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What grade does your state get for its insurance regulation?

February 05, 2016, 9:49 AM

From Property Casualty 360

North Carolina went from bad to worse in R Street’s annual rankings of state insurance regulation.

Coming in at No. 49 last year in the R Street Institute’s Insurance Regulation Report Card, the Tar Heel state dropped to No. 50 and received an “F” grade for the second year in a row.

Utah citizens: Internet sales tax system works fine, don’t mess with it

February 05, 2016, 9:46 AM

From NetChoice

“The new NetChoice-Vrge Analytics research finds conclusively that among ordinary Utahns, such proposals are viewed as little more than a power and money grab. These findings largely track the results of 2014 polling conducted by Mercury, which found that Utahns opposed Internet sales tax legislation by a 15-point margin overall, including a 21-point margin among independents.” said Andrew Moylan, executive director, R Street Institute.

 

Cameron Smith talks New Hampshire Primary

February 05, 2016, 9:04 AM

R Street State Programs Director Cameron Smith appeared on the Feb. 4 edition of the Matt Murphy show on 1070 WAPI in Alabama to discuss the GOP Presidential Field, the New Hampshire Primary and Alabama politics. The full audio is below.

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

The tension between hedge fund activism and corporate law

February 05, 2016, 8:00 AM

The attached paper was presented at a Jan. 22, 2016 symposium honoring the work of Henry G. Manne, sponsored by the Law & Economics Center at George Mason University School of Law. This is a draft version, while the final will be published in the symposium issue of the Journal of Law, Economics & Policy.

What role is an activist hedge fund to play in the decision-making of a public company? That question is very simple to answer. If a public company is organized as a corporation, which is very likely, and it has not opted out of the default rule that provides managerial control of the company to the board of directors (board), which is even more likely, then, like any other shareholder, the activist hedge fund can, at most, play only a purely advisory role. That is, even if the activist hedge fund yells and screams about the company’s poor performance, publicly insults the current board and executive management or threatens a proxy contest to replace some or all of the current members of the board with its own nominees, it is not provided any decision-making authority under corporate law.

Therefore, the real corporate governance issue that needs to be addressed is the following: to what extent may a board act to reduce an activist hedge fund’s influence in company decision-making? Like defensive measures that are utilized by the board to defend against a hostile bidder, such as the poison pill, this question will ultimately be answered by the judiciary in its statutory interpretation of corporate law’s default rule that provides the board with ultimate management authority. For purposes of this article, that default rule is Delaware General Corporation Law (DGCL) §141(a):

The business and affairs of every corporation organized under this chapter shall be managed by or under the direction of a board of directors, except as may be otherwise provided in this chapter or in its certificate of incorporation.

The judicial review of board decision-making is built on an approach that provides great deference to board authority. For the overwhelming majority of potential fact patterns, this deferential approach enhances the decision-making of public companies and helps move them to shareholder-wealth maximization, the objective of board authority. However, hedge fund activism (HFA), with numerous empirical studies that attests to its role in enhancing shareholder value and target-company performance, legitimately questions the value of that deferential approach in some exceptional, but very important, fact patterns.

The thesis of this article is as follows: the courts will be overly permissive in allowing boards to mute the activities of activist hedge funds unless the courts start to recognize the value of hedge-fund activism (HFA) as a corrective mechanism and thereby feel the need to make an exception to their traditional approach to judicial review: strong deference to board authority. We have already seen evidence of the courts not recognizing the value of HFA in in Third Point LLC v. Ruprecht, a case where the court reviewed with approval a discriminatory poison pill meant to keep an activist hedge fund from winning a proxy contest.

There are four important observations about corporate law that support this thesis. First, the default rules of statutory corporate law explicitly provide the board with unlimited authority to manage the public company. Without modification of this default rule, there is no place for an activist hedge fund in the decision-making of a corporation. Second, the parties to the corporate contract of a public company never modify the board’s statutory authority in any substantive way. The courts understand that this private ordering is being sanctioned by statutory corporate law and will feel compelled to act aggressively to protect board authority. Third, the courts also understand, because of the inherent limitations of being a judge and not a business leader, that the board and its executive officers are in the best position to determine if a corporate decision is wealth-maximizing and feel compelled to defer to their expertise. Fourth, the first three observations imply that when the courts review a board decision, it will provide strong deference to board authority. Therefore, even though it has created fiduciary duties to constrain the unlimited power of the board, it will apply them in a very gentle way. That is, the plaintiffs will have a hard time satisfying the court that the board has breached its duties. The evidence for this is found in the traditional application of the business-judgment rule and the permissive Unocal test. This traditional approach to judicial review includes being restrained in finding a breach in fiduciary duties when the board takes actions meant to mute the activities of an activist hedge fund, even when it is clear that the activist hedge fund is acting as a corrective mechanism in corporate governance.

