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FCC’s Open Internet Order Do-over – Key Going Forward Takeaways

Somewhat Reasonable - March 06, 2014, 10:55 AM

As the dust has settled from the D.C. Circuit’s January 14th decision to vacate and remand the FCC Open Internet Order for another try, and from FCC Chairman Wheeler’s February 19th statement accepting the court’s invitation to propose open Internet rules that could pass court muster, what does it all this mean going forward?

First, we need to glean the key separate baseline takeaways from what the court ruled and also what Chairman Wheeler initially decided. Then we need to put them together to glean what the big going-forward takeaways are.

Court Decision Takeaways

A big takeaway is that this court majority went out of its way to help the FCC and affirm its “general authority to regulate in this arena.”

While most of the coverage and analysis rightfully focused on the Court’s important denial of the FCC’s attempt to de facto regulate broadband providers as common carriers, many underappreciated the majority’s strong affirmation of the FCC’s broad authority under Section 706. It found the FCC’s assertion of 706-authority reasonable and supported by substantial evidence. It also concluded the FCC is due considerable deference by the Court on section 706.

After this big give to the FCC it also took away. The court drew a bright line that under the law an information service provider cannot be treated as if it were a common carrier p. 53, 60. Simply the FCC cannot legally compel an ISP to do something generally for everyone. However even here, the majority remained friendly to the FCC’s enforcement authority by providing a veritable roadmap p. 61 for how the FCC could navigate the court’s limits to achieve much of its no blocking and no discrimination goals in a redo mirroring the Court’s Cellco decision, which upheld the FCC’s data roaming rules.

Senior Circuit Judge Silberman’s dissent spotlighted how friendly the majority was to the FCC in ways that could make the FCC’s newly-affirmed 706 regulatory authority vulnerable to further appeal in the future under administrative law. Judge Silberman’s dissent effectively suggests the FCC should create a better evidence record and also should incorporate more market power analysis and its anti-competitive exercise in the future.

The big top-line takeaway from this court’s decision is that freedom-defined net neutrality is legal, while common carrier-defined net neutrality for broadband information services is illegal.

FCC Chairman Wheeler Statement Takeaways

The FCC acknowledged that the Court removed any real uncertainty over whether “the FCC has the legal authority to issue enforceable rules of the road to preserve Internet freedom and openness” – it clearly does under Section 706 for the foreseeable future.

The most important takeaway here is that when offered the opportunity by the Court to reclassify broadband as a Title II common carrier service, Chairman Wheeler rejected that option, essentially affirming Chairman Genachowski’s fundamental judgment that reclassification as a policy matter is not necessary, warranted, or best for preserving the Open Internet.

“Unfairly,” was the most important word that Chairman Wheeler used in his statement, because “unfairly” effectively qualifies much of what his new rules intend to accomplish.

See: “…innovators cannot be judged on their own merits if they are unfairly prevented from harnessing the full power of the Internet…” para 3 and “…we can ensure that edge providers are not unfairly blocked, explicitly or implicitly, from reaching consumers…” para 7. [Bold added]

Words matter. The big takeaway here is that this particular key qualifying word — unfairly” – matters a whole lot because it signals a more FTC-like unfair-competition standard for the Open Internet rather than the traditional FCC common carrier qualifying words of “unjust and unreasonable” of Title II.

Importantly, an “unfair” standard is generally employed after the fact upon a complaint, whereas the common carrier standard of no “unjust and unreasonable discrimination,” is generally prophylactic economic regulation. Most importantly, an “unfair” standard presumes normal commercial price discrimination based on economics of speed, usage, quality of service guarantees, etc. are ok.

The tricky part of crafting new rules for the FCC will be threading the needle the Cellco-way that the court suggested p. 61, and resisting the institution’s natural tendency to overreach like it did in both the original Comcast net neutrality enforcement decision and the original Open Internet Order.

Overall Combined Takeaways

There are two big combined economic takeaways from the Court and Chairman Wheeler’s guidance.

First, economics and normal “individualized bargaining and discrimination in terms,” p. 50 are “commercially reasonable,” p. 50 fair, and pro-competitive behaviors; they are neither per se illegal behaviors nor discrimination in violation of openness.

This is extremely important because common-carrier defined net neutrality proponents have long tried to define different speed tier prices, usage based pricing, usage caps, and two-sided markets as anti-Internet freedom and anti-Internet openness — and per se illegal discrimination. We now know they are legal and not generally considered an FCC violation of Internet openness.

What the FCC must figure out is when normal legal economic behavior in a competitive market, somehow crosses some provable, principled, predictable, anti-competitive line to become a violation of Internet freedom or openness. That would appear to be like an after-the-fact, antitrust-ish or FTC Section 5-like, enforcement standard against deceptive or unfair business practices.

Second, two-sided markets, like in the Internet backbone peering market where Google, Microsoft, Netflix etc. pay for the cost of their asymmetric traffic, are now presumptively legal and not a violation of Internet openness under the Court and FCC Chairman Wheeler’s mutually-reinforcing guidance.

Specifically, the FCC cannot compel information service providers to generally offer free or zero pricing to edge providers. See: p.60 “In requiring that all edge providers receive this minimum level of access for free, these rules would appear on their face to impose per se common carrier regulation.

Thus the big takeaway here is that the practice of charging edge providers for their asymmetric Internet backbone traffic is not presumptively a net neutrality violation of Internet openness, but is a commercially reasonable practice. This clarity will further economically rationalize Internet prices with Internet costs and benefits over time.

In sum, there is a broad consensus and deep commitment in the broadband industry to abide by freedom-defined net neutrality adjudicated by the FCC that ensures a free and open Internet where users have the freedom to access the legal content and applications of their choice.

