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R Street Institute & Future 500

October 07, 2014, 3:06 PM

Supreme Court’s action validating same-sex marriages in 11 states creates critical juncture for political reaction

October 07, 2014, 11:10 AM

Yesterday, the U.S. Supreme Court denied review of all seven petitions that resulted from opposition to state bans on same-sex marriage. The court’s orders carried specific significance because they permitted the lower courts’ decisions to stand, invalidating the same-sex marriage bans in Virginia, Oklahoma, Indiana, Wisconsin and Utah. By refusing to reconsider the rulings, the court also effectively legalized same-sex marriage in six additional states overseen by the respective federal circuit courts of appeals.

The additions of North Carolina, South Carolina, West Virginia, Colorado, Kansas and Wyoming will mean that a majority of the states, either through legislative action or judicial decree, will now allow same-sex marriage.

According to a comprehensive Gallup poll from May of this year, 55 percent of Americans support legally recognizing same-sex marriages, up from 27 percent in 1996. While current support for same-sex marriage is far from unanimous, the long-term trajectory for proponents of traditional marriage seems bleak with 78 percent of 18 to 29-year-olds supporting same-sex marriage.

The court’s actions also set up the issue as a potential political football this election cycle and the next in 2016.

Democratic leadership, generally more supportive of same-sex marriage, might be initially tempted to highlight the issue in hopes of sparking a larger national trend. At the same time, raising the flag on same-sex marriage before the November elections could have negative repercussions on critical Senate races in more moderate to conservative states.

The decision simultaneously pushes Republicans into a potentially critical juncture that could pull the party into a fight to set its position on same-sex marriage. Two immediate reactions mark radically different paths by thought leaders from the right who have fought to defend traditional marriage.

Sen. Ted Cruz called the move “both tragic and indefensible” and pledged to introduce a constitutional amendment “to prevent the federal government or the courts from attacking or striking down state marriage laws.”

Wisconsin Gov. Scott Walker took a decidedly different tenor. “For us, it’s over in Wisconsin,” said Walker regarding his state’s same-sex marriage ban. “Others will have to talk about the federal level.”

House Speaker John Boehner has taken yet another track by honoring his commitment to raise funds for gay GOP candidates and highlighting their political accomplishments and fiscal responsibility, rather than tackling the subject of same-sex marriage directly.

While the nation remains divided on the issue, the Supreme Court’s intentional inaction has changed the landscape for same-sex marriage. The coming weeks will provide significant insight into the political impact of the decision and how Democrats and Republicans plan to resolve intra-party and even generational splits on the matter.

More importantly, decisions by the remaining federal circuit appellate courts will likely determine when and if the Supreme Court ultimately elects to decide the issue at the national level.

Emerging markets create need for innovative insurance products, R Street study finds

October 07, 2014, 9:38 AM

WASHINGTON (October 7, 2014) – Emerging markets in the ride-sharing industry have created an opportunity for new insurance products that encompass both personal and commercial lines, according to an R Street Institute study released today.

“Blurred lines: insurance challenges in the ride-sharing market,” authored by R Street Editor-in-Chief and Senior Fellow R.J. Lehmann, examines the unique challenges faced by ride-sharing companies and drivers with regard to ambiguous questions of liability before and during the transport of passengers.

“Most personal auto insurance policies currently on the market exclude coverage for a vehicle being used as a livery conveyance,” said Lehmann. “The fact that insurers do not offer coverage for ride-sharing has prompted regulators to issue consumer bulletins and warnings; in some cases this gap has prompted lawmakers to pass onerous restrictions on ride-sharing in their jurisdictions.”

In the absence of personal lines insurance products to cover ride-sharing risks, drivers would theoretically be forced to turn to the commercial auto insurance market. However, rates for commercial auto insurance to cover livery services are unlikely to be affordable for most part-time drivers.

Innovative insurance products that over part-time drivers for ride-sharing services would appear to be a simple way of addressing these issues. However, insurance companies to date have not created these new products. Uncertainties in many complex environments have proven to be an effective barrier to product innovation.

“When insurers become convinced that the liabilities, regulatory barriers, rating and underwriting factors and market demand presented by ride-sharing services merit new products, new products will be brought to market,” said Lehmann. “Alternatively, the ride-sharing companies could form captive insurance companies to cover their drivers’ risks, or ride-sharing drivers could form their own mutual insurance company to offer coverage not readily available on the open market.”

In the meantime, Lehmann urged lawmakers to follow a set of guidelines as they examine insurance challenges in the ride-sharing industry.

