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US returns Magna Carta to England

January 20, 2015, 3:05 PM

Today, America bids farewell to the Magna Carta. The 800-year old document returns home to Lincolnshire, England, after six months in America. It landed at Boston’s Museum of Fine Arts in July and spent the past few months at the Library of Congress.

This copy of the Magna Carta visited here once before when England asked the United States to safeguard it from Nazi bombs. But we should not expect to see the Lincoln Magna Carta on these shores again. It is one of only four surviving copies of the 1215 charter, and it shows its 800 years of age. The parchment will be preserved in a newly constructed, high-tech protective case in Lincoln Castle.

Much has been written about Magna Carta’s current visit to America, particularly in relation to the inchoate liberties it birthed. Rightly so. The Magna Carta’s importance cannot be understated. It is font of the liberties we enjoy today.

After tolerating one outrage after another by King John, barons in league with English church officials rebelled. They renounced their allegiance to the king, who foolishly seized their property. The king was quickly overwhelmed, with the barons taking London.

At Runymede in June 1215, King John signed, in effect, a treaty with his own people. The Magna Carta curbed the authority of the king, offering protections to the church and the rights of free men. In return for renewing their oaths to the king, he was forced to cede some power. His power over the pockets and persons of freemen was reduced. The barons could check the king’s authority to enact certain types of tax. King John also recognized the “ancient liberties” of some inhabitants. Jailing them willy-nilly in perpetuity was expressly disallowed.

No Freeman shall be taken or imprisoned, or be disseised [dispossessed] of his Freehold, or Liberties, or free Customs, or be outlawed, or exiled, or any other wise destroyed; nor will We not pass upon him, nor condemn him, but by lawful judgment of his Peers, or by the Law of the land.

Additionally, the Magna Carta was a key moment in the advancement of civilization. The Great Charter helped move the accepted basis for human governance further away from rule by might to rule by law. Words on paper, not arms, would structure a polity. Humanity could flourish under the stability and liberty afforded by shared agreements about the basic rules of social life.

Politics, the ancient Greeks noted, was a means of moving fights from the streets into a forum. Lay down arms and use words to settle conflicts. Written agreements on power-sharing naturally followed from this notion. But these ancient treaties rarely had lasting power. Inevitably, one party to the agreement would see advantage in reneging, and war would return.

The term “charter” is derived from the ancient Latin “charta” or, perhaps, the ancient Greek “chartês,” both of which mean “paper.” In the 1200s, charters were a common legal instrument in England. They had been in use since 600 AD, and they tended to deal with mundane property matters. For example, a 679 AD charter from Hlothhere, King of the Men of Kent to Beorhtweald, the Abbot of Reculver, declares:

In the name of our Lord, Our Savior Jesus Christ, I, Hlothhere, King of the men dwelling in Kent, for the cure of my soul give land in ‘Thanet’ which is called ‘West of the stream,’ to you, Beortwheald, and to your monastery, fields, pastures, marshes, little woods, springs, fish ponds, [M]ay you hold, possess, and your successors defend in perpetuity …. [T]his little charter of donation remaining nonetheless in its own effect …. Let it be contradicted by no man, which God forbid, neither by me nor my relations nor by others.

King John himself broke his word soon after putting his seal on the Magna Carta. It was a huge mistake, but a fortunate one for posterity. The outrage was immediate and subsequent kings understood that maintaining peace required reaffirming the charter. Thus, what began as a written agreement between warring equals was progressively elevated to a higher authority held sacred. Magna Carta—the Great Charter.

This conception of a piece of paper as expressing higher law that binds both rulers and the people is a philosophical assumption undergirding American and modern Western constitutions generally.

It is the dawn of the 21st century, and much of the globe remains mired in civil warfare. Despots ruling by might are the norm not the exception. All of which makes the Great Charter and its achievement appear even greater.

What D.C.’s food scene can teach us about copyright law

January 20, 2015, 2:44 PM

As Congress prepares for another battle over copyright law, D.C. policy wonks seeking guidance need look no further than the way the local restaurant scene has developed. Though there are clear differences, the district’s eating places offer some valuable insights into the intersection of intellectual property and creativity.

Washington has seen vast improvements in its food scene over the past few decades. From humble foods like hamburgers, Ethiopian wots or Vietnamese banh mi to the finest high-end New American, French and Indian cooking, D.C. has the bases covered. We even have bona fide celebrity chefs with national reputations, like Michel Richard and José Andrés.

Of course, it isn’t just the local chefs offering more and better culinary options to consumers. National chains like Chipotle, Panera and the Lorton, Va.-based Five Guys sell top-notch fast-casual food at thousands of locations for very reasonable prices.

This is a huge change for the better. When Lyndon Johnson occupied the White House 50 years ago, there were no Thai, Ethiopian or Vietnamese restaurants anywhere in the United States and pizza was sold in only a few big cities. Much of the food people cooked at home was so bad that it’s now a topic for gross-out humor.

Bear in mind that this massive change and incredible outflowing of culinary creativity has burst forth from an industry in which copyrights play almost no role.  While the names of dishes can be trademarked, anybody can cook and sell any recipe. Well-known chefs almost all publish cookbooks full of “secrets” and many restaurants will hand out copies of their recipes at no charge.

Local celebrity chef Michel Richard’s signature desert refines the flavors of the Kit Kat candy bar (which he, of course, didn’t invent) and versions of it have shown up on menus from Birmingham, Ala. to San Francisco. The trend isn’t confined to high-end dining. Burger King, for example, serves a near carbon-copy of McDonald’s Big Mac sandwich.

