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R Street Institute Commends Passage of H.R. 2901

April 28, 2016, 2:49 PM

WASHINGTON (April 28, 2016) – The R Street Institute today commended the U.S. House of Representatives for its passage of H.R. 2901, the Flood Insurance Market Parity and Modernization Act of 2015, which passed by a margin of 419-0.

Introduced by Reps. Dennis Ross, R-Fla., and Patrick Murphy, D-Fla., the bill is a necessary follow-up to the Biggert-Waters Flood Insurance Reform Act of 2012, clarifying Congress’ intent to encourage development of a private market in flood-insurance products to compete with the taxpayer-subsidized policies offered through the National Flood Insurance Program.

R Street Senior Fellow R.J. Lehmann noted that the expansion of the flood-insurance market has only become more necessary following a series of major catastrophes, including Hurricane Katrina and Superstorm Sandy. According to Lehmann, “The NFIP remains more than $20 billion in debt to U.S. taxpayers and has been on the nonpartisan Government Accountability Office’s list of high-risk federal programs since 2006. Prospects to shrink the program’s $1.1 trillion of total property exposure rely on the emergence of private-sector solutions.”

H.R. 2901 defers to the states’ expertise in insurance regulation to develop appropriate guidelines for qualifying policies, including those written through the excess and surplus lines markets. Additionally, it ensures that any period in which a property is covered either by an NFIP policy or a private policy is to be considered “continuous coverage.”

Passage of these commonsense adjustments and clarifications are important steps toward meaningful flood insurance reform and should be considered a victory for advocates of consumer choice and fiscal responsibility.

Royal College of Physicians: E-cig switch benefits smokers

April 28, 2016, 1:27 PM

The United Kingdom’s Royal College of Physicians issued a groundbreaking report this morning on electronic cigarettes which concludes that encouraging smokers to switch to e-cigarettes is likely to be beneficial to U.K. public health. Smokers can therefore be reassured and encouraged to use them, and the public can be reassured that e-cigarettes are much safer than smoking.

The 200-page report reviewed recent evidence on e-cigarettes and came to the following conclusions:

  • E-cigarettes are not a gateway to smoking– In the United Kingdom, use of e-cigarettes is limited almost entirely to those who already use, or have used, tobacco.
  • E-cigarettes do not result in normalization of smoking– There is no evidence that either nicotine replacement therapy (NRT) or e-cigarette use has resulted in renormalization of smoking. None of these products has to date attracted significant use among adult never-smokers, or demonstrated evidence of significant gateway progression into smoking among young people.
  • E-cigarettes help smokers to quit– Among smokers, e-cigarette use is likely to lead to quit attempts that would not otherwise have happened, and in a proportion of these to successful cessation. In this way, e-cigarettes can act as a gateway from smoking.
  • E-cigarettes cause much less long-term harm– The possibility of some harm from long-term e-cigarette use cannot be dismissed, due to inhalation of the ingredients other than nicotine, but is likely to be very small, and substantially smaller than that arising from tobacco smoking. With appropriate product standards to minimize exposure to the other ingredients, it should be possible to reduce risks of physical health still further. Although it is not possible to estimate the long-term health risks associated with e-cigarettes precisely, the available data suggest that they are unlikely to exceed 5 percent of those associated with smoked tobacco products, and may well be substantially lower than this figure.

While the report acknowledges the need for regulation of e-cigarettes, they suggested that regulation should not be allowed to inhibit significantly the development and use of harm-reduction products by smokers. A regulatory strategy should take a balanced approach to ensure product safety, enable and encourage smokers to use these product instead of tobacco, and to detect and prevent effects that counter the overall goals of tobacco-control policy.

The early response from the U.S. Centers for Disease Control and Prevention and other public health authorities in the United States has been muted. They already have staked out a position that opposes adopting unregulated e-cigarettes as a harm-reduction strategy. From their point of view, the unintended consequences of e-cigarettes, in terms of youth adoption and unknown hazards associated with vapor, supersede any potential benefit to current adult smokers. They arrive at these positions from the same data summarized in the RCP report.

In an article that appeared earlier this month in the New England Journal of Medicine, Sharon H. Green and her co-authors explain that the framing for harm-reduction interventions is the key distinction: England has a long tradition of helping people with addictions (e.g., providing heroin and needles for heroin addicts) while the United States has been more critical of methadone maintenance, needle exchange and other similar programs.

When framed in the context of reducing the burden of tobacco-related illness, the evidence clearly favors use of e-cigarettes. When framed in the context of youth utilization, unknown harms, uncertainties regarding content and unintended consequences, use of e-cigarettes appears to generate red flags for U.S. regulators. For public-health officials steeped in a precautionary principle, the presumption becomes that no action can be taken until e-cigarettes are shown to be absolutely safe.

There can be little question that a subset of adult smokers in both the United Kingdom and the United States are able to quit smoking or reduce their smoking substantially by using e-cigarettes.

At the Oct. 20, 2015, CDC Public Health Grand Rounds on E-cigarettes, CDC Director Tom Frieden was quoted saying: “For the individual smoker, there is no question that e-cigarettes are safer.” While the debate about the RCP report is sure to continue, an increasing fraction of smokers and their doctors will be framing the question from a perspective of the benefits switching to e-cigarettes can convey.

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

Is Jerry Brown California’s savior?

April 28, 2016, 12:46 PM

It may be news to many of us living here, but California — according to a recent Newsweek issue — apparently no longer faces intractable budgetary, debt, infrastructure, business, tax, poverty, and regulatory problems. The state has been “saved” and its savior is none other than its third-term governor, Jerry Brown.