“A transparent and thoughtful process, requiring disclosure, uniform coverage requirements, a common law standard-of-care, underwriting freedom and product flexibility is crucial in any new regulations set forth,” he said. “An overzealous regulatory response can crush a new and innovative industry in its cradle.”

The policy study can be found at: http://www.rstreet.org/policy-study/blurred-lines-insurance-challenges-in-the-ride-sharing-market/ 

Blurred Lines: Insurance challenges in the ride-sharing market

October 07, 2014, 8:00 AM

The world of property/casualty insurance long has been divided into two separate and entirely circumscribed hemispheres: the personal and the commercial. Personal lines policies – primarily home and auto insurance, but also coverage for renters, motorcycles and boats – are largely standardized, sold directly or through agents and, in many states, are subject to strict regulation of rates and forms. By contrast, commercial lines policies – directors and officers, general liability, commercial auto, inland marine – are bespoke to individual firms’ needs, sold through brokers and, as business-to-business transactions entered into by presumably competent parties, are largely unregulated (with the notable exception of workers’ compensation).

However, a new range of services made possible by improved communications technology and ubiquitous smart phone applications are beginning to blur these once-clear lines of demarcation. These peer-to-peer markets connect potential buyers and sellers in ways that were not previously possible. Largely by offering convenient pricing, payment, marketing and screening services, these match-makers make it possible for many heretofore amateur providers to deploy their capital and labor in productive ways.

Each of these new services presents potential risks to property or creates potential liabilities for those who opt to use them, either as consumers or producers. Three specific areas of the peer-production economy – ride-sharing, car-sharing and space-sharing – have offered some of the thorniest coverage questions for personal lines insurers, for regulators and for the general public. As a growing number of private individuals look to earn ancillary income streams by renting out rooms or entire properties, by renting out their cars or by providing ad hoc livery and limousine services, what are the consequences for the home and auto insurance markets? Do personal lines policies offer liability coverage when amateurs turn professional? Who should provide coverage – the peer production service, or the individual drivers and renters? And what thresholds should be set for when and how much coverage must be obtained to ensure that consumers are appropriately protected?

The future of these services depends crucially on finding answers to these and other questions. This paper looks to explore some of the pressing insurance issues within one specific subset of the peer production economy – ride-sharing – and will conclude with some broad recommendations about ways both regulators and market participants could address those issues in the months and years ahead.

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October 07, 2014, 3:00 AM

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Why conservatives should support carbon taxation

October 06, 2014, 1:54 PM

Conservatives are conditioned to wince at the mention of the word “tax.” Mention the term “carbon tax,” and many will recoil altogether. Still, in the only place in North America where a carbon tax has been introduced, it has been something of a success. U.S. states in the Pacific Northwest are beginning to take notice.

Canada’s British Columbia introduced a carbon tax in 2008. Designed to be revenue neutral, the tax places a price on carbon dioxide emissions, while simultaneously offsetting the cost of implementation with tax reductions in other areas. Thus, B.C. has been able to cut more than $760 million worth of income and other taxes.

Both Oregon and Washington have decided to study the prospects of implementing their own carbon taxes. In Oregon, the last legislative session saw the narrow passage of S.B. 306, which commissioned a feasibility study. The results of that study are expected later this year, but an interim legislative committee heard testimony last month that left legislators excited by the prospective health benefits of reducing carbon emissions. In Washington state, a study that initially yielded disconcerting results has been revised after the discovery of a methodological flaw. The accurate results forecast that, over its first decade, a Washington carbon tax would have virtually no impact on the state’s GDP while still meaningfully reducing carbon emissions.

The rationales that have excited legislators in Oregon and Washington are not likely to energize conservatives, but that does not mean there are no reasons conservatives might find a carbon tax desirable. Shifting the basis of taxation from income and investment to consumption carries with it a slew of benefits. For one, taxing a harmful activity instead of a desirable activity will better align policy incentives with economic growth.

Long-time conservative tax targets like the death tax and capital gains tax could be eliminated and offset by carbon-tax revenue. Moreover, this could be done while simultaneously complying with the Environmental Protection Agency’s proposed regulations on greenhouse gas emissions in a much less economically destructive way. The absolute cornerstone of conservative support for a carbon tax will be authentic revenue neutrality. Particularly out west, where tax burdens are among the most onerous in the nation, any effort to price carbon without an attendant and commensurate reduction elsewhere will be met with opposition.

To be clear, so long as conservatives remain unconvinced of the threat posed by rising carbon emissions, the environmental value of a carbon tax will escape them. However, if conservatives can be convinced of the value of pegging government revenue to a stable, controllable and ultimately reducible phenomenon, they might just come to the table to discuss climate-change solutions.