Now we also know that there is an unappealed court ruling that affirms the legality of freedom-defined net neutrality and the illegality of imposing common carrier-defined net neutrality on information services providers.


Categories: On the Blog

Los Angeles City Council Votes to Treat Much-Safer E-Cigarettes Just Like Dangerous Tobacco Cigarettes

Somewhat Reasonable - March 06, 2014, 10:29 AM

In a closer vote than expected, the Los Angeles City Council today voted not to carve-out an exception for bars in that city’s new ban on public vaping (the use of e-cigarettes, which emit smokeless vapor).

National Center for Public Policy Research Risk Analysis Director Jeff Stier testified at the hearing, encouraging the council members not to vote to ban all public vaping in Los Angeles, including in bars, where children are banned.

“The ‘precautionary principle’ should be applied to regulations… regulations should be narrowly-tailored to achieve a public health goal, and they shouldn’t do more harm than good… The science is very well developed on the dangers of smoking [tobacco cigarettes],” said Stier, who says e-cigarettes have helped many nicotine-addicted adults quit smoking tobacco cigarettes.

“Let me tell you one very serious consequence of a regulation like this without having an exemption for bars,” said Stier, who went on to explain to the city council that smokers currently must leave bars to smoke outside. And if vapers, that is, e-cigarette users who are using e-cigarettes to quit smoking, are forced by regulations to go outside with the tobacco smokers to appease their nicotine habit, they will be more tempted to resume smoking tobacco.

As a public health policy, said Stier, “That’s nonsense! If you put them outside, they’re going to go back to smoking.”

The Los Angeles City Council ultimately voted 8-6 to treat vaping just like smoking, and not to allow an exception for bars, but the vote was closer than anticipated.

“This ban will be directly responsible for some former smokers going back to smoking – all in the name of ‘public health,’” said Stier.

“E-cigarettes do not re-normalize smoking,” Stier concluded. “They normalize not smoking.”

A video of Stier’s testimony in Los Angeles today is available on YouTube athttps://www.youtube.com/watch?v=kIGnT6LOX4o .

Stier has testified before states and localities in recent months about the relative safety of e-cigarettes compared to tobacco cigarettes. He says, “The vast majority of those who purchase e-cigarettes are adult smokers trying to quit. So discouraging the use of e-cigarettes actually incentivizes smokers to continue smoking.”

Stier is hopeful that as more elected officials realize the public health benefits of allowing the use of e-cigarettes, the more they will oppose policies, including e-cigarette bans and high excise taxes on e-cigarettes, that discourage people from using them to quit smoking tobacco.

New York City-based Jeff Stier is a Senior Fellow at the National Center for Public Policy Research in Washington, D.C., and heads its Risk Analysis Division. Stier is a frequent guest on CNBC, and has addressed health policy on CNN, Fox News Channel, MSNBC, as well as network newscasts. Stier’s National Center op-eds have been published in top outlets, including the Los Angeles Times, the New York Post, Newsday, Forbes, the Washington Examiner and National Review Online. He also frequently discusses risk issues on Twitter at@JeffaStier.

Stier has testified about e-cigarette regulation before the New York, Los Angeles and San Diego City Councils, submitted testimony to theOklahoma and Rhode Island legislatures has met with federal officials at the Office of Management and Budget and the Food and Drug Administration on the issue.

He’s written about the topic for the New York Post, the Huffington Post the Des Moines Register, and elsewhere.

Stier previously worked in both the office of the mayor and in the corporation counsel’s office during the Giuliani administration in New York City. His responsibilities included planning environmental agency programs, legal analysis of proposed legislation, and health policy. Mr. Stier also is chairman of the board of the Jewish International Connection, NY. While earning his law degree at the Benjamin N. Cardozo School of Law, he served two terms as editor-in-chief of the Cardozo Law Forum.

[Originally posted at JeffStier.org]
Categories: On the Blog

Design patents are a poor match for high fashion

Out of the Storm News - March 05, 2014, 4:36 PM

As the lengthy Hollywood awards season has shown us, fashion – especially red carpet fashion – is rife with faux pas, but none so great as “stealing the look.” It is considered terrible form to shop for your own paparazzi-ready gown in the pages of In Style magazine’s party circuit coverage, and worse form to look better than the original wearer. It doesn’t stop most rising starlets — especially the ones interested in making a name for themselves in a “who wore it better?” piece — but it never quite improves anyone’s situation.

Fashion itself is no different. Designers strive to inject fantasy and innovation into their fall ready-to-wear and couture lines, featured weeks ago in New York, last week in London and this week in Paris. The major fashion houses set the stage for style in the seasons to come. And then, consumers interested in being wallet-friendly fashionistas have created an ever-expanding market of “knockoff” fashion, allowing them to duplicate runway looks for a fraction of the price, shopping in their local mall instead of on Fifth Avenue. In an economy as unpredictable as ours, the market for consumer-driven fashion from stores like Forever 21, Zara, H&M, TopShop and ASOS seems nowhere near fading. (Although Forever 21 has faced a bevy of lawsuits, accused of copying the work of Anna Sui, 3.1 Phillip Lim and others.)

So how do designers, who work all year long in their chosen artistic field, protect the designs they create and preserve their own luxury? At least one group of designers has suggested expanding the scope of design patents — those patens given out to protect a product’s new and novel utility — into the realm of fashion, with the intent to protect their spin on age-old products, ready-to-wear and accessories, as a tech company would a new cell phone design.

The idea is, at least on its face, complex. Fashion rarely makes a leap forward in technology. Although there are firms working to make clothes more responsive to the human body, and even working to provide a healing and developing aspect to what you wear, most designers are merely building off basic constructions available to them since humans began crafting the first rudimentary clothing from fig leaves and animal skins (of course, fashion designs with a novel utility would already be eligible for utility patents, rather than design patents).

