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The Internet is out in North Korea

December 23, 2014, 11:37 AM

Apparently, they actually do have Internet. Or…erm…they did.

According to the New York Times, North Korea is now suffering a complete Internet blackout. What appears to be a Denial of Service Attack (or DDOS attack) is targeting North Korean routers, and all of North Koreas 1,200 IP addresses have gone dark.

North Korea’s already tenuous links to the Internet went completely dark on Monday after days of instability, in what Internet monitors described as one of the worst North Korean network failures in years.

The loss of service came just days after President Obama pledged that the United States would launch a “proportional response” to the recent attacks on Sony Pictures, which government officials have linked to North Korea. While an attack on North Korea’s networks was suspected, there was no definitive evidence of it

Doug Madory, the director of Internet analysis at Dyn Research, an Internet performance management company, said that North Korean Internet access first became unstable late Friday. The situation worsened over the weekend, and by Monday, North Korea’s Internet was completely offline.

“Their networks are under duress,” Mr. Madory said. “This is consistent with a DDoS attack on their routers,” he said, referring to a distributed denial of service attack, in which attackers flood a network with traffic until it collapses under the load.

An Internet company executive the Times spoke to noted that the entire North Korean network was, in no uncertain terms, “toast.”

There is no indication whether this is an American attack, though Anonymous has been issuing threats over the last several days, alluding to a possible organized attack in North Korea. It would, of course, be rare for us to engage in all-out cyberwarfare, and it would be even rarer for us to engage in all-out cyberwarfare after our president took decisive action in issuing a sternly worded demand to North Korea to admit they broke Sony’s Internet and pay for what they’ve done out of their allowance.

U.S.-China nuclear accord to be sent to Congress in early 2015

December 23, 2014, 11:25 AM

From Platts Nuclear Fuel:

George Banks, a senior fellow with the R Street Institute, a self-described free-market think tank, called China’s ENR activities “a non-starter issue” in the US negotiations for a renewed 123 agreement.

“China is in a unique position if you look at its influence and power vis-a-vis the US,” said Banks, who also is a senior fellow for nuclear energy policy at the Center for Strategic & International Studies. “The majority of ‘new nuclear build’ in the next few decades will occur in China. I don’t see how [the US], at the end of the day, has much influence with the Chinese nuclear power program,” he said.

You say ‘po-tay-toh,’ I say massive spud fraud

December 23, 2014, 11:00 AM

A pair of Cooperstown, N.D. brothers have been convicted in a $2 million scheme to defraud the federal crop insurance program with false claims of loss on their potato harvest.

In convicting the brothers, Aaron and Derek Johnson, jurors relied on the testimony of a former farmhand who claimed that he had conspired with them to intentionally destroy the potato crop, as well as neighboring farmers who asserted their own potatoes made it through the harvest unscathed.

The brothers were accused of adding spoiled and frozen potatoes to the stored crop and using portable heaters to warm the warehouse above 80 degrees, in attempt to make the potatoes deteriorate faster. The defendants, prosecutors said, found that the best way to wreck the crop was using Rid-X, a chemical that’s designed to dissolve solid materials in septic systems.

Just as a reminder, the federal government subsidizes roughly 62 percent of farmers’ crop insurance premiums, at a cost of about $9 billion annually. Earlier this year, Congress approved and President Barack Obama signed a five-year, $1 trillion farm bill, including a massive new “shallow loss” insurance program (at no cost to farmers) that locks in record-high prices for commodities like corn and soybeans.

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Play EFF’s fantastic copyright crossword

December 23, 2014, 10:00 AM

This holiday season, our friends at the Electronic Frontier Foundation have put together this fantastic crossword puzzle (also available in electronic and printable formats), comprised of clues relating to major copyright reform news from 2014.



2. Zoe ______,  member of Congress who received one of EFF’s 2014 Pioneer Awards, in part for her commitment to reforming the Digital Millennium Copyright Act

7. First name of the fictional detective who—thanks to the Supreme Court’s refusal to take up the case—is officially in the public domain

8. Former Panamanian dictator who used the “right of publicity” to attack the creators of Call of Duty for including him in their game

9. Code-sharing website from which PopcornTime torrent software, was removed after an elaborate takedown request from the MPAA

10. Company that lost a major case before the Supreme Court over letting users rent dime-sized antennas to record television programming

13. Cindy Lee ______, actor who filed a copyright suit against Google over her five-second performance in the notorious “Innocence of Muslims” video

14. Blog site, run by Automattic, that earned all the possible stars in EFF’s inaugural Who Has Your Back copyright and trademark report

17. According to a dangerous decision by the Federal Circuit Court in Oracle v. Google, these Java specifications may be considered copyrightable.

18. “Monkey _____” (see crossword background) was the center of a controversy when a photographer didn’t like that it was uploaded as a public domain image to Wikimedia Commons

19. You can now do this to your cellphone to bring it to a different carrier, thanks to a bill signed by President Obama in August

20. News and gossip site that Quentin Tarantino filed a copyright lawsuit against after it linked to a leaked script of his upcoming movie The Hateful Eight

21. Photography licensing company that made its images “free to embed” and announced it would dial back its copyright enforcement


1. Porn troll Malibu Media filed more than 1,600 copyright lawsuits in 2014, using this name in place of many of the yet-to-be-identified defendants

3. An appeals court ruled that you can’t copyright the shape of this tobacco paraphernalia

4. Outgoing “IP Czar” Victoria Espinel has taken the top job at the Business Software Association. In political circles, this move is known as the revolving ___

5. Image-hosting site owned by Yahoo that raised some hackles when it announced it would be selling prints of some users’ Creative Commons licensed prints

6. Company whose leaked emails revealed a secret anti-piracy meeting organized by the Department of Homeland Security

7. Comedy Central show Nathan For You tested the limits of fair use with its parody coffee shop, “Dumb ________”

11. Brian Knappenberger released his Aaron Swartz documentary, “The Internet’s ___ ___” under a Creative Commons License

12. In December, Swedish police raided this notoriously resilient torrent site, bringing it down worldwide

15. “Blurred Lines” singer Robin _____ went to court to ask for a declaratory judgment that his song does not infringe Marvin Gaye’s “Got To Give It Up.”

16. Maker of single-serving brewing pods that introduced something akin to DRM for coffee machines

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

Texas craft brewers sue for freedom from distributors

December 23, 2014, 9:00 AM

During its last session nearly two years ago, the Texas Legislature passed groundbreaking reforms to allow the state’s craft breweries greater freedom to operate. But thanks to a little-noticed provision slipped into the bill, that freedom may soon hit a roadblock.

