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Kansas City could make terrible ridesharing market even worse

April 06, 2015, 7:00 AM

I was in Dallas last week and used my Uber account to hire rides from Love Field to the hotel, and then back again when I was finished with my business. I am a frequent traveler, with a long history of trying to find the right balance between inexpensive ground transportation and getting to my destination in a timely fashion. I also use shuttles, light rail, city buses, subways and Uber’s competitor ride-sharing service Lyft where available. As I travel frequently on my own nickel, I consider transportation options very carefully most of the time.

It has been interesting to watch the politics of transportation options. Traditional livery and transportation services – threatened by the emergence of digitally summoned, paid, receipted and rated operations like Uber and Lyft – have moved to protect their turf by seeking to have the popular new services regulated out of existence.

It’s reminded me very much of the grocery store clerks’ union trying to stop the automated checkout scanning in supermarkets, which rarely makes mistakes, in comparison to humans trying to key in thousands of prices every day at the registers. We had major league fights in the legislatures some years ago about this, but technology finally won out, and we are mostly better off for it in the 21st century.

There is another wave of legislation accompanying this relatively new transportation option. Much of it has to do with rationalizing the insurance that covers accidents involving vehicles used for ride-sharing. Because they are privately owned, yet at times engaged for hire, ride-sharing drivers’ cars need coverage that allows for commercial activity, which requires insurance appropriate to the higher-risk profile of a driver-for-hire.

This is an undertaking that requires a sorting out of risks from casual and part-time engagement as a livery service to virtually full-time work as a driver. As one can imagine, the public policy question of mandating the proper level of liability coverage for accidents turns on when the driver is operating his or her vehicle privately and when it is for hire. The period of time when a driver makes him or herself available, but has not yet acquired a passenger has received the most attention.

For the most part, state legislation has provided the best solutions, although many municipal ordinances have produced good public policy and happy customers. My colleagues at R Street have produced a white paper rating the transportation friendliness of the top 50 cities in America, which you can access here.

Where the state or its major cities can go wrong, in our judgment, is currently exemplified by the Kansas City market. Kansas City was given an “F“ grade in transportation friendliness by our ratings, including the highest score in the chart for “hostile regulation.”

The city appears bent on maintaining a poor score for apparently trying to regulate the new services as taxicabs, but reportedly requiring higher fees and more insurance than taxis are required to carry. The City Council has been debating an ordinance for “months,” according to the Kansas City Star, and it goes to the full council this week. Lyft suspended operations in Kansas City last October, and Uber has said publicly that its drivers will be priced out of the market, as well.

At the same time, both houses of the Kansas Legislature have passed and sent to Gov. Sam Brownback a bill which increases the insurance requirements and requires background checks of drivers. The latter is sound public policy, but requiring insurance for physical damage to the vehicles, which even taxis are not required to carry, seems like harassment.

Meanwhile, the Missouri Legislature, which governs most of the Kansas City metro area, is considering a bill to prohibit local regulation of transportation network companies. These divergent approaches could produce real schizophrenia in the metro area.

We have to come down on the side of the customer in all this. We think that safety regulation and insurance liability coverage are important, but that places like Kansas City, which aren’t yet finding the right balance of public interests, ought to reconsider in light of what many other jurisdictions are able to fashion as workable rules for both the insurers, the TNCs and those of us who travel a lot.

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NTU urges Washington legislators to oppose House Bill 2211

April 04, 2015, 12:12 PM

From National Taxpayers Union:

Before implementing this 60 percent tax, lawmakers should consider the make-up of an e-cigarette. The main ingredients that produce the water vapor—propylene glycol and glycerin—are considered harmless by the FDA and can be found in everything from toothpaste and fog machines to foods and cosmetics. Such products contain no tobacco, and a study by Dr. Joel Nitzkin of the R Street Institute found that e-cigarettes can actually reduce the risk of tobacco-related deaths or illnesses by 98 percent or more. By implementing a tax rate of 60 percent, HB 2211 would discourage the use of an option that can save lives.

Cutting defense in a time of war

April 03, 2015, 8:29 AM

Defense spending is a hot topic in Washington, with growing pressure to bust the budget caps agreed to in the Budget Control Act in 2011.

With uncertainty over Russian intervention in Ukraine, the advance of the Islamic State in Iraq and Syria, civil war in Libya and Yemen and continuing tensions with Iran, most budget proposals considered this year, regardless of party, are to increase defense spending, although by varying amounts.

With the geopolitical and domestic political winds blowing in that direction, is there a way for those of who support defense reform to remain relevant? There are, in fact, ample opportunities to cut defense spending, even when the United States is at war.