While a few designers have managed to invent a new clothing option – Diane von Furstenberg’s wrap dress comes to mind, celebrating it’s 40th anniversary at this year’s fashion week – those designers have often seen their work copied not by discount fashion retailers but by other high-end designers. Just last week, Roberto Cavalli had a small meltdown over Michael Kors’s Fall 2014 collection, accusing the Project Runway mentor and his million-dollar commercial fashion operation of “stealing” the works of other brands, including Cavalli’s, Celine, Hermes, Louis Vuitton and Tory Burch.

And designers who would most need to protect their work — upcoming and independent labels whose clothes are knocked off most often by consumer-driven fashion entities — would hardly be able to afford the time and fortune that initial paperwork and follow-up litigation would cost; no designer can afford to wait months for a single design to pass through a government initiation process, when runway shows are a bi-annual staple.

There are, of course, already means at a designer’s disposal, namely copyright protections, that can afford some measure of control over who gets to sell a knockoff of your design. While design patents have been and would be notoriously difficult to prove, copyrights – which protects an artist’s control over their work in print – have been litigated successfully, including against discount fashion retailers. Forever 21, often the victor in suits leveled by top brands seeking to prevent the store from selling “designer inspired” garments (such a regular occurrence they’ve noted that it’s part of their business strategy and a budgeted expense), was easily on the losing end of a lawsuit involving a perfectly copied fabric pattern, swiped from indie fashion house Feral Childe.

Copyright also has more lenient boundaries than the existing patent structure. As the world of digital media expands, so has the world of copyright, as musicians, writers and photographers look to harness the power of its protection on the Internet. Visual works, like Feral Childe’s textile designs, logos like Louis Vuitton’s eponymous “LV” and Burberry’s iconic tartan have all earned copyright protection alongside their luxury status, a protection that has served to preserve their status as luxury brands. Considering fashion designs “visual works” for the purpose of copyright protection could do the same for up-and-coming labels looking to make a unique mark on the field, while also preserving fashion’s process of marketing and innovation, even to discount markets.

Slight changes, derivative products and unique takes inspired by iconic designs are still available to designers looking to build on fashion’s storied history. After all, the future of fashion would not look the same without modern touches to Givenchy’s little black dress, Dior’s cinched-waist feminine suit or Diane von Furstenberg’s wrap dress, even as those fashion houses look to the seasons ahead.

Some designers have, of course, headed off the trials of consumer-driven discount fashion by inking deals with large-scale retailers. Chanel’s Karl Lagerfeld, for example, has embarked on partnerships with discount fashion retailer H&M and retail powerhouse Macys. Missoni cemented a record-breaking partnership with Target with products that sold out across the globe, and ready-to-wear staples like Nanette Lepore and Vera Wang are now working with JCPenny and Kohl’s respectively. Market-friendly strategies that anticipate consumers’ needs and wants, while preserving the good name of the fashion house and building consumer demand for the same designers’ works at higher price points. By embracing the free market, some designers have bypassed the need for litigation altogether.

In short, the cumbersome, complicated and time-consuming nature of design patents makes them a poor match for the fashion industry. Between an existing litigation rubric that uses copyright law to preserve the most iconic aspects of fashion design and being as innovated in marketing as they are on the runway, designers can adapt to the future, meet consumer demand and build buzz for their brands without resorting to the very un-modern federal government.

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

New Rules Could Undermine Successful Medicare Part D Program

Somewhat Reasonable - March 05, 2014, 4:36 PM

A new effort by the Obama Administration to change the Medicare Part D prescription drug program by imposing new rules on how the plans are set up and managed risk undermining what has been one the government’s few health care success stories. The proposed rules from the Centers for Medicare and Medicaid Services (CMS) would hinder the ability of Medicare beneficiaries to choose the kind of private plan that works best for them and limit access to the drugs they need. The proposed rules would limit the number of Part D plans that can be offered in a particular region, weaken the current guarantee that certain classes of medications must be fully available to patients with serious illnesses and places limits of health plans to negotiation with pharmacies to reduce drug costs.

The key to Medicare Part D is competition. Under the Part D model, private insurance plans compete against each other for the business of senior Medicare recipients, offering different benefits, costs and levels of coverage. The program empowers seniors to choose which plan works best for them and the government subsidizes the premiums. This competition leads to lower prices for seniors. Negotiation between the plan providers and pharmacies also reduces prescription costs.

The rules have drawn sharp criticism from consumer and free-market groups. In late February, a coalition of 283 organizations representing patients, seniors, employers disabled Americans sent a letter to CMS Administrator Marilyn Tavenner calling for the withdrawal of the new regulations that would undermine the many successes of Part D while having “unintended consequences for seniors and beneficiaries with disabilities.”

The Healthcare Leadership Council outlined several major problems with the proposed rules that were presented in the coalition letter:

The regulations would limit the number of Part D plans that could be offered to beneficiaries.  “Millions of seniors and beneficiaries with disabilities would lose their current plan of choice or face changes in coverage,” they wrote.

Despite the clear intent of Congress that Medicare Part D should rely solely upon market-based pricing and private sector competition, the rules would “dramatically expand the federal government’s role in Medicare Part D despite the fact that there is no compelling reason for doing so.  Reshaping Part D in this way will neither improve quality and affordability, nor incentivize plan innovation,” the letter said.

New cost burdens imposed as a result of the proposed regulations “will drive higher premiums for millions of beneficiaries and lead to higher costs for Medicare without tangible gains in service or quality for beneficiaries.”

