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There’s no good reason to delay conservation compliance

July 20, 2015, 7:00 AM

Even as the U.S. Department of Agriculture was reporting a record 98.2 percent of farmers and ranchers have met new “conservation compliance” guidelines required to qualify for federally subsidized crop insurance, some in Congress are pushing for needless delays that would allow more time to keep destroying the environment on the taxpayers’ dime.

According to the USDA, just 1.8 percent of affected producers failed to meet the June 1 deadline set in the 2014 farm bill to submit an AD-1026 form with the Farm Service Agency. The paperwork simply identifies highly erodible land and wetlands that a farmer has or will convert to agricultural use. Under provisions of the current farm bill, an additional 1.5 million acres of highly erodible land and 1.1 million acres of wetlands will be covered by conservation compliance programs, according to the department.

The USDA certainly can’t be accused of not letting farmers and ranchers know the deadline was coming. Notifications have accompanied every crop insurance contract written in the past year for the nation’s 561,000 policyholders and insurance agents who sell the policies have been ordered to highlight the deadline. The department also mailed out more than 50,000 reminder cards and letters; made more than 25,000 phone calls and held information sessions across the countries for more than 6,000 groups.

But bowing to pressure from fruit and vegetable producers, represented by the Specialty Crop Farm Bill Alliance, the House Appropriations Committee gave unanimous support last week to a $143.9 billion Fiscal Year 2016 Agriculture Appropriations bill that will delay enforcement of conservation compliance for another year.

The Senate Agricultural Appropriations Subcommittee on Tuesday marked up its own version of the legislation, which thankfully did not include the delay. But this leaves a major question to resolve as both measures move to their respective chambers’ floors.

Despite having a name seemingly designed to enrage conservatives – for whom both “conservation” and “compliance” tend to be dirty words – the requirements actually are common-sense measures intended to protect taxpayers as much as they are the environment.

First signed by Ronald Reagan in 1985, conservation compliance offers farmers a basic deal. They can do whatever they want with their own land. But if they want to enjoy subsidies from the taxpayers, who pay 62 percent of farmers’ insurance premiums, they have to take some basic precautions to ensure they conserve soil and don’t drain fragile wetlands. Since the program’s inception, it’s estimated it has saved more than $1 billion and about 2 billion tons of soil.

There are only about 10,000 farmers who aren’t already in compliance and the USDA believes the vast majority are those who have died, retired or submitted forms with mismatched identifications or other paperwork errors. The department has said it will need to contact about 2,500 farmers individually, and many would be granted the opportunity to extend the deadline. The actual number of noncomplying farmers, for whom enforcement of the entire program would be put on hold, could be as low as a couple dozen.

It’s also already the case that who have not participated in USDA programs before June 1 can delay certification for the current reinsurance year and those who have already filed are still allowed to make corrections to their forms. For most farmers, conservation compliance is not new, as it was a requirement of the “direct payments” program created in 1995, but abolished as part of the 2014 farm bill. Producers of commodity crops like grain, oilseed and cotton already have to meet the requirements to be eligible for other programs.

The decision to reattach conservation compliance to crop insurance subsidy eligibility is one of the few good things to come out of the 2014 farm bill. It would be folly for Congress to put off implementation for even one more day. As Ferd Hoefner, policy director of the National Sustainable Agriculture Coalition, told the site Agri-Pulse: “There is no issue or problem that such a delay would be solving.”

Conferees should spike IP czar language in customs bill

July 20, 2015, 6:00 AM

With customs bills having passed both chambers of Congress, it’s now up to conferees to decide if the final legislation will include language from the Senate bill to create a new intellectual property enforcement czar.

As my colleague Mike Godwin previously wrote, the Senate version of the bill – S. 1269, the Trade Facilitation and Trade Enforcement Act – features language advanced by Sen. Orrin Hatch, R-Utah, to create a new chief of intellectual-property enforcement within the Office of the U.S. Trade Representative. Section 611 of the bill would amend the Trade Act of 1974 to create the new IP czar, who:

(7) shall be to conduct trade negotiations and to enforce trade agreements relating to United States intellectual property and to take appropriate actions to address acts, policies, and practices of foreign governments that have a significant adverse impact on the value of United States innovation. The Chief Innovation and Intellectual Property Negotiator shall be a vigorous advocate on behalf of United States innovation and intellectual property interests. The Chief Innovation and Intellectual Property Negotiator shall perform such other functions as the United States Trade Representative may direct.

The title “Chief Innovation and Intellectual Property Negotiator” is itself a fundamentally conflicted idea. Promoting maximalist intellectual-property enforcement often will actually hinder innovation in a whole host of ways. In addition to this new position being a generally bad idea, the White House already has an intellectual property enforcement coordinator, who commonly is called the “IP czar.”

What’s more, the Congressional Budget Office estimates in its report on the Senate bill that creating the new position will cost taxpayers at least $10 million over the next four years. Since the USTR already looks out for U.S. intellectual property interests in negotiating trade deals, and the U.S. Commerce Department’s International Trade Administration ensures that our trading partners uphold the terms of those deals, it’s hard to see why this would be a good way to spend taxpayer money. Unless you’re Sen. Hatch, and want to create another White House position that, once confirmed, will be basically unaccountable to you.