  • Require the Pentagon to pass an audit to receive funding. The Audit the Pentagon coalition has been working on legislation to force the Pentagon to comply with the Chief Financial Officers Act of 1990. That law requires all federal agencies to pass an annual financial audit and the Pentagon has never been in compliance. Congress should attach financial penalties to defense spending any year the Pentagon cannot pass an audit. This will identify whether or not tax dollars are being spend appropriately by the Department of Defense.
  • Time to cancel the F-35 fighter. The F-35 Joint Strike Fighter is touted as possibly the last-manned fighter the U.S. Air Force, Navy and Marine Corps would ever order. It’s also touted as the plane that would ensure American air superiority for years to come. The plane has been plagued with cost overruns and technical issues. The two most recent technical issues could impact the F-35’s intended role in close air support. The new Small Diameter Bomb II cannot fit inside the bomb bay of the Marine Corps’ F-35B. If an F-35 pilot wanted to engage targets using a cannon, they would be out of luck, as well. The software required to fire the cannon won’t be ready until 2019. It’s time to begin exploring alternatives to the F-35 and pull the plug on the program.
  • Cut the civilian staff of the Department of Defense. New Defense Secretary Ashton Carter has opened the door to cutting more civilian staff. Republican lawmakers proposed a bill to cut more than 115,000 jobs from the Pentagon’s work force. Surely both parties can reach a deal to cut the size of the civilian workforce. This will free funds to take care of the combat needs of the military.
  • Reduce the number of generals and admirals and restructure the force. The U.S. military has too many generals and admirals. The force is also too top-heavy with the large number of support personnel attached to each flag officer. Former Defense Secretary Robert Gates once bemoaned that there were 30 layers of bureaucracy between him and an action officer. These generals and admirals have access to numerous taxpayer-funded perks, including stately quarters, personal chefs and drivers and private jets. As of 2012, the GAO estimated the cost to taxpayers of these combatant commands is $1.1 billion. This personnel structure not only bleeds taxpayer money, but places the lives of troops in danger, as it slows down reaction time in a crisis.
  • The Pentagon must better account for money spent overseas. While the entire Pentagon must be audited, so long as the United States is engaged in overseas combat operations, safeguards are needed to ensure the money is best spent wisely. Recent reports show that the government cannot account for $45 billion spent in Afghanistan. It will be much more difficult to ask for money for overseas operations without accounting for how current money is spent.

There is widespread agreement that men and women in uniform need the equipment and support to accomplish their missions. The Pentagon and Congress also have obligations to taxpayers to ensure that money is well spent.

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Lawsuit over cable and satellite sports packages may be a bad play for fans

April 03, 2015, 8:14 AM

As major league baseball teams ready for the start of the new season this weekend, a federal court in New York is considering whether to grant class-action status to a lawsuit over the way sports leagues package out-of-town games for cable and satellite companies.

The lawsuit, brought against Major League Baseball and the National Hockey League by cable consumers who are sports fans, contends that MLB and the NHL’s Extra Innings and Center Ice packages, respectively, gouge viewers because they offer no option other than to receive all out-of-town games. There also is no option to let consumers pay less to watch games featuring only one particular team. The NFL, which makes its popular Sunday Ticket package available exclusively through DirecTV, was not named in the suit, although that package could be affected by a final court decision.

The fans’ complaint is a variation on the long-standing demand for a la carte cable channels, made in the belief that it would be a much cheaper alternative if the cable companies allowed consumers to choose the few individual channels they want, rather force them to pay for groups of hundreds that they don’t watch.

In the case of sports-programming packages, the plaintiffs’ assumption is that, if it costs $200 for a season of MLB Extra Innings, which delivers about 40 out-of-town games a week, it would be proportionately less to deliver four or five.

The error in this assumption is that TV signals are not physical commodities that each have their own associated production and delivery costs. It costs DirecTV or Comcast the same amount to transmit one ballgame as it does all 15 that might be played on a given night. In fact, the signals from every game are reaching the satellite or cable receiver. It’s more accurate to say that viewers pay to have the signal descrambled.

Right now, it’s likely that viewers are getting a good deal. The service providers get games in bulk and pass them along to consumers. One thing is for certain, the choice to see the games only featuring your favorite team won’t be one-fifteenth the cost of the current Extra Innings package. Fans may be unpleasantly surprised, should they win this case, when there is no drop in the cost to select one team, but a substantial increase in the price to receive all games. That would be the logical way for things to go.

Overall, programming packages keep prices low by providing broad viewership. When a la carte was being debated in 2013, one analyst projected ESPN by itself would cost $30 a month, to make up for loss of general subscription fees and ad revenue.

Over the top (OTT) delivery, using the broadband connection, changes this equation substantially and may indeed become a new spin on the a la carte idea. It remains to be seen how this plays out.

As a final aside, I’m skeptical when people claim they only watch a handful of cable channels. If a Yankees fan living in Dallas is committed enough to purchase Extra Innings, as the pennant race heats up, that fan’s likely also checking out how the rival Red Sox are faring.

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End life tenure for federal employees

April 03, 2015, 8:06 AM

J. David Cox traveled to Selma, Ala. at the invitation of. President Barack Obama to commemorate the hallowed civil rights march. It was an honor for the president of the American Federation of Government Employees. No other union heads were invited. George and Laura Bush were there, as was House Majority Leader Kevin McCarthy, R-Calif. Rep. John Lewis, D-Ga., who braved the police billy clubs on the Edmund Pettus Bridge 50 years earlier, also was in attendance.

Cox treated the august moment for remembrance as an opportunity. After shaking the president’s hand, Cox told him, “boss man, it’s time for a raise.” Being asked for more money at a civil rights event must have been an awkward moment for the president.