CMS’ proposal would have a dramatic effect on the number of plans available for seniors. A study by Avalere Health found that the rule change limiting the number of prescription drug plans (PDPs) per region could end up forcing 39 percent of all enhanced plans to be eliminated in 2016. The Avalere study also estimated that the regional limit, which holds standalone PDP sponsors to one basic and one enhanced plan per region would require “214 of the current 552 enhanced PDPs to be terminated or consolidated with an existing plan.”

The new rules would also dramatically increase the cost of the program. The National Taxpayers Union points to a study from the Milliman actuarial firm that concluded that the cost of Medicare Part D would increase by an additional $1.6 billion per year if the rules are adopted.

Testifying before the House Subcommittee on Health, Douglas Holtz-Eakin, the President of the American Action Forum argued that reforming Medicare Part D and limiting competition violates the intent of the Medicare Modernization Act and will increase cost and decrease drug access for seniors.

From Holtz-Eakin’s testimony:

  1. The Medicare Part D program is a proven success story of bipartisan Medicare reform, making affordable prescription drug coverage available to seniors and the disabled;
  2. The proposed new rule titled “Medicare Program; Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs” clearly violates the intent of Congress when it passed the Medicare Modernization Act (MMA) and rests on a questionable legal foundation by interfering with the established negotiation processes;
  3. Policy analyses show the proposed rule is likely to raise costs for seniors, programs, and the federal taxpayers, unnecessarily harming the superb record that the competition-based design of Part D has built; and
  4. The rule imposes requirements that will decrease seniors’ access to vital prescription drugs.

Medicare Part D is not broken. Part D has proven that a modern, free-market model can replace a system of price controls and provide medications to the neediest of Americans, all at a lower cost than the old system. Instead of foisting unnecessary changes on an already successful program, legislators should be using the successful free market mechanisms at the heart of Part D as a model for other bidding processes within Medicare.

For more information on Medicare Part D and the misguided effort to reform the program, please visit the Heartland Institute’s website on the issue: http://savemedicarepartd.com/.

Categories: On the Blog

Video: Scott Cleland on Why We Need a New Communications Law

Somewhat Reasonable - March 05, 2014, 12:18 PM

Scott Cleland, successful entrepreneur and former Deputy Coordinator for Communications and Information Policy for the George H.W. Bush administration, has released a new video detailing the pressing need in America for a new communications law. The woefully out of date laws currently on the books are in desperate need of a 21st century re-write. Watch the short video to see what needs to be done to keep American telecoms free and competitive.


Categories: On the Blog

Congress shouldn’t overlook design patents in its push for reform

Out of the Storm News - March 05, 2014, 10:49 AM

With legislation passed in the House, the U.S. Senate is set to move forward on multiple bills to combat the costly problem of patent trolls. While current proposals address issues with transparency, patent quality and litigation procedure, they do little to address growing problems with “design patents.”

What most people imagine when they think of patents are “utility patents,” which offer protection for new technologies as a way to foster innovation. But intellectual property law also extends protection to the non-functional elements of a product’s design. This can include the shape of a camisole or generic-looking fuzzy slippers. In practice, an item’s shape and ornamentation often is patented to restrict competition, rather than to protect genuine innovation.

Moreover, these design patents have an application process that differs from utility patents in ways that are sometimes problematic. Where utility patent applications allow lots of time for public comment and input, design patent applications are not published before they are granted and have no mechanism for feedback about prior art.Where the terms of utility patents are dated to the day the application was filed, design patents are dated to the day they are issued. This quirk creates a loophole that allows a design patent applicant to enjoy perpetual protection by simply filing a series of “continuations” in conjunction with the patent application.Design patents once were considered fairly unimportant, but circumstances have changed. In addition to the Hague agreement that took effect last year, the 2008 decision in Egyptian Goddess vs. Swisa did a lot to strengthen design patents. That decision made design patent infringement much easier to prove by replacing the “point of novelty” test with a test that finds, if an ordinary observer would find the designs of two products to be substantially the same, then the patent is infringed. Design patents also are cheap, easy to procure and, unlike utility patents, require no maintenance fees, making them attractive to firms who wish to bolster their patent portfolios.

Under current infringement standards, if your fuzzy slippers, your camisole or – more crucially — the rounded edges on your smartphone are substantially similar to some patented competitor, you can be held liable for potentially hundreds of millions in damages. This is particularly problematic when there is no effective process to raise the objection that certain patented designs are not novel, and may have already existed for decades.

These differences also pose a problem for Congress as it drafts patent reform legislation. At The Faculty Lounge, professor Sarah Burstein highlights some unintended consequences of current patent reform proposals, which overlook how design patents work. The House’s patent bill, for instance, requires putative patent trolls to do things that either aren’t possible or don’t make sense in design patent cases.

Bringing design patent applications out into the open, like their utility patent cousins, would do a lot of good. It would bring down the number of lawsuits by exposing frivolous patent applications. In turn, this would enable more businesses to invest in jobs and development, rather than being forced to pay settlements for infringement.

Congress should look to address these problems as it moves forward with efforts to reform the patent system. To help organize these efforts, my colleagues at the R Street Institute have launched a new coalition called Unfair by Design. Check it out at unfairbydesign.com.

House passes flood insurance bill

Out of the Storm News - March 05, 2014, 10:38 AM

From the Greenville News:

“Everybody we talked to, virtually without fail, recognize that these delay and repeal efforts are damaging and counterproductive,” said Andrew Moylan, a senior fellow at the R Street Institute. “Rushing a vote the way that they are is an indication that in their heart of hearts, they know it’s the wrong thing to do.”

