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Updated: 22 min 55 sec ago

Let’s help the strivers

October 10, 2014, 10:13 AM

In 2009, Bryce Harper—then a sophomore at Las Vegas High School and already the best high school baseball player in the nation—made the unusual and controversial decision to forgo his final two years of high school, on the grounds that there was simply no effective competition for him at that level. He passed the GED test and enrolled in the two-year College of Southern Nevada.

Harper’s choice turned out to be the right one. In his only season at CSN, he more than doubled the school’s single-season home run record, was awarded the Golden Spikes award as the best player in college baseball and was the first player taken in the 2010 Major League Baseball draft. Starring for the Washington Nationals, Harper was the National League’s rookie of the year in 2012.

The choice Harper made is not one limited just to once-in-a-generation athletes. Based on results from some limited experiments, proposals to allow students to finish high school a year early in favor of two-year community college scholarships have a lot to recommend them.

Texas and Utah currently offer small grants for students who forgo a fourth year of high school to enroll in college, while Arizona provides forgivable loans for the same purpose. Connecticut’s Yankee Institute for Public Policy has promoted the idea in conservative circles. But the idea has hardly caught fire, even though it could appeal across party lines, saving taxpayer money while also expanding opportunities for some of those poorly served by the educational system.

Liberals have obvious reasons to like such scholarships. They would provide 14 years of free schooling to students, rather than the current 13 years. They would relieve financial pressures for those who would struggle to pay the $2,700 a year that full-time community college costs, on average. They also would mark a significant public sector investment in professional training, greatly increasing the potential earning power of those who otherwise might receive only a high school degree.

Fiscal conservatives should be attracted by the fact that high school is far more expensive than community college, and even trading two years of the latter for one of the former will usually be a net savings. In Boston, for example, high school costs an average of about $17,000 per year, per student, while the most expensive community college option is only $4,500. In some areas, free community college could avoid pricey duplication of resources. A rural high school might not need to build an advanced placement physics lab if students could get essentially the same instruction at a community college.

Community college scholarships also would bend the cost curve for many who eventually go on to a four-year college, but would need to finance only two years there. This could prove especially helpful to those ambitious strivers who might not be ready or able to complete a four-year degree, but could “ease in” through community college. Those that didn’t complete the degree quickly would still leave with at least some college credit and new skills.

The feasibility of such plans will vary by jurisdiction. In most states, a high school diploma requires four years of class credits. However, in some localities, students may finish school early by compressing their schedules. And local boards of education in some places have broad powers to decide when to award diplomas. In others, students may be able to complete high school and an associate degree simultaneously, by applying community colleges courses for high school credit. (This is already pretty common.) In still others, the GED test may be the most efficient way to accelerate the process.

There are potential drawbacks that policymakers must consider. Students who take a chance on free community college would be left with no credential if they dropped out, and community college drop-out rates are very high. One reason community colleges cost less than high schools is that they do less: Class sizes are larger, total class time is more limited, and there are often fewer extracurricular opportunities like sports and theater. Students also are financially responsible for books and other materials that high schools typically provide for free.

But these issues can all be addressed, and the idea of getting high school students to complete college classwork already has broad appeal. In recent years, both the Democratic and Republican national platforms have called for more opportunities to earn college credits in high school. Most high schools have offered at least some advanced placement courses for decades. A full third of the class of 2013 took at least one AP exam, and the overwhelming majority scored well enough for most colleges to award them credit.

Most larger school districts also allow dual enrollment in some college courses already. The Gates Foundation’s Early College High School initiative has helped students in 28 states take college and high school classes simultaneously, sometimes earning an associate degree in the process. (The programs generally take place at special high schools rather than traditional community college campuses.) At least one very well respected freestanding program, Bard College at Simon’s Rock, exists exclusively for students who want to start college after 10th grade. Furthermore, many four-year college admissions offices will consider applications from sufficiently prepared high school juniors already.

Nonetheless, the idea of trading some high school for guaranteed community college scholarships has not attracted much support, and implementation of current programs leaves something to be desired. Arizona provides loan forgiveness only if students complete associate degrees or the equivalent. Students in most of the programs aren’t able to apply the grants to tuition at a four-year school, which limits their appeal. Since the programs don’t usually attract the very best students, who are bound for four-year colleges anyway, they haven’t found as many takers as they might. Not only should the grants be more broadly applicable (including as a way to pay part of the tuition for a four-year college), but the window in which to take them should be expanded to accommodate those who might need to work after high school or simply aren’t ready for college right away.

