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Gillibrand proposes reinsurance tax gimmick to fund 9/11 victims

November 18, 2015, 1:28 PM

In his seminal 1987 work Crisis and Leviathan, economic historian Robert Higgs traces the pattern of government growth as a response to catastrophic events. The federal government, in particular, grows over time through a “ratcheting up” effect, as politicians respond to disasters and catastrophes with calls to “do something,” often involving the creation of new laws, regulations and agencies.

Inevitably, the crisis passes, but the new government structures it engendered remain. Indeed, not infrequently, those structures have little tangible relation even to the immediate crisis they ostensibly were intended to address.

We could be in the midst of seeing yet another example of this ratchet effect in the making. The tragic events in Paris over this past weekend have renewed political interest in the fight over reauthorizing the James Zadroga 9/11 Health and Compensation Act. If the reauthorization bill’s primary Senate sponsor –Sen. Kirsten Gillibrand, D-N.Y. – has her way, the legislation could be used as a vehicle to smuggle in a completely unrelated change in U.S. tax law — a thoroughly destructive and utterly protectionist tax on offshore reinsurance.

Originally signed by President Barack Obama back in early 2011, the 9/11 Health & Compensation Act established the World Trade Center (WTC) Health Program, which funds medical services (once workers’ compensation resources have been exhausted) for roughly 60,000 first responders who report medical complications stemming largely from exposure to airborne toxins at the World Trade Center, Pentagon and Shanksville, Pa. sites. The law also reopened the September 11 Victim Compensation Fund – originally exhausted in 2003 – for another roughly 25,000 residents of lower Manhattan who experienced economic losses as a result of illness or injury stemming from the 9/11 attacks.

Statutory authorization for both the compensation fund and the WTC Health Program – the latter of which is administered by the National Institute for Occupational Safety and Health and is 10 percent funded by the City of New York – expired Oct. 1. At the current pace of drawdowns from their financial reserves, both the program and the fund will be completely bust by late 2016.

One might ask what any of that has to do with offshore reinsurance. It would be a valid question. Gillibrand made no mention of reinsurance in the reauthorization bill she introduced on the subject back in April (S. 928), which has attracted an impressive 65 Senate cosponsors. It’s also not mentioned in the companion House bill (H.R. 1786) introduced by Rep. Carolyn Maloney, D-N.Y., which itself has some 249 cosponsors.

The subject has come up only recently, in the wake of Rep. Steve Chabot, R-Ohio, introducing H.R.3858, the September 11th VCF Reauthorization and U.S. Victims of State Sponsored Terrorism Compensation Act. Unlike the Gillibrand and Maloney bills, which call for permanent reauthorization of both the WTC health program and the victims’ compensation fund, Chabot’s bill proposes only a five-year reauthorization and only of the compensation fund. And while Chabot’s bill currently has only two cosponsors, one of them is Rep. Bob Goodlatte, R-Va., chairman of the committee of jurisdiction.

Another crucial difference is in the funding. The Congressional Budget Office has estimated the Gillibrand bill would require between $8 billion and $11 billion in additional spending over the next decade, with additional spending continuing for several years after that.

By contrast, the Chabot-Goodlatte bill would be funded by redirecting $2.77 billion to the compensation fund from an $8.9 billion settlement the government reached in June 2014 with French bank BNP Paribas SA for violating U.S. sanctions against the Sudan, Iran and Cuba. The U.S. Justice Department is currently administering $3.8 billion of the fines for a victims’ compensation fund, while the rest was split among the New York State Department of Financial Services, Manhattan district attorney’s office and the Federal Reserve System’s Board of Governors.

At the time of its introduction in late October, Gillibrand called the Chabot-Goodlatte bill “outrageous” and previewed that:

‘We have a way to pay for our bill that will be disclosed in due time that is acceptable to the Republican leadership,’ Gillibrand said. ‘So we have a way to pass the bill as written and pay for it completely. So what Congressman Goodlatte has done is irresponsible.’

That “way” finally was unveiled this week, as Gillibrand announced her bill would be financed by “closing a tax loophole” that, she says, “allows foreign insurance companies to issue reinsurance in the United States without paying the same taxes as their U.S. competitors.”

For those who have been around the insurance world a few more years than Kirsten Gillibrand, we’ve seen this script before. A cadre of large domestic specialty insurers have been pushing for similar legislation, literally, for decades. It does not involve “closing a loophole.” It involves treating insurance groups differently based on where their headquarters is located.

