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Updated: 2 weeks 5 days ago

R Street Panels at SXSW 2015

March 13, 2015, 3:00 AM
Join the R Street Institute in Austin, Texas for three policy-focused panels during SXSW Interactive.

Panel: Conservative Thought and Sustainability

November 13, 2014, 9:30 AM
R Street's Lori Sanders will be speaking at the ASBC Annual Business Summit on November 13, 2014.

The California Model: What We Can Learn from the Golden State’s Approach to Ridesharing

November 10, 2014, 1:00 PM
Join the R Street Institute and Engine for a candid discussion about new ridesharing legislation.

Election post-mortem in California

November 07, 2014, 12:06 PM

If the key to success is maintaining low expectations, California Republicans had a great election night.

Over the past several years, every objective measure of the party’s success has pointed toward failure. Heading into the midterm, California Republicans held no statewide offices and were subject to Democratic super-majorities in the Assembly and the Senate (though, in the Senate, the Democrat advantage was rarely realized because of members’ ethical failures, leading to three suspensions).

Though some votes are still being counted, close races for statewide office have all been resolved in favor of Democrats. In the legislative branch, it looks as though California Republicans have crawled back to simple minority status in each chamber. This is enough for California Republicans to go wild in celebration.

The significance of the Republican legislative gains are largely symbolic. The budget, formerly the best tool for leveraging their agenda, no longer requires a two-thirds vote. Still, tax increases do require the two-thirds number, thus, there likely will not be an attack on Prop 13 (property tax restrictions) in the coming session.

Democrats had a rough night nationally, but their California candidates came away largely unscathed. Arguably, the party spent time and money on unwinnable races (AD 36 and AD 65) at the expense of other close contests (AD 66).

Of more interest than the losses in vulnerable legislative districts were the results of Democratic intraparty races. Two big lessons appeared from those:

  1. Candidates that reached out to non-Democrats did better than those who did not. In Sacramento, one candidate sent/had sent 18 mailers directly to registered Republicans – his new title is “senator-elect.”
  2. No incumbent is safe. The chairman of the Revenue and Taxation Committee, and rumored speaker-to-be, walked to a large win in the primary only to lose to another Democrat in the general election. His opponent, a self-styled “humble-housewife,” had no campaign committee and no contributions or expenditures worthy of reporting to the secretary of state.

For their part, California voters had a say on a handful of initiatives. Propositions 1 and 2, a water bond and a rainy day fund, enjoyed broad bipartisan support. Gov. Jerry Brown campaigned for reelection by way of stumping for each of them (which had some Democrats grumbling about a hole at the top of the ticket). Both passed. Further down the ballot, Props 45 and 46, prior-approval of health care rates and an increase in the state’s cap on non-economic damages, tested well-funded defensive political machines. Both failed by double digits.

Here are some final thoughts on California’s election cycle and what it means for the next legislative session and California’s political future generally:

  • The California Republican Party is not dead, but it took a major national wave to trigger a revival. Freshman state legislators from swing seats will need to occasionally frustrate caucus recommendations to vote their districts if they hope to survive next cycle.
  • The Senate will be a confusing place to count votes, because a number of members that won reelection also won congressional seats. That will trigger special elections. What’s more, a former speaker of the Assembly was just elected to the Senate. Should further ethics problems surface, it will test the new pro tempore’s hold on his office.
  • The California Teachers Association went all out in its successful effort to retain Superintendent Tom Torlakson. The challenger, Marshall Tuck, had the backing of Silicon Valley. This will not be the last time that tech and unions collide.
  • The two top contenders for an open U.S. Senate seat from California are Attorney General Kamala Harris and Lt. Gov. Gavin Newsom. Neither had significant opposition, though Harris did receive 2,000 more votes than Newsom.
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Will TDI hold the line on TWIA liability expansion?

November 07, 2014, 9:00 AM

The Texas Department of Insurance met Wednesday to consider whether to expand liability for the Texas Windstorm Insurance Association (TWIA). State law caps the amount that TWIA can cover in an individual policy, but allows it to request increases in the cap each year to account for increased construction costs.

This year, TWIA is asking to increase the maximum allowable coverage amount from $1.77 million to $1.85 million for individual townhouses; from $370,000 to $390,000 for the contents of apartments, condos or townhouses; and from $4.4 million to $4.6 million for commercial structures and their contents.

It was a brief and somewhat sleepy affair. There was testimony from TWIA’s actuary, as well as from a coastal area interest group. The hearing was adjourned with a decision left pending.

On the surface, the whole thing might seem routine. And yet, for the past two years, TDI has denied TWIA’s request for increase, and there is a decent chance it will do so again this year. As TDI noted in its previous denials, TWIA’s liability increases over the last decade have far exceeded the cost increases in the BOECKH Index (upon which TWIA is statutorily supposed to base its increase requests).