Ever since the repeal of Prohibition, Texas law has required a separation between producers, distributors and retailers of alcoholic beverages. Under this so-called “three-tier” system, breweries over a given size must contract with a distribution company to sell their booze to retailers.

The 2013 reforms prohibit alcohol manufacturers from receiving compensation from distributors as inducement for a territorial distribution agreement. That’s significant, because Texas law requires distribution agreements to be both geographically exclusive (for example, a given brewer can only distribute through a single distributor in Houston) as well as irrevocable.

These features of distribution contracts make them potentially very valuable to distributors. In fact, distributors have themselves been known to sell distribution rights to third-parties, which conveniently is not prohibited under Texas law. All of this means that, to distribute their products, breweries are required to give away a valuable property right for free.

The law does allow small brewers to self-distribute if they wish. However, should a small brewery decide to distribute its products through a third party, it must have the same sorts of exclusivity agreements as those that bound the larger beermakers.

Given the costs of self-distribution, both large and small brewers are hampered by this anti-competitive provision of the law. Some small-scale brewers have gotten so fed up with this unfairness that they’ve decided to settle it the American way: in court. On Dec. 10, three craft breweries (Live Oak Brewing in East Austin, and Revolver and Peticolas Brewing in the DFW area) filed suit challenging the constitutionality of the prohibition. The lawsuit claims both that the prohibition on payment to manufacturers represents a taking of property and that the law generally infringes on plaintiffs’ economic liberties.

The Institute for Justice is representing the craft brewers in the case. IJ has made a name for itself challenging nonsensical regulations on economic liberty grounds. The group currently has a case before the Texas Supreme Court challenging burdensome restrictions on hair-braiding, and was successful recently in a challenge brought by monks to a Louisiana law licensing casket-makers.

Texas’ regulatory framework for alcohol is structured around an industry as it exited 70 years ago. The growth in craft brewing is only one way that, as in many other areas, changes in business and technology are increasingly rendering these laws obsolete. Regardless of what happens with the current lawsuit, Texas lawmakers will have to address this matter.

Test Email Form

December 22, 2014, 5:24 PM

What if they threw a market panic and nobody came?

December 22, 2014, 1:24 PM

The news last week that Congress would adjourn without extending the $100 billion federal backstop offered by the Terrorism Risk Insurance Act was greeted with howls of shock and dismay from the affected industries

The Property Casualty Insurers Association of America said it was “unconscionable” that Congress would adjourn without reauthorizing the 12-year-old terrorism reinsurance program.

The Risk and Insurance Management Society, which represents major buyers of commercial insurance coverage, predicted the “program’s expiration will have many negative repercussions for commercial insurance consumers, the countless organizations they represent and the U.S. economy as a whole.”

NAIOP, the trade association for commercial real estate developers, called failure to renew “more than a speed bump, it’s a stop sign.”

But a funny thing happened on the way to the panic. Despite headlines that blared the news would cause “chaos,” leave the “community stunned,” “bode ill,” “send shockwaves,””wreak havoc” and “roil industry,” actual prices in actual markets certainly suggest most market actors appear to be treating the news as a big ole nothingburger.

Indeed, the gift Congress offered to markets this Christmas is that most rare of commodities: genuinely new and surprising information. As Manhattan real estate developer Douglas Durst put it to the New York Times:

‘Everybody expected this would get done,’ he said, fuming. ‘These actions make it impossible to make investments in this country.’

One need not be a devotee of any particular variant of the Efficient Markets Hypothesis to recognize that an action which truly made it “impossible” to invest would be expected to be reflected in sharp and immediate declines in the share prices of those public companies most affected by the developments.

And yet, that’s really not what we’ve seen this past week. Instead, the market action appears to have been fairly modest, more reflective of the old trader’s adage, with respect to negative shocks, that one ought to “sell on the rumor, buy on the news.”

For instance, looking at the share prices of major commercial insurers like Chubb, Travelers and Ace, one sees just slight dips in their share prices from Dec. 11 to Dec. 16 – when word of Sen. Tom Coburn’s threatened “hold” on the TRIA extension started making the rounds – followed immediately by price jumps by the time Congress formally adjourned without action on Dec. 18.

This price movement tracked broad industry aggregates, like SNL Financial’s U.S. Insurance Underwriter Index, which is mostly comprised of companies with no appreciable exposure to terrorism, such as life insurers and writers of personal home and auto coverage.

The same basic trends can be seen among real estate investment trusts, as measured by the share prices of the largest exchange-traded funds specializing in REITs.

You see the same basic curve even in the share price of the company that arguably has been most vocal about the need to extend the TRIA program – hotel and hospitality giant Marriott International (which, to be fair, has seen real material losses as a result of terrorism, both on Sept. 11, and in other actions around the world.)

In case after case, one sees the same thing: a mild dip of only a few percentage points, well within the running 52-week range, during the week the terror bill’s fate was uncertain, followed by an immediate bump once Congress adjourned and the bill’s demise was settled fact.

What’s more, given that this period coincided almost precisely with uncertainty over a potential federal government shutdown, the degree to which any effect is ascribable specifically to TRIA, as opposed to broad macro variables, can never be known with any precision. The fact that share prices of the big U.S. commercial property insurers tracked closely with their industry at-large is further evidence that the signal, however feint it already was, could never be effectively separated from the noise.

Perhaps one reason the market panic has not quite materialized as anticipated is that, thus far, the credit rating agencies have been fairly sedate in their responses. Insurance rating agency A.M. Best Co. opted not to take any rating actions in response to the lapse, not even on insurers it previously had identified as “overly reliant” on the TRIA program:

All of the rating units deemed overly reliant upon TRIPRA were brought before a rating committee to evaluate action plans that would be implemented in the event TRIPRA was not renewed or if its protection was materially altered. After a thorough review of these action plans, it was determined that sufficient mitigation initiatives were developed to avoid a material impact on a rating unit’s financial strength.

Fitch said it has identified about 20 commercial mortgage-backed securities transactions that are likely to be placed on a negative ratings watch in the absence of TRIA, with the greatest impact falling on “office properties with loans in CMBS single-asset transactions.” Fitch did note that, over the past decade, “commercial property insurers have gradually enhanced their ability to measure and model exposure to terrorism events.” In the end, compared to the withdrawal of terror coverage in 2002 that prompted passage of TRIA in the first place, the rating agency said it “remains difficult to predict whether financial and property markets have a greater propensity to adapt to an environment without a government-sponsored terrorism insurance program.”

On the other hand, almost immediately after offering that guidance, Fitch affirmed (with a “stable” outlook) the A- rating of Greater New York Mutual Insurance Co., precisely the kind of mid-sized, geographically concentrated commercial property insurer that partisans of the TRIA program long have pointed to as needing the program. In February, GNY Chairman and CEO Warren Heck served as a key witness for the industry, offering testimony to the Senate Banking Committee pleading for reauthorization of TRIA.

