Out of the Storm News
From The Hill:
The National Park Service is under pressure to reverse its decision to ban electronic cigarettes in all places where tobacco smoking is prohibited on federally supervised parks.
In a letter to Park Service Director Jonathan Jarvis on Thursday, Joel Nitzkin, a senior fellow for tobacco policy at the nonpartisan D.C.-based think tank R Street Institute, said there is no need for such restrictions and no public health or environmental benefit in doing so.
“E-cigarettes involve no combustion,” he said. “There is no fire hazard.”
…But Nitzkin said the amounts of nicotine in exhaled vapor is comparable to the amount of nicotine people ingest on a daily basis by eating eggplant, tomatoes, potatoes, peppers and other common foods that contain trace amounts of nicotine.
“I am not aware of any public-health authority ever urging restriction of intake of these vegetables or other nicotine-containing foods by infants, pregnant women or others to avoid brain damage, lung damage or addiction,” he said in his letter.
Nitzkin went on to provide additional research to support his claims and asked to speak with whoever advised the agency to institute this policy.
This note is in response to the National Park Service news release dated Sept. 14, 2015, about subjecting electronic cigarettes to the same rules imposed on combustible tobacco products.
There is no need for such restrictions on the use of e-cigarettes and no public health or environmental benefit from doing so.
E-cigarettes involve no combustion. There is no fire hazard.
As noted in your press release, exhaled vapor contains far less nicotine than secondhand cigarette smoke. While exhaled cigarette smoke is extremely hazardous, almost none of this risk is attributable to the nicotine. The amounts of nicotine in exhaled vapor are comparable to the amounts of nicotine people ingest on a daily basis. Eggplant, tomatoes, potatoes, peppers and other common foods contain trace quantities of nicotine. I am not aware of any public-health authority ever urging restriction of intake of these vegetables or other nicotine-containing foods by infants, pregnant women or others to avoid brain damage, lung damage or addiction.
Exhaled e-cigarette vapor does contain minute trace quantities of a variety of other toxic chemicals. Nonsmokers also exhale trace quantities of some of these same toxic chemicals. The amounts exhaled are so small that they are barely measurable above background in most indoor environments. They are surely far less than the amounts of these same chemicals released by wood fires.
The references noted below include links to papers in support of the statements made above. The first also includes a description of my background and how both I and R Street became involved in the e-cigarette issue.1-3
- J.L. Nitzkin, “E-cigarettes: A life-saving technology or a way for tobacco companies to re-normalize smoking in American society?,” FDLI’s Food and Drug Policy Forum. 2014;4(6) (June 30):1-17. http://www.rstreet.org/wp-content/uploads/2014/07/20140630FDLI-EcigForum.pdf
- K. Farsalinos and R. Polosa, “Safety evaluation and risk assessment of electronic cigarettes as tobacco cigarette substitutes: A systematic review,” Therapeutic Advances in Drug Safety. 2014;5(20):67-86. http://www.ncbi.nlm.nih.gov/pubmed/25083263
- A. McNeill , L. Brose, R. Calder and S. Hitchman, “E-cigarettes: An evidence update,” a report commissioned by Public Health England, London, England. August 2015.; “An Evidence Update Plus Policy Implications,” Public Health England, Aug. 19 2015. https://www.gov.uk/government/publications/e-cigarettes-an-evidence-update
Please let me know if you or any of your colleagues would like additional information on this topic. I would welcome the opportunity to provide additional references and to discuss this with whoever advised NPS to institute this policy.
On behalf of our groups and organizations, together representing millions of Americans, we urge you to end the Crude Oil Export Ban. Repealing this antiquated government mandate will spur economic growth, create hundreds of thousands of jobs, and allow Americans to benefit from affordable and reliable energy.
As a result of an energy crisis in the 1970s, the United States has kept a ban in place on crude oil exports. This ban has restricted the expansion of the U.S. energy economy, which is thriving and delivering lower-‐cost energy to consumers. Policymakers should look to unleash the potential of the energy economy instead of limiting it.
Multiple independent studies show that the ban harms U.S. economic growth and job creation. The National Economic Research Associates (NERA), for example, found that eliminating the export ban would inject between $600 billion and $1.8 trillion into the domestic economy and reduce national unemployment by an average of 200,000 jobs over 2015-2020.
States would benefit from the creation of thousands of new jobs in manufacturing, including steel and cement. According to a study conducted by IHS Global Inc., higher U.S. oil production resulting from a lifting of the ban would create at its peak 1 million jobs, grow gross domestic product by $135 billion, and increase average household income by $391. A quarter of the employment growth would occur in non-oil producing states, thanks to the petroleum sector’s extensive supply chain.
Critics argue that lifting the ban would increase gasoline prices. However, a recent report by the U.S. Energy Information Administration (EIA) found that repealing the ban wouldn’t increase gasoline prices and could even lower them. This in turn would provide relief to consumers at the pump.
We encourage members of both chambers of Congress to support legislation that fully lifts the ban on crude oil exports. We would also urge you to oppose efforts to use the legislation as a vehicle to extend handouts for green energy such as the wind production tax credit or the solar investment tax credit.
Brent Gardner, Vice President of Government Affairs
Americans for Prosperity
Phil Kerpen, President
George David Banks, Executive Vice President
American Council for Capital Formation
Sean Noble, President
Thomas J. Pyle, President
American Energy Alliance
Coley Jackson, President
Americans for Competitive Enterprise
Grover Norquist, President
Americans for Tax Reform
Jeffrey Mazzella, President
Center for Individual Freedom
Myron Ebell, Director, Center for Energy and Environment
Competitive Enterprise Institute
Marita Noon, Executive Director
Energy Makes America Great
Matt Kibbe, President and CEO
George Landrith, President
Frontiers of Freedom
Michael A. Needham, CEO
Heritage Action for America
Andrew Langer, President
Institute for Liberty
Seton Motley, President
Harry C. Alford, President/CEO
National Black Chamber of Commerce
Pete Sepp, President
National Taxpayers Union
Andrew Moylan, Executive Director
R Street Institute
David Williams, President
Taxpayers Protection Alliance
Judson Phillips, Founder
Tea Party Nation
Unsurprisingly, witnesses who testified today before the Senate Judiciary Committee in favor of reforms to the Electronic Communications Privacy Act stressed that the law, passed before the down of the public Internet, is showing its age.
Privacy expectations have shifted significantly since ECPA was passed in 1986. As I wrote Monday in Slate, it makes more sense to look back to 1967, when the Supreme Court’s understanding of the Fourth Amendment stressed the need to protect “people, not places.”
Even so, the pro-reform witnesses made plenty of good points. (The witnesses and their written testimony, together with a stream of the testimony, are available here). Perhaps the best was this passage from the Center for Democracy and Technology’s Chris Calabrese:
A short (and probably incomplete) list of the communications content that I store with third parties today includes:
- Work and personal email,
- Text messages,
- More than a decade of photographs,
- All of my music,
- My passwords to all my online accounts,
- Social networking posts – many of which are shared with very few people,
- My notes – both personal and work,
- All of my personal contacts,
- My calendar,
- Hundreds of books, and
- Home videos and movies.
Calabrese’s point is compelling; now that we trust service-provider third parties with so much of our lives in the form of digital data, it makes sense for Congress to update ECPA by strengthening the warrant requirements for agencies that seek our electronic communications from the likes of Microsoft and Google.