Thankfully, this provision was left out of the House version of the bill, H.R. 644. As the two chambers’ bills move to conference this week, conferees should spike the IP czar language. Conservatives, after all, shouldn’t be in the business of needlessly expanding government bureaucracy.

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

Tallahassee City Commission right on Uber vote

July 18, 2015, 5:11 PM

Last week, the Tallahassee City Commission showed that even a broken clock is right twice a day. I have oftentimes taken issue with its decisions over the years —especially the vote to increase my property taxes yet again. But I feel compelled to give credit where credit is due.

As local governments around the state take protectionist, anti-market steps under the guise of “public safety” to undermine competition and drive out ride-sharing companies such as Uber and Lyft, Tallahassee commissioners actually did the right thing.

The commission enacted sensible regulations — focused on public safety rather than market interference — which will allow ride-sharing and taxi companies to safely coexist. This is not only a win for consumers, but more importantly, it preserves an alternative many have used to avoid getting behind the wheel after a night of drinking.

Unfortunately, other local governments around the state have elected to enact onerous regulations intended to drive out competition rather than to foster it. The Legislature should therefore still revisit this issue during next year’s session so that all Floridians may access the competitive transportation options that we enjoy in Tallahassee.

In the tanks

July 17, 2015, 5:41 PM

From National Journal:

As the new director of energy policy at the R Street Institute, a conservative think tank, Catrina Rorke hopes to persuade fellow conservatives that a tax on carbon pollution is sound policy. She knows that particular effort will be an uphill climb. But Rorke, 30, a Long Island native whose parents are both nuclear engineers, tells me she will also be advocating for policies that enjoy significantly more support on the Right, including cutting regulatory red tape and increasing natural-gas exports. “A big part of what I’m going to do is find ways to identify R Street as conservative on energy,” she says. “It’s helpful to be able to tell our friends that we agree with them 99 percent of the time.” Rorke, a graduate of the University of North Carolina at Chapel Hill and Columbia University, joined R Street in April, after nearly four years at the American Action Forum, a “center-right” policy research group.

30 under 30

July 17, 2015, 5:37 PM

From Red Alert Politics:

Lori Sanders is the outreach director and a senior fellow at the R Street Institute. In this role, she is responsible for R Street’s coalition efforts, as well as providing public outreach and education about public policy issues to regulators, lawmakers, and their staffs. She has appeared on numerous television and radio outlets, and her writing has been featured in National Affairs, the Weekly Standard, and National Review, among others.

Sanders came to R Street from the American Enterprise Institute (AEI), where she most recently served as program manager for AEI’s Road to Freedom project. Prior to her work at AEI, Sanders worked at George Mason University’s Mercatus Center, as a participant in the Charles Koch Institute’s Koch Associate Program.

Why is it important that at this particular point in time, right-of-center youth become involved publicly, whether in politics, media, their communities, or in other capacities?

The Republican Party and the Libertarian Party both need to move forward on a variety of issues. We tend to legislate like it’s still 1980, when in fact we face very different problems. Our generation more than any other is bearing the brunt of community breakdown, wage stagnation, and low economic growth, and we also understand more than any other generation the way that technology, ingenuity, and a renewed sense of dedication to our communities can overcome these problems. Unless we step up, our generation will be left further behind as the policies of the left continue to drag us down. The left’s ideas resonate with those looking for an answer, but in the end they just cause more problems. We need to come up with new, more inclusive solutions and find creative ways to market them for future generations.

What must elected officials and others in positions of leadership do to make a right-of-center message resonate with the Millennial generation?

We really need to focus more on how our ideas help make the world a better place. We need to showcase how our solutions lead to the new and exciting changes that improve lives everywhere. I think a lot of that relies on finding the sweet spot between promoting Millennial’s desire for freedom of choice and individuality, while also showing that our policies won’t leave anyone behind and will restore community. We focus too much on the success story of the millionaire entrepreneur and should instead focus on giving everyone the opportunity they need to build the life they want for themselves. The left’s message seems inclusive, but it’s only inclusive if you want the things they want for your life. We offer people the freedom to choose for themselves, and a restored American dream that makes it possible for them to get there.

Where would you like to see the conservative movement in 10 years — and how can it get there?

I’d love to see the conservative movement be the party for everyone — all races, sexes, and orientations — but with the message that personal responsibility combined with freedom is the best way to keep America strong. We need to focus on the plight of men and disaffected workers, on flexibility for women (particularly single mothers), and on restoring access to opportunity through more than just lower regulatory burden and lower taxes. Our message is a message for everyone, if we’re willing to find new, creative conservative solutions for all walks of life, not just those we identify with as part of our base.

Dear Birmingham, Mobile and Huntsville welcome Uber…why can’t we?

July 17, 2015, 8:00 AM

With a unanimous vote, Mobile’s City Council affirmed amendments to the city’s vehicle-for-hire ordinance, enabling app-based transportation companies like Uber to operate.