Moreover, fellow rating agency Standard & Poor’s opined that, given the currently overcapitalized state of the global reinsurance market, it actually is possible that private coverage could step in to fill the gap almost entirely. S&P pegs the market’s current capacity at between $3 billion and $4 billion per risk, although that drops down to closer to $1 billion in dense Tier One cities like New York, where insurers have issues of excessive aggregation risk. But the longer the TRIA program remains expired, the more likely it is that both traditional reinsurance and alternative sources of capital will be deployed for terrorism coverage, S&P said:

They (insurers) will seek to limit their exposures in peak risk areas like downtown Manhattan by purchasing additional reinsurance and targeting underwriting actions. In addition to exclusions and sublimits, commercial property and workers’ compensation policies may see rate increases, if not nonrenewals, where exposure is concentrated. We do not expect NBCR coverage to be available on any lines except those like workers’ compensation where regulation expressly requires it. Currently available private-market capacity could leave buildings in peak zones underinsured.

If TRIA legislation remains dormant for long enough, however, well-capitalized insurance companies, compelled by market demand and a desire to deploy excess capital, may begin providing terrorism coverage for higher premiums. Also, stand-alone terrorism coverage providers are likely to provide additional capacity for the right price.

Early reports suggest that underwriters and managing general agents are responding well to the anticipated uptick in demand for standalone terror cover from the private market. Broker USI Holdings has been among those flagging a new terrorism facility solution, with limits of up to $200 million, flexible deductibles, individually underwritten premiums and terrorism definitions that are much broader than those offered under TRIA. Competitor Willis noted “there does remain a vibrant stand-alone terrorism solution which can be explored once clients have evaluated their needs,” while Marsh, the largest commercial insurance broker in the world, said the standalone terror insurance market “has large but limited capacity.”

Bermuda-based XL Group, which earlier this month introduced a standalone U.S. terror policy, more recently rolled out a product that would even cover chemical and nuclear attacks. Meanwhile, infamous former longtime AIG Chairman and CEO Maurice R. “Hank” Greenberg, now the chairman and CEO of Starr Insurance Holdings, was quick to respond to news of the TRIA program’s expiration with the declaration that Starr is “ready to respond to the needs of our clients.”

We have capacity for stand-alone coverage for a broad array of Property, Casualty and Aviation exposures. We would also like to take this opportunity to emphasize that many of our policies already provide for terrorism exposure. We encourage you to contact us immediately to create solutions for your needs.

Even in the workers’ comp market – generally considered most vulnerable to TRIA’s expiration, both due to the mandatory nature of the coverage and the fact that exclusions cannot be written for nuclear or other WMD-type attacks – significant expansions have been seen this year in private terror coverage options. Writing at PropertyCasualty360, Safety National Vice President Mark Walls noted that while some workers’ comp policies could expire due to end of TRIA, “I do not get the impression that this is a widespread issue.”

Carriers are likely paying more attention to their geographic concentration of exposures, which means employers will have fewer choices, and may see higher pricing. But, at the end of the day, employers should be able to obtain workers’ compensation coverage without the TRIA backstop in place.

None of this should be interpreted as a claim that TRIA’s expiration will have no effect on the insurance market or the commercial real estate market. Certainly, terrorism insurance should be expected to be more expensive and somewhat less available going forward. In some cases, policyholders who believed they had bound new insurance contracts, which in many cases renew on Jan. 1, will need to reassess whether that includes coverage for terrorism.

Contract forms developed for the industry by ISO (available in all states except New York and Florida) have since 2004 included conditional language that allows terrorism coverage to become excluded or limited in the middle of a coverage term, in the event the TRIA program were to expire. ISO said last week it would be monitoring developments in the 114th Congress closely, including “a potential retroactive renewal of TRIA.”

Kroll Bond Rating Agency added that, for CMBS and REITs, master servicers could conceivably have to force-place coverage for certain properties, raising the potential for additional servicing costs or even litigation. Kroll said it “has identified 27 CMBS single borrower securitizations within our rated universe where we believe the master servicer may be inclined to force-place insurance.”

We haven’t changed our stance on the issue. The federal terrorism insurance backstop should be phased out in a way that is steady and predictable. Sudden capital shocks do not make for wise public policy.

At the same time, always take the hyperbolic claims of special interests bearing tales of chaos and panic with a significant grain of salt. In this case, the numbers don’t lie.

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The rise of the populists: Could Warren, Cruz and Sessions change Washington?

December 22, 2014, 10:00 AM

For many conservatives, agreeing with Sen. Elizabeth Warren, D-Mass., is a rare occurrence. Warren is a pure collectivist who views strong government control as a critical mechanism for politicians to “improve” the lives of Americans as they see fit. Her liberal voting record and view that individual financial success creates a social obligation to pay heavy taxes reinforce those perspectives.

Yet in her recent opposition to federal spending legislation, Warren correctly noted that reinstituting federal insurance for riskier financial products like credit default swaps was a concession to the largest banks in America, contrary to the interests of most taxpayers. Credit default swaps caused significant damage in the most recent recession. But for taxpayer-funded bailouts, companies like AIG would likely have failed because of their derivative exposure.

“If big Wall Street banks want to gamble with their own money, so be it,” said Warren. “Let them take their risks with their own money, and let them live with the consequences of those risks. That is how markets are supposed to work.”

Wait a minute. How is a Massachusetts liberal sounding like a free-market conservative?

For many liberals, Sen. Ted Cruz, R-Texas, seems to be little more than a “Cruz” missile specifically targeted at the federal government. Berated for his hardball tactics and persistent interest in picking policy fights, Cruz believes that Washington has failed America. “The rules of the game [in Washington, D.C.] have resulted in bankrupting our kids and grandkids, and seeing our constitutional liberties eroded, and enough is enough,” Cruz noted.

If he had not blistered his establishment colleagues enough, Cruz drove home the point:

 You look at this omnibus that just passed Congress. It’s 1.1 trillion dollars of every payoff for special interest, for lobbyists, for K Street, all of them got taken care of, it was the perfect example of Washington corruption. But you know the people who were not taken care of is the working men and women, the millions of conservatives, grassroots activists, who showed up and gave Republicans the majority.

Was that a Republican railing against corporate cronyism to protect working Americans?

Then Alabama’s Jeff Sessions asked a particularly pointed question, “Why can’t Americans get representation in their own Senate?”

Perhaps that question is the driving force for the growing populist movement challenging Washington’s establishment culture. Americans have reached the breaking point with Washington’s bipartisan oligarchy. Who do members of Congress actually represent?