The one budget proposal worth seizing

Out of the Storm News - March 05, 2014, 10:34 AM

President Obama’s new budget for fiscal year 2015 is almost entirely free of surprises. The Obama administration supports a number of large tax increases, most but not all of which target high-income households, and so the budget assumes that revenues will grow faster than expenditures over the coming decades and that debt levels will decline. One key reason the White House is able to paint so rosy a picture is that its economic assumptions are different from those of the more buttoned-up Congressional Budget Office. Specifically, the Office of Management and Budget, which is responsible for crafting the president’s budget proposal, maintains that the U.S. economy will be 2 percentage points bigger in 2024 than it will be in the CBO’s projection.

This might not sound like a huge difference. But it matters more than you might think. The CBO has devoted considerable time and effort to understand why its 2010 prediction of a robust economic recovery failed to materialize, and it found that the post-crisis recovery really has been as dismal as it feels. Sluggish capital investment has contributed to sluggish productivity growth, and the labor market recovery hasn’t been strong enough to draw the long-term unemployed back into steady jobs.

With this sobering picture in mind, the CBO has lowered its estimate for America’s economic growth potential over the next decade to a mere 2.5 percent, far lower than the 3.3 percent that’s been the average growth rate for the U.S. economy since 1950. CBO projects that real GDP growth will actually fall to 2.2 percent in the second half of the next decade, which is to say they assume things will get worse rather than better. It turns out that even quite small changes, on the order of a 0.1 percentage point difference in the average annual growth rate, can have enormous fiscal consequences. So it’s very noteworthy that between 2010 and 2014, the CBO’s forecast for average real GDP growth over the next decade has gone from 3 percent to 2.5 percent.

How does the White House justify its more optimistic assessment? It seems that the Obama administration is counting on comprehensive immigration reform to deliver large economic benefits. The CBO has estimated that immigration reform could increase the size of the U.S. economy over the next decade by as much as 3 percentage points. It remains to be seen if the benefits of the immigration reform favored by the president will outweigh the benefits. I’m skeptical. It is easy to imagine that a more selective, skills-based immigration policy could be an enormous boon to the U.S. economy, as the economists Xavier Chojnicki, Frédéric Docquier and Lionel Ragot have suggested. Yet the president favors a substantial increase in less-skilled immigration that could prove quite expensive in an era of rapid technological change.

Regardless, there is no question that factoring in the potential benefits of immigration reform is a new development in presidential budgeting. It could speak to the fact that realistic estimates of America’s growth potential have fallen so much over the course of the Obama presidency that the president’s staffers felt an obligation to get creative.

There is, however, one very promising new initiative in the president’s budget proposal. He calls for a large expansion of the earned income tax credit (EITC), a program that greatly increases the incomes of poor households headed by a working adult. As it currently stands, the EITC is far more generous to parents than it is to childless workers. The unfortunate result is that the wages on offer to many childless adults, and in particular to childless men, are not high enough to draw them into entry-level jobs that can serve as a stepping stone toward economic independence. A number of activists, on the left and on the right, have suggested that an EITC that is more generous to childless workers might make work attractive to men with modest skills, and this might, in turn, make them better marriage partners and, eventually, better parents.

Unfortunately, the Obama administration has also vocally championed a substantial increase in the minimum wage that, unlike its proposed expansion of the EITC, is actually very poorly targeted. The CBO has found that while 19 percent of the income gains associated with increasing the federal minimum wage to $10.10 would go to households earning less than the poverty level, 29 percent would go to households earning more than three times the poverty level. The benefits of President Obama’s EITC expansion, in contrast, would flow almost entirely to the very poor, who need it most.

If anything, the president’s budget proposal is a reminder of the weakness of the U.S. economy. If America’s growth potential were even slightly higher — if it even came close to what the CBO assumed it would be at the start of the Obama years — it would be far easier to carry the growing burden of caring for older Americans and far easier to shrink our public debt.

House votes to curtail flood insurance rate hikes

Out of the Storm News - March 05, 2014, 10:18 AM

From the Miami Herald:

Andrew Moylan, a senior fellow at the R Street Institute, a libertarian group, said his group’s goal was to move from a government-run flood insurance program to the private market. But until that happens, there should be a means test so that people who can’t afford the insurance get help and the wealthy pay their own way, he said.

R Street deeply disappointed by House flood insurance bill

Out of the Storm News - March 04, 2014, 7:16 PM

WASHINGTON (Mar. 4, 2014) – The R Street Institute is deeply disappointed by today’s passage of HR 3370 in the House of Representatives. The bill represents a significant step backward from the much-heralded Biggert-Waters Flood Insurance Reform Act of 2012, which was meant to move the National Flood Insurance Program toward financial solvency.

HR 3370 undermines the current law’s goal of ending taxpayer subsidies for the roughly one-fifth of NFIP policyholders who receive them. It would extend into perpetuity subsidies for roughly 700,000 older primary homes, even if they are resold by the current owner. The measure also rolls back rate increases for properties that have been resold since the law was passed in mid-2012.

The bill as passed also repeals entirely the section of the flood insurance reform law that calls on FEMA to update its maps. For most NFIP policyholders, this bill, along with legislation already passed by the Senate, will result in higher rates than they would otherwise pay, as increases for remapped properties that were paying insufficient rates would be offset by reductions for other properties in the program.

Complying with these changes will keep FEMA from ever being able to charge actuarially sound rates for flood insurance, which in turn will keep the NFIP in significant debt to the taxpayers as more bailouts are needed to deal with destruction from major storms similar to Hurricane Katrina and Superstorm Sandy.

“This bill as passed does severe damage to the goal of making the NFIP financially solvent,” said R Street Senior Fellow R.J. Lehmann. “With the program in debt to the taxpayers to the tune of $25 billion, this bill makes clear that members are unwilling to stand behind the free-market principles and fiscal responsibility that the House leadership claims to embrace.”