For example, from 2005 to 2013, the BOECKH Index factors relating to individually owned townhouses have increased by about 30 percent. By contrast, TWIA’s maximum allowed liability for individually owned townhouses has increased by 305 percent over the same time period (no, that’s not a typo). If prior liability expansions have been excessive, it only makes sense to hold off on further expansions until the long-term trends aren’t quite so out of whack.

From a big picture perspective, there is something more than a little odd about approving any liability expansion, given TWIA’s overall precarious financial position. TWIA currently has $77 billion in liability. Were Texas to be hit by a major storm, it likely would not be able to meet its financial obligations. Indeed, in 2013 TWIA briefly considered going into receivership to deal with claims made after 2008′s Hurricane Ike.

It’s true that, compared to TWIA’s current liabilities, the proposed increase in exposure from its current request would be minimal. But to paraphrase Everett Dirksen, even if TWIA only expands its liability by a little each year, pretty soon it will add up to real money. When TWIA’s financial viability is in doubt, insuring houses worth more than $1.8 million should not be high on the organization’s priority list. Texas needs to be looking at ways to lower TWIA’s liability exposure, not expand it.

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Heartland Institute experts react to the 2014 midterm elections

November 06, 2014, 1:26 PM

From the Heartland Institute:

“The shift in Senate leadership could lead to significant progress in technology policy. For one, we could at last see movement on patent reform, an issue that has bipartisan consensus but was tabled this year by Democratic Majority Leader Harry Reid in response to pressure from the trial lawyers lobby.

“We may also see a long-overdue rewrite of the Telecom Act, which would serve the dual purpose of updating regulation to reflect the 21st century Internet era as well as reign in recent FCC regulatory overreach, such as its ongoing attempt to unilaterally reclassify Internet service providers as heavily regulated telephone companies and extend broadcast regulations into online programming and content.”

Steven Titch
Policy Advisor
The Heartland Institute
Fellow R Street Institute

The new tobacco war

November 06, 2014, 12:23 PM

From The Bulletin:

“We now have established a pretty good body of literature showing that e-cigarettes do not attract non-smokers. They simply don’t. Virtually every e-cigarette user is a smoker who switched,” said Dr. Joel Nitzkin, a public health physician who now consults for R Street, a conservative think tank in Washingon, D.C. “There are lots of non-smokers, especially kids, who are tempted to try e-cigarettes, to sample them. But it’s hard to find even a single kid who is started off as a non-smoker, sampled them and continued its use.”

He points to two studies conducted by public health groups as proof. A U.S. survey of 3,240 adults found only six nonsmokers who had ever used an e-cigarette, and a 2013 UK survey of more than 12,000 adults and 2,000 children was not able to identify a single nonsmoker who used e-cigarettes regularly.

CDC data, he said, could be interpreted in the same way, showing a rapid increase in teens trying e-cigarette use, but a continued decline in teen smoking rates.

“The best path from where we are to a tobacco-free society is to adopt tobacco harm reduction elements in the public health programs and have people switch to products that are a whole lot easier to quit,” Nitzkin said. “Not only are they easier to quit, they cut the risk of potentially fatal tobacco related illness by 99 percent or more. I think we have good solid scientific evidence to point that out.”


Colorado smoking ban: no impact on heart attacks

November 06, 2014, 12:08 PM

As early as 2004, various medical journals published articles claiming that small-community smoking bans resulted in nearly immediate reductions in heart disease. For example, the high-profile BMJ reported that hospital admissions for acute myocardial infarction (AMI) declined 40 percent, from 40 to 24, in Helena, Mont., after implementation of a smoke-free ordinance. Circulation, the journal of the American Heart Association, reported that AMI admissions dropped 27 percent “within months” in Pueblo, Colo. Similar reports came from Bowling Green, Ohio; Monroe County, Ind.; and beyond.

The striking implication was: eliminating second-hand smoke saves lives by reducing heart disease.

There were two problems with these claims. First, the declines, based on small numbers of observations, were actually consistent with random variation. Second, none of the reports accounted for the long-term downward trend in heart disease in the United States. They credited no-smoking intervention with the lower number of AMIs at a time when rates were declining nationwide.

In 2011, I documented that state-wide smoking bans in California, Utah, Delaware, South Dakota, New York and Florida had little or no immediate measurable effect on AMI deaths. The study, published in the Journal of Community Health, eliminated the “tiny-number” problem and factored in the national downward trend in AMI deaths.

I discussed these findings on my blog, but the work was largely ignored, until now.

Recently, researchers from three Colorado institutions reported AMI rates before and after a statewide smoking ban there; their work appears in the American Journal of Medicine. (Thanks to Chris Snowdon, who also blogged about it here).

