Accountability Ersatz

The Court Challenges Program shows accountable government is no substitute for a small government

Over at TheCourt.ca, Nicholas Hay offers a qualified and nuanced defence of the Court Challenges Program, which recently relaunched by the federal government. I have criticized the Program here and elsewhere, as have others ― for example the National Post’s editorial board (which mentions some of my arguments). Mr. Hay responds to one of my criticisms by arguing that the Program would benefit “an expansion to include all Charter rights” ― but this only meets my concern that it plays favourites with the constitution half-way, if there, because it would still be objectionable for the government to indicate that it values the enforcement of Charter rights more than that of the federal division of powers. In any case, in this post, I will not re-argue that. Rather, I’ll make a different point, which isn’t only about the Court Challenges Program alone, but which Mr. Hay’s argument brings to mind.

Mr. Hay argues that “the very crux of the Program is government accountability”. To allow, and even to help, citizens challenge unconstitutional government action means making the government answer for its decisions. Unfortunately, Mr. Hay adds, the Program risks being implemented in a way that pays insufficient heed to concerns about accountability within its own functioning. He argues that there is a “need for an enhanced, accountable selection process that will appoint disinterested members” to the expert panels that choose the cases the Program will fund. In addition “the Program should be open to regular review by the Auditor General, and the files should be open to the public under the Access to Information Act”. And when it comes to making the actual decisions about which cases to support, “the Program needs a robust method of allocating subsidies, and tighter spending rules, to ensure support for those truly in need, regardless of what side of the issue they’re on”.

It is hard to disagree with these recommendations, if one accepts the premise of the Program’s existence. But they show, I think, an additional reason for why that premise is worth challenging. Mr. Hay’s argument is, in effect, that the Program, a necessary or at least a most useful form of government accountability, generates demands for further accountability mechanisms in order to secure its own legitimacy. The watchers must be watched. And then, those who watch the watchers must, presumably, be watched in their turn. It’s not enough for an “accountable selection process” for the Program’s expert panels to exist: someone needs to keep an eye on what results it produces. It’s not enough for the Program’s expenses to be audited: someone needs to read the reports. It’s not enough for the Program to be subject to the Access to Information Act: someone needs to put in those requests. Of course this isn’t a flaw of the Program as such, or of Mr. Hay’s proposals to improve it. The same goes for any government accountability mechanism. And, you might think, accountability all around is good; we want as much accountability as we can get, don’t we?

But there can be too much of a good thing. Who will have the time to dig into the reports on the selection of expert panels, the Auditor General’s reports, and the further reports on the selection of cases the Court Challenges Program funds? The Program is a tiny sliver of the federal government’s total spending; most people are probably unaware of its existence; even those who, like journalists, are aware of it have bigger fish to fry. More accountability mechanisms means more things to keep an eye on, more work, more resources consumed. And the time and resources of the relatively few people or organizations with the expertise to keep an eye on the Program may well be better spent on doing other things. At some point, the margin accountability returns on additional accountability mechanisms are likely to become nil or even negative.

My point is not that we should reject Mr. Hay’s proposals for improving the accountability of the Court Challenges Program. It is, rather, that we should be skeptical of the  Program itself, and of any other mechanism that creates the need for an accountability ratchet that is likely to become counterproductive if not self-destructive. Accountability mechanisms that are part of government are still part of government, and they deserve as much skepticism as any other part of government. Their multiplication, like the growth of any other sector of government operations, creates potential for abuse, and makes government more difficult to oversee and to control. Sometimes, like other government functions, accountability mechanisms are necessary and beneficial. But it is always useful to ask ourselves whether any given one really is, and perhaps even to start with a presumption, albeit a rebuttable presumption, against government intervention. The reasons I once outlined for having such a presumption in the case of government provision of goods and services mostly apply to accountability mechanisms too.