The discussion that follows, when it references state corporate law, has been pragmatically framed in the context of Delaware corporate law. Delaware is the state where the majority of the largest U.S. companies are incorporated, and its corporate law often serves as the authority that other states look to when developing their own statutory and case law. Therefore, the primary examples are from Delaware, but the thinking is meant to be global in nature.

This article proceeds as follows: Part I briefly describes HFA. Part II describes how HFA operates as a corrective mechanism in corporate governance. This description closely parallels how acquirers seek control to correct managerial inefficiencies. This part closes by providing a theory of shareholder activism that explains how HFA creates value for shareholders and enhances the performance of target companies. This argument has as its foundation Henry Manne’s remarkable article, “Mergers and the Market for Corporate Control.” Manne argued that control of a public company was a valuable asset in and of itself if used to correct managerial inefficiencies. Shareholder activism, such as HFA, can be thought of in the same manner, a valuable asset in and of itself if the purpose of such activism is to correct such inefficiencies. Part III discusses how the judiciary’s traditional approach to the review of board decisions, strong deference to board authority, could potentially be used to reduce the incentives of hedge funds to act as activists. The judiciary could do this by being overly permissive in allowing boards to mute the activities of activist hedge funds. The judiciary’s strong deference to board authority derives from a strong respect for statutory corporate law’s private ordering of authority and its understanding that the board and its management team, not the courts, are the business experts. Part IV discusses the Unocal test as a permissive standard of review and how the application of the test in Third Point conforms to the thesis. Part V concludes with general recommendations on how the courts should handle the review of board actions meant to mute the activities of activist hedge funds.

Here’s who was wrong about Rand Paul

February 04, 2016, 10:37 PM

From Politico

“And, even though it’s still early, I think that there’s a good case that Paul’s early support may turn into something real. In other words, he’s a legitimate frontrunner.” (Eli Lehrer, Huffington Post, March 17, 2014)

 

20+ Conservative Organizations to South Dakota Legislature: Oppose Online Sales Tax Proposal

February 04, 2016, 5:38 PM

February 2, 2016

Dear South Dakota State legislator:

On behalf of our organizations and the millions of citizens we represent, we write in strong opposition to the online sales tax proposal currently being considered in the South Dakota state legislature. This misguided plan (SB 106) would empower South Dakota to collect taxes from businesses with no presence in the state, and would create host of economic, logistic, and Constitutional problems.

Allowing states to assert tax authority on businesses outside their borders is also constitutionally suspect and practically unwise. It’s constitutionally suspect because the interstate commerce clause exists precisely to empower Congress to prevent such activities and because Supreme Court precedent underscores the importance of physical presence. It’s practically unwise because it could subject South Dakota businesses to the tax collectors of states that don’t share your generally conservative governance, like California, New York, and Illinois.

Despite proponents’ claim to the contrary, online sales tax legislation would impose high costs of compliance on businesses, especially small businesses and individual sellers. Keeping constantly-changing rates, bases, and collection methodologies, would be very challenging for remote sellers, and may even prevent some from selling to South Dakota consumers. This is a much higher collection standard than bricks-and-mortar sellers, which are only required to collect at the rate of their physical location.

We oppose efforts to impose tax collection and reporting requirements on businesses without a physical presence in the state, including measures like SB 106 and others like it.

Sincerely,

Ben Lee, South Dakota State Director
Americans for Prosperity

Grover Norquist, President
Americans for Tax Reform

Wayne Brough, PhD, Chief Economist and VP for Research
FreedomWorks

Lisa B. Nelson, CEO
The Jeffersonian Project, an affiliate of the American Legislative Exchange Council

Brandon Arnold, Executive Vice President
National Taxpayers Union

Andrew Moylan, Executive Director and Senior Fellow
R Street Institute

George David Banks, Executive Vice President
American Council for Capital Formation

Sean Noble, President
American Encore

Coley Jackson, President
Americans for Competitive Enterprise

Peter J. Thomas, Chairman
Americans for Constitutional Liberty

Norm Singleton, President
Campaign For Liberty

Timothy H. Lee, Senior Vice President of Legal and Public Affairs
Center for Individual Freedom

Tom Brinkman Jr., Chairman
Coalition Opposed to Additional Spending and Taxes (COAST)

Jessica Melugin, Adjunct Fellow
Competitive Enterprise Institute

Katie McAuliffe, Executive Director
Digital Liberty

Jonathan Haines, Director
Federalism In Action

George Landrith, President
Frontiers of Freedom

Andrew Clark, President
Generation Opportunity

Mario H. Lopez, President
Hispanic Leadership Fund

Seton Motley, President
Less Government

Daniel Garza, Executive Director
The LIBRE Initiative

David Williams, President
Taxpayers Protection Alliance

Judson Phillips, Founder
Tea Party Nation

Labor and Employment Issues: The sharing economy

February 04, 2016, 3:52 PM

From Opportunity America:

Eli Lehrer president, R Street Institute

‘What’s in it for the employer? We need to provide an incentive for employers to participate in a portable benefits system. One way to do that would be to reverse the presumption about who is an employee and who is an independent contractor. As is, courts in many states put the burden on the employer to prove that the worker is an independent contractor. Employers who contribute to a portable benefits fund should not have to prove that. In their case, the burden should be on the worker – if workers want full employee benefits, they should have to prove they are employees.’