Paul Basel and colleagues found that “No significant reduction in [AMI] rates was observed” after the Colorado ban was implemented. They also referred to our study:

[The Rodu et al.] study compared the decline in [AMI] mortality in 6 states with smoke-free ordinances, with the average decline among 44 states unaffected by smoke-free policy. No state with a smoke-free ordinance had a significantly lower observed [AMI] mortality compared with that expected by the nationwide secular decrease in states without the ordinance. This emerging evidence highlights the importance of accounting for secular trends in [AMI] incidence before definitive attribution to smoke-free ordinances can be made.

It is comforting to see unfounded second-hand smoke claims corrected, particularly in the pages of a prestigious journal.

Hey, taxi!

November 06, 2014, 10:48 AM

Sometimes, people and businesses start out by trying to avoid regulation, and then discover that some basic ground rules aren’t such a bad thing after all. At an extreme, you have those who went long Bitcoin because they didn’t trust banks or the government, only to find that the Magic: The Gathering online exchange didn’t have federal deposit insurance.

I’ll take a little inflation risk and a slightly lower yield in exchange for deposit insurance and a numeraire currency, and I’m not just saying that because I was a Washington Mutual customer.

Uber is the latest entrepreneurial anarchist to embrace regulation. In late October, Uber’s blog touted the passage of the Vehicle-For-Hire Innovation Act in Washington, D.C., as “a watershed moment: 14 U.S, jurisdictions have now adopted permanent regulatory frameworks for ridesharing, a transportation alternative that didn’t even exist 4 years ago.”

Car-sharing companies like Uber, Lyft and Sidecar are being to recognize that basic safety regulations may help customers to trust them. These are new companies offering a new concept and entering an industry where there isn’t a great history of trust. Many people have had bad experiences with taxi drivers who can’t find an address, run up a fare, avoid certain neighborhoods or won’t pick them up. If that’s how customers are treated by regulated cabbies, some consumers might reasonably ask, what will a bunch of regular people driving better cars to do them?

I’m a regular Uber user in Chicago and I’ve been happy. So have enough people in enough places that the company has been able to expand to Sao Paulo and Milan, Akron and Wichita. Drivers use their own cars and the electronic infrastructure is easy to scale. Hence, start-up costs are low, and many of these cities do not have extensive taxi services in place. Uber has tended to raise more outrage in places where people rely on taxis to get around, not just getting to and from the airport.

Uber once resisted any regulation, insisting that it wasn’t in the same business as taxis and that, evenif they were, the taxi industry was regulated in order to protect the medallion owners from competition. The company entered new markets without waiting for regulatory blessing. As Uber and its counterparts have become more established, and as they have sought to reach a wider customer base, they have begun to accept some basic rules of the road. The new rules in D.C. give customers some assurance that there is recourse if their driver is careless or predatory.

Now that more major cities have accepted Uber and its counterparts, the ride-sharing industry has gained legitimacy. It will be interesting to see what happens next. Will competition play out so that the best provider wins? Will the streets become a free-for-all with every driver looking to pick up every pedestrian? Or as these upstarts become established, will they, like the taxis before them, turn to regulation in order to cement their positions?

The history of regulation shows that the latter is likely over the long run. In new and young markets, regulation can help grant legitimacy. At its root, regulation means to “make regular”; it is intended to help buyers and seller set expectations for fair trade. Competition is essential, but there can be costs associated with a free-for-all in which the terms and risks of trade are less than fully transparent. Think of all those poor Mt Gox account holders believing their Bitcoin wallets was safe.

Once regulation is established, however, the fun work of regulatory capture begins. Finding ways to exploit the regulatory process becomes more important than serving customers. It brings us right back to the situation that made Uber possible in the first place: taxi drivers who can’t find an address, run up a fare, avoid certain neighborhoods or won’t pick up potential customers. The regulation became a way to support the monopoly profits of the medallion owners rather than the livelihood of the drivers or the needs of the customers.

Until that happens, enjoy the ridesharing. Calling a car right to your house beats walking two blocks in the snow, and having a driver who knows how to use a GPS service to find an odd address is much better than driving in circles. The fact that ridesharing is often cheaper than a taxi makes it even better.

Although, in my humble opinion, regulators need to do one more thing to make ridesharing legitimate. They must outlaw those hideous pink mustaches, to make American cities even more beautiful.

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HomeAway goes to court over San Francisco’s ‘Airbnb law’

November 05, 2014, 12:10 PM

An old adage in the legal profession suggests: “When the facts are on your side, pound the facts. When the law is on your side, pound the law. When neither is on your side, pound the table.”

This week, HomeAway, a vacation-home rental site, filed a complaint in federal court alleging the city and county of San Francisco are in violation of the Commerce Clause of the U.S. Constitution because of a recently passed ordinance, slated to go into effect in February, which regulates short-term rentals of residential property.

HomeAway is vigorously pounding the table.