For most students, a standard four-year high school experience is still probably best. Few students want to miss out on prom, homecoming games, or many of the other senior-year rites of passage. Community colleges, while great resources, aren’t necessarily intended for the very brightest and most ambitious students. As with any choice, some who make this decision might find that they are worse off. But it is an option that could benefit many, and for that reason alone, it’s an idea that deserves a closer look.

Is all-or-nothing better than nothing at all?

October 10, 2014, 9:11 AM

The loudest criticism of the ongoing Transatlantic Trade and Investment Partnerships negotiations between the United States and the European Union is that they are conducted behind closed doors. On both sides of the Atlantic, there are concerns that the negotiation process’ lack of transparency is inherently undemocratic, ignoring the will of the people and violating national sovereignty. Particularly in Europe, many question the choice to present the European Parliament with an “all-or-nothing” proposition, in which the final version must be voted on without modification.

This is an argument we’ve seen before, in an earlier century over the ratification of a different document: the U.S. Constitution.

Many of the strongest opponents to the Constitution were opposed to the procedure for ratification, rather than the content of the document, as revealed by the late historian Pauline Maier in her award-winning book, Ratification. Following the Constitutional Convention, state conventions were required to vote “yea or nay” on the final document without any modifications. Opposition leaders, like George Mason of Virginia and Robert Whitehill and William Findlay of Pennsylvania, blamed the demand to “take this or nothing” for converting “men who had had hoped to ‘perfect’ the Constitution into its opponents.”

There is no denying that the foundational text for United States was created through a relatively undemocratic process. As historian Ray Raphael explained in an analysis of Maier’s book:

Without any means for amending the document prior to ratification, the people, in whose name the Constitution was supposedly written, were being asked merely to add their assent to a document not of their own making.

It is an issue that gets at the core of federalist politics, particularly when it comes to trade. Are there instances when supranational agreements should be negotiated above the level of democratically elected national governments, especially in the interest of speed and efficiency? What takes precedence, national or supranational law? Which body adjudicates disputes?

In theory, TTIP is not an unpopular or polarizing concept. According to a Pew Research survey conducted in April 2014, 75 percent of Germans and 72 percent of Americans believed increased trade between the United States and the EU would be a good thing. But the undemocratic negotiating process has soured public opinion on a number of leaked TTIP developments. The controversial investor-state dispute settlement has been targeted as a mechanism for promoting corporate sovereignty. Edward Snowden’s surveillance leaks have provided an excuse for greater data protectionism and the increased regulation of large content and service providers such as Apple, Google and Amazon.

Digital trade should be an area where TTIP could make progress and do good. It lies at the heart of the global Internet economy and is naturally suited for seamless transnational transactions. As the European Commission implements an ambitious plan to realize a “digital single market” in the next six months, TTIP will play a major role in harmonizing digital trade both between the United States and Europe and within the EU by addressing key regulatory discrepancies in intellectual property and data flows. But even provisions that would effectively encourage and facilitate the transnational flow of content online — by removing intermediary liabilities, such as a version of Section 230 of the Communications Decency Act — have been tainted by the secretive nature of the negotiations.

Whether negotiation outcomes would be different with public input is impossible to know, but the perception that the voices of the people are being ignored is almost equally damaging. One of the major strategic goals of TTIP is to promote transatlantic unity. A deal in which nations feel unable to defend their interests will do quite the opposite.

Possibly in recognition of such concerns, the EU just yesterday chose to publish the TTIP negotiating mandates. It is a welcome move, though whether it will assuage transparency concerns sufficiently to complete negotiations before the 2016 U.S. presidential election campaign remains to be seen.

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

American Sustainable Business Council

October 09, 2014, 11:24 AM

K&L Gates LLP

October 09, 2014, 11:24 AM

More third-hand nicotine nonsense: From vapor?

October 09, 2014, 10:36 AM

Nicotine can be detected in a chamber after releasing vapor directly from an e-cigarette, according to a report in Nicotine and Tobacco Research by Roswell Park Cancer Institute investigators. A Carl Phillips parody of the abstract convinced me to review the journal article. Clive Bates also published a scathing critique.