The magazine’s cover story, “How Jerry Brown Quietly Saved California,” recounts the governor’s political career against the backdrop of the current presidential race. The writer interviews an analyst who laments that the 78-year-old governor isn’t 10 years younger. Then Brown would be poised to take California’s miracle to the nation. (And you were lamenting a Donald Trump or Hillary Clinton presidency…)

“While his cloistered days are long gone, forays into Zen Buddhism and Mother Teresa’s India have reminded Brown about the impermanence of earthly things,” wrote the lengthy puff piece. “Beyond informing his interior decorating, Brown’s intellectual infinity for austerity has helped him pull the state out of a fiscal canyon about $27 billion deep.”

Furthermore, the article explains, Brown has turned California from the equivalent ofdecrepit Greece, “which was then in the midst of a protracted meltdown,” to economically booming Germany, “a smoothly functioning social democracy that couples technological avant-gardism with liberal social norms and fiscal restraint.”

Just as I had sworn off writing about Brown for a while, this piece — discussed widely and even referenced by the Los Angeles Times — cries out for a rebuttal. I’m no Brown hater. He’s a fascinating character whose recent legacy isn’t entirely bad. But the main thing the governor accomplished (with the help of a rebounding economy and a couple voter-approved initiatives) is to derail a burgeoning reform movement that offered some hope of addressing the state’s fundamental problems.

In my 18 years in California, the most public optimism I’ve sensed about the state’s future wasn’t when Arnold Schwarzenegger bounced the aptly named “Gray” Davis from the governorship in 2003. Most people were angry at the budget mess and smitten by the Terminator’s celebrity, but I never sensed great hope in long-lasting reform. It was more like relief the rolling blackouts (from the electricity crisis) might end and the massive deficits might go away.

The greatest time of optimism actually coincided with Brown’s inauguration to his third term, although it had little to do with his election. Sure, liberals were happy a quirky, lefty governor would be working with overwhelming Democratic legislative majorities. But many of us non-liberals were excited for decidedly different reasons.

The hopefulness stemmed, counterintuitively, from the dire conditions the state faced at the time. California had a massive general-fund budget deficit. Its unfunded liabilities, to pay for a decade-long spree of retroactive pension increases for public employees, had become front-page news, an amazing feat given the “eyes glazing over” nature of the topic.

Reformers weren’t joyful that California was being pronounced a “failed state.” But they naively believed the long-awaited “day of reckoning” was at hand. They figured, eventually, California’s public-sector-enriching, tax-raising, regulation-happy politics would hit the wall, and there’d be no other choice but to pass meaningful reform. Boy, did we misjudge that one.

There was some legitimate reason for the headiness. Two Democratic-majority cities (San Jose and San Diego) soon passed serious pension-reform initiatives with nearly 70-percent “yes” votes. There also was hope various court decisions would put an end to the dreaded California Rule, which forbade public agencies from ever reducing pension benefits — even going forward. There was chatter about education reform and other matters. There were some serious Democrats on board this reform agenda, a necessity in this Democratic-dominated state.

“[T]he state that was once held up as the epitome of the boundless opportunities of America has collapsed,” reported the Guardian in 2009. The British newspaper told stories of budget cuts, 12-percent unemployment rates, a soaring deficit, a busted housing bubble. It was helpful to the reform movement that such “failed state” pronouncements came from publications across the political spectrum.

But then the crisis evaporated. Voters in 2010 gave the Legislature the ability to pass budgets with a simple majority, thus helping to end an annual budget crisis in which the Republican minority had some political clout. And Brown used his political capital to convince voters in 2012 to increase sales and income taxes significantly. Now, instead of looking at the failed state, mainstream publications are lauding our supposedly successful state.

“Long derided for its ‘fruit-and-nuts’ politics, California is leading the way in envisioning a political system that can actually get things done,” the Huffington Post breathlessly reported in January. Expect more of this as we head into a national political race. California will be proof, we’ll be told, that Democratic policies are working.

It’s nonsense, of course. The stingy Brown shtick has some truth to it. At budget press conferences, Brown always points to a chart showing that budget years with deficits far exceed those years with surpluses. He has been a bulwark against the Democratic Legislature’s endless desire to create costly new permanent programs to avoid those deficits. “Some on California’s vociferous left have called on the stingy governor to spend more on social programs that might benefit the young, the sick, the homeless and the poor,” Newsweeknotes.

But his latest budget broke spending records with its $123-billion general fund. He’s devoted to a $15-billion-plus tunnel project in the Delta and a $68-billion-plus bullet train that is turning into a ridiculous boondoggle. He wants to spend more — lots more — but wants to assure the state can afford it. That’s something, especially in this state, but it’s ultimately not very much.

Unfortunately, that approach — and the resulting budgetary good news — helped to put the end to the reform movement by forcing “crisis” stories off the front pages. Even though nothing fundamentally changed, California no longer was viewed as a failed state. With coffers flush, no one wanted to talk about pension liabilities. More public employees than ever were joining the $100,000 club and enriching themselves thanks to spiking schemes and disability games. But the media coverage of them trickled away.

Unfunded liabilities are now higher than ever. We’re still the most impoverished state in the nation, based on the Census Bureau’s cost-of-living based data. The 24/7 Wall Street blog publishes its list of U.S. cities with the most grinding poverty. Four of 11 are in California. “California’s lawsuit climate ranks among worst in country, again,” reports the Voice of OC.Chief Executive magazine put California at No. 50 for business climate. Data show a steady stream of businesses and wealthier residents leaving because of tax and regulatory issues. The state’s schools and infrastructure are atrocious.

The goal here isn’t to blame Brown for problems caused by myriad legislators and governors. But it’s certainly silly to portray him as California’s savior. The state still is desperately in need of saving, even if its leadership — and the national media — don’t know it yet.

Environmentalists’ attack on free speech

April 28, 2016, 12:35 PM

I’m a former employee of the Competitive Enterprise Institute who disagrees with the organization’s take on the subject of climate change. I’m nonetheless outraged that CEI now faces a subpoena for records related to its internal discussions about our changing climate. The attack on CEI launched by U.S. Virgin Islands Attorney General Claude Earl Walker, and supported by former Vice President Al Gore and the group Attorneys General United for Clean Power, is an attack on both free speech and public participation in the policy process.