If you have borne with me this far, you probably want to ask: isn’t this whole argument counter-intuitive to the point of absurdity? Mustn’t the government be held to account, whatever the problems attempts to do so engender? Given the government’s scope and power, aren’t accountability mechanisms a necessary safeguard against abuse? But here’s the thing: I don’t think we should accept the government’s scope and power as a given. The fewer things government does, the fewer issues there are to hold it accountable on, and the more readily external accountability mechanisms ― whether the media or citizens suing the government on their own, without its assistance ― are able to deal with it. Instead of having a Court Challenges Program to hold government to account when it legislates, and then additional accountability safeguards to make sure the Program works as intended, how about we have a government that legislates less, and thus is in less need of being held to account? As Ilya Somin says, smaller government is smarter. Or, as one might also say, an accountable government is no substitute for a small government. It is, at best, an ersatz.

Why?

A friend recently challenged my habitual skepticism about the government: “Why is it,” he asked, “that if something is a public service, we always question whether it should be? Isn’t that just ideology?” It’s a good question, and since the views that underpin it are widely held, it is worth answering here. Note that I will be focusing only on government supply of goods and services, not arguing for libertarianism, still less for anarchy. Furthermore, I am only arguing for a prima facie skepticism, which can be overcome in specific cases. I will say more on that at the end. And, before I begin, two disclaimers. First, none of what follows will be original. It’s just important stuff that bears repetition. And second, this will be quite long. My apologies.

Of course the most familiar reason for being skeptical about anything the government does is ideological. Government action often involves coercion. This might be less obvious with public services, which citizens are not always forced to use. But they are forced to use some, and most others are funded at least in part by coercively-levied taxes. If we value freedom at all, coercion is presumptively wrong, and must be justified. But people might (1) not value freedom, or (2) not think economic freedom (that is, freedom of contract and property rights), which is mostly at stake when government expands to provide goods and services, is valuable, or (3) think that while economic freedom is of some value, it is easily outweighed by other considerations. Those are deep philosophical commitments, and I will avoid arguing about them here, because I think that the skeptical case can be made out without challenging them.

What drives the non-ideological version of the skeptical case is a concern not with liberty but with efficiency. Now, efficiency is often thought of as an ideological dirty word. It’s not. Efficiency is simply the fact of using fewer scarce resources (whether labour, capital, or natural resources) to achieve a given objective. I fail to see why anyone, whatever one’s deep philosophical commitments, would be opposed to that.

There are three main reasons why a concern with efficiency supports prima facie skepticism with government delivery of goods and services, which I will discuss in order of, I think, increasing subtlety.

The first of these reasons comes from “public choice” economics, which analyses the behaviour of the government on the assumption that the people who serve in it―whether as legislators or as bureaucrats―are self-interested agents concerned with their own welfare. Perhaps this assumption can be taken too far―I’m willing to believe that government officials are partly motivated by what they see as the public good, and not only by self-interest. Still, it would be naïve to assume that they are entirely selfless and do not care about things like financial rewards, leisure, and re-election in the case of legislators. Public choice theory warns us that government officials are likely to want to give out favours to their friends, campaign contributors, or pet causes. And the provision of goods and services by the government is a great vehicle for that. A public investment fund can be instructed to protect a favoured corporation from a hostile take-over, as the Caisse de dépôt et placement du Québec regularly is; a public company can be told to give jobs, or to provide cheap goods for the supporters of the politicians in power. Of course, allocation of resources in the basis of politicians or bureaucrats’ self-interests is seldom going to be efficient.

The second reason to question whether the government should provide goods and services comes from F.A. Hayek’s insight about the limitations imposed on government planners by their lack of information. Even if public choice theorists were wrong and government officials were invariably concerned with the public good and nothing else, they would be hampered in its pursuit by their inability to get a hold of all the information about people’s needs and wants. That information comes from price fluctuations in a free market, with increasing prices signalling increased demand for a good or service, and/or reflecting the increased scarcity of the resources necessary to produce it. When the price mechanism is replaced by government control, with prices of goods and services produced by the government determined (in some considerable part) by political considerations rather than by the cost of and demand for these goods and services, the allocation of resources to the production of these goods and services need not bear any relationship to the actual demand for them and to possibility that these resources would be better expended on something else.

