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Biloxi’s crude deal: Oil spill reparations are funding a baseball stadium in Mississippi

May 28, 2015, 1:27 PM

From Vice:

“For something that is a ‘combination event’ where there are environmental and economic impacts, you should be looking at projects that have environmental and economic benefits,” says Cameron Smith, a senior fellow at the R Street Institute, a libertarian think tank that is researching the use of oil spill funds. “I’m not sure about the environmental nexus of a stadium, and there’s a large body of research that suggests they aren’t even the [drivers of] economic development that they purport to be.”

…Perhaps the tide will soon turn for Biloxi and its fishing community. Though BP’s total fines are still being litigated, a lot of money is on its way to the Mississippi Gulf Coast. About $50 million has already been earmarked for the restoration of an oyster reef in Heron Bay on the Louisiana state line, the type of project Smith says can be “an environmental win but also, where fishing is a major industry, a really good economic plan.” The project’s coordinator expects work to begin in late 2015.

 

 

Is regulatory reform a hopeless cause?

May 28, 2015, 12:34 PM

In short, no, although the reader of Charles Murray’s new book might come away with that conclusion. In By the People: Rebuilding Liberty Without Permission (Crown Forum, 2015), Murray paints a dispiriting picture of the modern American state. The U.S. Constitution established a limited federal government within a federal system. The 10th Amendment encapsulates their vision: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.” Until the Progressive Era, the federal government remained small. A large standing army, a bugbear of the Founders, did not exist before the 20th century.

Now, Murray laments, we have a “leviathan” that spends $3.4 trillion per year, and is huge beyond comprehension. Consider: “As of 2013, three undersecretaries reported to the Office of the Secretary of Energy. Combined, those three undersecretaries ran 29 separate offices… In addition, the heads of 15 other offices report directly to the Office of the Secretary. That’s 44 entities.” One senses that Murray’s head nearly exploded when he clicked on one of the bureaus and found it had five divisions and 37 sub-offices.

A particularly confounding and central feature of modern American government is the administrative state. Executive branch agencies issue a few thousand rules per year that have the effect of law. The Code of Federal Regulations, the corpus of standing federal rules, runs nearly 175,000 pages. And this says nothing of the various guidance documents agencies issue to those whom they regulate, and the substantial body of regulatory case law produced by both agencies and the judiciary. One can be forgiven for wondering, as Murray does, if Congress remains our nation’s primary lawmaking body.

The administrative state is, Murray contends, “an extra-legal state within the state,” and his proposed remedy is rebellion. No, Murray is not advocating insurrection or assaults on the government or its employees. He instead proposes “a declaration of limited resistance to the existing government.” The administrative state, he argues, is a bit like the Wizard of Oz—frightening but, in fact, feeble. For all the rules and regulations promulgated, agencies have very limited resources to enforce them. So, we should simply disobey. If “the man” comes down on you, then the “Madison Fund,” a private legal defense fund he proposes, will defend you.

Murray’s dour assessment and impish proposal is predicated on the hopelessness of reform. Congress “is systemically corrupt” and will never roll back the administrative state in any significant way. For sure, Congress has been complicit in the growth of the administrative state. It established and funds agencies, and has delegated much authority to them. Additionally, Congress’s previous efforts at regulatory reform, as Stuart Shapiro and Deanna Moran of the Mercatus Center point out, have not lived up to expectations. The Paperwork Reduction Act, the Regulatory Flexibility Act, the Unfunded Mandates Reform Act, the Small Business Regulatory Enforcement Fairness Act and the Congressional Review Act all have nibbled at the margins of the administrative state. The fundamental machinery of the regulatory process, as established by the Administrative Procedure Act, chugs on.

But the argument that Congress can never do much to reform the regulatory state is unpersuasive. It can. The central political challenge is to make regulatory reform a more bipartisan issue. Democratic advocates for regulatory reform tend to be few. Regulatory reform tends to be treated as a business – and therefore, Republican – issue.

This is unfortunate, because regulations affect nearly every aspect of modern life. They are neither inherently left nor inherently right. A perusal of the Competitive Enterprise Institute’s survey, “The 10,000 Commandments,” highlights the diversity of subjects for new regulations: the military’s Tricare prescription drug program; catfish inspections; federal assistance to foreign atomic energy activities; and disaster assistance programs, to cite just a few.

“Public-school teachers,” Murray observes, “typically labor under regulatory regimes that prescribe not only the curriculum but minutely spell out how that curriculum must be taught—an infantilization of teachers that drives many of the best ones from the public schools.”

There are approaches to regulatory reform that are innately bipartisan: they would strengthen the legislative branch as an institution vis-a-vis the executive. Congress could establish a Congressional Regulatory Office. Modeled on the nonpartisan Congressional Budget Office and Congressional Research Service, the new CRO would advise Congress on proposed and forthcoming regulations, and regulatory policy generally. A Congress with more expertise in regulations might well be less apt to give away its law-making authority and more able to thwart bad regulations before they are issued.

As for the great mass of existing regulations that Murray (and others, including myself) find problematic, there is a bipartisan, institutional solution. Congress can create a commission to study the corpus of federal regulations and identify rules for abolition. Anachronistic or unwise regulations would be rolled into a bill, and Congress would vote up or down on them (a bit like BRAC). Assuming this commission operates collegially and avoids highly charged regulations (e.g., Obamacare), it could significantly reduce the stock of regulations in a sensible fashion. Sen. Angus King, I-Maine, has proposed doing this in the Regulatory Improvement Act (S. 708), which has both Republican and Democratic original co-sponsors. Think tanks on the left and right both have advocated such a commission. Rep. Jason Smith (R-MO), has introduced the SCRUB Act (H.R. 1155) in the House, which proposes a similar commission.

Regulatory reform is not easy, but it is also not impossible. Committees in both chambers of Congress are working on it. Republicans in the House would be happy to move a regulation reform bill. All that is needed is a few more Democrats in the Senate to join the effort, and major reform can be achieved.

Daily fantasy sports and the case for legal online gambling

May 28, 2015, 12:09 PM

If daily online fantasy sports contests are legal, why aren’t online poker or other casino-type gambling games?

I’m not against the idea of playing fantasy sports for money, I just wish legislators, with some enabling from the major sports leagues and the fantasy sports sites themselves, would stop kidding themselves (and us) that it is not online gambling.

Gambling is defined as when two or more parties stake a sum of money on an uncertain outcome. Once the outcome is determined, the party who predicted correctly collects the total of the funds at risk.

The contest can be one of skill or chance. Two people can wager on which one can make 10 basketball shots in a row or how many red M&Ms they’ll find in a factory-sealed package.

Fantasy sports originally were contested on a season-long basis, usually among groups of friends, and friendly wagering often was involved. Sites like DraftKings and FanDuel brought the scale of the Internet into play, and introduced daily contests allowing contestants to play against others one-on-one or against thousands at a time. The rules work with any sport. In baseball, for example, contestants choose a line-up of pitchers and position players. As games progress through the day, points are awarded on the basis of the performance of the ballplayers–hits, home runs, RBIs, strikeouts and such. The fantasy contestant whose line-up totals the most points wins.