For those whose home office has a U.S. address, operating units could continue deducting the cost of affiliate reinsurance, just as they always have. But if the postal label instead reads “Bermuda” or “Switzerland” or “Ireland,” that option no longer would be available. The net result would be to make U.S. insurance and reinsurance markets less competitive and to make coverage more costly. The intent is to give a leg up to the largest domestic carriers, both against foreign-based competitors and also against smaller domestic competitors, who purchase relatively more reinsurance.

The idea, which has become a standing line item in the Obama White House budget, has been vetted repeatedly and found lacking. A study earlier this year by economist Art Laffer at the Pacific Research Institute estimated imposing the change would cost the U.S. economy $1.35 billion in gross domestic product, with private sector losses estimated to run roughly four times as great as the tax revenues raised. A report from the Cambridge, Mass.-based Brattle Group estimates taxing offshore affiliate reinsurance transactions would cost consumers between $110 and $140 billion over the next decade, taking the form of lost capacity and higher insurance prices.

There is no good policy case for this proposal when, if anything, we should be seeking ways to lower the corporate taxes that have led insurance capital to move overseas in the first place. Moreover, our major trading partners already have made it known they believe such a change would be a violation of the 20-year-old General Agreement on Trade in Services. Adopting this policy almost certainly will spark both retaliatory taxes and the very real possibility of sanctions from the World Trade Organization. This would be precisely the opposite message the United States is trying to convey in a time when our trade ambassadors continue to seek finalization of the Trans Pacific Partnership.

Of course, the real irony of looking to fund a 9/11 victims compensation fund with a punitive tax on foreign insurers is that foreign insurers already bore as much as half of the $25 billion the insurance industry paid out in response to the attacks, and they continue to pay first responders’ workers’ comp claims.

If Congress believes the health and compensation funds need to be extended, then that’s a responsibility we all share. Proposing to fund those shared responsibilities with a gimmicky tax should be considered an insult to their dignity.

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

Leamer talks ISIS on The Big Picture

November 18, 2015, 10:01 AM

R Street Outreach Manager Nathan Leamer appeared on the Nov. 17 edition of RT’s The Big Picture, to discuss the Paris attacks, ISIS, Syrian refugees, digital privacy and congressional authorization for use of force. Watch the full video below.


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

Americans still move, just not enough

November 18, 2015, 9:33 AM

From Bloomberg View

In a 2014 article in National Affairs, Eli Lehrer and Lori Sanders of the conservative/libertarian think tank R Street agreed that housing prices — and the zoning and other restrictions that helped cause them — were part of the problem, but focused on “place-based” aid programs that keep less-affluent people tied down where they are.

Whistleblowers for innovation

November 18, 2015, 9:31 AM

From Marginal Revolution

Derek Khanna at the R Street Institute suggests a similar system to reward innovators (pdf).

Imagine a research team developed a cancer drug that could save the federal government $1 billion a year. Under the innovation savings program, a portion of those savings would flow back to the researchers themselves, in exchange for their not patenting the technology. In order to be eligible for a prize payout, the innovation would need to meet a minimum cost-savings threshold established by Congress (e.g., $100 million). Since the researchers would be paid out of funds already authorized by Congress, there would be no additional cost to taxpayers, who instead would expect to see still additional savings.


Texas shouldn’t wait to address EPA carbon rule

November 18, 2015, 9:30 AM

WASHINGTON (Nov. 18, 2015) – The option to use carbon fees to comply with the Environmental Protection Agency’s Clean Power Plan could produce enough revenue for Texas to offset more than $2.5 billion in tax relief in other areas, according to a new R Street Institute study.

Authored by R Street Texas State Director and Senior Fellow Josiah Neeley, the study examines EPA data for the state to determine the “shadow price” of carbon imputed from emissions-reductions goals called for the in the CPP. Neeley extrapolated from that price and Texas’ projected 2030 emissions to determine how much revenue could be generated by using fees, rather than regulatory dictates, to come into compliance.

The $2.5 billion that Texas could collect from carbon-fee collections could be used to eliminate the state’s franchise tax, reduce the sales tax or reform the property tax. But Neeley cautions that Texas must act to address the CPP now, even as the state pursues legal options to fight the plan.

“The choice Texas faces is whether to enact a policy to comply with the CPP, or be saddled with the federal plan,” he said. “Pursuing legal strategies to resist the regulation is a necessary first step, but should not preclude work on a state plan.”

Neeley demonstrates that any legal battle will almost certainly not be resolved by the federally mandated deadline. If a state plan is not in place, the federal plan will take effect automatically.

