Congress Takes Aim At Cronyism-By-Licensing

America was once called the land of opportunity — promising upward mobility and freedom for entrepreneurs to compete in the market. Does that remain true in an era when — according to a report issued last year by the Obama administration — more than 1 out of 4 workers in America are required to have a government-issued occupational license before plying their trade?

Too often, occupational licensing laws are mere cronyism: They arise when professional groups lobby states to impose daunting, often irrelevant training, education or apprenticeship requirements for new workers and would-be entrepreneurs. Individuals who can’t afford the time or money to pursue the license are shut out of the occupation — protecting existing workers and businesses from honest competition.

It’s not just complicated or highly-paid professions like doctors and lawyers that require government permission to work. Dozens of ordinary, lower-income occupations now make the list, including auctioneers, upholsterers, funeral attendants and florists.

Last week, legislation was introduced in the U.S. Congress aimed at reducing the abuse of licensing laws for protectionist purposes. At root, the law encourages states to eliminate any licensing law that is more about protecting the profits of politically favored businesses than reducing real risks to public health or safety.

The new legislation arises in response to a 2014 U.S. Supreme Court decision that made it a little easier to sue state licensing boards for enforcing anticompetitive license requirements. The court overturned a North Carolina ban on non-dentists offering teeth-whitening services and said that workers shut out of the business could bring antitrust lawsuits against state licensing boards that engage in protectionism.

The “Restoring Board Immunity Act” (RBI), introduced in the U.S. Senate by Sen. Mike Lee, R-Utah, co-sponsored by Sens. Ted Cruz, R-Texas, and Ben Sasse, R-Neb., and in the U.S. House of Representatives by Rep. Darryl Issa, R-Calif., would give limited legal immunity from costly antitrust suits to states that enact laws restraining licensing boards from using their powers for anticompetitive purposes.

The bill gives states two ways to do that.

First, they can establish comprehensive periodic reviews of licensing board activities — meaningful reviews of bureaucrats by the executive and legislative branches to detect and end anticompetitive activities.

In the alternative, states can empower their courts to place the legal burden squarely on the government to show that enforcement of the licensing law serves a public health and safety purpose. This is vitally important to roll back the relentless growth of licensing that has occurred in recent decades.

Occupational licensing laws are easy to pass and hard to repeal: Incumbent businesses and professionals get a big benefit by having their competition restricted and they lobby hard for the laws; the costs of the unreasonable regulations are dispersed among consumers who face fewer choices and higher prices — a burden that often escapes their attention; and the upstart businesses and young workers who are out of a job rarely have enough of a voice or money to sway the political process. That leaves the courts as the last place to stop the proliferation of red tape.

But courtroom challenges to occupational licensing laws are a tremendously uphill battle. Modern legal precedent instructs courts to presume that all economic regulations are constitutional and to treat dismissively evidence that any given regulation is more about protectionism than a real risk to public health or safety. The deck is stacked against anyone with the courage to protest, through  a lawsuit against the government, a violation of economic liberty.

If states respond to the RBI by heightening standards of judicial review over occupational licensing, however, it would change that outrageous status quo by leveling the field of legal battle. Courts would no longer be tempted to rubber-stamp the actions of even the most abusive licensing boards. That would be a very welcome step in protecting all individuals’ constitutional right to earn a living.

Published by Investor’s Business Daily