Bringing the political right meaningfully into climate-change discussions is essential if the political left hopes to move its climate change agenda nationally. Perhaps Cascadia, with its celebrated history of political collaboration, can lead the way.

Jacksonville should find a commonsense solution for ride-sharing

October 06, 2014, 12:30 PM

Jacksonville, Fla., is making headlines over plans to enact stiff penalties against ride-sharing drivers. Some transportation network company drivers in Jacksonville have recently gotten into trouble for not carrying the necessary permits or other official authorization to provide paid transportation.  Several have been fined, but because the TNCs have covered those fines for their drivers, the Jacksonville City Council is considering more punitive measures, including impounding offenders’ vehicles.

In 2013, the council began to address TNCs like Uber and Lyft by allowing them essentially to serve as dispatchers for existing limousine and “black car” companies.  The ordinance also rightfully repealed the arcane requirement many cities still have that driver-for-hire companies charge a minimum fare.

Per the City of Jacksonville’s Digital Dispatch Services website, current rules require that a driver wishing to use and work with a TNC, he or she must work for a “registered vehicle-for-hire company.” A TNC is explicitly excluded from being considered such a company.  Therefore, if an individual wants to serve as a TNC driver, he or she would have to either be hired by a registered company (i.e., a limousine service) or would have to incorporate one and be self-employed by it.  Per the application, registering a new company involves incorporating it, insuring it, obtaining an occupational license, and ultimately applying for a permit, which involves a background check and vehicle inspection.

Needless to say, individuals looking to earn extra money by working as a TNC driver a few hours a week may be discouraged to do so due to the hassle and expense involved in incorporating a new company and everything else that goes into it, especially since Uber and Lyft already fulfill that role. In other places, they may only have to undergo a background check, a simple vehicle inspection and/or obtain the proper commercial insurance to comply with the law.

The City of Jacksonville appears to be in its legal right to penalize individuals who are not permitted to drive-for-hire per local laws, and they are certainly within their rights to enact tougher penalties for repeat offenders.  However, instead of enacting tougher penalties, lawmakers should consider establishing a permitting framework that allows TNC drivers to enter the marketplace with commonsense regulations that level the playing field, promote competition and, most importantly, preserve public safety.

R Street experts have written extensively about the emerging regulatory and marketplace issues affecting ride-sharing services provided by transportation network companies such as Uber and Lyft. Several states and local municipalities have taken different approaches, ranging from explicitly allowing them to operate in their cities to enacting outright punitive and protectionist measures that outlaw them, to the competitive advantage of traditional taxicabs and limousine services.  An upcoming R Street report by will analyze how  several local governments have responded to this emerging transportation business model, and assign grades to each locality based on several factors affecting competitiveness.

Jacksonville’s existing permitting system for drivers working for “registered vehicle-for-hire” companies that utilize TNCs is a starting point. However, as the forthcoming R Street paper finds, they should consider lifting the requirement that individuals incorporate their own companies and instead allow TNCs who meet certain reasonable criteria, such as Uber and Lyft, to fulfill that role.

Ultimately, it is not unreasonable to require participating TNCs to carry sufficient insurance; drivers to undergo background checks; vehicles to pass safety inspections; and sensible permitting fees to offset their costs.  However, the current requirement that an individual be hired by an existing company or incorporate his or her own to merely work as a part-time TNC driver is an unnecessary imposition that has much more to do with shutting down an emerging business model than it has to do with public safety.

If TNCs can safely and successfully operate in harmony with their traditional taxi and limousine competitors in big-government, regulation-heavy cities such as Chicago, Washington and San Francisco, lawmakers should be able to find a fair, commonsense  solution in Jacksonville, Fla.

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

Tax reform and the family life cycle

October 06, 2014, 11:19 AM

Over the last several decades, one of the central objectives of conservative tax reformers has been to “neutralize” the tax code – to cut down on the incentives and indirect expenditures that are a major cause of the system’s maddening complexity.

However, attempts to simplify the tax code routinely run headlong into a combination of good intentions and simple self-interest. Provisions like the mortgage interest deduction, charitable donation deduction, child tax and earned income credits and the tax exemption for municipal bond interest – to say nothing of the wide array of incentives for retirement, education and medical savings – all have ardent defenders, including those who benefit directly and the industries which rely on these indirect subsidies. Tax reformers struggle with the fact that many of these incentives may even serve valid purposes.