“Ultimately, Texas must remain in control of its own destiny. A resilient power sector is vital to the state’s economy and the well-being of its citizens,” he said.  “Properly implemented, a carbon fee on electrical generation can both meet Texas’ CPP goals and provide a vehicle for much-needed tax relief and reform.”


Facing up to government sprawl

November 18, 2015, 9:23 AM

Reducing the size of the federal workforce has become a hot political issue this year.

When the House and Senate drew up their budget plans this spring, both chambers included a provision to shrink the civil service. Rep. Ken Calvert, R-Calif., unveiled a bill in August to reduce the number of civilian defense employees. Shortly after the 114th Congress began, Rep. Cynthia Lummis, R-Wyo., introduced the Federal Workforce Reduction through Attrition Act. It would gradually roll back and then freeze the number of federal employees at 90 percent of the workforce rolls as of Sept. 30, 2013. To reach this target promptly, the legislation would permit agencies to hire a new employee only after three had retired. The idea has attracted a great deal of attention and advocates.

Republican presidential candidates have also taken up the issue. Jeb Bush favors the Lummis “three-out-one-in” hiring curb. Carly Fiorina wants to freeze hiring and shrink the federal workforce by as many as 600,000.

Mostly, the calls for fewer feds have come from the political right, who have tied them to concerns about Washington’s finances. The federal government has run deficits 36 of the past 40 years. “We’ve racked up $18 trillion in debt simply because Washington has no idea when to stop spending,” notes Rep. Lummis. Conservatives are dismayed that few federal employees are fired for low performance or bad behavior. However, it is worth recalling that the bipartisan National Commission on Fiscal Responsibility and Reform (aka Simpson-Bowles) also proposed civil service cuts.

So, do we need fewer bureaucrats? To answer this question requires first admitting there is no easy way to calculate optimal federal employment. Private-sector firms size their staffs based on market forces. Firms hire as many employees as can productively offer positive returns on the investment in human capital.

The federal government, by contrast, hires as many individuals as Congress permits. Each year, appropriations laws allot funds to pay federal employees. How many individuals our government hires is a function of whatever criteria loom in the minds of legislators. Last year’s staffing levels usually are a key consideration.

Ideally, the number of federal employees should be based on the amount of federal work that needs to be done. That clearly is not happening. Year after year, Congress and the president create new agencies, policies and programs, layering them atop existing ones. Today, the federal government has about 180 agencies, although there is no definitive count. As the more than 170,000-page Code of Federal Regulations illustrates, the government’s responsibilities are innumerable and touch upon just about everything under the sun.

While the reach of government has expanded massively, the federal workforce has not. Currently, about 2 million individuals are employed in the civilian workforce. This does not include the 500,000 persons who work for the self-funding U.S. Postal Service and the undisclosed staff levels for the secretive national security apparatus (e.g., the Central Intelligence Agency). In the past decade, federal employment has increased by a couple of hundred thousand. Over the past half-century, however, the number of feds has been flat and, as the National Academy of Public Administration’s John DiIulio has pointed out, federal spending has quintupled.

This is a ratio for badly administered government, which is what we all-too-often get. As a practical matter, it also has meant outsourcing a huge amount of government work with little oversight. To cite just two examples: the U.S. Defense Department relies on 710,000 contractors, while the federal Head Start program is administered by 200,000 state, local and private-sector employees.

If we are going to reduce the federal workforce, we also need to reduce the size of the government. Cutting federal workers, while assigning them more duties, makes little sense.

Proposals to reduce the federal workforce should incorporate plans to reduce government sprawl and better focus government work. This can be done many ways. Passing a statute to eliminate the requirement that agencies produce reports that nobody reads will free manpower for more useful tasks. So too would allowing agencies to unload buildings they do not need, rather than continue to maintain them.

Congress also could establish an annual exercise, wherein it abolishes antiquated and unproven programs, such as those identified in the president’s annual budget. (This past year, the president proposed more than 130 cuts that would save $17 billion annually. Nearly every federal agency had something on the chopping block.) Alternatively, Congress could draw upon the reports by the inspector generals and the Government Accountability Office identifying ineffective programs.

So do we need fewer bureaucrats? Maybe. We will not know until we decide exactly what it is we want them to do.

The Texas Path: Preserving energy sovereignty to cut taxes

November 18, 2015, 9:00 AM

Texas faces some tough energy choices. Under the U.S. Environmental Protection Agency’s Clean Power Plan (CPP), Texas is expected by 2030 to have reduced carbon dioxide (CO2 ) emissions from existing electrical generation units (EGUs) by between 21 and 33 percent. Dealing with the fallout from the CPP will have profound implications for Texas’ economy, environment and electric grid.