Lehmann added that the outcry to undo Biggert-Waters has been driven by wildly inaccurate or exaggerated claims about the impact of rate increases. For instance, the phase-out of subsidies for older properties – which see premium increases of 25 percent a year until they reach risk-based rates – currently only affects second homes, business properties and about 9,000 properties that have been completely destroyed more than once. It does not affect primary homes unless the owner resells the property or allows his or her policy to lapse.

Moreover, according to FEMA data, as of July 31, 2013, 97.9 percent of the 5.6 million policies within the NFIP paid rates that were less than $5,000. Only seven properties in the entire United States had rates that were greater than $20,000.

“In this environment of budget cuts and growing deficits, the Biggert-Waters Act demonstrated a commitment to fiscal responsibility for a program that has been operating in debt since 2005. Gutting those reforms will taje us further into the debt that House members always claim to want to reduce.”

The bill now moves to conference with similar legislation passed by the Senate.

Letter to Washington Legislature on e-cigarettes

Out of the Storm News - March 04, 2014, 5:07 PM

Dear Speaker Chopp,­­­

In the next few days, you and your colleagues will again consider measures that impose significant new taxes on e-cigarette products and will serve to make their use nearly as costly as those of cigarettes. I urge you to approach these proposals with extreme skepticism.

E-cigarettes are addictive and their use is certainly not good for one’s health. Measures to restrict their availability to children and place other limits on their sale are certainly justified.  But a huge increase in their taxes may well do more harm than good for public health.

As the attached paper by Dr. Joel Nitzkin demonstrates, they hold significant potential to improve public health if current smokers switch from tobacco cigarettes. As he writes in the included paper:

“A flood of new scientific papers relating to these products suggest the possibility that e-cigarettes may be the greatest advance in reducing tobacco-attributable illness and death in decades. Hugely higher taxes on e-cigarettes could, for all intents and purposes, urge people to continue using vastly more harmful tobacco cigarettes. “

Dr. Nitzkin, a long-time anti-tobacco crusader, is a senior fellow of the R Street Institute and a former public health commissioner of the State of Louisiana.  His opinions, and the findings in the scientific literature that he reviews, are certainly worth your attention.

The regulation and control of e-cigarettes is an important issue. I urge you to read the attached paper and reach your conclusion about e-cigarettes based on the best available evidence.

Yours sincerely,

Eli Lehrer


R Street Institute

R Street concerned about protectionist reinsurance tax

Out of the Storm News - March 04, 2014, 2:16 PM

WASHINGTON (March 4, 2014) – The R Street Institute today expressed concern about a plank in the White House’s proposed 2015 budget that would impose protectionist taxes on legitimate reinsurance transactions made by affiliates of non-U.S. companies.

The proposal, which the White House estimates would raise $7.57 billion over the next decade, would disallow the deduction for certain reinsurance transactions between domestic insurers and reinsurers and affiliates that are based offshore.

“This proposal violates the fundamental principle that, in a free and open society, similar parties and similar transactions should be treated equitably, regardless of where a person is from or where a company is headquartered,” R Street Senior Fellow R.J. Lehmann said.

The proposal – and similar legislation from Sen. Bob Menendez, D-N.J. and Rep. Richard Neal, D-Mass. – would particularly impact states like Florida and California, which face significant natural disaster risks and depend on insurance and reinsurance capacity from firms headquartered outside of the United States. A report from the Cambridge, Mass.-based Brattle Group estimated taxing such transactions would cost consumers between $110 and $140 billion over the next decade.

Earlier this year, R Street joined with seven other taxpayer and free-market groups – including Americans for Tax Reform, National Taxpayers Union and Americans for Prosperity – to send a letter to the Senate Finance Committee opposing these sorts of protectionist tax proposals.

John Kerry’s Climate Policy is the Same as Bloodletting: Patients are not Cured, and Sometimes Die

Somewhat Reasonable - March 04, 2014, 11:48 AM

On February 16, Secretary of State John Kerry gave a long speech in Jakarta, Indonesia before a group of Indonesian students, civic leaders, and government officials in a U. S. Embassy-run American Center in a shopping mall.  The subject was on climate change policy and Secretary Kerry ripped into those who disagreed with his thinking.  Secretary Kerry said, “We simply don’t have time to let a few loud interest groups hijack the climate conversation,” he said, referring to what he called “big companies” that “don’t want to change and spend a lot of money” to act to reduce the risks.  “We should not allow a tiny minority of shoddy scientists and science and extreme ideologues to compete with scientific facts.”  “Nor should we allow any room for those who think that the costs associated with doing the right thing outweigh the benefits.”  “The science is unequivocal, and those who refuse to believe it are simply burying their heads in the sand,” Kerry said.  “We don’t have time for a meeting anywhere of the Flat Earth Society.”

Secretary Kerry also said scientists claim climate changes are leading to drought, wildfires, rising sea levels, melting polar ice, plant and animal extinctions, and other extreme conditions.  In addition, he pointed out recent weather disasters such as flooding and typhoons in Asia and their impacts on commerce, fishing, agriculture and daily living conditions for billions of people.

He added: “In a sense, climate change can now be considered the world’s largest weapon of mass destruction, perhaps even, the world’s most fearsome weapon of mass destruction.”  The solution, Kerry said, is a new global energy policy that shifts reliance from fossil fuels to cleaner technologies.  He noted President Barack Obama is championing such a shift and encouraged others to appeal to their leaders to join.

Tens of millions of Americans take offense to an American Secretary of State on foreign soil labeling them “a tiny minority of shoddy scientists and science and extreme ideologues to compete with scientific facts.”  There is no precedent for such actions.