Huntsville has also declared itself open for business to transportation network companies (TNC) by passing recent changes to its rules.

Montgomery doesn’t appear to be far behind.

And then there’s Birmingham.

The city with an average per capita income of less than $20,000 and more than 30 percent of its residents in poverty simply can’t get out of its own way.

There are plenty of good things happening in Birmingham. We’re making inroads in the food scene. We have a really great minor league baseball stadium and several nice parks. Medical researchers and hipsters navigate the same community with ease.

Wait…it’s that last part that isn’t entirely accurate.

We’ve known for a while we need better transportation options. TNCs like Uber and Lyft meet a clear demand in Birmingham without imposing drastic infrastructure costs on the city.

If we want to bring the magic back to the Magic City, we need to think about what’s holding us back. Want to partake in Birmingham’s growing craft beer industry? How about a baseball game at Regions Field? Or even something as simple as a nice date night out for dinner at Birmingham’s Uptown Entertainment District? The obvious challenge is moving people conveniently and safely around the city and back home.

Transportation improvements are a huge part of enabling cities across the Birmingham metro area to connect.

Birmingham’s City Council blames Uber for not being able to reach a deal, but Uber doesn’t seem to have similar problems elsewhere in the state. The bigger point is that companies like Lyft and Uber don’t need Birmingham nearly as much as the city needs them.

If the mayor and City Council can’t show a better ability to work with market innovators in Birmingham, we’ll be left in the dust of our neighboring Alabama cities with a better eye to the future.

Wisconsin Supreme Court slams vicious, partisan ‘John Doe’ probe

July 17, 2015, 7:00 AM

For months, conservative donors, activists and groups in Wisconsin were terrorized by partisan district attorneys using loosely interpreted election law to comb through their finances, enter their homes and question their friends and families – all in an effort to “prove” that Scott Walker had illegally coordinated with grassroots efforts to win his recall election and subsequent re-election campaigns.

The bizarre series of events – which would make an excellent Lifetime movie, honestly – culminated in a ruling yesterday from the Wisconsin Supreme Court, who were, shall we say, not very kind to the law enforcement and local government officials who concocted the elaborate intimidation scheme.

To be clear, this conclusion ends the John Doe investigation because the special prosecutor’s legal theory is unsupported in either reason or law.  Consequently, the investigation is closed.  Consistent with our decision and the order entered by Reserve Judge Peterson, we order that the special prosecutor and the district attorneys involved in this investigation must cease all activities related to the investigation, return all property seized in the investigation from any individual or organization, and permanently destroy all copies of information and other materials obtained through the investigation.  

All Unnamed Movants are relieved of any duty to cooperate further with the investigation.

According to the prosecutors, merely being supportive of a candidate was juuuuuuust enough to make you complicit in their campaign. The court clearly disagreed, noting that the freedom of speech isn’t just something the Founders scrawled on the back of a napkin in the hopes that one day someone would find a workaround that allowed them to bust up coordinated meetings, in private homes, seeking all sorts of private information. And they weren’t subtle about their feelings, either.


In other words, this whole thing? Not an excellent idea, guys.

Now that the courts have spoken in Wisconsin, the plaintiffs in this case may finally be able to file civil claims against the Wisconsin DAs. They had tried earlier, but the 7th U.S. Circuit Court of Appeals put a halt to their lawsuit, on the condition that it wait until the state courts had spoken. Now that they have, it may be time for an even more interesting proceeding.

Members of Congress warn against throwing patent system out of balance

July 16, 2015, 9:57 AM

From Watchdog.org:

Citing the conservative Heritage Foundation, for example, the DC-based R Street Institute recently blogged that patent reform was “not just about the patent system.”

“Patent-reform offers a case study for broader limitations on predatory trial lawyers,” wrote R Street’s innovation policy director Mike Godwin and senior fellow Zach Graves.

Judge fixes troubling court order in CloudFlare filtering case

July 16, 2015, 9:33 AM

I’ve written before to express skepticism about whether it makes sense for a federal court to order a content-delivery network like CloudFlare to filter its services proactively for domain names and other content that might infringe intellectual-property rights.

Happily, the judge in the case now has revised that order; if Arista Records or other plaintiffs want CloudFlare to deny services to particular infringing clients or websites, they have to give CloudFlare notice of the infringement.

The Electronic Frontier Foundation should be applauded for it key role in asserting that CloudFlare, like other Internet intermediary services, shouldn’t have to take on the task of monitoring all its traffic to determine (or guess) whether Arista’s trademarks or copyright interests are infringed. You can find EFF’s summary of the issues in the case here. EFF Attorney Mitch Stoltz makes a key point when he writes:

The original order against CloudFlare, if it had become the norm, would put service providers in the uncomfortable position of having to figure out who’s allowed to use terms like ‘grooveshark’ and who isn’t—or of having to block them all. Turning Internet companies into enforcers of who can say what on the Internet is exactly what laws like the DMCA were meant to avoid.