What makes the game challenging is the “salary cap” that fantasy players must hold to. Top performing players “cost” more, preventing contestants from loading up on superstars and forcing them to strategically evaluate and balance their choices.

Daily fantasy sports has become popular. An estimated 3 million to 4 million play each day. DraftKings claims 2 million registered members, an increase from 200,000 last year, according to the Washington Post. Daily fantasy accounted for $492 million in annual spending as of early 2013, according to the New York Times.

Because it spurs interest in games outside home markets, thereby increasing the value of national television contracts, the major sports leagues have taken an interest. In 2013, Major League Baseball purchased an undisclosed minority stake in DraftKings. Disney, owner of ESPN and the National Hockey League’s Anaheim Mighty Ducks, invested $250 million in the site in April. The National Basketball Association holds a 2.5 percent stake in FanDuel.

By any definition, daily fantasy sports is gambling. Real money is at stake, from as little as $1 to $10,000. The terms can be winner-take-all or, in a large player field, a set number of top finishers.

The only people who deny that daily fantasy sports is gambling are the sites themselves, their investors and the U.S. Congress, which created a carve-out for fantasy sports in the Unlawful Internet Gambling Enforcement Act (UIGEA). Otherwise, all other online games where groups of players risk actual money, like poker, are illegal. UIGEA notwithstanding, five states define fantasy sports as gambling and have banned it.

The daily fantasy sports industry argues that the UIGEA carve-out is legitimate because fantasy sports games require skill. But, as noted above, skill is not a defining aspect of gambling. Poker depends predominantly on skill. Roulette, on the other hand, is all luck.

And while the Fantasy Sports Trade Association falls over itself explaining the skills needed to win at fantasy sports, such as keeping track of injuries, coaching styles, weather patterns and home and away statistics (all true), it leaves out the most important part, which pertains specifically any form of successful gambling – the ability to identify and exploit statistical correlations.

Here’s a strategy hint for all would-be daily fantasy players: for all practical purposes, fantasy sports is a parlay wager. In a parlay, a gambler bets on two or more outcomes. If they all occur, the player wins the bet. When casual gamblers bet a parlay, they usually pick outcomes that are independent and isolated. In a baseball parley, that might mean choosing the Mets and Nationals to win their respective games. This bet can be expressed simply as x + y.

Professional gamblers look for statistical correlations between two events. That is, if the first outcome in the parley occurs, the probability of the other outcome increases greatly. A skilled sports parley can be expressed as “if x, then y.” To be more concrete, the first thing a daily fantasy sports player should do each day is look for games that have high over/under lines. That is, the games in which handicappers believe a large number of runs will be scored. (Hat tip to poker guru Ed Miller, who offers more thoughts on this podcast.)

I doubt opponents of online gambling would argue with any of this. It’s only a matter of time before the anti-gambling side takes notice. But with the pro sports establishment and major media outlets behind it, online fantasy sports may already have enough momentum to escape prohibition.

To be frank, that would allow us to look at fantasy sports as a laboratory for online gambling. Opponents say online gambling would only spread addiction, entice children to burn through their parents’ credit card lines and, in the case of sports betting, breed corruption. Recent efforts have been aimed at getting Congress to rewrite the Wire Act to prohibit intrastate online gambling.

Yet despite the popularity of daily fantasy sports, it does not seem to have become a social problem. I have seen no breathless news stories of families rendered destitute by a profligate fantasy sports player. While we hear a lot about keeping children safe online, fantasy sports sites have not been listed among the threats. The honesty of the contests has not been called into question. Companies that run fantasy sports sites are publicly traded. Congress seems comfortable with the sport leagues doing business with them.

In other words, it’s turned out that at least one type of online wagering game is enjoyed responsibly by millions of Americans. Its example makes a strong case for allowing states to make their own decisions about online gambling, scrapping UIGEA and, in general, giving Americans greater freedom to play other wagering games, including poker, online.

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

Oracle v. Google: We’re not screwed yet

May 28, 2015, 11:50 AM

From InfoWorld:

 I think the Solicitor General’s critique reflects the incorrect understanding of a non-programmer. An API is certainly written in code, but it’s being used in a different way than the (indisputably copyrightable) use of code in an implementation. As Mike Godwin of the R Street Institute observes, asserting the first use of code is not copyrightable and the second is, is no more dangerous than asserting a threat to the copyrightability of prose by treating a recipe differently from the description of the actual preparation of a meal made according to the recipe.

There is no ‘conservative’ and no ‘liberal’ in wine politics

May 28, 2015, 11:21 AM

From Fermentation: The Daily Wine Blog:

I was reminded of this upon reading, “Free America’s Beverage Markets” by Kevin Kosar, a senior fellow at the right-leaning R Street Institute. In this piece, Kosar takes to task the states’ various absurd, archaic and mostly anti-consumer regulations. He sums up this view in writing that the 21st Amendment “does not mandate the rampant anti-consumer statutes and regulations that are so common States can do better. Legislators should support consumer choice, private enterprise and free markets by clearing out anachronistic and protectionist alcohol regulations and statutes.”

Free America’s beverage markets!

May 28, 2015, 9:05 AM

It is difficult to understate just how politicized America’s alcoholic beverage markets are. And I say “markets” because the country does not have a single nationwide market. Rather, it has markets far too numerous to count. These markets are the product of various regulatory regimes across federal, state, county and municipal levels of government.

The federal government taxes alcoholic beverages, regulates their production and acts as gatekeeper for proposed new products. Each state has its own regulatory regime; counties and other sub-state governments also have their own sets of policies. I cannot tell you how many times I have heard that neighborhood community advisory boards, whose decisions hold great sway with alcohol licensing authorities, put a bar out of business before it even opened.

To make matters even more confusing, alcohol sales regulations also vary based on the type of beverage (beer versus spirits versus wines); the type of seller (sole proprietor shop versus chain store); and the venue (e.g., tavern versus restaurant versus party boat). It is sufficiently baroque that a “field guide” to state liquor laws has been published, and law firms specialize in alcohol policy.

Some alcoholic beverage sales policies are sensible. Disallowing the retail sale of intoxicating beverages in the wee hours of the morning aims to decrease dangerous behavior by stopping already-intoxicated individuals from buying more alcohol and getting drunker still. Requiring anyone who makes alcoholic beverages to specify a beverage’s alcohol content is truth in labeling.