Walter Olson of the Cato Institute puts it better than I could:

If the forces behind this show-us-your-papers subpoena succeed in punishing (or simply inflicting prolonged legal harassment on) groups conducting supposedly wrongful advocacy, there’s every reason to think they will come after other advocacy groups later. Like yours.

And while I think that climate change is both human-caused to a significant extent and likely to be a problem, I would warn my environmentalist friends about the dangerous precedent the attack on CEI sets. For example, there’s scientific consensus that genetically modified organisms are safe and likely to be a net environmental positive. Nonetheless, environmental organizations like Greenpeace have objected to commercialized genetic engineering and sought a variety of laws to label or otherwise limit the use of GMOs.

If a pro-Monsanto government official decided to go after Greenpeace or our friends at the Environmental Working Group (which R Street works with a lot on agricultural issues) in the same way AG Walker has launched this witch hunt against CEI, we all would be outraged, and fully justified in that outrage.

The basis of the attorneys general’s campaign is that energy companies like ExxonMobil have engaged in conspiracies with think tanks and other policy organizations to spread disinformation about climate change. Think of the “conspiracies” that could be alleged against environmental-advocacy groups who have fought to impose new regulations, stop environmentally harmful projects or raise public awareness about environmental hazards.

Indeed, that’s the major purpose of the environmental movement, which at its best seeks to concentrate the social costs of pollution on those who impose them on society. But there are dozens of corporations and government entities that stand to lose profits or tax revenues as a result of these “conspiracies” and who would jump at an opportunity to attack advocacy groups. In addition to forcing them to expend precious dollars fending off frivolous lawsuits, demanding that environmental groups hand over personal records and emails could discourage many grassroots activists from getting involved in the first place.

And while the sorts of things that Exxon and others said about the changing climate in the 1980s and 1990s no longer match the modern scientific consensus, environmental groups should bear in mind that at least some of the claims and predictions they now make will, in the future, almost certainly also be shown to be wrong. For example, a preponderance of the evidence suggests that hurricanes will become more frequent in a warmer world. But very few scientists who have studied the question are willing to assign anything like certainty to this prediction. If future experience shows that hurricanes haven’t become more frequent, will government officials pull the “show us your papers” attack on environmental groups for such “wrongful advocacy”? It seems plausible.

Scientific data can tell us a lot about the world but it can’t determine what policy ought to be. No matter how much they disagree with CEI’s positions on climate change, environmentalists should be scared — very scared — about campaigns by public officials to intimidate private organizations into silence.

Less than 10% of Farmers Would Feel Effects of Cap on Premium Subsidies

April 28, 2016, 11:22 AM

WASHINGTON (April 28, 2016) – Less than 10 percent of farms that plant major cash crops in some of the largest farm states would feel the impact of proposals to cap taxpayer-financed crop insurance premium subsidies at $50,000 a year, a new policy study from R Street Associate Fellow Vincent Smith finds.

Using publicly available data from the most recent agricultural census on farm size and crop mix – as well as information from U.S. Department of Agriculture and the Risk Management Agency on crop prices, premium rates, premium subsidies and the proportion of farms that signed up for different levels of coverage and types of policies – Smith simulated the impact of premium subsidy caps for about 250,000 representative farms that plant corn, cotton, peanuts, rice, soybeans and wheat in 12 geographically diverse farm states.

“We find only about 9 percent of the estimated 254,233 farms in the 12 states that plant corn, cotton, peanuts, rice, soybeans and wheat would experience a reduction in their crop insurance premium subsidy payments under a $50,000 premium subsidy cap,” Smith writes. “The absolute size of the reductions in those payments, in dollar-amount terms, would be relatively small for most of the affected farms and would be close to negligible relative to their annual average revenues from market sales, which for the vast majority of the affected farms are well over $750,000 a year (and in many cases, are in the multiples of millions of dollars).”

Though farm lobby advocates routinely suggest that making changes to federal crop insurance programs that don’t expand subsidies for farmers would have dramatically negative effects on U.S. crop production, Smith suggests such dire predictions may be greatly exaggerated. In fact, he finds even more stringent annual caps – such as $30,000 or even $10,000 – would have only relatively limited impact on crop production.

“One set of interest groups that would be very concerned about this shift is the crop insurance industry itself, including the private primary insurers that service all federal crop insurance policies, the independent insurance agents that sell those policies and the multinational reinsurance companies that, historically, have handled much of the insurance risk faced by the private primary crop insurers,” Smith writes. “In other words, it is reasonable to expect that a broad-based coalition of farm and crop insurance groups would strongly oppose all legislative initiatives to introduce premium-subsidy caps, no matter how reasonable, from the broader perspective of social policy, those initiatives might be.”

Oregon town ponders onerous short-term rental rule

April 28, 2016, 10:49 AM

The Hood River, Oregon, City Council has delayed its decision until May 9 on an ordinance that would restrict short-term rentals to a family’s primary residence and ban them in granny flats. Here is the portion of the letter we sent to the council members and mayor:

R Street opposes the kind of restrictive ordinances the Hood River City Council is proposing. For starters, short-term rentals – especially in vacation-friendly communities such as Hood River – are sources of income, jobs and economic growth. Rather than have empty rooms or houses languish, STRs let owners promote what these cities should applaud: making it easier for people to come to town, spend their money and enjoy local amenities.

While we understand concerns about neighborhood character, the prevalence of STRs suggests that, quite frankly, the nature of the community already has changed. By putting severe limits on strong demand for short-term housing in residential areas, such laws merely drive the process underground, creating black markets and depriving cities of revenue and the ability to enforce reasonable regulations that uphold the quality of life. In other words, underground businesses are far more difficult to tax and regulate than legitimate ones.