The timing of Cox’s ask was doubly tacky because it came shortly after the Government Accountability Office dropped a bombshell: only 0.18 percent of the federal workforce was fired for poor performance and bad conduct last year. Can anyone name another employer who so little weeds out bad workers?

Federal union heads blame management. Matthew Biggs of the International Federation of Professional and Technical Engineers said federal managers have plenty of tools to dump bad employees. William Dougan, head of the National Federation of Federal Employees, said “a lack of proper training and preparation of the first-line supervisors” is the reason bum feds stay in their jobs.

Strictly speaking, federal workers can be fired for poor performance. The Civil Service Reform Act of 1978 lays out the process in law, which is further spelled out in reams of Office of Personnel and agency-specific regulations. An employee must have regular performance assessments and must be encouraged to help set performance standards. Those who do not perform well must be given notice, meetings must be held to discuss performance and under-performers must be given help and opportunities to improve. Before an employee can be fired or even demoted, he is entitled to be represented by an attorney. It takes six months to a year, according to GAO, to get rid of a bad fed, and this usually occurs with new hires.

Managers who take issue with an employee’s performance may face reprisal in the form of accusations of discrimination or creating a hostile work environment. This partly explains why so few feds are removed from their jobs; he process is paper-work heavy and grueling.

Unions exist to protect their members. But a “due process” system that produces guaranteed lifetime employment benefits nobody.

For one, it is inherently inequitable. Most of America’s 105 million full-time workers do not have jobs for life. Having to work hard and keep the boss happy is the norm. To the average working stiff, a government job for life looks like an entitlement. Perhaps this is part of the reason a mere 11 percent of the public has great confidence in government agencies.

GAO also observes the failure to show bad workers the door is toxic for morale. Most federal employees are good workers. They suffer when the bad eggs among them misbehave and fail to pull their load.

The feeling of guaranteed lifetime employment has insidious effects. Workers grow comfortable and see little reason to push themselves or keep their skills and resumes market competitive. At some point, they realize they are stuck: bored in their current jobs but uncompetitive in the job market. They become clock-watchers, waiting for the opportunity to retire.

Congress should make Cox an offer he cannot refuse: give federal employees a raise but end life tenure. Current employees could retain the protections of the Civil Service Reform Act, but all newly hired feds would be put on 10-year renewable contracts. Those workers who are good at their jobs will indubitably be retained, because it is a costly hassle to replace a good employee.

Over time, renewable 10-year contracts would produce a happier and better federal workforce, and one without bad employees enjoying taxpayer-subsidized jobs for life. What’s not to like?

The West not yet fully won for ridesharing

April 03, 2015, 7:46 AM

On the heels of last week’s cross-industry compromise on insurance requirements for ride-sharing drivers, and with some legislative sessions drawing to a close, it’s a good time to take a look at where ridesharing insurance regulation stands in the West.

Unsurprisingly, some states have all but settled on a framework for regulating the insurance coverage for TNCs, while others are just beginning to work on legislation. While late-coming states will have the benefit of the wisdom won through extended negotiations by the parties elsewhere, they must act quickly if they hope to provide the legal certainty necessary for the speedy introduction of new insurance products.

Missed opportunity

The Legislature in Santa Fe adjourned without passing any TNC legislation. On the penultimate day of the legislative session, after passing the first chamber by a large margin, a New Mexico Senate committee scuttled the taxi-opposed measure without a vote. Now, for the first time in 60 years, there is talk of the need for a special legislative session.

Wyoming, in spite of having TNCs in state, also took no action before adjourning this session.

Active, but quiet, legislation

In Alaska and Oregon, ridesharing legislation has been introduced, but has been slow to move. In the far north, that is likely to change in the coming weeks. Session ends in Juneau in late April. Lawmakers in Salem have until July.

The Alaska bill is notable because, in its current form, it defines TNC activity exclusive of “Period 1” – when the app is on, but no connection is yet made. Both S.B. 58 and H.B. 120 read: “A person is performing TNC services…when the person accepts a request for transportation…” Alaska will be an interesting near-term test of how TNCs and insurers work together in the wake of their public agreement.

Oregon cities have been busy waging war on TNCs. Portland has banned ridesharing outright and Eugene recently sued Uber in an effort to achieve a similar outcome. Meanwhile, other more scandalous matters have preoccupied Oregon’s state government.

Two legislative vehicles, one supported by insurers and another supported by cabs, are vying for attention in the same committee. At the moment, only the insurer-backed bill, H.B. 2237, has been scheduled for a hearing.

Active and moving legislation

Arizona, Hawaii, Nevada and Washington are in the midst of pitched battles in various committees.

After Arizona Gov. Jan Brewer vetoed a TNC-backed bill last year, legislators in Phoenix have taken the unusual (and R Street-preferred) step of crafting insurance requirements for TNCs while simultaneously revising insurance requirements for cabs. Changes that were made in the Senate will require concurrence (another vote) in the House. But with all stakeholders more-or-less satisfied, H.B. 2135 has a good chance of becoming law.