Also important is the judge’s decision to allow CloudFlare to give 48 hours’ notice to a client or website that’s about to be cut off. This gives the targets a reasonable chance to challenge an unfair or overly broad order in court, which is yet another victory for due process.

Stoltz referenced the Digital Millennium Copyright Act, which deals with intellectual property. But the scope of protection for Internet intermediaries is even broader under American law, thanks to Section 230 of the Communications Decency Act.

Taken together, Section 230 and the DMCA have provided a protective legal framework that has shaped the Web we love today. That’s why we have to be vigilant about litigation, new laws or other efforts that may put this framework at risk.

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

Preserving energy access for distributed generation

July 16, 2015, 8:00 AM


  • Moving our energy generation paradigm increasingly toward distributed generation and market choice provides many potential benefits.
  • Regulations and state policy should ensure access to existing infrastructure at rates that are fair to distributed generators, while protecting non-participating ratepayers from indirectly subsidizing
    the practice.


Since at least the 1930s, the American power sector long has operated based on a paradigm of centralized generation.1 The advent of the alternating current grid enabled the bulk transmission of electricity over long distances. This allowed large-scale centralized generating facilities to produce power for many widely distributed customers.

For much of its existence, this centralized generation paradigm has created economies of scale, ensured reliability and addressed immediate environmental and health concerns by moving generation outside of highly populated areas. The model favored highly regulated monopoly utilities, who would be responsible for the generation, transmission and distribution of electricity.

But recent innovations have driven a significant shift in the way we produce and deliver electricity. Technologies designed to harness wind, solar, and geothermal power are equally effective on a customer’s roof or in his or her backyard as at a large, centralized installation. Broader adoption of these sources of renewable energy are having a variety of effects on the market, and lawmakers and regulators need to be prepared to respond to these changes.

Power produced through a network of many small installations is called distributed generation. Photovoltaic solar (PV) and small wind turbines allow individual residential and commercial customers to generate power on-site for themselves. This new technology also allows those who previously were energy consumers to become energy producers, selling power to their neighbors on the same electrical grid used by the large utility generators.


Distributed generation has the ability to foster technological innovation, improve national energy security and provide new options for consumers. At the same time, emergent technologies remain reliant on existing transmission infrastructure and backup generation.

The challenge across the nation is to foster policies that maintain the stability and reliability of legacy generation, transmission and distribution systems while simultaneously opening opportunities for distributed generation and emerging energy technologies to compete in the market. This inevitably will challenge America’s longstanding energy-generation paradigm.


With these considerations in mind, regulators and legislators should focus on the following principles to develop an effective new energy generation model:

  • Consumers should be free to generate their own electricity and protected from punitive regulatory measures or rate assessments designed to protect the status quo.
  • Utilities should receive fair payment for their services, including grid access, maintenance, reliability and backup generation.
  • Consumers who do not self-generate power should not bear any increased cost imposed by the addition of distributed generation.
  • Access to existing energy distribution and transmission infrastructure should be afforded to all customers and all power sources.
  • Regulators and legislators should avoid discriminating between particular types of distributed generation.

Support for the Innovation Act grows

July 15, 2015, 4:10 PM

From House Judiciary Committee:

Below are excerpts from the letter sent by R Street Institute, Niskanen Center, Center for Individual Freedom, Taxpayers Protection Alliance, Institute for Liberty, Small Business & Entrepreneurship Council, Independent Women’s Forum, American Consumer Institute, Citizen Outreach, and Minnesota Center-Right Coalition.  The full letter can be found here and a list of all supporters of H.R. 9 can be found here.

Letter supporting S.B. 602, California seismic retrofit financing

July 15, 2015, 3:30 PM

The R Street Institute is a nonprofit think tank headquartered in Washington. Our mission is to engage in policy research and outreach to promote free markets and limited, effective government. What’s more, we maintain the largest insurance-focused project of any non-industry think tank. In California, our focus has been in the area of property insurance reform, with an eye toward the California Earthquake Authority, in particular.

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

In our January 2015 study, “Insuring a Way Out: Modernizing the California Earthquake Authority,” we suggested the Legislature adopt an earthquake-retrofit equivalent of the “Property Assessed Clean Energy” financing program. We favor such an approach because it is a free-market and fiscally conservative approach to increasing the state’s seismic resilience:

The PACE model overcomes two of the biggest hurdles to widespread adoption of major property upgrades: the high upfront cost and property owners’ uncertainty about when they might sell their property. Investors also are protected, because their obligation becomes attached to the property itself.

S.B. 602 (Monning) is PACE for earthquakes made real – but, by another name. The “Property Secured

Mitigation Program” combines the scale and reach of government without warping the private price signals necessary to transmit a full understanding of risk.

Concerns about the impact of PACE-like programs have been expressed by federal lending authorities in the past. Their concerns, centered on the seniority of PACE liens, have proven to be illusory. PACE lending has successfully allowed Californians to outfit their homes with solar systems without encumbering the status or alienability of their mortgages or their properties.