Certain types of intellectual property protection do exist for food: trademark law allows restaurants to safeguard their brands; there are copyrights in the publishing of recipes; and patents are available when somebody develops a truly novel cooking process. But by and large, the lack of strong legal protections can’t be said to have hindered the flourishing of creative output in the world of restaurants.

A look at the progress of American cooking and eating may not provide specific guidance as to how we should reform copyright law. But it does show that there’s plenty of room for creativity, innovation and invention even in a business where copyright isn’t a major factor.

Otter again calls for trimming income tax over time

January 16, 2015, 5:27 PM

From Idaho Business Review:

A survey by the R Street Institute last year found that 52 percent of Idahoans opposed the Marketplace Fairness Act. National polls from the International Council of Shopping Centers show that over the past few years, increasing numbers of Americans support taxing Internet and catalog purchases, though that poll didn’t specifically look at Idahoans’ attitudes.

Do USB cables need regulation?

January 16, 2015, 10:31 AM

Frequent travelers know the pain of being out on the road without the correct charging plugs for their phones and other electronic devices, just as parents know the difficulties of lacking the right cord to power up a child’s video-game system or tablet.

In prototypically European fashion, the European Union’s bureaucrats in Brussels have promised to address problems like these by regulatory decree. Under pending rules, all portable electronics sold in the 28-nation EU region must, by January 2017, use the “micro-USB” connector that’s already the dominant standard for most smartphones, e-readers, and other devices.

The United States shouldn’t follow suit — but not for the reasons free-marketeers typically offer when arguing against regulation.

In some ways, the EU’s plan appears inoffensive. Standardized connections likely will have some cost efficiencies, at least in the short term, both for device makers and for consumers. Free-market advocates are wont to point to the proliferation of “job-killing regulations,” but it’s hard to identify anyone likely to lose a job because of a rule like this.

Indeed, many of the purported negative consequences of regulation just simply aren’t borne out in the data. According to surveys by the U.S. Bureau of Labor Statistics, employers blame regulations for fewer than 1 percent of all layoffs. This suggests the rosy projections of economic growth often offered by partisans of regulatory relief should be taken with an enormous grain of salt; deregulation simply isn’t likely to create a significant number of jobs in the short term.

Moreover, much of what the regulatory state does is actually to codify ground rules that evolved from common sense and the wisdom of voluntary market institutions. Abruptly dismantling regulatory bureaucracies without serious plans to replace their beneficial functions — food safety, basic environmental protection, enforcement of civil rights — would almost certainly do more harm than good.

Rather than a full-bore attack on the regulatory state writ large, free-market advocates are better served to focus on where regulatory proposals most often come up short — particularly in lawmakers and regulators’ inability to anticipate unintended consequences.

Take the European USB regulations: While the micro-USB would have seemed amazing even a decade ago, it’s only an incremental improvement over what came before it. Other port designs, like the “lightning” connector that Apple uses for most of its devices, can provide slimmer port openings and faster data transfer. According to many technophiles, not-yet-widespread USB-Type C ports and “universal connectors” are better still.

Even if these technologies aren’t really superior, there’s little reason to think that the EU’s chosen standard represents the very best way that humanity will ever devise to charge and communicate with mobile devices. Mandating it as the only standard will, at best, retard progress, as there would be little incentive to develop something better.

Some regulations destroy jobs, some degrade services and nearly all cost someone money. But the real cost of regulation is often unmeasurable, as it comes from shutting out the creative advances we never knew we were missing.

Don’t forget Ex-Im

January 15, 2015, 5:00 PM

Republicans have an excellent opportunity this year to present a robust conservative agenda and establish their vision for policies that encourage economic opportunity. There are a host of issues that many Republican leaders have vowed to push forward, including tax reform, the XL Keystone Pipeline and reducing government overreach in health care.

But one issue conservative legislators should not ignore is killing the Export-Import Bank, which currently is set to expire next June. With Ex-Im Bank critics assuming control of key committees, and a recent string of bad press that calls into question the bank’s economic claims, conservatives have a golden opportunity to end this New Deal relic once and for all.

Created in 1934, the Export-Import Bank is the “official export credit agency of the United States.” The bank offers export credit and insurance to U.S. companies in place of private financing. By guaranteeing taxpayer-backed loans, the bank can provide financing below market value, a prime example of corporate welfare that puts politically connected businesses at an advantage.

Routinely reauthorized for decades, the Export-Import Bank has faced increased opposition over the past few years. In early 2012, a small but vocal group of conservatives objected to the bank’s extension and struck a deal that initiated some reforms. Emboldened by these successes, a larger coalition of conservative legislators and outside groups spent 2014 working to shut down the bank, pushing Congress to let its charter expire on Sept. 30. Their advocacy led to a short-term extension of the bank through June 2015.

The bank’s defenders highlight the jobs “created” by the institution and suggest government intervention is an “essential tool” in international markets. They also point to a 2013 report in which the bank claimed it was “reaching more small businesses than ever before.”

However a recent Reuters report calls into question whether Ex-Im is really focused on helping the “little guy.” Reuters detailed how the bank mischaracterized hundreds of units of multinational conglomerates as small businesses, calculating that “as much as $3 billion in authorizations listed as those for small business may have been misclassified over eight years.”

Prominent Ex-Im critic Rep. Jason Chaffetz, R-Utah, has taken the gavel of the House Oversight Committee, from which position he has an excellent opportunity to scrutinize the bank’s claims of broad economic benefits, just as Financial Service Committee Chairman Jeb Hensarling, R-Texas, already has. Chaffetz is also empowered to investigate alleged improprieties and corruption, with subpoena power, if necessary.

