My new op-ed in the Examiner looks at the interstate migration of top-earning households. I argue that states such as New York lose a lot when their high taxes drive out top earners, including losing their incomes, investments in startups, and entrepreneurial and charitable activities.

Many states are figuring this out, and my NRO op-ed last week discusses the recent wave of income tax cutting. While the leaders of monopoly Democratic states, such as New York, seem oblivious to the chronic damage their states are suffering from out-migration, leaders in states such as Iowa and Nebraska are doing something about it with pro-growth tax reforms. These issues are discussed in the forthcoming Fiscal Report Card on America’s Governors.

The chart shows something interesting about the interstate migration data, which is available from the IRS. For each state, I calculated the ratio of in-migration to out-migration. States losing households have ratios of less than 1.0, and states gaining households have ratios of more than 1.0. For example, New York gained 147,324 households in 2020 and lost 276,550, for a ratio of 0.53. Meanwhile, Florida gained 337,375 and lost 256,190, for a ratio of 1.32.

The IRS splits out households earning more than $200,000, and I calculated the migration ratios separately for this group. On the chart, each state is a dot. The horizontal axis is the ratio for all households, and the vertical axis is the ratio for households over $200,000. I labeled some of the states gaining and losing the most households.

Here’s what interesting. For the states gaining a lot of households, the ratio for top-earners is always higher than the overall ratio. Florida’s overall ratio is 1.32 but its top-earner ratio is 2.72. So Americans generally like Florida, but top earners super like Florida. This pattern is the same for all the states substantially above the line in the chart, including Arizona, Florida, Idaho, Maine, Montana, and South Carolina.

For states suffering out-migration, it is flipped. New York’s ratio for all households is 0.53, but for top-earning households is 0.33. That means New York gains one household for each two it loses overall, but it gains one household for each three it loses within the top-earning group. This pattern is true for the other large out-migration states—that is, the states on the far left below the line, including Illinois and California.

The out-migration states are doing something to drive out their residents, and those things are particularly toxic to top earners. State policymakers should figure out what those things are and fix them.

I have argued here , here, and here that the commissioner of the Food and Drug Administration (FDA) should exercise his authority to make the overdose antidote naloxone available over the counter (OTC). As long ago as 2016, Karen M. Mahoney, MD, then-Deputy Director of the FDA’s Division of Nonprescription Drug Products, stated that the opioid overdose antidote—approved by the FDA in 1971—was safe and ready to be reclassified as OTC, and encouraged the drug’s manufacturers to apply for reclassification. In 2019, then-FDA Commissioner Scott Gottlieb, MD announced the agency took the unprecedented step of preparing and testing the Drug Facts Label that a move from prescription-only to OTC would require—a task that the drug makers usually must perform. In the announcement, the commissioner practically pleaded with naloxone’s makers to officially apply for a change to OTC status.

Until last Friday, if harm reduction organizations operating syringe services programs needed naloxone to hand out to drug users, they needed to obtain a “standing order” prescription from a state-licensed health care practitioner. A standing order usually expires after one year. It instructs pharmacists throughout the state to dispense a drug—in this case naloxone—to any people who request it, under the authority of the prescriber, who assumes responsibility for the action. States have permitted and encouraged standing orders to work around the prescription-only status of naloxone.

Now the FDA has taken another step toward removing the prescription-only obstacle. On September 23, the FDA issued a statement that permits, as an emergency measure, harm reduction organizations to purchase naloxone in bulk without a prescription and to distribute it to their clients.

Writing in the harm reduction publication Filter, Kastalia Medrano states:

Naloxone is still a prescription drug. But this guidance circumvents, in one fell swoop, the entire bureaucratic patchwork of state-level regulations that have long prevented most harm reduction groups from wholesale distribution. The high-threshold requirements included having a unique DEA-licensed prescriber and commercial shipping address, and administrative barriers so cumbersome most groups couldn’t even accept naloxone donated by manufacturers for free.

As I have pointed out before, the FDA commissioner need not wait for a formal request from the naloxone makers to reclassify the drug OTC. The commissioner has the legal authority to order naloxone reclassified over-the-counter.

Naloxone manufacturers lack the incentive to apply for a change in the drug’s status to over-the-counter status. They can charge third party payers a much higher price than they might otherwise get away with if the drug was available without a prescription. In our white paper, “Drug Reformation: End Government’s Power to Require Prescriptions,” Michael Cannon and I point out that prices generally drop when drugs move from prescription-only to over-the-counter.

With the new FDA policy announced September 23, the agency can no longer justify further delaying making naloxone available over the counter not only to harm reduction organizations, but to any individual who wishes to obtain it.

Food prices in the United States are rising at the fastest rate in decades, and many policymakers want to respond. Increasing the number of legal foreign workers available to farms would increase food production and lower prices for consumers. The H‑2A program that allows farmers to hire foreign workers has no cap. Instead, Department of Labor (DOL) H‑2A minimum wage rules limit the number of workers hired and so reduce food production, which increases food inflation.

The Farm Workforce Modernization Act (H.R. 1603)—which passed the House of Representatives last year and is waiting for Senate action—reforms the H‑2A minimum wage rules to allow more foreign workers to harvest more crops on U.S. farms. This would be particularly important for crops with the highest cost of labor, such as fruits and vegetables, which account for about 60 percent of all H‑2A workers. This legislation could have some significant effects on this important problem:

• Food prices have increased 11.4 percent over the last year—the fastest rate in over 4 decades.
• H‑2A labor costs are increasing much faster than labor costs elsewhere.
• Agricultural unemployment reached 3.1 percent this summer.
• Low unemployment has driven 20-percent increases in the H‑2A program in 2021 and 2022.
• Increasing H‑2A costs alongside greater participation means that H‑2A wages are on pace to double by 2024 and make up over 29 percent of all farm labor costs.
• The Farm Workforce Modernization Act would reduce labor costs for H‑2A farms by about $1 billion in the first year and $1.8 billion in the second, which would result in many more workers being hired, more productivity, and lower prices for consumers.