Secretary Kerry always used the words climate change instead of global warming as buzz words for human-caused present and future disasters.  Climate change has existed since the beginning of the planet 4.5 billion years ago.  Debating climate change makes as much sense as debating the sun rises in the East each morning.  Secretary Kerry, as well as President Obama, is arguing the hypothesis carbon dioxide from burning fossil fuels is causing global warming with catastrophic weather events.  Tens of millions of thinking Americans, including tens of thousands of scientists, disagree with this hypothesis.

If Secretary Kerry and his compatriots would listen to the debate, they would learn the following answers to global warming questions:  Is global warming taking place?  Yes, for reasons explained later.  Do human activity’s causing global warming?  Yes, temperatures are increasing in large metropolitan areas where massive amounts of concrete and asphalt store the sun’s energy and increases local temperatures; particularly at night.  This is called the Urban Heat Island Effect.  Does carbon dioxide from burning fossil fuels cause significant global warming?   No, historical and scientific events show increasing carbon dioxide has an insignificant role in global warming.

Historical data covering almost one million years show no significant role of carbon dioxide changes on temperatures.  Antarctic ice core data hundreds of thousands of years ago show temperature increases led carbon dioxide increases by 100 to 900 years.  This indicates temperature drives carbon dioxide changes; not the other way.  More recently the planet experienced periods of approximately 500-year duration in which the planet warmed and then cooled; while carbon dioxide levels remained constant.  The periods have names–Roman Warming Period (100 BC-400 AD), Dark Ages (400 AD-900 AD), Medieval Warm Period (900 AD-1300 AD), Little Ice Age (1300 AD-1850 AD), and Current Warm Period (1850 AD-?).   If history repeats itself the Current Warm Period will last until 2300 AD and then the planet’s climate will shift into another 500-year cold period.  Temperatures during the Medieval Warm Period were warmer than today as shown by Greenland’s agricultural districts, wine produced in Scotland, sea levels being higher than today, and higher local temperature measurements at many locations.

Carbon dioxide is one of several greenhouse gases that absorbs and re-emits radiant heat emitted from the earth’s surface.  This effect is thought to have warmed the earth by about 60 degrees F. above what would exist if this phenomenon did not occur.

Carbon dioxide from burning fossil fuels is a small portion of the carbon dioxide emitted annually into the atmosphere.  At this time, natural emissions due to out-gassing from the oceans, plant and animal decay, volcanoes, etc. are about 800 billion tons per year.  Current carbon dioxide emissions are about 36 billion tons per year.  Current atmospheric carbon dioxide level is 400 parts per million (ppm); increasing at a rate of 2 ppm annually.  For the past ten thousand years, carbon dioxide levels are thought to be 280 ppm until the start of the Industrial Revolution in 1750.  From that time, carbon dioxide levels gradually increased to 310 ppm from 1750 to 1950.  Since 1950, carbon dioxide levels increased 90 ppm to the 400 ppm level of 2014.  It is this 64-year period from 1950 to present that carbon dioxide from burning fossil fuels is alleged to contribute to global warming.

Water vapor is also a greenhouse gas more powerful than carbon dioxide due to its more complex molecular structure.  On average water vapor exists on the planet at 10,000 ppm; forty times more prevalent than carbon dioxide.  Water vapor accounts for most of the earth’s 60 degree temperature increase due to the greenhouse effect.

Examining global temperatures during the Current Warming Period shows a slight decline in temperatures from 1880 until 1910, a rise in temperatures from 1910 to 1940, a slight decline in temperatures from 1940 until 1975, a rise in temperatures from 1975 until 1998, and leveling(the pause) of temperatures from 1998 to present.  Those debating the role of carbon dioxide from burning fossil fuels on global warming concede the influence is from 1950 to present.  Prior to 1950, global warming is caused by natural events.  During the 64-year period with a 90 ppm increase in atmospheric carbon dioxide, global warming occurred only 23 years.  Those with good memories might recall in 1974 Newsweek and Time Magazine came out with issues of alarm about global cooling may usher in another Ice Age.  The 15-year pause in global warming with the highest rate of annual carbon dioxide increases (32 ppm over 15 years) has led to consternation for many promoting catastrophic global warming.  This is the reason Secretary Kerry and President Obama use the words climate change instead of global warming in their remarks slandering America’s citizens.

The scares about global warming (climate change) are due to a multitude of computer models that predict present and future global temperatures and events like sea level rise.  All of these models are unable to predict the current pause and overestimate global temperatures when compared to current temperatures.   Another factor frequently omitted in discussing the worth of computer models is all of them predict a “hot spot” in the upper atmosphere from latitudes 30 degrees South to 30 degrees North.  The “hot spot” reaches from an altitude of 4 miles to 10 miles.  Millions of radiosonde and satellite temperature measurements show no existence of the “hot spot”.   The failure of computer models to predict actual events show they are not worthy of basing energy policy on their projections.

Secretary Kerry read off a list of events such as droughts, forest fires, hurricanes, tornados, sea level rise, and polar ice melting that have centuries of data showing their changes.  All of these events occurred in the past when carbon dioxide levels were not increasing; surprisingly, many of these events are less frequent and powerful the last few decades.  Secretary Kerry claimed a vast preponderance of scientists agree with him about the dangers of burning fossil fuels.  One example of disagreement is the Oregon Petition  during the late 1990s that had 31,487 scientists, including 9029 PhDs, who stated carbon dioxide increases are not worth considering for energy policy.