In Hawaii, SB 1280 is scheduled for hearing this week. The bill would designate the Hawaii Public Utilities Commission as the industry’s regulator, a development that would do away the state’s hitherto confusing system of patchwork regulation. Though TNCs currently oppose the bill, there is reason to believe that further amendments will be forthcoming that will reflect the national compromise.

Montana’s TNC legislation, S.B. 396, is based on the national model and is now awaiting hearing in the second house. Time is of the essence, because the legislative session comes to a close at the end of the month.

Nevada – home to Las Vegas, one of the least friendly ridesharing environments in the nation – is working on legislation that could significantly improve its score on our RideScore evaluation of transportation-for-hire environments. S.B. 440 and its non-insurance concomitant seek to create a framework for TNC operation. Cab operators, who have outsized influence in Nevada, are flocking to Carson City to voice their opposition.

Legislation in Olympia that requires insurance coverage from “app on” has moved to the House floor after encountering opposition from its own author. S.B. 5550, which at one point embraced heightened local regulations, has been narrowed to address only insurance issues. At the moment, TNCs continue to oppose the bill because they believe that it goes beyond the national compromise.

Awaiting signature

Idaho’s Legislature has passed a bill (H.B. 262) that is now sitting on its governor’s desk. The bill comes just in time to resolve an ongoing conflict between TNCs and the city of Boise, which suspended its effort to regulate ridesharing, pending passage of the state law.

Laws in place

On the final day of March, Utah Gov. Gary Herbert signed S.B. 294 and made Utah the latest state to adopt a sensible model for ridesharing regulation.

Last year, in California and Colorado, legislation that defines TNC activity and makes determinations about the appropriate amounts of insurance coverage during the various so-called “periods of activity” became law. Colorado’s legislation went into effect Jan. 1, while California’s will come into effect on July 1.

Though insurers and TNCs have differing opinions about the quality of the two laws – insurers prefer the California approach and TNCs prefer the Colorado approach – the introduction of a regulatory framework in each state has created the certainty necessary for the filing and introduction of TNC-specific insurance products.

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It’s time for open data in insurance

April 02, 2015, 12:43 PM

The National Association of Police Organizations is a non-profit group that represents and serves police officers, police unions and local police associations. The National Association of Insurance Commissioners is a non-profit group that represents and serves insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Both are private organizations, although their memberships consist of public employees.

Most Americans have never heard of NAPO, although they are likely more familiar with the Patrolmen’s Benevolent Association and Fraternal Order of Police locals that are among its constituent supporters. Imagine one day that NAPO were to assert that it — and not the FBI or any other public agency — is uniquely entitled to collect, process and sell to the highest bidder all of the arrest reports and other criminal records collected by its members.

There would understandably be significant public backlash. Crime statistics are public records. They are collected by public officials, whose salaries are paid by the public, in the course of upholding the public trust. They should be free and open to everyone, due to the valuable role they play in research and in shaping public policy. But if anyone should profit from their sale, it is the taxpayers themselves, not a private organization.

And yet, that is precisely the status quo when it comes to the NAIC. Like other financial regulators, state insurance commissioners regularly collect data from the companies they regulate: quarterly and annual financial statements, investment schedules, reinsurance exhibits. But states also require regulated insurers to file those statements with the NAIC, which charges steep filings fees for the privilege.

What the NAIC does with the data it collects can mostly be filed under the category of “wholesaler.” It has natural clients in the major rating agencies and in financial data firms like Bloomberg, Thomson Reuters and SNL Financial. But the group also produces its own reports for sale and markets its ability to sell customized data to order, bragging that:

We can search our financial statement data for any schedule/exhibit or we can customize an order right down to any page, column or line. Our database spans 10-years and has 6,000 companies if you need to track any trends in the insurance industry. E-mail idp@naic.org for a quote today!

As the size of that database would suggest, insurance data is big business for the NAIC. The group’s just-released annual report details how the organization took in $26.9 million in database fees in 2014 and $15.2 million in revenues from the sale of its publications and data products. Together, that represents 44.5 percent of the association’s $94.7 million in 2014 revenues. By comparison, member assessments from the 56 jurisdictions that comprise the NAIC generated only $2.3 million in revenues, or just 2.5 percent.

Apologists for the status quo are apt to note that those revenues are necessary to fund the NAIC’s operations, which include many valuable services to state insurance departments. It is undoubtedly true that the NAIC does, indeed, serve a crucial role in the state-based system of insurance regulation, from its Securities Valuation Office to the National Insurance Producer Registry. But the notion that granting a monopoly to a private organization on the collection and sale of what properly should be public records is the only way to deliver those services just simply has no basis in reality.

As detailed in R Street’s 2014 Insurance Regulation Report Card, U.S. states and territories collected $2.74 billion in regulatory fees and assessments from the insurance industry in 2013, but spent less than half that amount, $1.32 billion, on regulating the industry. If you throw in the $168 million in fines and penalties collected by insurance regulators, $1.15 billion in miscellaneous revenues received by insurance departments and, of course, the whopping $16.39 billion in premium taxes collected by the states, only about 6.4 percent of the more than $20 billion states collected from the insurance industry was actually spent on insurance regulation.

Surely, somewhere in that $20 billion, states could find at least the $15 million that would make up for the loss of data product sales and allow the NAIC to give this stuff away for free.