The sensible policies, sadly, are not the only ones. Myriad regulations bear no relationship to the public good, limit consumer choice and profit the politically well-connected at a cost to the public. Some examples include:

  • In Massachusetts, the Demosthenes Greek-American Democratic Club got hauled before state regulators for buying liquor from…a liquor store. By diktat of the state government, such establishments may only purchase from wholesalers.
  • In many states, a distiller cannot sell his or her product to the public. Folks can visit a distillery and watch the liquor get made, but then must drive to a retail store, which by law had to buy the liquor from a wholesaler. In states where distilleries can sell to their visitors, business owners must apply for a special license and then fill out copious tax and regulatory compliance paperwork.
  • Florida and 15 other states prohibit beer and wine retailers from selling spirits, unless they are willing to open a separate storefront or “dedicated” space.
  • Texas forbids publicly-held companies, like Wal-Mart, from obtaining liquor sales licenses. The Longhorn State also caps any individual or organization from having more than five beverage licenses.
  • Wisconsin and 10 other states have franchise laws that prohibit a retailer from terminating purchase agreements with wholesalers. So if you are a shop owner and tell a bad wholesaler to take a hike, you can be forced to pay damages.
  • Virginia is one of 17 states who operate state-run liquor stores, which sell the brands of drink that the government thinks should be available. The opportunities for corruption are immense. In Alabama, landlords who own the property these state stores operate from lobby against legislation to authorize private liquor stores.

The 21st Amendment to the U.S. Constitution gives states the lion’s share of discretion over their alcoholic beverage regimes. It does not, however, mandate the rampant anti-consumer statutes and regulations that are so common.

States can do better. Legislators should support consumer choice, private enterprise and free markets by clearing out anachronistic and protectionist alcohol regulations and statutes.

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

The federal government is looking to control your puddles

May 28, 2015, 8:13 AM

And lo, he of the name Obama shall have dominion over all of the birds of the air and the fish of the sea and the water that collects in the potholes after a rainstorm.

President Obama’s administration on Wednesday claimed dominion over all of America’s streams, creeks, rills, ditches, brooks, rivulets, burns, tributaries, criks, wetlands — perhaps even puddles — in a sweeping move to assert unilateral federal authority.

The Environmental Protection Agency, along with the Army Corps of Engineers, says it has the authority to control all waterways within the United States — and will exercise that authority.

“We’re finalizing a clean water rule to protect the streams and the wetlands that one in three Americans rely on for drinking water. And we’re doing that without creating any new permitting requirements and maintaining all previous exemptions and exclusions,” EPA head Gina McCarthy told reporters Wednesday.

If that sounds suspiciously like they’re claiming they’ve done nothing in hopes that you won’t notice they’ve made a massive departure from the status quo, well congratulations, you’re catching on. The EPA has the ability to apply the Clean Water Act to “navigable waterways.” To you, this probably means a waterway you can sail a small boat on, or a Jet Ski or, in the event this is the mid-19th century and we’re trapped in the wilderness with only the strength of our hearts and our talking animal friends to help us survive, a hollowed-out tree trunk. The EPA defines “navigable waterway” as “literally any standing water.” As the U.S. Supreme Court thinks that’s overkill, the EPA is moving to define its control a little better – by being less specific about what they actually lord over.

And thank heavens. We were once in danger of the EPA exercising its regulatory power over any ditch and divot that held a slight amount of water for any given time. Now, we’re definitely in danger of that. So things are improving.

Congress looks to reduce the regulatory behemoth

May 27, 2015, 10:00 AM

The Code of Federal Regulations is more than 170,000 pages long. How did it become such a behemoth? Simple: every year, about 4,000 new regulations are proposed, and each new rule can run anywhere from one to hundreds of pages in length. Far fewer regulations are scraped from the books each year.

This is the problem often called “regulatory accumulation.” Make no mistake, this is not just one of those inside-the-Beltway issues. Regulatory accumulation is a major problem, the costs of which are felt nationwide.

Regulations act a bit like an invisible tax. The government does not send anyone a bill, but the public pays the cost nonetheless. A Mercatus Institute study notes that regulatory accumulation can act as a drag on the economy. New regulations issued during the Obama administration alone are estimated to cost Americans $80 billion, according to a new Heritage Foundation study. Complying with all current federal regulations, according to the OMB’s Office of Information and Regulatory Affairs, takes Americans 10 billion hours per year.

Too many regulations also can inhibit entrepreneurship. Seeing why requires no more than opening the Code of Federal Regulations. Despite agencies’ attempts to write clearly, regulations can be extremely difficult to understand. For example, the person who starts a direct-mail marketing company might look at 39 C.F.R. 121 to discern the various mail classes and their delivery speeds. There, he will encounter text like this:

(a) End-to-End. (1) The service standard for Sectional Center Facility (SCF) turnaround Standard Mail pieces accepted at origin before the day-zero Critical Entry Time is 3 days when the origin Processing & Distribution Center/Facility (OPD&C/F) and the SCF are the same building, except for mail between the territories of Puerto Rico and the U.S. Virgin Islands.

Regulations are not mere words on paper that can be casually ignored. Regulations are laws, and the agencies that issue them often have the authority to act as cop, judge and jury in their enforcement. Penalties include crushing fines, property seizure, revocation of business licenses and jail time. The more regulations issued, the more individuals and businesses are at-risk for breaking them.

By its very nature, then, regulatory accumulation inflicts legal costs. Businesses feel the need to lawyer up to protect themselves, and to keep watch for new regulations. Manufacturers of water pumps for swimming pools, for example, may be surprised to learn the Department of Energy might raise the energy-efficiency standards for new pumps.

The current Congress certainly has shown great interest in regulatory reform. Bills have been introduced that would slow regulatory accumulation by a variety of means. Sen. Pat Roberts, R-Kan., has legislation that would raise the bar for agencies by requiring new regulations to “impose the least burden on society.” Rep. Scott Garrett, R-N.J., advocates that small businesses be permitted to exempt themselves from any regulations issued since 2009. Sen. Rand Paul, R-Ky., and Rep. Todd Young, R-Ind., have reintroduced the REINS Act, which would give Congress an expedited means to stop costly regulations before they are implemented. All of these bills would slow the flow of new regulations.

Other bills would attack the existing regulatory heap. Sen. Roy Blunt, R-Mo., has a bill that would impose expiration dates (“sunsets”) on some regulations. Similarly, Rep. Randy Hultgren, R-Ill., would require agencies to more aggressively review regulations to see if they can be scrapped. Sen. Mark Kirk, R-Ill., proposes to sunset regulations affecting small businesses. Sen. Angus King, I-Maine, advocates establishing a BRAC (Base Realignment and Closure)-type body, which would solicit public input on bad or outdated regulations and submit a package of proposed repeals to Congress, which would vote to keep or ditch the whole lot. Rep. Jason Smith, R-Mo., has introduced the SCRUB Act in the House, which would create a similar regulation-cutting commission.

The prospects for regulatory reform look promising. President Barack Obama has issued modest regulatory reform executive orders. The problem of regulatory accumulation is so large that a belt-and-suspenders approach is needed. We need agencies to issue fewer regulations, we need Congress to stop unwise ones before they take effect and we need robust processes to abolish outdated or needlessly costly rules.

 

Comments to Federal Trade Commission on the sharing economy

May 27, 2015, 9:00 AM

Thank you for the opportunity to take part in the Federal Trade Commission’s Sharing Economy Workshop. I offer the following comments on behalf of the R Street Institute, a free-market think tank that has undertaken rigorous and well-regarded research in the realm of disruptive technologies and the sharing economy, including transportation network companies.