By invoking the Commerce Clause, HomeAway clings to a theory that San Francisco is discriminating against out-of-state interests by limiting the ability to list properties for sharing purposes to local residents. Even a cursory review of relevant legal precedent reveals that local land use decisions, particularly about zoning, are left almost entirely to the judgment of local authorities. Since economic rights receive a low level of constitutional deference, and because the nature of the regulation here is so modest, were the U.S. District Court of Northern California to find for HomeAway, it would be ploughing fresh constitutional soil.

The grist of HomeAway’s concern is actually totally unrelated to the Commerce Clause. Instead, it is that the new San Francisco law will have a deleterious impact on their business, while having a relatively minor impact on Airbnb’s business. Further, HomeAway maintains that the San Francisco legislation was crafted specifically with Airbnb in mind.

But even if it was, so long as political decision-making does not run afoul of the law – which, in this case, it clearly does not – it’s hard to see the basis for a legal complaint. If anything, HomeAway’s complaint ultimately is that the Board of Supervisors came to an ill-conceived policy conclusion.

This suit is a business decision wrapped in a legal delaying action. HomeAway was unable to exert the political influence necessary to shape public policy in such a way that its business model could be accommodated. Thus, instead of seeking to amend the legislation through the democratic process, HomeAway has opted to inflict pain through the litigation process.

Politically, the lawsuit’s optics may be favorable. HomeAway’s complaint details Airbnb’s political activity during the ordinance’s drafting process. While nothing that Airbnb did was illegal, the suit – which news outlets are seemingly compelled to take seriously – has created a wave of negative press. HomeAway, no doubt, hopes to create a critical mass of negative attention that it can focus and wield to attain its political objective.

Lost in the suit, and in the contest between HomeAway and Airbnb, is the ultimate policy goal that players in the sharing economy should keep in mind. Greater personal freedom, circumscribed where necessary by limited regulation, will encourage markets and foster the creation of wealth. Where opportunity is created and residents are left better off, policy makers will be more willing to listen.

Instead of banging the table in a jurisdiction interested in other priorities, HomeAway should build a case for its model that San Francisco will want to embrace.

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Come hear how Texas will benefit from a ‘conservative budget’

November 05, 2014, 11:01 AM

Next Monday, Nov. 10, I officially join R Street as its new Texas director. I’ll be working on a variety of issues of critical importance to the Lone Star State, such as introducing the discipline of competition into the state’s windstorm insurance system, using markets to solve environmental problems and eliminating the regulatory barriers that prevent new emerging technologies from disrupting protected industries.

But there’s one issue that’s so pressing I can’t wait till my formal start date to tell you about it: limiting the growth in Texas’ budget.

Tomorrow, Nov. 6, the Texas Public Policy Foundation is hosting a lunch primer on the budget, titled “Would Texans benefit from a conservative Texas budget?” (Spoiler alert: the answer is yes). In the last decade, public spending in Texas has increased by an estimated 63 percent. Even controlling for inflation and increases in population, the average family of four in Texas is now paying $1,200 more a year to account for this additional spending.

Unless checked, the natural tendency of government is to grow. That’s why it is important to have real structural limits on state spending growth. R Street is proud to be a part of the Conservative Texas Budget Coalition, calling for a budget that limits spending growth to no more than population plus inflation (an estimated 6.2 percent). TPPF, which happens to be my current employer, is also a member of the coalition, and their primer will feature speakers from coalition partners TPPF, Americans for Tax Reform and Americans for Prosperity, explaining how spending discipline will benefit all Texans.

The event will be from 11:30 a.m. to 1 pm in the Legislative Conference Center, Room E2.002 at the state Capitol. Lunch is provided. Y’all should come. And if you see me, be sure to say hello.

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Postal Service mail-tracking: three big questions

November 04, 2014, 11:11 AM

Last week, the New York Times reported there were nearly 50,000 incidents of mail surveillance in 2013. Under the “mail cover” program, which has been around for roughly a century, federal, state and even local law enforcement officials can trace a suspect’s mail using data collected from the outside of an envelope or a parcel, including sender and recipient, addresses and where the mail entered the postal system.

Law-enforcement officials obtain mail covers by placing a request with the Postal Inspection Service, who are in charge of vetting requests and asking the Postal Service turn over the data. (Opening the mail would require an additional step: obtaining a warrant.)

This is unsettling news for anyone who cares about privacy. The Inspection Service, which polices the mail for kiddie porn, illegal lotteries, and other perfidy, is not administering the program very well. An inspector general’s report found numerous screw-ups. About 21 percent of approved mail-cover requests were granted without written authorization and the Inspection Service failed to review the program annually for policy compliance. Plainly, heads need to roll and the program needs reform.

For certain, the mail-tracking controversy underscores the importance of independent inspectors general and the Freedom of Information Act. It was the USPS IG who conducted the audit and refused the Postal Service’s request to keep it hidden from the public. FOIA helped the Times pry loose additional information about the mail cover program.