Food Inflation Is Rising Alongside Increases in H‑2A Costs

Figure 1 graphs the scope of the food inflation problem. In four decades, the year-over-year increase in the Consumer Price Index for food has never gone far beyond 6 percent. In August 2022, it reached an astounding 11.4 percent—four times the average from 1982 to 2020 and nearly double the peak during that period. Unfortunately, it is showing no signs of letting up. Every possible effort must be made to reduce food costs because it eats up 10 percent of Americans’ disposable income, and it was 27 percent of total income for lower-income Americans.

The DOL assigns each state an H‑2A minimum wage—known as the Adverse Effect Wage Rate (AEWR)—which sets the wage that employers must offer to U.S. workers before hiring H‑2A workers and which must be paid to H‑2A workers. Right now, the H‑2A AEWR is based on the regional average wage paid to field and livestock workers reported in the Farm Labor Survey from the U.S. Department of Agriculture (USDA). DOL’s use of this survey is highly problematic because its methodology effectively guarantees continuous increases in the AEWR. Here is why:

DOL adjusts the AEWR annually based on a survey and uniquely classifies overtime, hazard pay, bonuses, performance incentives, and all other payments as wages. This inflates the base hourly rate before adding these types of extra compensation for the following year. This inflated average rate then applies to all workers, pricing out H‑2A and U.S. workers who had below-average wages. When these workers drop out, the surveyed wage is artificially inflated even further.

Partly because of these procedures, the H‑2A AEWR has increased much faster than the increase in the Employment Cost Index—which measures changes in the cost of employment nationwide. From 2006 to 2022, the nominal AEWR (the average of state AEWRs) increased 71 percent compared to 52 percent in the Employment Cost Index (Figure 2). In other words, the AEWR is having its intended effect of raising the price for farm labor faster than the price for labor generally.

These additional H‑2A labor costs are now important more than ever because the H‑2A program is growing rapidly. From 2011 to 2022, the number of certified H‑2A positions has increased from about 90,000 to nearly 380,000 (Figure 3). Farmers attempting to receive H‑2A workers must also offer U.S. workers the AEWR, and the number of U.S. workers subject to H‑2A contract was nearly 100,000, meaning that nearly half a million farm workers in 2022 were covered by the AEWR. The H‑2A program is growing rapidly at a rate of more than 20 percent per year from 2020 to 2022, and it is showing no signs of slowing down. With the very low unemployment rate in agriculture, it is likely that this growth rate continues, and the number of workers under H‑2A contracts will approach 690,000 by 2024.

The H‑2A program in 2022 covered wage contracts worth nearly $7 billion—already a nominal increase of nearly $2.5 billion over 2020. Given the increases in the AEWR and growth in workers, the amount of H‑2A wage contracts will almost certainly exceed $8.7 billion in 2023 and likely reach $11.3 billion by 2024. These projections assume that the number of workers keeps growing at its current 20-percent pace, and the AEWR grows at a projected 8 percent (which is the current year-over-year growth rate for the average wage in the Farm Labor Survey as of May). Figure 4 shows the astounding increase in H‑2A wage expenditures from 2006 to 2022 (with projections for 2023 and 2024 based on current trends).

Also, these growing expenditures also mean that the H‑2A wages now make up a much larger proportion of total labor expenditures for U.S. farms overall. H‑2A wages hit about 19 percent of all farm labor expenses in 2022 and would reach 29 percent of all labor expenses by 2024 if current trends continue (including the trend for overall increases in farm labor expenses). This means that the AEWR is having a powerful influence on the cost of food production in the United States, and its importance will grow much larger in the next two years.

How the Farm Workforce Modernization Act Would Help

The Farm Workforce Modernization Act (H.R. 1603) would put the brakes on AEWR increases by first freezing the AEWR for the next year (2023) and then capping increases at 3.25 percent for nine years after that. Given the fact that the AEWR is likely to increase by about 8 percent in 2023, the 3.25 percent cap will effectively be the new AEWR from that point forward. Using the projections of the AEWR and number of workers described in Figure 3, the bill’s new rules would have the effect of reducing H‑2A wage expenditures by nearly $2.8 billion over 2022 to 2024—$1 billion in 2023 and by nearly $1.8 billion in 2024. The savings are higher in 2024 than 2023 because the projection assumes both a 20 percent increase in workers and an increase in the AEWR of 8 percent in each year. The savings in later years would also likely grow. Florida farmers would see the largest savings of nearly $337 million over two years. 

The scale of this estimate is most sensitive to the assumption about the growth in the number of H‑2A workers. The estimate of 20-percent growth used in this post is based on the growth rate for 2020 to 2022. Given the low unemployment rate and the increasing demand for agricultural products, it is reasonable to expect this trend to continue regardless, but the Farm Workforce Modernization Act actually contains several provisions that could cause even more farms to use the H‑2A program.

First, the bill streamlines the approval process in important ways, such as by creating a single filing portal to replace multiple applications and eliminating duplicative application reviews by different agencies. Second, it expands the program to year-round farm jobs like those on dairies. These jobs would have a cap of 20,000 in 2023 and up to 22,500 in 2024 (so up to 42,500 cumulatively would be working in 2024), but the cap could be waived for severe shortages. Without getting into every provision, the legislation is deregulatory beyond just the wage provisions, making it highly likely that the program continues to expand with its passage.

Conclusion

The agricultural products market is highly competitive, and wage savings would benefit both farms and consumers. Farmers would likely spend the same amount on labor but could hire about 125,000 additional workers to increase production. Under the Farm Workforce Modernization Act, farm productivity would increase by more than the $1.8 billion in savings on labor, which would expand the supply of goods and result in a proportional decline in prices for food consumers.

