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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  The ordinance also rightfully repealed the arcane requirement many cities still have that driver-for-hire companies charge a minimum fare.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.

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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.

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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.

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‘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:

Transformation, tests and t-shirts

September 30, 2014, 8:00 AM

Intellectual property laws sometimes pit different camps of creators against each other. On the one hand, makers want the freedom to pull inspiration from works that have already been made. On the other, they want to be paid for their own work. Last week, the Seventh U.S. Circuit Court of Appeals decided a case in Madison, Wisconsin that pitted a photographer against a t-shirt designer, with dashes of parody, political speech and perceived defamation thrown in.

In 2012, the mayor of Madison, Paul Soglin, tried to stop the annual Mifflin Street Block Party. The event, held on the first Saturday each May, was founded in 1969 as a protest of the Vietnam War. After the war ended, it evolved into a bacchanalia for University of Wisconsin students and their road-tripping friends. By 2011, the event was out of control, with allegations of fights, sexual assaults and stabbings.

Despite the problems, the students loved the Mifflin Street festivities, and they were not happy about the mayor’s threats. Before the 2012 party, the staff at Sconnie Nation, a local t-shirt store (WiSCONsin, get it?), pulled a photo of the mayor off of the city’s website, adapted it for a silk screen and produced t-shirts that said “Sorry for Partying” — in part, a reference to the fact that Soglin himself took part in the very first Mifflin Street Block Party. They sold a total of 54 shirts, making a small profit.

Michael Kienitz, the photographer who took the picture of Soglin, cried foul. He may have filed suit at the instigation of Mayor Soglin, although that’s neither here nor there from a legal perspective. Kienitz said the photo was copyrighted and that the city had a license to use it for non-commercial purposes only. Therefore, Sconnie Nation had appropriated his image, and Kienitz wanted compensation.

The federal court for the Western District of Wisconsin ruled for the defendants, saying that Sconnie Nation’s design was a transformative use of the photo. It cited a decision by the Second District Court of Appeals, Cariou v. Prince, about the right to create artwork based on copyrighted photographs. In that case, the court ruled that Prince’s artwork transformed the works enough to be considered fair use.

Kienitz appealed, and the case went to the Seventh Circuit. The appeals court not only upheld the decision, but it also criticized the Cariou v. Prince rationale. They said that it is difficult to determine whether something is transformative, and that a better test is Section 107 of the U.S. Copyright Act, which lists four factors that can be used to determine if use is fair:

  • The purpose and character of the use, including whether it is commercial in nature
  • The nature of the copyrighted work
  • The amount of the portion used in relation to the copyrighted work as a whole
  • The effect of the use upon the potential market for, or value of, the copyrighted work

Using these factors, the court noted Sconnie Nation’s use was commercial and that the photograph was copyrighted properly. However, the design and silk-screening process reduced the photo (see left) to the outlines of Soglin’s face, a small part of the original. Furthermore, the t-shirts didn’t affect the market for Kienitz’s original photo.

Legal scholars have been abuzz about this case because it criticized another court’s decision. It also upheld the use of the four factors in copyright law, giving makers good guidance on what to do when faced with similar situations.

In short, blur the heck out of the image so that the original work is not easily recognizable by an aggrieved subject. If your case is heard by the second circuit or the seventh, you’ll be safe.

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Under carbon rule, the EPA will be either Alabama’s overlord or its puppet master

September 29, 2014, 3:13 PM

In June of 2014, the EPA proposed a draft rule to regulate carbon dioxide. The rule made headlines for weeks and then largely dropped from public conversation. While the conversation may have died, the ramifications of the rule will be felt by Alabama’s political class much sooner than many expect.

The EPA has proposed that Alabama reduce its carbon emissions related to electricity generation from 1,444 pounds per megawatt hour to 1,059 pounds by 2030, a reduction of slightly less than 30 percent.

The rule is based on EPA’s view of optimal future carbon reductions as embodied by the Best System of Emission Reduction (BSER). The BSER assumes four “building blocks” to reduce carbon. The first is heat rate improvements at existing generating units. The second block expects increased generation from natural gas combined-cycle plants. The third anticipates more low-or-zero carbon-emission generating units, and the fourth block predicts demand-side energy-efficiency improvements.

Most importantly, the EPA plans to issue a final rule by June 2015. From there, states must submit their compliance plans to their respective regional EPA office no later than June 30, 2016.