How Manhattan made a mockery of Prohibition

February 04, 2016, 2:06 PM

“It should not be forgotten,” writes historian Ellen NicKenzie Lawson, “that one possible derivation of the word Manhattan is the Native-American word manahachtanienk, which translates as ‘place of general inebriation.'” It thus should not surprise that when the federal government imposed Prohibition, New York City became the nation’s biggest scofflaw.

Drinking was a normal daily activity for many city dwellers. The poor drank in rough taverns and the working classes in beer saloons. The rich and learned had opulent clubs like the Union Club (est. 1836) and Century Association (est. 1847) where they could knock back Madeira, Champagne and anything else their bellies desired.

When Prohibition first hit the city in 1920, Mayor John F. Hylan shrugged. “I have never been a drinker or a smoker,” he told a crowd. “But that does not mean I am for Prohibition. I believe in personal freedom.”

Voters replaced Hylan in 1925 with a boozier pol. Jimmy Walker was a carouser and a drinker, whose nocturnal gallivanting earned him the moniker “the night mayor.” Walker advocated policies to make some drinking licit. When that failed, he ignored Prohibition and shamelessly hung out in speakeasies, celebrating the night. But it wasn’t all fun and games during the time of teetotalism. Prohibition unleashed mayhem in Manhattan, as Lawson richly details in “Smugglers, Bootleggers, and Scofflaws” (SUNY Press).

To understand why, one need only consider the basic economics of the matter. Outlawing the supply of goods and services does not demand for those things disappear. Supply instead shifts from licit producer and sellers to illicit ones, who will fight among themselves for market share. The quality of the product may decline, as firms can’t be held unaccountable by either the government or customers.

So it was that the city became riven with gangs, who formed complex syndicates that trafficked in smuggled, illicitly produced and often toxic alcoholic beverages. With 30,000 speakeasies operating and millions of bottles and kegs of drink being consumed, one can only imagine how immense was the untaxed wealth flowing into the pockets of thugs like Big Bill Dwyer and Lucky Luciano.

Manhattan and its fellow boroughs — Brooklyn, Queens, Manhattan, the Bronx and Staten Island — are surrounded by water. Massive amounts of liquor and other strong drinks slipped into the city via ships like the Mazel Tov, which deposited lord-only-knows-how-much liquor. The tugs, barges, tankers and speedboats were joined by trucks and automobiles, which hauled hooch over the spans of new bridges built in the previous few decades. Trains also brought intoxicating drinks to town. Surveying the insanity in 1932, abstemious titan John D. Rockefeller, wrote:

When Prohibition was introduced, I hoped that it would be widely supported by public opinion and the day would soon come when the evil effects of alcohol would be recognized. I have slowly and reluctantly come to believe that this has not been the result. Instead, drinking has generally increased; the speakeasy has replaced the saloon; a vast army of lawbreakers has appeared; many of our best citizens have openly ignored Prohibition; respect for the law has been greatly lessened; and crime has increased to a level never seen before.

New York City was greatly relieved in 1933. Prohibition was abolished, in part, due to the machinations of President Franklin D. Roosevelt (a New Yorker). Legal drinking establishments rapidly opened across the city and the speakeasies died off. The hoodlums shifted into other rackets, with so little moonshine in demand. The prices for drinks went down and the quality went up. People were happy.

The 21st Amendment, to its credit, carved back the federal government’s role in alcohol policy. Its major downside was that it immensely empowered states to regulate the trade of alcohol, an arrangement that runs headfirst into the Constitution’s Commerce Clause.  (Article 1, Section 8, Clause 3). Like most states, New York erected all sorts of protectionist, anti-trade and often corrupt policies that inhibit the free trade of alcohol among the states, to say nothing of within them. That, however, is a subject for another day.

New poll echoes R Street finding that Utah residents oppose Internet sales taxes

February 04, 2016, 1:36 PM

WASHINGTON (Feb. 4, 2016) – A new poll released today shows that Utah residents overwhelmingly oppose Internet-sales-tax collection schemes at the federal and state level that would require online businesses to collect and file taxes with up to 46 states.

When Utah residents were polled by research firm Vrge Analytics, 71 percent said they oppose the proposed online-sales-tax legislation. These findings mirror similar results from polling completed by the R Street Institute and the National Taxpayers Union in 2014.

“It’s no surprise that Utah voters oppose legislation that effectively would force e-retailers across the state to serve as tax collectors for other jurisdictions, like New York and California,” said Moylan. “It confirms the results of our own polling, which found broad and deep opposition to this power grab by tax officials.”