In spite of objections from institutional lenders and the broker community, PACE-financing programs exist across the nation. To date, 31 states have enabled PACE programs and California’s approach has been a terrific success. Applying a similar principle to seismic retrofitting would be both a national first and a step toward addressing California’s urgent vulnerability to earthquakes.

For these reasons, the R Street Institute is an enthusiastic supporter of S.B. 602 (Monning) and urges a “Yes” vote. If you have any questions, please contact Ian Adams at (916)761-5269.

30 million U.S. adults have used e-cigarettes, unpublicized CDC data reveals

July 15, 2015, 12:30 PM

Analyzing fresh data from the 2014 National Health Interview Survey, which involved nearly 37,000 respondents, it can be estimated that 30 million American adults have used an e-cigarette at least once, and 8.9 million were current users last year. The data was released by the Centers for Disease Control and Prevention June 29.

This was the first time the NHIS, the main source for national smoking prevalence statistics, asked about e-cigarettes.  The survey asked participants if they had ever used e-cigs, even one time; if they had, a second question asked them if they currently used them every day, some days or not at all (“triers”). From this data, I have produced the first-ever national estimates of e-cigarette use.

About 71 percent of e-cigarette users are also current smokers (every day or some days), and 22 percent are former smokers. The rest (about 7 percent or 595,000) were never cigarette smokers, but nearly 70 percent of them said they smoke products other than cigarettes (cigars, pipes, water pipes or hookahs, very small cigars that look like cigarettes, bidis or cigarillos) every day, some days or rarely.

Of the 6.3 million smokers who used e-cigarettes, only 22 percent used them every day. In contrast, among the nearly 2 million former smokers who used e-cigarettes, about 63 percent – or 1.25 million – were daily users. Among those who never smoked cigarettes, but did vape, only 16 percent were daily users.

Among daily smokers, there was virtually no difference in cigarette consumption; regardless of whether they vaped or not, daily smokers consumed 14-15 cigarettes per day on average. Cigarette consumption was more variable among “some day” smokers: those who used e-cigarettes every day smoked only 3.5 cigarettes on the days they smoked, while those who used e-cigs on some days smoked 5.2 cigarettes. Some-day smokers who had tried e-cigarettes consumed 7.8 cigarettes per day, while those who had never used an e-cig smoked 5.6 cigarettes.

While it is encouraging that almost 2 million former smokers were currently using e-cigarettes in 2014, it is not possible to prove that they had used e-cigarettes to quit. However, 85 percent of these former smokers had quit five years or less before the survey, making it plausible that e-cigarettes played some role in their becoming or staying smoke-free.

The table below compares some characteristics of former smokers who currently used e-cigarettes with former smokers who never used them. (These comparisons are general observations that might change after additional analysis). Former smokers who used e-cigarettes were younger and more likely to live in the South; they looked more frequently for health information on the Internet during the previous 12 months.

Former smokers who use e-cigarettes  and those who never use them Characteristic Current users Never used Under age 45 59 percent 22 percent Live in the South 46 percent 36 percent Live in the Northeast 9 percent 19 percent Looked for health info/ Internet 62 percent 44 percent Quit smoking less than five years prior 85 percent 15 percent


Another statistic stands out: In 2014, the percentage of adults in the U.S. who smoked was 16.7 percent, down from 17.8% in 2013.

Cigarette smoking in the U.S. continues an inexorable decline. Rather than impeding progress, e-cigarettes may be accelerating a smoke-free revolution.

Progressives turn their backs on the sharing economy

July 15, 2015, 9:00 AM

Santa Monica, Calif., is now spending $410,000 a year investigating, ticketing and fining residents who sublet their houses and apartments on Airbnb.

In Key West, Fla., a new city ordinance outlaws ride-sharing without a vehicle-for-hire license. Police are arresting Uber and Lyft drivers if they catch them offering passengers a ride in exchange for compensation.

These recent news items represent the most extreme examples of local-government attempts to constrain the so-called “sharing” economy, an emerging economic ecosystem that combines the social networking, geolocation and transaction-processing capabilities of the Internet to connect buyers and sellers of various services.

Uber and Airbnb arguably are the two most high-profile players in this emerging business segment. Uber, along with Lyft and Sidecar, provides economical local transportation. Airbnb lets homeowners and apartment dwellers rent or sublease their residences to visitors looking for a place to stay. Others, like TaskRabbit, are more general, providing classified-type listings for a wide range of personal services, from lawn maintenance to furniture assembly.

Until recently, excitement about the sharing economy’s potential was rare common ground for free-market libertarians and socially conscious progressives. Both saw the trend as a way to provide economic empowerment to individuals with limited resources. In ridesharing, at least, there also was the bonus of undermining politically protected monopolies with poor records of pricing and performance.

Sadly, progressives more recently have turned hostile. They charge that jobs in the sharing economy pay less than minimum wage and allow corporations to get away with improperly classifying as workers as contractors in order to avoid social safety net obligations like health insurance coverage and payment of Social Security and Medicare taxes.