Enter Sens. Mike Lee and Marco Rubio who, in a recent Wall Street Journal op-ed, set out to synthesize the objectives of neutrality, simplicity and humanity in the tax code. In their proposal, Lee and Rubio propose a comprehensive tax reform package, including simpler rates, reductions in corporate taxes to improve American competiveness, fixing the Earned Income Tax Credit to coordinate with poverty-relief programs and introducing an expanded child tax credit that could reduce a family’s income and payroll taxes.

Lee and Rubio’s proposals, particularly that for the new child tax credit, will meet with resistance from tax-reform purists who argue such changes will not simplify the system at all, but will add complexity to an already arcane code. Americans with several children might owe less under Lee and Rubio’s plan – particularly the middle and working class, who tend to pay more in payroll taxes than in income taxes – but getting them to take advantage of these benefits would require understanding the credits and remembering to claim them, or using a tax professional who does.

In addition, the IRS will have to design new forms or worksheets and, inevitably, some taxpayers will claim refunds to which they’re not entitled or make honest mistakes which expose them to IRS audits. All of which means additional time and frustration for the intended beneficiaries of the proposal. One might even accuse Lee and Rubio of a failure of imagination: A refundable tax credit whose selling point is portability across the income and payroll tax systems, and that may actually increase Americans’ tax-filing burden? This is the great new conservative idea?

Whatever the possible issues with implementation, however, Lee and Rubio deserve credit for introducing these ideas. More importantly, they have presented a subtle but important shift in the way we should understand taxes and the burdens imposed on American workers.

We are accustomed to thinking of taxes as a charge on people as individuals: the amount I owe, the amount withheld from my paycheck and the deductions I can claim. While married Americans can file their income taxes on a single return, this is only a partial exception to the general rule. Key to Lee and Rubio’s proposal is that we begin to think of tax burdens as weighing on families, not just individuals, and that a family’s tax burden be considered across time, even across generations. Having children, they point out, is effectively an investment, one that the tax system penalizes since today’s children fund Social Security and Medicare tomorrow. This is an insight that bears even on issues which Lee and Rubio do not address, like taxes on investment through capital gains and dividend income, and the oft-disparaged estate tax.

Fundamentally, the U.S. tax system today does a poor job accounting for the life-cycle of American families. During young adulthood and middle age, when many Americans are working hard to raise children and pay the mortgage, our tax burden is often high relative to our available resources. Later in life, when the kids are grown and debts are paid, we tend to have higher disposable income and household wealth, a reality which income tax rates reflect only crudely. Failing to recognize this reality imposes costs on taxpayers precisely when their fixed costs are highest, squeezing family budgets and impeding the savings upon which long-term growth – and, of course, future tax collections – ultimately depends. Kudos to Mike Lee and Marco Rubio for pointing in a different direction.

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

One Republican’s carbon-tax campaign faces an uphill battle

October 06, 2014, 10:17 AM

From the Seattle Times:

“The people on the political left have worked very hard to associate this with an agenda of the things they want to do, and that — more than anything else — has made the issue toxic,” said Eli Lehrer, president of the R Street Institute, a conservative think tank in Washington, D.C.

Insurers worry about House GOP delaying extension of terrorism program

October 06, 2014, 10:13 AM

From the Washington Examiner:

It “is entirely possible … that the House will demand a six-month extension so that a Republican Senate next year is a better negotiation partner for their position,” said R.J. Lehmann, an analyst at the right-of-center R Street Institute. “It depends on how strongly the House leadership wants to back the Financial Services Committee chairman.”

What’s the matter with Paul Krugman?

October 06, 2014, 10:11 AM

Rarely does a Nobel Prize-winning economist specifically inquire about the job performance of a state like Alabama. This week, Paul Krugman, a popular liberal commentary writer for the New York Times, asked, “What’s the matter with Alabama?”

Specifically, Krugman referred to a Bloomberg News chart which provided a national snapshot of state job gains and losses since their pre-recession peak. North Dakota led the way in job gains as a result of the state’s energy boom. The only state that Alabama outperformed was Nevada.

From the chart, Krugman sarcastically noted that the political right’s narrative of states with “job-destroying liberal Democratic governors” faring worse “than those with job-creating conservative Republican governors” does not seem to match the job performance of the states.

Krugman’s piece slid into the conclusion that the only way to believe that taxing the rich or helping the poor would destroy job growth is to “invent your own facts.” He may have simply been taking a jab at Heritage Foundation economist Stephen Moore, but that does not excuse his comment.

Krugman is not easily dismissed as a liberal ideologue. He is smart, snarky and a constant thorn in the side of supply-side economists. He also happened to be a Democrat on the staff of Reagan’s Council of Economic Advisors.

