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Updated: 3 weeks 6 days ago

Fracking and quakes

April 10, 2015, 8:39 AM

Over the past decade, huge improvements in hydraulic fracturing techniques used to unlock natural gas deposits have lowered energy prices and boosted the economy. They’ve been great for the environment, too. While it’s not pollution-free, gas produces almost none of the particulates and much less of the greenhouse gas that comes from burning coal.

Portions of the environmental left, apparently unhappy with cleaner, cheaper energy, have looked for ways to attack fracking, and one of their most promising ideas has been that fracking causes earthquakes. Since the procedure involves injecting fluid deep into the Earth, nearly all seismologists agreed that such quakes were possible. When experiments confirmed that small quakes had actually resulted from fracking, left-wing environmental blogs and groups like the Center for American Progress reacted with barely restrained glee.

But a new letter from the California Earthquake Authority—a government-run, privately financed entity that’s by far the nation’s largest provider of residential earthquake insurance—should give pause to anybody who wants to say that damaging fracking-related earthquakes are a menace. In response to questions from Republican Assemblyman Scott Wilk, CEA Chief Executive Officer Glenn Pomeroy says that he is “not aware of any claims having been submitted .  .  . in which human activity [has] caused or [been found] to have contributed to damaging ground movement.” This is true even though nearly all of California’s fracking activity is concentrated in its very densely populated, earthquake-prone southern portion.

It’s probably impossible to prove that fracking could never cause a major earthquake. But the CEA’s letter does show that the burden of proof ought to remain on those making the claims.

Limited government? Four Republicans keep Alabama in state-run retail liquor business

April 10, 2015, 8:35 AM

You’d expect it from Democrats in the Alabama Senate – they’ve never met a state-run operation they did not want to preserve.

But Republicans in the Alabama Senate? Last time I checked, Republicans campaigned on a platform of limited, efficient, right-sized government.

Yet it was Clyde Chambliss, Steve Livingston, Jabo Waggoner and Cam Ward who joined the Democrats and voted to keep Alabama in the retail liquor business. The bipartisan big-government alliance gave S.B. 115 an unfavorable report by a vote of 6-7 in the Senate Finance & Taxation General Fund Committee. Republican Sens. Arthur Orr, Bill Holtzclaw, Tim Melson, Trip Pittman, Paul Sanford and Larry Stutts supported the legislation.

The Alcoholic Beverage Control (ABC) Board pulled out all the stops to keep the state-run liquor stores under their control. They made every argument, from the bill causing drunks to roam the streets to the high “cost” of eliminating around 600 state jobs.

That’s right. The ABC wanted legislators to think that reducing the number of state employees would cost money. Sure … if you simply ignore the massive savings that result from not having to pay salary and benefits to that many employees in the coming years.

More importantly, Alabama already has three times as many private retail stores as state-run stores. If we were going to see the massive negative social impacts of privatization, we would already be experiencing them.

We are not.

The legislation considered in the Senate simply closed the state-run retail stores and, as a result, ended the leases for the ABC retail stores.

Ah, wait a minute. Those leases.

A taxpayer-funded lease with the State of Alabama sounds like a pretty stable financial gig if you can get it. I wonder if any of those property owners had any influence on keeping Alabama right in the middle of the liquor business?

Cronyism in Alabama politics? Nah, no way.

Here’s the bigger problem. Conservatives in Alabama need to start calling it like they see it. Whether it’s Gov. Robert Bentley’s tax plan or the four Republicans who voted against the opportunity to shrink government and limit its control over our lives, the truth is that plenty of our politicians aren’t giving us what we thought we were getting when we voted for them.

That does not mean they are bad people or that they don’t have other good ideas. Cam Ward, for example, has done a tremendous job trying to reform our state prisons.

It does mean that we need to call them out and help them understand that we know the difference between limited government and lip service.

Hawaii considers bill to regulate ride-sharing…in 2112

April 09, 2015, 3:28 PM

No two states are the same. What passes for polite in New England may be considered downright abrasive in the Pacific Northwest. What a Californian finds politically correct, a midwesterner might find utterly confusing.

It is no surprise, then, that each state legislature has its own eccentricities that reflect the region and culture in which it is situated – particularly when it comes to the delicate task of amending, or outright killing, legislation.

For this reason, deciphering what exactly the Hawaii Legislature is doing with its piece of ridesharing legislation, S.B. 1280, is no easy feat. Consider that, in its current form, the bill has an effective date of July 1, 2112, and that it just passed the House Finance Committee unanimously.

Now, one of two things could be going on here: either Hawaii really wants to ensure that both insurers and transportation network companies truly have ample time to conform to the new regulatory standards, or something else entirely is transpiring behind the scenes. My bet is on the latter.

A national compromise between TNCs and insurers, reached in March, has provided model ridesharing language for state legislatures across the nation. Yet, Hawaii, like other states, has been working on its own piece of ridesharing legislation since session began at the beginning of the year. Changing the expectations and the objectives of legislators so far into the legislative process is no easy feat.

To give themselves time to embrace the national compromise, Hawaii legislators have grafted the tongue-in-cheek “defective date” into S.B. 1280 to allow it to continue through the process, while simultaneously telegraphing to all parties that the current legislation is a work in progress. Thus, in spite of the fact that insurers and TNCs lined up on opposite sides of S.B. 1280 when it was it last appeared in committee April 7, it was with the certain knowledge that the bill is bound to be amended.

What we at R Street are hearing is that S.B. 1280 will pass out of the House in the coming weeks and returned to the Senate for concurrence. Once there, instead of proceeding to a floor vote for referral to the governor’s desk, the bill will likely be referred to a conference committee, where it will take on a form similar to the national compromise.

While any number of factors could lead the ridesharing legislation down a different route, the Hawaii experience is illustrative of the broader point that state legislative affairs demand a high degree of sensitivity to regional practice. A “defective date” that would read as a poison pill in another state legislature sends an entirely different signal in Honolulu.

For the sake of rideshare drivers and customers, let’s hope that this mainlander read the signals correctly.

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

Coalition urges Congress to pull funding for the OECD

April 09, 2015, 11:56 AM

Dear Senators and Representatives:

American taxpayers should not be asked to subsidize international organizations working against U.S. interests. The undersigned organizations, representing the Coalition for Tax Competition, call on Congress to protect American interests by ending subsidies to the Paris-based Organization for Economic Cooperation and Development (OECD).