But at least three big questions remain unanswered.

The first concerns the growth of this program. Why did mail cover approvals skyrocket from about 8,000 per year between 2002 and 2012 to 49,000 in 2013? Is the Inspection Service, to venture a charitable hypothesis, simply becoming more efficient at processing these requests? Are local law-enforcement agencies catching on to this program, much as they did with the federally authorized asset seizure program? Or are other factors at play?

This leads to a second question worth a public response: how many law-enforcement requests for mail covers were denied? Knowing this number would clarify whether the Inspection Service is rubber-stamping these requests. Which it may well be, seeing as it authorized a renegade sheriff and prosecutor to use mail tracking to investigate a politician who dared criticize them. A former FBI agent has said the mail cover program is “so easy to use…you don’t have to go through a judge….You just fill out a form.”

The IG report on this program was first released in June, and Politico immediately ran a story on it. The New York Times covered the topic in July, and further revealed that USPS is digitally recording the information of every piece of mail, sent by everyone, creating a vast data trove. This mass data collection goes way beyond the mail-cover program approved by federal courts in the 1978 decision U.S. v. Choates.

Months have passed, and not a single congressional hearing has been held on the subject. Nor has any legislation been introduced to rein in the practice. The president has done nothing. The First Amendment protects an individual’s freedom to communicate and associate with others. So why are our elected officials not doing anything about the mail-cover program?

Tea partiers: Don’t compare us to Gamergate

November 03, 2014, 3:58 PM

From Slate:

And Mytheos Holt, an associate policy analyst at the R Street Institute and video game reviewer for Gamesided who described himself as “a sympathetic bystander” to Gamergate, also said right-wingers could find a “new conservative constituency” within this movement.

“If the right can make the case that there will never be room for them in the left’s ideal world, this may be the start of a new coalition,” says Holt.

A big conservative city is about to strangle its sharing economy

November 03, 2014, 11:40 AM

Onerous new regulations in Houston, Texas, set to go into force this Tuesday, may end up shutting down some ride-sharing operations in the country’s fourth most populous city — a place that desperately needs them. The city’s sheer overreach in regulating companies like Uber and Lyft, indeed, should serve as a strong rejoinder to cities that might consider following a similar path.

Under Houston’s new regime, everyone who drives for pay, even on a very occasional basis, will have to go through a 40-step process that the city specifies in excruciating detail. Individually, the requirements the city imposes for things like safety inspections and criminal records checks aren’t unreasonable. But the way that Houston wants to do them is. In many cases, the city insists on doing and redoing things (such as background checks) that companies have already done. The result: Uber is complaining bitterly and will almost certainly see its driver ranks shrink, while Lyft is likely to suspend all operations on Nov. 4. Smaller companies like Wingz that might have targeted Houston’s large and lucrative market are, for now, staying away entirely.

In some cities, with lots of mass transit, this might not be that big a deal. Houston, which doesn’t have the population density to support street-hail taxis in most of its neighborhoods and possesses only one urban rail line, companies like Uber and Lyft are sometimes the only practicable way to get around for those who don’t have access to a car. Imposing regulations that make life nearly impossible for the companies’ drivers, as the city has done, sets an awful precedent, reduces options for consumers and seems likely to increase drunk driving.

And it’s particularly disturbing because Houston, of all cities, should know better. Although it’s hardly a tea-party hotbed, the city easily stands as America’s most conservative city with more than 1 million residents. In 2012, Barack Obama and Mitt Romney came within a few thousand votes of each other county-wide and it’s the only really big city in the country that regularly elects city council members who could do fine in the House GOP caucus. The governments of San Francisco and Washington, D.C. — the two most liberal cities in the country by many measures — have both been much more welcoming to Uber and Lyft, and even our nanny state on the Hudson, New York City, has done much better than Houston. The city needs to change. Quickly.

New peer production companies are a vibrant new economic sector. Houston is proving how the wrong regulations can crush them.

Redefining ‘public interest’

November 03, 2014, 10:48 AM

For decades, trial lawyers, the insurance industry, and health-care providers have battled over how to set insurance rates and adjudicate medical-liability claims. In California this year, two ballot measures—Propositions 45 and 46—won’t make that debate any clearer, though if you’re on the insurance commissioner’s payroll or a member of the plaintiffs’ bar, you’ll be happy if they win public approval.

Prop. 45 seeks to limit the power of health insurers and providers to raise rates by subjecting them to stiffer regulatory scrutiny. Its proponents—primarily Insurance Commissioner Dave Jones and Santa Monica-based advocacy group Consumer Watchdog—want health insurers and providers to submit to a prior-approval process similar to one enshrined in 1988 for property and casualty insurers, under which the insurance commissioner may reject insurance rate hikes outright. Prop. 45’s backers maintain that consumers have saved billions of dollars on property and casualty insurance thanks to this regulatory authority, and that a similar arrangement could save them billions more on health care.

Prop. 46, another Consumer Watchdog-backed effort, would raise the state’s current cap on non-economic damages in medical-negligence cases while also requiring doctors to undergo drug testing. The damage-cap adjustment relates to 1975’s Medical Injury Compensation Reform Act (MICRA), which capped “pain and suffering” at $250,000 without any adjustment for inflation. Backers say that the drug testing would curb substance-related medical malpractice claims.

The two measures are unnecessary, to put it mildly. Prop. 45 advocates claim that state health insurance is too expensive and should be more tightly regulated. But if rates are too high, it isn’t for lack of regulation. California is unique among states in its oversight of insurance premiums. The Golden State already has two tiers of health-insurance rate review, which often work in tandem. The first tier has been around since 2010, when the state subjected health insurance rates to a “file-and-use” system. Right now, insurers submit proposed rate changes to the relevant regulator—either the Department of Insurance or the Department of Managed Healthcare. If the regulator determines that the rate is unreasonable, it can ask the insurer or health plan to reduce it. If the insurer fails to comply, its refusal is made public, and the regulator may try to force the issue through a public hearing. Covered California, the state’s Affordable Care Act exchange, serves as the second tier. Unlike the file-and-use system, which relies on public perception to influence insurers, Covered California regulators can veto rate hikes of 10 percent or more.

To an already onerous process, Prop. 45 would add two additional tiers of review. The third tier would give the state insurance commissioner the power to reject health insurance rate hikes, regardless of their amount, just as he can do now with property and casualty insurance rates. Notwithstanding public scrutiny and Covered California’s discretion, Prop. 45’s supporters insist that consumers will suffer unless the state has the power to stop any and all “unreasonable” rates. That’s arguable, at best. Insurers often do reduce their rates at the first hint of public scrutiny. And the Department of Insurance is hardly a neutral arbiter of rate reasonability. The process for deciding whether a rate is reasonable ultimately relies on subjective judgments and political incentives, because the insurance commissioner himself is a career politician. Political incentives almost invariably result in efforts to push for lower rates that ignore market realities.

The fourth and final tier of review would introduce “private intervenors” (that is, attorneys) to the health insurance rate-approval process. The role is modeled again on the property and casualty rate process, in which private intervenors may challenge a proposed insurance rate while the prior-approval process is underway. In theory, intervenors are public-spirited lawyers who forego financial reward for the sake of the public interest. But the role has evolved into a nice practice for professional contrarians—like Ralph Nader protégé and Consumer Watchdog founder Harvey Rosenfield, who has made millions as an intervenor. No other state allows paid intervenors to weigh in during the rate-approval process—one reason why California’s insurers can expect to wait anywhere from one to two years for the state to approve a rate hike.

If Prop. 45 passes, then insurers, facing a four-tier review process, would have to account for the extra time that it will take for rate changes to take effect. They would likely propose rates that lead to as few trips through the rate-approval labyrinth as possible. In practice, this would lead to an unresponsive, more expensive market. California’s auto insurance rates are needlessly high precisely for this reason.

Prop. 46 would have a similarly harmful impact on consumers. The state legislature capped “pain-and-suffering” damages in 1975 to help end an insurance-availability crisis. Windfall damage awards had forced malpractice insurers to raise rates to reflect the new risk, which encouraged doctors to scale back their practices or leave the state. That led legislators to enact a range of tort reforms, most notably the $250,000 cap. Prop. 46’s backers make a superficially reasonable case that after nearly 40 years, the damage cap is too low. But the trouble with non-economic damages is that they don’t comport with objective measurement, much less inflation. Unlike economic damages, which relate to quantifiable losses, “pain-and-suffering” bears no relationship with lost property or wages. As it exists today, the civil-justice system provides remuneration for grievous but measurable losses. On these terms, plaintiffs are being made whole.

Prop. 46 proponents assume that improving the position of plaintiffs will help all Californians. Two problems: first, bigger windfalls for a small collection of plaintiffs would raise the cost of medical care for everyone; second, under the ACA, the cost of those windfalls will be borne directly by consumers or spread among taxpayers, who fund federal health-care insurance subsidies. In either case, the costs will make their way to consumers and undermine access to quality care. Nor will greater windfall awards adjust the behavior of medical providers. State law punishes medical negligence not only through civil penalties but also with administrative and criminal sanctions. The stakes are high already. Negligence persists not because providers are lazy but because achieving favorable outcomes 100 percent of the time is impossible.

The public interest is not the exclusive domain of those who seek government solutions. California’s voters seem to get the point. A Public Policy Institute of California poll released last week shows Prop. 45 and Prop. 46 losing support. In this case, the interests of insurers and medical providers more closely mirror those of the public.

Three things conservatives wrote this week that everyone should read

November 03, 2014, 10:40 AM

From ThinkProgress:

Eli Lehrer argued in The Weekly Standard this week that a carbon tax could ostensibly break this gridlock. Because it reduces carbon emissions in a particularly efficient and market-friendly manner, the policy could ostensibly enjoy support from experts and thinkers across the political spectrum. But as Lehrer points out, the idea remains anathema to GOP politicians. He thinks liberals could change this, but they would have to give up “new revenue, new regulations, and new resource development restrictions” to make it happen…

…Because it builds the price of climate change into fossil fuels from the beginning, a (sufficiently punitive) carbon tax really would make fuel-economy standards, EPA’s power plant rule, and restrictions on fossil fuel drilling technically redundant. Liberals won’t give up on the goal of massive public investment in renewables, but that’s something the U.S. should be doing regardless — there’s no reason to politically tie that goal to the revenue from a carbon tax. But while state-by-state carbon taxes would be better than nothing, one federal carbon tax would make life simpler for businesses. It would also allow Lehrer’s revenue-neutrality goal to be hit by reducing payroll taxes — the form of federal taxation that falls hardest on the poor and working class — an equivalent amount.

Transparency crucial with RESTORE money

November 03, 2014, 9:00 AM

Florida’s 23 Gulf Coast counties are about to enjoy a windfall, as the U.S. Treasury Department recently finalized rules allowing states impacted by the 2010 Deepwater Horizon oil spill to apply for billions in funds. How they choose to spend that money could go a long way toward determining the future of the region.

Passed in 2012, the Resources and Ecosystems Sustainability, Tourist Opportunity and Revived Economics of the Gulf States Act, or RESTORE Act, dedicates 80 percent of fines levied against BP to projects that support environmental restoration and economic development in the Gulf Coast states that felt the spill’s effects.

Unlike the other four affected states, the RESTORE Act requires Florida’s allocation go directly to the 23 Gulf Coast counties. Thus, while the state governments of Texas, Louisiana, Mississippi and Alabama will have a significant say in how funds are spent, in Florida, such decisions will be made at the local level.

The millions of dollars that will pour directly into Gulf Coast counties place a great deal of responsibility on their leaders, as well as presenting them unique opportunities. Full transparency and a measured approach will be crucial to ensure the funds are spent in the best possible way.

Citizens should be given ample time and opportunities to review and comment on recommended projects. With today’s technology, transparency is not a cumbersome or expensive proposition: projects, their cost estimates and other related analyses should be posted on official websites well in advance of final decisions. Healthy discussion and oversight will help counties avoid unintended consequences.

Officials should know the long-term costs of projects they elect to undertake, and their guiding principle should be to avoid creating liabilities for taxpayers. Projects that require continued subsidies, permanent growth in public sector employment or, worse, new government programs to keep them viable will require taxpayers to pick up the tab when RESTORE money runs out.

In short, these funds should be treated as a one-time windfall and should be directed toward high-return projects and improvements. They should not be used to grow government, impose new taxpayer liabilities or benefit a politically connected few. Rather, they should be used to make Florida safer, greener and more economically and physically resilient.

Restoration of Florida’s wetlands and barrier islands, for example, can begin to achieve these goals. The state’s fishing industry, which employs roughly a quarter-million Floridians, benefits from healthy coastal wetlands that provide natural habitats for fish, oysters and other wildlife. Many of Florida’s 7 million ecotourists visit these areas. But perhaps more importantly, coastal wetlands and barrier islands serve as vital natural buffers that protect developed inland areas from wind and storm surge.

There are a number of other ways RESTORE Act funds can be used to make coastal areas more resilient. Building or modernizing levees, pumps, storm-water drainage systems and other infrastructure to reduce flooding would make areas safer, as well as cheaper to insure. Fortifying or widening causeway bridges to facilitate coastal evacuations and disaster response before and after hurricanes could save lives and accelerate the recovery process. Modernizing water and sewage systems would reduce toxic discharge, preserve drinking water and hasten service restoration after a disaster.

Although the Deepwater Horizon oil spill was the greatest ecological disaster to affect Florida, the RESTORE Act gives us an unprecedented opportunity to make large-scale investments that will leave a lasting impact. If used wisely, they can help make our Gulf Coast stronger and more vibrant than ever before.

R Street responds to Intergovernmental Panel on Climate Change report

November 02, 2014, 9:54 AM

WASHINGTON (Nov. 2, 2014) – Congress should heed today’s warning from the Intergovernmental Panel on Climate Change to pursue effective mitigation and adaptation strategies to counter the risks of a warming globe, starting with an immediate end to government subsidies that make the problem worse, the R Street Institute said. 

As part of the 40th session of the United Nations’ IPCC this week in Copenhagen, Denmark, the panel adopted the final “synthesis” report of its Fifth Assessment Report. The first full-scale update to climate projections since 2007, the report reiterates scientific consensus that “human influence on the climate system is clear,” with ramifications for ecosystems and the food supply from rising seas and rising surface temperatures.

Rather than continue the politicized trench warfare that has paralyzed lawmakers, R Street outlines three crucial steps that Congress could take today to better prepare Americans for their climate future.

• Phase Out the National Flood Insurance Program: In 2012, Congress passed perhaps its most important piece of climate change legislation to date with the Biggert-Waters Act, which gradually phased out subsidies to properties in flood-prone areas. Alas, facing backlash over rising insurance costs, those same lawmakers gutted many of those same reforms earlier this year. The threat of more frequent and more damaging floods means there is no time to dither. Congress needs to phase out all flood insurance subsidies for all properties and set the stage to shift this risk entirely to the private sector.

• Expand the Coastal Barrier Resources Act: Signed into law by President Reagan just over 30 years ago, the CBRA withholds federal subsidies to development in a 1.3 million acre coastal zone, mostly along America’s Atlantic and Gulf coastlines and the Great Lakes. But much pre-existing development was grandfathered at the time of the bill’s passage, while other parcels have been carved out of the zone over the years. It’s time to reverse that trend and strengthen the law to ensure taxpayer dollars aren’t used to encourage development in areas most at risk from climate change.

• Enact Carbon Pricing Legislation to Preempt Proposed Onerous EPA Regulations: The EPA has proposed regulations to impose a 30 percent reduction in carbon emissions from electricity generation by 2030. These regulations likely will impose enormous costs for relatively modest emissions reductions. Instead, Congress should embrace the power of the free market by utilizing revenue-neutral carbon pricing as a complete substitute for command-and-control regulation. Carbon pricing would allow states to achieve mandated emissions reductions through a price signal instead of complicated regulation, while utilizing all resulting revenue to eliminate or reduce taxes that are damaging to the economy.

The following R Street Experts are available for comment on the report:

Ian Adams, California Director  - Adams has written about climate change and a carbon taxation program in publications like The Oregonian.

Christian Cámara, Florida Director – Cámara has testified before the U.S. House of Representatives Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs about the Coastal Barrier Resource Act.

R.J. Lehmann, Senior Fellow – Lehmann has written extensively on the National Flood Insurance Program and why it should be privatized, including providing input during drafting of the Biggert-Waters Act in 2012.

Eli Lehrer, President – Lehrer has written on climate change and in favor of a carbon tax in conservative magazines like The Weekly Standard and National Review.

Lori Sanders, Outreach Director – Sanders has written a policy study on expanding the Coastal Barriers Resources Act and comments to the EPA on the proposed greenhouse gas regulations. She also recently took part in a panel discussion on the regulations.

To arrange to speak with any of the R Street climate change experts, please contact Nicole Roeberg at nroeberg@rstreet.org or (202) 997-1186.

It’s time for Georgia lawmakers to end the auto dealership monopoly

November 01, 2014, 12:02 PM

From Peach Pundit:

Andrew Moylan of the R Street Institute and Peter Van Doren of the Cato Institute spoke at length about the regulatory issues Tesla and other innovative technologies that have gained popularity face.

R Street disappointed in onerous regulations on ridesharing in the City of Houston

October 31, 2014, 4:10 PM

HOUSTON, TEXAS (Oct. 31, 2014) – The R Street Institute expressed deep disappointment in the onerous regulations for transportation network companies set to go in effect in the City of Houston on Tuesday, Nov. 4. The new rules present an unnecessary bureaucracy that will cost taxpayers an estimated $600,000.

Among the many requirements are additional background checks of all drivers and an automotive check to be performed by one specific contracting facility. This is in addition to the background checks and automobile inspections already required by TNCs.

“Regulations, when properly written, set standards and requirements,” said Houston-based R Street Associate Fellow Steven Titch. “Building fire codes stipulate necessary fire suppression and alarm systems, but they don’t tell builders they must use one particular contractor or purchase one specific brand of fire extinguishers. All builders must do is show inspectors they have complied with the code.”

“The City of Houston’s demand that ride-sharing drivers use the state’s systems micromanages the compliance process while placing a substantial economic burden on taxpayers, due to administrative costs. TNCs have shown they can meet the law’s requirements for driver background checks without using the expensive and burdensome mechanisms the city is demanding,” he said.

TNCs currently require drivers nationwide to pass vigorous background and automotive checks, at no cost to taxpayers.

“While we’ve seen many cities recently adopt regulations that are more welcoming to TNC s, the exact opposite is happening in Houston,” said Andrew Moylan, senior fellow and executive director of R Street.  “Cities should encourage more job development, not enact new regulations that will cost the taxpayers money and hinder people trying to enter the workforce on a full-time or part-time basis. It would be unfortunate to see ride-sharing companies cease operations in Houston because of onerous rules that do not make anyone safer than the status quo.”