In New Jersey, a pending lawsuit seeks to overturn the state’s ban on fusion voting: the practice where two or more parties nominate the same candidate, who then appears on the ballot as the nominee of multiple parties, with all of the votes cast for that candidate combined to determine the winner of the election. The case for allowing fusion is interesting in and of itself, but also at stake is a broader First Amendment principle.



Fusion nominations were once common in American politics. Before his tenure as chief justice, Earl Warren was re-elected as governor of California in 1946 as the simultaneous nominee of both the Republican and Democratic parties. But more commonly, fusion allowed third parties to grow in influence and support by selectively endorsing major-party candidates.



In the 19th century, fusion allowed growing third-party movements to form alliances with the weaker of the two major parties in a state, challenging the dominant party, often to good effect. In the 1890s, the Democratic stranglehold on the post-Reconstruction, Jim Crow-era Deep South was broken for a time in North Carolina, bringing to power a biracial fusion coalition of Republicans and Populists. After the Democrats regained power in 1898, explicitly campaigning on a platform of white supremacy, ending fusion went hand-in-hand with systematically disenfranchising black voters.

Across the country, fusion voting was used successfully by parties like the Greenbacks, Populists, and later the Progressives. In some states, these parties became so influential and successful that they eventually merged into one of the two major parties. This is why, to this day, Minnesota Democrats run under the banner of “Democratic-Farmer-Labor,” born of a merger between Democrats and the Farmer-Labor Party after the latter achieved substantial success with a mix of both fusion and non-fusion candidates.



The prohibition of fusion played a major role in the decline of third parties in the United States after decades in which they had played a significant role and frequently elected governors, state legislators, and members of Congress. Instead, the end of fusion relegated third parties to mostly running protest candidates and usually receiving an insubstantial percentage of the vote. American politics was always dominated by two major parties, but the end of fusion ushered in the modern era of having the world’s strictest and most exclusive two-party system. Today, the United States is the only major democracy with just two parties represented in its national legislature. Even for lower offices, successful third-party candidates are few and far between. 



Only a handful of states still permit fusion, and several of those only allow it under very narrow and difficult circumstances, like winning a party’s primary by write-in votes. The states that do still permit traditional fusion are also the home of the most electorally successful third parties, such as the Working Families Party in New York and other states, and the Vermont Progressive Party, both of which routinely elect members to the state legislature and even statewide offices. Fusion also allows minor parties to grow and attract support so that, when they choose, they can also mount credible non-fusion campaigns.



In an age of hyper-polarization, restoring fusion offers an important way to break up the strict duopoly of American politics. That’s the goal of the lawsuit in New Jersey, on behalf of a new Moderate Party which would like to selectively cross-endorse both Republicans and Democrats to provide an electoral advantage and base of support to more centrist politicians. Other fusion parties represent views more to the right or left of one of the major parties, allowing a fusion nomination on the ballot to reflect an important signal and political leverage for their voters. That was the case for both the Liberal Party and the Conservative Party, which have since declined but for much of the 20th century played an important role in New York politics, electing both fusion and non-fusion nominees to major offices. 



Aside from its merits as an electoral reform, alongside other options such as ranked choice voting and proportional representation, the case against state laws banning fusion is rooted in the First Amendment. As the Supreme Court has repeatedly affirmed, political parties are engaged in core First Amendment activity: political speech and organizing. The Court has also held that parties have a First Amendment right to handle their internal affairs as they see fit and to nominate the candidate of their choice. Laws which burden a political party’s freedom and limit ballot access for candidates must, therefore, survive First Amendment scrutiny.



In general, that means restrictions on ballot access (that is, the ability of candidates to appear on the ballot) must be justified by a legitimate, compelling state interest and be narrowly tailored to meeting that goal. Laws requiring a certain number of petition signatures for candidates, for example, serve the interest of avoiding a cluttered ballot and possible voter confusion. For that reason, the courts have upheld such laws so long as they are not too restrictive and do not impose excessive burdens (an amorphous and frequently litigated standard). States are also allowed to restrict parties from using ballot labels that are confusingly similar to another party’s name, e.g. “Republic” in contrast to “Republican,” or the use of the word “Independent” in a party name when that label is already used to designate candidates without any party affiliation.



Unfortunately, the Court has sometimes strayed from this principle. In 1997, in Timmons v. Twin Cities Area New Party, Chief Justice Rehnquist upheld Minnesota’s ban on fusion in an opinion holding, for the first time, that perpetuating the two-party system is in and of itself a legitimate state interest justifying restrictions on the First Amendment rights of political parties. 



This holding is at odds with the general principle that such restrictions must be content and viewpoint-neutral. The proposition that a two-party system is preferable to a multi-party system is a defensible view, one held by many Americans. But it is plainly a question that is open for debate and the opposite view is not uncommon. To uphold a ban on fusion on this basis is endorsing the idea that the government can pick one side of that debate, favoring its proponents and imposing restrictions on the speech and association rights of its opponents. A political party should not be prohibited from nominating the eligible candidate of its choice just because the government does not like a specific political opinion.



Challenging the Timmons precedent is a worthwhile endeavor, even for those who have little interest in relatively arcane election law issues such as fusion voting and ballot access. States are free to maintain electoral systems such as first-past-the-post and single-member districts which, in practice, incentivize a political ecosystem dominated by two major parties. But they should not be able to directly impinge on First Amendment rights of third parties for no other reason than a desire to protect Republicans and Democrats from competition. Doing so violates the fundamental principles of government neutrality which are deeply embedded in First Amendment law. Correcting that error is long overdue and would represent an important opportunity to strengthen First Amendment neutrality jurisprudence more broadly.