R Street also maintains the largest insurance-focused project of any non-industry think tank. The nexus that has arisen between insurance issues and the ridesharing and space-sharing markets makes us, we believe, uniquely suited to this work.

Our research includes: “RideScore,” a comparative study of the regulatory approaches to transportation-for-hire taken by 50 of the nation’s largest cities; “Blurred Lines,” a paper examining the insurance challenges that confront the ride-sharing market; and “Five principles for regulating the peer production economy,” which offers state and local legislators and regulators a guide to interact with novel peer-production services. Copies of the latter two papers have been attached to these comments for your review.

We will focus on two of the provided prompts:

  1.  How have sharing economy platforms affected competition, existing suppliers, innovation, and consumer choice in sectors in which they operate? How might they do so in the future?
  2. How can state and local regulators meet legitimate regulatory goals (such as protecting consumers, public health and safety) while also promoting competition and innovation?

Impact on competition

TNCs have had a favorable impact on competition in the transportation-for-hire industry, but have hurt the market share and bottom line of existing suppliers, such as taxis and limousines. The entry of TNCs into the market has increased overall ridership of transportation-for-hire services, though it is difficult to discern whether the uptick is a function of an outright increase in demand, or a hitherto latent unserviceable demand. We suspect the latter.

Existing suppliers within the transportation-for-hire industry have not enjoyed increased ridership, as TNCs have eaten into the market share of taxis and limousines. By some conservative estimates, depending on the measurement used, taxi traffic has fallen by 20 to 30 percent in large markets like San Francisco. Taxi medallions in New York City, once valued at nearly $1 million each, have dropped in value precipitously. Similar markets in Chicago and Philadelphia have also plummeted. Overall, while the figures change from location to location, the trend is unambiguous. With the rise of TNCs, taxis have seen their ridership and associated value decline across the nation.

There are three advantages TNCs hold over taxis that we see driving current market dynamics: 1) novelty 2) reputational advantage; and 3) efficiency gains derived from a model for which taxis are ill-suited. Each of these points also apply, to greater or lesser extent, to other segments of the sharing economy.

The novelty of TNCs and the reputational advantage they enjoy both are functions of the marketing success of TNC firms in a market not accustomed to competing for ridership. Though there is little hard data on the impact of these two phenomenon, ridership figures suggest that something beyond price motivates people to get into TNCs.

While TNC marketing evokes images of fun, youth and high-end vehicles, taxis and limousine services have been caught flat-footed. They offered no publicly visible response to TNC services and were thus defined as old, purely transactional and less comfortable. Not even prominent warnings from regulators – largely focused on questions surrounding adequate insurance and driver reliability – managed to dissuade consumers from exploring this fast-growing service.

The third advantage TNCs presently maintain over taxis and limousines is that TNCs provide a meaningfully different service. They rely on low-cost prearranged rides, as opposed to street hails or rides prearranged at a higher cost. As a result, TNCs are better-suited to some fares than are taxis. For instance, in situations in which an immediate hail is required, a taxi will continue to make the most sense. But when a ride is needed in an area not otherwise frequented by transportation-for-hire, connecting with a TNC is an attractive option. Specialization of this kind enhances consumer choice, because the inefficiencies of a model ill-suited to a particular activity are not borne by the consumer.

Consumers are just beginning to tailor their behavior to accommodate the new model and, in some cases, likely are using TNCs in situations in which they are not as efficient as taxis. In the future, it seems likely that the profound advantages currently enjoyed by TNCs will abate. As a result, though incumbent players in the transportation-for-hire field proclaim that their continued existence is in danger, their fears are overstated.

The need for a taxi-like model will not disappear completely. Rather, as the market continues to change and as consumers become accustomed to new choices, a leaner and more consumer-friendly taxi industry will emerge. Innovation that springs from the sharing economy is not confined to the new market participants. To the extent that they must change to persist, existing industries like taxis will be made to innovate.

How to regulate the sharing economy

When it comes to regulating the sharing economy, consumer protection and safety are legitimate objectives. Most advocates for free-market public policies will concede that point. Unfortunately, self-interest cloaked in the rhetoric of consumer protection remains a problem in this market, as it is in many others. For rent-seekers, seizing the mantle of consumer protection can provide cover for great mischief.

As a threshold matter, we believe consumer-protection mechanisms must be narrowly tailored, both as to their depth and breadth. For example, a real or theoretical consumer must be identified as a subject of harm, not a competing market participant. To regulate the sharing economy effectively, it’s necessary for legislators and regulators to overcome in-built preferences for the status quo.

Startup firms within the sharing economy are at once dynamic and naïve, by their very nature. As such, in scenarios in which they have grappled with established interests for specific regulatory outcomes, they have, at times, struggled. Consider the experience of the firm Zenefits in Utah.

Though it does conform to the sharing economy notion of connecting users online for access to an asset and carries the mantel of market “disruption,” Zenefits can only loosely be characterized a sharing economy firm. Its business model is that of an online brokerage service, whereby firms in the market for benefits or various human resources-related products can be connected with retailers of those products and services.

In late 2014, the Utah Department of Insurance turned its back on the prevailing national understanding of an old and largely superfluous anti-rebating law in favor of a novel understanding. Crucially, the department did so under the auspices of protecting consumers. The true aim likely was not so high-minded. Instead, it was to protect in-state brokers whose business would suffer as a result of increased competition. It was aimed specifically at inhibiting the growth of Zenefits within the state.

Ultimately, the state Legislature in Salt Lake City was inclined to agree that the department had misinterpreted the statute and passed a bill to clarify the legality of Zenefits’ operation. Yet the affair highlights that ensuring that regulators effectively oversee the activity of firms within the sharing economy should not be a matter of circumscribing the creative behavior of those firms. Rather, it is incumbent upon government to demonstrate the flexibly necessary to adopt interpretive postures that accommodate market developments. In other words, when an old statute that was transparently conceived without particular behavior in mind inadvertently proscribes a benign market development, regulators should seek to reconcile the novel market activity with consumer protection before seeking to halt the activity.

The Zenefits example also points to another common problem of regulating the sharing economy, which is that regulators’ jurisdiction over sharing economy firms is not always conterminous with the scope and extent of the enterprise over which they seek to assert control. For instance, why was an insurance department regulating noninsurance activities?

When considering the behavior of firms within the sharing economy, it also may be necessary to account for the time horizon that dictates their business development. For example, while transportation network companies are aggressively expanding market share and accruing capital, other regulated firms, like insurance companies, may hold as a higher priority preserving their relationships with regulators.

 

Solicitor General drops the ball in Oracle v. Google copyright case

May 27, 2015, 8:00 AM

You probably already know it’s baseball season, but you may have missed some particularly interesting inside baseball going on in the world of copyright law and policy. The most recent example: the U.S. Solicitor General’s Office has recommended the Supreme Court deny certiorari  — that is, refuse to review — to a Federal Circuit Court decision earlier this month that reversed and remanded back to a U.S. district court a case which originally found, in part, that Google did not infringe copyrights held by Oracle Corp. Got that?