We’ve all seen neighborhoods and houses disrupted by unruly neighbors – many of whom have been long-term renters or even owners. The key with those situations, as with STRs, is to police the bad behavior, not to shut down productive uses of property or undermine people’s property rights.

In my reporting, I’ve seen older, decrepit neighborhoods upgrade because of the profits possible from STRs. It can be an admirable source of regeneration in older cities (such as Anaheim, California, for instance). It’s a different story in sought-after Hood River. But the affordability argument is something of a canard. This is from the above-mentioned R Street study: “There’s little evidence the current or near-term-future scale of short-term rentals is sufficiently large to have a significant impact on housing affordability.” Usually, the affordability problem is driven by regulations and restrictions that make it too hard to build enough homes to meet the needs of a growing population. That certainly is a problem in many parts of Oregon.

Hood River is considering a policy that would harm the local tourist trade, the local economy and property rights. All types of STRs – both primary and secondary – should be legalized and prudently regulated.

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

Where is OCC in court battle over state usury limits?

April 28, 2016, 8:41 AM

The following op-ed was co-authored by William M. Isaac, senior managing director and global head of financial institutions at FTI Consulting.

A surprising decision of the Second Circuit Court of Appeals in the case of Midland Funding v. Madden threatens the functioning of the national markets in loans and loan-backed securities. The ruling, if it stands, would overturn the more than 150-year-old guiding principle of “valid when made.”

The effects of the decision could be wide-ranging, affecting loans beyond the type at issue in the case. It is in the banking industry’s interest for the Supreme Court, at the very least, to limit its applicability. And since the Madden case could deal a blow to preemption under the National Bank Act, it is time for the Office of the Comptroller of the Currency to voice an opinion.

Under the valid-when-made principle, if the interest rate on a loan is legal and valid when the loan is originated, it remains so for any party to which the loan is sold or assigned. In other words, the question of who subsequently owns the financial instrument does not change its legal standing. But the appeals court found that a debt buyer does not have the same legal authority as the originating bank to collect the stated interest.

In the words of the amicus brief filed before the U.S. Supreme Court on behalf of several trade associations:

Since the first half of the nineteenth century, this Court has recognized the ‘cardinal rule’ that a loan that is not usurious in its inception cannot be rendered usurious subsequently. ” U.S. credit markets have functioned on the understanding that a loan originated by a national bank under the National Banking Act is subject to the usury law applicable at its origination, regardless of whether and to whom it is subsequently sold or assigned.

This, the argument continues, “is critically important to the functioning of the multitrillion-dollar U.S. credit markets.” So it is. And such markets are undeniably big, with hundreds of billions of dollars in consumer credit asset-backed securities, and more than $8 trillion in residential mortgage-backed securities, plus all whole loan sales.

Marketplace lenders and investors have already raised intense concerns about the decision, but the impact could go further. The validity of numerous types of loan-backed securities packaged and sold on the secondary market could suddenly be called into question. Packages of whole loans, as well as securitizations, include the diversified debt of multiple borrowers from different states with different usury limits, and then sold to investors. But the Madden decision suggests those structures are at risk of violating state usury laws.

A possible interpretation to narrow the impact of the case would be for future court decisions to find that the Madden outcome only applies to the specific situation of this case, namely to defaulted and charged-off loans sold by a national bank to an entity that is not a national bank. Thus, only the buyers of such defaulted debt would be bound by state usury limits in their collection efforts, and the impact will largely be limited to diminishing the value of such loans in the event of default.

The Second Circuit decision might not, based on this hypothesis, apply to performing loans or to the loan markets in general. However, as pointed out in a commentaryby Mayer Brown: “it will take years for the Second Circuit to distinguish Madden in enough decisions that the financial industry can get comfortable that Madden is an anomaly.” The law firm’s commentary presented many potential outcomes, including that the Madden case could be “technically overturned” but without the high court providing explicit support for the “valid-when-made” principle. That “would be a specter haunting the financial industry,” according to the firm’s analysis.

In the meantime, what happens?

It would be much better for the Supreme Court to reaffirm the valid-when-made principle as a “cardinal rule” governing markets in loans, and the Supreme Court is being petitioned to accept the case for review.

But at this point, one would also expect the OCC, the traditional defender of the powers of national banks and the preemption of state constraints on national bank lending, to be weighing in strongly. The comptroller of the currency should protect the ability of national banks to originate and sell loans guided by the valid-when-made principle. But the OCC seems not to be weighing in at all and is strangely absent from this issue.

Everyone agrees that national banks can make loans under federal preemption of state statutes, subject to national bank rules and regulations. Everyone agrees, as far as we know, that the valid-when-made principle is required for loans to move efficiently among lenders and investors in interstate and national markets, whether as whole loans or securities.

In our view, the OCC ought to be taking a clear and forceful public position to support the ability of national banks to originate loans which will be sold into national markets.

Limiting premium subsidies for crop insurance

April 28, 2016, 8:00 AM

One of the most persistent inaccurate claims made by some farm-lobby advocates, not to mention elected representatives with agricultural constituencies, is that any change to the Federal Crop Insurance Corp. program that does not expand subsidies to farmers will devastate U.S. crop production. Whether the proposal is a modest reduction in subsidies to private crop insurers, as was debated in November 2015 thanks to a provision of the 2015 bipartisan budget act, or a proposal to place modest caps – in the range of $40,000 to $50,000 – on the premium subsidies an individual farm may receive, the outcry from farm-subsidy proponents is the same.

Such claims not only are unsubstantiated, but they also are inconsistent with available evidence on the determinants of crop production. However, relatively little data-based evidence has been collected on the extent to which farm revenues, or any other aspect of farmers’ lives, would be affected by premium subsidy caps.

