Week in Review

IN THE NEWS

• The U.S. Senate passed the Social Security Fairness Act, repealing the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), which reduced benefits for public-sector retirees, such as teachers and firefighters. The WEP reduces Social Security benefits for individuals with pensions from jobs that did not contribute to Social Security, while the GPO cuts spousal or survivor benefits. The bipartisan legislation, approved by a 76-20 vote, is expected to increase Social Security payments for approximately 3 million individuals. The Act is expected to cost about $196 billion, which critics warn will exacerbate Social Security’s financial challenges and may accelerate the program’s insolvency to 2035.
• The U.S. Court of Appeals for the Third Circuit reaffirmed that non-violent felons cannot be barred from gun ownership under federal law. The decision centered around a Pennsylvania man convicted of food stamp fraud in 1995, who was previously prohibited from possessing firearms. The U.S. Supreme Court directed the Third Circuit to reconsider its earlier ruling after the Supreme Court clarified the standard for assessing the constitutionality of firearms regulations this summer. In a 13-2 decision, the Third Circuit found no historical precedent for disarming non-violent felons. The dissenting judges argued that historical practices of disarming groups perceived as disloyal support the government’s authority to disarm felons.
• The U.S. Department of Education withdrew a notice of proposed rulemaking to waive student loan repayments and provide targeted student loan debt relief. The Education Department claimed that this decision was not due to a change of view but to prioritize supporting borrowers who are still struggling after the pandemic. Student borrower associations such as the Student Borrower Protection Center, however, expressed disappointment with the withdrawal, pointing the finger at “right-wing” attorneys general who have “blocked tens of millions of borrowers from accessing critical student debt relief.”
• The Education Department also withdrew a notice of proposed rulemaking that aimed to establish guidelines for transgender athletes’ participation on school sports teams. The proposed rule would have amended the implementation of Title IX, creating some protections for transgender athletes by prohibiting outright bans on their participation while still allowing schools some discretionary exclusions. The Education Department decided to withdraw the proposal because of numerous pending lawsuits. Organizations such as The Leadership Conference on Civil and Human Rights have called the decision “profoundly disappointing.”
• The Food and Drug Administration (FDA) issued a final rule establishing requirements for nonprescription drug products that require an additional step by applicants before use. Under the rule, these drug products can be sold without a prescription only if the applicant implements a condition to ensure appropriate use without practitioner supervision. The rule requires the applicants to submit an additional application for approval of the product, demonstrating their ability to implement this condition. FDA intends for the rule to clarify the application process, labeling standards, and postmarketing reporting requirements for these drugs.
• The FDA also issued a final rule updating the definition of “healthy” for food labeling to reflect current nutritional science, introducing stricter limits on sugar, sodium, and saturated fats. The new rule aims to guide consumers toward healthier choices by including nutrient-dense foods such as nuts and salmon while excluding sugary or salty items such as certain yogurts and fruit cups. Although compliance with the rule is voluntary for food manufacturers, it has drawn criticism from industry groups, which argue that it is too restrictive and raises First Amendment concerns because it would prohibit truthful, non-misleading label claims for unjustified reasons. The agency is also working on front-of-package warning labels for foods high in sugar, sodium, or fat.
• The Internal Revenue Service (IRS) proposed a rule that would update the requirements for tax professionals who practice before the IRS. The rule would require tax practitioners to “maintain technological competence” and affirm the IRS’s authority over tax practitioners who have been suspended or disbarred. The rule would also classify certain contingent fee arrangements as “disreputable conduct” and introduce revised standards for the disqualification of appraisers. The rule is intended “to account for changes in the law and the evolving nature of tax practice.”
• The U.S. Department of Energy published a final rule revising energy conservation standards for walk-in freezers—enclosed refrigerated storage spaces under 3,000 square feet that are not designed for medical or scientific purposes. After evaluating the benefits and costs of different standards for the doors, panels, and refrigeration systems, the Energy Department concluded that the amended energy conservation standards are “technologically feasible and economically justified” and will conserve significant amounts of energy.

WHAT WE’RE READING THIS WEEK

• In an article in the Yale Journal on Regulation, Andrew Verstein, a law professor at the University of California, Los Angeles, proposed that the state that incorporates a business should be responsible for repaying that business’s unpaid debts. Verstein explained that this “incorporation responsibility” would solve the “dilemma” of limited liability for corporate shareholders. Verstein contended that this approach would provide both recovery for tort victims harmed by corporations’ actions and financial security for corporations’ shareholders. Verstein argued that incorporation responsibility would result in states internalizing “the costs and benefits of limited liability” by crafting rules that are fair and efficient for both investors and tort victims.
• In a recent working paper, Amy Finkelstein, a research associate at the Massachusetts Institute for Technology, Sarah Miller, a research associate at the University of Michigan, and Katherine Baicker, a research associate at the University of Chicago, studied the impact of Medicaid enrollment on crime rates. Finkelstien, Miller, and Baicker reviewed literature that suggested a correlation between enrollment and crime because Medicaid enrollment could decrease rates of mental illness, substance abuse, and financial distress. Despite this research, Finkelstien, Miller, and Baicker’s study found that enrollment had no significant effect on the number of criminal cases or charges. This finding was consistent across all crime types and demographics.
• In a policy brief published by the C. Boyden Gray Center for the Study of the Administrative State, Kevin Kosar, a senior fellow at the American Enterprise Institute, discussed the growing regulatory activity of the U.S. administrative state and Congress’s diminished capacity to oversee it. Kosar highlighted how staff levels have not kept pace with the significant expansion of executive agencies and regulations, which now include more than 180,000 pages of federal rules. Kosar argued for strengthening congressional oversight by increasing the number of staff dedicated to regulatory matters. Kosar proposed the creation of a new office called the Congressional Regulation Office, modeled on the Congressional Budget Office, to provide independent analyses of regulations. Kosar’s reform aims to rebalance the legislative-executive relationship and enhance Congress’s ability to oversee and influence federal regulatory activities.

EDITOR’S CHOICE

• In an essay in The Regulatory Review, Elizabeth Pollman, a professor at the University of Pennsylvania Carey Law School, argued that recent Delaware cases could start a trend toward greater accountability for corporate boards’ oversight of regulatory compliance. Pollman noted that the trend toward greater board accountability would help affirm corporate directors’ responsibility to “actively attempt to carry out their obligations with the aim of full legal compliance.” Pollman also explained that the trend could allow plaintiff-shareholders to hold corporate boards accountable through lawsuits when their failure to monitor results in regulatory noncompliance.