If not, here’s a brief summary: In May 2014, the U.S. Circuit Court of Appeals for the Federal Circuit more or less decided that Google is a likely copyright infringer of Oracle’s “application programming interfaces” (known in the industry as APIs), but allowed that Google may have “fair use” or other defenses under copyright law. With that ruling, the Federal Circuit remanded the case back to the district court to decide whether the defenses apply.

In the meantime, the U.S. Supreme Court asked U.S. Solicitor General Donald Verrilli whether the Supremes should hear appeals based on the suit. Late yesterday, the solicitor general published his brief recommending the court not take the case. (This isn’t a big surprise: before he joined the Obama administration, Verrilli led Viacom’s legal team when it sued Google for copyright infringement based on users’ uploading allegedly infringing works to YouTube.)

We think the solicitor general has made a mistake. Copyright law should focus on protecting the original expression of ideas, including original implementations of computer-program solutions, but not the general methods to produce computer-program solutions. To protect methods, we use patent law. The trial court in Oracle v. Google already determined back in 2012 that none of Oracle’s patents were infringed.

While copyright law, like patent law, plays an important role in rewarding creativity, we’re concerned that overreaching copyright protections may actually discourage creativity, including the creative energy that Google devoted to producing its Android operating system (the subject of the Oracle case).

There are plenty of creative enterprises that don’t require copyright protection at every possible level. As law professor Jessica Litman points out in her short, accessible 2001 book on digital copyright, creativity hasn’t relied on copyright law to flourish in areas as diverse as fashion design and the culinary arts. You normally can’t copyright a recipe, for example (although if you write a novel or a poem that contains a recipe or a dress design, the larger work can be protected by under copyright law). “Of course, we don’t give copyright protection to fashions or food,” Litman writes in Digital Copyright. “We never have.”

In our view, the subject matter of this Oracle v. Google case is, precisely, how to think of what the courts call “the declaring code and the structure, sequence, and organization of the API packages” really are. The Federal Circuit considers this API stuff to be essentially creative expression, which explains the appeals court’s infringement conclusions. But Google’s programmers understood these parts of their APIs to be more like instructions and best practices – more like recipes, in other words – which they then used to write their own original implementations in order to build the Android operating system for mobile phones and other portable technologies.

We agree that most of the code Google reused is more like a recipe, even if it doesn’t quite amount to a trendy dress design. We’d have preferred to see the Federal Circuit affirm the trial court on this particular issue of the scope of infringement. Since they haven’t done so, we hope the Supreme Court sidesteps the solicitor general’s advice and decides to take on the case. In copyright, as in baseball, we fans reserve the right to second-guess the umpire.

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Tech groups seek targeted changes, if any, to PTO’s review process

May 26, 2015, 10:46 AM

From Politico:

Four tech advocacy groups urged lawmakers Friday to avoid fundamental changes to the process for challenging patents at the USPTO — but they suggested a few ways they might improve the process. In a letter to Senate Judiciary Committee members, Engine, Public Knowledge, the Electronic Frontier Foundation and the R Street Institute emphasize the importance of the inter partes review process, which was created in the 2011 America Invents Act as a way to challenge patents outside of court. “Because low quality patents are the favorite weapon of patent trolls, we strongly support the IPR proceeding and would object to efforts to weaken it or make it less accessible to resource-­limited parties,” the groups wrote.

If changes must be made, the tech groups wrote, they should focus on lowering the fees to launch a challenge, giving petitioners a chance to reply to patent owners’ claims and letting petitioners appeal PTO’s decisions. Their letter: http://bit.ly/1eqUEJM

Reagan thought taxing the poor was a bad idea; Alabama should too

May 26, 2015, 9:58 AM

Alabamians below the federal poverty line should not pay income taxes.

In spite of the fact that almost 20 percent of Alabama’s population falls below the poverty level, Alabama taxes the poor more aggressively than any state in the nation.

We shouldn’t do that to the poor among us, and it doesn’t even make sense as a matter of public policy.

A 2014 report from the National Center for Children in Poverty notes that an Alabama family of four at the poverty level ($23,624) with two children has an income tax liability of $588. That is almost three times the burden placed on a family in poverty in Georgia and about four times the burden of Mississippi.

According to the report:

A married family with two children living in Alabama begins paying state income tax once its income exceeds $12,550, or 54 percent of the [federal poverty] threshold.

No, I haven’t lost my mind and become a bleeding heart liberal. I simply agree with Ronald Reagan’s ideas on the subject.

In his 1985 State of the Union address, Ronald Reagan highlighted the moral and economic import of supporting impoverished Americans. “To encourage opportunity and jobs rather than dependency and welfare,” he said, “we will propose that individuals living at or near the poverty line be totally exempt from federal income tax.”

Lower-income individuals and families spend most of what they earn on essentials such as food, clothing and housing. At or below the federal poverty level, taxes simply reduce the amount of money the poor have available for those necessities. Conservative voters looking to lessen public dependency on social welfare programs might want to start by enabling the poor to keep more of their money in the first place.

There is no better incentive for hard work than letting people keep more of what they earn.

We also know that the poor spend much of their income locally because of how they spend it. By eliminating income tax on the poor, we allocate dollars where they are needed more efficiently than any government program ever could.

In short, the social and economic cost of taxing the poor might actually be higher than the dollar value of the revenues the state is collecting from them.

Allowing Alabamians to keep more of their hard-earned dollars has been a constant talking point for the state’s conservative political leadership. It makes even more sense when applied to the poor.

Shielding working Alabamians at or below the federal poverty from the state’s income tax rewards those attempting to move out of poverty and may give them the economic breathing room they need to take the next step.

It is time for Alabama to consider Reagan’s wisdom and give Alabama’s working poor a break…an income tax break.

Letter to New York City Taxi and Limousine Commission

May 25, 2015, 9:00 AM

My name is R.J. Lehmann. I am editor-in-chief, a senior fellow and a co-founder of the R Street Institute, a nonprofit public-policy research organization headquartered in Washington. I write in response to the commission’s solicitation of public comments regarding new rules governing the licensing of for-hire vehicle dispatch applications and proposed amendments to existing rules governing how for-hire vehicle bases may use smartphones to dispatch vehicles.

R Street has been engaged actively in evaluating the emerging ridesharing industry and recommending appropriate regulatory structures to accommodate an open, equitable and competitive market in for-hire transportation options.  In the past year, we have produced the white papers “Five principles for regulating the peer-production economy,” “Blurred Lines: Insurance challenges in the ride-sharing market,” and our flagship study, “RideScore 2014: Hired driver rules in U.S. cities.” That last report, which evaluated for-hire rules in 50 of the largest U.S. cities, graded New York City a “D” in its regulation of transportation network companies; a “D” in its regulation of taxicabs; and a “B” in its regulation of limousines and livery services, for an overall grade of “D+.”