A decades-old Washington bureaucracy won’t disappear overnight. Opponents need to take the next few months to demonstrate to the public that the Export-Import Bank hurts job growth, costs taxpayer money and is simply a slush fund for big corporations. In ending the bank, conservatives would demonstrate their sincerity to ending corporate welfare and expanding real economic opportunity.

R Street disappointed by Hunter bill to reform TWIA

January 15, 2015, 4:36 PM

AUSTIN, Texas (January 15, 2015) – New legislation introduced by state Rep. Todd Hunter, R-Corpus Christi, would take the wrong approach to reforming the Texas Windstorm Insurance Association, the R Street Institute said today.
While Hunter’s bill correctly recognizes the need to shrink TWIA, calling for a 60 percent reduction in the pool’s total exposure over the next 12 years. But the measure fails to set forth a reasonable strategy to achieve that goal, which it proposes to enforce with the threat of $200 million in penalties assessed against member insurers.

“While reducing TWIA’s exposure is an important goal, this cannot be achieved by state mandates or by penalizing private insurers,” said Josiah Neeley, Texas director of the R Street Institute. “TWIA itself must be reformed.”

Instead of penalizing insurers, Neeley said the Legislature should enact reforms to adopt actuarially sound rates; lower the coverage limit extended to TWIA policyholders; end coverage for second homes; and strengthen TWIA’s depopulation portal to move more policies back into the private market.  Additionally, TWIA should buy more reinsurance and issue more catastrophe bonds.

“The market is ripe for more risk transfer,” said Neeley. “Texas taxpayers should not be bearing this burden when there is ample interest from the private insurance market to take up the risk.”


Five reasons why you can’t judge a Congress by counting laws

January 15, 2015, 12:05 PM

For the past six weeks, the media has bid a raucous good riddance to the 113th Congress. They have trashed it for its hyper-partisanship, for shutting down the government and for being in session so seldom. They also point to Congress’ 14 percent public approval rating. But most of all, the 113th is trashed for being “unproductive.”

While the disdain for the 113th Congress is understandable, critics err when they tar Congress based on a bogus metric: the number of laws passed.

The Associated Press’ Alan Fram was among those to note that the roughly 200 bills that became law during the past two years were “the fewest since at least 1947 and 1948, when what President Harry Truman dubbed ‘the do-nothing Congress’ enacted over 900 laws.”

Fram, for sure, was not the first to level this charge. Way back in September 2012, Roll Call’s Jonathan Strong and Humberto Sanchez dumped on Congress for not passing enough statutes.

But Congressional productivity cannot and should not be measured by laws enacted. As pointed out by Dr. Jacob Straus of the nonpartisan Congressional Research Service, “there is no agreement [among scholars of Congress] on what quantitative measures might be best for understanding the legislative process and evaluating congressional output over a 2-year period.”

There are at least five reasons why counting laws is a lousy measurement of congressional productivity.

1.  It makes no consideration of the substance of the laws, ludicrously treating post office naming bills and other trite legislation as numerically equivalent to hugely substantive public policies, like the Patriot Act.

2. Much of the legislation enacted by Congress today is in omnibus form. One law will make policy in disparate issue areas, or will be a package into which separate bills are folded. In December, Congress passed the 1,600-page “CRomnibus” that comprised 13 appropriation acts. It counted as only one law enacted. Had Congress moved the spending bills separately, it would have scored 13 statutes. A few years ago, Dr. Straus points out, Congress rolled 160 bills into a single Omnibus Land Management Act.

3. Congress has changed its practices in ways that purposely reduce the number of laws it enacts. For example, Congress used to pass private laws—bills that benefit a single person—all the time. The 59th Congress (1905-1906) passed 6,249 of them, with the House of Representatives once moving 320 such bills in an hour. Additionally, Congress also delegated to agencies the authority to do things that used to require the passage of a law. Today, most agencies are free to acquire land and erect facilities. During the 80th or “do-nothing” Congress, bill after bill was introduced for purposes such as the building a high school in Roosevelt, Utah. Finally, Congress also has established internal rules that greatly limit the number of commemorative bills it passes. The 110th Congress passed 109 post office naming bills. The 113th Congress enacted 75 percent fewer of these laws because it decided they were a waste of valuable time.

4. The metric produces politically biased results. A Congress that passes few statutes is damned for being a do-nothing legislature, while a busybody Congress that enacts hundreds of laws is deemed highly productive. Even fans of big government cannot say unequivocally that more laws would be better than fewer laws. Would the left cheer the productivity of a Congress that passed hundreds of laws to jail nonconformists, conscript all 18 year olds into the military and create a 21st-century version of Sparta? Of course not.

5. Most fundamentally, counting laws fails to account for all the other duties and functions of our national legislature. Congress’ constitutional duties are many, and lawmaking is just one of them. The Senate must approve treaties and consider executive and judicial appointments. Congress as a whole has a duty to oversee the executive branch; amend or abolish failed or anachronistic policies; safeguard liberties from encroachment by the executive branch; and, of course, represent the public. Hence, accurately measuring congressional productivity requires fashioning a metric that encompasses all the duties and functions of Congress.

It is time to retire counting laws as a measure of Congress. It is a crude, biased, and meaningless metric.

Texas Legislature should address hail litigation, R Street study finds

January 15, 2015, 9:03 AM

AUSTIN, Texas (Jan. 15, 2015) – With insurance claim litigation over hail damage at an all-time high in Texas, the Legislature should make tort reform a priority in the 2015 session, according to a study released by the R Street Institute today.