In a closely watched decision, the California Labor Commission earlier this month ruled that an Uber driver should be reimbursed for expenses as an employee. Though the ruling doesn’t affect other drivers – at least, not yet – it sets a dangerous precedent in an industry that has insisted drivers are independent contractors who own their vehicles, set their own hours and do not report to an Uber supervisor. The decision seems geared to create cost and red tape both for Uber and its drivers and, if applied more broadly, could even drive the company out of its home state.

This week, Hillary Clinton, the Democratic Party’s presidential front-runner, made the sharing economy a campaign issue by promising to “crack down” on companies that misclassify employees as contractors. All her rhetoric will do is provide local governments with more cover to shut down or criminalize sharing economy activities, as in Santa Monica and Key West.

The fight over the sharing economy is the first skirmish in what looks to become an outright battle over labor policy in the next few years. I regret the loss of my progressive friends on the issue, because I don’t think anyone’s interests are served when the government, at any level, goes out of its way to outlaw voluntary transactions between individuals because they don’t follow traditional models.

It’s worse still, because traditional models of gainful employment already have been upended. In “A World Without Work,” an article in this month’s Atlantic, Derek Thompson offers a startling picture of the revolution that the unstoppable forces of globalization, automation and inexpensive software have brought to American labor. For example, in 1964, the nation’s most valuable company, AT&T, was worth $267 billion in today’s dollars and employed 758,600 people. Today’s telecommunications giant, Google, is worth $370 billion but has only 55,000 employees. As Thompson writes, that shift is visible in the data that shows that one in six men between the ages of 25 and 54 are either unemployed or out of the workforce altogether:

This is what the economist Tyler Cowen calls “the key statistic” for understanding the spreading rot in the American workforce. Conventional wisdom has long held that under normal economic conditions, men in this age group—at the peak of their abilities and less likely than women to be primary caregivers for children—should almost all be working. Yet fewer and fewer are.

These trends run head-on into the current progressive policy that seeks to use business — particularly large, entrenched corporations that can employ thousands –as the avenue for welfare-state benefits. The California Labor Commission does not wish to deny citizens the opportunity to make a living. They are, however, tasked with sustaining California’s employee entitlement policies. Sharing economy platforms, which foster individual economic empowerment, threaten this mission.

What progressives should be asking is whether the entitlement partnership between big government and big business is sustainable, given the structural shift underway in the American labor market. They need to question whether they really want to deny millions of individuals the freedom to adjust to this shift by deliberately sabotaging the sharing economy.

Instead, the sharing economy should be understood as an organic response to the changing labor market. Entrepreneurs have fashioned opportunities out of new technologies and real market needs are being met. Uber averages 82,000 rides a day in New York City alone. Airbnb claims 1.2 million listings in 34,000 cities worldwide. These services are not harming people; and are measurably contributing to the local economy. They provide income for a growing generation of workers who see themselves as independent agents, empowered to negotiate on their own terms by balancing security, freedom and fulfillment.

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

Proxy access proposals do not maximize shareholder wealth, R Street study finds

July 15, 2015, 8:01 AM

WASHINGTON (July 15, 2015) – Shareholder-sponsored proxy access proposals, which have passed at 39 of the 65 companies that have voted on them in 2015, do not maximize wealth and may have led to $14.6 billion in foregone value for the companies that passed them, according to a new paper from the R Street Institute.

Often touted as promoting “shareholder democracy,” proxy access is a process that allows independent shareholders with minority stakes to nominate director candidates and have those nominees included in the packets sent to shareholders ahead of a company’s annual meeting. But 2015 has seen a surge of politically motivated proposals for proxy access from major public employee pension funds.

Most notable in this year’s proxy season have been the 75 companies targeted by New York City Comptroller Scott Stringer, with roughly half of them concentrated in the utilities and energy sectors. According to R Street’s policy study, authored by Editor-in-Chief and Senior Fellow R.J. Lehmann, investor response to the recent proposals demonstrates the dangers of empowering activist shareholders more interested in extracting concessions from companies than in fulfilling the fiduciary duties of a board of directors.

“The results support the supposition that investors do not positively value news that a firm has passed proxy access, but they did positively value news that a proxy access initiative failed,” Lehmann wrote.

Lehmann noted however that the idea of proxy access is not inherently bad.

“When wielded by the appropriate parties, proxy access does hold at least some promise to act as a counter to the myopic tunnel vision or never-ending echo chamber that bedevils some underperforming boards,” he wrote.

Toward that end, Lehmann offered up policy recommendations to counter the misapplication of proxy access, ranging from SEC clarification on conflicting proposals to preservation of state laws of incorporation to the exemption of small and medium-sized filers from proxy access initiatives.

He also recommended states and municipalities reform public employee pensions by moving toward defined contribution programs. Doing so not only would help ensure their long-term solvency, but also reduce politicians’ incentive to use pension funds as a cudgel against public companies.

“Grandstanding of the sort engaged in by New York City’s comptroller would be impossible if the authority to determine investment allocations were transferred from the politicians to the workers themselves,” Lehmann wrote.


Proxy Access: Shareholder democracy or creeping mercantilism?