Given this, it is important to make a clear-eyed evaluation of Texas’ options to respond. This paper looks at one such option: imposing a fee on electricity generated from CO2 – emitting sources, with all resulting revenue returned to taxpayers in the form of cuts to existing taxes. This approach would not foreclose existing or future legal or legislative challenges to the CPP. However, it would achieve three other crucial goals:

  1. Using market mechanisms to achieve emissions reductions at the lowest-feasible cost;
  2. Providing needed tax relief to Texans; and
  3. Allowing Texas to escape a federal regulatory approach.

It also would reassert the traditional division of power between states and the federal government on matters of environmental policy.

Part I will briefly summarize the CPP, both in general and as it is proposed to apply to Texas. Part II lays out the details of an emissions-fee approach to CPP compliance and gives several specific examples of how the tax swap could be implemented. Part III looks at how an emissions-fee approach can be incorporated into alternate strategies for how Texas should respond to the CPP.

An unrealistic smoking ban

November 18, 2015, 8:19 AM

The regulations proposed by the Department of Housing and Urban Development described in the Nov. 13 Federal Eye column, “Plan to snuff smoking in public housing” [The Fed Page], are flawed. There is almost no evidence that proposals to prevent public housing tenants from smoking in their apartments are practical or enforceable.

The few studies that have been done on multi-unit housing where smoking has been banned show that the majority of tenants who smoke ignore the prohibitions. The cost of enforcing an all-out smoking ban likely would be quite high, and higher still if it were expanded to include less-dangerous nicotine products such as chewing tobacco and e-cigarettes.

In the context of a sustained effort to encourage smokers to quit or, at least, switch to safer forms of nicotine, a ban might be possible. As a free-standing effort, however, it seems almost certain to fail.

Music policy briefing & breakfast

November 17, 2015, 2:28 PM
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Remarks prepared for Re:Create Coalition briefing

November 17, 2015, 8:30 AM

In the sweaty summer of 1787, our Founding Fathers created the oldest working written constitution in the world. This document, as those of us on the political right are wont to point out, exists not only to structure government, but also to limit its powers.

But one power the men meeting in Philadelphia clearly did grant the federal government was to create intellectual-property protections. They authorized Congress: “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

Indeed, it’s a fitting and proper power of our government to grant these “exclusive rights.” Creators ought to have some level of protection; not because it’s a natural right, but because it’s useful to society.

But the mere grant of power does not mean that power ought to be unlimited or to trump our natural rights of free speech and free expression. Copyright is a creation of the state. It’s a useful one, but a limited one. In deciding how it should be constructed, we also must look to the founders’ intent and appeal to our own reason.

In fact, the founders let us know their intentions well, by making clear the term of copyright ought to be limited. We know that because they used that precise word. At the time of our founding, they placed limits both on the nature of copyright and its reach. At our founding, the term of copyright could not be more than 28 years. Today, it is, in many cases, well over a century. That’s longer than any human life span.

The founders told us that copyright exists to promote “Progress of Science and useful Arts.” This strongly implies that it must be judged on pragmatic grounds. Today’s copyright system, and its ever-growing grants of rights, fulfills no part of the founders’ vision. There is no way the original intent of the Constitution included retroactive extensions of copyright. This is crony capitalism at its most intense.

Part of the point of copyright, after all, is to encourage sharing and assure that, after creators have earned their well-deserved profits, the work enters the public domain, where others can learn from, add to and transform it.

The flourishing of any society is best measured not by its power, might or even its wealth, but rather by its ability to create. All creators stand on the shoulders of giants; almost all creativity is an additive process. Without a vibrant public domain, true social flourishing, true human flourishing, is difficult to achieve.

James Madison, the father of our Constitution, once told a correspondent from Kentucky that: “The advancement and diffusion of knowledge is the only guardian of true liberty.”

He was right. Our current copyright system is deeply flawed. It does not need to be abolished. But it ought to be transformed and brought in-line with the realities of the digital age.

Thank you.

Will we carve ‘safe spaces’ out of free speech?

November 16, 2015, 3:08 PM

Public college campuses strive to have plenty of safe spaces for students. That’s just a fact. If students aren’t safe, schools won’t be successful for very long.

But recent calls for “safe spaces” at colleges and universities seem to be different demands entirely.

So what exactly are students at schools like Claremont McKenna, Missouri, Yale and even the University of Alabama demanding?