The preceding paragraphs cover a lot of climate science that is readily available on the Internet.  They show most of Secretary Kerry’s statements involving global warming are false.  I always urge individuals to be skeptical of everything and verify their beliefs.  A good start is information from a group of scientists, the Nongovernmental International Panel on Climate Change (NIPCC), and their most recent report Climate Change Reconsidered II: Physical Science .  This report is on the Internet, over 1000 pages long, and with over 4000 references.  Another excellent source of information is the Internet report by Popular Technology that lists 1350 + peer-reviewed papers challenging catastrophic global warming by categories such as Arctic, sea level rise, temperatures, etc.

Secretary Kerry’s remarks are political and attempting to convince American’s the nation should adopt policies to reduce fossil fuel use and lead the world on introducing a world-wide protocol, similar to the expired 1997 Kyoto Treaty, administered by the United Nations and consummated at the Conference of the Parties meeting in Paris November 30-December 10, 2015.  In his speech, Secretary Kerry mentioned giving Indonesia $332 million from the Millennium Challenge Corporation as part of the Green Prosperity program to help insure that nation’s cooperation in getting a new Kyoto Treaty passed.  Statements by some of the people Secretary Kerry consorts with may give insight on what is in store for the United States.

Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change, said in a 2014 interview  at Bloomberg News headquarters in New York the following remarks about China:

 ”They actually want to breathe air that they don’t have to look at.  They’re not doing this because they want to save the planet.  They’re doing it because it’s in their national interest.  China is also able to implement policies because its political system avoids some of the legislative hurdles seen in countries including the U.S. Key policies, reforms and appointments are decided at plenums, or meeting of the governing Communist Party’s more than 200-strong Central Committee.  The National People’s Congress, China’s unicameral legislature, largely enforces decisions made by the party and other executive organs.  The political divide in the U.S. Congress has slowed efforts to pass climate legislation and is “very detrimental” to the fight against global warming, she remarked.”

Another player in the United Nations attempt at energy policy control, Ottmar Edenhofer is the co-chair of the IPCC Working Group III, gave the following interview with Neue Zurcher Zeitung November 14, 2010 : “De facto, this means an expropriation of the countries with natural resources. This leads to a very different development from that which has been triggered by development policy.”

Edenhofer replied,

“First of all, developed countries have basically expropriated the atmosphere of the world community.  But one must say clearly that we redistribute de facto the world’s wealth by climate policy. Obviously, the owners of coal and oil will not be enthusiastic about this. One has to free oneself from the illusion that international climate policy is environmental policy. This has almost nothing to do with environmental policy anymore, with problems such as deforestation or the ozone hole.”

These individuals want a new world order where the United States cedes sovereignty to the demands of the United Nations.

Secretary Kerry said, “Climate change can now be considered the world’s most fearsome weapon of mass destruction.”  Can his memory be so short not to remember over ten thousand have died due to the war on terror that stretches back to at least 1983 when 241 Marines were killed in a Lebanon barracks and trillions of tax dollars spent on a war that is not finished.

Fossil fuel use is the lifeblood of developed industrial nations.  It has eliminated hunger, poverty, lack of shelter, drudgery, and provided healthier, more comfortable, and longer lifespans.  The United States is blessed by having over one hundred years or more supply of inexpensive or moderate cost deposits of each of the fossil fuels–coal, oil, and natural gas.  Secretary Kerry, along with President Obama and his supporters, want to eliminate use of the nation’s abundant, reliable, and economical fossil fuels and replace them with renewable energy sources–wind and solar–whose present state of technology make them expensive, unreliable, and impractical to scale up to the size of present fossil fuel capabilities.  These policies will substantially lower the standard of living for Americans and condemn developing nations to perpetual poverty.

Secretary Kerry’s solutions to the non-existent global warming problem can be compared to the pre-20th century medical practice of bloodletting—patients are not cured and many die.

All of Secretary Kerry’s and President Obama’s plans to relieve “Climate Change” are a total waste of money.  Society has used common sense to mitigate natural climate change for many thousands of years.  The first use was called clothing–it was noticed clothing made people more comfortable in cold weather.  Society has progressed ever since due to human actions that did not require government persuasion.   Umbrellas were invented to make traveling more comfortable during rainfall.  Secretary Kerry’s plans are similar to having government tell the public to open their umbrellas during rainfall.  With the U. S. government sinking in debt $2 billion per day, do we need to waste tax dollars on agencies to tell us to do what we would naturally do?

Damage to the nation’s economy by climate change and energy policies of Secretary Kerry, President Obama, and their followers demand examination of their fitness to run this country.  The public needs to thoroughly study these issues and make decisive votes in the 2014 and 2016 elections.

Students of 19th century American history may recall the great Nez Perce Chief Joseph who led his tribe on an epic 1500-mile trek in the Northwest trying to lead his people to freedom in Canada and was forced to surrender.  After surrender he made the memorable statement, “From where the sun now stands I will fight no more forever.”  Due to sadness about perils facing our country, I make this statement, ”Where the sun now stands John Kerry is my Secretary of State no more forever.”

Categories: On the Blog

Sen. Mary Landrieu endorses House flood insurance bill after ‘affordability’ provisions added

Out of the Storm News - March 04, 2014, 11:09 AM

From the Times-Picayune:

Landrieu lashed out at a statement last week by a leader of the conservative R Street Institute, that congressional leaders are moving away from the Biggert-Waters Act for political reasons, with Democrats wanting to help Landrieu’s re-election efforts and Republicans wanting to assist her main GOP challenger, Rep. Bill Cassidy, R-Baton Rouge. A lot of the credit, Landrieu said, goes to influential groups representing homeowners, real estate agents, homebuilders, banks and others who worked hard to convince lawmakers to take action. All acted to “represent their industries,” and interests — their goal wasn’t to try “to get me elected or Bill Cassidy elected,” Landrieu said.

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