I’ve long advocated that the data currently controlled by the NAIC could and should be made available by the Treasury Department’s Federal Insurance Office, much as the Securities and Exchange Commission makes public company filings available through their EDGAR service and the Federal Reserve does the same for bank holding company reports through its National Information Center.

FIO was created, according to the statutory language of the Dodd-Frank Act, to “receive and collect data and information on and from the insurance industry and insurers; enter into information-sharing agreements; analyze and disseminate data and information; and issue reports regarding all lines of insurance except health insurance.” The text of Dodd-Frank also specifies that Title 5 Section 552 of the U.S. Code (better known as the Freedom of Information Act) “shall apply to any data or information submitted to the Office by an insurer or an affiliate of an insurer.”

FIO Director Michael McRaith demurely declined to answer when I asked him in a public forum last month whether his office should make this data available to the public for free, but he did agree that members of the public should be able to access information about insurance companies. I would not hold my breath waiting for the office to take a more forceful stance on the issue any time in the near future.

But perhaps not all hope is lost that the NAIC itself might finally see the light. There is precedent. Twenty years ago, the SEC was likewise intransigent about the costs and logistical difficulties involved in making public filings available for free on the Internet. That is, until the Internet Multicasting Service, with a donated computer and a National Science Foundation grant, created the software and user interface that would serve as the basis of Edgar. Within two years, the commission had taken over the project.

Given a sufficient groundswell of interest, let’s hope history can repeat itself.

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What do conservative policy intellectuals think about climate change?

April 02, 2015, 10:03 AM

From the Grist:

Eli Lehrer, president and cofounder of the R Street Institute

Lehrer previously worked at the Heritage Foundation and the Heartland Institute, then cofounded R Street as a reality-based free-market think tank in part because of Heartland’s refusal to accept climate science. (Lehrer raised money for his programs at Heartland from the insurance industry, which cannot afford to deny the reality of climate change.) Lehrer tries to convince conservatives to support a carbon tax on the grounds that the revenue can be used to reduce other taxes. His substantive policy positions are quite reasonable. The problem is that until he builds enough support among Republicans to pass a carbon tax, he thinks Democrats should “be willing to wait” instead of doing what can be done under existing law.

Quote: “President Obama’s various proposals to deal with climate change have deep flaws. But that doesn’t mean the problem they seek to address isn’t genuine. Conservatives should care about global warming. And, just as liberals have done for almost 20 years, they should use the issue as a way to promote policies they already favor.”

British Medical Association misleads on e-cigarettes

April 02, 2015, 8:50 AM

Dr. George Rae, chairman of British Medical Association Northeast, made reckless comments about e-cigarettes in a March 31 BBC radio interview, available here. I highlight Rae’s most egregious claims in the transcript provided by Clive Bates.

Interviewer: Give us the science bit: How dangerous could they be?

Rae: …You’ve got to realize that there are chemicals within e-cigarettes, particularly a group of chemicals called nitrosamines, and nitrosamines can cause cancer, and they [e-cigarettes] can be even more cancer-forming than what you’re getting within cigarettes themselves.

Obviously, as a doctor, that is causing me concern, because there is the perception by obviously many people that, ‘well, I’m not smoking cigarettes, which have got tar and have got nicotine, and therefore, that this is a safe substitute.’ Well what I think what has got to be coming across loud and clear, and I’ve been on the airwaves in the previous months and other doctors [are] saying ‘look hang on, this isn’t the case, there are chemicals within those e-cigarettes and these are serious chemicals’ and I’ve given you one example, the nitrosamines.

So there are lots and lots of concerns about e-cigarettes. I don’t think you’ll get many, if indeed any, doctors coming on the radio and saying ‘Look, it’s ok. They’re an acceptable substitute and let’s just go with it.’ I think nothing could be further from the truth.

Interviewer: We often hear about tar, you know in the advertisements from years ago, it’s all about the tar causing the problems. But with e-cigarettes, if there’s different types of chemicals, by the sounds of it, they can cause the same types of problems.

Rae: Absolutely! No, there’s absolutely no doubt about that at all. That is the whole point. They are being marketed as something which is safe and a safe substitute, and that’s not the reality. I don’t think there have been any clinical trials done on e-cigarettes. And anyway, doctors wouldn’t get involved in anything which wasn’t regulated. [BR note: The BMA spokesman ought to be aware of the growing body of scientific evidence here].

Interviewer: But surely it’s better than the alternative [smoking]?

Rae: No, it’s not better. Because what I’m actually trying to get across and I’ll say it again, there are potentially more cancer-forming chemicals within e-cigarettes than you’ve actually got in cigarettes, per se, themselves. Now nobody’s going to go on the air and say, you know, that is better for you – it’s not! It’s actually a bit of a time bomb that people are actually unaware of. I think you are not going to find the medical profession relenting on the message we are trying to get across on e-cigarettes.

The British Medical Association ought to assure that its spokespeople are properly educated and sticks to the facts on such an important public health matter.

What if Congress won’t do its job?

April 02, 2015, 8:41 AM

The U.S. Constitution is abundantly clear about which branch of the federal government creates our laws: “All legislative powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.” But what the Constitution makes simple, Congress and the president have turned into a hot mess.