The problem with Krugman’s little blurb is that he concedes “there’s not much correlation either way.” Even if there were a correlation, a policy conclusion is a much more complicated exercise. But without even so much as a correlation, Krugman reaches a general conclusion about the policies of the political right and then takes a shot at Alabama because the title “What’s the matter with Nevada?” probably did not have the same ring to it.

It is sloppy work from a talented writer who otherwise has the ability to develop politically practical economic ideas. Alabama’s perspectives on taxes and government might not fit with Krugman’s, but America needs people with his abilities to help craft solutions that fit within political realities.

Simply saying we should increase taxes on the wealthy and spend more on government programs is nothing new. What would be novel is an economist like Krugman trying to build solutions within a system where raising taxes is a political non-starter.

What’s the matter with Paul Krugman? Maybe he is more comfortable sniping at conservative states than he is developing economic ideas that could actually work in them.

R Street welcomes Kevin Kosar as senior fellow and governance project director

October 06, 2014, 8:14 AM

WASHINGTON (October 6, 2014) – The R Street Institute is pleased to announce the appointment of Kevin Kosar as senior fellow and governance project director. Kosar comes to R Street from the Congressional Research Service, where he was an analyst for more than 10 years and served as acting research manager.

In this newly created position at R Street, Kosar will be examining the federal budget process and executive branch oversight, as well as assessing democratic dysfunction in governance from a conservative point of view.

“In thinking about this position, it was important to us to have someone who could not only speak to the issues at hand, but who had a deep understanding of Capitol Hill and a record of published works,” said Eli Lehrer, president of R Street. “We are lucky to have found all of that and more in Kevin.”

Kosar brings a variety of experience to the role, having held positions in government, the not-for-profit sector and academia. He is a widely published author, and has worked closely with Congress.

“I’m thrilled to be joining the team at R Street and taking on governance issues. They are critical to the health of our republic,” said Kosar. “Having spent nearly all of my professional career in public policy, I’m looking forward to tackling these subjects from a perspective grounded in both principles and practice.”

Kosar earned his bachelor’s degree from The Ohio State University, and his master’s and doctorate from New York University.

Earthquake coverage should be standard for mortgage loans

October 06, 2014, 8:00 AM

When it comes to California earthquake insurance, affordability is in the eye of the beholder. Californians are not convinced that earthquake risk is sufficient to warrant the purchase of products that are currently available, made clear by just a 10 percent take-up rate, despite a law forcing insurers to offer the product.

Why are 90 percent of the people not buying an essential product? The argument in favor of securing earthquake insurance has an individual component and a societal component.

From an individual perspective, privately secured capital to rebuild is fast to respond after a quake, since it is subject to contract law and not political will. For example, in Chile, a nation far poorer than the United States, the most recent major earthquake registered 8.8 magnitude and destroyed roughly 20 percent of GDP. Nonetheless, recovery began almost immediately, because 96 percent of homes with a mortgage were covered by private earthquake insurance.

From a societal perspective, relying on government aid creates an untenable situation in which, for every $1 spent on aid, individuals in high-risk areas forego spending $6 on private insurance. As time goes on and this cycle recurs, greater and greater amounts of government aid are needed.

Since earthquake risk is not abating, and since federal largess is not a guarantee, California’s policymakers need to consider ways to improve the California Earthquake Authority’s policy offerings. To the CEA’s credit, it already has taken the first step of offering lower-deductible policies. But more must be done.

The answer might be to broaden the pool of risk by bringing horizontal uniformity to the home mortgage process. Currently, lenders require homeowners to purchase multi-peril homeowners’ coverage to secure virtually any type of mortgage. Lenders do this to protect their investment, to forestall default in the event of a major loss and because such coverage is required by the government-sponsored entities Fannie Mae and Freddie Mac.

But lenders also should require insurance for specific catastrophic risks. In the case of flood risk, they already do. Homeowners situated in flood zones are required to carry flood insurance as a condition of their mortgage.

If a similar approach were taken with earthquake insurance the quality of earthquake policies would improve, since the risk pool would be larger and the institutions financing the risk could bundle California’s risk with other risks unlikely to be realized at the same time. On the consumer end, lower deductibles, lower premiums and discounts for mitigation efforts would all be made available.

Politically, an earthquake insurance requirement on mortgages will be a difficult lift. While conservatives may be perturbed at the prospect of another mandate, requiring private earthquake insurance coverage would prevent the government from having to act rashly in the wake of a catastrophe. Liberals may dislike more premiums being channeled into private hands, but this would allow the government can focus increasingly-scarce funds elsewhere.