The third, related, reason for skepticism about the government as a supplier of goods and services is the difficulty to know whether it is supplying them efficiently. In a free market, an inefficient producer (one that is, for example, paying two workers for doing a job that one could do, or buying supplies for an above-market price because of its owner’s relationship with the supplier, etc.) will be seen as charging more for its products than its competitors. It will have to mend its ways or to fail. But when that producer is a monopolist, as the government often is for the goods and services it provides, it is much more difficult to tell whether it is inefficient. And the case of the government is worse than that of a private monopolist. For one thing, it is not just the monopolist’s shareholders and its customers, but all the taxpayers who are paying for its inefficiency. For another, a private monopolist’s inefficiency invites competitors to enter the market and undercut it. But the government usually can prohibit would-be competitors from doing so, even if there are any, which is not always the case.

Now these claims are somewhat overstated. Democracy and other limitations on governmental power go some way towards correcting at least the extremes of self-interested behaviour by public officials. And although we usually cannot rely on the market to prevent the government from being inefficient, free and democratic polities have other mechanisms to compensate for this. Democracy makes it possible to, in effect, change (part of) the management of the government-supplier if the incumbent managers are inefficient. Public institutions such as auditors-general are empowered to investigate and maybe try to eliminate government inefficiencies. And private actors, especially journalists, can do the same thing. But these mechanisms are imperfect. Elections are fought over only a handful of issues, not all of them having to do with the incumbent officials’ public-spiritedness and managerial competence, and against a background of massive political ignorance. Many bureaucrats are subject to very limited and indirect electoral control anyway. Self-interest can move politicians and bureaucrats to impede the work of public and private investigators. And so on.

So we have good reason to be skeptical of governmental provision of goods and services. But skepticism should not make us oppose it in every case. The government is likely enough to do a bad job of providing goods and services, but the market sometimes does an even worse one. This is the case of “public goods,” that is goods or services the producers of which cannot, for any of a number of reasons, charge those who benefit from them anything like a price that would make their production worthwhile (and not to be confused with “the public good”). (For more on that, see this entry in Larry Solum’s Legal Theory Lexicon.) Still, the questions whether a given good or service is subject to such a “market failure,” and whether, if so, the market failure is greater than the “government failure” resulting from its production by the government, are always worth asking.

As I said in the beginning of this post, all that does not amount to a libertarian manifesto. Even if we are skeptical about the government providing goods and services, we might decide that the government (that is, the taxpayers) ought to pay, or help pay, for people to acquire some goods and services on the free market. That’s how social security works―instead of the government producing food and feeding the unemployed, the elderly, or the infirm, the government gives them money so that they can feed themselves. And of course even if we are skeptical about the government as a supplier of goods and services, we have good reasons to want the government to engage in (some) regulation to prevent some negative effects people’s economic activity might have on third parties, air pollution being a classic example.

Despite all these qualifications, this might not convince those who think that economics is incipiently and terminally ideological. To them, I can only quote Hayek:

It may sound noble to say, ‘Damn economics, let us build up a decent world’―but it is, in fact, merely irresponsible.

This Will Be Good

I wrote last summer about the issue whether a federal legislature could enact a statute in order to implement a treaty despite the fact that, absent the treaty, the statute would be ultra vires (because provincial or state, rather than the federal legislatures have jurisdiction over its subject matter. If so, I said, this would give states the ability to act “like a child who, denied by one parent, asks the other to let them stay up late,” with other states playing the role of the lenient parent. I think that, in public policy (as, I suppose, in parenting) this is a bad idea. And, in Canada, the constitution has been interpreted as preventing such schemes, in the Labour Conventions Reference

The leading case on this issue in the United States is Missouri v. Holland, 252 U.S. 416 (1920), I always thought that it stood for the contrary proposition, that Congress can legislate to implement a treaty regardless of whether its subject-matter is within its enumerated powers. But now people better-informed and wiser than I, namely Nick Rosenkranz and NYU’s own Rick Pildes, will take up the question of whether this is right over at the Volokh Conspiracy, in anticipation of, maybe, the US Supreme Court eventually hearing a case where it arises. (Their first stab at it is here.)

It should be very interesting, and too much for any effective summary here, so I thought I’d alert however many (or, more likely, few) readers I have.

 

A different ERA?

The ERA – the the Expenditure Restraint Act, S.C. 2009, c. 2, s. 393 – is actually the same that was at issue in Association des Réalisateurs c. Canada (Procureur Général), 2012 QCCS 3223, which I blogged about a month ago. But the conclusion of the Ontario Court of Appeal in Association of Justice Counsel v. Canada (Attorney General), 2012 ONCA 530, is different from the one Québec’s Superior Court reached in Réalisateurs. The two cases are alike, however, in being very much about the specific facts at issue.