July 15, 2015, 8:00 AM

Following certain rule changes made by Congress and the U.S. Securities and Exchange Commission, the 2015 proxy season has seen a deluge of shareholder proposals at U.S. public companies calling for proxy access – the ability of minority shareholders to have their slate of directors included in the materials presented to shareholders ahead of a company’s annual meeting. Promoted as a means to enhance “shareholder democracy,” the legal and economic literature on proxy access does not support claims it maximizes shareholder wealth. Moreover, the process may allow unions and certain elected officials to use the corporate boardroom to effect politically motivated outcomes. This paper’s analysis of 65 proxy ballots completed through June 2015 suggests shareholders of firms that passed access initiatives lost $14.6 billion of wealth. The paper concludes with recommendations to grant more leeway to companies that omit or disqualify some kinds of proxy access proposals, as well as changes to rein in the power of elected officials who serve as administrators of public pension plans.

Texas Supreme Court strikes stupid licensing law

July 15, 2015, 7:00 AM

Last month, the Texas Supreme Court struck a blow for liberty. Progressives are predictably upset about it. In Patel v. Texas Department of Licensing and Regulation, the court invalided state regulations requiring an individual to complete 750 hours of training from an accredited cosmetology school before they can practice hair threading, an ancient technique for removing facial or body hair using a thin string.

I don’t know much about hair threading. On the other hand, neither do most schools of cosmetology. As the majority opinion notes, of the nearly 400 state-approved beauty schools in Texas, fewer than ten teach threading techniques at all. Only one devotes more than a few hours to the practice.

Instead, much of the required curriculum is on topics that have nothing to do with hair threading. These include at least 225 hours of instruction on facial treatments, cleansing, masking, and therapy; 15 hours on aromatherapy; ten hours on nutrition; and ten hours on color psychology.

Admittedly, some of the required curriculum covers items—such as general sanitation and hygiene—that could be relevant to hair threading. Exactly how much of the coursework was irrelevant was a matter of dispute between the parties in the case. Plaintiffs claimed that 710 of the 750 required hours were irrelevant. According to the state, this was an exaggeration; it was only 320 hours that were a complete waste of time.

In other words, requiring hair threaders to get a cosmetology license makes no sense. But is it really fair to expect the law to make sense? Mark Joseph Stern doesn’t think so. Writing in Slate, Stern claims:

[The court’s] startling decision revives a dangerous, widely discredited doctrine that gives judges authority to strike down economic regulations that interfere with the free market. By resuscitating it, the Texas Supreme Court has effectively declared that laissez-faire capitalism is the only true form of American liberty.

Are irrational laws unconstitutional?

To understand what Stern is getting at, one needs a quick review of the last 150 years of constitutional law. In 1868, the United States adopted the Fourteenth Amendment to the Constitution, which states (among other things) that citizens may not be denied “life, liberty, or property without due process of law.” A similar provision was adopted as part of the Texas Constitution in the 1870s.

How to interpret the Due Process Clause has been a matter of extended controversy. One school of thought says the requirements of the Due Process Clause are purely procedural. If the law says you can get life in prison for stepping on a sidewalk crack on a Tuesday, then as long as the state gives you a fair trial before sending you to the slammer, you’re out of luck.

Alternatively, some scholars argue the Due Process Clause also imposes some kind of substantive limitation on how irrational the law can be. If the requirements of a law bear no relationship to any legitimate purpose (at least in certain areas), then they are unconstitutional even if the state follows all the typical procedural requirements. So-called “substantive due process” has come in for a lot of mockery over the years (the great constitutional theorist John Hart Ely called it “a contradiction in terms, sort of like ‘green pastel redness.’”) But few people have been willing to live without it entirely.

During the early part of the last century, the Supreme Court occasionally applied substantive due process to economic regulations. The most famous example, Lochner v. New York, involved a maximum-hours regulation for bakers that, the court found, didn’t actually improve health or safety (for more details, see here). Lochner soon became a bête noire among progressives, and Justice Oliver Wendell Holmes, who wrote a stinging dissent accusing the court of substituting its own views for those of an elected legislature, was lionized as a progressive hero.

The dignity of earning a living

Holmes, at least, really meant it. He thought courts shouldn’t be in the business of second-guessing the wisdom of legislative measures. That applied not only to economic regulations, but also to laws mandating forced sterilization and making it difficult for southern blacks to change jobs.

Today’s progressives, by contrast, mostly don’t mean it. On the same day that the Texas Supreme Court decided the hair-threading case, the U.S. Supreme Court ruled in Obergefell v. Hodges that state bans on same-sex marriage were unconstitutional. Holmes’ Lochner dissent could be adapted with very few changes to a dissent in Obergefell.

Stern recognizes this problem, but his attempt to deal with it is lacking: “The court still enforces the ‘liberty’ guaranteed by the Due Process Clause—but now it protects only those fundamental rights relating to personal dignity and autonomy, which judges are much better at describing and defending.”