Our concerns with New York’s system include its requirement that even casual ride-sharing drivers must submit to commercial licensure; its prohibition of price experimentation; and the artificial supply restrictions created by its medallion requirement. We understand such concerns are beyond the scope of the rule-making immediately at-hand, but remain hopeful that state and city lawmakers will come to understand how such rules harm the availability and affordability of transportation services from which New York consumers may choose.

With respect to the proposed rules, while we share the commission’s goal to create “uniform standards on all current and future apps used by FHVs,” we are concerned that these regulations would have the effect of locking out new entrants and reducing the competitive vibrancy of the for-hire transportation market overall. Our most significant concerns include:

  • One platform per driver: Section 8(f) of the proposed rules calls for “No Unauthorized Equipment,” while Section 9(e) provides that “In addition to the dispatch equipment required by the Vehicle’s affiliated Base pursuant to §59B-15(d)(1) of these Rules, a For-Hire Vehicle may be equipped with one electronic device that is used to accept dispatches from a Base or FHV Dispatch Application.” The effect of permitting only “one electronic device” would be to prohibit drivers from working with multiple licensed third-party application platforms. This is a common arrangement across the country for TNC drivers, both those operating as part of a formal livery service and those who act as sole proprietors. We see no justification for restricting drivers and services from choosing an arrangement that is normal and appropriate for an industry whose workers commonly function as independent contractors.
  • Technology fee: Section 13(b) provides that the “Commission will charge an additional fee of $1000, due at the beginning of each Base License term, to any Base that lists a smartphone application in its contact information.” In effect, this rule would slow significantly or halt altogether the roll-out of new dispatch application options, by requiring each new potential customer to pay an exorbitant fee to make use of the service. This represents an unreasonable barrier to entry that will have the effect of blocking app developers from introducing new and better products that licensed FHV bases may wish to adopt.
  • Policing TNC source code: In addition to requiring that FHV dispatch applications must be licensed, Section 77-03(i) grants the commission authority to review virtually any modification to licensed apps, including their “functionality, performance characteristics, security measures or technical environment,” as well as the “interfaces to the Software, Hardware, network, or other FHV Dispatch Application components.” Such requirements not only go far beyond what’s necessary for the commission to uphold the stated goal of ensuring app-enabled bases comply with existing safety, accessibility and rate regulations, but they arguably exceed even the commission’s own technical competence.
  • Infringement indemnification: While insisting that TNCs must provide copies of their code and receive clearance for modifications to that code, the commission simultaneously insists in Section 77-11(a) that those same TNCs “must defend, indemnify and hold the City harmless from any and all third-party claims” related to that duty, including “any copyright, trade secrets, trademark or patent rights or any other property or personal right of any third party in the conduct of the licensed activities.” On this point, there can be no debate. If the commission is to subject dispatch applications to unique and unprecedented regulatory review, it must be held responsible for the consequences of that choice.

The commission notes in the introduction to its proposed rules that roughly 42 percent of New York’s for-hire vehicles currently can be booked through smartphone app, with as many as 75 different apps currently operating in the New York market. We see these developments as positive for New York consumers, although much more significant reforms are needed to open the market to competition even further. In the meantime, it is essential that the commission not take steps that discourage new entrants and new business models from providing New Yorkers the transportation services they need.

Nevada lawmakers send bill legalizing ridesharing to Gov. Sandoval

May 25, 2015, 8:00 AM

There was no rest for lawmakers in Carson City over the weekend as the Nevada Legislature was hard at work in the early hours of Saturday morning. The state’s consumers soon will reap the benefits of their diligence.

At 1:50 a.m. Saturday, the Assembly mustered a two-thirds majority and concurred with Senate amendments to A.B. 175, known colloquially as the “Uber bill.” The measure now moves along to the desk of Gov. Brian Sandoval. Effective upon his signature, the law will legalize transportation networking companies in a state where they hitherto had been banned.

The bill’s approval comes after a turbulent journey through the Legislature. At times, it appeared that no measure would be passed. The original legislative vehicles created to carry TNC-enabling legislation died late in the session, typically a sign that no agreement could be achieved.

Then, in early April, the Assembly passed a nominally related bill pertaining to the use of seatbelts by passengers in taxis. Upon arrival in the Senate, language from the failed TNC-legalization vehicles was added to A.B. 175 transforming it into a late-session priority measure.

After a false start, the Senate passed A.B. 175 back to the Assembly to gain its concurrence. Unfortunately, to secure Senate approval of A.B. 175 it was necessary for proponents to accede to the inclusion of a 3 percent tax on all TNC trips. That tax triggered controversy among fiscal conservatives in the Assembly, which threw the bill’s future into doubt.

Ultimately, though reluctant to support the bill because of the tax on TNC activity, Assembly members realized that sinking a deal to make TNC activity legal, and losing out on the attendant employment and market activity, was a worse outcome.

Gov. Sandoval is expected to sing the bill soon, at which point, TNCs will be allowed to register with their new regulator, the Nevada Public Utilities Commission, for operating certificates.

At R Street, we believe that the perfect should never be the enemy of the good. We congratulate Nevada’s lawmakers on finding their way to a workable, though imperfect, path to legalizing ridesharing.

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R Street urges Texas Legislature to oppose S.B. 900

May 25, 2015, 7:30 AM

R Street is a free-market think tank dedicated to limited, effective government, free markets and responsible environmental stewardship. One of R Street’s core focus areas is insurance reform, and we long have advocated measures to restore the fiscal sustainability of the Texas Windstorm Insurance Association (TWIA). We write today to urge you to oppose SB 900, which would take TWIA in the wrong direction.

SB 900 attempts to deal with TWIA’s fiscal shortfall by shifting cost and risk onto policyholders throughout the state. The bill would require TWIA to use assessments of up to $500 million on insurance companies as a first resort in the event it has insufficient funds to meet claims. It also increases total potential assessments to $1 billion. These costs will be passed on to millions of non-TWIA policyholders both along the coast and throughout the state who receive no benefit from the TWIA program.

We also have grave concerns about provisions in SB 900 restructuring TWIA’s board. While TWIA has made significant strides toward rate adequacy in recent years, its rates remain 22 percent below what is needed for the agency to be actuarially sound. The reconfigured board would give a dominant role to coastal membership, which has traditionally opposed moves toward rate adequacy. If enacted, SB 900 likely would undermine any further progress toward actuarially sound rates.

TWIA does need fundamental reform, but SB 900 is not an appropriate approach to achieve fiscal stability for the agency. We therefore respectfully ask you to oppose SB 900.

Coalition letter to Senate Judiciary Committee on the PATENT Act

May 25, 2015, 7:00 AM

Dear Chairman Grassley, Ranking Member Leahy, and Members of the Senate Judiciary Committee,

We are proud to support the PATENT Act. We believe it is a well-rounded piece of legislation that, taken as a whole, will directly address a dangerous patent troll problem.