Safe zones aren’t, or at least shouldn’t be, about physical safety or preventing illegal conduct. When it comes to issues of breaking and entering or assault, as recently alleged by University of Alabama Senior Amanda Bennett, “safe zones” aren’t enough. Those acts are criminal and should be combated by universities and law enforcement wherever they occur. The laws that protect us aren’t limited to physical violence either. We already have statutes to prevent intimidation and harassment.

So let’s assume we’re not talking about letting criminal conduct go unpunished everywhere outside the requested “safe spaces.”

Then certainly it must have something to do with the right to gather publicly?

Congregating with people who share the same interest and values is common. We do that frequently in both public and private. Just take a look at every college football tailgate on a Saturday in the South. Nobody is arguing—at all—that any group of people should be prevented from assembling in public.

The truth is that the present formulation of “safe zones” is meaningless unless they effectively operate as “exclusion zones” for certain individuals, speech or conduct. Recently we’ve seen efforts to create public safe spaces from media, other viewpoints and even along racial lines.

That’s simply unacceptable.

Designating specific areas on public college campuses where speech content or association is restrained is antithetical to our founding principles and likely unconstitutional—not to mention a terrible idea. The same civil liberties that protect students speaking truth to power must be afforded to those who question the protesters themselves.

Regardless of color, creed, identity or orientation, we don’t afford public protection for feelings and self-esteem, and we shouldn’t.

Before you lose it, the operative word there is “public.” In private—our homes or dorm rooms for example—we can control the voices and conduct we choose to engage. We can be as limiting or as open as we choose. If someone forces his or her way in, we’re back to illegal conduct.

In contrast, our nation has seen the danger and harm of public exclusion zones. “White only,” “no Jews,” or “men only” signs weren’t terribly hard to find throughout much of American history. Do we really want to usher in a new era of public exclusion zones under different names at universities?

We shouldn’t paint with broad strokes when it comes to what kinds of people and ideas are permitted in which public spaces. Even when we don’t like the words or presence of others in public, the benefits of free speech and association far outweigh the harms stemming from their abuse.

Universities across the nation have a choice to make: Will they reject the lines that divide us or embrace them through public exclusions under the guise of “safe spaces?”

Dr. Ben Carson vs. Dr. Jill Biden

November 16, 2015, 2:55 PM

From Washington Examiner

R.J. Lehmann for the R Street Institute: Ben Carson has surged ahead to become the leading contender for the Republican presidential nomination. Carson now has the support of 26 percent of Republican primary voters, four percentage points ahead of Donald Trump.

Read more…

Replace Patents With Prizes To Spur Innovation, Create Savings: R Street

November 16, 2015, 2:53 PM

From ValueWalk

As R Street’s Derek Kanna points out in a recent policy study: “Even when they work properly, patents limit competition by granting a 20-year legal monopoly.7 De jure legal monopolies are able to use the power of the law to extract excess rents from consumers and other firms. In practice, it is not unusual that multiple teams work simultaneously on similar concepts and make similar or iterative discoveries, but only the team that receives the patent enjoys the windfall. The others typically will be barred from bringing their independent invention to market, rendering the research and development invested in such projects sunk costs.”


Dispatch: Sunshine State looks to a new conservative future

November 16, 2015, 2:51 PM

From The Telegraph

They were firm friends,” said Christian Camara, a Florida lobbyist and a personal friend of Mr Rubio. “They worked together very closely.”

Should oil firms be held liable in earthquake lawsuits?

November 16, 2015, 2:41 PM

Holding companies liable for damages caused by fracking-induced earthquakes is an unreliable way to manage this new risk. The courts simply aren’t equipped to handle this issue in a way that is fair to the companies and to the people who have been harmed, while also taking into account the best interests of the broader population.

The science is straightforward. Increases in drilling activity, including hydraulic fracturing and deep-well injections, have caused dramatic changes in seismic activity. Last year, 5,415 earthquakes were documented in Oklahoma, making it the most seismically active state in the continental United States. The frequency and severity of these earthquakes are both on the rise.

While the relationship between fracking and earthquakes may appear sufficient to hold companies liable, how to apportion liability is a much more difficult question. The devil is in the details. Scientists are only now beginning to connect seismic activity to certain types of drilling-related activities, and are still exploring whether a causal relationship between those particular activities and quakes can be determined. Drilling sites are extremely active and clustered, making it extraordinarily difficult to differentiate how each well or event contributes to the geologic stresses that cause earthquakes.

Research is beginning to connect discrete seismic events to discrete drilling phases in a few isolated incidents, but not with the confidence necessary to pinpoint how—and how much—oil and gas developments contribute to the timing and severity of those events. Earthquakes are a wickedly complex subject, even without any human activity involved. Indeed, the natural system is so complex that we rely on probability analysis, not true forecasts, to plan and prepare for earthquakes.