[Ed.: A previous version of this post said that Earl Warren was the Republican, Democratic, and Progressive nominee in the 1946 California gubernatorial election. The Progressive Party by this time was not on the ballot in California, and so Warren only appeared as the nominee of both the Republicans and the Democrats. Thanks to Richard Winger of Ballot Access News for the correction]. 

As Puerto Rico reels from the impact of Hurricane Fiona, a ship laden with 300,000 barrels of diesel fuel from Texas has arrived off the island’s southern coast that could help supply the island’s numerous power generators. Thanks to the Jones Act, however, unloading the valuable and timely cargo would be illegal. Passed in 1920, the Jones Act restricts the waterborne domestic transport of goods—such as the transportation of diesel fuel from Texas to Puerto Rico—to vessels that are U.S.-flagged, U.S.-built and mostly U.S.-crewed and owned. But the tanker transporting the U.S. diesel fuel, like over 99 percent of the world’s nearly 54,000 ships, does not meet these requirements. And so both it and the people of Puerto Rico must wait and hope that the Biden administration grants a waiver of this law—something that by the letter of the law can only be done for national defense.

This is the Jones Act’s harm in real-time.

On August 24, 2022, President Joe Biden announced a long-anticipated plan to cancel $10,000–$20,000 in federal student loans for all borrowers below an income cutoff. My colleague Neal McCluskey has explained why student loan cancellation would be very bad policy. This post will focus on two additional questions: Is the plan legal? And can anyone challenge it in court?

Is Biden’s Debt Forgiveness Plan Legal?

The Administration’s Argument in Favor of Legality

While the debt cancellation plan has not been formally implemented yet as of this writing, we already know how the administration is likely to defend its legality in court. That’s because the Office of Legal Counsel in the Department of Justice (OLC) has released a memo concluding that student loan forgiveness can be implemented via a 2003 law called the Higher Education Relief Opportunities for Students (HEROES) Act. This section will first summarize the OLC memo’s argument and then explain why it fails to persuade.

As implied by the name and year of the HEROES Act, the law was enacted as a reaction to the Iraq War. Several of the floor statements from members of Congress when the HEROES Act was introduced reveal that a primary motivation for the act was to ensure that military members didn’t fall into default on their student loans while serving their country.

But the HEROES Act extends eligibility for its benefits to more than just members of the military. The law refers to people potentially eligible for relief as “affected individuals,” and that term is defined to encompass several categories of people beyond just service members, including anyone who “resides … in an area that is declared a disaster area … in connection with a national emergency.” The federal government has declared the Covid-19 pandemic a national emergency and has also declared the entire United States a disaster area in connection with that emergency, which means, according to the memo, that every resident of the United States is currently an “affected individual” as defined by the act.

The HEROES Act allows for several potential benefits for “affected individuals.” The one which OLC relies on to justify nationwide debt cancellation is an authorization for the secretary of education to “waive or modify any provision” of law applicable to federal student loans “as may be necessary to ensure that … recipients of student financial assistance… who are affected individuals are not placed in a worse position financially in relation to that financial assistance because of their status as affected individuals.”

OLC argues that the requirement to pay back the principal balance of a federal student loan is a “provision” of federal law that the secretary of education may “waive” for affected individuals. Thus, the argument goes, the secretary may forgive any amount of federal student debt for any residents of a disaster area, so long as that forgiveness is “necessary to ensure that” the individuals “are not placed in a worse position financially in relation to that financial assistance because of their status” as residents of a disaster area.

That leaves the question of whether loan forgiveness for some or all U.S. residents would in fact ensure that this goal is achieved. OLC argues that this could plausibly be so (while declining to endorse any specific plan, since one has not been implemented yet). First, to establish that debt forgiveness could at least sometimes be necessary to ensure that this statutory goal is met, OLC posits a hypothetical example involving military service: “[T]he Secretary might reasonably find that debt cancellation would ‘ensure’ that a soldier permanently disabled in a military operation and unable to work was ‘not placed in a worse position financially in relation to [her] financial assistance because of’ her military service.” In cases like this, OLC argues, “the aggregate financial harm suffered by borrowers as a result of their status as affected individuals might make cancellation of some or all of their federal student indebtedness appropriate.”

OLC next suggests that the secretary of education could plausibly determine that the Covid-19 pandemic is also a case where the cancellation of some student loan debt for U.S. residents is appropriate. While the memo does not spell out how this might be justified, the analogy to the hypothetical disabled soldier makes the logic clear: Many Americans earned less over the last two years than they would have if not for the pandemic, whether due to job loss, covid-related inability to work, or simply the general economic downturn. While the average American’s lost earnings may not be as dramatic as the hypothetical disabled soldier, debt cancellation equal to those lost earnings would similarly place an individual back in an equivalent financial position.

Of course, it is only possible to speak here of averages; it is obviously not true that every single student loan recipient has earned less than they would have without the pandemic. But, as OLC points out, the HEROES Act explicitly notes that the secretary “is not required to exercise the waiver or modification authority … on a case-by-case basis.” OLC argues that this gives the secretary discretion to provide identical relief to a large category of people, “even though categorical rules by their nature entail a degree of imprecision.” Thus, OLC suggests that it would be acceptable to grant an identical amount of loan forgiveness to each of a large class of people, even though this will inevitably include some who are no worse off financially for having lived through the pandemic.

The Flaw in OLC’s Argument

Where is the flaw in this legal argument? The OLC memo takes a wrong turn when it postulates the hypothetical disabled soldier and argues that the HEROES Act could authorize debt forgiveness as compensation for “the aggregate financial harm” of lost income. The problem with this reading of the act is that it effectively ignores an important portion of the statutory text: all waivers must ensure student loan recipients “are not placed in a worse position financially in relation to that financial assistance” (emphasis added).