Lately, Congress has assailed the president for essentially writing law on his own. Congress is right. From immigration to environmental regulation and even health care, Barack Obama has used a combination of regulation and executive action to achieve his policy objectives. He even has gone so far as to take military action under the suspect legal authority of a congressional authorization of force from 2001.

Recent presidents have argued, however, that what appears to the public as unilaterally writing law is simply presidents’ using the fullest extent of their delegated power to respond to the issues of the day. And they’re right in a way, too. Over the course of several decades, Congress has shifted an immense amount of its constitutional law-writing authority to the president and federal agencies. The House and Senate seem perfectly content to complain about the president exceeding his constitutional authority while doing precious little to exercise their own.

The shift has been subtle but significant. Add one agency here. Delegate rulemaking authority there. Bring in some creative legal reasoning. Pretty soon, you have our current regulatory state, where bureaucrats use decades-old congressional authority to draft what amounts to new law.

Delegated congressional authority is substantively different than the executive branch’s responsibility to ensure that laws are faithfully executed. Purely administrative action is well within the president’s power. Developing new substantive provisions of law, crafting arbitrary exemptions to laws, and ignoring deadlines and details clearly laid out in properly enacted laws are not.

As my colleague Kevin R. Kosar writes in a new paper, the REINS Act, introduced in the current Congress by Rep. Todd Young, R-Ind., and Sen. Rand Paul, R-Ky., is just one way that Congress could take back its constitutional responsibility. The legislation would require Congress and the president to affirm major federal rules — those with an economic impact of $100 million or more — before such rules could be enforced. Congress would not be forced to write the rules itself; it would simply become accountable for the exercise of its authority.

Unfortunately, Congress is not clamoring to pass the REINS Act. At this point, Americans need to ask themselves — do senators and congressmen really have any interest in the arduous task of writing law, or would they rather talk about it? We hear so much about executive overreach, but what about legislative underreach? What if the biggest problem is not the president, but rather a complete unwillingness of Congress to develop or be accountable for positive ideas to address the challenges our nation faces?

The issue is not simply with Republicans. When Democrats most recently controlled Congress, they drafted the Affordable Care Act to look like a Mad Libs game, with the Health and Human Services secretary directed to fill in the blanks as she saw fit. Then-Speaker Nancy Pelosi’s preference — to pass the bill to find out what was in it — was a complete abdication of law-writing responsibility.

The REINS Act should have been one of the first bills the Republican Congress put on the president’s desk. The measure is not about attacking the president; it is about Congress being serious about its constitutional charge. Instead, we have watched Congress try to undo the president’s actions under authority Congress gave away long ago. Congress is not trying to take its authority back from the president. Instead, our senators and congressmen are saying: “We have no plans to use our authority, but we really do not want the president doing anything with it, either.”

The Constitution rejects a president that both writes the laws and executes them, but it also expects a Congress willing to do its job. Until Congress demonstrates a willingness, through legislation like the REINS Act, to be accountable for the laws that affect the American people, talk of separation of powers and overreach by the president is little more than empty political rhetoric.


Lehrer talks flood insurance on Morning Edition

April 02, 2015, 7:53 AM

R Street President Eli Lehrer joined reporter Charles Lane recently to discuss pending flood insurance rate increases on National Public Radio’s Morning Edition program. The full audio of the segment can be found here, while the transcript of his remarks are below.

LANE: Most homeowners, however, will see no rate increases and only a $250 annual surcharge. But for those who live in the most flood-prone areas, the idea is to align the cost of insurance with the actual flood risk. Eli Lehrer is a conservative policy analyst who helped Congress draft the rate increase.

ELI LEHRER: We encourage enormous numbers of people to live in areas where they really shouldn’t be living because we provide them with subsidized flood insurance.

LANE: After Superstorm Sandy, the flood program’s debt got so big that premiums barely covered the interest payments, so Congress raised rates. But Lehrer, who advocates for taking the government out of the insurance business, says it wasn’t enough.

LEHRER: The program still has enough built-in subsidies that it will be another decade at least before we can even have a hope of bringing all or almost all rates to actuarial soundness.

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

NSA was totally going to stop spying until Edward Snowden showed up

April 01, 2015, 4:04 PM

Edward Snowden doesn’t seem to be enjoying his Russian home – word has it that he’s looking to barter a plea deal with the United States in order to make a return – but in the wake of his massive intelligence leak that blew the lid off of the NSA’s data collection program, it was at least assumed that his actions were responsible for halting, or at least reeling in, the program itself.

Now, the NSA — which has been facing backlash over its program for more than a year, especially from privacy advocates that argue that even if the collection program stopped terrorism, that Americans should have been informed of the privacy they were giving up — says that it’s because of Edward Snowden that the program continued for so long. In fact, according to intelligence officials, the NSA was totally on the way to scrapping the program when Snowden leaked his information to journalists.

Because if there’s anything you can count on a government entity to do, it’s to discontinue an ineffective program. Or something.

The National Security Agency considered abandoning its secret program to collect and store American calling records in the months before leaker Edward Snowden revealed the practice, current and former intelligence officials say, because some officials believed the costs outweighed the meager counterterrorism benefits.