Meeting the conditions for liability in these circumstances is hugely complicated. But even if it was conceivable to meet such a threshold, it would still be inappropriate for the courts to make this decision.

Common-law liability is simply too blunt an instrument. It asks the court not only to sort through complicated and inconclusive scientific data, but also to judge, in effect, whether limited instances of earthquake damages should put an end to oil-and-gas operations that promote economic growth and enhanced energy security.

There is no doubt that oil-and-gas development in Oklahoma has enormous upside benefits. Oil production has nearly doubled in the state over five years, creating jobs and raising average wages, increasing revenue to the state treasury and holding state unemployment well below the national average. Other benefits accrue to the rest of the country, creating supply-chain jobs, lowering manufacturing costs and increasing the supply of stable, domestic energy resources.

These benefits must be balanced against the risks of increased seismic activity—not sacrificed to a tenuous connection between any one oil and gas operation and a particular seismic event.

Thankfully, the legislative and executive branches are designed to handle exactly such inherently political calculations. Limited state action, in cooperation with the oil and gas industry, to identify and codify the best technical practices to mitigate earthquake risk is a much more effective and efficient approach than litigation.

That doesn’t mean people shouldn’t be compensated for earthquake damages. Ideally that’s the role of the insurance market. In the absence of coverage, it may be necessary to create an alternative compensation pool funded by industry contributions or any other number of sources.

There is no doubt that aggressive development of shale deposits has increased the frequency and magnitude of earthquakes in the central United States. Managing and mitigating practices that contribute to damaging earthquakes can be part of successful, continuing investment in oil and gas development, but not if the judgment is left to the courts.

Feds to punish public-housing tenants for smoking in their own apartments

November 16, 2015, 11:19 AM

Sometime in the next two years, if Obama administration bureaucrats get their way, public-housing tenants who smoke in their own apartments will face sanctions, fines and perhaps even eviction. The proposed policy is deeply flawed. However, those who oppose it—as many conservatives will reflexively—ought to use their opposition to reconsider misguided, if well-intentioned, efforts to micromanage the lives of the poor, even when such efforts come from the political right.

First, one ought to give the Obama administration’s proposal its due. Cigarettes are addictive and smoking shaves years off life. Americans living near or below the poverty line smoke at a higher rate than the population as a whole. Since nearly all people in public housing qualify for government-supported health care, taxpayers end up picking up their medical bills. Bans on smoking in workplaces and indoor public areas appear to have caused reductions in the smoking rate, while sparing millions from second-hand smoke.

Nonetheless, the proposed bans are deeply problematic, because they involve micromanagement of public housing tenant’s lives.  Because cigarettes are addictive and because smoking is a cultural and social ritual, the overwhelming majority of quit attempts fail. Telling regular smokers they can’t smoke in their own homes will seriously disrupt their lives. While private-market landlords can and do restrict smoking, of course, people who rent from such property owners will almost always have a choice of housing. Public housing tenants don’t. Forcing people who happen to live in public housing to give up a perfectly legal habit—albeit one that is considered a vice—raises lots of questions. If smoking is to be restricted, then why not restrict alcohol use? If that, why not unhealthy foods? At some point, it becomes ridiculous.

Enforcing one-size-fits-all anti-smoking rules may well prove impossible anyway. Studies of efforts to ban smoking in apartments show the great majority of smokers ignore the rules. Indeed, even though a third of all public-housing units already ban smoking, smoking rates in public housing remain higher than they are among the population. And the wrong rule could even harm public health. The current draft regulations hint at the possibility that the federal government might ban e-cigarettes and chewing tobacco, as well. Since these things deliver nicotine in a much safer fashion than combustible cigarettes, banning them would encourage more smoking and thus more disease. If this happens, the rule will end up being more an effort to impose left-wing lifestyle preferences on the poor than a legitimate public-health measure.

We should be just as cautious of similar, conservative efforts at social engineering. Kansas, for example, has placed numerous restrictions on how cash-welfare recipients can use their benefits. The states’ restrictions on buying movie tickets and underwear with welfare benefits, and even withdrawing cash from ATMs, reek of micromanagement. Even the fast-growing idea of drug-testing welfare recipients has caught very few scofflaws, while imposing costs far in excess of its benefits. While it may be fair, in principle, to deny cash welfare to drug users, it seems a lot more dubious to do what Wisconsin is proposing and deny SNAP benefits (previously known as food stamps) to people who test positive for drugs.