However, Calabrese’s testimony notes that a reform bill like the Lee-Leahy ECPA Amendments Act or its House counterpart – sponsored by Reps. Kevin Yoder, R-Kan., and Jared Polis, D-Colo. – “does not fix all the problems” with ECPA. In particular, it doesn’t address the metadata problem or the social-network problems (obtaining all of your contacts!), where a warrant should be required even when the state or federal agency is not seeking the content itself.
As modest as the House and Senate ECPA proposals are, they still are drawing fire from federal and state agencies that have grown used to being able to Hoover up gigabytes of user data with subpoenas, rather than search warrants. In particular, the Securities and Exchange Commission is anxious to preserve its right to capture email with only an administrative subpoena.
What makes SEC’s testimony particularly odd is that the commission’s former chief litigation counsel told reporters this week that a recent federal court ruling imposing warrant requirements for email seizures “has had no impact on [the SEC’s] ability to enforce securities laws.”This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
WASHINGTON (Sept. 16. 2015) – A review of the literature on commonly cited environmental hazards of hydraulic fracturing, or “fracking,” demonstrates that the process’ economic benefits far outweigh the risks, according to a new policy brief published today by the R Street Institute.
In the brief, R Street Texas Director Josiah Neeley examines the substantial economic impact of fracking, which has led to declines in residential natural-gas bills of $13 billion per year and contributed $283 billion to U.S. gross domestic product in 2012 alone. He also looks at studies of fracking’s potential impact on the climate, emissions, air quality and water quality and availability.
“Every source of energy has its advantages and drawbacks,” Neeley writes. “Fracked natural gas has supplanted significant amounts of coal electricity, delivering low-cost electricity with half the levels of greenhouse-gas emissions.”
Neeley finds that reported cases of fracking actually having negative impacts on air and water quality are rare and inconsistent, and pose less significant threats than exposure to high levels of ozone, particulates and other emissions from more emissions-intensive fuel sources.
“While fracking can pose environmental challenges, these can be managed via appropriate regulation and oversight,” he said.
Originally patented in 1949, hydraulic fracturing – known colloquially as “fracking” – is a process to recover oil and gas from shale rock. In the fracking process, water, sand and other materials are pumped deep below the surface, where the pressure from opens small fractures in the shale rock that allow the oil and gas within to be extracted more easily. While the fracking process has been in use for more than 75 years, it is only within the last 10 years that refinements in the process, combined with other technologies (such as horizontal drilling), have made it economical to recover significant quantities of oil and gas from shale.
As with many environmental issues, the debate over hydraulic fracturing is often framed as a conflict between what’s good for the economy and what’s good for the environment.
The economic case for fracking is strong. According to a recent analysis by the Brookings Institution, fracking has been responsible for annual declines in residential natural gas bills of $13 billion a year between 2007 and 2013, an average savings of $200 a year per household. Analysis by IHS Inc.’s Cambridge Energy Research Associates (IHS CERA) found that, in 2012 the fracking-led energy boom contributed $283 billion to U.S. gross domestic product, an increase of more than $1,200 in income per household.
But do these economic benefits necessitate sacrificing environmental quality? The answer, in brief, is no. Many of the claimed environmental harms from hydraulic fracturing do not stand up to scrutiny, while other concerns can be managed and limited by effective oversight. Fracking is not only an economic boon, but it is also a net positive for the environment.
Climate effects of fracking
U.S. greenhouse gas (GHG) emissions have fallen significantly in recent years. U.S. GHG emissions in 2013 were lower than in 1995, and per-capita emissions are comparable to emissions levels in the mid-1960s.
FIGURE 1: U.S. Annual Carbon Emissions from Energy
While some of this decline is no doubt due to the 2007 to 2009 recession and its aftermath, emissions declines have continued into the recovery. U.S. emissions declined faster and farther than almost any other country. Emissions from power generation fell 15.4 percent between 2007 and 2013.
Analysis from Yale Climate Connections concluded that, while there were multiple factors in the emissions decline, “the transition from coal to natural gas for electricity generation has probably been the single largest contributor.” Other studies have found a smaller effect from fuel switching, but still a substantial one.
This transition from coal electricity to natural gas has been enabled largely by the decline in natural-gas prices due to fracking. After reaching highs of more than $12 per thousand cubic feet in June 2008, the price of natural gas prices for electricity fell rapidly to less than $5 one year later, and ultimately fell below $3 in August 2012. Prices have since rebounded somewhat, but even at current levels, fracking has made natural gas cost-competitive with coal. In 2005, 50 percent of America’s electricity came from coal, compared with 19 percent from natural gas. Today, coal’s share of the power market has fallen to 36 percent, while natural gas increased to 29 percent.
Both coal and natural gas are fossil fuels, but when it comes to carbon-dioxide emissions, not all fossil fuels are created equal. Burning natural gas releases about half the CO2 per unit of electricity generated as does coal. By helping to reduce the price of natural gas, fracking has therefore been a major factor in recent CO2 reductions.
Fracking also has led to emissions reductions in other ways. Globally, governments spend around $540 billion a year on subsidies for fossil-fuel use. Most of these subsidies are provided by developing nations and are meant to offset the high cost of basic-energy needs. Subsidizing fossil fuel use is bad policy, but removing the subsidies poses its own set of difficulties, as the poor in many developing nations are particularly dependent on affordable energy. However, as oil prices have fallen, also thanks to fracking, several countries have moved to scale back or eliminate their fossil-fuel subsidies.
Methane emissions from fracking
Opponents of hydraulic fracturing claim that any reductions in CO2 emissions are offset by increases in methane emissions. Methane (CH4) is a more potent greenhouse gas than CO2, albeit one with a far shorter life span in the atmosphere. Once emitted, CO2 stays in the atmosphere for hundreds or even thousands of years. By contrast, methane breaks down in the atmosphere after about a decade. Nevertheless, over shorter time horizons, methane has a greater warming effect than does an equal amount of CO2. Over a 100-year time period, the warming effect of a ton of CH4 is 25 times greater than a ton of CO2.
While some methane clearly does escape during oil and gas production from fracked wells, most analyses have concluded that, even factoring in methane emissions, electricity from natural gas still has half the total greenhouse gas footprint of an equivalent amount of coal.
Fracking and air quality
The shift from coal to natural gas also has benefits for air quality, generally.
For an equivalent amount of electricity generated, power plant use of natural gas produces less than a third as much of the nitrogen oxides, and about 1 percent as much of the sulfur oxides, as coal. Burning natural gas also produces far fewer particulates than coal per unit of energy generated. Burning coal also produces emissions of other hazardous substances, such as mercury, which are not present in natural gas.
While overall emissions from natural gas are lower, certain local areas may experience an increase in certain types of emissions due to an increase in energy production activities in that area. It is important to keep such cases in perspective. For example, in 2009, a private environmental consulting firm found evidence of “carcinogenic and neurotoxin compounds” near shale wells and compressor stations in Dish, Texas. However, the levels of these compounds were sufficiently low that, while exposure might cause headaches or nausea, short-term exposure would not cause a toxic reaction. A later investigation by the Texas Department of State Health Services found no evidence of widespread exposure to the compounds among Dish residents.
Proper regulation and oversight to prevent such events is appropriate, but the scale of the effects does not compare to the widespread exposure to high level of ozone, particulates and other emissions from more emissions-intensive fuel sources.