While the EPA considers its model to be an example of “cooperative federalism,” many state politicians would likely consider it an example of “federal puppetry.” Like other pollutants regulated under the Clean Air Act, Alabama is required to design a state implementation plan (SIP) for the new rule. If that plan does not meet EPA approval, the EPA may require amendments to the SIP. If those amendments do not occur within two years, the EPA can then craft a federal implementation plan (FIP) that cuts the state out of the regulatory framework entirely.

Needless to say, most of Alabama’s state and federal politicians consider the EPA’s carbon rule to be the height of federal overreach and a significant economic burden imposed on the state for a relatively negligible impact on global carbon emissions. Most opponents of the carbon rule continue to hope that the courts invalidate the rule or that political dynamics change enough to undo it.

While those options remain possibilities, time could become a critical issue. Without any immediate changes, Alabama could be facing a final EPA carbon rule around nine months from now.

If legal and political efforts to derail the EPA’s carbon rule fail, politicians who have fought President Obama’s carbon regulation plan tooth and nail will be required to create their own means of reducing carbon emissions under the EPA’s supervision, or stand idly by and watch the EPA completely craft the regulatory environment for energy generation in the state.

Neither option will be politically palatable in a conservative state like Alabama, but the situation could serve as a sobering reality concerning the growing power of the EPA and the states that have become little more than its puppets.

R Street is hiring a new outreach manager

September 29, 2014, 1:21 PM

The R Street Institute, a free-market think tank based in Washington, D.C., is looking for a dynamic, versatile, bright and well-connected person to serve as our outreach manager.  Founded in 2012, R Street operates under the motto “Free markets. Real solutions.” We’ve been called “pragmatic libertarians” and accept that label. Our work covers a variety of “high-complexity/low-salience” issues that we approach from a principled, free-market perspective.

Candidates should have at least three years of full-time experience working on public policy issues in Washington, D.C. In particular, experience at another think tank or on Capitol Hill is highly desirable. Some experience doing coalition work is also necessary. The ability to write well and quickly is also highly desirable and a record of published work is an enormous plus.

Candidates’ personality, cultural fit and work ethic are at least as important as their specific backgrounds. We’re all self-motivated, high-energy types who strive to get things done quickly without micromanagement. If you haven’t at least sometimes felt that you were more productive than almost everyone else in your workplace, you probably won’t fit in with the rest of us.

Because we work on a wide variety of issues, deep expertise in our issue set is not expected and, to some extent, we will build an outreach manager’s particular issue set around his or her own background. That said, we expect the person we hire will work on issues like intellectual property reform, agricultural policy, taxes, technology and the environment, so experience on those particular issues and others in R Street’s portfolio is highly desirable.

This position will report to R Street’s outreach director and, indirectly, to our executive director.

Pay is commensurate with experience. R Street’s salaries are highly competitive and people leaving other non-profits to work for R Street have always received significant raises. This is a full-time, W-2 job with health insurance fully paid by the employer and a suite of excellent benefits, including an employer-funded HRA, a 401(k), gym membership reimbursement and a very generous vacation policy.

R Street is a non-partisan organization, but is often identified with the political right. That said, we’re a lot more interested in solving problems than winning fights. As such, a willingness to work with people that you may agree with on few issues is a requirement. Likewise, we want and need someone who can disagree without being disagreeable. Someone who is actively opposed to our work shouldn’t apply, but there is certainly no party affiliation litmus test or need to agree with every word that everyone at R Street has ever written.

Needless to say, we don’t discriminate on the basis of sex, race, creed, color, national origin, sexual orientation, gender identity, veteran status, taste in music or anything else that is illegal, immoral or stupid to use as a basis for hiring.

To apply, put your cover letter into the body of an e-mail, attach a resume, and send it to employment@rstreet.org. Include the word “Outreach” in the subject line and include one writing sample (a published one is greatly preferred and web links are fine). We intend to accept applications until Oct. 24 and plan to do interviews in Washington, D.C. during the week of Oct. 27, probably on Oct. 31. If you think you’re very well qualified and we haven’t gotten back to you within a week of you submitting your resume, please drop us a line and we’ll be sure to take another look.