None of this means that the poor shouldn’t be held responsible for their own behavior: work requirements, experiments that require Medicaid beneficiaries to make token co-payments and efforts to evict public-housing tenants guilty of serious crimes are all good policies.

But those who criticize the ways that government run everything from transit authorities to farm programs ought to be just as skeptical as efforts to micromanage individuals’ lives, simply because they happen to be poor.

As Congress remains gridlocked, the USPS loses

November 16, 2015, 8:00 AM

The U.S. Postal Service lost nearly $5 billion this past year, according to its just-released year-end financial results. As in recent years, the agency did not make the legally required $5.7 billion payment to its Retiree Health Benefits Fund. The agency is $15 billion in debt and legally prohibited from borrowing additional funds. The unfunded portion of its retiree-health-benefits obligation is $54 billion.

Revenues increased slightly but mail volume slid by 1.4 billion pieces from last year to 154 billion. The agency has $6.6 billion of cash on hand, which is better than in recent years and means USPS is in no immediate danger of having to shut off the lights due to lack of cash. The agency’s financial results benefited from a temporary emergency price increase and a lower-than-expected employee compensation charge.

All told, the results confirm what’s been obvious for some time: the USPS faces not just a financial crisis, but an existential one. The agency’s business model was predicating on the assumption that granting it a monopoly over first-class mail delivery would enable it to reap high margins that would subsidize the agency’s service nationwide. Thanks to electronic bill-paying services, among other factors, first-class mail volume has plunged. Worse still, total mail volume is down more than 25 percent since 2007.

Equally problematic is that the USPS’s mission has become increasingly anachronistic. The agency’s authorizing statute declares:

The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people.

Can anyone in the modern age say with a straight face that our nation is united by mail? Moreover, the word “correspondence” denotes two-way communication, such as me sending a letter to my mother and she writing me back. But person-to-person correspondence is less than 1 percent of the mail sent, as the USPS’s household diary study and “revenue, pieces and weight” reports show. Most mail today is not correspondence; it’s advertisements and solicitations broadcast at the public.

Magazines – which, in some instances, may be “educational” or “literary,” but often not – constitute less than 5 percent of the mail. Packages account for about 1 percent of what the postman delivers, despite the widespread misperception that USPS is a big parcel-deliverer. When I logged and surveyed a month’s worth of my own mail recently, almost one-third of what arrived were needless corporate notifications, like my mortgage company sending me a paper bill despite my choice to auto-pay online.

To date, Congress has proven wholly incapable of thinking big about what sort of USPS we need for the 21st century and beyond. For the past five years, lawmakers have feuded among themselves about what to do. Neither the House nor Senate has voted on any of the postal-reform bills that have been introduced.

Much of this paralysis is driven by the forces of the status quo. Postal unions (one of which has endorsed a socialist for president) and liberal romantics deny an existential problem exists. These same individuals often propagate the myth that the USPS would be doing just fine were it not for the mandate that it prefund its health-care benefits. Economist Michael Schuyler has shown that if you remove this cost, USPS nevertheless lost $10 billion over the past seven years, and the situation would have been worse still were it not for the temporary emergency-rate increase, which forces mailers to pay the government monopoly more. These same proponents of the status quo tacitly admit the USPS’ existential problem when they advocate for it to enter new lines of business, like banking.

Many congressmen, particularly from rural areas, object to shuttering post offices and outsourcing counter service to private retail outlets, like cafes and big box stores. And many legislators treat reducing home-mail delivery service from six to five days a week as a non-starter, no matter that USPS wants to do it or that the shift would save money.

For the foreseeable future, America will see more of the same news. Absent a miraculous rebound in mail volume and revenues or an outbreak of political courage on Capitol Hill, the Postal Service likely will continue to post losses and do what it can to trim service.

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

Paris Attacks: Do the bad guys win in the real world?

November 14, 2015, 3:08 PM

It was a long night in Paris, and they’ll have many more. My wife and I stayed up watching the horrible events unfold.

The chaos, confusion and pain were palpable. I imagine this is what it felt like across the Atlantic watching the terrorist attacks of 9/11 unfold in the United States.

I was tired this morning. I’ve also been tired of feeling like we’re permanently trapped between war and peace.

My sons don’t know what happened in France. All they know was that it’s 6 a.m. on a Saturday. Neither the Legos inside nor the piles of leaves outside are going to play with themselves.

As we scrounged for breakfast before setting out this morning, I randomly asked them a question from a heavy heart: “Boys, do the bad guys win in the real world?”