OLC’s reading would be much more plausible if Congress had instead written that a waiver must ensure borrowers “are not placed in a worse position financially,” period. If that were the law, then the education secretary could treat loan forgiveness as simply a mathematical equation; if a borrower has lost $10,000 by virtue of living in a disaster area, the secretary could forgive $10,000 in debt to make it a financial wash.

But that is not what the HEROES Act says. It’s a fundamental tenet of statutory interpretation that all portions of the text should have some meaningful effect, so the qualifier “in relation to that financial assistance” must place some additional limit on the secretary’s discretion. And the historical context in which the HEROES Act was passed gives a clear indication of what this statutory text was understood to mean.

As the OLC memo acknowledges, the discussion of the HEROES Act in Congress consistently focused on giving the secretary the power to forbear loans and defer payments for service members, and the power to ensure that service members did not lose eligibility for any loan forgiveness programs that might otherwise require making consecutive minimum payments. In essence, Congress did not want those serving in the military and temporarily unable to make payments on their loans to leave the service and find that their principal balance had gone up (by accruing interest) or that they had lost eligibility for relief programs for which they were previously eligible. In both of these scenarios, service members would have found themselves not just in a worse financial position generally, but in a worse financial position specifically in relation to their loan status.

This suggests a narrow but plausibly well-defined reading of the HEROES Act provision at issue: that the education secretary can grant modifications or waivers only to ensure that an affected individual’s loan balance does not go up or to ensure that the individual does not lose eligibility for any federal aid programs. Under this reading, the secretary can grant a loan forbearance for as long as affected individuals have lost work due to their status as affected individuals, but the secretary can’t go further to actually decrease the individuals’ principal balances. (Indeed, the HEROES Act has already been used multiple times during the Covid-19 pandemic to grant a nationwide student loan forbearance without legal challenge, which under this reading of the statute is a much more plausible use of its authority.)

There are two potential rebuttals to this narrower reading of the statute, but both would likely be unsuccessful in court. First, suffering a loss of earnings could be understood as being put in a worse financial position in relation to one’s student loans, because lost earnings mean an individual has less money to put toward paying off those student loans. A loss of earnings could mean that one’s principal balance is not as low as it otherwise would have been, and debt cancellation could bring that principal balance down to where it otherwise would have been. Thus, the argument goes, debt cancellation is still tied to an individual’s financial status in relation to his student loans, because the focus of relief is on the principal balance of his student loans, not of his bank account.

The problem with this argument is that it proves too much, and it would lead to an interpretation of the HEROES Act that is functionally identical to a version of the law missing the “in relation to that financial assistance” language entirely. To be sure, losing $10,000 through lost work or an economic downturn would mean that, if all other expenses stay the same, a borrower would have $10,000 less to pay toward his principal student loan balance. But it is equally true that losing $10,000 puts an individual in a worse position financially in relation to any other potential expense.

If someone with such an economic loss had been hoping to buy a motorcycle, and had kept all other expenses constant (including student loan payments), then he would be $10,000 further from being able to afford the motorcycle. Thus, it could just as truthfully be said that such a person is in a worse position financially in relation to the planned motorcycle purchase as it could be said that he is in a worse position financially in relation to his student loans. Since money is fungible, reading the HEROES Act expansively to include a loss of money that could be used to pay down student loans is effectively no different from reading the law to allow compensation for any financial harms.

The OLC memo appears to acknowledge that the “in relation to” language does serve some limiting function. The memo concedes that “no matter how much financial harm a borrower may have suffered because of a national emergency, the Secretary can use the HEROES Act only to offset that portion of the harm that has a ‘relation to’ the borrower’s [federal student loan] assistance.” But the memo never grapples with what this relation must look like, and the memo seems to endorse a reading of the act in which this additional requirement would have little chance of offering any meaningful roadblocks to debt cancellation.

Second, the narrower reading of the HEROES Act could be criticized as harmfully and unnecessarily cabining the authority of the education secretary to help borrowers who are in dire circumstances out of their control. Congress clearly intended for the HEROES Act to be a boon for military members who have federal student loan debt, and Congress chose to extend the benefits of the law not just to military members but to others affected by national emergencies. One could argue that the HEROES Act is already sufficiently cabined because, of course, any waiver can only be granted to those who have outstanding federal student loans. Rather than an all-purpose grant of authority to make the victims of natural disasters or wartime injuries whole, the law could be understood as a congressional choice to give special priority for relief to those who participated in federal student aid programs.

Based on recent trends in statutory interpretation, however, the Supreme Court would be likely to reject this argument. In a still-developing doctrine known as “major questions,” the Supreme Court has recently stayed or struck down three separate executive actions that were based on novel and expansive readings of longstanding laws. And one common theme of these decisions is particularly relevant to interpreting the HEROES Act: the Court’s skepticism of finding novel powers in one agency that would make more sense assigned to a different agency.

Perhaps the clearest example of this approach was when the Supreme Court stayed the nationwide “vaccine or test” mandate imposed by the Occupational Safety and Health Administration (OSHA). As the Court explained, the statute at issue consistently addressed only workplace hazards; it did not “address[] public health more generally, which falls outside of OSHA’s sphere of expertise.” Noting that a vaccine mandate is unlike the regulations OSHA typically imposes, the Court held that such a mandate “is simply not ‘part of what the agency was built for.’” Supporting this view of OSHA’s powers was the fact that OSHA had “never before adopted a broad public health regulation of this kind.”

The Biden administration argued that Covid-19 was, literally speaking, a hazard in the workplace (among many other places), but the Court rejected this argument: “Permitting OSHA to regulate the hazards of daily life—simply because most Americans have jobs and face those same risks while on the clock—would significantly expand OSHA’s regulatory authority without clear congressional authorization.” In the same way, permitting the Department of Education to offer compensation for all economic harms arising from national emergencies, simply because those economic harms can affect student loan payments, would expand the department’s powers well beyond their previously understood bounds and well beyond the department’s area of expertise.