Also under explored are the potential impacts of various proposals to restrict farm subsidy payments based on an individual farm family or landowner’s taxable income. Some federal farm subsidy programs – with the crop insurance program as a notable exception — already prohibit payments to farm families or farm owners with annual taxable gross incomes that average more $900,000 over a three-year period. Economists generally have regarded such caps as ineffective, as anything short of draconian enforcement mechanisms would still leave farm owners able to reconfigure the structure of their ownership to avoid such payment restrictions. Therefore, the focus has been on the extent to which caps on crop insurance premium subsidies to farms would affect the farm sector.

Two major questions are examined in this study. The first is whether different premium-subsidy caps would have any impact on the subsidies farms receive – if so, how many farms would be affected and how many would not. The second is the extent to which those farms affected by premium-subsidy caps would see a substantial reduction in the gross income from their crop operations (market revenues plus government subsidies), not simply in dollar terms, but in terms of the likely proportional declines in their gross incomes. Net farm-income effects are not considered, for two reasons. First, all estimates of farm costs of production are highly imprecise and include many outlays that would be viewed as consumption expenditures for nonfarm households. Second, at the farm level, costs genuinely associated with the production of a crop vary substantially among farms, not least because of wide variations in soil quality, topography, climate and management skills. However, if the reductions in gross incomes that result from premium caps are negligible in percentage terms, then the impacts on farm household incomes are also almost surely negligible.

The analysis is based on publicly available data collected by U.S. Department of Agriculture agencies through three major vehicles: the most recent (2012) agricultural census; the annual survey of farms carried out by the National Agricultural Statistical Service; and the data on federally subsidized crop insurance premium rates and program participation rates that are provided, maintained and collected by the USDA Risk Management Agency. The focus is on farms producing major crops that are heavily insured in 12 states. Six are “Corn Belt” states in which corn and soybeans are major crops: Illinois, Indiana, Iowa, Minnesota, Nebraska and Ohio. Three – Kansas, North Dakota and Oklahoma – historically have been viewed as “wheat” states, although corn is now raised more extensively in Kansas and North Dakota than in the 1990s and early 2000s. The other states are Georgia (cotton and peanuts), Arkansas (rice) and Texas (cotton and wheat).

The approach is to identify typical crop-oriented farm operations in each of the states by farm size, in terms of acreage allocated to the crops of interest; to identify typical crop insurance products used by producers in the states; to obtain representative premium rates for the requisite products; to identify the crop insurance coverage levels (the amount of protection on a per-acre basis) selected by most producers for each crop; and to calculate premiums and premium subsidies for each size class of farm.

We find only about 9 percent of the estimated 254,233 farms in the 12 states that plant corn, cotton, peanuts, rice, soybeans and wheat would experience a reduction in their crop insurance premium subsidy payments under a $50,000 premium subsidy cap. The absolute size of the reductions in those payments, in dollar-amount terms, would be relatively small for most of the affected farms and would be close to negligible relative to their annual average revenues from market sales, which for the vast majority of the affected farms are well over $750,000 a year (and in many cases, are in the multiples of millions of dollars).

More substantial premium caps would affect a larger proportion of farms. For example, a $30,000 premium-subsidy cap could affect premium-subsidy payments of an estimated 14 percent of all farms considered in the analysis. A $10,000 premium cap would affect 37 percent of farms considered in the analysis. However, even in the case of a $10,000 premium-subsidy cap, the financial impacts would be modest and manageable for nearly all farms.

Despite these generally modest and negligible impacts, regional and crop-specific differences with respect to the effects of the premium caps are likely to result in vigorous lobbying efforts by agricultural commodity groups to prevent legislation that propose such caps. In addition, because effective premium-subsidy caps may reduce the demand for many widely used federal crop insurance products, the crop insurance industry also is likely to oppose the introduction of such limits on premium-subsidy payments.

Vincent Smith

April 27, 2016, 3:48 PM

Vincent H. Smith is a professor of economics in the Department of Agricultural Economics and Economics at Montana State University and an associate fellow of the R Street Institute.

He is the director of Montana State’s Agricultural Marketing Policy Center and has been a visiting scholar at the American Enterprise Institute since 2011. He received his doctorate in economics from North Carolina State University in 1987

Email: vsmith@montana.edu

Statement from R Street Institute’s Policy Analyst Nathan Leamer on the unanimous passage of HR 699

April 27, 2016, 3:32 PM

WASHINGTON (April 27, 2016) – The R Street Institute is pleased by this strong statement of unanimous support from the House. Most of our lives are on our screens, and it’s about time we expand essential Fourth Amendment protections to our phone and computer correspondence. We urge the Senate to act quickly and decisively on this commonsense bipartisan reform.

Bryn: Texas rains bring people together

April 27, 2016, 2:56 PM

From Pasadena Citizen

That is precisely why many others, from ExxonMobil to reliably conservative think tanks in Washington like the R-Street Institute, continue to point out that any carbon price must be REVENUE-NEUTRAL. This basically means the government doesn’t keep the money, but instead it is all returned to the economy in some way. This “revenue-neutrality” may sound like a subtle difference, but it’s not – it’s a game changer that alters the economics dramatically.

TWIA shifts on reinsurance

April 27, 2016, 9:40 AM

Texas’ state-created windstorm pool is looking at changes to the way it would cover losses in the event of a major storm. Last week the Actuarial Committee of the Texas Windstorm Insurance Association (TWIA) met with the organization’s reinsurance broker Guy Carpenter to discuss possible changes to its reinsurance policies.

State law requires TWIA to maintain adequate funds to cover a 1 in 100 year event, which is estimated to be $4.9 billion. TWIA has traditionally met this obligation partly through reinsurance and partly through other mechanisms, such as the agency’s Catastrophic Reserve Trust Fund.

Now, as reported at Seeking Alpha:

Due to a projected $100m increase in the size of the CRTF for 2016, based on premiums coming in and the ability for TWIA to increase CRTF funding as a result, in order to maintain the $4.9 billion of funding TWIA would only need to have $2.2 billion of reinsurance and catastrophe bonds in place, a $100m reduction in reinsurance limit required as the attachment point shifts up to $2.7 billion.