On balance, while such a proposal may not appeal to everyone, the present system is a clearly heading for failure. Sometimes a nudge is in the best interest of society’s economic health.

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

Here’s how NYC’s new on-demand shipping app could actually survive

October 03, 2014, 12:38 PM

From CityLab:

Special thanks to Kevin Kosar, senior fellow at the R Street Institute, for his insight into the Postal Service.

Four reasons why international climate discussions should matter to U.S. industry

October 03, 2014, 12:18 PM

Virtually every American in the climate change policy space is supporting, fighting or still deciphering the EPA’s plan to regulate CO2 emissions from existing power plants – commonly known as the 111d proposal. Over the next two months, hundreds of thousands of stakeholders, particularly within the regulated community, will be focused on finalizing and submitting comments, which are due on Dec. 1. (As of Sept. 22, the Agency had already received 1.1 million comments.)

But Dec. 1 is significant for another reason – it is the launch of the international climate negotiations in Lima, Peru, also known as the 20th Conference of the Parties (COP). Next year’s COP in Paris receives greater attention from most observers due to its promised result – a new international climate agreement, the first since 1997 –  but negotiators in Lima aim to define the shape and form of that arrangement. Accordingly, the outcome of this year’s talks potentially holds immense importance to U.S. policymakers and industry, including those entities directly and indirectly impacted by EPA rulemaking.

Although EPA carbon regulation is not linked formally to the international climate process, the Lima meeting and other ongoing discussions related to international climate issues should be watched closely by domestic policy wonks for at least the following four reasons – all of which offer economic and political opportunities:

1. U.S. leverage: From the administration’s perspective, EPA proposals on new and existing power plants should build international confidence in the U.S. commitment to reduce carbon emissions and provide leverage to seek concessions from other major emitters. It remains to be seen, however, if other governments will be satisfied with assurances from the Obama administration that the United States, through EPA and other executive branch action, can alone achieve the “necessary” emissions reductions. Although many Republicans believe the White House will circumvent the Senate with an executive agreement on international climate, other governments may demand a treaty, given their lack of confidence in the commitment level of following U.S. administrations.

It is a widely known assumption in international policy circles, including those in Europe, that a top-down climate treaty like the Kyoto Protocol would almost certainly be rejected by the U.S. Senate. Therefore, climate negotiators may gamble on an alternative approach to Kyoto that may not be as politically controversial in Washington – a treaty embracing a bottom-up approach with domestically-enforceable obligations from all major economies, including China and India. If that happens, the Senate could possibly debate an international treaty in 2016.

 2. Availability of international offsets: A number of foreign governments will be eager to preserve a role under a new global agreement for international offsets in the developing world that help developed countries meet their emissions targets. Questions persist whether tradable credits will be rewarded for land use and forest conservation, but such an option should intrigue U.S. regulated entities, because the cost of such credits can be much lower than the costs of retooling domestic energy systems – especially in the near term. The EPA has estimated that developing country forests can mitigate more than a gigaton of emissions at prices below $3 per ton and 3.5 gigatons at prices below $13.3 per ton. If international forest offsets were used at $3 per ton, the total cost of the 111d proposal would fall from EPA’s estimate of $7.3 to $8.8 billion per year to less than $2 billion, assuming U.S. annual reductions of 0.5 gigatons.

Although the EPA’s proposal does not allow for such offsets, there is no reason why a final rule could not be amended in later years to lower compliance costs substantially, assuming that the agency’s interpretation of “best system of emission reduction” survives certain litigation. If the courts give approval to meeting reductions outside the regulated entity (i.e., the power plant), there is no reason why EPA should not then attempt to broaden the compliance opportunities further to include domestic and international offsets. Domestic energy-policy wonks should thus be keenly interested in making sure that an international agreement leaves room for such tradable credits, to keep costs low for future domestic climate regulations – whatever shape they might take.

3. Energy financing: Developed-country funding for fossil-fuel projects in developing countries has come under scrutiny in recent years. A number of major economies, including the United States, Germany, and the United Kingdom, have placed stringent conditions on financing overseas coal plants – even highly efficient coal-fired generation. Although finance ministers take the lead in such policy, developing countries, such as India, Nigeria and Vietnam, could put stronger and more realistic climate action plans on the table if they were linked to a more refined approach on energy financing from the United States and its partners – one that supports cleaner and more efficient coal plants. Such an effort by those developing governments would reinforce the position of congressional Republicans who wish to prevent the Obama administration from placing tough restrictions on financing power plant exports or projects through the U.S. Export-Import Bank (Ex-Im) or the Overseas Private Investment Corp. (OPIC).