After the leak and the collective surprise around the world, NSA leaders strongly defended the phone records program to Congress and the public, but without disclosing the internal debate.

The proposal to kill the program was circulating among top managers but had not yet reached the desk of Gen. Keith Alexander, then the NSA director, according to current and former intelligence officials who would not be quoted because the details are sensitive. Two former senior NSA officials say they doubt Alexander would have approved it.

As the Huffington Post points out, noting that NSA higher-ups were uncomfortable with the project and its cost is nothing new. After news of the program leaked, NSA officials spoke to several news outlets about how they feared the public would have a problem with a program that captured all of their cellphone metadata with the blessing of their carrier services and stored it for future use.

The least this story does, though, is drive home that the NSA has some of the same concerns about the program that pro-privacy legislators and civil liberties activists do: that the massive scale of the program makes it unwieldy and that, despite assertions to the contrary, the program has not been an effective aid in combatting terrorism. But, of course, that doesn’t really mean anything in the context of government efficency. After all, Ronald Reagan put it best when he said that the nearest thing we will ever see to eternal life is a government program.

Testimony to the Delaware House Health and Human Development Committee

April 01, 2015, 2:00 PM

Rep. Michael A. Barbieri
House Health and Human Development Committee
Delaware House of Representatives

Re: H.B. 5 (Heffernan) Electronic Cigarettes

Chairman Barbieri:

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 H.B. 5, 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 additive 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 H.B. 5 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

PPA cautiously optimistic after RAWA hearing

April 01, 2015, 10:00 AM

From Cards Chat News:

That viewpoint was represented at the hearings by Andrew Moylan, executive director of the R Street Institute. Moylan provided a conservative voice on the panel that was against RAWA for reasons GOP members of the subcommittee might get behind.

“RAWA’s potential overreach in failing to exempt intrastate activity is unwise from the perspective of federalism, but it could also prove largely unnecessary,” Moylan said. “If a state wishes to prohibit gambling within its borders, it has sufficient power to do so.”

Five thoughts: RAWA hearing, Global Poker Masters, Urbanovich and more

April 01, 2015, 9:57 AM

From Poker News:

Parry Aftab, Executive Director of WiredSafety, and Andrew Moylan, Executive Director of the R Street Institute served as the voices of reason. Aftab actually acknowledged that there are three regulated states in America, and that their “fictitious borders” were actually working. Likewise, she informed the committee that each state’s regulatory body was effectively protecting underage citizens with the use of government-issued identification like social security…

…Moylan, while not necessarily pro-online gaming, is in favor of states’ rights. He testified that RAWA has no right to restrict these states’ rights to legalize and regulate, as long as they are doing so safely and effectively. Remember, this is a bit of a double-edged sword because the same 10th Amendment argument can and will be used against the federal legalization of online gaming.

While frustrating and a bit scary, the hearing gave me hope. Neither Aftab nor Moylan have a lot riding on the line with RAWA — they aren’t operators looking to prosper economically — yet they were the only two people called to the stand that offered relevant data. That makes me think there are more smart, thoughtful individuals out there that will see the merits of allowing states to regulate their own online gaming.

Net neutrality rules full of faults, R Street warns

April 01, 2015, 8:00 AM

WASHINGTON (April 1, 2015) – The R Street Institute expresses deep concern about this morning’s announcement by the Federal Communications Commission that it would expand its recently proposed net-neutrality rules to tennis, basketball and other sports-related broadcasts.

The proposed changes in net regulation from the FCC’s newly created Office of Mesh Guidelines (OMG) came as a surprise to many observers.

“This overreaching regulation will have profoundly negative effects on competition. The Davis Cup and Wimbledon will never be the same,” said R Street President Eli Lehrer, adding that the new rules likely would also undercut attendance at Washington Wizards games.

“Before the OMG stepped in with still more net-neutrality rules, no one even thought it possible for Wizards attendance to dip any lower,” Lehrer added.

Under the new rules, OMG regulators at tennis matches will regularly pull the nets lower to ensure balls reach the other side of the court. On basketball courts, the expanded rules will require lowering nets to five feet and expanding their diameter to five feet as well, to ensure that dominant players’ natural height or shooting ability doesn’t undermine the game’s fairness.

“This mandatory increase in bandwidth will do no harm to incumbent players, while lowering barriers to entry for new players,” an OMG spokesperson said. “Access to the courts long has been a cherished American tradition and we view it a basic human right.”

Other R Street scholars were similarly critical of the new rules.

“The commission thinks it has come up with a final solution, but in practice, it will trigger total war over the Internet. April 1, 2015 is a date that will live in online infamy,” said Mike Godwin, Director of the institute’s Center for the Study of National Socialism. “This kind of anticompetitive intervention is like something former Labor Secretary Robert Reich might have recommended in his book ‘Beyond Outrage,’ which is the third Reich book I’ve read.”

“These new rules will lead to massive regulatory confusion,” Godwin added. “The whole issue could have been avoided if OMG staff had been more thorough when they looked up the meaning of the word ‘server.'”