The study, “Come Hail or High Water: Texas’ Litigation Explosion,” was authored by R Street Texas Director Josiah Neeley. In it, he notes that homeowners’ insurers paid $10.4 billion for hail-related losses between 1999 and 2011, more than any other peril. At the same time, litigation over hail claims has grown significantly.

“Historically, only about 2 percent of property insurance claims result in a lawsuit,” said Neeley. “Yet closer to 35 percent of recent hail damage claims have seen some sort of litigation.”

Neeley writes that this increase can be partially blamed on “case-running,” an organized process of public adjusters and others soliciting and referring individuals with potential claims to attorneys, who then bring large numbers of coordinated suits against insurance companies. To further complicate matters, many of these cases may involve re-opened claims that previously had been settled, or claims of otherwise dubious merit.

“As with many forms of nuisance suits, the large number of cases and the cost of litigation can create an incentive for insurance companies to settle,” said Neeley.

Neeley outlines solutions the Texas Legislature should take to address hail litigation, including isolating the specific amounts at issue in a dispute (the difference between what the insurer and policyholder believe the claim to be worth, as opposed to the entire amount of the claim), and updating current statutory provisions that apply an 18 percent interest rate for late payments in insurance claims. The state should also look for ways to resolve more insurance disputes outside of the court system.

Texas should not look to increase professional regulation for public adjusters and others, Neeley writes. Nor should the state adopt rules prohibiting public adjusters from referring policyholders to attorneys.

“The growth of hail claim litigation is certain to continue until it is addressed by the state,” said Neeley. “Luckily, Texas has a menu of options it could use to make sure legitimate claims are processed and paid in a timely manner, while clamping down on questionable claims and abuse.”

Come Hail or High Water: Texas’ litigation explosion

January 15, 2015, 9:00 AM

Texas is known for its extreme weather. From hurricanes along the coast to wildfires in Bastrop, the state has absorbed more than its share of weather-related property damage. Yet when it comes to property damage, the most costly culprit is one we typically don’t think about: hail

Between 1999 and 2011, homeowners’ insurers paid $10.4 billion for hail-related losses, more than any other peril. From 2010 to 2012, Texas generated more than 320,000 hail insurance claims, more than double any other state. Hail insurance claims have increased 84 percent since 2010.

That trend appears likely to continue. An April 2014 storm in Denton is expected to result in $500 million in losses, while June storm in Abilene may result in another $400 million.

Texans have the highest insurance premiums in the country, 50 percent higher than the national average. Hail claims are the most significant single contributor to those costs. Insurance losses from hail claims in Texas exceed those from hurricanes and tornadoes combined.

Politics, regulations are ruining state insurance market

January 14, 2015, 6:24 PM

Much has been made of the so-called California comeback, and it’s certainly true that the state’s economy is beginning to show signs of life. But in some ways, California’s insurance market is further from excellence than it has ever been.

A new study compiled by my colleagues at the R Street Institute offers a comprehensive and comparative analysis of insurance markets in all 50 states and finds, for the first time, that California ranks dead last. Californians have become victims of the very regulatory apparatus established to protect them.

The brief explanation for the Golden State’s dismal performance is simple: The market, bound up by countless legal and regulatory threads, is imprisoned and unduly politicized. It is a bad place to do business.

California grants insurers very little freedom in underwriting – the process by which they evaluate whether a customer is eligible for their product based upon the nature of the customer’s risk. For property and casualty insurance (such as home and auto), the state regulates according to the dictates of the 26-year-old Proposition 103, which mandates certain rating factors, prohibits others and includes a de facto ban on any factor not contemplated when the proposition was passed.

In practice, Proposition 103 prevents insurers from offering time-sensitive rate adjustments that allow consumers to realize the benefits of competition. This out-of-date and clumsy initiative also inhibits companies from creating and offering new insurance products, as is necessary for transportation network companies such as Uber and Lyft.

Compounding the harms associated with its unresponsiveness, the California insurance market is vulnerable to political manipulation. The state insurance commissioner is an elected office. This is problematic because insurance is a highly technical field in which optimal market outcomes do not always correlate with political empire-building or contrived political rhetoric. Winning elections clouds regulatory judgment over an industry that demands consistent and predictable oversight to flourish.

The same problems of political caprice also arise because the insurance market is subject to the initiative process. Asking voters to judge insurance issues virtually guarantees a mismatch between political impulse and sound policy.

In spite of coming last among the states, California does have areas of success that it can build upon. For one, the state’s anti-fraud measures are comparatively efficient and successful. Those efforts lower costs to policyholders by millions of dollars. Further, California also does a good job of spending the fees and assessments that it collects from insurers on its regulatory mission, as opposed to other state programs.

Improving California’s insurance market will mean increasing the freedom of insurers to respond to consumer demand. To do so, the state will need to consciously modernize its regulations to both increase underwriting flexibility and reduce political manipulation.

Reform will not arrive overnight, but with the start of a new legislative session it could come sooner rather than later. Instead of moving further away into mediocrity, the insurance market must “come back,” too.

The 11 worst states for insurance regulation: Report

January 14, 2015, 2:54 PM

From Insurance Business America:

California and North Carolina are the worst states in the nation for free market-promoting insurance regulation.

That’s the finding from the 2014 Insurance Regulation Report Card, issued by The R Street, a think tank promoting the values of “limited, effective and efficient government.”

In its annual review of insurance regulation across the country, the group assessed each state for proficiency in 12 areas, including ensuring carrier pricing flexibility; competitiveness in home, auto and workers’ comp markets; monitoring carrier solvency and efficiency. While it noted that some—like Florida—were making efforts to “scale back,” other states “appear to be moving in the wrong direction.”