Several bills in Utah’s current legislative session would require out-of-state businesses that make online sales to Utah residents to collect Utah sales tax on those sales or report them to Utah tax authorities. According to the Vrge poll, 67 percent of Utah residents believe imposing sales-tax-collection obligations on businesses that aren’t physically present in the state amounts to a tax hike. A whopping 78 percent of voters said the state’s current sales-tax system doesn’t need to be changed.

“The bills currently under consideration constitute an attempt by Utah to pressure Congress and the courts to give the state extraordinary powers to enforce its tax law outside its borders,” R Street Executive Director Andrew Moylan said. “It’s important that the strong voices of opposition to these tax collection schemes be heard.”

The recent polling was conducted on behalf of NetChoice, an association of e-commerce businesses and online consumers who share the goals of promoting convenience, choice and commerce on the Internet.

In the R Street/NTU polling of Utah likely voters from 2014, respondents opposed a federal Internet sales tax law by a 15-point margin overall, including 21-point margins of opposition among independents and Republicans. Strong majorities also indicated their belief that the Internet should remain as free from regulation and taxation as possible, by an overwhelming 55-point margin. R Street and NTU found similar results in 19 other states.

“Lawmakers from Utah and across the country would do well to listen to the clear message that’s being sent to them on this issue,” Moylan said.

Fueling the e-cigarette ‘gateway’ crusade with tax dollars

February 04, 2016, 12:16 PM

In an extraordinary leap of logic, a report in Tobacco Control links “ever” use of e-cigarettes – even a single experimental puff – to subsequent “ever” use of cigarettes.  Researchers from the University of Hawaii, University of Connecticut and the Norris Cotton Cancer Center in New Hampshire base their findings on surveys of high-school students on the Hawaiian island of Oahu.  The journal’s press release publicizing the study quotes first author Thomas Wills: “Teens who use e-cigarettes are more likely to try the real thing a year later.”

In the journal and the release, the terms “use” and “try” are used interchangeably to make the case for the e-cigarette as a gateway to smoking.  The news media eagerly took the bait (see here and here).

Wills defines an e-cig user as anyone who “smoked [sic] e-cigarettes 1-2 times…3-4 times…a few e-cigarettes a year…a few e-cigarettes a month…a few e-cigarettes a week…[or] every day.”  In other words, students who ever took a puff on an e-cig were counted together with students who used them more often.  Wills similarly distorts the definition of cigarette smoking.

Such broad definitions are pointless from a scientific perspective, but they have one advantage: by inflating the number of users, they support a (false) linkage between e-cigs and cigarettes.

If we use the generally accepted definition for adolescent substance use – i.e., used in the past month – the prevalence of e-cig use was 8 percent and cigarette use was 4 percent during the study.  By manipulating the definitions, Wills claims that 31 to 38 percent of students used e-cigs and 15 to 21 percent of students smoked.

Those numbers are then used to suggest that students who were e-cigarette users were two to four times more likely to use cigarettes at the one-year follow-up than students who had never used an e-cigarette.  This is not a surprising finding.  As I have repeatedly noted (here and here): “If you have ever used one tobacco product, you are likely to have ever used another.”

Even if we accept the authors’ definitions and analysis, the majority of new smokers at follow-up were students who had never used e-cigarettes, as shown in this table.

Number of Ever Cigarette Smokers at Follow-Up Among Never Smokers at Baseline, According to E-Cigarette Use E-Cigarette Use at Baseline (n) Percent Smoking at Follow-up Number Never (926) 5 percent 46 Ever 1-2 times (60) 14 8 Ever 3-4 times (82) 11 9 More often (73) 19 14 All (1,141) 77

The bottom line: although “ever” e-cig users were more likely to ever use a cigarette than “never” e-cig users, the numbers still show that most new “ever” users of cigarettes at follow-up (46 of 77) were teens who had never used an e-cig.

Another flaw in the Tobacco Control article is that the authors write that they completed a “[l]ongitudinal school-based survey with a baseline sample of 2,338 students (9th and 10th graders…) in Hawaii…in 2013…and followed up 1 year later…” (The number was repeated in the journal’s press release).  That is, in fact, a gross overstatement, as there was only complete follow-up information for 1,302 students.  Since, of those, 161 had used cigarettes at baseline, my results in the table above are based on 1,141 students from Table 2 of the publication.  However, Wills’ results are based on only 1,070 students.

A co-author of the article, James Sargent, was cited in this blog last year for co-authoring a “fatally flawed” gateway article about youth e-cig use.  My examination of that study revealed similar problems with defining “ever” or current use.  The first author of that study, Brian Primack, is quoted in a Reuters’ story about the current study, as is Adam Leventhal, first author on a third flawed gateway study.

I have described how the National Institutes of Health is spending hundreds of millions of dollars to fund anti-tobacco research.  These studies are prime examples.  Primack reported that his work was supported by $1.3 million in grants from the NIH’s National Cancer Institute; Leventhal listed NCI grants totaling nearly $13 million; the Wills study acknowledges a $660,000 NCI grant.