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RESTORE Act committee should get back to work

September 29, 2014, 11:11 AM

The committee established by Monroe County to recommend how to spend nearly $1.2 million in BP Oil Spill money has an unprecedented and unique opportunity. (RE: “Back to work for RESTORE Act committee,” 9/16/14)

As your article states, the federal RESTORE Act authorizes counties affected by the 2010 oil spill including Monroe to receive a portion of the multimillion dollar fines paid by BP to be used for environmental restoration, capital improvements and other economic stimulus projects.

Monroe, however, is a special case. There is arguably no other Gulf Coast county whose natural environment is so precious and economically vital as Monroe’s. Additionally, there is likely no other county at greater risk of hurricanes, storm surge and other related disasters.

Therefore, the committee should examine ways to maximize RESTORE funds to mitigate against these risks and to make Monroe County more resilient while helping preserve its natural environment. Coastal wetlands restoration projects, for example, promote wildlife habitats and simultaneously provide natural buffers to wind and surge. Modernizing water and sewage systems reduce toxic leaks and runoff, and should make it easier to eventually restore services after a hurricane.

These are some examples, but the committee must remember that these are not recurring funds — eventually, the “free money” will run out. As such, the temptation to use these funds to create new programs or otherwise grow government should be avoided so taxpayers are not on the hook. The focus should remain on tangible investments that will help the environment, reduce risk and, by extension, help secure Monroe County’s economy.

Pornographers choke in ‘Deep Throat’ case

September 26, 2014, 12:34 PM

While Hollywood is often known as one of the groups most fiercely committed to protecting copyrighted works, a recent case shows that even in Tinseltown, the veto power of intellectual property owners is not absolute.

And what a case it is. The Guardian reports:

Producers of the most successful porn movie of all time, Deep Throat, have lost a legal battle against the makers of a biopic about its tragic lead, Linda Lovelace. A New York judge ruled on Monday that Lovelace, the 2013 biographical drama starring Amanda Seyfried as the title character, does not infringe copyright of the infamous 1972 porn film that inspired it.

Deep Throat’s producers had argued that three key scenes, two involving oral sex and one in which Lovelace can be seen driving in her Cadillac, “reproduced dialogue word for word, positioned the actors identically or nearly identically, recreated camera angles and lighting, and reproduced costumes and settings”.

After viewing both movies Judge Thomas Griesa demurred. “Deep Throat is a pornographic film containing 17 scenes of explicit sexual content,” he wrote in his ruling, which was covered by The Hollywood Reporter. “Conversely, Lovelace is a critical biographical film that documents the tragic story of Linda Lovelace and provides a behind-the-scenes perspective on the filming of Deep Throat. It does not contain any nudity.”

The decision will presumably cause some relief in Hollywood, which routinely recreates famous scenes for biographical films. Had the ruling gone differently, movies such as My Week With Marilyn, the 2011 film that depicted the shooting of scenes from the 1957 rom-com The Prince and the Showgirl, might conceivably have found themselves mired in legal difficulties.

Yes, that’s right, the pornographers behind Deep Throat sued not because another film used their footage, but because the filmmakers behind Lovelace mimicked the shots they made in order to lend authenticity to the film’s depiction of its subject’s career. Yes, they were the same shots, but on a different camera, with a different cast and crew, on a different set, as part of a different film.

It’s not just the lurid nature of this case that should tempt the reader to laugh. The entire theory underlying it is laughable. Imagine, for instance, that the estate of Richard Wagner sued every artist who set a composition in the key of E flat major, because the overture to Das Rhinegold is set in E flat major, or that the estate of Charles Dickens sued for every time the phrase “dead as a doornail” was used, and you have some idea of the degree of over-generalization involved. Granted, both the works of Wagner and the works of Dickens are in the public domain, but one could just as easily imagine similarly ridiculous ideas coming from the estates of authors whose work is still under copyright.

But there is a more fundamentally entertaining element of this case. That is, that is set up a fight between different elements of the film industry over exactly the sort of copyright legalism the industry frequently relies on in order to protect its almost deliberately obsolete business model. Unfortunately, what is not so entertaining is that, in cases where a studio’s financial and legal might can’t be brought to bear, such a copyright claim could easily have strangled legitimate artistic expression.