The Supreme Court expressed a similar skepticism of novel agency powers when it stayed the nationwide eviction moratorium imposed by the Centers for Disease Control (CDC), which relied on a statutory authorization to impose regulations preventing the interstate spread of disease. As the Court noted, the CDC had “imposed a nationwide moratorium on evictions in reliance on a decades-old statute that authorizes it to implement measures like fumigation and pest extermination.” Again emphasizing the novelty of the action, the Court recounted that the law at issue had “rarely been invoked—and never before to justify an eviction moratorium.”

The Court also stressed the tenuousness of the connection between housing regulations and the agency’s focus (public health), describing the chain of logic necessary to justify the moratorium as follows: “If evictions occur, some subset of tenants might move from one State to another, and some subset of that group might do so while infected with COVID–19.” The Court rejected the administration’s reliance on this “downstream connection between eviction and the interstate spread of disease,” and it likely would similarly reject an argument based on the downstream connection between the economic harm of the pandemic and student loan payments.

Finally and most recently, the Court again returned to the themes of novelty and lack of agency expertise when it struck down the EPA’s claim of authority to impose a regulation that would have limited the amount of electricity produced by coal plants nationwide. The Court noted that predicting nationwide “trends in areas such as electricity transmission, distribution, and storage” requires “technical and policy expertise not traditionally needed in EPA regulatory development.” The Court remarked that when an agency lacks “comparative expertise in making certain policy judgments, … Congress presumably would not task it with doing so.” (Cleaned up.) Once again rejecting a Biden administration textual argument that rested on an extended chain of cause and effect, the Court pointed out by analogy that it “would not expect the Department of Homeland Security to make trade or foreign policy even though doing so could decrease illegal immigration.”

Similarly here, the education secretary’s expertise much more plausibly lies in understanding the rules, nuances, and finances of various federal educational aid programs. It is certainly within the secretary’s wheelhouse to decide when some eligibility rules for these programs should be loosened or waived, for example. But the education secretary is much less plausibly equipped to calculate the monetary harm of wartime injuries, long term disease, or economic downturns, and to provide full compensation based on those calculations. Even though such compensation is necessarily limited to the full amount of an individual’s federal student loans, that does not fix the core problem that calculating and compensating such harms at all is an unusual and unlikely power to have been placed in the Department of Education.

In a nutshell, it is plausible that Congress would be in favor of providing compensation to injured soldiers, but it is much more plausible that it would assign that task to the Department of Veterans Affairs than to the Department of Education. There is no evidence in the text or history of the HEROES Act that Congress thought it was authorizing the Department of Education to assume that power as an alternative to the VA. Nor is there evidence that it was authorizing the Department of Education to become a natural disaster compensation service. Applying the major questions doctrine, courts would likely rule that the HEROES Act does not clearly grant the education secretary the authority to compensate individuals by means of loan cancellation for any and all economic harms arising from national emergencies.

The Further Legal Problems Raised by the Income Cutoffs

For the reasons just given, the HEROES Act does not authorize waivers of principal loan balances as compensation for financial harms, whether on an individual level or for a class of people. But even assuming, for the sake of argument, that the act does allow such waivers in some circumstances, there is an additional problem with how the Biden administration intends to implement its nationwide debt waiver. As explained in the White House announcement, the $10,000 in loan forgiveness (or $20,000 for those who have previously received need-based Pell Grants) will only go to those who fall below an income cutoff, either $125,000 for individuals or $250,000 for married couples.

OLC is correct that the HEROES Act allows relief to be granted on a classwide basis, rather than case-by-case. Even so, the choice to exclude some people from the definition of that class must have some relation to the justification for the relief. In other words, the choice to exclude some people from the class must be made because the secretary believes doing so will better tailor the relief to the statutorily prescribed goal of ensuring individuals “are not placed in a worse position financially in relation to [their] financial assistance.” Otherwise, the choice to affirmatively exclude some people from the class would not be consistent with this statutory requirement. Indeed, a legal memo recently issued by the Department of Education appears to concede this point, advising that “[t]he Secretary’s determinations regarding the amount of relief, and the categories of borrowers for whom relief is necessary, should be informed by evidence regarding the financial harms that borrowers have experienced, or will likely experience, because of the COVID-19 pandemic.”

In this case, since the administration’s justification for the classwide relief is based on a worsened financial position after two years of the Covid-19 pandemic, any limitation on that class must be an attempt to exclude individuals who did not suffer the same level of financial harm from having lived through covid as did those included in the class. But a flat income cutoff is not plausible as a means of line-drawing intended to narrow the class of relief to those who have suffered greater financial harm from covid. Nor is the additional cutoff restricting the larger $20,000 cancellation to those who have received Pell Grants. Both class definitions instead seem clearly intended as choices based on the administration’s preferred policy, and perhaps also based on perceived political popularity.

But even if income cutoffs may be more popular politically than granting nationwide debt relief regardless of income, the cutoffs will raise an additional legal problem for the Biden administration. Courts will likely ask the administration to show that both the $10,000 and $20,000 amounts and the class definitions were chosen based on an attempt to roughly compensate for economic losses from Covid-19 as best as possible. (And the calculation of net financial harm will also have to take into account the fact that during the pandemic borrowers have benefited from zero student loan interest and from zero-dollar minimum payments counting toward public service loan forgiveness.) If the administration cannot make such a showing, and if the evidence instead indicates that both the amounts and class definitions were chosen based on policy or political concerns, then courts will be more likely to find that the action did not follow the standards set by the HEROES Act, even if classwide debt cancellation might be permissible in some circumstances.