Dr. Maciej Goniewicz and collaborator Lily Lee released e-cig vapor from 100 four- to five-second puffs into a 12x10x9-foot room. Meticulous collection of samples revealed that about 205 micrograms of nicotine were spread out over 81 square feet of tile floor. This is unsurprising, as most of the nicotine in vapor is expected to eventually fall to earth. Far less nicotine was recovered from vertical surfaces like walls and windows.

As Phillips noted, a huge amount of vapor was involved in this test, and it was injected directly into the room without passing through a user. Even so, Phillips notes in his parody, “this means someone would have to lick clean the entire surface of a sliding glass door in order to get a dose of nicotine similar to smoking half a low-nicotine cigarette.” Or, Phillips might have said, one would have to lick about two-thirds of the 120-square-foot floor. (Recovery from a vertical surface is about one-fourth that of the floor.)

Four years ago, I reported that third-hand smoke is an almost imaginary vector by which smokers expose everything and everyone to dangerous toxins. Today, smokeless tobacco users are also the scare campaign’s targets. According to a 2013 study in Nicotine and Tobacco Research, “children living with smokeless tobacco users may be exposed to nicotine and other constituents of tobacco via contact with contaminated dust and household surfaces.” In this scenario, a child could consume 20 micrograms of nicotine, about one-tenth the amount of the vapor floor-licker, by eating about one ounce of dust.

For Goniewicz and Lee, the exposure to nicotine from e-cigarettes is important because of “potential risks of third-hand exposure to carcinogens formed from nicotine released from e-cigarettes.” This is reminiscent of reports that U.S. paper currency is contaminated with cocaine  or heroin, morphine, methamphetamine and PCP. That issue was put into perspective by Adam Negrusz of the University of Illinois at Chicago: “I never think about this as a source of danger. We have more things which can be potentially harmful.”

Third-hand nicotine harmful? Don’t even think about it.

No, the F-22’s success against ISIS doesn’t justify its price tag

October 09, 2014, 8:00 AM

The controversial F-22 fighter just had its combat debut in Syria, bombing ISIS-controlled targets. The plane, which costs $412 million per copy, finally saw action 23 years after it was first approved and nine years after it entered service. It was used to evade Syrian air defenses and drop bombs in the middle of a city, without causing collateral damage or injuries.

This successful airstrike prompted a Fox News article in which defense analysts sang the praises of the F-22:

“It seems to have been very successful – it was designed to have that ‘first night,’ precision strike capability,” Rebecca Grant, president of Washington D.C.-based defense research firm IRIS Independent Research, told FoxNews.com. “This proves that the F-22 is a viable combat aircraft and a good air-to-ground weapon.”

Rebecca Grant was not alone in her praise of the F-22.

“The U.S. has invested a lot in the F-22 Raptor and the U.S. Air Force has worked so much in the last few years to turn the troubled, expensive interceptor into a real multi-role platform that could be eventually used in a real operation,” Rome-based aviation expert, pilot, and former Italian Air Force officer David Cenciotti told FoxNews.com in an email. “In this case it was also the chance to appease those who criticized the costly stealth plane and the fact it was never used in combat until a couple of days ago,” he said.

Joining the defense analysts were hawks who saw an opportunity to criticize the Obama administration for cancelling the F-22 in 2009. Leading the criticism was Breitbart writer Thomas Rose, who called the F-22 “the most capable fighter aircraft ever developed.” Breitbart.TV also featured President Obama’s speech in which he called for the plane’s cancellation, deeming it “outdated and unnecessary.”

The problem with the claims that this recent bombing strike proves the F-22 is a successful fighter is that this is not the sort of mission for which the F-22 was designed. The F-22 project was authorized to ensure American air superiority for decades to come. As Michael Peck at The National Interest points out, the F-22 won’t face a serious test in the current campaign against ISIS. ISIS has no credible air force to speak of and limited air defenses. Most aircraft in the U.S. inventory, which are far cheaper, are more than capable of dropping bombs.

The Pentagon knew that simple fact even when the F-22 entered service. The Pentagon believed that the United States’ enemies were too low-tech to justify tuse of the F-22 in Afghanistan, Iraq or Libya.

