the Sierra Club, have already made it clear they will not be deterred from challenging the EPA in court. They are digging in for “trench warfare” in which they are anticipating lawsuits aimed at “making the EPA enforce its own rules and abide by agreed-upon timelines.” Green activists will also likely continue to pressure regulators and legislators in the court of public opinion to further their policy goals by using sympathetic groups to promote their message.
  • What Are The Next Steps For Policymakers? Other cabinet officials may do well to follow Pruitt’s example and limit sue and settle practices in their respective agencies. In addition, legislators in both the House of Representatives and Senate have pushed for curbing sue and settle for some time. With Pruitt’s directive issued, the burden is now on Congress to write legislation that prevents a future Administrator, in a future Administration, from easily reviving this practice.

Curbing sue and settle at the EPA may be a win for transparent government and the judicious use of taxpayer dollars, but this victory is far from permanent. What’s more, environmental groups are already adapting their tactics to compete in policy debates going forward. However, it remains to be seen whether these adapted tactics will be enough to compensate for the ending of sue and settle, which has previously provided major sources of revenue and policy advancements in the past.

News You Can Use

THE ROAD TO UNINTENDED CONSEQUENCES

Sometimes well-intentioned government proposals miss the mark, creating perilous public affairs challenges for groups concerned about the unintended consequences of these proposals. That appears to be the case with the Stop Enabling Sex Traffickers Act (SESTA), which would hold website operators accountable for enabling sex trafficking. In order to deter sex trafficking, SESTA would make online services liable for the illegal content, like sex trafficking, that they monetize through ad revenue.

While agreeing on the need to fight sex trafficking, tech companies oppose SESTA because they believe that if implemented, the legislation’s sweeping provisions would lead to steps that would constrict and fundamentally alter the free flow of information that is the foundation of the internet. This conundrum highlights that even reasonable concerns about the unintended consequences of well-intentioned legislation can be difficult to raise in the face of an emotionally-charged and important issue like this one.

TAXATION WITHOUT LEGISLATION

The Canada Revenue Agency (CRA) caused widespread confusion after announcing that it is changing the way it interprets existing law regarding employee discounts. The guidance, which now classifies some perks like employee discounts at retail stores to be taxable income, will have a disproportionate impact on low-wage earners, who rely on such discounts as a supplementary benefit to their taxable hourly wage. Employers will also face an additional administrative burden to track discounted items sold to employees.

Public resistance from employees, employers, and others has led to members of the elected Liberal government blaming CRA bureaucrats and calls for the plan to be scrapped. With governments looking for new ways to raise revenues, and more often than not facing resistance from the public to pay more, such changes to taxation without legislation through reinterpreted rules and practices may continue to be a trend.

THE FINTECH FIGHT OVER YOUR DATA

Consumers who use financial apps like Mint, Expensify, and Venmo to control their spending and saving habits are finding themselves in the middle of a struggle between their apps and their banks. Traditional banks are uncomfortable with allowing financial apps to access consumer financial data, preferring instead to reach specific agreements with the apps on what information can be shared, or outright refusing to provide access at all – resulting in customer complaints.

Data has become the world’s most valuable resource, and financial apps provide services for users and in some cases monetize their data by selling it to third parties, a practice also sometimes utilized by banks themselves. With uncertainty surrounding the Dodd-Frank financial reform law, which includes provisions that outline the sharing of consumer financial data, and Republican hostility to the Consumer Financial Protection Bureau (CFPB), which is appointed by Congress to make rules on these issues, it remains to be seen how long it will take for policymakers to provide clarity to the various factions involved in this uniquely 21st century issue.

DIVIDERS GONNA DIVIDE?

Are Americans divided for the sake of being divided? The answer appears to be yes. The partisan divide between Democrats and Republicans has grown wider on a variety of issues over the last two decades, suggesting that party affiliation is the main driver of policy positions. This partisan lens is further illustrated by the fact that millennials overwhelmingly supported a tax plan they were told was a proposal from Sen. Bernie Sanders, and were less enthused when learning that the features were actually part of President Trump’s plan.

George Washington warned against partisanship in his Farewell Address in 1796, and lamented that factionalism could have negative impacts on the republic. In an effort to bridge today’s hyper-partisanship, remedies that take steps to this end have included re-examining extreme party loyalties, exploring outside of one’s ideological comfort zone, and “making politics boring again” by returning it to a politics about government policy.

WETHINK TO WECODE IN A WEEK

In last week’s TL;DR, we noted WeWork’s partnership with the Aspen Institute to study the future of work and cities as an innovative avenue to influence future policies on labor issues. Since then, the $20 billion coworking startup made a splash almost immediately through its acquisition of the Flatiron School, a coding academy and programming school.

Flatiron’s coding academy delivers a 15-week, $15,000 vocational education that is oriented to deliver “fulfilling careers in today’s tech-oriented world.” This acquisition, which will bring Flatiron courses to its employees and members, suggests that WeWork is betting that the future of work includes innovative high-skill programs that can disrupt the traditional four-year college degree path.