Who Has Standing to Challenge Loan Forgiveness?

Even if loan cancellation under the HEROES Act would indeed be illegal, the action can only be struck down if it is successfully challenged in court. And doing so requires not just a winning legal argument on the merits, but also a plaintiff who satisfies the legal test for “standing” to challenge the action.

At its most basic level, the doctrine of standing comes from the Constitution’s limit on the judiciary to deciding only cases or controversies. At a bare minimum, constitutional standing requires that a plaintiff have been injured by the challenged action and that this injury would likely be remedied by the relief sought (in this case invalidating the debt cancellation). But over time, the Supreme Court has added various additional requirements to these basic constitutional benchmarks. Most relevant to this case is that the Supreme Court has, with rare exceptions, denied standing to taxpayers to sue to stop allegedly illegal uses of tax dollars.

Given that the most obvious harm from an illegal spending program is the misuse of taxpayer dollars, the unlikelihood of taxpayer standing makes finding a valid plaintiff trickier. Indeed, when student loan forgiveness was being widely debated but before the Biden administration announced its plan, a Virginia Law Review Online essay argued that no one would have standing to challenge a federal loan cancellation. In the essay, author Jack Hoover argued that courts would find a lack of standing for each of the five most likely types of plaintiffs challenging loan cancellation: taxpayers, former borrowers who had already paid off their loans, Congress, state governments, and loan servicers.

Hoover’s essay is thorough and well worth reading, but in one important respect it is already partially out of date. Like most commentators, Hoover expected that the Biden administration would legally justify student loan cancellation based on a provision of the Higher Education Act (HEA). The Biden administration’s choice to rely instead on the HEROES Act (as signaled by the OLC memo) took most observers by surprise. (Ilya Somin has explained why reliance on the HEA would have had its own legal flaws.) And most relevant here, the administration’s choice to rely on the HEROES Act undercuts the strongest argument against loan servicer standing.

As both Hoover and Ilya Somin have explained, loan servicers are federal contractors who receive small monthly fees (currently $2.85 per borrower) to collect student loan payments from borrowers for the government. While their payment per borrower is small, these fees add up across the millions of Americans making monthly student loan payments. Eliminating those payments entirely for borrowers with principal balances of $10,000 or less (who are below the cancellation income cutoff) would mean immediate lost income for these servicers. Indeed, the Biden administration estimates that roughly 20 million borrowers would have their full balance canceled under the plan.

For this reason, Hoover concedes that loan servicers would satisfy the baseline constitutional standing requirement of suffering an injury that would be redressed by blocking the loan cancellation. But, Hoover argues, loan servicers would fail to hurdle an additional requirement known as prudential standing that applies to challenges brought under the Administrative Procedure Act (APA). This requirement is based on the text of the APA, which allows a plaintiff to challenge an agency action if the plaintiff was “adversely affected or aggrieved by agency action within the meaning of a relevant statute.” (Emphasis added.) The Supreme Court has interpreted this text to mean that a plaintiff may sue under the APA if the plaintiff’s interests “fall within the zone of interests protected by the law invoked.”

The Supreme Court has noted that when applying this test, “the benefit of any doubt goes to the plaintiff,” and the test “forecloses suit only when a plaintiff’s interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress authorized that plaintiff to sue.” But as Hoover recounts, the Court has occasionally blocked suits for failing even this lenient test. And one hypothetical example of a suit that would fail this test, posited by Justice Antonin Scalia, may at first blush sound reminiscent of a potential loan servicer lawsuit:

[T]he failure of an agency to comply with a statutory provision requiring “on the record” hearings would assuredly have an adverse effect upon the company that has the contract to record and transcribe the agency’s proceedings; but since the provision was obviously enacted to protect the interests of the parties to the proceedings and not those of the reporters, that company would not be ‘adversely affected within the meaning’ of the statute.

Hoover argues that the HEA similarly lacks evidence that the interests of loan servicers were intended to be considered whenever the education secretary exercised her waiver powers under that act. But whether that is true or not, there is strong textual evidence that Congress did intend the HEROES Act to protect loan servicers’ interests. The provision which OLC relies on authorizes the education secretary to waive or modify legal provisions to ensure one of five goals, only one of which is the “not placed in a worse position financially” goal discussed above. Another one of these five statutory goals is to ensure that “institutions of higher education, eligible lenders, guaranty agencies, and other entities participating in the student assistance programs … that are located in areas that are declared disaster areas … may be granted temporary relief from requirements that are rendered infeasible or unreasonable by a national emergency, including due diligence requirements and reporting deadlines.”

Thus, loan servicers who are located in a disaster area (which, again, is currently the entire United States) are one of the entities meant to be protected by the HEROES Act; the law explicitly contemplates granting them relief from administrative requirements that may become burdensome during an emergency. Based on this textual evidence, loan services should have a winning case for prudential standing under the HEROES Act. The law grants the education secretary the authority to grant relief to all participants in the student loan process during an emergency, and each has an interest in ensuring that this authority is not illegally used to benefit some of them while harming others.

Since loan servicers will likely be found to have both constitutional and prudential standing, they represent the most clear-cut (though not necessarily the only) valid challengers to debt cancellation under the HEROES Act.

Conclusion

The HEROES Act of 2003 is an implausible vehicle for a nationwide debt cancellation plan, and a careful examination of the act’s text reveals no clear congressional intent to authorize such a sweeping plan. The Biden administration’s student loan cancellation will be challenged in court by many plaintiffs, at least some of whom are likely to have standing. And when the action is challenged, it is likely to fall, just as several other dubious claims of statutory authority have fallen over the last two years.

In September of last year, Texas passed a law declaring that large social media platforms are “common carriers” subject to onerous regulations over who and what they can host. The law prohibits platforms from removing, demonetizing, or blocking a user or a piece of content based on the viewpoint expressed. Platforms found to violate this requirement face liability for each piece of content they remove.