For many voters, a government “of the people, by the people, for the people” has felt more like a government of the powerful, by the politicians, for the connected. Rarely are the interests of the average American served by having their tax dollars subsidize, favor, bail out or insure large corporations, unions or interest groups. Yet those entities always seem to be at the front of the line when it comes to government spending, regulation and tax treatment.

Certainly their interests should be considered, but how do they balance out against the attention legislators pay to their average constituent?

For Warren, Cruz and Sessions, the answer is relatively clear. They represent the voters who sent them to Washington. Each acts for a significantly different type of voter, but each is more interested in garnering favor with the people back home than with Washington’s power brokers. They all understand the simmering outrage of voters who feel that their elected representatives have largely left them behind.

The question is whether the emerging class of populist politicians will be able to channel that outrage into a positive force that allows them to actually change Washington. Defiant protests and political fights may inspire their political bases, but they must also be able to band together and reach legislative compromises that benefit the common American.

Warren, Cruz and Sessions may have lost their battle against the recent omnibus, but they are far from finished. In fact, the rise of the populists may very well continue as an incoming class of legislators thinks long and hard about whom they truly represent.

Seeking common sense in 2015

December 22, 2014, 9:00 AM

I was going to try to write something positive at the end of the year, to balance out what a scold I’ve been almost all year long about the state of public policy in America.


I was hoping, for example, to find a situation where the government has drawn a line between helping people who suffer misfortune and those who clearly have made, and mostly continue to make, bad choices. I’ve searched the media for good news about government courage in pushing back against the erosion of personal responsibility, in areas from pensions and student loans to lawsuits and insurance.

Not much luck. One can only hope the new folks elected this year to represent us will make a difference on this score in the months and years ahead.

One of our favorite topics at R Street is insurance, where we stand up for the private market-oriented approaches and against the expansion of government-subsidized coverage for practically any predicament. If left to the market, insurers will charge people more for fire insurance protection if they live in log cabins and heat with a wood-burning stove. The government is adverse to charging people the expected cost of protection if they happen to live on a potential earthquake fault or a hurricane-exposed beach, or if they are better or worse drivers than average.

In fact, my colleague Ian Adams has just posted a piece detailing the California Earthquake Authority’s plan to tax virtually all of the state residents to pay for the next shift in the earth’s crust, since fewer than 10 percent of the Golden State property owners are buying its policies.

The state of North Carolina has been discussing elimination of its last-in-the-nation rate bureau for auto insurers, who are operating roughly a cost-plus business similar to electric utilities, and unable to file their own rates.

I say “roughly” because all insurance premiums are guesses – sophisticated guesses – but guesses nonetheless, since insurance is arguably the one business where the price is set before the costs of the product can be determined. Some companies operating in North Carolina actually don’t take any auto insurance business except what is underwritten by the state, which they are paid to service. This is not how a marketplace best functions.

The government doesn’t have to worry about its lack of expertise in predicting risk or costs, because if they miscalculate they don’t go out of business. In one of my favorite examples, the swine flu vaccinations of the 1970s were insured by the federal government for any liability. The Center for Disease Control did a study at the time suggesting that a statistical increase in the number of Guillain-Barré cases might have been related to a recent national round of vaccinations. The federal government eventually paid out around $72 million to settle more than 750 of 4,000 cases that were uncovered through the intense publicity that the project generated. The feds had reserved just $2 million for claims.

There are examples everywhere one looks. The City of Detroit has been paying out bonuses to every employee for years, even after when their finances sunk completely underwater. The perception is that there have been few lasting consequences to the largest municipal bankruptcy in history. Sure, the investors in city securities and bond insurers are still in court, but not the city’s retired employees. The California pension systems pay benefits on projected earnings of 7.5 percent, but actually earned just 1 percent last year. No big deal, the pension managers say. We’ll level it out in the long run.

When Union Carbide’s chemical plant blew up in Bophal, India in 1984 — the worst industrial accident in history — the chemical industry formed an international organization to promote business ethics, beyond those enhancements needed for worker safety. They once met in my hometown, with a three-day conference allocating one day each to issues in Europe, North America and Asia. One of the many programs on the “corruption” agenda was a brief study of compulsory government reinsurance in Argentina in the 1950s. As one might expect, when the government says they will cover anything over a certain amount, the normal market discipline completely vanished. The program didn’t last long, and was a disaster.

In the American savings & loan crisis of the 1980s, the federal government agency had, over several years, lowered the premium paid to insure the thrift’s reserves to one-twelfth of the original amount, and the provided coverage expanded from $2,500 to $250,000 for each account. This ended up forcing all of these institutions to compete with those who were pushing the envelope on risk, and to lean ever more heavily on the government to safeguard the deposits.

The taxpayers were let down by their political leadership, who were advised by President Reagan’s Grace Commission report that the resultant negative net earnings of these institutions could be fixed for about $20 billion. With no course correction, the numbers got a lot worse and we all had to cough up about $160 billion to resolve the mess.

It’s a situation many federal and state programs face today. If interest rates were to double over the next couple of years, more than $400 billion dollars would have to be be taken out of the federal budget to make the additional interest payments. Of course that would swallow nearly all discretionary spending by the federal government outside of defense, so that won’t happen. As long as we can get away with it, we will just print more money and pretend like we borrowed it. Our kids and theirs will pay in many ways.

The beloved humorist Will Rogers used to say that he would regularly ask his member of Congress “to please not do anything for me, because I can’t afford it.” Perhaps we will be forced to accept his famous common sense at some point.

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Big SIFI news: MetLife is designated, Obama signs insurance capital standards bill

December 21, 2014, 12:42 PM

This week brought big news on two fronts in the world of allegedly “too big to fail” insurers.

By a nine to one vote, with former Kentucky Insurance Commissioner Roy Woodall as the lone dissenter, the Financial Stability Oversight Council voted Friday to designate MetLife Inc. as a systemically important financial institution. In a statement, Treasury Secretary Jack Lew said the council concluded after an 18-month investigation that “material financial distress at MetLife could pose a threat to U.S. financial stability,” adding that:

Designation of a nonbank financial company is a critical tool for the Council to address potential threats to U.S. financial stability.  Consistent with its mandate, the Council remains focused on protecting the broader economy from the types of risk that contributed to the financial crisis.

FSOC is the “college of regulators” created under the Dodd-Frank Act and charged with monitoring, preventing and ultimately resolving broad systemic risks to the U.S. economy. Under the FSOC process, certain non-bank financial institutions designated as SIFIs may be subject to heightened scrutiny and capital standards, both by the council and by the Federal Reserve Board. FSOC previously has slapped the SIFI tag on fellow insurers Prudential Financial and American International Group.