We understand conversations are under way regarding the inter partes review (IPR) program, a successful cornerstone of 2011’s America Invents Act. IPR is a necessary tool for the public interest and small companies because it offers a more affordable avenue for challenging the mass of low-quality patents on limited grounds. Because low-quality patents are the favorite weapon of patent trolls, we strongly support the IPR proceeding and would object to efforts to weaken it or make it less accessible to resource-limited parties.

However, to the extent that the Senate believes changes to the contours of IPR—and other post-grant reviews—should be considered as part of the PATENT Act, we believe there are areas where these proceedings could be strengthened, and would like to suggest the following improvements:

  • Lower petition fees for small and micro entities: Current petition fees stand at $23,000 just to institute an IPR challenge. This is before any legal fees. This price is prohibitively expensive for small and micro entities, for whom the Patent Office already offers a discount on many patent filings. The same should apply for IPR.
    Allow petitioners to file replies: Currently, a patent owner may file a response to an IPR petition, but the petitioner has no opportunity to reply to that response. This unfairly allows a patent owner to raise new, unexpected arguments that will go unanswered.
    Allow petitioners the right to appeal: In Consumer Watchdog v. Wisconsin Alumni Research Fund, the Federal Circuit held that a pre-AIA inter partes reexamination petitioner could not appeal an adverse decision, but respondents are always able to appeal. If applied to IPRs, this creates an unfair asymmetry that should be addressed, as it runs directly contrary to congressional intent in the AIA.
    Allow petitioners to raise challenges under 35 USC §§ 101 and 112: Under current law, IPR is a very limited program, only allowing for challenges based on prior art in printed publications and patents. Numerous pre-AIA patents are likely invalid for other reasons, including abstractness and lack of definiteness, particularly following recent Supreme Court decisions in Alice v. CLS Bank and Nautilus v. Biosig Instruments. Petitioners should be able to use IPR to challenge patents on these grounds as well.
  • Extend CBM to cover all pre-Alice patents: The AIA’s Covered Business Method review program is the only Patent Office procedure through which many patents may be challenged under the recent Alice v. CLS Bank case  CBM is currently set to expire in 2020. The program should be kept open at least long enough for petitioners to challenge any patent that was issued before the ruling in Alice.

Flushing the system of invalid patents is a task of monumental public interest, and the AIA’s IPR provisions were specifically intended to advance that public interest. We hope that the conversation about IPR can be enhanced by considering how the program may be made more fair toward those who do a service to the whole economy by challenging low-quality patents. We look forward to continuing to engage with you in further discussions on this subject.

Sincerely,

Engine
Public Knowledge
Electronic Frontier Foundation
R Street Institute

 

The road less traveled: surveillance reform

May 22, 2015, 4:40 PM

Two years ago, major revelations about the National Security Agency’s massive intrusion into the lives of all Americans jumpstarted a renewed national debate about the right to privacy and questions of government intrusion into our personal lives.

The U.S. House of Representatives has echoed this discourse with a series of important votes that address different aspects of the Snowden revelations. The action has showcased dynamic floor debate, where members claimed the need for a new approach. House Republicans and Democrats have shown a commitment to curtail mass surveillance. They came together to carefully deliberate on legislation that will limit or end the NSA’s invasive programs, in an effort to restore Fourth Amendment protections.

The result is a bill that – while it is not perfect and, in many ways, it doesn’t go far enough – would be the first real reform of the Foreign Intelligence Surveillance Act since it was passed in 1978. The USA F Act was carefully constructed to earn support from privacy advocates and the tech community, as well as from many in the intelligence community.

The approach this legislation sets out reflects current public distrust of the NSA. It would end domestic bulk collection of telephone records, increase transparency into the secret FISA Court and implement accountability measures to Congress and the public. Last week, it passed the House overwhelmingly.

The House’s action underscores how little time and attention the Senate has actually paid to the issue. Instead of using open committee and floor debate to adequately deliberate the value of the PATRIOT Act’s surveillance authorities, Senate Republican leadership has pushed to continue the status quo, relying on tired rhetoric that doesn’t hold up to scrutiny.

In theory, the U.S. Senate was designed to consider issues facing the country carefully and with rational debate and discussion. Unfortunately, the Senate has not followed the House’s lead of careful consideration on the right path forward, balancing the need to restore privacy protection with the need to ensure national security.

The Senate failed to reach cloture on a similar version of the USA Freedom Act last November. At the time, then-Minority Leader Mitch McConnell suggested that, in the 114th Congress, they would have full debate with “reasonable consideration by relevant committees.”

Instead of meeting that goal, the Senate Republican leadership held no hearings on either on the USA Freedom Act or proposals to reauthorize the PATRIOT Act in a “clean” fashion. With just days until sunset of the PATRIOT Act’s Section 215, the Senate is finally beginning to work on a solution.

Because of their unwillingness to have a full and open debate, the Senate faces an imminent deadline and limited options. With the House adjourned and content with their reformed extension of the PATRIOT Act, it now seems the only real options for the Senate are to move forward on the House-passed USA Freedom Act or allow the PATRIOT Act expire.

It is up to the Senate whether they are prepared to accept the House-passed bipartisan reform or go forward with an expiration that will turn back the clock on surveillance and security policy back to a pre-9/11 state. The difficulty of the first option grows greater by the hour. So the Senate may choose, by default if nothing else, the latter option. That does have the unique advantage of giving Congress a clean slate to rethink the FISA framework from the ground up for the first time in nearly four decades.

Remembering a victim of the War on Drugs

May 22, 2015, 10:56 AM

President Barack Obama has wielded his executive authority to reduce the amount of military equipment flowing to local cops. His action comes in response to demonstrations of force by policy during the civil disturbances in Ferguson and Baltimore. Congressmen on the right and left also have been up in arms about this matter, albeit for different reasons.

The 1033 program, as it’s termed, sends $500,000 annually in Pentagon war gear to communities big and small. “We’ve seen,” the president told a Camden, N.J. crowd, “how militarized gear can sometimes give people the feeling like there’s an occupied force, as opposed to a force that is part of that community it is protecting and serving.” So, the flow of MRAP (mine-resistant ambush-protected) vehicles and the like will slow a bit.

The 1033 program started in 1997, when Congress included the provision in a defense-funding bill. The crime rate already was falling by then. Today, violent crime is 40 percent less common than it was 20 years ago. Nonetheless, the Defense Department gear kept flowing in larger and larger amounts. Over time, some 460,000 military weapons, night-vision goggles and more have been transferred to local law enforcement. The Internet is replete with selfies of local cops decked out in fatigues with semi-automatic rifles in front of armored vehicles. The difference between police officer and soldier has blurred.

Why on earth would Congress give military equipment to local police? The nation long has had a Federal Bureau of Investigation, which is plenty able to handle armed-to-the-teeth criminal syndicates. Many cities have SWAT teams, which can respond to emergency situations like hostage-holding.

The notion propelling the 1033 program, as Newsweek explained, was “if the U.S. wanted its police to act like drug warriors, it should equip them like warriors.” Drugs, Mayor Rudy Giuliani later explained to Congress, are not merely a local problem. They are “the most important domestic and maybe international problem we face.” Thus, the argument goes, the federal government must lead the fight. Giuliani himself had been at war with dope since serving as a federal prosecutor in the 1970s.