As I explained in the post about Réalisateurs,

The Expenditure Restraint Act sets out upper limits on the extent of pay raises that the government and a number of crown corporations are entitled to grant their employees, as part of a package of measures responding to the global economic crisis and the ensuing budgetary difficulties. Provisions of collective bargaining agreements stipulating higher raises are invalid to the extent that they exceed the limits allowed by the statute …

In  Réalisateurs, the ERA operated retroactively to modify an agreement concluded between the union and CBC/Radio-Canada. The court found that an interference with the union members’ Charter right to engage into a meaningful collective negotiation over fundamental conditions of their employment (which, it went on to hold, which not justified by s. 1 of the Charter).

The situation in Justice Counsel is different. By the time the ERA came into force, the union and the government had not yet concluded a collective agreement. Despite lengthy negotiations, they had been unable to agree, and decided to resort to arbitration. In these circumstances, the Court holds,  “the ERA had the effect of taking wages off the table for the arbitration, [but] that does not, standing alone, amount to an infringement” of the right to negotiate collectively (par. 39). That right entails an ability to make representations, which must be listened to in good faith, but no particular outcome need follow, and binding arbitration is not constitutionally required. The union was able to make representations over the course of the negotiations, and the negotiations’ failure is no proof that they were not listened in good faith. On these facts, the ERA didn’t take away from the union anything it had a right to.

The decision is thus quite narrow, because the circumstances of the parties involved are unusual. It does not tell us very much about the ERA‘s constitutionality as applied to other unions. In my post about Réalisateurs, I criticized the courts for not showing sufficient restraint in extending constitutional protection to civil service union contracts. What I had in mind were the substantive rules applied in these cases. But here is another mode of judicial restraint: deciding a case on narrow – but relevant – facts, and avoiding broad issues altogether.

Go Ask Your Mom!

Is it conceivable that states, like a child who, denied by one parent, asks the other to let them stay up late, ask around for permission to do something they would not normally be permitted? Lord Atkin enlisted the threat of such a course of action as an argument in his famous opinion for the Judicial Committee of the Privy Council in The Labour Conventions Reference, writing (at p.9 in the document linked to) that “it would be remarkable that while the Dominion could not initiate legislation however desirable which affected civil rights in the provinces, yet its government … need only agree with a foreign country to enact such legislation.”

The judgment, denying Parliament the ability to enact social legislation it felt was necessary to respond to the Great Depression on the ground that such legislation was for the provinces to adopt, made a lot of people furious and, if I remember well, F.R. Scott for example criticized this suggestion as being fanciful fear-mongering. Justice Holmes, writing for the majority of the Supreme Court of the United States in Missouri v. Holland, 252 U.S. 416 (1920), a case that presented much the same issue as Labour Conventions, did not even consider this question, and went on to hold – contrary to Lord Atkin and the Privy Council – that the federal legislature could legislate to implement an international treaty regardless of its (dis)ability to enact the same legislation in the absence of a treaty.

But recent developments suggest that Lord Atkin’s worry it is not so crazy anymore, if it ever was. On intellectual property for example, states (and supranational organizations such as the European Union) have apparently taken to using free-trade agreements as vehicles for smuggling into their domestic legislation restrictive rules on intellectual property which they would might find politically impossible to enact in stand-alone statutes visibly devoted to this purpose, as University of Ottawa’s Michael Geist has detailed in a series of blog posts.

Of course, there is a crucial difference between this example and the Labour Conventions case. The impediments to legislative expansions of IP rights are (mostly) purely political, not constitutional. In such cases, Lord Atkin’s “watertight compartments” (p. 10) are of no assistance. Nonetheless, his insistence that the existence of an international treaty should not prevent us from insisting that the usual constraints, be they constitutional or political, on government power ought always to be be upheld. Foreign governments should not be able to play the lenient parent if domestic courts, or voters, are inclined to be strict.