The OECD has made ending tax competition one of its major purposes. In pursuit of this goal, it targets jurisdictions with low tax rates and robust privacy rules aimed at protecting human rights.

Tax competition plays a key role in promoting efficient government and encourages politicians to adopt pro-growth policies. It is an essential protection for taxpayers worldwide. The United States is also the world’s biggest beneficiary of international capital flows and tax competition through its attraction of international capital.

The OECD even weighs in on domestic U.S. policy debates and consistently sides with bigger government. In the past it has supported so-called “stimulus” spending, pushed Obamacare-style health care, advocated for cap-and-trade regulation, and suggested a value-added tax in the United States. In its most recent “Economic Survey” of the United States released last year, the OECD advocated for making the personal income tax system more redistributive, for greater federal involvement in education and for new barriers to employment through a higher minimum wage and nationally mandated paid family leave.

In FY 2014, the United States sent $87 million to the OECD, much of which went to pay the tax-free salaries of its army of elite global bureaucrats. The United States is its single largest supporter, accounting for more than 21 percent of its total 2014 budget.

There’s never a good time to ask American taxpayers to fund lavish paychecks for international bureaucrats working against their interests, but it’s especially egregious to do so when Washington can’t balance the budget. The undersigned organizations call upon Congress to defund the OECD.

Andrew Quinlan, President
Center for Freedom & Prosperity

Grover Norquist, President
Americans for Tax Reform

Pete Sepp, President
National Taxpayers Union

Phil Kerpen, President
American Commitment

J. Bradley Jansen, Director
Center for Financial Privacy and Human Rights

Seton Motley, President
Less Government

David Williams, President
Taxpayers Protection Alliance

Bob Bauman, Chairman
Sovereign Society Freedom Alliance

Tom Giovanetti, President
Institute for Policy Innovation

George Landrith, President
Frontiers of Freedom

Iain Murray, Vice President
Competitive Enterprise Institute

Andrew Moylan, Executive Director
R Street Institute

Tom Schatz, President
Council for Citizens Against Government Waste

Sabrina Schaeffer, Executive Director
Independent Women’s Forum

James L. Martin, Chairman
60 Plus Association

Heather Higgins, President
Independent Women’s Voice

Lew Uhler, President
National Tax Limitation Committee

Karen Kerrigan, President
Small Business & Entrepreneurship Council

Wayne Brough, Chief Economist and Vice President of Research

John Tate, President
Campaign for Liberty

Richard Manning, President
Americans for Limited Government

Moving toward real water prices

April 09, 2015, 10:13 AM

Gov. Jerry Brown has taken a dramatic, but dangerous, step by issuing an executive order to cut non-agricultural water usage by 25 percent. The unprecedented and problematic step will accomplish at once too little and too much. It will not seriously impact the shortage, but will simultaneously sour Californians on the need for a new approach to water use.

The seriousness of California’s water shortage is lost on no one. The state’s snowpack is a fraction of what it has been historically and ground water is being depleted at a rate well above replacement. The desolate images of California’s shrinking surface water storage sites confirm what the dire statistics cannot. Our water usage will never be the same. It’s possible the Golden State is not actually experiencing a drought, but is instead transitioning to a new environmental epoch.

Such a transition demands more than a headline-grabbing half-measure. It requires a fundamental reevaluation of how California’s most precious scarce resource is treated. That means moving from management by decree to management by choice.

A decree like Brown’s is inefficient because it does not address the economics of water use. So long as the economic calculus remains the same, the state will continue to suffer from resource misallocation. What’s ultimately required is meaningful market-based water pricing.

By allowing the price of water to rise, California residents would be forced to judge just how much they value their lawns, their pools and their long showers. Price signals would modify, or at least inform, their behavior.

Accurate water pricing certainly would sort out the state’s most egregious example of misallocation, which is how water is used in agriculture. In the midst of a water shortage, it is not without irony that agriculture – an industry that, according to The Economist, accounts for 2 percent of California’s economic activity while consuming a full 80 percent of its water— was exempt from the governor’s executive order.

Regrettably, carving out a distinction between water agricultural and residential water use is easier than actually creating the structure for a functioning price system that would apply to both. The central political challenge is no secret. There is bipartisan interest in the status quo.

California’s Republicans are put in a difficult position by the prospect of true, market-driven, competitive water pricing. On the one hand, they purport to value free markets and competitive enterprise. On the other hand, the Legislature’s Republicans represent constituents that rely heavily on agriculture. No one wants to recognize that the billions the agricultural sector earns mask the even greater cost of the water needed to produce those crops. The sector enjoys a subsidy, plain and simple. Who pays for that?

As the consequences of inefficient water allocation cascade, it would behoove those in government, particularly those who believe in climate change and/or free markets, such as Gov. Brown and the legislative Republicans, to consider the limitations of an illusory cut in water use and focus instead on the need for real prices in water.

Plan to regulate Airbnb might lead to total deregulation in Maine

April 09, 2015, 9:00 AM

A summer trip to Maine has it all: fresh air, ample boating, moose watching, covered bridges, picturesque lighthouses, lobster rolls, blueberry pie, perhaps a visit to downtown Portland’s International Cryptozoology Museum. And for many, there is no better way to experience it than with a stay in one of the state’s many historic inns or bed and breakfasts.

The growth in popularity of space-sharing services like Airbnb has provided a new, more affordable option for vacationers, in some cases allowing them to rent a cozy cottage overlooking a gorgeous rocky coastal bluff for less than the cost of one room in an inn. But predictably, this new source of competition has not been well-received by the incumbents, and the Maine Innkeepers Association is demanding state legislators in Augusta take action.

But a funny thing happened on the way to the rent-seeking trough. A bill proposed to amend the state’s innkeeper regulations and require that space-sharing rentals submit to licensing has drawn a huge public backlash. Now, some lawmakers – most notably, Gov. Paul LePage – are mulling proposals to move in a very different direction.