Patrick Dorismond was a father of two young children. He was born in Haiti in 1974 and lived in Brooklyn. Dorismond worked as a security guard for the 34th Street Partnership, which was founded to help clean up then-sleazy Times Square. After his late shift, the 26-year-old liked to have a beer before heading home to bed. On March 16, 2000, while waiting for a cab outside the Distinguished Wakamba Cocktail Lounge near Times Square, Dorismond was approached at about 12:30 a.m. by a few men who asked where they could buy dope. Dorismond was offended, and loudly protested that he was not a dealer. Words were exchanged, and Dorismond soon lay dead on the filthy Eighth Ave. sidewalk, shot by an undercover police officer. He was the third unarmed person shot by undercover police in a 13-month stretch.

Mayor Giuliani, who was seeking a U.S. Senate seat, immediately defended the plainclothes cops, who were on an aggressive drug buy-and-bust mission that night. The mayor released Dorismond’s sealed juvenile record. Giuliani told the press Dorismond “was no altar boy” and insisted the public had “a right to know the background and record of a person in a criminal situation.”

In fact, Dorismond had attended Catholic school, the same one Giuliani had. His juvenile record showed only that Dorismond had once punched another kid in the nose in a dispute over a quarter. Dorismond had had some misdemeanors as an adult, but he had never been convicted of a crime. He was minding his own business and had no idea the guys hassling him were cops.

Thousands attended Dorismond’s funeral in Brooklyn, where fights with the police broke out. Giuliani quit his bid for the Senate later that year. The City of New York paid $2.25 million to Dorismond’s grieving family in 2003. None of the officers from the Gang Investigation Division’s narcotics unit were convicted of wrongdoing.

In the next few months, Congress will consider President Obama’s request for $27.6 billion to fight the drug war for another year. One hopes there will be some consideration of the nonmonetary costs.

Federal storm policies put Florida in danger

May 21, 2015, 2:03 PM

The following piece was co-authored by Jay Liles, a policy consultant with the Florida Wildlife Federation, and Gary Appelson, policy coordinator of the Sea Turtle Conservancy.

Andrew. Charley. Wilma. Say these names in Miami-Dade or the Florida Keys or Port Charlotte and people wince.

As we all know, the past decade has been remarkably quiet. Since the record-breaking Atlantic hurricane season in 2005 that featured both Wilma and Katrina, we have not seen any hurricane strike Florida, which makes the length of this “drought” unprecedented. While we don’t doubt that it’s better to be lucky than not, as Floridians, it’s worth asking whether “hope” is a sound national disaster management policy and just how long that luck will last.

The central issue is that, after years of shortsighted government policies that exacerbated Floridians’ vulnerability to storms, the state is facing a fiscal time bomb that ticks a little faster each time a hurricane nears. The federal government has held off on putting serious policies in place that mitigate the impact of storms before they hit.

The potential for destruction has grown as development has concentrated near the shoreline. Today, Miami alone contains $416 billion in assets at risk for flooding and sea level rise, making it the most vulnerable city on Earth, according to the Organization for Economic Cooperation and Development.

To date, federal disaster policies squarely focus on rebuilding only after a storm has struck, instead of encouraging smarter preparations and building practices on the front end. Instead of continuing with this reckless course, federal lawmakers should take inspiration from a report recently released by SmarterSafer, a diverse coalition of environmentalists, budget watchdogs and insurers that are calling for a more rational national disaster policy.

While the impact of floods and hurricanes has escalated, federal disaster policies have compounded their toll. Since the Stafford Act was passed in 1988, making it easier to appeal for disaster assistance, the number of disaster declarations has skyrocketed. In 2011, a record 242 declarations were issued — a far cry from the 16 in 1988. As a result, the federal share of disaster spending has ballooned from just 23 percent of all spending for Hurricane Hugo in 1989 to 80 percent after Hurricane Sandy.

Moreover, the National Flood Insurance Program, which covers millions of policies in Florida, is deeply in debt and in financial jeopardy, the result of decades of keeping rates below the rate of risk. The program’s finances took major hits from hurricanes such as Katrina and Sandy, driving up its debt to $23 billion. Without significant reform or continued massive taxpayer bailouts, the program faces insolvency.

The current course is simply unsustainable. There are a number of proven ways, however, to make disaster policies work better for the long term.

Reforms to NFIP are critical, particularly for a state that relies so heavily on the program. To make the program sustainable, flood insurance rates should reflect actual levels of risk, based on updated flood maps that incorporate the latest science and modeling technology. Additionally, risk-based rates would organically discourage development in disaster-prone areas, or at least encourage more resilient construction to better mitigate the risks and help protect natural resources.

To help those residents who would genuinely struggle with higher rates, Congress can address affordability with temporary, means-tested assistance outside of the rate structure. Lawmakers should also look into loosening regulations on private flood insurance, which traditionally has faced significant barriers to entering the market.

As a whole, disaster resources must be shifted to mitigating the impact of a storm before it makes landfall. Such preparation should include building standards that explicitly take heightened flood risks into account and the preservation of natural infrastructure that can protect built areas from storm surge. Fortunately, Florida is blessed with a wealth of such natural infrastructure, ranging from marshes in the south to reefs and barrier beaches along its coastline.

Rather than settle for piecemeal reform, Congress must come together and craft a comprehensive, bipartisan strategy to prepare Florida and other disaster-prone states for the challenges it will face in the future.

With the stakes rising, now is the time to act.

General Motors says it’s just loaning you your car’s software

May 21, 2015, 12:55 PM

Imagine a world in which automakers declared that, even though you own most of the vehicle you purchased from your auto dealer, you don’t own the tires. No, in fact, you just have a license to use the tires, the Big Three might say. If you want to get them changed or improved, they’d say, you need to go to dealer who is authorized by the automaker to do so.

Crazy, huh? But that’s essentially the position that General Motors has taken in a U.S. Copyright Office proceeding. In this instance, though, the subject matter is not whether you own the tires that came with your new car, but whether you own a copy of the software that came with it.

Whether you own the software in your car, and whether you have the right to change or modify that software or hire someone to do it for you, is something that actually matters. You may not want to be forced into a lifetime-of-the-product relationship with the company who made your car. And whether you buy a used car or a new one, wouldn’t you like to be certain that you’re free to consult with third-party software mechanics to fix or improve it? Odds are, you value your inalienable right to find an independent garage to get your tires changed or replace your brake lights.

Your right to tinker with something you own is a consumer issue, not just a copyright issue. That’s why the Copyright Office has said you can tinker with the software on your smartphone. It’s also why, in addition to a favorable ruling from the Copyright Office on the auto-software issue—exactly the same issue raised by John Deere’s lamentable letter to farm-equipment dealers—we need to see passage of the You Own Devices Act (YODA), sponsored by Rep. Blake Farenthold,  R-Texas.

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