Though the company challenged the preliminary designation back in September, in some ways, it was years in the making. In the case of MetLife, the designation amounts more rejoining the group of SIFIs. The company previously was organized as a bank holding company, and went through the first several rounds of the Fed’s annual “stress tests,” dating back to the height of the financial crisis in early 2009.

However, there long have been questions about whether the bank-centric focus of the Fed’s Comprehensive Capital Analysis and Review test was appropriate for a company primarily engaged in the business of life insurance. These concerns reached a boiling point in 2012, when the company failed the stress test, as the Fed found that it did not have the minimum 8 percent total risk-based capital it estimated was necessary to withstand a stress scenario.

Largely in response to the MetLife scenario, Congress this year has been debating various versions of legislation to clarify that state-regulated insurers who are part of the same holding company as a depository institution, or that are subject to Fed supervision as a nonbank holding company, are not to be subject to the minimum leverage and minimum risk-based capital requirements established by federal banking regulators. Among other changes, the bill allows insurers who must report their financial results to federal banking regulators to do so using the Statutory Accounting Principles employed under state insurance law, rather than Generally Accepted Accounting Principles.

After much debate and procedural mire, Congress reported the S. 2270 version of the bill to the White House this week, which President Barack Obama signed on Dec. 18. The bill does not preclude FSOC’s designation of MetLife, Prudential and AIG, though it would conceivably alter how financial strength tests are applied to the companies going forward.

In a separate dissenting opinion, Woodall – the only voting member of FSOC with insurance experience, as Missouri Insurance Commissioner John Huff and Federal Insurance Office Director Michael McRaith are both non-voting members – criticized the FSOC analysis of MetLife, saying it presumed “that all current operations and activities are static without consideration of any dynamics or responses occurring before a presumed insolvency.”

Moreover, Woodall said the analysis was dismissive of the state-based regulatory regime that governs insurance and the willingness and ability of state regulators to act in advance of a potential insolvency. He added that the analysis relied on “implausible, contrived scenarios as well as failures to appreciate fundamental aspects of insurance and annuity products,” and that even in the unlikely case that the company or its major operating units did face a solvency crisis, it isn’t apparent that MetLife provides “any critical financial service or product for which substitutes are unavailable.”

I do share concerns about some of MetLife’s activities, particularly in the non-insurance and capital markets activities spheres, and in the resulting exposures identified and described in the Council’s Notice of Final Determination in the Company Overview and Exposure Transmission Channel sections. These activities might conceivably pose a threat to the U.S. financial stability under certain circumstances. It is these types of activities that should be fully evaluated under the Second Determination Standard, as opposed to the flawed Council analysis under the First Determination Standard.

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Senate will release bulk downloads of legislative summaries, bill text from 113th and 114th Congress

December 19, 2014, 4:30 PM

WASHINGTON (Dec. 19, 2014) — The U.S. Senate will deliver access to its legislative information in modern, open data formats, starting when the 114th Congress convenes in January 2015.

That announcement was made at yesterday’s public stakeholder meeting of the Legislative Branch Bulk Data Task Force. The Senate will join the legislative data publishing system created by the Government Printing Office and originally launched for all 113th Congress House bills in January 2013.

“Complete, digital and modern access to America’s most important information — our laws and legislation — is now in view,” said Seamus Kraft, executive director of The OpenGov Foundation and a Congressional Data Coalition steering committee member.  “Though the Senate won’t catch up to the House on open legislative data overnight, upper chamber implementation should be fast and efficient, thanks to the fantastic foundation laid by the staff of  the House Clerk, Library of Congress, GPO, House Administration Committee, Speaker Boehner and others.  It’s amazing what Congress can accomplish with non-partisan teamwork, sustained public engagement and a clear focus to deliver better results for all Americans.”

“In the modern age, public access to legislative information must include digital access,”  said Citizens for Responsibility and Ethics in Washington’s Daniel Schuman, a founding CDC steering committee member.  “The Senate’s move to join the House in releasing information about legislation in useful formats provides a stable platform for innovation and public access to the work of government. While there is still more to do, this is a tremendous step forward.”

“This is great news for both the public and scholars studying our national legislature,” adds R Street Institute Governance Project Director Kevin Kosar. “Making this data available in a very useful format will help give us a better view of our national legislature’s work.”.

Today’s announcement builds on years of non-partisan collaboration across Congress and civil society groups like the OpenGov Foundation and Congressional Data Coalition.  It paves the way for the completion of  work to modernize and improve public access to the most important information in our democracy.  .,

“The House of Representatives’ collective efforts to make its activities more open and transparent to the public,” Schuman said “For proof, one merely needs to look to the series of annual transparency conferences, the ongoing meetings of the Legislative Bulk Data Task Force, the recent Legislative Branch Appropriations Bill, the creation of docs.house.gov, the ongoing upgrades to rules.house.gov, the updated version of the U.S. code, and so on.”

Click here to visit the GPO’s bulk legislative data portal, which will grow to include Senate data over the course of 2015.  And click here to read the Congressional Data Coalition’s open legislative information primer for non-geeks.

Groups demand Congress really oversee intelligence agencies

December 19, 2014, 8:26 AM

From the Daily Caller:

Nathan Leamer from the R Street Institute, a group that signed the letter, told The Daily Caller News Foundation that intelligence information gets bottled up in the intelligence committees. Congressmen end up having outdated or even incorrect information. When outside groups contradict the intelligence committees, Congress has little information to go on.

“Do you trust just the intelligence committee or are we going to trust all members of Congress to know what they are voting on?” Leamer asked.

Leamer said the letter has received positive feedback from multiple members of Congress.

Why we need to get DATA Act standards right

December 19, 2014, 7:00 AM

Passing the Digital Accountability and Transparency Act (DATA) Act was a victory for open government and congressional data transparency. But passing the law alone is not enough — as we move into the implementation stage, it is crucial to get the standards for data formatting right.

Despite pre-existing transparency legislation, insufficient standards and poor implementation have led to major inaccuracies in data published by the federal government. According to an August 2014 report from the U.S. Government Accountability Office, federal agencies did not properly report approximately $619 billion in fiscal year 2012, making the data published on USASpending.gov unreliable. That mistake alone significantly undercut the objective of data-transparency efforts.

GAO Comptroller General Gene Dodaro recently told the House Committee on Oversight and Government Reform that, in spite of good intentions, “there is a long way to go before [federal agencies are] going to have the standards in place.”

The Office of Management and Budget and the Treasury Department are supposed to have formatting standards for the DATA Act in place by May 2015. According to Dodaro, the future success of real government-spending transparency hinges on these standards, telling the oversight panel: “Without the legislative underpinning and consistent oversight, this won’t happen.”

Government transparency is a core component of effective representative democracy. We need access to government spending data on publicly accessible platforms if we are going to hold the government accountable for spending activities.