And this is what the Actuarial Committee have proposed to the TWIA Board, that the organization should secure enough reinsurance or additional catastrophe bonds in order to maintain the $4.9 billion funding level, for the lowest cost possible.

The decision on whether to access the catastrophe bond market again will depend on analysis done by Guy Carpenter as well as the response of the traditional reinsurance and alternative markets. However if cat bond capacity is available at a conducive price, within the layer, TWIA may well seek to sponsor another bond.

Making this change would, however, increase TWIA’s vulnerability should it face multiple events in a year:

TWIA has a potential gap in its funding should a major event occur in 2016 and erode the CRTF, leaving the other financing to drop down while the reinsurance and cat bond coverage would continue to attach at $2.7 billion.

That could leave as much as a $700m gap in TWIA’s funding structure, just below the reinsurance attachment point. The Guy Carpenter brokers told the Committee that there could be various options available to close that gap, by securing some sort of second or subsequent event coverage or reinstatement.

This could be achieved by buying another $700m of reinsurance which inures to the CRTF layer, so replacing any CRTF that is eroded and ensuring no gap in coverage.

While the overall change here is relatively minor, it does indicate improved confidence on the part of TWIA in its fiscal position, which has been aided by low storm activity and some rate increases.

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

Dear Philadelphia, Uber isn’t ISIS

April 27, 2016, 9:33 AM

One of the most disappointing aspects of being involved in politics is the tone one consistently encounters. Differing opinions are rarely given the benefit of the doubt.

Do you have nuanced views on environmental issues? You’re either a tree-hugging wingnut or you’re leading the charge to raze Earth’s rainforests.

Do you disagree with a given party line on immigration? You either don’t want Americans to be safe or you’re a racist.

For too many, the extreme margins of any given issue are all that exist – you’re “pro” or you’re “anti.” Of course, upon further examination, even the most extreme views are often far more nuanced than they might seem. Policy stances are rarely actually a result of outright bad faith. But recent developments in Philadelphia have proven to be a rather dramatic exception to the rule.

Ridesharing company Uber is back in the headlines in Philadelphia after the Pennsylvania Utilities Commission last week announced an $11.4 million fine against the company. The commission would no doubt maintain that the fine represents incredible generosity, since the regulatory body had originally wanted Uber to pay nearly $50 million for ostensibly operating illegally (i.e., having the gall to offer an alternative to cab companies) within Philadelphia. The story comes at a time when some observers are heralding new legislation as the solution to a long standoff over ridesharing in Philadelphia. But this is a rare instance in which Philadelphia regulators do not deserve the benefit of the doubt, as many local officials’ responses to the rise of ridesharing have taken anti-competitive crony capitalism to – and I truly don’t say this lightly – near-villainous extremes.

Consider the case of Raymond Reyes. When Reyes began driving for Uber in 2014, it was his sole source of income. So his devastation was understandable when, one evening, upon dropping two customers safely at their destination in Northeast Philadelphia, Reyes found Philadelphia police officers waiting for him alongside representatives from the Philadelphia Parking Authority (PPA). Reyes was accused of operating an illegal taxi, his personal car was impounded for nearly three weeks and his only source of income was gone.

Reyes’ story is not the only one of its kind. Far from a neutral desire to ensure a simple, fair regulatory framework, regulators in Philadelphia have unabashedly abused their positions both to block transportation network companies’ ability to conduct business and to harass ridesharing drivers personally.

Many localities have struggled to keep up with the emergence of Uber and Lyft, due to the plodding nature of bureaucracies filled with folks for whom working on a 30-year-old Commodore Amiga is just another day at the office. Philadelphia, on the other hand, has greeted the rise of ridesharing as one might expect the city to greet a surge in gang violence.

Since Uber introduced its services in Pennsylvania in 2014, the campaign against the company by allies of the city’s firmly entrenched (to put it lightly) cab companies was both organized and fierce. A month before the company was scheduled to begin operating in Philadelphia, the general counsel for the PPA, Dennis Weldon, was already hard at work, actively campaigning in support of an initiative in the Legislature that would carve out an exemption for Philadelphia – blocking Uber from operating in the state’s largest city.

“FYI. The House is the problem. We all need to focus there, hard. Is your guy OK?” Weldon wrote in an email to the cofounder of a local taxi company. The emails were later leaked. A few days after his initial message, Weldon continued his strategy session, suggesting how best to prevent Uber from operating:

Again, word is that the House is more resistant to a Philly carve out. I think this is an area where your lobbyist can bring some real world info to the members as to the impact this bill will have on the legally operating medallion business. Just my $.02, your lobbyist may see a different path

Included in the emails – which display the sort of shameless corruption most Americans are only accustomed to seeing while binging House of Cards – are references to concerted efforts by everyone from the director of the PPA’s taxicab and limousine division, all the way up to the PPA’s executive director.

Contrary to the assertions of Alex Friedman, the “totally reasonable” president of the Pennsylvania Taxi Association who also is counted among the participants in the leaked PPA correspondence, Uber is not “exactly the same menace” as “a terroristic act like ISIS invading the Middle East.” Nor, presumably, are the 700,000-plus Philadelphians who have used Uber since its debut doing so due to some deep-seated commitment to automotive jihad. Instead, the city’s residents are being offered a service they view as superior to an entrenched monopoly that remains content to beat would-be competitors into submission, rather than improving their own level of service to remain competitive. Basketball fans might recognize it as the “hack-a-Shaq” strategy, reimagined: if you can’t stop a dominant player through legitimate means, intentionally foul him to prevent him from being able to shoot at all.