Single-device user Hillary Clinton actually used two devices at State

April 01, 2015, 7:00 AM

Remember when Hillary Clinton stood in front of a press gaggle at the United Nations and claimed that she used her personal email in order to simplify her communications routine, as her tiny little female brain was unable to account for two mobile devices at the same time, despite her quick adaptation to the iPad in addition to her phone? Sure, we all do. I missed lunch for it. The things I do for you people.

Well, it turns out that, once Clinton released her emails to the Associated Press, she was betrayed, somewhat ironically, by her real inability to use two devices. In at least one communication with her senior aide Huma Abedin, where Clinton mistakenly replied to a very important State Department email about drone debris in Pakistan, with a series of queries about benches and floral arrangements.

While limited, the emails offer one of the first looks into Clinton’s correspondence while secretary of state. The messages came from and were sent to her private email address, hosted on a server at her property in Chappaqua, New York, as opposed to a government-run email account.

They show that Clinton, on at least one occasion, accidentally mingled personal and work matters. In reply to a message sent in September 2011 by adviser Huma Abedin to Clinton’s personal email account, which contained an AP story about a drone strike in Pakistan, Clinton mistakenly replied with questions that appear to be about decorations.

“I like the idea of these,” she wrote to Abedin. “How high are they? What would the bench be made of? And I’d prefer two shelves or attractive boxes/baskets/ conmtainers (sic) on one. What do you think?”

Abedin replied, “Did u mean to send to me?” To which Clinton wrote, “No-sorry! Also, pls let me know if you got a reply from my ipad. I’m not sure replies go thru.”

The other emails between Clinton and her advisers provided by the State Department contained a summary of a 2011 meeting between Sen. John McCain, R-Ariz., and senior Egyptian officials in Cairo. It was uncensored and did not appear to contain sensitive information. That email was forwarded to Clinton’s private account from Abedin’s government email address.

The iPad was, of course, released more than a year after Clinton became Secretary of State, but the emails are from within a year of the iPad’s release, making Clinton something of an “early adopter” of the technology, which is very much at odds with the “technological ignoramus” card she played at the United Nations. Worse, the emails the AP obtained make it clear that Clinton did have a hard time separating personal email from work email, and now that all 30,000 emails on the server are gone, it’s hard to know whether some of the emails she marked as “personal” came from within conversations that were decidedly professional.

According to the AP, which asked her spokesperson for comment, Clinton’s aides now admit that then-Secretary Clinton did also use an iPad in addition to her Blackberry, but mostly to “read news clippings” and not primarily for email. Obviously because the latter was very difficult.

Recap of RAWA House subcommittee hearing and what it means for igaming

March 31, 2015, 4:26 PM

From JD Supra:

Some balance was introduced by Andrew Moylan, Executive Director of R Street, who strongly argued that RAWA would be dangerous precedent which substitutes the judgment of the federal government for that of the states. Setting aside the issue of internet gaming specifically, Mr. Moylan noted that it is problematic to say that anything that happens over the internet constitutes an interstate transaction which should be subject it to the federal government’s oversight as it would subject such a broad range of activity to the federal government’s jurisdiction. The final witness, Parry Aftab, executive director of Wired Safety, provided reasoned testimony that unregulated offshore gambling websites present a serious threat to citizens, whereas the regulated i-gaming industry has strong consumer protection measures built in.

Biased witnesses give testimony at RAWA hearing

March 31, 2015, 4:25 PM

From Online Casino Reports:

The other two witnesses were more subjective on the issue of RAWA. These were WiredSafety executive director Parry Aftab and R Street Institute executive director Andrew Moylan. Aftab said that the regulation of online gambling in the United States will better protect American citizens, and that there is certainly the technology to prevent minors from using the sites. Moylan argued that RAWA is very problematic for states’ rights.

Letter on Texas Alcoholic Beverage Code reform

March 31, 2015, 2:45 PM

The Honorable Kevin Eltife
Chairman, Texas Senate Business and Commerce Committee
Texas State Capitol
Austin, TX 78711

Dear Chairman Eltife:

My name is Josiah Neeley, and I am Texas director of the R Street Institute, a free-market think tank devoted to developing pragmatic solutions to public-policy challenges. I write today to urge you and other members of the Business and Commerce Committee to support S.B. 609.

It’s been more than 80 years since America ended its ill-fated experiment with Prohibition. Yet the Texas Alcoholic Beverage Code is littered with provisions that serve little purpose other than to constrain competition and favor entrenched interests. Current Texas law prohibits publicly traded corporations (other than hotels) from competing in the retail sale of alcoholic spirits, while allowing private corporations to do so. Texas is the only state in the nation to have such a restriction, which serves no purpose other than as an anti-competitive measure.

Similarly, provisions in current law limit the number of package store permits to sell alcoholic spirits that a given individual or entity may own. Yet loopholes in the law for family members and hotels allow certain types of businesses to hold many times the ostensible limit.

These provisions do not advance any state interest in health, safety or welfare. They serve only to limit competition, harming consumers. The provisions are inconsistent with the mission of the TABC, which includes as a goal to “ensure fair competition within the alcoholic beverage industry.” S.B. 609 takes the necessary step of modernizing Texas’ alcohol regulation by removing these anti-free market restrictions from the code.


Josiah Neeley
R Street Institute