Current Maine law requires “lodging places” that rent four or more rooms to the public be licensed by the state Department of Health and Human Services’ Division of Licensing and Regulatory Services. Licensed inns must pay a $125 fee and submit to regular inspections for compliance with the hotel code. The law carves out exemptions for youth camps, non-profit dorms, fraternity houses and “vacation rentals,” which are defined as residential properties rented for anywhere from a day to a month for recreational purposes. Under these terms, most space-sharing properties would easily fit that definition.

But under L.D. 436 – co-sponsored by Republican state Rep. Richard Malaby, himself the owner of the Crocker House Country Inn in Hancock – the law would be rewritten to apply licensing requirements to any property that rents even one room for “overnight occupancy,” defined as a period of less than seven days. The result would be to expand licensing requirements currently applied to the state’s roughly 1,400 hotels and inns to an estimated 22,000 vacation properties.

The Portland Press-Herald reports that, at an April 6 hearing on the bill, Boothbay-based Cottage Connection Vacation Rentals owner Audrey Miller spoke for many vacation property owners when she pointed to the seemingly arbitrary and capricious nature of the seven-day cutoff.

Speaking before the Legislature’s Joint Standing Committee on Health and Human Services, Miller questioned the motives of the bill’s sponsors, particularly their contention that licensing is a way to protect the safety of short-term guests.

“Why is it safe to stay in a rental for seven nights and not for four?” she said, eliciting applause from the standing-room-only crowd.

Portland resident Elizabeth Burke told the committee that the income she has earned from renting out spare rooms in her home and a family cabin on Airbnb has allowed her to pay for property improvements and taxes while bringing out-of-state dollars to Maine.

“Airbnb has made my life possible,” she said.

Speaking after the hearing to the Mount Desert Islander, Malaby himself sounded ready to concede defeat:

Malaby added that as much as he would like to see the bill pass, he believes that it will fail to become law at this time, because Airbnb has a statewide presence that many people are against regulating. He also believes his Republican peers will vote against it, as the bill adds a layer of regulatory authority to state government.

“I got over 400 emails objecting to the bill, which indicates a good amount of opposition,” he said.

There might, indeed, still be a way to create the “level playing field” the bill’s sponsors say they want, but it is likely to look very different from the one for which the Maine Innkeepers Association is agitating. Gov. LePage not only would veto the current bill if it were presented to him, adviser Holly Lusk told the assembled hearing, but he is preparing a plan to completely remove licensing requirements for lodging facilities across the state.

Among the other goals of deregulation would be to transfer inn inspectors to begin to make a dent in the state’s backlog of restaurant inspections. The Bangor Daily News reports that Lusk said the deregulation proposal would be deferred until the 2016 legislative session.

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

Congress revives plan to collect sales tax on Internet purchases

April 09, 2015, 8:39 AM

From the Heartland Institute:

R Street Executive Director and Senior Fellow Andrew Moylan says MFA would make doing business more complex and expensive for small business owners and workers using the Internet to sell goods and services.

“The Marketplace Fairness Act would have a huge impact on web-based retailers, their consumers, and the Internet economy as a whole,” Moylan said. “The Internet is borderless, and giving states the power to tax outside their borders, as the MFA does, would add significant burdens on e-commerce to the detriment of businesses and individuals.”

Moylan says MFA’s name is misleading and that the legislation is actually unfair for both consumers and businesses.

“When you make a purchase in a brick-and-mortar store, [businesses] are not required to ask where you live and then forced to accurately determine, collect, and remit those tax dollars to a far-flung jurisdiction with which they may have no physical connection at all,” Moylan said. “And yet, that’s precisely what the MFA would force Internet sellers to do.”


Diverse group of advocacy organizations, intellectual property experts come together in opposition to Florida digital goods bill

April 08, 2015, 4:47 PM

WASHINGTON – Today, a diverse group of advocacy organizations issued a joint public statement in opposition to the True Origin of Digital Goods Act being considered by the Florida state Legislature. By requiring website owners and operators to provide personal identification information plainly on the website, including a user’s name, address, and either a telephone number or email address, the legislation would have a number of negative impacts, including hurting Florida’s economy. A full list of the organizations that signed onto the public statement is copied below.

“The True Origin of Digital Goods Act looks innocent, but in reality it would do more harm than good to Florida businesses and residents by fundamentally changing the infrastructure of the Internet, stifling future innovation, jeopardizing Florida jobs and attacking First Amendment rights.

“If passed, the bill would impinge on free speech and undoubtedly result in abuse and clog Florida’s courts with frivolous injunctions. Under current federal law, copyright owners already have the full power of the courts if they want to identify who operates a website devoted to piracy. Existing laws, like the Digital Millennium Copyright Act, lay out avenues for copyright holders to notify websites of infringement. While we recognize the Florida state Legislature’s goal of putting a stop to illicit online behavior, this legislation goes far beyond that. We encourage members to heed our warnings about the consequences of passing this harmful legislation and support First Amendment rights.”

In addition to the groups who issued today’s public statement, other prominent organizations have opposed the True Origin of Digital Goods Act. The Florida Press Association raised concerns about potential manipulation and cautioned against abusive plaintiffs who try to use a subpoena or early discovery powers to track down their critics’ identity, citing First Amendment protections.

The joint public statement was issued by: the American Library Association, Center for Democracy & Technology, New America’s Open Technology Institute, Public Knowledge and the R Street Institute.

What the ‘zero rating’ debate reveals about net neutrality

April 08, 2015, 3:47 PM

February’s vote by the Federal Communications Commission (FCC) to impose demanding net-neutrality rules on Internet Service Providers (ISPs) has now been followed by a 300-plus-page Report and Order. Add in more than 80 extra pages of individual Commissioner statements (including Democrats’ concurrences and Republicans’ dissents), and you’ve got 400 pages. So we’ve got plenty of fresh fuel for years of heated net-neutrality debate between proponents and opponents, not just at the Commission, but also in Congress and in the courts.

Understanding this particular issue, in the larger context of the FCC’s assertion of public-utility regulatory authority of broadband internet access service (a.k.a. “BIAS”), is like zooming in on computer-generated fractal imagery—the closer you look, the more detail you see. But we can start picking out the details by unpacking a couple of the Commission’s terms and concepts.