Fracking’s effects on water quality
Much of the criticism of hydraulic fracturing from an environmental perspective has focused on water quality. There have been numerous claims that hydraulic fracturing has contaminated drinking water or poses other risks to water quality. The precise mechanism by which impairment of water quality is supposed to occur varies greatly from allegation to allegation, but can be grouped into several categories.
First are claims that the fracking process itself could contaminate water supplies. Despite numerous investigations, there are currently no cases where the fracking process has been shown to have contaminated groundwater supplies in Texas. Indeed, geological considerations make direct contamination via fracking unlikely. While groundwater supplies typically lie a few hundred feet below the earth’s surface, shale oil and gas resides several thousand feet down. For fracking to contaminate groundwater, chemicals from the process would have to migrate up through thousands of feet of solid rock.
A second group of claims concern contamination due not to fracking itself, but to other parts of the oil-production process. For example, leaks from well casings or from chemicals stored on the surface could contaminate groundwater or surface-water supplies. While such contamination is possible, a recent Environmental Protection Agency review found that actual incidents of contamination are rare. The EPA’s report also notes:
A survey of oil and gas wells hydraulically fractured by nine oil and gas service companies in 2009 and 2010 estimated that 97 percent of the wells had cement across a portion of the casing installed through the bottom of the protected groundwater resource identified by well operators. The EPA’s review identified just 10 incidents of contamination in Texas that were deemed related to drilling and construction activities among a survey of 250,000 oil and gas wells. For the most part, “the contamination incidents were associated with wells that were constructed before Texas revised its regulations on cementing in 1969.” Similarly, the EPA found that, of 151 recorded instances of fracking fluid spills, “fluids reached surface water in 13 (9 percent of 151) cases and soil in 97 (64 percent) cases. None of the spills of hydraulic fracturing fluid were reported to have reached ground water.”
So while there is some theoretical risk of contamination, real-world instances of this are rare, if not practically nonexistent. Where risks do occur, they typically involve issues such as well casings that are not specific to hydraulic fracturing, but are common to all oil-and-gas production, as well as to other forms of energy production.
Fracking’s impact on water availability
Some criticisms of hydraulic fracturing focus not on water quality, but on water quantity. Specifically, it is sometimes claimed that fracking uses too much water, and that extensive hydraulic fracturing could create water shortages elsewhere.
As with previous criticisms, these claims are largely unfounded. In most parts of the country, water use by hydraulic fracturing operations represent less than 1 percent of the fresh water that is locally available. Water used for fracking does represent a significantly higher fraction of total water use in a handful of counties in South and West Texas. However, a detailed case study of fracking in South Texas found that, even in this area, water supplies for hydraulic fracturing were generally adequate. Excessive drawdown of local groundwater was found in only 6 percent of the Eagle Ford Shale, and the potential impacts of these drawdowns could be avoided by a shift toward brackish water instead of fresh water.
As with air quality, water use for hydraulic fracturing has to be compared to the water use that would be required to produce the largely coal-power electricity that natural gas displaces. A 2013 analysis found that “water saved by using natural gas combined cycle plants relative to coal steam turbine plants is 25–50 times greater than the amount of water used in hydraulic fracturing to extract the gas.”[xix]
Every source of energy has plusses and minuses. Wind farms provide zero carbon electricity, but this energy is intermittent and the turbines themselves can kill birds and other species. Hydroelectric dams can provide reliable power, but can radically alter local ecosystems. To evaluate an energy source properly, one must look at it not in the abstract, but in comparison to the most likely alternatives.
Judged from this perspective, the environmental record of hydraulic fracturing looks pretty good. Fracked natural gas has supplanted significant amounts of coal electricity, delivering low cost electricity with half the levels of greenhouse gas emissions. Emissions of other harmful compounds are also drastically less. Fracking poses little risk to water quality, and uses less water than coal. While hydraulic fracturing can pose environmental challenges, particularly in certain local areas, these can be managed via appropriate regulation and oversight.
The federal government has seen a century of growth. In 1915, the government had only a handful of departments, 400,000 employees (half of whom worked for the U.S. Postal Service) and a total budget that, even when adjusted to 2009, amounted to just $11.7 billion.
Today, there are perhaps 180 federal agencies, although as Wayne Crews points out, nobody is entirely certain. The federal government employs 4.1 million civilian and military employees. Annual spending is about $3.9 trillion per year and growing.
But it’s not just the size of the federal budget and workforce that are expanding. Government policy has encroached into many more areas of life. In 1915, there was little environmental protection policy nor were there social welfare safety nets like Medicare, Medicaid, Social Security or Temporary Assistance to Needy Families.
One look at the either the hefty U.S. Code (the corpus of current federal law) or the 175,000-page Code of Federal Regulation (the corpus of current regulatory policy) offers a sense of the scope of federal activities. Nearly everything about you – the home you live in, the transportation you take, the food you eat and the medicine available to you – is governed by federal statutes and regulations.
Some shrug off this growth as natural. Civil society itself is larger and more complex. Drones did not exist a century ago; now, they do. Governments will develop new policies to contend with new problems.
Others have a less sanguine perspective. Leviathan – the biblical sea monster that served as the title and central animating metaphor of British philosopher Thomas Hobbes’ 17th century treatise on the social contract – is the name they use for today’s big government. More government makes for less freedom. One author estimates there are so many laws and rules that an average citizen breaks three laws each day.
However one feels about the size of the federal government, its growth inarguably has created an oversight problem. The U.S. Constitution set up a principle-agent relationship between Congress and the executive branch. Congress writes the laws, the agencies implement them and the legislature (the principle) is supposed to keep watch. The massive growth of government has made the task of oversight all-the-more challenging. There are so many agencies to track and so many complex programs and policies to comprehend.
The problem is compounded by a basic time-on-task discrepancy. Today’s executive branch is a perpetual-motion machine. The president is always on the job and agencies operate 52 weeks a year. Our national legislature: not so much. Certainly, congressmen are busy people. A survey by the Congressional Management Foundation suggests legislators work 70 hours per week. Unfortunately, very little of their time is devoted to holding hearings and studying policy efficacy. Members of Congress are in Washington only a few days each week, on average.
Sensibly, Congress long ago took action to bolster its oversight capabilities. In 1914, it created the Legislative Reference Service (later remade into the Congressional Research Service). Congress also established the Government Accountability Office (1921) and Congressional Budget Office (1974) and has bolstered and rearranged its own operations in 1946 and 1970.
Unfortunately, Congress has done little in the past 40 years to augment its strength. In fact, since 1985, Congress has reduced its staff and the staffs of the GAO and CRS. (CBO’s small staff size has crept up a bit.) Presently, Congress spends a mere $4.5 billion on itself and its various support agencies. That is 0.1 percent of total federal spending, which is penny-wise and pound-foolish.
This effort in self-diminution is an ill-conceived effort to show the public Congress can downsize government. It has not worked. Despite the cuts, the public still believes Congress is overstaffed. Congress also tends to pay most staff poorly and many leave Capitol Hill because they spend so much of their time tending to communications work, rather than policy. Further insult was added when some members of Congress tried to forbid their employees from getting help to buy health care.
Public administrators, citizens and members of Congress all say they want efficient, effective government. We will never have it unless the oversight problem is addressed. There is no way 535 members of Congress can oversee a $3.9 trillion government properly, even if they were in town seven days per week.