NetChoice, a trade association of online businesses, sued to block the law on First Amendment grounds, among other claims. A federal district court in Texas ruled in favor of NetChoice and preliminarily enjoined the law. Texas appealed to the Fifth Circuit, where Cato filed an amicus brief supporting NetChoice. After the Fifth Circuit let the law go into effect without a written opinion, NetChoice filed an emergency petition to the Supreme Court (which Cato again supported), and the high Court put the stay back in place by a 5–4 vote.

Last Friday, however, the Fifth Circuit finally issued a written opinion on the merits and lifted the stay once again, holding (by a 2–1 vote on the key issue of the speech-hosting requirements) that the law complies with the First Amendment.

The Fifth Circuit’s opinion is notable and startling for its complete rejection of a First Amendment right to editorial freedom, a right that the Eleventh Circuit recently affirmed in a decision blocking a similar Florida social media law. Indeed, on this crucial issue, the Fifth Circuit got exactly wrong what the Eleventh Circuit got right, and the implications could ripple far beyond just social media.

The key Supreme Court case that has been understood to establish a right to editorial freedom is Miami Herald v. Tornillo (1974), which struck down a Florida law mandating that newspapers print responses to negative editorials about political candidates. The Tornillo opinion concluded with this crucial passage, which summed up its holding:

The choice of material to go into a newspaper, and the decisions made as to limitations on the size and content of the paper, and treatment of public issues and public officials—whether fair or unfair—constitute the exercise of editorial control and judgment. It has yet to be demonstrated how governmental regulation of this crucial process can be exercised consistent with First Amendment guarantees of a free press as they have evolved to this time.

This holding, along with that of other cases which built on Tornillo, led the Eleventh Circuit to find that “a private entity’s decisions about whether, to what extent, and in what manner to disseminate third-party-created content to the public are editorial judgments protected by the First Amendment.”

But the Fifth Circuit has now interpreted Tornillo much more narrowly than the Eleventh, holding that editorial discretion is not its own right but merely “one relevant consideration when deciding whether a challenged regulation impermissibly compels or restricts protected speech.” On that view, forcing a newspaper or a website to host content is not a First Amendment violation per se; it only rises to the level of a First Amendment violation if such forced hosting compels the host itself to speak (or interferes with its speech).

Under the Fifth Circuit’s approach, whether compelled hosting rises to the level of compelled speech depends on whether the platform at issue implicitly endorses the value of the speech it chooses to host: “[W]hen a newspaper affirmatively chooses to publish something, it says that particular speech—at the very least—should be heard and discussed. So forcing a newspaper to run this or that column is tantamount to forcing the newspaper to speak.”

The Fifth Circuit concluded that social media platforms do not give similar endorsements to the speech on their sites because they “exercise virtually no editorial control or judgment” over the posts that they host. For that reason, the Fifth Circuit held that forcing a social media site to host content does not raise a compelled speech concern.

There are several problems with this reasoning. First, it seems to endorse what then‑D.C. Circuit Judge Brett Kavanaugh once called a “use it or lose it” theory of the First Amendment, namely the theory that platforms which exercise too little editorial discretion can lose their right to do so in the future. As Judge Kavanaugh explained, this theory makes little sense even on its own terms, since a “‘carry all comers’ decision itself is an exercise of editorial discretion.”

In addition, this test will raise difficult and unanswered line-drawing problems with enormous First Amendment implications. How many submissions does a newspaper have to reject to be understood as implicitly endorsing the worthiness of everything it runs (and thus adopting it as its own speech)? At what point might a social media company’s algorithm become aggressive enough in rejecting posts to reach the threshold necessary for compelled hosting to become compelled speech? And most relevant to the social media platforms at issue in this case, can the decision (whether by algorithm or human) to prioritize or deprioritize certain posts on social media ever qualify as protected speech? These questions are left unanswered.

But more fundamentally, the Fifth Circuit’s test is asking the wrong questions because its conclusion rests on two false premises. First, editorial freedom is a distinct form of free expression protected by the First Amendment; it is the right to curate and present a unique mix of speech in a distinct arrangement and order. Social media platforms do engage in such editorial expression, both when they bar some posts as against their rules (even when those rules are lenient) and when they present each user with their own “feed” arranging others’ posts in a particular order. Websites do not need to pass an “appearance of endorsement” test to have this right.

Second, the Fifth Circuit raises too high a bar for finding a compelled speech violation, which also does not require an appearance of endorsement. After all, the Supreme Court held in Wooley v. Maynard (1977) that a state may not force a driver to carry a motto on his license plate, even though no one would assume that the driver endorsed the message. And the Supreme Court has repeatedly held that compelled funding of others’ speech is a form of compelled speech, even though, once again, such funding would not be perceived by others as endorsement.

To be sure, the Supreme Court has not been as clear and consistent on the issue of compelled speech as it could have been. In Pruneyard Shopping Center v. Robins (1980) (a case heavily relied on by the Fifth Circuit), the Supreme Court held that a state may force a private outdoor shopping center to host political pamphleteers. In my view, Pruneyard was wrongly decided and is inconsistent with Maynard and other compelled-speech cases. But even though it remains binding precedent, Pruneyard has never been extended by the Supreme Court to apply to a media company that hosts and presents speech as its very reason for existing, as opposed to a shopping center or other piece of real estate open to the public that primarily exists for some other purpose.

There are many other questionable conclusions and leaps of logic in the Fifth Circuit’s opinion, too many to list here. But given the fundamental incompatibility between the holdings of the Fifth and Eleventh Circuit, one thing seems certain. As Fifth Circuit Judge Leslie Southwick notes near the end of his partial concurrence and partial dissent, “The Supreme Court will, as always, have the final word.”