Taxpayers continue unwittingly to finance an ill-conceived battle against tobacco harm reduction.

Don’t blame business for government mandates

February 04, 2016, 12:07 PM

People rightly rail against the evils of big government. But just as serious a problem is what might be called “hidden government,” when regulation becomes so pervasive that you can no longer tell where government stops and the private sector begins.

Consider, for example, the recent controversy over open-carry in grocery stores. Texas law prohibits individuals from carrying firearms in places where alcohol is served. The law makes an exception, however, for people who have a license to carry a handgun.

As of Jan. 1, Texans who hold a concealed handgun license may openly carry a gun in a holster or belt. In response, some Wal-Mart stores have begun asking to see license documentation for anyone openly carrying in certain stores.

While this has sparked a backlash and calls for boycott among some gun rights activists, Wal-Mart’s defense is that the new policy is necessary to prevent the loss of its own liquor licenses. Under Texas law, a business that “knowingly allows” unlicensed individuals to carry firearms on their premises risks losing their permit to sell alcohol.

Of course, the law doesn’t explicitly require stores to make these checks. Nor were they expected to check patrons for concealed weapons. But while the Texas Alcoholic Beverage Commission hasn’t said that a store will lose its ability to sell alcohol if it doesn’t do open-carry checks, its answers haven’t been reassuring, either.

“Anytime you have a TABC license or permit, you’re required to abide by the structure of the alcoholic beverage code to ensure that alcohol is sold safely and lawfully,” Chris Porter, public information officer for the TABC, recently told KVIA News. “In this case, making sure all handguns brought onto the premises [are licensed] is part of that responsibility.”

Given the amount of money at stake, you can’t blame Wal-Mart from erring on the side of caution. The end result, however, is that the business is forced to carry out the wishes of bureaucrats even when it isn’t legally required to do so. Whatever you think about the merits of open carry, that should be troubling.

Sadly, this isn’t an isolated case. I was recently at a workshop on tax-compliance issues for nonprofits. Tax-exempt organizations are restricted from engaging in certain types of political activities, yet the standard for the advice seemed to be that you should avoid doing anything that could be considered prohibited by an IRS official in a bad mood. When the penalties are stark enough, any regulatory uncertainty can create a broad chilling effect, forcing people to go above and beyond the call of the law for fear that someone might see things differently.

The worst part about hidden government is that it removes the accountability essential to a democracy. If there are potholes on the public streets, I know whom to hold responsible. But when businesses adopt precautionary policies to avoid the wrath of regulators, it may not be apparent to the average consumer what’s really going on. Without that awareness, it’s hard for people to take appropriate action.

That’s bad news. Because without accountability, neither government nor the private sector can be counted on to serve the public interest.

What about agriculture?

February 04, 2016, 11:42 AM

From The American Conservative

Lori Sanders of the R Street Institute explains the bill’s importance:

Tucked neatly away in Sec. 32205, on Page 1,143 of the 1,301-page bill, is a repeal of Sec. 201 of the Bipartisan Budget Act of 2015, passed in early November. For taxpayer advocates, Sec. 201 was one of that bill’s strongest selling points. It ordered the Department of Agriculture to renegotiate the Standard Reinsurance Agreement the federal government has with private insurers who participate in the federal crop insurance program. It would push their taxpayer-guaranteed rate of return down from 14 percent to 8.9 percent.

This small reduction actually goes a long way. The agriculture portion of the farm bill is vastly over budget, to the tune of more than $5 billion in 2014 alone. Despite Big Ag’s cries that their programs deliver taxpayer savings, a large chunk of the supposed savings from the latest farm bill already have been squandered on higher-than-expected payouts from our overly generous farm programs.

That’s why free-market advocates from Citizens against Government Waste to FreedomWorks to the National Taxpayers Union came out in force to support renegotiation. The Heritage Foundation lauded the provision as real savings in a package they otherwise termed a “colossal step” away from fiscal restraint. Unfortunately, it seems Big Ag is about to win the day, and in the most backhanded way – by attaching a seven-line provision to a completely unrelated bill.

 

Don’t blame business for government mandates

February 04, 2016, 9:06 AM

People rightly rail against the evils of big government. But just as serious a problem is what might be called “hidden government,” when regulation becomes so pervasive that you can no longer tell where government stops and the private sector begins.

Consider, for example, the recent controversy over open-carry in grocery stores. Texas law prohibits individuals from carrying firearms in places where alcohol is served. The law makes an exception, however, for people who have a license to carry a handgun.

As of Jan. 1, Texans who hold a concealed handgun license may openly carry a gun in a holster or belt. In response, some Wal-Mart stores have begun asking to see license documentation for anyone openly carrying in certain stores.