Suppose, for instance, that an independent filmmaker set out to create the exact scenes depicted in Lovelace with exactly the same degree of precision, and then released those scenes on YouTube. YouTube currently employs what is arguably an exceedingly overzealous copyright protection regime, which in some cases even blocks the accounts of independent critics and Let’s Play producers, because the background music in the very films and/or video games they are producing was licensed by the film/game producers but not by the users themselves. Never mind that this sort of usage clearly falls under Fair Use. YouTube blocks it anyway. So if that can be covered, why wouldn’t YouTube’s content bots flag the shots used in Lovelace, if they really are so exact as to be nigh indistinguishable from the original?

Answer: They would, and there would probably be nothing the user in question could do about it. Granted, YouTube is a private company, not the United States government, but the reason its copyright policy has to be so stringent is intimately tied with current copyright policy. Consider that 100 hours of video is uploaded to YouTube every minute. If even one of those hours contains a copyright violation, then in a single day, YouTube could be liable for as much as $200 million in damages. In fact, under current copyright law, a single year of copyright lawsuits could potentially cost a company like YouTube close to $80 billion, even if only 1 percent of their content was infringing, provided the studios asked for maximum damages. Even with minimum damages, in fact, the price tag would be close to $400 million. If you were potentially on the hook for at least one third the GDP of Zimbabwe every year, you’d employ a stringent copyright protection system as well.

In other words, unless you’re a major motion picture studio, you probably can’t make Lovelace the way it was filmed and expect to get away with the same leeway, even though if you did, you’d win in court. The fact that companies like YouTube are forced to resort to extra-judicial means of copyright enforcement that frequently fly in the face of Fair Use law, or that an independent filmmaker can have their livelihood wrecked by a contentless claim, ought to make all of us choke, Deep Throat or no.

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Despite Senate inaction, progress on patent trolls

September 26, 2014, 12:15 PM

In May, Senate Democrats — led by Judiciary Committee Chairman Patrick Leahy, D-Vt. – tabled the patent reform bill on which his panel had worked for months. The bill was designed to curtail “patent trolls,” non-practicing entities whose business model is founded on extracting settlements in legal suits brought against alleged infringers of low-quality patents.

Patent trolls pose a threat to legitimate inventors and startups, stifling innovation with threats of litigation. However, in the months since Leahy sidelined the reform effort, major developments in both the courts and the executive branch have made the patent troll business model much more difficult.

In June, the U.S. Supreme Court upheld and expanded the precedent that abstract ideas could not be patented in the case of Alice Corp vs CLS Bank International. The ruling invalidated a patent held by Alice Corp. on how computers can settle financial transactions through a third party. The concept is called “escrow” and has been around since the beginning of finance, but Alice’s patent is one of thousands, possibly tens of thousands of patents that have been granted for taking such abstract concepts and adding the phrase “on a computer.”

Since Alice, federal courts have wiped out at least 11 software patents for functions that have been commonly performed by humans, in same cases since ancient times, when they are performed instead by a computer program. Some of the software patents that have been wiped out include patents for upselling customers , using surety bonds to guarantee transactions and even managing a bingo game. The courts increasingly are finding these “inventions” are not novel.

The courts are not the only place where it’s becoming harder to make a living as a patent troll. On Monday, the U.S. Patent and Trademark Office killed a company’s patent on screen displays that rotate when a device rotates, as it does on most smartphones. Cloud-computing pioneer Rackspace was threatened by a patent troll called Rotatable Technologies and instead of settling, Rackspace decided to take the case to the PTO. Rackspace successfully challenged the patent in a new inter partes review appeals process and it resulted in Rotatable’s patent being invalidated.

The expanded inter partes review system was created by the America Invents Act of 2012 and was designed to allow companies to challenge patents without the expense of a drawn-out court battle through the administrative law system. Instead of spending years fighting patent trolls, some low-quality patents now can be addressed within 12 to 18 months by the Patent Trial and Appeal Board. One of the first early tests of the board resulted in the crushing of a patent troll by Google and Apple over a lawsuit filed over the use of Google Maps “Street View” in the iPhone and iPad. The victories of Apple, Google and Rackspace are testament to the Patent Trial and Appeal Board’s ability to weed out patents that shouldn’t have been issued in the first place.

The combination of the Supreme Court’s decision in Alice and the expansion of inter partes review and creation of the Patent Trial and Appeal Board is threatening the patent troll model of doing business. This is a victory both for those who support innovation in the technology industry and for those who support an updated intellectual property system to protect legitimate creators and innovators.

While this is no substitute for legislative action, the developments in the courts and at the Patent Board are very good news for those of us who see patent trolls as innovation-killing parasites.

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