No Resraint

The Superior Court of Québec issued a potentially far-reaching decision last week, declaring a number of provisions of the Expenditure Restraint Act, S.C. 2009, c. 2, s. 393, constitutionally inapplicable to the CBC/Société Radio-Canada. In Association des Réalisateurs c. Canada (Procureur Général), 2012 QCCS 3223, justice Lise Matteau held that the application of provisions limiting salary raises that could be offered to civil servants to Radio-Canada’s employees was a violation of their right to freedom of association, protected by s. 2(d) of the Charter.

The Expenditure Restraint Act sets out upper limits on the extent of pay raises that the government and a number of crown corporations are entitled to grant their employees, as part of a package of measures responding to the global economic crisis and the ensuing budgetary difficulties. Provisions of collective bargaining agreements stipulating higher raises are invalid to the extent that they exceed the limits allowed by the statute, whether the agreement was entered into before or after its enactment. This means that the statute retroactively changes some collective agreements, including those of concluded by the plaintiffs in Association des Réalisateurs.

This, they said, deprived them of their right to engage in meaningful collective negotiations with their employer over the terms of their employments, in violation of s. 2(d) of the Charter as interpreted by the Supreme Court. Justice Matteau accepted this submission. Salary questions are key to the employees’ relationship with the employer and thus being able to negotiate on them is essential for the plaintiffs’ collective-bargaining rights to be meaningful. By setting aside the agreement reached between the plaintiffs and their employer, the Expenditure Restraint Act infringes on their right to collective bargaining.

The next question the court had to decide is whether the infringement was justified under s. 1 of the Charter. Although the plaintiffs challenged the government’s claim that the Expenditure Restraint Act addressed pressing and substantial concerns, Justice Matteau accepts it, given the context of economic crisis and budgetary pressure in which it was enacted. However, she holds that the application of the statute to CBC/Radio-Canada’s agreements with its employees is not rationally connected to the objective of reducing expenditures and controlling the salaries of the public sector employees. That is because the government financing of the CBC/Société Radio-Canada does not depend on the contracts it negotiates with its employees. The government gives the CBC a lump sum of money, and the corporation decides what to do with it. Cutting or limiting the growth of the CBC’s payroll does not change its lump sum subsidy and thus doesn’t help the government’s finances.

This seems like the correct result in light of the Supreme Court’s s. 2(d) jurisprudence, although I am far from being an expert in this area. But, assuming that the decision is indeed correct, it helps illustrate just how troubling that jurisprudence is. The problem is not so much the decision itself. If the court’s analysis of the CBC’s financial relationship with the government is right, there seems to be relatively little reason for imposing salary restraints on the CBC’s employees, except perhaps the rather speculative claim that, if allowed to raise its salaries as it pleases, the CBC will end up asking for – and obtaining – unaffordable financing increases from the government.

But the more troubling question is whether courts should be policing propriety of Parliament interference with collective agreements between the government and civil servants in the first place. I think that a consideration of the institutions involved and the rights at stake suggests a negative answer.

Consider, first, the institutions. Suppose a civil servants’ union challenges the Expenditure Restraint Act. As applied to actual civil servants, it presumably is rationally connected to its objectives. So the court hearing the case will need to proceed to further stages of the s. 1 analysis – asking itself whether the restrictions it puts in place are minimally impairing of the s. 2(d) right and whether its beneficial effect outweigh the deleterious ones. Can it do so? Are courts really in a position that the limits on negotiating salaries that Parliament imposed were as little as possible? Although some comments made in obiter by Justice Matteau suggest that it would have been enough for the government to consult the unions, I wonder whether this is so considering that, after the consultation, Parliament still went ahead and imposed binding legislation. Deciding whether this legislation really was minimally impairing requires, it seems to me, analyzing the government’s budgetary situation, which is not something the courts are equipped for doing. And quite apart from institutional competence, there is the question of who, as a matter of legitimacy or political morality, ought to control government spending. The Stuart kings asserted the power to do so – and Charles I had his head cut off for his troubles. Since then, nobody has seriously challenged Parliament’s power of the purse. Is the Canadian judiciary prepared to do so?