Meanwhile, there remain serious questions about the F-22’s combat capabilities. A recent piece in Business Insider raised questions about the F-22’s ability to fight non-stealthy fourth-generation aircraft, such as the Eurofighter Typhoon and the French-made Dassault Rafale. The more accurate designation for planes like the Typhoon and Rafale are Generation 4.5, a category that also includes the Russian Su-35 and upgraded variants of the Su-30 and MiG-29. The Chinese Air Force also flies Generation 4.5 fighters, such as the J-10B and upgraded Su-30 variants. China and Russia are the closest peer competitors to the United States.

Until the F-22 faces air-to-air combat against fourth generation fighters and especially against Generation 4.5 fighters, we really won’t have an empirical test of the plane’s combat capabilities. At $412 million per plane, the Obama administration did the right thing acknowledging there are cheaper alternatives for dropping bombs.

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

Law against porn-watching by fed workers?

October 08, 2014, 12:39 PM

Rep. Mark Meadows, R-N.C., has introduced legislation to prohibit federal employees from accessing pornographic websites on their computers. As reported by The Washington Post, this legislation was prompted after the Environmental Protection Agency’s inspector general discovered a senior employee had downloaded 7,000 smut files on his work computer, and spent many work hours eyeballing the website “Sadism Is Beautiful.”

Obviously, it is not appropriate for a government employee to shirk his official duties and spend the day watching kink online. But the question remains: will enacting a new law make a difference? Probably not.

Plainly, all federal employees know they are not permitted to watch porn on their work computers. Most, if not all, agencies already have policies on the appropriate use of computers. At the Library of Congress, every employee must take a computer security awareness course each year. It warns against phishing scams and perilous email attachments and, yes, it reminds employees not to use government computers to view porn. Additionally, each time a Library employee powers on his computer, a splash screen reminds him the computer is government property and must be used in accordance with agency rules.

This is an example of the oversight system working. An inspector general caught an employee breaking the rules. In this instance, the employee was banned from the EPA’s headquarters and is under investigation. The IG informed Congress in a May oversight hearing. It is a classic example of what scholars Mathew D. McCubbins and Thomas Schwartz called fire alarm oversight. Members of Congress cannot monitor every federal employee constantly, so they rely upon watchdogs to pull the alarm when there is mischief.

There also is the matter of implementation. How exactly is an agency supposed to prevent an employee from viewing porn on the job? That is what H.R. 5628 ultimately intends. Again, the bureaucracies already have rules forbidding smut watching; yet, it occurs. Agencies use Web filters to block some pornographic sites, but they are crude tools. The software frequently blocks non-pornographic websites, and does nothing to stop the luridly inclined from getting their thrills ogling not-for-work material via Google or Yahoo images. And let us not forget that more than half of the public carries personal smartphones. The priapic bureaucrat can use his cellphone to fritter away his day viewing “Bare So Horny,” another favorite website of the EPA creep.

H.R. 5628 would require the Office of Management and Budget (OMB) to issue rules against watching porn, which agencies then would have to spend time comparing with their current rules. This sounds sensible, but in practice, it likely will devolve into an exercise in bureaucratic busy work. The OMB will spend weeks, if not months, drafting the policy, then agencies will have to compare their own policies against the OMB’s and then alter them accordingly. The agencies will issue implementing directives, all of which will absorb agency energy and resources that could be spent doing the public’s business.

A better approach to the problem would be for Congress to ask the EPA to report back promptly on the steps its information technology folks have taken to block access to smut sites. Congress could then post this information online, and invite the public to comment. Who knows, maybe a techie out there can recommend better filtering software to the EPA.

It is commendable for Meadows and others in Congress to call foul on this bad behavior at the EPA. But putting another law on the books will not fix the problem. Rather, Congress as a whole should take this episode as further reason to devote additional time and energy to holding federal agencies and employees accountable for their performance.

Five ideas to put taxis, limos and ride-sharing companies on equal footing

October 08, 2014, 11:45 AM

Recent polling by the University of Chicago’s Initiative on Global Markets find that economists overwhelmingly agree that the rise of ride-sharing services like Uber and Lyft is good for consumers.

The initiative’s weighted poll of economics professionals found that 100 percent agreed, and 65 percent strongly agreed with the proposition that “letting car services such as Uber or Lyft compete with taxi firms on equal footing regarding genuine safety and insurance requirements, but without restrictions on prices or routes, raises consumer welfare.”