Take “net neutrality.” Basically, this is the broad term for policy and regulation that prevents service providers from favoring some services and applications over others. Not all versions are the same—some regulators prefer a “light-touch” regulatory framework (the FCC’s majority says this is what they’re providing in the March 12 Report and Order). Some net neutrality advocates don’t trust incumbent telecommunications companies and ISPs to do anything at all without regulatory oversight. And, perhaps unsurprisingly in the telecom world—long afflicted with captured regulators and crony capitalism—even the most free-market talk is invariably reducible to incumbents wanting different regulations rather than no regulation at all.

A big sub topic in the net-neutrality debate have been the “zero-rated” services, services whose data costs nothing at all and is exempt from the data usage count. Hungry competitors in the smartphone market here in the United States have offered services (such as music streaming) that, while providing digital content over the Internet, don’t count against the “data cap” of a subscriber’s plan. Phone companies argue that the freedom to make such offerings (which can be interpreted as discriminating in favor of one kind of internet service as against other kinds) allows them to be more competitive. Critics say “zero-rating” lets the providers pick winners over losers among internet content, and that giving providers this option allows them to distort the content market (and, in addition, to extract more cash from the chosen content services). The Commission appears to take arguments from both sides seriously, and expressly “forbears” (as regulators like to say) from regulating zero-rated services in any categorical way, reserving instead the right to determine on a case-by-case basis whether a particular zero-rated service is being deployed anti-competitively.

What that debate mostly won’t address is an issue dear to my heart: whether “zero-rated” Wikipedia is a blessing or a curse.  My non-neutral view is that zero-rated Wikipedia is an unalloyed blessing, especially in the developing world where internet access is priced expensively by the byte, but, really, pretty much anywhere. So the FCC has wisely chosen to avoid any categorical regulation of zero-rated services in general.

While it’s good to see the FCC remain agnostically “retail” on an issue where it might have chosen to regulate “wholesale,” it’s discomfiting to see the Commission apply the terms “sponsored data” and “zero-rated” interchangeably. The former suggests that money is changing hands between the carrier and the service, so that if you’re lucky enough to have a special “zero-rated” relationship with a provider, you get to lock out competitors.  There’s plenty of reason to think that muddying the waters this way does no one any good—not even net neutrality’s advocates—and no example better makes this point than net-neutrality advocates’ consistent, yet misguided, criticisms of the Wikipedia Zero project.

This is the heart of my concerns about net neutrality, so I should admit my own non-neutrality upfront. I served as general counsel for the Wikimedia Foundation, which operates Wikipedia and other free internet resources, for more than three years. I also admit I’ve favored at least some limited forms of network neutrality from time to time. But I have to be deeply skeptical of any kind of thinking that, even indirectly, could imperil or discredit Wikipedia Zero, the “zero-rated” version of Wikipedia that offers the massive online encyclopedia in developing countries in ways that don’t run up against the limits of mobile users’ data caps on their smartphones.

Wikipedia has had a complicated relationship with net neutrality, due in part to the way Facebook and other frankly commercial entities point to Wikipedia Zero to justify their own zero-rated services. Let me be clear: I think there really are some good arguments for zero-rated commercial services too. But whatever the arguments for and against zero-rated commercial services may be, they don’t really apply to Wikipedia, whose primary mission is to make the world’s information available for free to everyone.

Wikipedia, in other words, is a charity—the non-profit Wikimedia Foundation exists almost entirely on charitable donations, which average (last I checked) at around US $25 per person. As a committed Wikipedian and supporter of this charity, I have no trouble stepping away from absolutist arguments for net neutrality where doing so advances that mission. This is why I think the estimable blog Techdirt is misguided when it trashes all zero-rated offerings as inherently corrupt and anti-competitive (see “T-Mobile Still Doesn’t Understand (Or Simply Doesn’t Care) That Their ‘Music Freedom’ Plan Tramples Net Neutrality”). The normally more thoughtful Susan Crawford is similarly misguided when she crows over Chile’s prohibition of zero-rated services—a prohibition she assumes includes Wikipedia Zero. (See “Zero for Conduct”.)  (It turns out she got this last bit wrong; Chilean regulators welcomed Wikipedia Zero.) This attitude is especially true for citizens of the developing world and transitioning democracies, where the need for access to free knowledge is particularly acute.

In the sorts of developing countries where Wikipedia Zero is deployed, Internet access exists almost solely on mobile platforms—many of these countries skipped landline technology altogether. Mobile devices are typically saddled with data caps, in which a user pays a certain monthly rate and is allowed to use the Internet until the cap is met. Beyond that point, a user has to pay more, sometimes a lot more, for more data or web-surfing. This kind of harsh data rationing may remind you of what water rationing feels like after a year-long drought, but that’s precisely what those in the developing world must contend with.

In wealthier societies like the United States, the European Union, and Japan, a rich informational resource like Wikipedia gets richer if more people use it and contribute to it.  In developing countries, data caps effectively discourage people from using Wikipedia as extensively, cheating them of the gift of a free informational resource, and thus cheating us all of their contributions.

To address this systemic problem and help citizens of developing countries along the paths of economic and democratic development, the Wikimedia Foundation makes arrangements (never based on a cash exchange, never exclusive) with mobile carriers to offer “zero-rated” access that allows Wikipedia users to dodge those killer monthly data costs. (The rules are pretty simple: in essence, if a carrier offers Wikipedia Zero, a user’s use of this service does not count against his or her data cap. In return, the carrier gets to use—nonexclusively—Wikipedia trademarks like the famous puzzle-globe logo.) This result is something very closely aligned with the longstanding mission of the project: free knowledge, available to everyone, to which everyone can contribute.

Understanding that zero-rated services might actually be a good thing requires a degree of nuanced analysis that some, though not all, advocates of network neutrality either don’t understand, or simply don’t take the time to consider.

Those who love Wikipedia Zero, as I do, can’t let arguments by net-neutrality absolutists define “zero-rated” services for us or paint the issue of net neutrality only in black and white strokes. Wikipedia is not in economic competition with, well, anyone. Legally, you can start your own Wikipedia tomorrow, lifting the content right off of Wikipedia’s own pages and repurposing it for commercial uses. In particular, Wikipedia is not a market-dominant player competing against similar entities for market share and revenue, for eyeballs and advertising dollars. The encyclopedia doesn’t allow advertising at all. Instead, it actively gives away the information that makes it so valuable. In economic terms, Wikipedia is as close to a “non-rivalrous” good as one can imagine. Its provision of free knowledge does not exclude other enterprises, including commercial ones, from using and sharing Wikipedia-hosted knowledge on their own sites, or re-using it in other ways.