“States should regulate only those market activities where government is best-positioned to act,” R Street senior fellow R. J. Lehmann wrote in the report. “They should do so competently and with measurable results…Their activities should lay the minimum possible financial burden on policyholders, companies and, ultimately, taxpayers.”

By those parameters, the group labeled the following 11 states the worst in the nation for insurance regulation.

1. California (F)
Strengths: Antifraud, fiscal efficiency, auto insurance market, workers’ comp market
Weaknesses: High politicization, rate regulation, desk drawer rules, rating restrictions, little regulatory modernization

2. North Carolina (F)
Strengths: Workers’ comp market, regulatory clarity
Weaknesses: Solvency regulation, consumer protection, auto insurance market, rate regulation, little regulatory modernization

3. Montana (D-)
Strengths: Antifraud, auto insurance market, home insurance market
Weaknesses: Solvency regulation, fiscal efficiency, workers’ comp market, little regulatory modernization

4. Hawaii (D)
Strengths: Solvency regulation, fiscal efficiency, workers’ comp market
Weaknesses: Home insurance market

5. New York (D)
Strengths: Low politicization, home insurance market, few rating restrictions
Weaknesses: Fiscal efficiency, desk drawer rules, little regulatory modernization

6. Massachusetts (D)
Strengths: Low politicization, home insurance market, workers’ comp market
Weaknesses: Fiscal efficiency, desk drawer rules, little regulatory modernization

7. Michigan (D)
Strengths: Fiscal efficiency, home insurance market, workers’ comp market
Weaknesses: Fraud, auto insurance market, little regulatory modernization

8. Louisiana (D)
Strengths: Regulatory clarity, workers’ comp market, few rating restrictions
Weaknesses: Politicization, fiscal efficiency

9. Washington (D+)
Strengths: Auto insurance market, home insurance market
Weaknesses: Workers’ comp market, little regulatory modernization

10. Mississippi (D)
Strengths: Solvency regulation, auto insurance market, workers’ comp market, few rating restrictions
Weaknesses: Desk drawer rules, little regulatory modernization

11. Florida (D+)
On the other end of the spectrum, states like Vermont (A+), Virginia (A) and Iowa (A) were honored for achievement in the 12 points of assessment. Maine, Utah, Ohio and Kentucky also fared well, with grades of A-.

Overall, R Street applauded state-based regulation on its job of encouraging competition and carrier solvency. The report noted, however, that some state-by-state regulations lead to inefficiencies in the market.

The message Boehner should give to House Republicans

January 14, 2015, 2:47 PM

I used to work for a big and complicated enterprise – a multinational, multibillion dollar financial services confection of companies. I worked on public policy. In large commercial enterprises, it is essential to have a business structure and process to resolve the conflicts that arise between departments, product lines, manager passions, executive egos and even philanthropical objectives.

Most successful companies have a structure that accommodates this essential process, with someone empowered to decide to resolve the conflict. When it comes to judging the effectiveness of the CEO and board of directors, it might well be that successfully navigating these decisions is the most important of all leadership skills.

But when it comes to navigating public policy, even well-run businesses sometimes make choices that appear random. My experience was that such deliberations don’t always go through the same decision tree that works reliably on the business side. Sometimes, the public policy decision never even gets made, and the company will support interests in conflict with each other and occasionally even antithetical to its own mission.

Likewise, in the political realm more broadly, there’s long been a shortage of important players who see the big picture. Unlike a successful CEO, our president prides himself on his unwillingness to bargain with the opposition. He is unashamed that not a single Republican member of Congress could be persuaded to vote for the legislation for which he is most known. His focus, like that of many politicians, is to delivering all the benefits of government that he can control to those constituencies that heavily supported him. These are not unusual tendencies in political systems, nut the public is right to question the incessant weighing of interests with a thumb on the scale.

Consider the president’s chief political adversary of recent years. I have known John Boehner for many years and consider him generally to have one of the finest political minds I’ve ever encountered. A dozen or so members of his caucus did not vote for him as Speaker, sparking news media and blogosphere discussions about how the system is supposed to work in the midst of mutiny. It has been true through history that, when you take on the king and lose, there are uncomfortable consequences. None of the Republicans of Congress who refused to support Boehner should be shocked that they would face some kind of retribution.

But perhaps the speaker will take a slightly different approach. “My way or the highway” has not been the hallmark of his term and vengeance doesn’t really befit the man. It’s true that the ability to fashion a solution from all of the competing interests for the good of the order is not as highly valued today as it was in the past. Indeed, those who demonstrate the capacity to do precisely this often are reviled, as compromise rarely aligns perfectly with a particular passion or theory of government. The Pew Research Center found last year that 92 percent of Republicans are more conservative than the median Democrat, and 94 percent of Democrats are more liberal than the median Republican. This constitutes both a pretty big challenge for the leader of a national legislative body and a major shift from most of U.S. history.

If I were advising Speaker Boehner, I might start with the legendary advice from Dick Armstrong, the former president of the Public Affairs Council. To paraphrase, he might say: “do not ask the caucus to sacrifice itself on the altar of your convictions.” The speaker might well say to his caucus members something like this:

“We are a large family, and families don’t always agree. Standing up for principles is not just important, but critical. But much of what we do here involves many principles. Some of ours compete for primacy among themselves, not to mention with principles popular in the other caucus. If our many long hours of work in the Capitol are to be consequential, we must occasionally build solutions from principles in unfamiliar combinations.