It is no surprise that Philadelphia received the lowest score out of the 50 cities graded for the R Street Institute’s annual Ridescore project, which ranks the friendliness of localities’ regulatory frameworks toward ridesharing and other transportation-for-hire services. While other cities that had received low scores in previous years had begun to change their ways, according to the latest report, the City of Brotherly Love stood alone in its refusal to adapt to modernity. Philadelphia’s “failure to improve has left it alone at the bottom as the only city to receive a failing grade” on friendliness to ridesharing.

State Rep. Bob Godshall, R-Souderton, who chairs the Consumer Affairs Committee in the Pennsylvania General Assembly, has asked all involved parties to present a compromise on the latest piece of legislation by today, April 27. But given its history of aggressively seeking to choose winners and losers using government resources, it is unlikely the PPA’s efforts to sink evenhanded ridesharing legislation are over, despite the body’s hollow statement that its only “goal is to ensure public safety.” Philadelphians would be well-advised to keep an eye on the progress of the legislation, recognizing that the only outcome of this protracted battle that ultimately would benefit the city’s residents is a reasonable regulatory framework that offers maximum consumer choice and robust, equal competition.

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

Bipartisan coalition to Rules Committee: Recommend to Senate that Dr. Carla Hayden be confirmed as Librarian of Congress

April 26, 2016, 6:53 PM

Dear Chairman Blunt, Ranking Member Schumer and Members of the Committee:

We are organizations, businesses, libraries, coalitions, and associations from across the political spectrum and around the country that today call on the Rules Committee to speedily vote to recom­mend to the full Senate that Dr. Carla Hayden be confirmed immediately as the nation’s 14th Librarian of Congress. We appreciate the thoughtful hearing with the nominee on April 20th and look forward to your acting promptly.

The relationship between the Librarian and Congress is of significant importance, as is the role the Library of Congress should play in the life of our nation. Indeed, the Library of Congress is in the midst of a critical transformation to serve the public as a 21st century institution and a strong leader is necessary to prioritize that digital change. There is no time to waste in bringing more congressional information online and doing so in formats that allow public engagement and comprehension. We commend the following three issues to your attention throughout the nomination process and afterward.

First, the Library of Congress plays — or should play — a key role in making information about Congress available to the public. Over the last few years the House and Senate made tremendous strides in publishing legislative data online in formats the public can reuse, but the Library often has not been at the forefront of these efforts. We hope the Library will embrace the mission of publishing congressional information online in formats that allow the public to fully engage with information held by the Library. In addition, we hope the Library will build tools to enhance public comprehension of information held by the Library, including through collaboration with the public and civil society.

Second, the Library of Congress has garnered a reputation in some quarters as an insular institution. We hope the Library will commit to a process of ongoing public and stakeholder engagement on its missions and programs, particularly concerning its mission of online public access to congressional information. We would welcome a permanent stakeholder advisory group in support of that mission.

Finally, the Library of Congress holds many important documents, from committee documents to Congressional Research Service Reports, from the Constitution Annotated to the Statutes at Large. We hope the Library of Congress will adopt a pro-disclosure bias, supporting online public access to information held or generated by the Library except in limited circumstances.

Based on her experiences and testimony, we are hopeful Dr. Hayden will take these concerns to heart and work to transform the Library into the 21st century institution the American people need it to be. We look forward to her confirmation.

For more information, please contact Congressional Data Coalition co-chairs Daniel Schuman or Zach Graves at daniel@demandprogress.org or zgraves@rstreet.org.

With best regards,

Center for Data Innovation

Data Coalition

Demand Progress

Government Accountability Project



New America’s Open Technology Institute


Project On Government Oversight (POGO)

R Street Institute

Sunlight Foundation

The OpenGov Foundation

67 organizations and companies to Congress: Support the Email Privacy Act

April 26, 2016, 2:03 PM

Dear Representative,

We, the undersigned civil society organizations, companies and trade associations, write to express our support for the Email Privacy Act (H.R. 699). The Act updates the Electronic Communications Privacy Act (ECPA), the law that sets standards for government access to private internet communications, to reflect internet users’ reasonable expectations of privacy with respect to emails, texts, notes, photos, and other sensitive information stored in “the cloud.”

The bill would end ECPA’s arbitrary “180-day rule,” which permits email communications to be obtained without a warrant after 180 days. The Act would also reject the Department of Justice interpretation of ECPA that the act of opening an email removes it from warrant protection. These reforms would ratify the Sixth Circuit’s decision in U.S. v. Warshak, which held that email content is protected by the Fourth Amendment and that law enforcement access requires a probable cause warrant. Moreover, the changes reflect current practices: DOJ and FBI policies already require law enforcement officials seeking content to obtain a search warrant, and many service providers will not relinquish their users’ content without one.

The bill reported from committee does not achieve all of the reforms we had hoped for. Indeed, it removes key provisions of the proposed bill, such as the section requiring notice from the government to the customer when a warrant is served, which are necessary to protect users. However, it does impose a warrant-for-content rule with limited exceptions. We are particularly pleased that the bill does not carve out civil agencies from the warrant requirement, which would have expanded government surveillance power and undermined the very purpose of the bill.

For these reasons, we support H.R.699 and urge its immediate passage without any amendments that would weaken the protections afforded by the bill.



ACT | The App Association


American Civil Liberties Union

American Library Association

American Association of Law Libraries

Americans for Tax Reform

Application Developers Alliance

Association of Research Libraries

Automattic Inc.

Brennan Center for Justice

BSA | The Software Alliance

Center for Democracy & Technology

Center for Financial Privacy and Human Rights

Cisco Systems

Competitive Enterprise Institute


Computer & Communications Industry Association

The Constitution Project

Consumer Action

Consumer Technology Association

Council for Citizens Against Government Waste

Data Foundry, Inc.

Deluxe Corp

Digital Liberty

Direct Marketing Association

Distributed Computing Industry Association (DCIA)


Electronic Frontier Foundation






Federation of Genealogical Societies

Future of Privacy Forum

Golden Frog, GmbH



Hewlett Packard Enterprise

HP Inc.