There can be no question that Wikipedia Zero, by encouraging higher usage of Wikipedia without additional costs to users, increases demand on the mobile infrastructure. Providers will have to expand capacity to handle the increased demand, and they can’t do this by demanding fees from Wikipedia, which the Wikimedia Foundation can’t and won’t pay in any case. In the long run, increased demand and increased capacity, together with the free informational resources that Wikipedia and its sibling projects provide, will promote increased Internet access in the developing world.

That is an unalloyed positive result, in my view. For true believers in the strongest forms of net neutrality, the necessary build-out in capacity driven by Wikipedia Zero and other similar free resources could be precisely what, in the long term, makes a neutral net more tenable in the developing world.  (I’m deliberately avoiding the first-world-problem perspective I detect in some net-neutrality absolutists.) As I’ve hinted, a similar argument may be advanced for Facebook Zero and other for-profit offerings, but you don’t even need to ask cui bono when it comes to Wikipedia Zero. We all benefit, including those of us who never will use Wikipedia Zero.

Nor is the lesson here limited to Wikipedia Zero. While I personally think some limited forms of net neutrality promote free markets and free expression, I also see the potential for unsubtle regulation to do just the opposite. And even some free-market advocates in Congress seem to be signaling that some kinds of basic fairness-oriented regulation of Internet service providers may be ok. Like me, they may look at the market distortions already baked into our telecom laws—none of us outside of a cryogenics lab will live to see restoration of any kind of pre-regulation Golden World of Telecom—and find themselves tacitly accepting the Theory of the Second Best.

There’s a higher-level free-market argument that deserves at least some consideration, and it’s this: I believe Justice Oliver Wendell Holmes would agree that concepts like “net neutrality” and “common carriage” are also part of his formulation of the “free trade in ideas,” even when they put some economic limits on markets. That’s OK by me. In the same dissenting opinion in which he coined that phrase, Holmes reflected that the “theory of our Constitution” is “an experiment, as all life is an experiment.”

We’re currently in the early experimental stages of net neutrality as a policy in the United States. It’s too soon to say whether our American experiment has already proved the theory right for the world.

Testimony to California Senate Health Committee

April 08, 2015, 3:30 PM

Sen. Ed Hernandez
Senate Committee on Health
California State Senate

Re: S.B. 140 (Leno) Electronic Cigarettes

Chairman Hernandez:

My name is Edward Anselm and I serve as medical director for Health Republic Insurance of New Jersey (HRINJ). I hold the title of assistant professor of medicine at the Mount Sinai School of Medicine. I have a 30-year history of tobacco-control advocacy and running smoking cessation programs. I recently joined the R Street Institute as a senior fellow. I am here today to share my thoughts about S.B. 140, and hope you will consider some modification to the proposed language.

HRINJ is the first health plan to implement a tobacco harm-reduction program. We have complemented a comprehensive program of smoking cessation with a recognition that the majority of smokers are not ready to change. Even if not ready to quit entirely, most smokers are concerned about their health. We provide counseling services to members who want to reduce their smoking level. This can be supported by several means, including FDA-approved medications and electronic cigarettes. While the science supporting the role of electronic cigarettes is far from complete, we have sufficient evidence to support patients and doctors having a dialogue about harm reduction.

Harm reduction as a public health strategy is inherently controversial. It is rooted in the concept that some degree of self-destructive behavior is inevitable. For example, medicalization and decriminalization of marijuana represent a set of compromises about people’s behavior and the consequences of intervention. The net effect includes increased ease of access to marijuana by young people. In every harm reduction strategy, there is a trade-off.

I want to talk about nicotine. Lots of young people try smoking, but only a fraction adopt it as a regular habit. Those individuals gain some benefit. A focus on the addictive nature of nicotine distorts our understanding of why people smoke. An important insight is gained from looking at the prevalence of smoking among people with mental illness, which is double that of the general population. Nicotine is an antidepressant, and when people stop smoking, they get depressed. People with schizophrenia and attention deficit disorder have better cognition on nicotine. My experience with smoking-cessation clinics shows that people quit smoking often, but relapse when overwhelmed by life stresses. People learn they can self-medicate with nicotine and they take the drug in order to avoid feeling bad. Here lies the harm-reduction opportunity: if people need nicotine, why do they have to smoke to obtain it?

Last year, we celebrated the 50th anniversary of the 1964 Surgeon General’s Report on Tobacco, and applauded the 50 percent reduction in the prevalence of smoking since its release. Notwithstanding this great progress, there are still more than 42 million smokers in the United States. Each year, we expect another 540,000 avoidable deaths attributed to smoking nationwide. The smoke of combusted cigarettes contains the well-recognized toxins that cause tobacco-related disease. Any reduction in the number of cigarettes smoked would translate into savings of life, health and health-care costs.

Electronic cigarettes represents an opportunity to provide nicotine to current smokers. There are now more than 600 brands of electronic cigarettes available in a market that remains largely unregulated. What these electronic nicotine delivery systems have in common is that they deliver nicotine to the lungs by heating liquid nicotine. By every comparison available, vapor produced by ENDS devices has far less harmful agents than cigarette smoke. No one is suggesting that electronic cigarettes are harmless, but it is not difficult to conclude that they are less harmful than cigarettes.

What about the harm to people who don’t smoke? The harm of cigarette smoke extends to household companions and co-workers who share the same environment. Legislation to protect individuals from other people’s smoking has been effective in transforming the culture of smoking and protecting many from exposure. If vapor is far less toxic than cigarette smoke, there may be settings in which electronic cigarettes could be considered to have minimal harm to others, such as the privacy of one’s home or in outdoor spaces.

In summary, I support the basic provisions of S.B. 140 with regard to restricting youth access to ENDS. I believe that appropriate distinctions need to be made between cigarette use and electronic cigarette use. An excessive restriction of electronic cigarette use by adults may limit their value in reducing harm from cigarette smoking.