Beyond questions of openness and accountability, research shows that data transparency is directly tied to the quality of government performance and execution. In a study of psychology papers in two major journals, researchers in the Faculty of Social and Behavioral Sciences at the University of Amsterdam found “the authors’ reluctance to share data was associated with more errors in reporting of statistical results and with relatively weaker evidence.” In other words, data transparency was directly correlated with data accuracy. Open data standards improve the quality of research.

Data transparency is just not a bonus feature to appease a small faction of geeks and activists. It is a quality-control mechanism that should be baked into every step of governance. The DATA Act holds great potential, but only if the responsible parties put serious thought and effort into making sure its standards and execution fulfill the law’s promise.

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

Two steps forward, one step back

December 18, 2014, 10:00 AM

When news broke that the Utah Department of Insurance found that popular new benefits company Zenefits was not in compliance with state insurance law, and would have to alter its operation or cease transacting business, there was an outcry from free marketers and Silicon Valley-types alike. At R Street, we were surprised by the department’s decision because Utah is otherwise such a great state to engage in the business of insurance.

Subsequently, the department has faced local scrutiny. Gov. Gary Herbert has signaled his willingness to seek reform and there is word of a legislative vehicle sponsored by state Rep. John Knotwell, R-Herriman, to amend the statute in question.

Since a political resolution to the department’s action appears to be in the works, it would be worthwhile to reflect on a few principles for regulating fast-moving, “disruptive” market actors:

  • Tread lightly: Unless and until specific harms are experienced, the decision to regulate, or to enforce ill-fitting law in a novel context, should be weighed thoughtfully against the deleterious impact such measures could have on new market actors.

Utah already has crossed this threshold. By doing so, the Department of Insurance has necessitated a costly and contentious response by Zenefits.

Prospectively accounting for the need to tread lightly, policymakers should circumscribe the interpretive discretion of insurance regulators. They can do so by stating, explicitly, their intention to see particular statutes applied to the circumstances they are contemplating at the time the statute is promulgated.

  • Strive for neutrality: Existing market participants enjoy the benefit of having familiarity with and, often, an impact on the laws that govern them. That reality doesn’t always pose a problem, but the significance of in-built structural advantages counsels for mindfulness of a statute’s original purpose.

For instance, in the case of anti-rebating statutes like the one Zenefits was deemed to have violated, the original purpose was twofold. First, statutes sought to ensure that insurer solvency was not compromised by the distribution of potentially rate-distorting ancillary benefits. Second, there was a desire to protect similarly situated consumers from illegally experiencing different treatment.

Zenefits’ alleged transgression is its willingness to offer a web-based human resources portal for free while also selling insurance benefits. The trouble is that the statute inadvertently inhibits a new model that bundles service without violating the purpose of the statute. As described by Joe Markland of Employee Benefit News:

If I buy the system, I get the HR and benefits parts whether I use them or not. One of the leading systems I know charges $5 (per employee per month) for its system. Without the HR, it is $5. With the HR, it is $5. The Utah Insurance laws treat these systems like they are different systems when they are not.

Legislative specificity goes hand-in-hand with neutral enforcement of the law, mindful of statutory purpose

The 21st century is an age of wonders. Never before has the world experienced a pace of change like that experienced today. Inevitably, old regulatory models will struggle with fast-paced market innovations. Zenefits is just the latest firm to be frustrated by an old model. Fortunately, Utah has an opportunity to quickly address not only the confusion surrounding the statute in question, but also confusion on the part of its regulatory apparatus.

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

Sony hack reveals celebrity gossip, plot to undermine free and open Internet

December 18, 2014, 8:00 AM

Hollywood media have feasted this month on  thousands of emails and internal documents leaked as part of a massive breach of Sony Pictures by the hacker group “Guardians of Peace.” The breach has led to a steady stream of stories revealing everything from celebrity name calling, to nepotism, to gender pay gaps, to the details of upcoming films.

In an op-ed for the New York Times, screenwriter Aaron Sorkin questioned the ethics of journalists who traffic in the stolen documents, arguing there could be nothing of public interest:

“Do the emails contain any information about Sony breaking the law? No. Misleading the public? No. Acting in direct harm to customers, the way the tobacco companies or Enron did? No.”

Well, that’s not entirely true. As The Verge revealed Friday, the leaked emails show a lot more than celebrity gossip. They uncover a massive underhanded scheme between Sony and the MPAA (as well as other content producers like Paramount, Warner Brothers, Fox, Comcast and the RIAA) to take down “Goliath” — a codename for Google and other search giants.

The plan wasn’t limited to search engines. The media giants actually aimed to resurrect principles of the notorious failed SOPA (Stop Online Privacy Act) legislation. While ostensibly intended to combat online piracy, in practice, the bill would grant content producers enormous new powers to block websites and exert control over the way search engines operate, at the expense of free speech, fair use and a free and open Internet (really, we have enough absurd takedown disputes as it is).

As part of a multi-pronged approach, the MPAA and cohorts cozied up with various state attorneys general (a strategy the New York Times recently covered) and lobbied them to go after their number one target: Google. According to the emails, they didn’t simply take AGs out to fancy dinners. They directly funded their investigations against Google to the tune of “$585,000 to $1.175 million” in legal and public relations support. This even included investigations that were totally unrelated to online piracy, presumably just for the sake of harassment. On top of this, they spend more than $100,000 toward generating “media stories based on” these actions (R Street President Eli Lehrer discusses the plan in The Weekly Standard).

All this comes after Google changed its search ranking algorithm in October to downrank sites thought to be promoting illicit content, something the content industry long had sought (although they reacted poorly to the news). But even before this change, as R Street’s Mytheos Holt recently pointed out, mainstream search engines weren’t where people went to find pirated content.

Not only do Google users search for “Katy Perry” more often than they do “Free Katy Perry MP3,” but they do so 200,000 times more often. While sites that host pirated content do get 16 percent of their traffic from search engines, that’s far below the 64 percent average for the Internet at large (for comparison, R Street’s website gets 68.5 percent of its traffic from search, the vast majority of which is from Google).

The attack on Sony was reprehensible. But while one can debate the ethics of unearthing embarrassing comments about celebrities from illegally purloined documents, there’s a clear public interest in talking about the content industry’s campaign to corrupt government officials and undermine the free speech rights of ordinary citizens.

Copyright policy has long been an arena dominated by special interests. Ultimately, we need to take a balanced approach to protect the interests of rights holders while still allowing elbow room for free expression. For some reform-minded policy ideas, check out R Street’s paper on restoring the constitutional purpose of copyright.

The CEA considers a tax by any other name

December 17, 2014, 7:45 PM

The California Earthquake Authority has a heady legislative agenda on-tap for 2015, and Californians without earthquake insurance coverage could be made to foot the bill.

The CEA’s CEO, Glenn Pomeroy, on Wednesday presented two proposals, one laudatory and one lamentable, to the CEA Board of Directors — one designed to improve the state’s earthquake mitigation efforts and the other to increase the earthquake insurance take-up rate.

The laudable proposal would have the CEA seek legislative authority to establish a mitigation-financing program that will allow homeowners to pay for the cost of retrofitting their homes as part of their property tax bill. Such a program would be similar to the Property Assessed Clean Energy concept that R Street has enthusiastically embraced in the past.

The lamentable proposal, a plan to realize “risk-transfer cost savings,” is an effort to displace the costs of an earthquake from CEA policyholders to a broader pool of insureds: those without a CEA policy but insured by a CEA participating insurer. In other words, it’s a potential tax that would hit virtually all Californians.

The CEA’s plan envisions assessing Californians by introducing a layer of post-event bonds to the CEA’s capital structure. Borrowing to finance losses that have already occurred would allow the CEA to reduce its reliance on reinsurance. That would, according to the CEA, allow it to lower its rates. Lower rates would, in theory, encourage more Californians to purchase earthquake insurance.

Pomeroy made much of the fact that reinsurance is the CEA’s largest cost, and maintained that “we need to be less dependent on it to make our product ever more affordable.”

No doubt, increasing the earthquake insurance take-up rate and lowering earthquake insurance rates are laudable goals, but the CEA is going about it all wrong. Reducing reliance on reinsurance requires two significant and undesirable policy changes. First, it shifts risk-financing from pre-event to post-event and second, it displaces financing responsibility from the private realm to he public realm.

The pitfalls of post-event funding are manifest. Post-event funding would diminish the CEA’s ability to prospectively finance subsequent losses and would force the authority to gamble that subsequent assessments would not be necessary. Further, post-event funding would concentrate catastrophe risk in California. Concentrating catastrophe risk guarantees an outsized and long-tailed economic impact within the state.

Florida’s Citizens Property Insurance Corp., another catastrophe-focused, state-run insurance instrumentality, is an archetype of the post-event funding folly. Its reliance on post-event funding led to more than a decade of assessments, in spite of an unprecedented pause in hurricane activity. Citizens seems to have learned its lesson and is now seeking to fund more of its risk with pre-event reinsurance from the private market.

The intrinsic shortcomings of post-event bonding aside, the timing of CEA’s legislative effort is strange. The CEA is seeking to reduce its reliance on reinsurance at exactly the moment that market conditions are such that the CEA could lock in longer-term reinsurance products at lower rates. It was not without some irony that the CEA’s own financial advisor, Kapil Bhatia of Raymond James & Associates Inc., testified before the board: “there is a record level of capital in the reinsurance market.”

Of course, the CEA is well aware of the value to be had on the reinsurance market. The CEA is filing for a rate decrease with the California Department of Insurance based largely on a 16 percent decrease in reinsurance premium that it has realized in the last year.

Given the value proposition of reinsurance, and the increasing availability of capital from the alternative market, there is sufficient financial room to achieve the universal goal of increasing the earthquake insurance up-take rate without shifting risk onto the public.

This raises the question: why is the CEA seeking to reduce its reliance on a method of risk-transfer that was largely responsible for the very rate decreases that it is now so proudly touting?

The answer is straightforward. Pomeroy believes that earthquake exposure is a public liability that all Californians, regardless of their risk, share. Under this rationale, transferring risk onto the public is an appropriate substitute for personal responsibility. Post-event bonds are the first step.

The proposal is a tax, plain and simple. And the last thing California needs is yet another tax.

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

After CRomnibus, a conservative wish list for a Republican-controlled Congress

December 17, 2014, 5:10 PM

While enactment of the trillion dollar “CRomnibus” left some conservatives fuming over Republican leadership’s unwillingness to fight a shutdown battle over immigration or the Affordable Care Act, here are a few actions that might encourage conservatives in the upcoming Congress:

  1. Force President Obama to act on Keystone XL – If Republicans are not able to put approval of the Keystone XL pipeline on President Barack Obama’s desk quickly, they will have missed a serious opportunity. Even without control of the Senate, Republicans were only one vote away from making it happen. If President Obama vetoes the measure, Republicans have a strong political narrative on his preference of satisfying his environmental base over improving America’s energy infrastructure. If he approves Keystone XL, Republicans will have a bipartisan victory on a significant policy priority.
  1. Fight Obama’s executive actions on immigration and enact reforms – Republican leaders promised supporters of the CRomnibus an opportunity to fight President Obama’s executive immigration actions early next Congress without shutting down the whole government at the end of 2014. The tactical deferral becomes a political albatross and a divisive issue for Republicans if leadership somehow avoids the confrontation early next year. Republicans must also be proactive by introducing their own immigration reforms that include border security, addressing illegal immigrants in the United States and improving immigration efficiency. As always, the issue of a “path to citizenship” for illegal immigrants will be a political sticking point, but that should not stop Republicans from offering their own plan for the president to consider.
  1. Make Congress accountable for major federal regulations – Most Americans may not realize that presidents and their executive branch agencies are able to make so many regulations that feel like laws because Congress has delegated away its constitutional legislative responsibilities. For years, members of Congress have complained about executive overreach without reclaiming their legislative power. The REINS Act would require members of Congress to approve major federal rules before they could take effect. The GOP needs to show a willingness to be accountable for regulations created using their authority.
  1. Restore the regular budgetary process – Playing chicken with the entire federal government is a tremendous political leverage tool. After being forced to battle with Senate Majority Leader Harry Reid, some in the GOP would love to have President Obama’s veto pen take the blame for a government shutdown. A return to a regular budget process would show a willingness to engage in a real political dialogue, versus winner-take-all politics. While Republicans lose a potential leverage tool, so does the president. More importantly, splitting up federal spending into smaller bills shows a dedication to transparency, rather than giant omnibus measures where various policy changes are easier to hide.
  1. Enact corporate tax reform prioritizing simplicity over cronyism – Almost all Democrat and Republican politicians talk about the federal tax code being filled with loopholes for every special interest imaginable. At a minimum, both sides should be able to agree that eliminating provisions impacting specific industry groups could offset the revenue loss that would come with lowering the 35 percent corporate tax rate that makes the United States less competitive globally. Rather than playing games with the tax code, reducing the marginal rate toward the effective rate (what many companies actually pay) would treat corporations similarly across the board, improve transparency and lower the economic drag of tax compliance on domestic businesses.
  1. Remember the importance of inspiration – For all the lionizing of President Ronald Reagan, Republicans have frequently failed to embrace his ability to motivate with inspiration rather than fear. Inspiring Americans by creating a vision of a better future requires much more effort, but America desperately needs hopeful, happy leaders. Opposing the Affordable Care Act, carbon regulation and the president’s actions on immigration are important policy positions for many conservatives, but they are not a substitute for a positive alternative agenda from the political left. Breaking the bipartisan practice of fear mongering would breathe new life into the GOP and be a welcome change for many Americans.