Information Technology and Innovation Foundation

Information Technology Industry Council


Institute for Policy Innovation

Internet Association

Internet Infrastructure Coalition – I2Coalition

The Jeffersonian Project

Less Government




New America’s Open Technology Institute

Newspaper Association of America

Niskanen Center


R Street Institute

Reform Government Surveillance

Software & Information Industry Association


Taxpayers Protection Alliance




U.S. Chamber of Commerce

Venture Politics



Michael W. Carroll, American University Washington College of Law*

James X. Dempsey, University of California, Berkeley*

Paul Rosenzweig, Visiting Fellow at the Heritage Foundation*

* For identification only

R Street Institute urges Congress to vote yes on H.R. 2901, the Flood Insurance Market Parity and Modernization Act of 2015

April 26, 2016, 12:26 PM

Dear Representative,

The R Street Institute urges all members to vote yes on H.R. 2901, the Flood Insurance Market Parity and Modernization Act of 2015, sponsored by Reps. Dennis Ross and Patrick Murphy. The legislation is a necessary follow-up to the Biggert-Waters Flood Insurance Reform Act of 2012, as it clarifies Congress’ intent to encourage the development of a private market in flood-insurance products to compete with the taxpayer-subsidized policies offered through the National Flood Insurance Program.

The NFIP is more than $20 billion in debt to U.S. taxpayers. Shifting the risk for the program’s $1.1 trillion of total property exposure requires a thriving private market, which insurers and reinsurers are willing to provide. However, the current statutory language unnecessarily limits the available admitted policies and stymies development of acceptable options in the private sector.

H.R. 2901 defers to the states’ expertise in insurance regulation to develop appropriate guidelines for qualifying policies, including those written through the excess and surplus lines markets. Additionally, it ensures that any period in which a property is covered either by an NFIP policy or a private policy is to be considered “continuous coverage.”

These commonsense adjustments and clarifications represent important steps toward flood insurance reform. It’s long past time to put the NFIP on a fiscally sound trajectory and provide those living in flood-prone properties more choice. We urge all members to support this bill.

R Street Institute

Rideshare rules could cost Austin coveted ‘Smart City’ designation

April 26, 2016, 7:30 AM

Austinites will vote next week on how to regulate ridesharing companies in the city (early voting began Monday). On the ballot is Proposition 1, which would continue the ridesharing regulations currently in place and pre-empt a new pending set of rules approved by the City Council late last year.

Uber and Lyft (the two main ridesharing companies) consider the new regulations unjustifiably burdensome, and have announced that they will suspend operations in the city unless Proposition 1 passes (I’ve written about some of the issues with the new regulations here).

Aside from the specifics of the different regulations, many see the battle over Proposition 1 as symbolic of Austin’s openness to new technologies and business models in general. The latest voice to weigh in is the U.S. Chamber of Commerce, which has suggested that forcing ridesharing out of the city could undermine Austin’s bid to win the Smart City Challenge:

In a letter to U.S. Transportation Secretary Anthony Foxx, the U.S. Chamber of Commerce writes, if Uber and Lyft leave Austin that will be a setback for the Smart City approach. The ridesharing companies have threatened to leave if voters support an ordinance to fingerprint drivers as a background check.

Austin was one of seven cities selected as finalists for the Smart City Challenge. Victory means not just bragging rights, but also $50 million.

Whether the failure of Proposition 1 would mean Austin will lose the Smart City Challenge is unclear. But it would mean an end to Uber and Lyft in Austin. Given the (often lifesaving) value that ridesharing brings to cities like Austin – that, in and of itself, is pretty significant.

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

Lehrer at the Aleph Institute’s ASKS Summit

April 26, 2016, 7:00 AM

R Street President Eli Lehrer took part recently in the Alternative Sentencing Key Stakeholder (ASKS) Summit, hosted in Washington by the Aleph Institute. Eli moderated a panel March 8, the second day of the summit, on whether federal criminal justice reform legislation would pass and whether it would make a difference. Panelists included John Malcolm of the Heritage Foundation, Jesselyn McCurdy of the American Civil Liberties Union and Nicole Austin-Hillery of the Brennan Center for Justice. Video of the full panel is embedded below.

Day 2 Will Federal Criminal Justice Reform Pass v11 from The Aleph Institute on Vimeo.

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

Amicus brief for Impression Products v. Lexmark International

April 25, 2016, 1:09 PM

According to the patent exhaustion doctrine, once a patentee sells an article embodying the patented invention, “the patentee may not thereafter, by virtue of his patent, control the use or disposition of the article.” United States v. Univis Lens Co., 316 U.S. 241, 250 (1942). Yet the Court of Appeals approved of two mechanisms by which a patentee may sell a patented article and yet still control use or disposition of that article. The questions presented are whether those mechanisms are tenable under the exhaustion doctrine. Specifically:

1. Whether a “conditional sale” that transfers title to the patented item while specifying post-sale restrictions on the article’s use or resale avoids application of the patent exhaustion doctrine and therefor permits the enforcement of such post-sale restrictions through the patent law’s infringement remedy.

2. Whether, in light of this Court’s holding in Kirtsaeng v. John Wiley & Sons, Inc. that the common law doctrine barring restraints on alienation that is the basis of the exhaustion doctrine “makes no geographical distinctions,” 133 S. Ct. 1351, 1363 (2013), a sale of a patented article—authorized by the U.S. patentee—that takes place outside of the United States exhausts the U.S. patent rights in that article.

The full amicus brief is attached above. 

Betsy’s page: cruising the web

April 25, 2016, 10:32 AM

From Betsy’s Page

Eli Lehrer details some of the reasons why Harriet Tubman is such an admirable role model. In addition to her work leading 300 slaves to freedom on the Underground Railroad, she was also a brave spy during the Civil War.