Edward Anselm, MD
Senior Fellow, R Street Institute
Assistant Clinical Professor of Medicine, Icahn School of Medicine at Mount Sinai


Testimony on California Earthquake Authority resolution

April 08, 2015, 3:30 PM

Chairman Daly, ladies and gentlemen of the committee, my name is Ian Adams and I am the Western region director of the R Street Institute. R Street is a non-profit, free-market think tank based in Washington that maintains the largest insurance-focused project of any non-industry think tank. In California, our focus has been in the area of property insurance reform, with an eye toward the California Earthquake Authority, in particular.

Nowhere is the risk of a major earthquake greater, in terms of a population’s exposure to high-intensity and severity events, than in California. In March 2015, the U.S. Geological Survey released its Third Uniform Earthquake Rupture Forecast. The study revised upward the odds of an 8.0 magnitude event occurring in California within the next 30 years from 4.7 percent to 7 percent. Less profound, though severely damaging, earthquakes are a virtual certainty.

AJR 6 neatly encapsulates both the history of California’s seismic responses, as well as a call for reform to make the state’s earthquake insurance system work better for residents. Indeed, the earthquake insurance take-up rate in California is too low, around 10 percent, and the CEA’s structure is something of an impediment to broader coverage penetration. Still, while AJR 6 correctly identifies the problems associated with a low take-up rate, it recommends a number of problematic solutions.

The resolution calls for a federal back-stop, in the form of debt guarantees, to furnish the state with post-event funds in the event of a major earthquake. In turn, the thought is that the CEA would be able to reduce its premiums because it would not need to purchase as much reinsurance. Lower premiums would then lead more residents to purchase earthquake insurance.

Such an approach is problematic for three reasons:

First, consider that insurance is a system to offset prospective large costs in the future by substituting smaller, known costs in the present. By displacing the burden of paying for catastrophe coverage to a post-event period, there is a temptation, which has been realized elsewhere, to underprice risk. Subsidizing earthquake risk by incurring debt after an event potentially places uninvolved and likely more prudent residents on the hook for those most vulnerable and least responsive to the risk.

Second, in the case of bonds, a post-event subsidy burdens future generations for the incurred expenses of present-day losses. In Florida’s case, after a series of major hurricanes in 2004 and 2005, residents faced more than a decade of taxes and assessments which, in turn, created a drag on the state’s economic recovery.

Third, the supposition that private capital would flock to federal bonds in a sufficiently timely fashion to furnish effective recovery is speculative, at best. Bonds must be drafted, marketed and sold, which will slow CEA’s ability to pay claims. Further, bonds must be repaid with interest. There is a qualitative difference between recoveries financed by private funds, as compared with those financed by public funds. Reinsurance pays quickly, jump starts reconstruction, provides an economic stimulus and does not need to be repaid.

Given that the state is characterized as “overdue” for an earthquake, is now the time to shift to post-event debt and repayment obligations? How many more years must the state avoid a devastating earthquake to save enough to justify shifting the risks to taxpayers? Ultimately, that is exactly what AJR 6 embraces – a cost-shifting mechanism to transfer risk from private parties to taxpayers. Lower upfront premiums will lead invariably to taxes and assessments on all Californians.

Thus, while AJR 6 is correct that something must be done to make earthquake insurance affordable to Californians, its recommendations would fundamentally recast the state’s response for the worse. California would be better served in the near term by correcting the CEA’s backward assessment structure; proving stronger incentivizes for seismic-mitigation efforts; and expanding the number and type of earthquake policies available through the CEA. In the long-term, the state should seek to make earthquake insurance a condition of securing a mortgage, as is currently the case with flood insurance in high-risk flood areas. All of these recommendations would lower earthquake insurance premiums.

For a full discussion of these and other solutions to the state’s earthquake vulnerability, please consult our white paper “Insuring a way out: Modernizing the California Earthquake Authority.

Thank you for your consideration. I am happy to field any questions that the committee has.

Coalition letter to ITC over international digital data transmission

April 08, 2015, 3:24 PM

The attached letter to U.S. International Trade Commission Chairman Meredith M. Broadbent from a coalition of 26 organizations and scholars (including R Street) critiques the commission’s April 2014 decision that transmission of digital data across national boundaries constitutes importation of articles over which the commission could maintain authority.

R Street joins broad coalition to reform government surveillance

April 08, 2015, 3:06 PM

WASHINGTON (April 8, 2015) – The R Street Institute has joined with the Electronic Frontier Foundation and more than 30 other organizations to launch Fight215.org. This new site will help concerned individuals contact lawmakers to demand an end to the NSA’s unconstitutional mass surveillance program.
The launch comes as privacy advocates count down to the scheduled expiration of Section 215 of the Patriot Act, currently set for June 1, 2015.

“Those of us steeped in American surveillance law long have known the scope of government foreign-intelligence surveillance was theoretically unlimited,” said Mike Godwin, R Street’s director of innovation policy. “What many more of us learned in the last two years is that, thanks to technological advance, there are no practical limits on government surveillance, even of American citizens unconnected to national security threats. The only workable way to limit what the government gets to do in capturing our communications is to reform the law, starting with Section 215.”

For years, the federal government has been collecting millions of its citizens’ call records, regardless of whether any of these citizens is perceived as a terrorist threat. Section 215 was reinterpreted in secrecy, largely by the intelligence community and without input from any consumer or public interest group. The coming expiration offers Congress the opportunity to find ways to ensure Americans’ safety, while maintaining their fundamental privacy rights.

“We endorse this path of reform not because we can guarantee we’ll be safer from foreign threats with more limits on government powers, but because we know that a government without meaningful checks on its powers is dangerous,” said Godwin. “We accept as adults that life with liberty is not risk-free and insist that our government be limited and accountable in how it monitors us. The time for reform is now, and this Congress is our best chance to put the breaks on the runaway surveillance train.”

Read more about the coalition at fight215.org.


Does no one die rich in Atlanta?

April 08, 2015, 11:51 AM

Lifehacker calls attention to this two-year-old chart by Amanda Cox and Shan Carter of the New York Times graphics department, illustrating relative income mobility in various U.S. cities, as documented by Harvard University’s Equality of Opportunity Project.

The chart compels one’s eyes to look at the City of Atlanta, which the data shows to have among the lowest levels of economic mobility in the country. According to the statistics, just 4 percent of children raised in the bottom-income quintile in Atlanta will end up in the city’s top quintile, and just 14 percent of those raised in the middle quintile will end up in the top quintile, both dead last among the cities chosen for graphic representation here.