4. Free trade in environmental goods: Earlier this year, the Obama administration announced that it would begin liberalized trade negotiations with 13 other WTO members, accounting for 86 percent of the global trade in environmental goods – worth roughly $1 trillion annually. Some developing country members charge tariffs as high as 35 percent; non-tariff barriers also represent substantial hurdles. With developing countries asking for financial assistance to deploy cleaner technologies as part of a global climate deal, it seems practical for the United States and other developed countries to demand liberalized trade as a precondition – a position that U.S. exporters of pollution-control technologies should favor.

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

‘Ike contingent’ pounding insurers with Texas hail claims

October 02, 2014, 10:58 AM

Insurance availability crises are nothing new. Nor is finger-pointing about what exactly causes them. In Texas, a red state that is nonetheless home to a robust plaintiffs’ bar, sparring in a particularly active legal blogosphere may portend the arrival of a new insurance availability crisis.

The physical cause of the crisis is a Texas specialty — hail. Texas leads the nation in the number of hail events experienced each year. In 2013, that number was 651, nearly 150 more than Kansas, the second most-afflicted state. Since 2000, Texas has been home to 20 percent of the nation’s hail claim losses.

Nationally, there has been a 70 percent increase in hail-related loses over the past six years. While this uptick could be the result of remarkable atmospheric change, it is more likely the result of decidedly earthbound agency – a labor market at work.

In the aftermath of Hurricane Ike, the need for personnel to assess, adjust and repair damage outstripped demand quickly. To fill the void, entrepreneurial armatures thrilled to the opportunity. Predictably, this “Ike contingent,” under-prepared and overly sought as they were, made missteps as they gained experience on the job. As Ike-related claims were exhausted, the Ike contingent found they had picked up skills not readily marketable absent catastrophe damage. Like water following the path of least resistance down a canyon, the Ike contingent moved predictably toward the analogous world of hail damage.

This led Steven Badger, a defense attorney, to ask “What the hail is going on in Texas?” Provided that one can overlook Mr. Badger’s goofy title to examine the piece itself, he presents a formidable argument that structural infirmities within the Texas civil justice system, exploited by the Ike contingent, are compromising the ability of insurers to interact appropriately with their clients. As a result, the frequency and severity of hail claims have increased.

Ultimately, Mr. Badger imagines that:

This pattern will continue until the insurance companies curtail their coverage to the point that it no longer makes sense for these third parties to get involved in the insurance claims process, or greater judicial and legislative attention is brought to bear.

Folks at the Merlin Law Group, a plaintiffs’ firm, proffered a repost to this characterization of Texas’ hail situation. Corey Harris writes that Mr. Badger wrongly places the entirety of the blame for the growth in hail claims on those attempting to assist policyholders, though he does allow that there are bad apples within the Ike contingent. Instead, Mr. Harris contends that insurers have not been prompt or fair in their payments because they are tiring of making large payouts. Chip Merlin goes a step further and asserts that:

When the frequency of a loss increases significantly from past historical levels, do not expect the insurance industry to accept this without a response.

No doubt, insurers have responded to the Ike contingent. They have had to, in order to protect their other insureds from cross-subsidization and outright fraud.

Mr. Harris’ speculation and Mr. Merlin’s ambiguous observation both suggest that insurers in Texas are actively and systematically dragging their feet in such a way that a wave of new hail claims has become necessary to remedy their behavior. Neither inclination is plausible. The scale of the conduct necessary to dictate the kind of uptake in hail claims that has taken place in Texas simply defies belief. The basic labor market reality of the Ike contingent’s industry is a more plausible explanation.

As the next legislative session nears, it bears keeping in mind that Texas already has the highest homeowners insurance rates in the country. If left unchecked, the Ike contingent and enterprising civil justice advocates could see it driven higher.

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

Survey: Louisiana voters opposed to change in Internet sales tax

October 02, 2014, 10:22 AM

From The Advocate:

The survey of 400 likely voters was conducted June 4-5 on behalf of the National Taxpayers Union, which lobbies for lower taxes, and the R Street Institute, a free-market think tank based in Washington, D.C.

 Andrew Moylan, the executive director for R Street, said the results were in line with a Gallup poll taken in June 2013 that indicated widespread disapproval toward a change in Internet sales tax law. Moylan noted that the measure was widely opposed across the board by Louisiana residents of all stripes, from conservative and liberal voters to frequent and infrequent online shoppers.

 

CDC sees e-cigarette use at marked increase and leveling off – tortured logic

October 01, 2014, 8:30 AM

The CDC has released another “more of the same” report on e-cigarette awareness and use. The lead author is Dr. Brian King; the report appears in Nicotine & Tobacco Research.