While this has sparked a backlash and calls for boycott among some gun rights activists, Wal-Mart’s defense is that the new policy is necessary to prevent the loss of its own liquor licenses. Under Texas law, a business that “knowingly allows” unlicensed individuals to carry firearms on their premises risks losing their permit to sell alcohol.

Of course, the law doesn’t explicitly require stores to make these checks. Nor were they expected to check patrons for concealed weapons. But while the Texas Alcoholic Beverage Commission hasn’t said that a store will lose its ability to sell alcohol if it doesn’t do open-carry checks, its answers haven’t been reassuring, either.

“Anytime you have a TABC license or permit, you’re required to abide by the structure of the alcoholic beverage code to ensure that alcohol is sold safely and lawfully,” Chris Porter, public information officer for the TABC, recently told KVIA News. “In this case, making sure all handguns brought onto the premises [are licensed] is part of that responsibility.”

Given the amount of money at stake, you can’t blame Wal-Mart from erring on the side of caution. The end result, however, is that the business is forced to carry out the wishes of bureaucrats even when it isn’t legally required to do so. Whatever you think about the merits of open carry, that should be troubling.

Sadly, this isn’t an isolated case. I was recently at a workshop on tax-compliance issues for nonprofits. Tax-exempt organizations are restricted from engaging in certain types of political activities, yet the standard for the advice seemed to be that you should avoid doing anything that could be considered prohibited by an IRS official in a bad mood. When the penalties are stark enough, any regulatory uncertainty can create a broad chilling effect, forcing people to go above and beyond the call of the law for fear that someone might see things differently.

The worst part about hidden government is that it removes the accountability essential to a democracy. If there are potholes on the public streets, I know whom to hold responsible. But when businesses adopt precautionary policies to avoid the wrath of regulators, it may not be apparent to the average consumer what’s really going on. Without that awareness, it’s hard for people to take appropriate action.

That’s bad news. Because without accountability, neither government nor the private sector can be counted on to serve the public interest.

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

Shut up, explained the businessman: how consumers like you get SLAPPed down

February 03, 2016, 12:33 PM

From Reason

Representatives from eight free market, pro-consumer groups just sent today a letter in support of the SPEAK FREE Actto the House Judiciary Committee. The groups involved include the R Street Institute, FreedomWorks, the Center for Individual Freedom, Tech Freedom, the American Consumer Institute Center for Citizen Research, the Niskanen Center, the Insitute for Liberty, and the Competitive Enterprise Institute.

 

Lefties who moved right

February 03, 2016, 11:11 AM

I very much enjoyed reading the “Exit Right: The People Who Left the Left and Reshaped the American Century” (Simon & Schuster, 2016), which details the movement of six very different individuals from the political left to the political right. The book’s subjects are Whittaker Chambers, James Burnham, Ronald Reagan, Norman Podhoretz, David Horowitz and Christopher Hitchens, each of whose apostasy is explicated in a chapter.

The subject matter intrigued me. As a graduate student at New York University, I seriously considered writing a dissertation on the history of conservatism in America (I switched to another topic when it became plain that the subject matter would not earn me a teaching job anywhere). Reading this book was a pleasure, in no small part, because it allowed me once again to read about the intellectual tumults of the second half of the 20th century, which birthed new voices on the right.

Stylistically, “Exit Right” is a beauty. Oppenheimer is a man of the left, but he does not checker his book with snark or condescension. He respectfully details each man’s life up to and through their political conversion. The book’s prose is mellifluous and engaging, which is no mean feat when you consider the subject matter: the evolving ideas of six men—most of whom are dead.

But what important subject matter it is, for as William Faulkner put it: “the past is never dead. It’s not even past.” Both the right and the left continue to experience the reverberations of the political defections of Chambers, Burnham and the rest to this day. To a degree, all of us continue to argue within the bounds they drew and divide ourselves according to the stands they took.

A complex amalgam of experiences and motivations drew each of the profiled individuals to make their respective journeys from left to right. For Chambers and Burnham, two men of very different casts of mind, the incompatibility of art with communism put them off the left. Reagan’s change of heart was more deliberate, flowing from his growing enamoration with the idea of America, which came from his travels as a General Electric pitchman. Reagan also was driven rightward by the attempts of communists to hijack Hollywood guilds. Podhoretz, meanwhile, was a lost man in his twenties and thirties hunting for a purpose for his generation. He found one in the well of his wounded soul, discoursing on “white guilt,” Jews’ place in America and more. Horowitz and Hitchens, who ostensibly share little more than the H’s in their last names, together took right turns after those they knew felt the brunt of political evil.

But none of these right turns were fated to happen. If Trotsky had not been so heavy-handed and condescending, Burnham might never have rejected Marxism and ended up editing National Review. Who knows?

One common thread is that each man was turned off by the left’s dogmatism. Hitchens was appalled when fellow leftists justified the Ayatollah Khomeini’s fatwa against Salman Rushdie, as they insisted on the primacy of “respecting cultural differences and sensitivities.” As thoughtful people, Chambers and the rest could not live with such toadying and rationalizations.

In this respect, “Exit Right” offers a lesson that still rings true today: defending the indefensible ultimately fails. Ideologies and political movements remain vibrant only so long as their visions remain appealing and credible.

Oppenheimer’s book is a fascinating intellectual history, but its stories also remind us of the value of humility. As he writes:

We know belief is complicated, contingent, multi-determined. But do we really know it? Do we feel it? Do we act as though it’s true, with the humility that such knowledge would entail? Not most of us. Not most of the time[T]he grounds of our beliefs are more contingent than we could possibly account for.

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

Meet your unauthorized federal government

February 03, 2016, 9:15 AM

From Politico

“They tried to clamp down on [permanent reauthorizations] because they thought if we quit doing that, we’ll have to actually stop and take the time and do reauthorizations, which is really well-intended,” said Kevin Kosar, a senior fellow at the R Street Institute and former analyst at the Congressional Research Service. He added: “And they just failed at it.”

 

Philly taxi cartel’s ‘public-private partnership’

February 02, 2016, 4:56 PM

Regulators have a long and lamented history of picking winners and losers among businesses and industries. But they typically at try to appear to be demonstrating impartial judgement when it comes to enforcing those decisions.

Not so in Philadelphia, where it’s alleged the city’s parking authority teamed up with members of the taxi industry not only to oppose legislation legalizing transportation network companies (which is technically legal) but also to conduct active sting operations against Uber drivers to impound their vehicles – which may not be.

The saga of TNC legalization in Pennsylvania generally, and Philadelphia specifically, has dragged on longer than in most other states and cities. The Pennsylvania Public Utility Commission, the state’s relevant regulatory authority, granted TNCs a two-year license to operate in late January 2015. However, that license explicitly excluded the City of Brotherly Love, where the Philadelphia Parking Authority retains authority to prohibit ridesharing.

Reporting by the Philadelphia Daily News suggests that, beginning in 2014, PPA members coordinated with a taxi firm, Freedom Taxi, to oppose statewide TNC legislation. That coordination included communicating about both legislative and grassroots strategy. Ultimately, their efforts yielded success. Viable statewide legislation is only now progressing through the Legislature in Harrisburg.

Uber has decried the coordination between taxis and the PPA on the basis of the PPA’s status as a regulatory body. At a news conference, Uber’s Pennsylvania general manager, Jon Feldman, declared that the PPA “is unelected, unaccountable, and now we know untrustworthy as well.”

Feldman’s frustration is understandable, but such coordination is not actually all that uncommon. Local government entities regularly seek to influence statewide policy.

What is far less common, and far more disconcerting, is the allegation that the PPA worked with the taxi industry to enforce its TNC ban. In the wake of a high-profile sting in which a young veteran had his car impounded, a taxi medallion owner admitted he had participated in sting operations run by the PPA. If true, the PPA’s credibility as an independent interpreter of its enabling legislation is suspect.

Worse, by empowering taxi interests to crack down on their competition with the support of law enforcement, the PPA throws the credibility of its enforcement actions into doubt. It is not unreasonable to wonder whether these stings are a matter of enforcing the law, or a function of industrial sabotage.

For its part, the PPA claims it has undertaken a “collaborative process” to reach a resolution to the TNC question in Philadelphia and that it is Uber that has refused to engage in good faith. But why would Uber engage with them? The recent emails demonstrate that the PPA has been captured by the industry it regulates and is a de facto arm of the taxis’ government affairs team.

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How Republicans weakened Congress and strengthened the presidency

February 02, 2016, 9:12 AM

From Washington Monthly

But the truth is, when it comes to the shift of power away from Congress and to the President, we’ve been walking down that path for a while now. Last week the think tank R Street released a white paper – Restoring Congress as the First Branch – that defines this as a problem and brings together several authors to propose solutions.

 

Free­-market, pro­-consumer groups support federal anti-­SLAPP legislation

February 02, 2016, 7:00 AM

On behalf of the undersigned free­-market organizations, we write to express our strong support for H.R. 2304, the SPEAK FREE Act, and urge you to move it swiftly through maAdd Newrkup. We believe robust free-speech protections are vital not only to preserve individual liberty, but also to facilitate commerce. This bipartisan legislation, introduced by Reps. Blake Farenthold, R­-Texas, and Anna Eshoo, D-­Calif., would bolster First Amendment protections against malicious or frivolous litigation that threatens to stifle free speech and undermine the digital economy.

Each year, a multitude of Americans fall victim to lawsuits called SLAPPs (strategic lawsuits against public participation) that are aimed at unfairly intimidating and silencing them. These kinds of lawsuits are highly effective, despite being without merit, since the legal costs, invasion of privacy, and hassle associated with fighting them is rarely considered a worthwhile use of individuals’ time.

