Law and the Limits of Government

Law and the Limits of Government

Temporary versus Permanent Legislation

Frank Fagan

Why do legislatures pass laws that automatically expire? Why are so many tax cuts sunset? In this first book-length treatment of those questions, the author explains that legislatures pass laws temporarily in order to reduce opposition from the citizenry, to increase the level of information revealed by lobbies, and to externalize the political costs of changing the tax code on to future legislatures. This book provides a careful analysis which does not normatively prescribe either permanent or temporary legislation in every instance, but rather specifies the conditions for which either permanent or temporary legislation would maximize social welfare.

Chapter 2: Short-to medium-term residual effects

Frank Fagan

Subjects: economics and finance, law and economics, law - academic, constitutional and administrative law, law and economics

Extract

Legislatures can pass legislation temporarily by including a duration or “sunset” clause that automatically invalidates a statute on a specified date. These clauses allow the legislature to authorize a statute for a limited time and govern temporarily. In contrast to “normal” permanent legislation, temporary legislation does not require additional legislative action for its rescission. It loses any legally binding effect when it reaches its predetermined date of expiration and can only be extended if the legislature passes a new bill that specifies an additional period of legal validity. Recent literature on legislative timing rules treats the effect of temporary legislation as dependent upon the continued existence of a legally binding rule (Parisi et al. 2004, Gersen 2007, Gersen and Posner 2007, Luppi and Parisi 2009, Yin 2009). The discussion assumes that when legislation expires, any compliance effect associated with that legislation also expires. No explicit consideration is given to the possibility that legislation can produce effects independent of statutory enforcement. For example, temporary law can be expressive, and change the level of social sanctioning around the substance of a law (Cooter 1998, McAdams and Rasmusen 2005, Funk 2007, Feldman 2009). Temporary industry regulations can lead to the permanent destruction of an industry or the emergence of substitute products (Nye 2007).

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