“Leadership must resolve these conflicts and hand the American people the best solution we can find. None of us can figure this out alone, but with the talent in this room and in all your offices, we can provide the direction that is needed. Everyone has a chance to help. If you have good advice for us it will be in the mix. If you came here unappreciative of the difference between governing and a protest movement, you won’t have much influence the next couple of years.

“The American people didn’t vote for us because they simply want to see us in charge. They voted for us in the hope that we could encourage good things to happen in this country and stop bad things from happening. It is our job to convince the folks which is which. They don’t care about scoring political points. They want solutions, but need to be reminded that government is not the only solution available. They want this never-ending recession to be over and to feel that the national government works for all of its citizens.”

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

Formaldehype vs. fact: Levels are far lower in e-cigarettes than In cigarettes

January 13, 2015, 12:24 PM

Researcher Naoki Kunugita at Japan’s National Institute of Public Health recently fueled anti-e-cig hysteria with this unverifiable claim:

In one brand of e-cigarette the team found more than 10 times the level of carcinogens contained in one regular cigarette.

The charge came not in a peer-reviewed study, but in comments to the press publicizing FAVORABLE e-cig research. His group looked at 13 Japanese e-cigs and reported in the International Journal of Environmental Research and Public Health that they had LOWER levels of formaldehyde than cigarettes.

Formaldehyde is everywhere, even in the air we breathe. Individuals inhale about 1,000 micrograms per day, according to the World Health Organization, and a microgram is a very small amount – one-millionth of a gram.

The Japanese researchers collected from 0 to 34 micrograms from 10 puffs of e-cigarettes – at most, about one-thirtieth of normal daily exposure from air. In contrast, 10 puffs of a cigarette deliver 150 to 200 micrograms.

Apparently, after the controlled research was completed, Kunugita recorded 1,600 micrograms (10 times the cigarette level) using another e-cig brand. That single observation generated the worldwide headlines. Not only is the finding completely out of range with respect to all other studies, the claim is unverifiable.

Publishing a scientific report showing low formaldehyde levels and then publicizing an unsubstantiated claim of 10-fold carcinogenicity is irresponsible. The announcement was rightfully condemned by e-cigarette expert Konstantinos Farsilanos in his research blog here.

The unvalidated claim undercuts legitimate science and sends smokers a horrific message: keep lighting up, because e-cigarettes are more dangerous.

Crafting a carbon tax Oregon conservatives can support

January 12, 2015, 11:16 AM

Three West Coast governors wrote recently of a regional model for addressing climate change. Each of their three states — California, Oregon and Washington — is taking a different approach to reducing carbon emissions. Oregon’s approach has an opportunity to be the best.

A new study released by Portland State University examines a number of scenarios for pricing carbon emissions, and the results are encouraging. In some scenarios, emissions reductions can be achieved without any negative impact on economic growth and without the need for higher taxes.

Troublingly for conservatives, there is no guarantee that Democrats in the Oregon Legislature will introduce a carbon tax proposal worthy of their support. To ensure that the best path forward ultimately is reflected in legislation introduced in Salem, Oregon Republicans will have to come to the table to advocate for objectives their constituents value.

Those values are crystal clear: economic growth, no net tax increase and authentic revenue neutrality. These three are prerequisites for Republicans’ support of any carbon tax proposal.

If these goals can be achieved, Republicans will be able to go back to their districts and articulate to their constituents free-market and limited government rationales for their votes.

The free-market case is straightforward. Carbon emissions are a market externality that distorts the true cost of production.

As a result, carbon-neutral alternatives cannot compete because they do not enjoy the same societal subsidy. A carbon tax removes the public subsidy and allows market actors to receive accurate price signals.

The limited government case is no less compelling. By pricing carbon and returning balance to the energy market, there will be no need for wasteful energy subsidies, be they for clean technologies or for fossil fuels. Government will not choose winners and losers. Consumers will. The agency of individuals, not the fiat of bureaucrats, will dictate Oregon’s energy future.

At bottom, internalizing the externality of carbon emissions is utterly consistent with the free-market beliefs that many conservatives and libertarians hold.

For their part, Oregon Democrats would do well to recognize that a policy change as significant as a carbon tax begs for a broad coalition of support. Twisting arms to achieve the bare minimum number of votes would further politicize an issue that will require national acceptance for real carbon mitigation outcomes to be achieved.

It bears repeating that a carbon price in Oregon, or along the Pacific Coast as a whole, is not sufficient to meaningfully affect global emissions.

The question of a carbon tax, then, is a question of revealed preferences: Which do climate activists in Salem care about more — a concrete step toward solving climate change, or their unrelated policy wish list? It would telling if they chose the latter.

If a rusty gravedigger dies in Alabama’s wetlands, should conservatives care?

January 11, 2015, 11:38 AM

We might not know it, but we are all environmentalists in Alabama…or at least, we should be. “Environmentalism” is not a dirty word or some practice reserved for liberals, hippies and academics.

Our state has historically depended on the natural world for much of its livelihood. Whether it has been farming, mining iron ore and coal, forestry or Alabama’s seafood industry, Alabama’s success is, and has been, directly connected to its environment.

Sadly, “environmentalism” has become identified with mandates from a distant and impersonal EPA, eroding private property rights and a hostile view toward virtually all human action. The result has been Alabama’s more conservative citizens mistakenly confusing the heavy-handed environmental tactics and extreme political stances with environmentalism itself.

The whole issue comes down to a rusty gravedigger in Alabama’s wetlands.

I read Ben Raines’s interesting account of re-discovering the “lipstick-red” crawfish in a swamp a few miles from his home in south Alabama. The rusty gravedigger found by Raines, previously thought extinct by the U.S. Fish and Wildlife Service, was the first one seen in 20 years.