Maybe I hoped for them to give me a “superhero” style answer to lift my spirits or at least demonstrate the childish innocence with regard to the evils we truly face.

“Of course not, dad,” said my eldest. “If you’re angry, you don’t win.”

Leave it to the six-year-old philosopher in Spider-Man pajamas to realize that the battle between good and evil isn’t about a specific attack and response; it’s about who we are and what we’ll become.

We cannot inoculate ourselves against evil. As we’ve seen, those bent on death and destruction are relentless.

Ironically, it was the French people who reminded us in 1886 about who we are as a nation. Her silent call:

Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!

That gift, the Statue of Liberty, stands watch over the site of the worst terrorist attack America has ever seen.

As powerful as our instincts may be to shut down our borders, reject refugees or launch into an empty contest of words about the myriad ways we’re going to kill terrorists, let’s not forget what makes us the shining city upon a hill.

Their victory is destruction; ours is rescue. They seek a world where control is imposed through intimidation and violence; we strive to afford liberty and justice for all. At least that’s who we ought to be.

Evil doesn’t win by toppling our towers or taking lives. It wins when we’re afraid and angry. When we cast a suspicious eye to the huddled masses and shut the doors to our shining city, evil rejoices.

We mustn’t let rage and fear overpower us, change who we are and dictate who we will become. Instead, we should stand shoulder-to-shoulder with our French brothers and sisters, stare down the darkness and ensure that liberty prevails. 

Adventures in opaque polling

November 13, 2015, 12:35 PM

Poll after poll show that ordinary Americans simply don’t cotton to the idea of an Internet sales tax, such as those proposed by the so-called “Marketplace Fairness Act” or the more recent Remote Transactions Parity Act.

A June 2013 Gallup Poll that asked whether respondents would “vote for or against a law that would allow each state to collect sales taxes on purchases its residents make online over the Internet” found that 57 percent said they’d vote against, with just 39 percent saying they’d support it. Among those between the ages 18 and 29, the results were even more dramatic 73 percent opposed to 27 percent in favor.

Working with our partners, the National Taxpayers Union, we at the R Street Institute commissioned the firm Mercury to do more extensive polling later in 2013 and found very similar results. When asked if they would “favor or oppose new legislation that changes the system for how states collect sales taxes from Internet purchases,” 57.1 percent were opposed and just 35.1 were in favor. The results were closest among Democrats, where the margin of opposition was 5.1 percentage points. The margin was 22.3 points among independents and a towering 38.5 points among Republicans.

Mercury’s polling also tested common arguments in support of Internet sales tax legislation and common arguments from the opposition. Among respondents, the strongest responses were not frustration about having to pay a few more dollars for online purchase. Instead, the polling responses made clear strong support for the proposition that state tax authorities should not be allowed to reach across their borders. In other words, respondents were not just indulging a knee-jerk reaction against the “T” word — taxes.

Subsequent state-level polling by Mercury fell in line with these earlier results. The polls found wide found wide margins of opposition in such key presidential battlegrounds as Ohio (25 points), Virginia (26 points), Florida (13 points) and North Carolina (26 points).

The Sunshine State Survey from the University of South Florida subsequently polled Floridians on whether collecting sales tax on Internet purchases would be the “wrong direction” or “right direction” for the state. They found 57 percent believed it would be the wrong direction, compared to just 24 percent who said it would be the right direction. Among those aged 18 to 34, the margin was 60 percent to 17 percent opposed.

These polls all have two things in common: they find strong opposition to Internet sales tax legislation and they are fully transparent in releasing the precise questions asked and relevant crosstabs for analysis.

What, then, to make of a poll recently released by the International Council of Shopping Centers (ICSC) which claims “seven out of 10 Americans support federal legislation that would require online-only vendors to collect sales tax at the time of purchase?” Surely a result this divergent from existing public opinion research on the matter must derive from the wording of the questions asked.

Unfortunately, the ICSC isn’t divulging any of the questions they asked and, after repeated attempts last week, we were unsuccessful in securing a list of questions or additional demographic detail on responses. Absent such transparency, it’s difficult to make anything of the poll as a useful measure of genuine public sentiment. Until further information is released, it will remain a riddle, wrapped in a mystery, inside an enigma.

The most important reason to approach Internet sales tax legislation with caution is that bills like MFA and RTPA empower states to tax across borders, harm small Internet-based businesses, and impose significant burdens on interstate commerce. But they also face broad and deep public opposition, at least according to transparently conducted public opinion research.

Like the proverbial tree falling in the forest, if a poll doesn’t release its questions, does it make a sound?