While 28 states have chosen to adopt anti­-SLAPP statutes in some form or another, the federal government has yet to adopt its own standard and provide access to this powerful tool to all Americans who seek to stand up for their free-­speech rights.

The SPEAK FREE Act would give defendants across the nation access to a special motion to dismiss SLAPPs, while also staying discovery. This would change the calculus of fighting meritless claims aimed at intimidation and censorship. In addition, the bill would empower courts to shift fees, so that defendants who prevail on an anti-­SLAPP motion would not have to face the otherwise formidable legal costs.

An increasingly important facet of the digital economy is the ability to provide online reviews or feedback. This ability bestows confidence to consumers to do business with those they’ve never met, whether they are buying a product, hailing a ride, or booking a place to stay in an unfamiliar city. Unfortunately, online reviews increasingly are targeted by SLAPPs, as unscrupulous businessmen seek to censor their critics, rather than working to improve the experiences, products or services they offer.

Another essential function of the innovation economy is creative destruction, wherein new business models disrupt incumbent businesses. But SLAPPs are also used by established firms as a tool to shut down competing startups. In this context, the need to expand access to this powerful tool is greater than ever.

Thus, we urge you to support this legislation to help create a strong national standard to protect free expression and digital commerce against the pernicious threat of useless litigation.

Sincerely,

Mike Godwin, R Street Institute
Wayne Brough, FreedomWorks
Berin Szoka, TechFreedom
Ryan Hagemann, Niskanen Center
Timothy Lee, Center for Individual Freedom
Mytheos Holt, Institute for Liberty
Steve Pociask, American Consumer Institute
Ryan Radia, Competitive Enterprise Institute
David Williams, Taxpayers Protection Alliance

Will the needless secrecy surrounding CRS reports end this year?

February 01, 2016, 6:13 PM

 

Not quite a year back, Rep. Mike Quigley, D-Ill., sought to do a little good for the American public. He offered an amendment to an appropriations bill that would require the Congressional Research Service to post publicly a list of the titles of its reports. Advocates for taxpayers and proponents for government transparency were delighted.

The CRS is an agency in the Library of Congress. Its staff of civil servants produce 1,000 or more reports each year. CRS reports describe government agencies (e.g., the Federal Election Commission); explain policies (e.g., SNAP/food stamps); and tally government spending (e.g., Department of Defense appropriations). Congress does not release these nonpartisan reports as a matter of course, but those within the Beltway know where to find copies. More than 20,000 congressional staff have access to CRS reports, so access is not an issue for lobbyists and policy-insiders.

Quigley explained to House appropriators that CRS reports “often are extraordinarily well-done” and that making the reports available to the public “would empower our constituents with extraordinary information about key issues, policies, and the budgets we are debating here in Congress.” Taxpayers pay $107 million per year to fund CRS and none of its reports contain classified or confidential information. Additionally, two other legislative branch agencies – the Congressional Budget Office and the Government Accountability Office – already release their reports publicly. (See here for a dozen other arguments for public release of CRS reports.)

Quigley’s amendment would not have made the contents of the reports public. All it would have done is enable the public to better know what reports exist. Having a list would enable John Q. Public to more easily request copies of CRS reports through their members of Congress. Quigley’s measure also would have been helpful to congressional staff, who labor to respond to constituents’ vague requests. (“I heard there was a report on agriculture that talked about subsidies. Can you get it for me?”)

Sadly, Quigley’s amendment never got a vote or even a discussion. Someone in the room disliked the amendment and Quigley reluctantly withdrew it.

The whole scene was bizarre and out-of-character for the House, which has shown great willingness to open legislative information and data to the public. No possible harm could come from publishing a list of CRS reports. In fact, such lists have been produced for decades. The CRS publishes an annual report for Congress that details its achievements and enumerates all its new reports, complete with their titles and authors’ names. It would be very easy for the CRS to post these reports on its website. Instead, the agency devotes time and expense to post a redacted version of its annual report that omits the list of reports. Why? Possibly, the House Committee on Administration requires it. But nobody will say publicly.

However, all is not lost. One can find the lists of CRS’s nonredacted annual reports online. Older copies placed long ago in federal depository libraries have been digitized in recent years. (See here for example.) Copies of CRS’ lists of reports for Congress from the past 20 years have been posted online by government transparency advocates (see here and here). These workarounds are not ideal, but they are helpful.

And what about Rep. Mike Quigley? He has not reintroduced his amendment thus far. But that does not mean he has given up the fight. Rather, he joined forces with Rep. Leonard Lance, R-N.J., who wrote legislation calling on CRS to publish entire CRS reports—not just a list of them— on the House Clerk’s website.

Congress will not be in DC much this year, thanks to the election. One hopes it can muster the wee bit of energy needed to put an end to the needless secrecy surrounding CRS reports. The public supports open government and would be grateful for increased access to honest information about their government’s doings.

Annual Report of the Congressional Research Service 2014 by R Street Institute

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