Alas, determining what those “genuine safety and insurance requirements” ought to be, and creating a path to ensure they are applied equitably, has proven a challenge for state and local lawmakers. In a new paper that examines some of the insurance challenges in the ride-sharing market, I outline five basic recommendations that could serve as a first step:

  1. Disclosure: As part of their terms of service, transportation network companies should be required to disclose, both to users and to drivers, what insurance coverage exists, what party is responsible for procuring it and any significant exclusions.
  2. Uniform coverage requirements: The minimum liability limits for bodily injury, physical damage and uninsured/underinsured driver coverages should be uniform across for-hire transportation services, whether they are taxicabs, limousines and livery drivers or ride-sharing services. In some cases, equalizing coverage requirements will require lowering current limits for livery drivers, which frequently are set higher than those for taxicabs.
  3. Common law standard-of-care: One important question to answer is whether a driver who is logged in to a ride-sharing app, but not currently transporting passengers, should be subject to the same heightened standard-of-care that is applied to common carriers like taxis and limos. Rather than attempting to answer this question with legislation, lawmakers would be well-served to see how courts come down on the issue of whether this behavior is inherently “commercial,” or whether it is more like a motorist’s use of a personal GPS device.
  4. Underwriting freedom: Insurers who do not judge ride-sharing to be an appropriate or profitable risk to underwrite should be free to exclude coverage for those services, or to deny or cancel coverage to applicants who are ride-sharing drivers. The alternative would be to force carriers to take on risks that are not appropriately priced, thus potentially driving up rates for all auto insurance consumers.
  5. Product flexibility: State lawmakers and regulators should be open to new insurance products that do not strictly meet the definitions of “personal” or “commercial” coverage. This should include allowing insurers to consider new rating factors for ride-sharing drivers. For instance, insurers may wish to introduce devices that track not only how many miles an insured is driving, but how many of those miles are logged while logged in to one or more ride-sharing services. Alternatively, insurers might look to base rates in part on the average scores ride-sharing drivers receive from customers.

Insurance coverage is just one of a host legal and regulatory issues that must be resolved as ride-sharing grows in popularity. Moreover, while early efforts by lawmakers to address such issues are, by necessity, going to respond to existing ride-sharing apps like Uber and Lyft, they should be prepared for the fact that services may evolve in the future with radically different business models.

An overzealous regulatory response, particularly one motivated by rent-seeking incumbents, can crush a new and innovative industry in its cradle. The answer is not to eschew any and all regulation, but to act modestly and cautiously, imposing new rules only where they genuinely address real consumer harms.

Given a commitment on the part of policymakers to the principles of limited, effective government, we believe ride-sharing and other emerging disruptive technologies should have every opportunity to thrive.

Florida’s insurance industry a big contributor to state economy

October 08, 2014, 10:37 AM

Its status as a low-lying peninsula jutting 500 miles into the warmest, most hurricane-active waters in the world makes Florida one of the riskiest places to live. So it comes as no surprise that the cost to insure properties in Florida does not come very cheap. Which, by extension, does not make insurance the most popular of industries among Floridians.

However, a recent study published by the Florida Office of Insurance Regulation sheds light on the positive impact the insurance industry has on Florida’s economy.

Every year, Florida law requires the OIR to produce a report describing the state of Florida’s insurance market for the previous year. The office found that, in 2012, the insurance industry provided billions in compensation to thousands of employees, and by extension, to the Florida economy.  Specifically, it found that:

  • Insurance-related entities provided more than 193,000 jobs, which amounts to almost 2 percent of all jobs in Florida;
  • Florida insurance industry employees received almost $12 billion in total compensation, comprising roughly 2.8 percent of statewide compensation;
  • The insurance industry in Florida generated almost $20 billion in total economic output, or roughly 2.5 percent of the gross state product; and
  • Premium taxes paid by insurance companies totaled almost $705 billion to the state’s general revenues in Fiscal Year 2012.

The report also found the insurance market in Florida experienced steady growth and further stabilization, especially in regards to the property insurance sector.  Florida domestic companies continued their growth, including expansion into other states.