To improve oversight, there are two basic choices: Congress can greatly reduce the size of government to make it easier to oversee or it can increase Congress’ professional support staff. Neither Ronald Reagan, Newt Gingrich nor any other powerful conservative has been able to cut the size of government appreciably. Realizing that, the way forward is pretty obvious.
AUSTIN, Tex. (Sept. 15, 2015) – The R Street Institute today expressed deep concern about proposed regulations currently before the Austin City Council that would restrict short-term rentals in the city.
On the agenda at today’s Planning and Neighborhoods Committee meeting are restrictions that would require homeowners to register with the city before they can rent out space in their homes, as well as to undergo inspections and even take out commercial insurance policies. The proposed amendments also limit the number of renters per house.
“These new regulations could have a devastating effect on Austin’s thriving short-term-rental market,” said Josiah Neeley, R Street’s Texas state director. “Austin is particularly dependent on short-term rentals because of the large number of festival attendees. These rentals are estimated to add $234 million annually to the local economy.”
“This new proposal is overly broad and threatens to shut many Austin homeowners out of this important part of the city’s economy,” he said. “R Street continues to encourage policymakers to pursue common sense, light-touch regulations that foster innovation while protecting the public interest.”
The council is expected to vote on the proposed regulations as early as Thursday.
Earlier this summer, the Texas Supreme Court overturned state licensing requirements for threading, the hair removal process most commonly used on eyebrows. The court found that the requirements, which prevented Texans from practicing hair threading unless they completed 750 hours of mostly irrelevant coursework, were an unconstitutional infringement on the right to earn a living.
While the court’s decision will provide a few entrepreneurs much-needed regulatory relief, far too many other Texans still find themselves in a similar predicament. More than 500 occupations in Texas currently require some form of professional license, and nearly one-third of the state’s workers are employed in a licensed field. Jobs requiring a license range from auctioneer to travel guide — and in many cases are hardly the stuff of life and death.
Getting these licenses is not easy. A report by the Institute for Justice, a Libertarian public interest law firm, found that getting an occupational license in Texas cost an average of $304 in fees and required 326 days of training and two exams. Overall, Texas has the 17th most burdensome licensing requirements in the country, according to the report — hardly something to brag about in a state that prides itself on keeping government interference to a minimum. As a result, many Texans are locked out of careers because they cannot afford to give up the time and money it takes to get licensed.
What’s more, a growing body of research suggests that licensing often does little to protect consumers from poor or dangerous service. A recent report issued by the White House found that while many licensing requirements did not increase quality of service, they did increase the price of services by between 3 and 16 percent.
Reversing the damage from over-licensing won’t be easy. The first step should be to stop adding to the harm. In Colorado, proposals to license a new occupation must first go through “sunrise review,” which is the flip side of the so-called “Sunset” review process Texas uses to reform state agencies.
During the sunrise review process, each proposal is scrutinized to see if there actually is a pressing need for additional regulation of the profession in question. If there is, the question turns to whether a less burdensome regulation would do just as well as a full licensing regime. These reviews would help legislators have a fuller picture of the likely effects of expanding the number of licensed occupations in Texas.
Texas also should give extra scrutiny to existing licensing during its regular Sunset review process. When an agency responsible for licensing an occupation goes up for review, it should be standard practice to consider whether licensing of that occupation serves the public interest or whether the public would be equally served by less restrictive means.
Even bolder options are available. Legislation filed in 2013 during the 83rd Texas legislative session would have given individuals a defense against administrative or criminal prosecution for violating licensing laws if they weren’t harming state interests. Forcing licensing agencies to abide by this standard would ensure that licensing was confined to cases where it actually served the public interest, and wasn’t just limiting competition.
The right to earn an honest living in the occupation of one’s choice is a core American and Texan value. It’s time we did a better job of living up to it.
A decade ago, when then-President George W. Bush proposed a partial privatization of Americans’ Social Security accounts, public debate largely centered on whether the change actually would mitigate the pending entitlements crisis, or merely expose retirees to inappropriate levels of risk.
But some at the time expressed a different kind of concern, one whose consideration was cut short by the plan’s ultimate failure: that making the federal government a significant stakeholder in private enterprise almost certainly was an invitation to all kinds of mischief.
Bush didn’t get his private accounts, but we’re nonetheless currently in the midst of a major experiment in what happens when markets are politicized. Led by New York City Comptroller Scott M. Stringer, and emboldened by recent rules changes enacted by Congress and the Securities and Exchange Commission, major public employee pension funds are flexing their muscles in a serious way in the 2015 proxy season. Thus far, they seem to be winning.
At issue is whether and under what terms to grant “proxy access” to activist shareholders to nominate their own slates of directors and have those directors’ names included in the proxy materials sent ahead of companies’ annual meetings. The Dodd-Frank Act, currently celebrating is fifth anniversary this week, empowered the SEC, for the first time, to set minimum proxy access standards. But the agency’s initial attempt to do so, just weeks after the law’s passage, was later struck down by the D.C. Circuit for violating federal procedures and failing to account for costs.
Instead, more subtle tweaks made to the so-called “private ordering” process has sparked a move by pension funds and other activist shareholders to target companies with non-binding proxy access questions on their annual ballots. There were six such votes in 2012, 11 in 2013 and 13 in 2014. This year, the floodgates truly opened, with 108 initiatives for proxy access, 75 of them registered by Stringer’s so-called “Boardroom Accountability Project.”
Stringer’s initiative is emblematic of where this new wave of proposals is headed. While asserting that proxy access would maximize shareholder wealth, Stringer notably did not target those companies he believed were underperforming their fundamentals. Instead, he targeted companies for having insufficiently diverse boards, highly compensated CEOs and, primarily, for operating in the fossil-fuels sector.
Through the end of June, there have been 65 shareholder-sponsored proxy access votes at public companies this year, including 22 in the energy sector and eight in the utilities sector. There were 39 successful votes, 31 of which were sponsored by Stringer. Based on the relative performance of companies where the votes were close, we estimate as much as $14.6 billion of potential shareholder wealth was foregone by companies that adopted the proposals.
That result shouldn’t be terribly surprising. The literature is thick with studies finding events that increase the probability of proxy access result in abnormally negative returns, while those that decrease the probability of proxy access result in abnormally positive returns. The effect is seen most demonstrably at firms where large stakes are held by activist investors. Indeed, evidence from the older kinds of proxy battles that lit up Wall Street in the 1980s show that the long-term record is no better. Even two years after such battles are waged, firms where dissident directors won seats performed 20 to 40 percent worse than their peers.
Though often pitched as a victory for “shareholder democracy,” it is unavoidable that proxy access transfers power to nominate directors from boards’ nominating committees – each comprised of independent directors with fiduciary duties to all shareholders – to a mass of unaccountable shareholders, many of whom may have vested interests. Even where such contests are unsuccessful, the result frequently is to give a minority of shareholders a megaphone for politicized concerns, which then can be used as a point of leverage with management and traded for other concessions.
In his 1776 masterwork “The Wealth of Nations,” Adam Smith was famously skeptical of the corporations of his day: royally chartered “joint-stock companies” who were granted certain monopoly privileges by the crown. Smith particularly decried their form of governance, ruled by directors who “seldom pretend to understand anything of the business of the company.”
History has mostly proven Smith wrong on this front, as corporations have played a major role in the world’s exponential growth of wealth over the past two and a half centuries. But given recent developments, we would be wise to remember his counsel.
From the New Republic:
“There’s a clear free market rationale for patent reform, and a consumer protection rationale,” said Ian Adams of the R Street Institute. “It’s a place where we can all meet. In such a partisan period, any opportunity to find common ground, both sides relish it.”
An ancient email privacy law might finally be updated. Congress needs to get it right.
A federal law protects some of your email from government snooping without a warrant. But it doesn’t protect your email if it’s been left on a server for too long, and, worse, it doesn’t protect your metadata—information that can get you arrested and prosecuted, that can reveal intimate secrets about you, and that would expose the entire network of people you talk to. On Wednesday the Senate Judiciary Committee is set to address the first problem, but reform efforts in both houses of Congress have largely passed over the second issue. In dodging the problem of metadata, legislators have missed the forest for the twigs.
The lawmakers who want to update the Electronic Communications Privacy Act of 1986 mean well, and it’s significant that they recognize how in 2015, email stored long-term on a server is just as deserving of Fourth Amendment protections as letters locked away for years in a drawer. But the scope of what government will still be able to glean from our mail without a warrant is far broader nowadays than it ever was in the pre-Internet era.
That’s why, if federal legislators truly want to bring the ECPA up to date, they shouldn’t stop with updating a statute that was flawed even at its passage in 1986. Instead, they should revisit the ECPA’s constitutional roots in a 1967 Supreme Court case. In that case the court, in a moment of prescience, truly grasped how invasive and sweeping government intrusion on American citizens could be. That’s true even though the case involved, somewhat quaintly by today’s standards, a public phone booth.
The Supreme Court decided in Katz v. United States that an eavesdropping device planted by the FBI in a phone booth, without any authorization by a judge, violated a defendant’s Fourth Amendment rights. The 7–1 decision overturned a nearly 40-year-old precedent in 1928’s Olmstead v. United States, which held that a telephone wiretap was not a “search or seizure” under the Fourth Amendment. As the majority wrote in Olmstead:
There was no searching. There was no seizure. The evidence was secured by the use of the sense of hearing and that only. There was no entry of the houses or offices of the defendants.
Olmstead is remembered today mostly for Justice Louis Brandeis’ memorable dissent, in which he described the founders as having:
conferred, as against the government, the right to be let alone—the most comprehensive of rights and the right most valued by civilized men. To protect that right, every unjustifiable intrusion by the government upon the privacy of the individual, whatever the means employed, must be deemed a violation of the Fourth Amendment.
By 1967 most of the court had come to agree with Brandeis. Writing the majority opinion in Katz, Justice Potter Stewart invoked Brandeis’ 1890 article “The Right to Privacy,” in a footnote and further elaborated on Brandeis’ principle with this passage:
For the Fourth Amendment protects people, not places. What a person knowingly exposes to the public, even in his own home or office, is not a subject of Fourth Amendment protection. … But what he seeks to preserve as private, even in an area accessible to the public, may be constitutionally protected.
That was a broad statement of Fourth Amendment theory in 1967, but it resonates even more strongly today, despite efforts by later courts to narrow Fourth Amendment protection to whether an individual has a “reasonable expectation of privacy” to things like phone call records. (These days we call such information metadata.) Internet service providers and others typically capture much more information about you than simply what phone number you’ve dialed.
The majority opinion in Katz led Congress the next year to pass Title III of the Omnibus Safe Streets and Crime Control Act. Better known as the federal Wiretap Statute, the law limits interceptions of telephone conversations in one’s home or office, but also prohibits recording private conversations one might have elsewhere, even when one is not on the phone. (Many pre-Katz cases involved bugging hotel rooms and other places we still consider private in 2015; unsurprisingly, relatively few wiretap cases center on phone booths these days.)
There have been efforts over time to narrow the power of the Katz majority opinion (“people, not places”). In a 5–3 decision in 1979, the court’s majority determined a “reasonable expectation of privacy” is the right standard to apply when government sets out to capture information about our electronic communications. Under this standard, phone numbers and other call-record information that service providers capture and keep are not regarded as the sorts of things about which one would have a “reasonable expectation of privacy.” The only real protection you arguably do have under the law is to the content of your communications.
Even with regard to content, there are wrinkles in the law. The original version of the ECPA expanded and amended the wiretap statute and sits right next to the wiretap laws in the U.S. Code. It tried to shade distinctions among “electronic communications” based on the kind of privacy you might reasonably expect if, for example, you left your email on a company’s servers for longer than 180 days. Congress in 1986 was thinking more about MCI Mail than about Gmail, and legislators hadn’t yet given any attention to the cloud services that companies like Yahoo, Google, Facebook, and Amazon would later offer. (A lot of us keep a lot of our email around on these services for much longer than 180 days.)
The U.S. government consistently has taken the position that metadata deserves less protection than content itself does. The problem, as any privacy expert can tell you, is that metadata may in fact reveal just as much about you as the content of your calls, emails, or Web postings. Internet security expert Susan Landau argues that, in fact, metadata is generally more revealing. As Landau told the New Yorker in 2013, when the government can easily capture and track “who you call, and who they call … you know exactly what is happening—you don’t need the content.”
Landau uses the example of when a call to a gynecologist is followed by a call to an oncologist and then calls to family members. The entity with the metadata may actually have more information about what you’re thinking and feeling than any of your family members may have. This kind of information is also useful for identifying political associations among individuals that many post–surveillance-state governments have severely restricted or banned from routine collection.
The government, including prominent supporters of the National Security Agency, agrees with Landau. Former NSA General Counsel Stewart Baker says that “metadata absolutely tells you everything about somebody’s life. If you have enough metadata, you don’t really need content.” Gen. Michael Hayden, former director of both the NSA and the CIA, puts it more bluntly: “We kill people based on metadata.”
The fact is, real public dialogue about the degree to which our communications deserve protection from government snooping hasn’t yet happened. The best ECPA reform proposal currently before Congress—S. 356, the Lee-Leahy ECPA Amendments Act—would require warrants for content disclosure and would rationalize and simplify the ECPA’s various provisions for how this is done. But despite its virtues, the bill is not aimed at metadata at all.
Another ECPA reform bill—Sen. Orrin Hatch’s Law Enforcement Access to Data Stored Abroad Act, or LEADS Act—is more problematic than the Lee-Leahy bill.* The LEADS Act sets conditions under which companies have to disclose user information, including content, but those conditions raise difficult questions. Notably, the act bases its compliance obligations on whether the user is a U.S. citizen and whether, by producing information that resides on a foreign server, a company might be violating a foreign country’s privacy laws.
The author and sponsors of the LEADS Act mean well—the law would address a particular legal problem with which Microsoft has been wrangling—but Internet companies like Google, Yahoo, and Facebook argue that the LEADS Act creates incentives both to track users’ citizenship and to track the geographic location of user information at all times.
Is there a better way to protect electronic communications? The recent passage of CalECPA, a state bill that includes both improved content protection and improved metadata protection, is a positive sign. The California bill was passed by both houses of the state Legislature, with bipartisan support and no opposition from the state law enforcement lobby. CalECPA now awaits Gov. Jerry Brown’s signature.
Regardless how the governor decides to handle the bill, CalECPA offers a stronger, better, more consistent, and more complete model for federal ECPA reform than any of the bills in Congress. With the Senate moving forward in discussing the ECPA, we need to tell our legislators that better content protections, while necessary, are not sufficient. We need to remind Congress to renew its support for a Fourth Amendment that protects people, not places, and that embraces Brandeis’ right to be let alone.
On behalf of our organizations’ members across the country, we urge you to create a path forward for miscellaneous trade bills (MTBs) in H.R. 644, the Trade Facilitation and Trade Enforcement Act of 2015.
MTBs allow Congress to reduce tariffs, which are nothing more than taxes on American consumers and businesses. While we would prefer broader, more comprehensive approaches to tariff reductions, MTBs have long served as a bipartisan approach to lessening the burden of government and increasing economic growth. Indeed, since they provide relief from tariffs on highly sought finished goods and raw materials brought into the United States, MTBs deliver advantages to our consumers and businesses above all others. Congress should not allow this opportunity to pass by once again. It should pass legislation that allows for permanent tariff reductions on as many product categories as possible.
At the same time, Congress must ensure that MTBs do not give undue consideration to special interests in Washington. To that end, the House and Senate should reform the process so that individual companies request tariff relief from the International Trade Commission, rather than appealing directly to members of Congress. This would greatly benefit taxpayers by increasing transparency and accountability. Additionally, Congress should ensure the ITC does not use MTBs to reward or deny tariff relief based on political considerations.
Congress has not passed an MTB package since 2010. It’s time to act. We urge you to include language in H.R. 644 that will allow Congress to pass MTBs, thereby reducing unnecessary tariffs and strengthening the economy here at home.
Brandon Arnold, Executive Vice President
National Taxpayers Union
Tom Schatz, President
Council for Citizens against Government Waste
Jeffrey Mazzella, President
Center for Individual Freedom
Fran Smith, Board Member and Adjunct Fellow
Competitive Enterprise Institute
Lori Sanders, Outreach Director and Senior Fellow
R Street Institute
Karen Kerrigan, President and CEO
Small Business and Entrepreneurship Council
Lisa Nelson, CEO
The Jeffersonian Project, An Affiliate of the American Legislative Exchange Council
David Williams, President Taxpayers Protection Alliance
From National Review:There’s a myth going around Washington that “real” conservatives should oppose patent reform. But as R Street’s Zach Graves has noted, patent reform actually has a lot of conservative support.
It’s nice to see so many Democrats and liberals produce eloquent remarks and social-media posts about America being a nation of laws. I knew it was a matter of time until they’d come around.
In Kentucky, Rowan County Clerk Kim Davis, a Democrat, has refused to issue marriage licenses to same-sex couples on account of her religious convictions.
To be clear, when a federal court interprets the Constitution – or any law, for that matter – it carries the force and effect of law.
The only way to alter such an order is an appeal to a higher court, a change to the law or an amendment the Constitution. With respect to the constitutional question of states prohibiting same-sex unions, the Supreme Court, the highest court in the land, has decided the issue. The only option left is to amend the Constitution or for the Supreme Court to change its mind.
Such an amendment isn’t in the foreseeable future and the court just released its opinion. That leaves Davis with the option either of resigning her office, finding a compromise or being held in contempt of court.
One of the hallmarks of our nation is the idea that nobody is above the law. We have a clear process for crafting laws, amending them and enforcing them. That’s not evidence of tyranny; it’s how we protect liberty.
Yes, the federal judiciary is full of unelected officials interpreting the law. As a nation, we’ve decided we like it that way. It isolates them from political pressure and significant bias. It does mean they’ll issue decisions we may not like and we have limited recourse.
Since they’re so excited about jailing Kim Davis, I’m sure it’s only a matter of time before the political left starts calling other Democrats to account for breaching the rule of law.
For example, look at what happened during the Baltimore riots in response to the death of Freddy Gray at the hands of police. Baltimore Mayor Stephanie Rawlings-Blake “gave those who wished to destroy, space to do that.” Unless I’m mistaken, the rule of law doesn’t change simply because people are justifiably upset.
And there’s President Barack Obama’s refusal to enforce federal immigration law for certain classes of immigrants and even to provide them with work permits. Multiple federal courts have enjoined his immigration plan as likely violating the legislative process and directly ignoring existing law.
While we’re talking about boldly rejecting court orders, Obama administration officials admitted to directly violating an injunction against the president’s immigration actions issued by a federal judge in Texas.
President Obama is “absolutely confident that what [his administration is] doing is the right thing to do.” With liberals going after Davis for her beliefs that contravene the law, how is the president any different? Is confidence—a belief—sufficient to ignore the rule of law for some politicians in certain cases but not others?
What about when the administration unilaterally altered the Worker Adjustment and Retraining Notification (WARN) Act, which prohibits large employers from conducting mass layoffs unless they give 60-day advance notification to employees? In 2012, those layoff notices would have gone out days before the presidential election. The Department of Labor said those notices weren’t necessary for anticipated layoffs due to federal budget cuts through sequestration. In fact, the White House Office of Management and Budget even offered to reimburse companies sued by employees for breaking the law.
I doubt the political left would give Kim Davis a reprieve if she arbitrarily decided she was going to delay issuing marriage licenses until she figured out a better to solution to accommodate her political interests. Attacks would only intensify if people found out that the Commonwealth of Kentucky was paying her legal expenses.
The rule of law sometimes produces results we don’t like. From time to time, it may even mean the wrong solutions to the challenges we face. Nevertheless, it’s vastly superior to elevating some class of individuals above the law, able to unilaterally force their preferred policies on the rest of us. It doesn’t matter whether it’s criminal laws, marriage, immigration or duly enacted deadlines and notice requirements.
It’s rare to reach political consensus these days, but agreeing on something as basic as the rule of law seems like a great place to start.
Joe Gerth | History tells us Kim Davis will lose; some Republicans seem to forget that, and primacy of rule of law http://t.co/FDXCq9MhJp
— Al Cross (@ruralj) September 6, 2015
“Davis and her supporters would like to see the ‘rule of law’ replaced with ‘the rule of your imaginary friends.'” http://t.co/7v8kcRIiY2
— Lavis Tarchuk (@larchuk) September 2, 2015
Ridesharing apps like Uber and Lyft are very popular among millennials. The ease of ordering a car service directly from your smartphone is very appealing to those who are technically savvy. But a recent study shows that ridesharing has another potentially significant client base: the poor.
Transportation often is one of the biggest expenses facing low-income workers. Many do not own a car. They’re reliant on public transit, which is inadequate in many cities, or on taxi cabs. Taxis, with their supply and rates typically controlled by local governments, often are a fairly pricy proposition. Moreover, some taxis refuse to service the kinds of higher-crime neighborhoods where poor people are most likely to live.
Some recent data out of New York City suggests that ridesharing services may be a better option for the poor. Jared Meyer of the Manhattan Institute conducted a survey of whom and where UberX, the lower-cost Uber option, serves. The results he found would surprise many of the company’s detractors:
UberX is far less Manhattan-focused. Only 6 percent of yellow-taxi pickups were outside Manhattan or outside city airports—compared with 22 percent for UberX.
UberX is growing fast in low-income neighborhoods. Of UberX rides in noncore Manhattan and non-airport ZIP codes in December, 60 percent were in ZIP codes with median household income below the noncore Manhattan median—up from 54 percent in January.
UberX serves predominantly nonwhite, as well as predominantly white, neighborhoods. In the 29 noncore Manhattan and non-airport ZIP codes with one or more UberX pickups per household, black households constituted 29 percent of all households, while the average for all 146 noncore Manhattan ZIP codes was 27 percent. The aforementioned 29 ZIP codes included neighborhoods ranging from Greenpoint and Park Slope—where less than 5 percent of households are black—to Crown Heights and Harlem, where more than 75 percent of households are black.
One of the common features of Uber and its competitors is that rates often are lower than those charged by taxi cabs. There also is no cap on the number of cars working with ridesharing companies, unlike taxi fleets. This helps to lower costs for consumers.
With smartphones becoming more accessible even for the poorest Americans, ridesharing companies can play a role in expanding public transportation in many of America’s cities. In Atlanta, the Metropolitan Atlanta Rapid Transit Authority (MARTA) is partnering with Uber to work with passengers to help complete their journeys home from the bus and train station. A similar pilot program is currently being explored in Hillsborough County, Fla., which includes Tampa.
Could ridesharing even replace public bus service in major cities? One company thinks it can. Loup is running a route in San Francisco that competes with the local bus service. It’s too early to say if it will catch on elsewhere, but if it does, it could offer a solution to public transportation needs without burdening taxpayers.
Ridesharing, commonly thought of as an indulgence for tech-savvy, upwardly mobile millennials, might actually provide promise as a cheap form of transportation for low-income workers. The best thing government could do in this instance is just stay out of the way.This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
It’s interesting to contrast the nightly news dispatches on the increasingly juvenile presidential campaign with the solid work of an organization composed of actual young adults — high school and college students – who quietly are attempting to attain political maturity by analyzing current trends in the U.S. economy.
When R Street celebrated its first birthday, back in the summer of 2013, we invited Charlie Kirk, then a high school senior, to dine with a few of us and our legislative advisory board to celebrate the anniversary of his founding Turning Point USA. The Turning Point message, which seems to be gaining interest, is that millennials are waking up to the notion that very few, if any, of the problems they face can be solved by big government.
The group’s mission statement reads:
Turning Point USA educates students about the importance of fiscal responsibility, free markets and limited government. Through non-partisan debate, dialogue and discussion, Turning Point USA believes that every young person can be enlightened to true free market values.
The student-produced publications offered on the TPUSA website explain the concept of “crony” capitalism, the impact of minimum-wage laws, how big government punishes success and how to avoid being indoctrinated by left-wing college professors. New publications bear titles like “Game of Loans,” about student loan debt; “50 Wacky Ways the Government Spends Your Money,” and “Capitalism Cures.” Among the most recent additions to the group’s site is a YouTube video featuring Kirk titled: “Love Uber? Then you love capitalism.”
Turning Point now claims more than 800 chapters on high school and college campuses and Kirk’s recruiting efforts are helped by nearly 30 regional directors and field staff. Kirk himself is now a frequent guest on television news shows, having appeared more than 90 times combined on Fox News, CNBC and Fox Business News.
The organization deserves the attention. As we did when we jointly celebrated a first anniversary, we wish Charlie and his enthusiastic crew all the best.This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
Isaiah Berlin. John Maynard Keynes. Leo Strauss. Michel Foucault. James Q. Wilson. These are some of the influential intellectuals whose life and work are featured at the newly launched ContemporaryThinkers.org. To date, there are microsites for 30 scholars of politics, philosophy and economics, with more in the works.
Each thinker’s microsite provides readers with a concise and authoritative introduction to his or her life and work. Many of the microsites also offer video and audio recordings of the intellectuals. For example, the Edward C. Banfield site, which I helped create, carries my short biography of Banfield and an essay on his research on government and politics, along with an exhaustive bibliography of his publications, and a curated collection of his most provocative essays (like “Policy Science as Metaphysical Madness”). The site also directs readers to free, online copies of Banfield’s work. One can hear Banfield muse on America’s problems, nihilism and more in this 1977 recording.
ContemporaryThinkers.org went online last month. It is a project of the Foundation for Constitutional Government, an organization “devoted to supporting the serious study of politics and political philosophy both online and on campus, with particular attention to the vonstitutional character of American government and the founding of the United States.” The foundation contracts with experts in academia and think-tanks who write and organize the sites’ content. The full list of sites is at http://www.contemporarythinkers.org.
This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
The following piece was co-authored by R Street Associate Fellow Neil Gilbert.
Traditional marriage is in big trouble in the United States. Between 1960 and 2011, the share of white adults 18 and older who were married declined by 25 percent, while the declines for Hispanic and black adults were 35 percent and 50 percent respectively.
This trend has profoundly negative consequences for adults, children, and society as a whole. Because a stable marriage is one of the best means of avoiding poverty, many children born and/or raised out of wedlock are economically disadvantaged. In addition, single parents tend to have less time, energy, and other resources for fostering their children’s development. And they are more likely to work at low-wage jobs with irregular hours. The negative effects run in both directions: The psychological stress of caring for a child alone can create barriers to professional success.
Some blame the decline in marriage on decaying moral values and loosening social norms abetted by the media. They yearn for a return to what they remember as the moral foundations of marriage. Programs designed to move us in this direction during the administration of George W. Bush had disappointing results.
Others, looking at the same data, see the unfortunate byproduct of a welcome increase in social tolerance and sexual freedom. Still others see the failure to marry as chiefly an economic decision. The decline in male employment and wages has reduced the number of “marriageable males.” Hence proposals to increase the earnings of low- and middle-income workers through expanded job training, a stronger role for labor unions, a higher minimum wage, more career-oriented high schools, and more effective public schooling generally. But translating these proposals, too, into effective programs has proven problematic.
What can be done?
There is one step that can be taken to make marriage more attractive to low- and moderate-income families that seems to be working in other countries with extensive social welfare benefits and high levels of cohabitation: reduce the marriage penalties embedded in our means-tested welfare programs. The growth in these programs has been dramatic: Federal spending on the nine largest means-tested programs (adjusted for inflation) climbed almost 750 percent between 1968 and 2011, while the U.S. population grew by only 56 percent. Ending the marriage penalty in these programs, then, could have far-reaching effects.
Marriage & the welfare state
As far back as 1997, a Congressional Budget Office report noted that a disincentive to marry is created by the potential loss of means-tested benefits received by low-income mothers—food stamps, housing assistance, Medicaid. If marriage to an employed man would increase the family income enough to make the mother and children ineligible for these benefits, she might choose to remain unmarried. Gene Steuerle of the Urban Institute notes wryly, “Cohabiting or not getting married has become the tax shelter of the poor.”
Eligibility for the major means-tested benefits is determined by the income of either the “family unit” (individuals living together related by blood, marriage, or adoption) or the “economic unit” (individuals living together who share resources, for example, to purchase food). The family unit is used to calculate eligibility for child-care vouchers, housing-choice vouchers, Medicaid, and, in all but a few states, Temporary Assistance for Needy Families (TANF). For these programs, the income of a cohabiting adult who is not the children’s biological parent is disregarded. Eligibility for the Supplemental Nutrition Assistance Program (SNAP), the Special Supple-mental Nutrition Program for Women, Infants and Children, school meals, and the Low Income Home Energy Assistance Program is based on the economic unit.
For cohabiting couples, the incentives are clear: The way to maximize benefits is to avoid getting married or to fail to disclose parental status and financial sharing to authorities.