Fed district court declares Obama’s executive amnesty unconstitutional

December 17, 2014, 4:03 PM

It’s only the first court of many that will review the order, so it’s nothing to get horribly excited about, but one federal district court in Pennsylvania has declared that some aspects of President Barrack Obama’s executive action on immigration go beyond mere “prosecutorial discretion” and are therefore unconstitutional.

Earlier Tuesday, a federal court in Pennsylvania declared aspects of President Obama’s executive actions on immigration policy unconstitutional.

According to the opinion by Judge Arthur Schwab, the president’s policy goes “beyond prosecutorial discretion” in that it provides a relatively rigid framework for considering applications for deferred action, thus obviating any meaningful case-by-case determination as prosecutorial discretion requires, and provides substantive rights to applicable individuals.  As a consequence,  Schwab concluded, the action exceeds the scope of executive authority.

This is the first judicial opinion to address Obama’s decision to expand deferred action for some individuals unlawfully present in the United States.

The case that this particular opinion sprung out of is intriguing: it has to do with an immigrant who was deported, but then re-entered the country illegally. Before the court declared that he should be deported again, the court asked for a briefing on how Obama’s new policies would impact the immigrant, and whether they provided a way for him to avoid deportation. According to the Washington Post‘s legal experts, the constitutional evaluation of Obama’s program wasn’t necessary, but the court decided to do it anyway, which is good, because in this case, a defendant facing deportation would actually have standing to bring a case. The problem with some of the other cases questioning the act’s constitutionality is that they’ve been brought by states, and those states may not actually be able to sue to stop this kind of presidential action.

The reason this court reached the conclusion that it did was because it felt that, while the executive branch does have some prosecutorial discretion on how it handles (or whether it handles) the execution of laws in existing cases, it had gone so far to detail the execution of these laws that it created de facto legislation. Once the executive branch sets forth such a complicated rubric, it teeters into becoming legislation. And when the executive branch usurps the Legislative Branch’s job (even if it’s not technically doing its job), the executive’s actions are unconstitutional.

In this case, the judge also argued that it’s not the job of the government to “gang up” on the individual, and while it may seem like an executive can and should be able to step in when the legislature is failing, that does not necessarily give him more power. And whether the legislature is “failing,” is also a subjective determination; there’s no real emergency, and no urgency in pursuing legislation except for, perhaps, political expediency. So in this case, the court found, “failure” might actually be a legitimate option.

You can read the opinion here.

The Wind Production Tax Credit lives on

December 17, 2014, 2:27 PM

After much negotiation, Congress has passed legislation retroactively extending 55 “temporary” tax breaks (or tax extenders) through the end of 2014. It is likely that the president will also approve this short-term measure. These tax breaks include a number of incentives for nonprofits, individuals and businesses.

While a number of these breaks may raise some eyebrows — such as the tax credits for NASCAR tracks, Puerto Rican rum makers and Kentucky Derby racehorse owners — there is one particular extension that blows the rest out of water: the Wind Production Tax Credit. The projected cost of another one-year extension is $6.1 billion dollars, which doesn’t count the increased electricity costs in states with the highest wind “productivity.”

While encouraging new energy sources is a noble objective, R Street has detailed on manyoccasions how poor public policies like the WPTC actually deter private sector investment in promising energy sources and cost the American taxpayers dearly.

It isn’t just fiscal conservatives who are wary of this wasteful spending. As Warren Buffett summed up eloquently: “we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”

It is about time policymakers hit the pause button and reevaluate their strategy on wind energy. Eliminating wasteful subsidies for the politically connected is a great place to start.

The temporary nature of this tax package gives the new Republican-led Congress a real opportunity to address our nation’s tax code. House and Senate leaders including (soon-to-be) Ways and Means Chairman Paul Ryan, R-Wis., and (soon-to-be) Senate Finance Chairman Orrin Hatch, R-Utah, have begun serious efforts to move the issue of tax reform forward.

It is about time we set a new course. One hopes the next Congress will eliminate the Wind Production Tax Credit as part of a serious effort to streamline and modernize our nation’s tax code.

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

50+ organizations and experts call for improved intelligence oversight

December 17, 2014, 10:47 AM

WASHINGTON (Dec. 17, 2014) – Citizens for Responsibility and Ethics in Washington, the R Street Institute, the Sunlight Foundation and 50 additional organizations and individuals today called on congressional leaders for much-needed oversight reform of intelligence collection.

The letter—sent to Speaker John Boehner, R-Ohio, and House Minority Leader Nancy Pelosi, D-Calif.—is accompanied by a report from Citizens for Responsibility and Ethics in Washington that expands on the recommendations and details the extreme need and urgency for swift action by the House of Representatives.

The groups’ call comes on the heels of the release of the redacted Senate torture report, the disturbing details of which emphasize the need to empower congressional oversight of intelligence activities.

“These important oversight reforms will lay the groundwork for a more informed debate over looming national security questions by empowering members of Congress to make better informed decisions for themselves and their constituents,” said R Street Policy Analyst Nathan Leamer.

Outdated rules currently pose an obstacle to members who seek to access information about intelligence collection and to provide adequate oversight. Proposed solutions include giving a greater number representatives with experience in appropriations, judiciary, armed forces and other relevant matters a seat on the House Permanent Select Committee on Intelligence—the committee charged with overseeing intelligence collection.

“For far too long, the intelligence community has eluded the accountability essential to a democracy,” said CREW Policy Director Daniel Schuman. “These recommendations empower members of Congress to engage in the oversight necessary to check executive power and keep the people informed about what government is doing in their name.”

There is consensus on the need for these changes among good government groups from across the political spectrum, and it is broadly understood across Congress.

The letter also urges House leadership to ensure the select committee has adequate staffing with appropriate clearances to access and review intelligence information. Non-committee members also should be able to communicate with and retrieve information from the committee in order to exercise their oversight duties and make informed votes on intelligence issues.

“The Obama administration has claimed the current rules are sufficient, but they inhibit members from knowing, much less understanding, the activities of the intelligence community,” said Sunlight Foundation Federal Policy Manager Sean Vitka. “The existing rules actively prevent effective oversight, especially among members who are not currently seated on the House Permanent Select Committee on Intelligence.”

For a copy of the full letter and a list of signers, go here.