The liberal regulatory response to such a discovery is predictable. Never mind the fact that the federal government had no idea the species even existed. Use the force of government to restrict, restrain, and prohibit human activity to protect the rusty gravedigger.

Unfortunately, the typical conservative response has been to downplay the issue entirely because “environmentalism” means prioritizing the rusty gravedigger over people, their jobs or their property. After all, why does it matter what happens to the small crawfish in a swamp that few people have reason to visit?

Conservatism has, at its very definitional core, the idea that we as a culture and society should conserve that which we value. Our natural world fits that idea perfectly. Conservatives should value our environmental constitution every bit as much as the Constitution that structures our nation. Our treatment of both has implications for the legacy we will leave to our children and grandchildren.

Rejecting an overreaching liberal regulatory response does not prevent us from considering or caring for the lowly rusty gravedigger. The connections between the crawfish, the wetlands and our state as a whole remain worth our time even if we reject the liberal command-and-control reaction to them.

A number of economic and security-oriented arguments should further motivate conservatives to develop a real environmental ethic, but they all fail to inspire unless our most important motive is our desire to responsibly care for our natural home. Our diverse ecology, our land, our forests and fields should be some of our most prized possessions. That does not mean we should surrender our love of hunting and fishing or stop using our abundant natural resources. We should protect our environment because we want those options available in the future.

Alabamians, for better or worse, pride their independence. We like to do things our way. We need to put that moxie to work in caring for our state instead of having the EPA and liberal activist groups operate as parents asking us to clean up our room. Keeping the rusty gravedigger around might not be a bad place to start.

Senate renews terrorism insurance program

January 09, 2015, 5:02 PM

From USA Today:

However, critics of the federal program say it does not go far enough in shifting the risk from taxpayers to the private sector.

Losses should have to be at least $1 billion to trigger the federal backstop, said the R Street Institute, a non-profit research company that advocates limited government. Renewal of the program also could discourage private insurers from offering more terrorism insurance, researchers said.

“The flood of new product offerings we have seen in the past few weeks, both in anticipation of the program’s Dec. 31 expiration and in the days since, is ample evidence that private insurers, reinsurers, brokers and underwriting syndicates are ready and able to do more,” said R.J. Lehmann, a senior fellow at the think tank.

How states rate on insurance regulation, ‘A’ to ‘F’

January 09, 2015, 3:17 PM

From Insurance Journal:

Vermont gets a grade of “A+” and California and North Carolina get grades of “F” in the annual report card on state insurance regulation issued by the free market think tank, The R Street Institute.

The 2014 Insurance Regulation Report Card judges how well states do regulating the business of insurance by assigning scores in 12 different areas that include insurer solvency, pricing flexibility, competitiveness and efficiency.

“Reviewing the data on insurance in 2014, we see mostly stable trends in consumer and business freedom in state insurance markets,” said R Street Editor-in-Chief and Senior Fellow R.J. Lehmann, the author of the study, in a release. “In some states – notably Florida – real efforts were made to scale back, or otherwise place on more sound financial footing, residual insurance markets and state-run insurance entities. Other states, notably North Carolina, appear to be moving in the wrong direction.”

R Street bills itself as a think tank dedicated to free markets. R Street believes that “an open and free insurance market maximizes the effectiveness of competition and best serves consumers.” Its approach to its research on regulation is to measure states’ regulatory systems against principles of “limited, effective and efficient” government.

“In this context, that means states should regulate only those market activities where government is best-positioned to act; that they should do so competently and with measur­able results; and that their activities should lay the minimum possible financial burden on policyholders, companies and, ultimately, taxpayers,” according to R Street.

12 Categories

The authors looked at 12 broad performance categories in grading the states: how well they monitor insurer solvency; how they police fraud; their response to consumer complaints; how efficiently they spend the insurance taxes and fees they collect; how competitive their home, auto and workers’ comp insurance markets are; to what degree they permit insurers to adjust rates and employ rating criteria as they see fit; the extent of transparency and politicization of insurance regulation in the state; and their willingness to take part in “cutting-edge regulatory modernization” initiatives.

R Street awarded Vermont consistent scores across almost all areas of the scorecard, specifically in consumer protection, politicization, auto and homeowners insurance environments, rate freedom and clarity and regulatory restrictions.

At the other end of the grading spectrum, North Carolina received a failing grade in part due to the state’s “inflexible rate bureau system” and recent growth of the residual market FAIR Plan and Beach Plan.

R Street said California earned a failing grade due to its “similarly inflexible Proposition 103 regulatory system.”

State Grades

The states receiving the best grades are: Vermont (A+), Virginia (A), Illinois (A), Iowa (A), Maine (A-), Utah (A-), Ohio (A-) and Kentucky (A-).

Twelve states received a “D” or “F” grade: California (F), North Carolina (F), Montana (D-), Hawaii (D), New York (D), Massachusetts (D), Michigan (D), Louisiana (D), Washington (D+), Mississippi (D+) and Florida (D+).

Twenty states received B+, B or B- scores: Idaho, New Jersey, Minnesota, Indiana, Nebraska Wisconsin, Colorado, Nevada, Wyoming, Kansas, Oregon, Arizona, Missouri, Tennessee, New Mexico, Rhode Island Pennsylvania, New Hampshire, Connecticut and Texas.

Eleven are graded C+, C or C-: South Dakota, Alabama, Alaska, South Carolina, North Dakota, Arkansas, Maryland, Georgia, West Virginia, Oklahoma and Delaware.