Measuring marriage penalties
Most safety-net benefits have steep phase-out rates or even “cliffs” as income rises. The recent expansion of safety-net programs to more middle-income households has extended marriage penalties to more Americans. Depending on the state where they live, a family of four making as much as $92,150 may be eligible for Medicaid; a similar family making $71,436 may qualify for child care assistance; a family earning $53,267 may claim the Earned Income Tax Credit; and a family making up to $31,008 may receive SNAP.
acking all the marriage penalties is difficult, as they are usually inadvertent and can appear in the most unexpected places. For example, the Affordable Care Act subsidizes health-insurance premiums for households making between 133 percent and 400 percent of the poverty line. For each additional dollar earned, households are required to contribute a higher percentage of their income.
For a family of three earning between $59,370 and $79,160, the ACA subsidy is a flat 9.5 percent of household income. If the couple is unmarried, each partner qualifies separately for the subsidy, even if they live together. But if they are married, their combined income reduces their subsidy and may disqualify them altogether. If one spouse earns a lot more than the other, they may lose as much as $3,486 in subsidies.
We used the Urban Institute’s newly updated Net Income Change Calculator database of national and state tax and social-welfare rules for all 50 states and the District of Columbia to estimate the effects of marriage on the incomes of seven hypothetical couples with two children. Our couples had earnings of $10,000, $20,000, $40,000, or $50,000, with several variations in the division of earnings between the partners; and we placed each scenario in states at the 10th, 50th, and 90th percentile of the distribution in marriage penalties and bonuses under current law. For each, we first ran the numbers with the couple cohabiting, one partner not a biological parent of the children present, and reportedly not sharing resources. We then ran the numbers for the same couple, only this time married and sharing resources, and compared the results to see whether marriage produced an increase (bonus) or decrease (penalty) in the couple’s income. Overall, we found that:
– Marriage penalties for those earning $10,000 range between $1,824 and $5,016.
– Marriage penalties for those earning $20,000 range between $1,784 and $8,902.
– Marriage penalties for those earning $40,000 range between $5,544 and $13,248.
– Marriage penalties for those earning $50,000 range between $6,960 and $14,148.
Ending marriage penalties
The simplest way to end marriage penalties in the welfare system would be to treat all cohabiting couples—whether or not they are biological parents—as economic units for all means-tested benefits. The default rule could be adopted that all couples who cohabit for longer than a year are automatically treated as economic units. Those who live together without sharing expenses could apply for an exemption and submit evidence demonstrating their separate finances. This would reduce the marriage penalty for cohabiters—but raise the cost of cohabitation and perhaps discourage even more biological parents from trying to form a family.
In Europe, where as many as a quarter of couples are unmarried cohabiters, benefits frequently are based on the household unit, rather than the family or economic unit. But there is also a recognition that not all cohabitation is marriage-like. Consequently, European agencies often impose further requirements on cohabiters seeking to qualify for benefits, such as joint bank accounts or shared mortgage loans. The French look for evidence that a couple is living a “common life.”
To enforce these rules, some countries, such as the Netherlands, use home visits. That sounds a lot like the discredited “man-in-the-house” rules of pre-1965 welfare programs and could enmesh U.S. social agencies in endless arguments about household economics. We think this approach is unlikely to gain widespread support in the United States.
Less politically contentious, but much more expensive, would be to minimize marriage penalties by extending to means-tested welfare programs the tax code’s approach to marital income. Married couples may file their taxes jointly, and the tax code rewards many of them for doing so—or at least softens the impact of the code’s progressively higher rates for higher incomes. Upon marriage, means-tested social-welfare benefits could be phased out gradually to reflect society’s interest in stable family arrangements.
This is not a novel idea. Marriage penalties under the old pre-welfare-reform Aid to Families with Dependent Children (AFDC) were enough of a concern that, before the enactment of TANF, at least three states obtained AFDC waivers designed to reduce the loss of welfare benefits due to marriage. These reforms were termed “wedfare” or “bridefare.” Nothing much came of these initial attempts to soften the marriage penalty because, with the enactment of the 1996 federal welfare reform, caseloads fell across the country and the issue became moot.
With the expansion of means-tested programs, it’s time to reconsider such efforts. It’s impossible to predict precisely how much more a marriage-neutral or marriage-friendly system would cost, but strengthening marriage would, over the long run, lift many families out of poverty.
A quietly crucial debate is going on within the California Public Utilities Commission about the future of distributed electricity generation.
At stake is the Self-Generation Incentive Program. Created in 2001 in response to the outrage Californians expressed over months of rolling blackouts, the SGIP was designed to reduce the load on California’s energy infrastructure by distributing the burden of peak-load power generation to other sources. The program taps resources like rooftop solar with the goal of eventually yielding a sophisticated power system better suited to provide reliable service to customers.
The problem is that distributed-generation technologies are not quite competitive with the centralized power-plant generation the state was aimed to replace. The result was that the program’s crafters determined the only feasible way to improve power reliability was to offer subsidies to distributed energy producers.
Like all energy subsidies, the SGIP is wasteful. It expends taxpayer resources to reshape the energy market in accordance with political will. In an ideal world, subsidies would be stricken from the books to limit government intrusion in the market. Until the point when that’s a realistic proposition, it’s crucial that subsidies from programs like the SGIP are targeted appropriately to achieve the goals policymakers have set out.
In that vein, the CPUC currently appears to be walking away from one of the SGIP’s principle objectives: the cultivation of distributed-power sources that will help California achieve its own greenhouse-gas targets.
The program initially did not differentiate between which sources could be used to generate supplemental power. But in 2009, the Legislature amended the program to favor developing less carbon-intensive energy. This has required the CPUC to determine what it means to reduce emissions, always a difficult task, given California’s ever-shifting targets.
The current objective is cut greenhouse gas emissions from all sources such that, by 2020, they must be at least 25 percent below the state’s 1990 emissions levels. But should the Legislature adopt S.B. 350 – sponsored by Senate President Pro Tempore Kevin De Leon, D-Los Angeles, it’s possible that even greater reductions will be required. De Leon’s bill would raise the state’s renewable portfolio standard to require that, by 2030, half of all power consumed in California comes from renewable sources.
The CPUC has proposed updating the SGIP to tighten eligibility rule for subsidies, reflecting language in the program’s reauthorization in last year’s budget. Under the proposed rules, 2016 projects must produce 5 percent fewer kilograms of carbon per megawatt hour to participate than in 2015. That’s a very modest change. So modest, in fact, that if it is implemented in concert with the more stringent renewables standards proposed by S.B. 350, one could imagine virtually all of the money being directed to projects intended to meet that goal and not to the original purpose of reducing strain on the grid.
An even more rigorous tightening of SGIP eligibility standards than the 5 percent proposed by CPUC might better help the state meet its target for greenhouse gas reductions. At a minimum, if one presumes that qualifying facilities remain operational at the end of the decade, we’d want to target the subsidy to those technologies that help California continue that trajectory.
The CPUC’s proposed changes to SGIP eligibility would keep California subsidizing an awful lot of non-renewable distributed generation that other state policy actively seeks to curb. This schizophrenic approach offers dangerous incentives to policymakers to pursue yet further subsidies.
We should eliminate all subsidies and reign in the expanding bureaucracy put in place to achieve California’s rapid and destructive greenhouse-gas reduction targets. As a second-best option, we should at least make those subsidies consistent with other directives.This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.