It might be said that, when rights are at stake, it should. And, to be sure, enforcement of Charter rights sometimes results in the courts, in effect, requiring the government to make expenditures – in the area of language rights for example. But what sort of rights are at issue here? Courts say it is about a meaningful freedom of association. But the effect of the judgments in Association des Réalisateurs is to prevent Parliament from interfering with a private contract (between the CBC and its employees). Now that might be a good thing if you believe in freedom of contract. But it is clear that the framers of the Charter made a fundamental, deliberate choice not to protect economic rights – property and freedom of contract. This decision – and the Supreme Court’s jurisprudence from which it is derived – seems to say that trade unions have a constitutional right that no other Canadian has. Whatever one thinks, substantively, of the merits and demerits of unions, their being more equal than the rest of us this ought to be troubling.

Although the expression is often overused, I think that this is an area in which judicial restraint is really called for. I suppose the government will want to appeal the decision in Association des Réalisateurs. Perhaps the Supreme Court will yet have an opportunity to show some.

A Reasonable Opinion

The Supreme Court delivered an interesting decision in Halifax (Regional Municipality) v. Canada (Public Works and Government Services), 2012 SCC 29, yesterday. On the surface, it is a rather dull, or at least purely technical, case about the proper method of assessing the value of land occupied by a historical monument. But it has much broader implications, because it is a useful reminder of the way in which courts ought to approach discretionary decision-making by the government, something of which the government of the day is very fond.

The case concerns the application of Payment in Lieu of Taxes Act, which authorizes the Minister of Public Works and Government Services to make “payments in lieu of [municipal] taxes” to municipalities in which federal property is situated. Federal property is constitutionally exempt from provincial (and hence municipal) taxation, but as a matter of fairness, Parliament authorizes payments to municipalities that are meant to replace municipal taxes that would otherwise be levied on most federal property. Nonetheless, the statute confers a great deal of discretion on the Minister: he decides whether to make payments; the amount of the payment is calculated using the taxation rate which would be applicable “in the Minister’s opinion” if the property were taxable; and the value to which this rate is applied is also one which “in the Minister’s opinion” would be assessed if the property were taxable.

 Justice Cromwell, writing for a unanimous Court, summarizes the case very effectively at par. 5:

The Minister … decided that a national historic site is effectively valueless if it does not support economically beneficial uses. He therefore concluded that roughly 40 acres of the [Halifax] Citadel site are worth ten dollars. This conclusion, in my view, is unreasonable for two reasons. First, the property value is to be the value which, in the Minister’s opinion, the local assessment authority would apply to the property … However, in valuing the property the Minister adopted an approach which the record discloses no example of a Canadian assessment authority using, and which significantly differs from the approaches that the record suggests assessment authorities in provinces across the country do use.  The Minister’s opinion that the value he arrived at “would be attributable by an assessment authority” has no basis in and is contrary to the evidence.  Second, the Minister’s decision is inconsistent with the Act’s purpose.  The Act permits payments for national historic sites. To decide that these sites have no value for taxation purposes except to the extent that they could support commercial uses negates the very purpose of their inclusion in the PILT scheme.  For these two reasons the Minister’s decision was unreasonable.

So, the Supreme Court reminds us – and, more importantly, the federal government, – the exercise of discretionary powers is judicially reviewable, and even though the standard of review is reasonableness, it is a meaningful review. The phrase “in the Minister’s opinion” which Parliament uses seems to confer a very wide discretion on the Minister. But this discretion has to be exercised on the basis of evidence and in a logical way. The Minister cannot act on a whim or just because a certain decision suits him better than its contrary. Nor can he act in a way that frustrates the purpose of the legislation he is applying.

None of this is exactly new – these themes go back at least to Justice Rand’s judgment in Roncarelli v. Duplessis, [1959] S.C.R. 121, for example his famous statement that “[i]n public regulation … there is no such thing as absolute and untrammelled “discretion”, that is that action can be taken on any ground or for any reason that can be suggested to the mind of the administrator” (p. 140). But the reminder is timely. Recent federal legislation has taken to delegating considerable powers to the executive, and also, it seems, to trying to insulate executive action from review, by adding discretion-conferring catchphrases such as “in the Minister’s opinion” to already-existing grants of discretionary power. As the Supreme Court’s latest decision shows, however, delegation and conferral of apparent discretion does not free the executive to do whatever it pleases.