The authors state that the report is “not intended as a referendum on specific regulators” and that an “F” score does not mean that a state’s insurance commissioner is inadequate anymore than an “A+” is an endorsement of an insurance department. They note that state legislatures more than regulators often control the conditions in the most heavily weighted variables examined in their report.

On balance, the authors conclude, states do an effective job encouraging competition and ensuring solvency. On the downside, they find that “the thicket of state-by-state regulations” leads to inefficiencies and also that policies in some states — rate controls in particular— discourage capital formation, stifle competition and concentrate risk. Also some states have been slow to modernize their regulation in ways that might encourage faster release of products and the introduction of more innovative products, according to the report.

Among the factors the authors analyzed is how a state uses the resources it has. According to the report, states continue to draw more in regulatory fees and assessments than they spend on insurance regulation. The 50 states, Puerto Rico and the District of Colum­bia spent $1.32 billion on insurance regulation in 2013 but collected more than double that amount, $2.74 billion, in reg­ulatory fees and assessments from the insurance industry.

“These surplus regulatory fees and assessments end up in state coffers to patch other holes in state budgets,” Lehmann said. “They serve as a hidden tax on insurance consumers, raising the cost of coverage for everyone.”

If premium taxes, fines and other revenues are included in the tally, only 6.4 percent of the $20.45 billion states collected from the insurance industry last year was spent on insurance regulation, down from 6.6 percent the prior year, the report says.

Members of The R Street Institute also author the RightStreet blog on InsuranceJournal.com.

Keystone pipeline drama returns for an exciting new season

January 08, 2015, 2:54 PM

Just as popular television shows often go on hiatus for the holidays, so our nation’s greatest political drama is now back for a new season. And measured purely in terms of entertainment value, it looks to be a good one.

The new Congress had barely been sworn in Tuesday when President Barack Obama issued his first veto threat. In the president’s crosshairs is a planned bill that would finally approve construction of the Keystone XL pipeline. The bill, which is expected to receive bi-partisan support, is set for a vote in the Senate soon.

You’ll note, though, that while President Obama says he will veto the bill, he isn’t formally opposing the Keystone project either. Rather, he wants to wait for the results of yet more study of the matter before he makes up his mind.

Last year, I wrote about why the Keystone issue never seemed to be resolved one way or the other. Despite broad popular support, the Obama administration never seemed able to even make up its own mind about the project, and was dead set against the issue being resolved in Congress. I posited that Keystone was a prime example of what author Peter Schweizer calls a “milker bill,” a regulation or law that is designed neither to pass nor to fail, but to be left perpetually hanging, so as to drum up political donations and support.

For Democrats, Keystone represents what Schweizer calls a “double milker.” Key Democratic constituencies are opposed to Keystone (e.g. the environmental movement) while others favor it (e.g. organized labor). Making a definitive decision either way would risk alienating one of them. It’s far better to just put off a decision for as long as possible and let both sides do their best to win you over. All this can make for good political theater. In policy terms, it is becoming a serious problem.

Will the fate of the Keystone pipeline finally be decided? Tune in next time to find out.

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

Coalition aims to depopulate state funded insurer

January 08, 2015, 12:48 PM

From First Coast News:

“We feel that more needs to be done because the day that the wind does blow and a hurricane does hit Florida, Florida could potentially face an economic and crippling situation,” said Christian Camara with Safer Stronger Florida.

Don’t let the boogeyman of change stop charter schools in Alabama

January 07, 2015, 12:00 PM

What if we created public schools that essentially operated under contracts that spelled out a mission, an educational strategy and the results the school was expected to produce?

I guess it could all go wrong. Bad people could come in and take advantage of public resources. Students might not get a quality education. In fact, the new schools could create chaos and public education in Alabama could become the worst in the nation.

Or not.

Here’s a simple idea: Don’t let the boogeyman of change stop public charter schools in Alabama before they get started.

It is time for Alabama to move past the notion that anything other than a child being zoned for one traditional public school is a subversive attack on public education.

My children are about to start school. The public school they will attend may prove to be an excellent educational fit. But what if one of my sons learns differently? What if he does not fit the educational mold? Prior to school choice options being enacted in Alabama, parents either had the means to seek out another educational option for their child or deal with their public assignment.

Creating multiple public education choices for parents and their children should continue to be pursued as a dream for Alabama, rather than a nightmare. Different educational models must not be limited only to those who have the means to afford them.

If charter schools were authorized in Alabama, could some of them struggle? Sure. Alabama’s political leaders should not try to gloss over the shortcomings of ineffective charter schools in other places. They should acknowledge them, learn from them and write a charter school law that avoids them as much as possible.

Critics noting charter schools that are “poorly regulated,” “without effective oversight” or “lacking strong accountability” simply highlight a reality facing any publicly funded system of education. Traditional public schools that are poorly run and unaccountable are equally as ineffective. Alabamians should expect and demand that our education leaders and representatives identify and correct those situations when and where they arise.

The entire point of public education is to equip students with the skills needed to have productive careers and function as positively contributing members of society. Alabama’s traditional public schools meet those goals for many students, but fail for others. That is precisely why we need charter schools. They are not a perfect fix for failing schools, they might not be necessary in communities with vibrant educational tracks within traditional public schools, but they just might create a public education option for kids who learn differently or need a change. That new opportunity alone is worth casting the boogeyman of change aside.

If public education is truly about securing a brighter future for children in Alabama, we should do so by any and all means necessary, regardless of what those structures look like. We should expect each one of those options to be run effectively, with transparency and accountability for their use of public resources.

Regardless of income, Alabamians should have public education options like charter schools for their children. Change in something as important as public education can be scary, but Alabama cannot let that boogeyman control our future any longer.