But if one slides over to the third column, you see an interesting footnote. Atlanta also ranks among the cities where those raised in the top quintile are least likely to end up on top. Indeed, just 30 percent of those raised in Atlanta’s top quintile will stay there, which by definition means that 70 percent will not.

There are, of course, two quintiles not represented here (the second highest and the second lowest), so presumably the answer to the question “who ends up rich in Atlanta?” can be found there. Or, another way to frame it is that there is income mobility in Atlanta; it’s just mostly downward.


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

FDA must correct snus warnings

April 08, 2015, 11:46 AM

An FDA advisory committee is meeting this week to discuss a landmark proposal to correct federal health warnings that have been misleading the public for almost 30 years.

Swedish Match, a manufacturer of the Scandinavian smokeless product called snus, petitioned the FDA to eliminate two package warning labels concerning mouth cancer, gum disease and tooth loss.  The company submitted numerous scientific studies documenting that these warnings, mandated in 1986, misrepresent the facts.

The mouth cancer warning was based on a flawed 1981 study of powdered dry snuff, an obscure product.  The reported cancer risk was far lower than from smoking, but it was incorrectly represented as high, and applicable to all American smokeless products (see here and here for background).  In fact, numerous epidemiologic studies document that users of American moist snuff and chewing tobacco, and Swedish snus, do not have significantly elevated mouth cancer risk.

The gum disease/tooth loss warning is also unfounded.  There is no credible scientific evidence that smokeless tobacco is an independent risk factor for any dental problem.

Swedish Match has also urged the FDA to replace another 30-year old deceptive warning, “This product is not a safe alternative to cigarettes,” with this: “No tobacco product is safe, but this product presents substantially lower risks to health than cigarettes.”  The replacement warning is identical to a change requested by R.J. Reynolds four years ago in a citizen petition filed with the FDA.  The agency ignored that petition.

The not-a-safe-alternative warning is particularly egregious, as I note in my book, “For Smokers Only.” The warning, appearing on packages and in advertising, has deceived millions of smokers.

The current warnings have been shown to discourage smokers from switching.  The proposed label would set the facts straight.  Numerous studies document that the health risks of smokeless tobacco use are so low as to be barely measurable, even for mouth cancer.  (The European Union removed warning labels for that disease from Swedish snus packages in 2001.)  Statistically, smokeless users have about the same risk of dying from their habit as automobile users have of dying in a car accident.

Swedes have a history of embracing harm reduction. They invented the modern seat belt, and they’ve eagerly substituted relatively safe snus for cigarettes. Snus use is directly associated with low smoking rates in Sweden, where men have smoked less and used more smokeless tobacco than in any other developed country.  The result: Swedish men have the lowest rates of lung cancer — indeed, of all smoking-related deaths — in the developed world.  If men in the rest of the EU smoked at the rate of Swedish men, there would be more than 250,000 fewer dead smokers in the EU each year. Inexplicably, the EU has banned snus in every country except Sweden, denying smokers this life-saving option.

The good news is that snus is now widely available in the United States (as are e-cigarettes, another safer-than-cigarettes option).  A 2006 study funded by the National Cancer Institute estimated 4 four million American smokers would switch to snus if they were informed about the vastly lower health risks of that product.  Research shows that smokeless tobacco has already helped many smokers quit deadly cigarettes.

With no good science behind them, anti-tobacco extremists have resorted to scaremongering.  Dr. Michael Steinberg, director of the Tobacco Dependence Program at Rutgers, recently told NPR this convoluted story:

If you imagine a young person who sees on a label that this is a less harmful tobacco product, they may interpret that as, ‘Oh, this is not harmful at all. I might as well try it and see what it’s all about.’  And that person can still become addicted to the nicotine effects, which could either lead to them becoming a long-term smokeless tobacco user, or could escalate to them starting to smoke cigarettes.

The FDA cannot take action based on fantasy scenarios.  Swedish Match’s request is scientifically sound.  Revised labels will tell the truth about snus, giving U.S. smokers life-saving information.

CEA says it’s seen no fracking-related earthquake claims

April 08, 2015, 7:50 AM

The California Earthquake Authority, the state-run insurance pool that is the primary source of residential earthquake coverage in the Golden State, says it hasn’t received any claims that assert human-caused activity like hydraulic fracturing or deep-well injection were the cause.

That statement was offered in response to a letter from Assemblyman Scott Wilk, R-Santa Clarita, echoing local concerns about a plan approved by the Santa Clarita Valley Sanitation District 18 months ago to inject a series of deep wells with excess chloride brine extracted from the Santa Clara River. The plan, which would allow the district to comply with orders from the Los Angeles Regional Water Quality Board, has raised a number of local concerns, including whether it would make local properties ineligible for earthquake coverage.

The simple answer, according to CEA Chief Executive Officer Glenn Pomeroy, is no.

The presence of a deep-well-injection site near a property does not affect the property’s eligibility to or insurability under a CEA earthquake policy. In addition, the presence or absence of DWI sites is not a factor in determining the premium rate for a CEA policy.

Because human-activity-caused ground movement is not an insured peril under a CEA earthquake insurance policy, DWI activities do not affect the risk of loss for the sole peril that is insured against under a CEA policy and hence do not affect eligibility or price.

Though the deep-well injection project that prompted the letter is not related to hydraulic fracturing processes for oil and gas extraction, concerns about potential links between fracking and earthquakes have grown in recent years. In an FAQ on the U.S. Geological Survey’s website, the USGS notes:

To produce natural gas from shale formations, it is necessary to increase the interconnectedness of the pore space (permeability) of the shale so that the gas can flow through the rock mass and be extracted through production wells. This is usually done by hydraulic fracturing (“fracking”). Fracking causes small earthquakes, but they are almost always too small to be a safety concern. In addition to natural gas, fracking fluids and formation waters are returned to the surface. These wastewaters are frequently disposed of by injection into deep wells. The injection of wastewater into the subsurface can cause earthquakes that are large enough to be felt and may cause damage.

Pomeroy said there are any number of other potential “human activities” that could be implicated in a destructive tremor, including blasting tunnels and mineshafts, accidental explosions or even terrorism. But to date, the CEA is “not aware of any claims having been submitted…in which human activity (including, but not limited to, DWI) are thought to have caused or to have contributed to damaging ground movement.”