Citizens Property Insurance Corp.’s share of the market decreased to 21.1 percent as of Dec. 31, 2012, from 23.6 percent the previous year, largely due to the gradual unfreezing of Citizens’ rates (10 percent “glidepath”) as well as takeout initiatives pursued by Citizens. Next year’s report should reflect an even greater scale-down of Citizens’ market share, due to implementation of the Citizens Clearinghouse and a number of successful take-outs.

Indeed, Florida’s property insurance system has experienced a degree of much-needed stabilization thanks in part to responsible legislation that has attempted to undo some of the ill-conceived reforms enacted in 2007 that largely distorted the market, undermined competition and foisted an enormous amount of risk from the private market onto taxpayers. Coupled with a historic drop in the cost of private reinsurance and Florida’s unprecedented eight years without a hurricane strike, Florida appears to be in its best position in years to absorb the economic impact of a major storm.

Nevertheless, the Legislature can and should do more to ensure that Florida and its property insurance market is more than just a “one-hit wonder.” If the 2004 and 2005 hurricane seasons taught us anything, it is that Florida is susceptible to multiple storms in a short period of time, and it should be financially prepared for it.

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

Detroit enables ‘prison guards of the past’

October 07, 2014, 4:25 PM
“There you go again…” exclaimed  Ronald Reagan famously, as he claimed the debate audience and eventually the White House.  The City of Detroit is once more eschewing hospitable relations with its residents and visitors by making one of the most helpful advancements in local transportation illegal. That was their first instinct as well, and the first official act was a cease-and-desist order.  Then, bowing no doubt to public pressure, the city signed agreements with two of the popular ride-sharing networks,  Lyft and Uber, to let them operate until the city can develop an ordinance. The agreement requires Lyft and Uber to carry a $1 million liability policy, maintain certified vehicles and to have annual background checks done. Now, Detroit Council Pro Tem George Cushingberry Jr. has asked the police department to ban Lyft and Uber, and his earthy strategy was quoted in the Detroit News: “Because then maybe I can smoke them out, because I don’t know what else to do.” The taxi companies complain that, in addition to the inspections and insurance issues the recent agreement looked to resolve, the transportation network companies don’t require their drivers to have taxi medallions ( called “bond plates” in Michigan) that cost up to $10,000. The taxi industry’s advocates are very active in Detroit and elsewhere to make sure that any new entrants to the system are burdened with all of the regulatory requirements that they face. In his most recent book, “Breakout,” Newt Gingrich refers to the systemic barriers to the new economy and potentially disruptive businesses as “prison guards of the past.”  There are many examples coming to light of people using what the insurance industry now generically calls “commercial use of personal assets.” People are sharing cooked meals, transporting people and stuff, (including a new business called Canary which delivers medical marijuana), and renting out bathrooms, power tools and many more kinds of assets as new small businesses. Free-market advocates, including lawmakers, aren’t against all regulation of these new businesses, but we do want to see thoughtful and limited regulation, which probably doesn’t look like what taxicabs now have. Actually, the federal government’s main agency looking out for consumers shockingly has it about right. Here are a couple of quotes from a recent letter from the Federal Trade Commission to the state of Colorado and the city of Anchorage, Alaska.:  In evaluating claims that the practices to be prohibited impose a genuine threat to consumer welfare, we recommend that CPUC (Colorado Public Utilities Commission) be guided by the principle that any restriction on competition designed to address such potential harm should be narrowly crafted to minimize its anticompetitive impact… Because new entry and competition may generate consumer benefits and are unlikely to harm consumers or competition, staff strongly supports eliminating restrictions on the number of vehicles that may provide taxicab service by 2022, or sooner, if practical. Staff also recommends that rates relating to the business of passenger vehicle transportation services should generally be set by competitive forces where there are no restrictions on entry… Regulation of new computer and smartphone applications should focus primarily on ensuring the safety of customers and drivers, deterring deceptive pricing practices, and addressing other consumer protection issues, especially privacy and the prevention of identity theft. A regulatory framework should not restrict the introduction or use of new types of applications, or novel features they provide, absent some evidence of public harm. In the event that the Assembly finds evidence of harm from new methods of competition, a restriction on competition should be narrowly crafted to minimize its anticompetitive impact… So we believe that Detroit is potentially once again turning the wrong way in service of its citizens and visitors.  Hopefully, the grassroots efforts by people who really appreciate these breakout industries will prevail and limited regulation to insure safety and sufficient accident coverage will emerge as the right choice. This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

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.”