While the manuscript refers at least 15 times to an “increase” in U.S. e-cigarette use from 2010 to 2013, Dr. King informed the media that e-cigarette use is leveling off. Ironically, Dr. King characterized the plateau in use of a vastly safer cigarette substitute as “a positive note.”

On what did Dr. King base his “leveling” remark? His conclusion was cherry-picked from two out of about 100 percentage figures in Table 2 (in yellow in the screenshot on the left; you’ll need some magnification). Those percentages were not even mentioned in the results, but Dr. King considered them important enough to highlight for the media.

This is a perfect example of the CDC producing data claiming one thing – a “considerable,” “marked,” “rapid,” “doubling” increase in e-cigarette use – then pitching it to the media as something else – a “leveling,” which is “positive.” The agency’s purpose is to disparage a vastly safer cigarette alternative.

The report contains other examples of distorted logic. A reasonable observation – “The marked increase [in use] among former smokers could be attributable to the use of e-cigarettes for cessation.” – is supported by the fact that “ever” e-cig use among former smokers increased to 10 percent in 2013. But King and his coauthors perversely observe that”

The increase could be attributable to new initiation of e-cigarettes among individuals who had successfully quit without previous use of the product, highlighting concerns over the potential for these products to promote relapse to combustible tobacco use.

In other words, the CDC thinks that e-cigs are a gateway to smoking because they might be corrupting former smokers who had previously been abstinent. As Lewis Carroll wrote, “It sounds uncommon nonsense.”

Does simply calling for Judge Fuller to resign send the right message about domestic violence and the federal bench?

October 01, 2014, 8:00 AM

In August, U.S. District Judge Mark Fuller was arrested for assaulting his wife and charged with misdemeanor battery. The Atlanta Police report noted that Fuller’s wife “explained that she accused Fuller of having an affair with his law clerk.” Fuller allegedly responded by pulling her hair, throwing her to the ground, and striking her repeatedly.

This month, Atlanta prosecutors permitted Fuller to enter a diversion program rather than face a criminal trial. If Fuller successfully completes the program, which includes domestic abuse counseling and an alcohol and substance abuse assessment, the arrest will be expunged from his record.

Calls for Fuller’s resignation have become a virtual chorus since his arrest. Gov. Bentley, almost all of Alabama’s federal delegation, congressional candidates and many others have called for Fuller to voluntarily leave the bench.

Now Judge Fuller faces a five-judge committee responsible for making disciplinary recommendations to the federal court’s Judicial Council. Options for the committee run the spectrum from a formal reprimand to requesting that the judge resign.

The bigger question is whether simply calling for Fuller to resign marks an acceptable resolution.

While the prosecution against Fuller may be consistent with that of other first-offender domestic abuse cases, a federal judge is not a common defendant. Fuller holds an office that quite literally stands in judgment of others. By its nature, the position requires a high level of personal integrity and conduct.

The reason for that high standard of conduct is obvious. From now on, whenever Fuller hands down punishment, at times severe, defendants and onlookers alike will point to his pre-trial diversion as evidence of a double standard of justice.

The Constitution states that federal judges “shall hold their Offices during good Behaviour.” Essentially, a federal judge holds his or her office for life unless he or she commits an impeachable offense. While impeachment is a rarely utilized disciplinary measure, Congress has wide discretion in its use.

The Federal Judicial Conference notes only 15 federal judges have been impeached since 1803 and only a handful of those have actually been convicted by the Senate and removed from office. The most recent judge to be impeached was U.S. District Judge Thomas Porteous, who was removed from office in 2010. Notably, several of the impeached judges elected to resign during the impeachment proceedings.

By any measure, Judge Fuller’s conduct could hardly be considered “good behavior.” Although no judge has ever been impeached for domestic violence, such actions cannot be given a foothold in the federal judiciary. While the chorus calling for Fuller’s resignation will undoubtedly grow, Congress should send a message that domestic violence will not be tolerated by judges on the federal bench and file articles of impeachment.

The criminal justice system seems to be willing to give Judge Fuller a second chance, but the integrity of our judicial system cannot afford for Congress to simply call for his resignation and hope that he complies.

How Google Fiber is spurring more internet competition

September 30, 2014, 9:38 AM

From AEI Ideas:

As R.J. Lehmann of the R Street Institute points out, “it’s useful to remember that Eugenio Barsanti and Felixce Matteucci invented the free-piston, four-cycle internal combustion engine in the 1850s, a good half-century before automobiles started rolling off Michigan assembly lines.” Lehmann also notes the good news buried in the story: