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Some in GOP yield to Sacramento’s secrecy lobby

April 18, 2016, 10:41 AM

In one of my favorite “Far Side” comic strips, the first panel offers what people typically say to dogs: “OK Ginger I’ve had it. You stay out of the garbage! Understand Ginger?” The next panel translates what dogs actually hear: “Blah blah Ginger, blah blah blah Ginger.”

I think of that comic sometimes when I’m stuck on the floor of the state Assembly or Senate and hear a Republican legislator giving a speech about “freedom.” All I hear is, “Blah blah Constitution, blah, blah limited-government.” My comprehension skills are better than the average mutt’s, but I’m trained to know blather when I hear it.

On two of the clearest liberty issues to come before the Legislature in recent years, most Republicans have sided with big-government secrecy. Those issues are back this year in the form of Senate Bill 1286, which calls for transparency by California’s law enforcement agencies, and SB443, which reins in some of the government’s most corrupt property-taking tactics.

Because of a 2006 state Supreme Court decision, Californians have had virtually no access to information about police officers who may have engaged in pattern of misbehaviors or who have been involved in multiple shootings. In Copley Press v. Superior Court, the San Diego Union-Tribune sought access to the disciplinary hearing of a San Diego deputy sheriff who appealed his termination.

The far-reaching ruling blocked the public’s access to information that previously was available and that remains widely accessible in most other states. A 2010 report by the Investigative Fund found that 25 of 27 Fresno police officers who were involved in repeated shootings remained on the force. The Copley decision meant the public had no right to learn who they were. That can allow bad officers to fester within a department.

In Tuesday’s hearing, Sen. Mark Leno, D-San Francisco, stood up for accountability, while Sen. Jeff Stone, R-Riverside County, did not. “This is not an anti-law-enforcement bill,” Leno said. “This bill is not opening all personnel files for public consumption. It’s an attempt to rebuild community and police trust through greater public access to sustained charges of egregious law-enforcement conduct.”

Perhaps the nation wouldn’t be facing so much turmoil over police use-of-force issues if there were fewer union prerogatives and more accountability. The bill recently was amended to deal solely with public records (and not personnel hearings), but even that won’t mollify the “secrecy lobby.”

“People need to be proven guilty before we disclose their identity and potentially enrage the public,” Sen. Stone said.

However, members of myriad professions have their disciplinary proceedings open to the public. We mere citizens could have allegations publicly raised against us (in a court proceeding, for instance) before any finding of guilt.

On the encouraging side, Sen. John Moorlach is a co-sponsor of SB 1286. The Costa Mesa Republican also supports reform of the asset-forfeiture process by which police agencies grab the property of citizens who have never been convicted, or even accused, of a crime. The process was designed to battle drug kingpins but has morphed into something despicable.

“The tactic has turned into an evil itself, with the corruption it engendered among government and law enforcement coming to clearly outweigh any benefits,” two U.S. Justice Department officials, who developed the program in the 1980s, wrote in a 2014 Washington Post column. New Mexico’s governor last year limited the practice after a city attorney was taped bragging: “We could be czars. We could own the city. We could be in the real estate business.”

California’s current law has some fairly tough restrictions on these takings, so local agencies partner with the feds and operate under more lenient federal laws. Then they split the loot. SB443 would shut down that loophole. Last year, the bill had widespread support, but then police agencies – fearing a loss of revenue – began arm-twisting at the Capitol.

Only a handful of Republicans held firm in the final vote, with Orange County putting in the best showing. Assemblymen Bill Brough, R-Dana Point, and Matt Harper, R-Huntington Beach, were two of only four Republicans in the Assembly who voted “yes” on a bill that did little more than uphold the Fifth Amendment’s requirement for due process.

Politicians from the party of Reagan and Lincoln should instinctively know the dangers of giving government officials unaccountable power. That so few of them do is a reminder that, when many of them talk about liberty, all the rest of us should hear is “blah, blah, blah.”

Treat kids like kids until 18

April 18, 2016, 10:30 AM

The following oped was coauthored by Marcy Mistrett, chief executive officer at the Campaign for Youth Justice.

The state Senate should be ashamed of itself. For the second time in as many years, it has refused (so far) to give serious consideration to widely supported efforts to make sure 16- and 17-year-olds don’t get sent to the adult criminal justice system when they get into trouble with the law. The right policy solution — doing what all neighboring states do and treating kids like kids until their 18th birthday — is simple. Now New York just needs the political will to do the right thing.

The facts, indeed, have widespread agreement on both the left and the right. The two of us, one a conservative think tank leader and one a progressive youth advocate, think the same way about this issue — as do Gov. Andrew Cuomo and the state Assembly and many law enforcement experts around the state.

We are not alone. The National Association of Counties, the American Bar Association, the conservative American Legislative Exchange Council and the American Correctional Association all support this smart-on-crime policy.

A bevy of research has shown the state’s current policy is simply bad for public safety. Children under 18 who are charged as adults commit more additional crimes and get involved in more serious offenses than their peers who remain in the rehabilitation-focused juvenile justice system.

Adult prisons are necessary for some offenders, to be sure, but sending children in trouble with the law into the clutches of hardened criminals simply ends up turning many misguided kids into career criminals.

This shouldn’t be surprising; high school students are known for needing adult support and guidance in order to navigate the complexities of adolescence. And even those who end up in the adult system but don’t actually serve a prison sentence still carry around the lifelong stigma of a public criminal record.

And it isn’t just a matter of dry academic research. The five states that have raised the age of criminal responsibility to 18 in the past decade (Connecticut, Illinois, Massachusetts, Mississippi and New Hampshire) have all seen falling arrests, lower correctional system costs and generally sinking crime rates.

To be clear, we aren’t calling for a simple slap on the wrist for offenders. The juvenile justice system isn’t a walk in the park for those caught up in it. Well-run programs put very real demands on their participants, and for many offenses, sentences can be just as long as those in the adult system. The few children who commit very serious offenses like murder and violent rape, likewise, are almost always eligible to be tried as adults in New York and everywhere else.

Indeed, it’s particularly disappointing that, while the Senate dithers, other states, some of which allow 17-year-olds to be charged routinely as adults, are taking action. Both South Carolina and Louisiana have recently introduced bills that keep most children out of the adult criminal justice system. And Louisiana Gov. John Bel Edwards in his State of the State speech highlighted that this is a priority for Louisiana.

Michigan is also considering similar legislation, and both Missouri and Wisconsin had legislation introduced this session. In short, America is adopting a smart-on-crime idea that has been proven to improve public safety: Children should get different treatment than adults in the criminal justice system.

Failing to take action now represents nothing but a surfeit of cowardice on the part of the state Senate. The Empire State’s kids and communities deserve better. New York should raise the age.


Orange County’s political divide has officials seeing red

April 16, 2016, 9:55 AM

The real division in the Golden State isn’t between Northern California and Southern California; it is between the coastal cities and the grittier inland. That’s true even at the local level. Orange County brings to mind gently swaying palm trees and placid gated communities. But 10 miles from its picturesque coastline, in the struggling city of Stanton, it’s a different story.

A small-seeming political fight in this town, covering a mere 3.2 square miles with 39,000 people, says much about California’s enduring problems. Two years ago Stanton voters approved, 55 percent to 45 percent, a new 1 percent local sales tax. Add that to state and county sales taxes, and the combined rate hits 9 percent. Local officials say the tax is needed to prevent cuts in Stanton’s policing and firefighting budgets.

Yet a measure to repeal the tax has made it to the November ballot, after opponents gathered the required 1,285 signatures from city residents. Repeal is backed by a former mayor, a Democrat, as well as the Lincoln Club of Orange County, based in nearby Newport Beach. Stanton officials are using the GOP group’s support to depict the sales-tax vote as a coup by meddling outsiders.

Stanton is a pocket of rundown apartment complexes and decrepit strip malls with a mostly Latino population. Newport Beach is home to Fashion Island, an ultra-fancy shopping mall on a bluff overlooking the Pacific Ocean. Thus, Stanton officials have portrayed the coming tax battle as an existential fight between rich out-of-towners and hardscrabble locals trying to save their city from a wave of crime and blight.

“The group that’s against us, they live down in Newport, they live in Irvine, they all live in South County. They’re all wealthy,” Stanton’s mayor pro tem said at a public event in March. “They don’t live here. They’ve just picked our city because we’re a small city and they want to control us. We’re low-hanging fruit.” A councilman added: “Just because you’re wealthy doesn’t give you the right to come and repeal our votes.”

Yet that simple description, typical of the way some local media have portrayed it, is woefully inaccurate. There is a class battle going on in Stanton, but it’s the town’s own local officials who are representing the rich and powerful. One of the main reasons the city can’t pay its bills without the sales tax is that it gives outlandish salaries and benefits to its government workers.

When the tax was being considered in 2014, Ed Ring, the executive director of the California Policy Center, offered this idea: Negotiate a 14 percent decrease in the average pay and benefits of the town’s 44 sheriff’s deputies and 21 firefighters. This, he wrote at the website Union Watch, “would eliminate their structural deficit of $1.8 million—and their firefighters would still earn average pay plus benefits, after the reduction, of $187,285 a year, and their sheriffs would still earn average pay plus benefits, after the reduction, of $160,412.”

Total compensation for the city’s 26 other workers averaged nearly $105,000 a year in 2012, according to Mr. Ring’s analysis. You can bet that the preponderance of Stanton’s workers live outside boundaries of the tiny, crime-ridden city. (They’d be quite comfortable in Newport Beach, which has a median income of around $108,000 a year.)

There are other ways Stanton could help plug its budget hole. Like many troubled California cities, Stanton became addicted to something known as “redevelopment,” a process whereby cities would acquire properties, sometimes using eminent domain, and then float debt to pay for improvements. Gov. Jerry Brown cracked down on the practice during a state budget crisis in 2011. Yet Stanton still holds dozens of properties. These are no longer on the tax rolls, and they could be sold immediately.

Although Stanton is not the only city that ran up redevelopment debt and paid its public employees unsustainable salaries and pensions, it is less able to handle the fallout. Newport Beach came under fire in 2011 for paying two of its lifeguards more than $200,000 a year. But wealthy cities can weather such foolishness. Stanton is facing insolvency.

“When Gov. Brown killed redevelopment, Stanton was suddenly a big game of financial musical chairs,” Mark Bucher, CEO of the California Policy Center, said in a recent interview. “You had city council members just slicing and dicing city services, while spending more every year on county firefighters and sheriffs—the people who get them into office and keep them there.”

Raising taxes on retailers in a tiny city is problematic over the long haul, and a bad precedent for Orange County’s other 33 cities. Yet instead of fixing its structural problems, Stanton has embraced an approach that threatens its viability. Some see serious consolidation on the horizon. “Smaller cities will go broke, or merge, in order to achieve proper economies of scale,” Fred Smoller, associate professor of political science at Chapman University in nearby Orange, told me last month. “Something has to give.”

That’s not because a nefarious group of wealthy outsiders has come in to take over. It’s because a group of wealthy insiders—public employees and especially police and firefighter unions—already control the budget. Despite the good news about California’s recovery, one need not travel far from the coast to see the story unfolding.

Stop trying Michigan 17-year-olds as adults

April 15, 2016, 4:56 PM

In states across the nation, some bold Republican lawmakers are putting aside party affiliations and joining with Democratic colleagues in a bipartisan effort to reconsider previously accepted “tough on crime” approaches to criminal-justice policies.

With plenty of research and data at their disposal, policymakers are working alongside criminologists and economists to alleviate prison overcrowding, reduce high recidivism, and remedy state and local budget crunches.

But there is one glaring area where Michigan state law lags behind roughly 40 other states — the policy of automatically trying 17-year-olds in the adult court system.

Michigan is one of only nine states to make this arbitrary distinction, under which 17-year-olds are denied the opportunities afforded to other children in the juvenile court system. There are situations where a teenager should be tried as an adult for very serious crimes, but grouping teens with adults for every offense is simply bad policy from both a fiscal and public-safety perspective.

The Michigan House of Representatives recently passed a bipartisan legislative package to reform the current law. The law would raise the age at which individuals are tried automatically as adults from 17 to 18. The Republican-controlled Senate should follow suit and pass this essential reform, and Gov. Rick Snyder should sign it into law. This improves public safety while also saving taxpayers money.

Despite some misconceptions, nearly 60 percent of juveniles in the adult criminal system were convicted of nonviolent crimes that did not involve a weapon. What’s more, 58 percent of those entering the system at age 17 had no prior juvenile criminal record.

Youth prosecuted in adult court are significantly more likely to recidivate than their counterparts in the juvenile-justice system. And children incarcerated in the adult system are, on average, 34 percent more likely to be rearrested for a felony than youth who stay in the juvenile system. It isn’t surprising that being put in adult facilities creates a training ground for young criminals, rather than an environment conducive to rehabilitation. This leads to more victims, not fewer.

The juvenile court system steers delinquents into rehabilitation programs to address the root causes of criminality, while also allowing teenagers to continue their education. This helps to offer them a future when they ultimately re-enter society. These opportunities are not viable in the adult system, which forces many juveniles onto a path with little opportunity for self-improvement or job prospects.

Legislative reform also promises economic benefits to taxpayers and relief to cash-strapped state budgets. A 2012 University of Texas analysis found that Texas would save about $90 million a year by ending its practice of automatically trying 17-year-old offenders as adults. The taxpayers of Michigan might expect to see similar savings as well.

Rhode Island attempted to lower the age of adult jurisdiction from 18 to 17 in hopes of saving money, but found the change actually had the opposite effect. Lowering the age forced the state to spend more on 17-year-old offenders than it previously had.

There is no silver bullet to ensure public safety, but raising the age to try individuals in an adult court holds the promise of rehabilitation for juvenile offenders. These benefits will translate into lower levels of public spending, less crime, and stronger families.

Puerto Rico: Time for Congress to act

April 15, 2016, 3:34 PM

The finances of Puerto Rico’s government are unraveling rapidly. With the commonwealth government broke and scrambling, its Legislative Assembly already has empowered Gov. Alejandro García Padilla to declare a moratorium on all debt payments.

In a report that was kept secret, the Government Development Bank, which is at the center of complex intragovernmental finances, was found last year to be insolvent. Adding together the explicit government debt and the liabilities of its 95 percent unfunded government pension plan, the total problem adds up to about $115 billion.

There is no pleasant outcome possible here. The first alternative available is to deal with many hard decisions and many necessary reforms in a controlled fashion. The second is to have an uncontrolled crisis of cascading defaults in a territory of the United States.

Congress needs to choose the controlled outcome by creating a strong emergency financial control board for Puerto Rico—and to do it now. This is the oversight board provided for in the bill currently before the House Natural Resources Committee. The bill further defines a process to restructure the Puerto Rican government’s massive debts, which undoubtedly will be required.

Some opponents of the bill, in a blatant misrepresentation, have been calling it a “bailout” to generate popular opposition. To paraphrase Patrick Henry, these people may cry: Bailout! Bailout!…but there is no bailout.

Enacting this bill is the first step to get under control a vast financial mess, the result of many years of overborrowing, overlending and financial and fiscal mismanagement.

Again to cite Patrick Henry, “Why stand we here idle?”

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

R Street warns Jolly bill would be a giant ‘beach house bailout’

April 15, 2016, 12:54 PM

WASHINGTON (April 15, 2016) – The R Street Institute today expressed its concern about the reintroduction of a deeply flawed legislative proposal to create a taxpayer-backed federal reinsurance scheme for state catastrophe funds.

Introduced by U.S. Rep David Jolly, R-Fla., H.R. 4947 would put the federal Treasury on the hook to cover shortfalls suffered by government-sponsored entities like the Florida Hurricane Catastrophe Fund in the event of a large disaster. According to R Street Senior Fellow R.J. Lehmann, the bill marks the latest iteration of a concept that Florida’s congressional delegation has been pushing for more than 20 years.

“As a Florida resident, I fully understand the frustrations Floridians feel at the high cost of homeowners insurance, an inevitable result of choosing to live on a low-lying peninsula that juts out into some of the most hurricane-prone waters in the world,” Lehmann said. “While it’s understandable that Florida would like to shift its problems onto the other 49 states, this sort of structure, which we call the ‘beach house bailout,’ is and has always been poor public policy.”

Whether structured as reinsurance or loan guarantees, the practical effect of federal support to state catastrophe funds is to subsidize risk-taking and development in environmentally sensitive regions, such as coastal wetlands, as well as to displace private insurance and reinsurance markets, Lehmann added. Moreover, there simply is no need for any legislation of this sort, as global reinsurance markets currently are as deep and competitively priced as they have ever been.

“Proposals for a national catastrophe fund are like the undead. They are killed over and over, as rational minds come to see just how ill-advised they are, but they slither back from the grave – just as brainless and stinky as ever,” Lehmann said.


¿Cuánto sube mi seguro de auto por una multa?

April 15, 2016, 7:25 AM

From Al Dia Dallas

“El asunto de fondo es que entre más riesgoso sea un conductor, más caro sale asegurarlo”, dijo Eli Lehrer, presidente de R Street Institute, una organización de estudio sin fines de lucro.

Should the Fed act as the world’s central bank?

April 14, 2016, 2:15 PM
05/05/2016 - 10:00 am - 12:00 pm
American Enterprise Institute
1150 17th St. NW

CCS credit credit backers see ‘new level’ of support on Hill despite FAA setback

April 14, 2016, 1:07 PM

From Inside EPA

The groups — Friends of the Earth, Taxpayers for Common Sense and the R Street Institute — also cite what they argue are hundreds of millions of dollars in taxpayer backing for clean coal programs that have provided little environmental benefit, including the defunct Future Gen effort.


Dumping water in the middle of a drought recovery

April 14, 2016, 12:20 PM

What would happen if the communists took over the Sahara Desert?” William F. Buckley asked during a discussion in 1972. “Nothing for 50 years. Then there will be a shortage of sand.” That laugh line can apply to any case in which the government — even a democratic one — has long-term control of a resource.

One could ask, “What happened after the California (and federal) government controlled the state’s water resources?” The obvious Buckley-esque answer: “Well, nothing much since construction of the State Water Project began in the early 1960s. Eventually, though,California started running out of water.”

The commonly accepted explanation for the state’s water shortages is a drought. It seems obvious a lack of rain eventually will lead to insufficient supplies of water, especially for a population that now tops 38.5 million. Environmentalists say this is a crisis of population growth. Democratic leaders also blame insufficient conservation and “profiteering.”

To state officials, even a relatively rainy winter is no sign the problems will let up. The New York Times reported this week that the Sierra Nevada snowpack, which provides 30 percent of the state’s water “after it melts and flows into rivers and reservoirs,” is at 87 percent of its historical averages. That’s up from 5 percent last year. But officials say global warming will turn snow to rain and reduce the amount of accumulation in the mountains.

The solution from these water officials, legislators, and environmentalists remains the same: tougher enforcement of water-conservation rules, more state and local regulations mandating less water usage by residents and businesses, fallowing fields that grow water-intensive crops such as almonds and stepping up the battle against climate change.

Gov. Jerry Brown also wants to spend $15 billion-plus to drill two tunnels under the Sacramento-San Joaquin Delta and bypass the aging levee system that channels Sacramento River water to the pumps. The project won’t necessarily send more water southward, but it might make the system more reliable by saving the Delta Smelt. Regulators routinely shut down the pumps at Tracy whenever one of these endangered bait fish is found in the screens.

Almost every proposal has one thing in common: giving state officials more control of water. Yes, the government built most of the system’s infrastructure, but the government has been the reason for chronic shortages ever since. Let’s look at the latest examples of what happens when bureaucrats, rather than market forces, allocate resources.

Item One: “After years of drought, Northern California has so much water that the state’s two largest reservoirs are releasing water to maintain flood-control safety,” the Sacramento Bee reported March 24. “Yet the free-flowing water remains a significant source of controversy throughout Northern California. Suburban Sacramentans wondered last month why water was being deliberately spilled out of Folsom Lake instead of stored for future use.”

The state is reluctant to ease water-conservation restrictions, even as it dumps so much water. One could be sure a private enterprise would find some profitable use for its most precious and apparently scarce resource rather than simply dumping it and letting it wash away into the ocean.

Item Two: The Oakdale Irrigation District sold up to 75,000 acre-feet of water to various water districts to meet its “obligation for swelling the river in April and May to propel young fish toward the ocean,” according to an April 4 Modesto Bee report. This is the latest in an ongoing and anger-inducing story.

Even as the drought was at its height, state and federal officials mandated massive water releases from the New Melones reservoir to help a handful of mostly hatchery-raised fish swim from the Stanislaus River toward the ocean (where they almost certainly were eaten by invasive species before getting there). It’s hard to comprehend such ideologically driven inflexibility.

“Last May … 25,000 acre feet of water was flushed out of Melones in an attempt to promote fisheries,” according to Jack Cox, chairman of the Lake Tulloch Alliance in nearby Copperopolis, in his written testimony before the district board. “The value of this water was $21 million. According to [the biology firm] Fishbio, the total number of fish pushed down the river was nine fish — at a value of $2 million-plus a fish.”

Item Three: “It looks as though the dams are coming down,” the Lost Coast Outpost reported April 4. “[H]igh-powered luminaries are coming to town … to make ‘a major announcement’ on long-running efforts to restore the Klamath, including the removal of four controversial hydropower dams along the middle stretch of the river.”

At a time when the state needs to store more water to meet the needs of its population, the feds and state are demolishing four dams. None of them provide immense water supplies, but this policy points to current priorities: environmental restoration, not providing water for farms or people.

Item Four: “San Diego’s overabundance of water during one of California’s worst droughts has reached a new, absurd level,” the Voice of San Diego reported last month. “The San Diego County Water Authority has dumped a half-billion gallons of costly drinking water into a lake near Chula Vista.” A lot of that water came from the county’s new desalination plant, meaning “water officials will now have to spend even more money to make the once-drinkable desalinated water drinkable again.”

One of the state’s driest regions has long been flush with water, a reminder that — even in the current, ridiculous system — it’s possible to have plenty of water if the bureaucrats plan ahead and (repeat slowly) build water-storage facilities.

Furthermore, while desalination is one critical piece of the state’s long-term water puzzle, the environmentalist-friendly California Coastal Commission has delayed permits for a desalination plant in Huntington Beach that’s nearly identical to the one recently opened Carlsbad. The commission’s concern? Its effect on plankton.

In what world would anyone put the needs of plankton before people or spend $2 million a pop to save a common fish? It’s the world Buckley pointed to — the one run by government, which would assure a shortage of sand if it were left in control of the Mojave.

Free-market groups support American Manufacturing Competitiveness Act of 2016

April 14, 2016, 11:09 AM

Dear Chairman Brady,

On behalf of our organizations, we write in support of your legislation, the “American Manufacturing Competitiveness Act of 2016,” which would revise and improve the process for consideration of Miscellaneous Tariff Bills (MTBs). For years, MTBs served as an imperfect, yet effective means to reduce unnecessary tariffs on selected goods and materials that are not produced domestically.

By cutting or eliminating tariffs on raw materials and other products, MTBs helped create economic benefits for consumers while bolstering the competitiveness of American companies. In fact, according to the National Association of Manufacturers, passage of a MTB would provide the U.S. with $1.875 billion of economic growth annually.

There are also strict rules as to what is eligible for tariff relief. There could not be domestic production of the imported good, the estimated cost of the waived or reduced tariff could not exceed $500,000 and it had to be implementable by the U.S. Customs Service at the border. The International Trade Commission (ITC) was the arbiter of whether a proposal met the criteria.

Though its economic benefits are clear, since 2010 the MTB process has been halted by concerns about earmarks. Specifically, a provision in the rules of the House of Representatives prohibits the passage of a “limited tariff benefit” that affects fewer than 10 companies – a threshold triggered by many previous MTBs. Your legislation would wisely allow Congress to achieve the positive economic effects of an MTB without violating the ban on earmarks.

The revised process in your bill would require companies to file petitions for tariff relief directly to the ITC instead of to individual Members of Congress. The ITC would carefully analyze these requests and report its recommendations to Congress. Congress could exclude products from the ITC proposal, but could not add to it. This would ensure that all enacted tariff reductions were thoroughly vetted by both the ITC and Congress.

These important procedural changes should serve to eliminate any concerns about the parochialism and unethical behavior that were endemic to the earmarking process. Additionally, they add unprecedented transparency, as all correspondence between businesses, the ITC, and Congress would be made easily available to the public in real time.

Again, we applaud you on creating a revised MTB process that increases transparency, avoids the pitfalls of earmarking, and sets the table for economic growth. Our organizations are pleased to endorse your bill and hope it will be swiftly enacted into law.


Brandon Arnold, Executive Vice President

National Taxpayers Union


Grover Norquist, President

Americans for Tax Reform


Norman Singleton, President

Campaign for Liberty


Jeffrey Mazzella, President

Center for Individual Freedom


Tom Schatz, President

Council for Citizens Against Government Waste


Lisa Nelson, CEO

Jeffersonian Project


Lori Sanders, Outreach Director and Senior Fellow

R Street Institute


Karen Kerrigan, President and CEO

Small Business and Entrepreneurship Council


Steve Ellis, Vice President

Taxpayers for Common Sense


David Williams, President

Taxpayers Protection Alliance

The Washington Post’s neo-prohibitionist movement

April 14, 2016, 10:34 AM

From American Spectator

I enjoy Christopher Ingraham’s writing for the Washington Post. His Wonk Blog posts are data-heavy, which makes them interesting.

Like Ingraham, I have serious concerns about America’s long war on drugs. It strikes me as a losing battle, seeing as it is very hard to stop people from taking intoxicants that are so easy to produce. Worse, the war on drugs has encouraged law enforcement to go to militaristic measures to thwart the illicit drug trade. Like raiding individuals’ homes, sometimes wrongly— then shooting their dogs and refusing to give back their property. And even killing innocent people. Intoxicants are like any other product, in that markets exist for them. Prohibition fosters illicit markets, which are highly profitable and therefore very violent. (Drug gangs slaughter other drug gangs to control market-share. Fast food companies do not.)

Read more…

People deserve second chances, even in the insurance industry

April 14, 2016, 9:58 AM

Two years ago, the online health-insurance broker and human-resources portal Zenefits hired an insurance agent with a criminal record. Now the San Francisco Chronicle is attacking the firm for that decision.

While Zenefits certainly has had some well-documented compliance problems, this hiring wasn’t one of them. If anything, it’s an example from which other insurance brokers and agents might have a bit to learn, when it comes to dealing with ex-offenders.

According to the Chronicle, Zenefits, hired Michael Henry Solomon as an insurance agent despite his having committed a number of relatively minor crimes in the late 1990s – with apparently none that involved insurance sales. Zenefits’ own background check may not have uncovered these events.

But between his brushes with the law and working for Zenefits, Solomon worked consistently and held two jobs working in the insurance industry. He had a valid California state insurance license, which he obtained after an initial rejection. In California, as in all other states, getting almost any sort of professional license after a criminal conviction requires examination of the specifics of past offenses and, almost always, lots of sterling character references.

There’s also no evidence that Solomon committed any sort of illegal act while employed by Zenefits or that he harmed any of its customers. His only recorded crime in the past 15 years was a drunken-driving conviction. Given that Zenefits certainly knew about this when it hired him and that the company’s model strongly suggests that driving wasn’t part of the job, it’s clearly something the company’s hiring managers decided wasn’t disqualifying.

In short, Zenefits gave a second chance to someone who had committed crimes but had shown evidence of reform and had worked in the industry for more than a decade. Solomon seems to have been just the type of person, in other words, who likely deserves a second chance.

People who sell insurance or any other financial product should likely be held to higher standards of financial probity than the public at-large. It is beyond obvious that people convicted of insurance-related fraud should generally be bared from the industry. But a minor criminal record needn’t be a reason to exclude people from the insurance industry altogether.

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

How high does your insurance rate accelerate when you’re caught speeding?

April 14, 2016, 9:08 AM

From Dallas Morning News

“The bottom line is that the riskier a driver is, the more expensive he or she is to insure,” said Eli Lehrer, president of R Street Institute, a nonprofit research group.

Regulators requested data on 12M Uber riders and drivers, transparency report shows

April 14, 2016, 9:02 AM

From SC Magazine

“Uber’s transparency report doesn’t add much fuel to the fire in terms of general criticism from the EU regarding Privacy Shield,” said Mike Godwin, director of innovation policy and general counsel for the R Street Institute, speaking with SCMagazine.com. If is determined that other government agencies were given access to this user data, that may change the equation, added Godwin. “But that is not what we’re seeing now.”


It’s time for Uber’s regulators to be as transparent as the company is

April 13, 2016, 2:20 PM

This post was coauthored by R Street Policy Analyst Nathan Leamer.

Recent years have seen a range of internet companies release “transparency reports” that attempt to detail, to the extent allowed by law, law-enforcement and national-security demands for user data. Most of these reports have been issued by companies that either are primarily internet service providers or internet-focused communications companies – such as Google, AT&T, Verizon, Twitter and CloudFlare – or longstanding, consumer-facing tech firms like Apple and Microsoft.

Uber, the internet-based ridesharing company, this week joined the ranks of companies to publish transparency reports, a move R Street applauds. Moreover, there are some key aspects to Uber’s first transparency report to which we should all pay attention.

In the final six months of 2015, Uber reports it received “33 requests from regulatory agencies, 34 from airport authorities, and 408 requests for rider account information and 205 for driver account information from law enforcement agencies.” These numbers need some unpacking.

First and foremost, Uber’s report includes aggregated data on information it’s provided to state regulatory agencies. State regulators gathered information, including GPS coordinates for pickups and drop-offs, on more than 12 million individuals (drivers and riders) just in the last half of 2015.

By comparison, Uber received only 415 warrants or subpoenas from law-enforcement agencies in all of 2015. Those 415 warrants or subpoenas covered only 613 drivers and riders, total. The company reports it hasn’t yet received any National Security Letters or any orders from the Foreign Intelligence Surveillance Court, but we may reasonably expect that to change over time as our intelligence services become more interested in the question of what logistical and other data they can recover from ridesharing services.

Turning our attention back to the roughly 11.6 million riders and 650,000 drivers whose data was swept up by state regulators, it wouldn’t be surprising to learn that federal agencies (as well as other state agencies) already have access to this information. There’s no standard set of rules that would illuminate what state agencies are doing with this data – whether it’s kept forever or erased at some point, or anything else. While it’s good that Uber is committed to transparency in what it shares with government agencies, this transparency report underscores the need for state regulators to be just as transparent about what they do with the data they collect from Uber and other ridesharing companies.

Another way that Uber’s duties under the law differ from (and arguably are greater than) those of other internet companies is the airport-reporting requirements. Everyone knows Uber drivers (in those states and localities that allow ridesharing companies to operate relatively freely) may pick up and drop off riders at airports. But what you may not know is that U.S. airports often operate as their own separate jurisdictions and may impose their own reporting requirements on Uber and similar companies. As Uber’s report puts it:

In order to operate at airports, regulated transportation companies and other similar services are required to enter into agreements created and enforced by each airport authority. These agreements vary by airport and require transportation services to report information such as trip volumes on a monthly basis; when vehicles enter and exit the airport area; where vehicles pick up and drop off within the airport area; and/or each vehicle’s registration information, license plate and driver. The statistics here show the number of riders and drivers affected by airport reporting requirements.

Not every airport chooses to impose such requirements, but from those that do, Uber received 34 requests for data that included information about more than 1.6 million riders and more than 150,000 drivers. As with the state regulators, we don’t know what the airports ultimately do with this information, the extent to which it’s protected or whether it’s ever deleted. In an age of cyber-security hacks and loads of potentially compromising information in government hands, there really is cause for concern that state and local agencies have the wherewithal to protect the details shared in these reports. These are questions worth raising now, since airports, like all government entities, ultimately ought to be accountable to citizens.

Unlike companies in other areas of internet-based commerce who previously have complied with mandated transparency reports, Uber is compelled to share extremely sensitive data about their drivers and users. We understand that, in some sense, Uber is simply meeting requirements that taxis and limo and courier services long have been required to meet.

But with Uber, there’s at least one important difference – the company’s business model relies on GPS, on in-depth customer reviews of drivers and even drivers’ review of riders.  All of that means the information transportation network companies must share may be vastly more detailed and intimate than, say, a taxi service would provide. Plus, taxi companies can (and typically do) accept cash rather than credit cards for payment.

Despite what we don’t yet know about what government agencies ultimately are doing with TNC data, we nonetheless have to praise Uber for taking the initiative to make this first transparency report public. We look forward to Uber’s efforts to adapt and evolve this transparency report over time. Not only do we expect federal and state law-enforcement, national-security and regulatory demands from companies like Uber to grow, but Uber and other international internet-based companies likely will be compelled to turn over information to other governments around the world. Uber has been operating internationally since 2012. Google and other pioneers of the transparency-report movement have made a point to include data about demands from other governments under whose jurisdiction they operate. In the long run, we’d like to see Uber publish transparency reports that include compliance with foreign governments’ demands, as well.

Uber’s transparency report marks a major milestone in the dialogue over data integrity and what should and should not be shared with government agencies. As internet-based companies continue to expand into traditional commerce, we look forward to other companies – as well as state regulators, federal agencies and other nations’ governments – following the examples set by Google, Apple, Twitter and now, Uber.

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

Searching for loyalty and prudence

April 13, 2016, 1:07 PM

In his provocative and knowledgeable new book, Other People’s Money: The Real Business of Finance, John Kay considers the complex ways that financial systems operate in between the real savers, on one hand, and the real investments, on the other.

He observes disapprovingly how very large contemporary financial systems have become, how much talent they absorb, how big are the bonuses they pay, how they often have lost sight of their basic fiduciary duty, and especially that “volumes in trading in financial markets have reached absurd levels.” Considering these unimaginably vast amounts of paper (electronic records) constantly being bought, sold and borrowed against among principal financial actors, he reasonably asks, “What is it all for?” He doubts that it really advances the fundamental purposes of financial systems.

Most of this activity involves somebody doing something with somebody else’s money.  To make this a “serious and responsible business,” in Kay’s intentionally old-school, and sound, view:

the guiding purpose of the legal and regulatory framework should be to impose and enforce the obligations of loyalty and prudence, personal and institutional, that go with the management of other people’s money.

This can be effective “only when the values appropriate to the handling of other people’s money are internalized by the market participants themselves.”  

Banks taking the deposits of the public, he adds, “are intended to be rather dull institutions.” They should be “limited in their choice of assets” to conservative ones. This recalls what Walter Bagehot observed in the greatest book on banking, Lombard Street, in 1873:

There is a cardinal difference between banking and other kinds of commerce; you can afford to run much less risk in banking. . . . A banker, dealing with the money of others, and money payable on demand, must be always, as it were, looking behind him, and seeing that he has reserve enough in store if payment should be asked for.

In Bagehot’s memorable summation: “Adventure is the life of commerce, but caution . . . is the life of banking.”

That sounds like the approach of the solid and careful Scottish bankers of Kay’s youth in the 1960s, whose virtues appeal to him far more than do the greater intelligence, quickness, and sparkle of the bankers of 50 years later.

About those former days, Kay reflects, “Banking was then a career for boys whose grades were not good enough to win admission to a good university.” If they joined the Bank of Scotland or the Royal Bank of Scotland, “they might, with appropriate diligence, after twenty years or so, become branch managers,” who were “paternalistic, notorious for their caution.” The branch manager of sober judgment “was a respected figure,” and “it never crossed his mind, or the minds of his customers, that the institution he had joined at the age of seventeen would not continue for ever.”

Instead of going on forever, these big Scottish banks both failed in 2008 and were taken over by the British government. By then, their leadership had degrees from elite universities. However, the “cleverer people managed things less well—much less well—than their intellectually less distinguished predecessors. Although clever, they were rarely as clever as they thought.”

This brings to mind a wonderful lesson taught me by an older banker years ago: “Remember Alex, that it is easier to be brilliant than right.” How right he was.

Kay likes old-fashioned banks. He most distinctly does not like traders or trading banks, especially those “people with an exaggerated idea of their relevance and of their own competence” whom he holds responsible for the 2007-2009 financial crisis.

When he was a director of a formerly old-fashioned institution, the Halifax Building Society, the board approved expanding trading activities. Kay asked where the Treasury profits would come from. He was told the institution would make money “because our traders were smarter,” he writes. “But the people I met did not seem particularly smart. And not everyone could be smarter than everybody else.”

However much an accomplished intellect like Kay may be irritated by the pretensions of the traders, was trading the fundamental cause of the financial crisis? Or was the real problem the more old-fashioned mistake of making a mass of bad loans, especially bad real estate loans? It seems clear to me that it was the latter: bad loans. Of course, trading activities did spread the bad loans around in the form of securities.

Kay poses a key question: Why did banking look so profitable before the crisis? He correctly answers that it is a business that combines “a high probability of a small profit with a low probability of a large loss.” When highly leveraged, the small profit looks big, and the large loss becomes catastrophic.

As an example of the problems this poses—in my words, not Kay’s—suppose we gamble in a statistically fair game with such a probability structure. For an equity investment of $10, it returns a $2 profit 90 percent of the time, but an $18 loss 10 percent of the time. I set the second probability at 10 percent because the average recurrence of financial crises is about once a decade. You might get a 20 percent return on equity for eight or nine years in a row, seeming to confirm how smart you are and triggering big bonuses, high dividends, and stock buybacks besides. Then comes the $18 loss, which wipes you out.

As Kay says, banking can only be meaningfully measured over a credit cycle, and in this game, the net profit for the 10 years as a whole is zero. But the bonuses from the nine 20-percent-return years are not paid back in the disastrous tenth year.

Whatever the problems were and are, Kay sees that the answer is not more reams of detailed financial regulations. “There has not been too little regulation, but far too much,” he writes. “We should put an end to the seemingly endless proliferation of complex rulebooks which are even now beyond the comprehension of the far too numerous regulatory professionals.”

Considering “the comprehensive failures of regulation before and during the global financial crisis,” and “why this approach was bound to fail,” he rightly cites the Austrian school’s critique of central planning.  He might have added, as Ludwig von Mises and F.A. Hayek would, that the ever-more-complex regulations serve the will to power of the regulatory bureaucrats and central bankers who write them. He might also have added that when the U.S. politicians and bureaucrats mandated making risky mortgage loans to promote home ownership, they obviously had no idea what they were really doing or how it would turn out—just as von Mises and Hayek would have said. (For an in-depth analysis of this, see Brian Domitrovic’s recent Law and Liberty post.)

Solutions are naturally more difficult than even the most insightful discussion of the problems.  Among his suggested reforms, Kay wants to make the lines between savers and investments clearer and more direct, to “re-establish short, simple linear chains of intermediation,” and to “restore specialist institutions with direct links to financial users.” These are interesting suggestions, but must make us skeptically think of the collapse of the specialist savings and loans and the specialist subprime lenders.

Kay also makes a proposal that would be excellent if it were politically possible: to “treat financial services as an industry like any other” and withdraw “public subsidies, state guarantees, and other mechanisms of government support.” If only we could. But we cannot even reform Fannie Mae and Freddie Mac, which continue to live entirely on government guarantees and support.

Finally, he stresses the central principle: that “anyone who handles other people’s money” should demonstrate “standards of loyalty and prudence in client dealings.”

This is worthy of constant effort, by precept and example.

2253 Rayburn House Office Building

April 13, 2016, 12:29 PM
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