Where human activity is considered a viable proximate cause of earth movement, he noted that “the injured party can seek legal recourse against the person or entity that caused that loss.” Such claims would not be covered under a CEA policy, because they would fail to meet the policy’s definition of an “earthquake,” Pomeroy wrote.

The CEA writes more than 80 percent of the residential earthquake policies in California, which is estimated to hold more than two-thirds of U.S. earthquake risk.

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

The conservative case for surveillance reform

April 07, 2015, 3:31 PM

This Wednesday, R Street is hosting a panel discussion on the looming battle over government surveillance in America. With key sections of the Patriot Act set to expire May 31, Congress must address the constitutionality and effectiveness of the NSA’s mass-surveillance programs and reevaluate the need for this massive intrusion into the personal lives of ordinary Americans.

Our panel will feature a dynamic discussion that addresses the concerns of gun owners, harm to the U.S. economy and runaway executive power. Panelists will include: R Street’s Mike Godwin, the Cato Institute’s Patrick Eddington, Wayne Brough of FreedomWorks and others. We’re also excited that Sunday Yokubaitis, president of the Austin, Texas-based tech company Golden Frog, will join our panel.

RSVP to attend in person: reformnsa.splashthat.com

Watch live online at 12:00 PM ET:

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

Top 5 findings on the environmental harms of crop insurance subsidies

April 07, 2015, 2:25 PM

We at R Street do a lot of warning that our nation’s misguided crop insurance supports, in combination with the disastrous Renewable Fuel Standard, are distorting land and food markets, wreaking environmental havoc and adding billions to the taxpayer’s tab.

A new report from researchers at the University of Wisconsin at Madison published online by the journal Environmental Research Letters explores precisely how much damage has been done due to conversion of our nation’s most sensitive grasslands, despite the fact that these lands are actually unsuitable for farming.

The negative consequences of this transformation are myriad, with perhaps the most important environmental implications coming from the effect this new farming has on U.S. carbon dioxide emissions.

The entire report is short and easily digestible, so it’s certainly worth a read. But in case you don’t have the chance, here are the top five takeaways from what the report deems “the greatest transformation to cropland since the ‘fencerow-to-fencerow’ era of the 1970s and the Dust Bowl of the 1930s prior.”

1. Farm acreage is expanding the most in marginal, environmentally sensitive areas; on lands traditionally used for livestock; and on lands with limited water availability. This obviously harms wildlife, injures ranchers, increases pollution from runoff and distorts water markets.

South Dakota and North Dakota experienced the greatest amount of new cultivation/ Here, expansion occurred primarily east of the Missouri river, especially concentrated in the Prairie Pothole Region, reinforcing the importance of previous studies focused on this region…. Croplands also substantially infilled the lesser-cultivated areas of Southern Iowa and Northern Missouri, a region characterized by steeply sloped hills normally reserved for livestock grazing. In western Kansas and the panhandles of Oklahoma and Texas, we found highly concentrated expansion hotspots, many of which are indicative of new, center-pivot irrigated fields. Located above the rapidly-depleting Ogallala aquifer, cropland expansion in this region raises substantial concerns about water use and sustainability.

2. Almost a quarter of these newly converted acres are areas with high amounts of carbon stored in the soil, which are now being released into the atmosphere.

Distinguishing long-term grasslands from other types of converted land is of high interest due to the elevated amounts of stored soil carbon and diverse native species these areas can often contain. We found 1.6 million acres of long-term (20 + year) unimproved grasslands were transformed to cropland during our recent four-year study period. Thus, over a quarter of converted grasslands and 22% of all land converted to crop production came from these longstanding prairie- and range-like locations

3. We’re converting these lands at an incredibly rapid pace.

In total, the 16.8 million acres of individual crop increases contributed to 7.34 million acres of new conversion, resulting in an overall conversion ratio of 43%. That is, for every additional acre dedicated to a specific crop over the study period, total cropland expanded on average by 0.43 acres.

4. Due to the perverse incentives created by crop insurance subsidies and RFS, farmers increasingly are willing to farm on lands they probably wouldn’t farm on their own dime.

New expansion occurred most frequently on marginal land that had severe to very severe limitations to cultivation, whereas previous croplands were most concentrated on prime farmland characterized by fewer limitations. As a result, total marginal cropland area expanded at twice the rate of cropland on well-suited soil (1.5% versus 0.77%). Crops planted on land deemed unsuitable for cultivation also experienced high relative growth (1.1%) over the study period. 

5. Which basically means we’re providing taxpayer-financed incentivizes to big agri-business to release an incredible amount of additional carbon into the atmosphere, equal to 11 percent of the current U.S. car fleet.

Estimated carbon emissions from corn and soybeans planted on recently converted land could range from 94 to 186 MMT CO2e, and may be closest to 131 MMT CO2e. The emissions from these crops alone would be equivalent to a year’s carbon dioxide release from 34 coal-fired power plants or an additional 28 million cars on the road.

The report highlights potential solutions, including expanding the recently revamped “Sodsaver” provisions in the farm bill that protect vulnerable grasslands in certain states. However, given the report’s damning findings, it seems Congress would do better to chuck the RFS altogether and dramatically ratchet down the subsidies to crop insurance recipients. Otherwise, we’ll continue to pay for our own destruction.


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

Patent Reform Briefing

April 07, 2015, 10:02 AM
This event has passed 04/16/2015 @ 12:00 pm - 1:30 pm

In late 2013, the relatively obscure issue of patent reform rocketed to prominence as the House of Representatives voted 325-91 to pass the Innovation Act, a package of civil litigation reforms advanced by House Judiciary Chairman Bob Goodlatte.

The legislation enjoyed broad, bipartisan support. Republicans voted for it by a margin of 7:1, and it also received strong support from the White House. While it was stopped in the Senate, the Innovation Act is back again this year. And a comparable Senate bill is expected imminently.

Please join us for a lunch and panel discussion on what’s next for patent reform. First, you’ll hear presentations from individuals facing abusive patent lawsuits. Then, we’ll hear from a bipartisan panel of lawyers and economists on the challenges of achieving balanced and substantive reform.

RSVP: http://patentreformbriefing.splashthat.com/

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