Leaving aside the question of whether earning a living is not itself a matter of personal dignity and autonomy, there’s nothing in the text or history of the Due Process Clause that says it wasn’t meant to apply to economic liberty.

Nor is it clear why judges would be better at describing and defending one type of liberty than another. Figuring out the consequences and rationale of economic rules is something that state court judges do routinely; the grand philosophizing is more of a hobby. As Justice Don Willett as aptly described in a concurring opinion, occupational licensing is “often less about protecting the public than about bestowing special privileges on political favorites.” The public-choice case for additional scrutiny of such laws is strong.

While Stern invokes the bogeyman of laissez faire capitalism, the only example he can come up with for his parade of horribles is that the continuing education requirement for dental hygienists could get reduced from 15 hours a year to six hours every three years. That hardly seems like the stuff of a “Mad Max” post-apocalyptic wasteland.

Reasonable people can disagree about the extent to which courts should defer to legislatures when they pass dumb laws. But two points are beyond dispute: 1) requiring that hair threaders go through hundreds of hours of meaningless training was really dumb, and 2) if courts are going to second-guess legislatures, it shouldn’t just be for Progressive pet projects. Economic liberty matters, too.

Free-market, taxpayer and consumer groups to Congress: Support the Innovation Act

July 15, 2015, 4:00 AM

Dear Representatives,

On behalf of the undersigned free-market, taxpayer and consumer organizations, we write to express strong support for ongoing efforts to enact patent-litigation reform in the U.S. House of Representatives. As advocates for a healthy innovation economy with a strong and effective patent system, we urge you to support the important litigation reforms in H.R. 9, also known as the Innovation Act, sponsored by House Judiciary Chairman Bob Goodlatte, R-Va.

Last Congress, a similar version of this legislation passed the House with broad bipartisan support and an overwhelming margin of 325-91. Republicans support was even more decisive, with a margin of more than seven to one.

We firmly believe these reforms are essential to buttress the structure of our patent system against predatory litigation. In so doing, it would create more clarity and better protections for legitimate intellectual property rights.

The Progress Clause in Article I, Section 8 of the U.S. Constitution establishes a patent system, first and foremost, with a mandate to “promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Though many other provisions of the document drafted at the Constitutional Convention were divisive, this language was supported unanimously and without debate. This reflects the foundational importance our nation’s framers placed on a robust legal structure that could protect inventors’ rights in their existing creations and, at the same time, foster new inventions and innovations.

Sadly, it has become clear that the current litigation environment surrounding our patent system has become an immense burden on the very innovators and innovations that the Constitution sought to encourage and protect. Each year, abusive patent litigation drains tens of billions of dollars from the economy, creating tremendous deadweight losses, as well as a great deal of uncertainty. This, in turn, dramatically reduces spending on research and development, venture capital investment and other essential business activities.

These assertion entities, otherwise known as “patent trolls,” don’t just go after big tech companies. About half the defendants in these lawsuits are small businesses, which make easier targets since they are less well-positioned financially to defend themselves in court.

Most of these businesses choose to settle, because patent litigation is risky, time-intensive and can cost millions of dollars in legal fees. Even when a claim against them is spurious, small businesses know it’s seldom a sensible business decision to put their entire enterprise on hold and risk bankruptcy in an extended legal battle.

We agree, of course, that patent-asserting entities do play a valued role in creating healthy secondary markets. However, the current civil-litigation environment invites abuse and exploitation from a multitude of bad actors.

The Innovation Act would address these problems by implementing several important reforms. These include allowing judges more discretion in fee shifting; changing venue rules to limit unfair forum shopping; adopting pleading standards that appropriately identify alleged infringements; and reducing abuse of the discovery process. Together, these changes would lower the cost to defend against spurious patent claims. Companies thus would less likely to resolve such disputes by paying out what are, in effect, extorted settlements.

With these changes, H.R. 9 would help reduce the economic harm associated with expensive and frivolous patent troll suits, while improving the overall strength and quality of America’s patent system, in accordance with the founders’ intent. The bill would bolster a system that promotes the freedom to innovate, rather than lining trial lawyers’ pockets and offering windfall revenues to patent-holders who do not, themselves, add to innovation and economic growth.

We urge you to support patent litigation reform once again, to better align our patent system with its constitutional mandate and to send a message that bad actors can no longer hold the innovation economy hostage.


R Street Institute
Niskanen Center
Center for Individual Freedom
Taxpayers Protection Alliance
Institute for Liberty
Small Business & Entrepreneurship Council
Independent Women’s Forum
American Consumer Institute
Citizen Outreach
Minnesota Center-Right Coalition

Coalition for Tax Competition urges Congress to represent taxpayer voices in the OECD

July 14, 2015, 3:02 PM

Dear Senators and Representatives:

The Organization for Economic Cooperation and Development (OECD) is rapidly working to rewrite global tax rules in the name of combating base erosion and profit shifting (BEPS). We the undersigned organizations are deeply concerned that this process lacks oversight and will result in onerous new reporting requirements and higher taxes on American businesses, and are urging Congress to speak up for U.S. interests by adding its voice to the process.

The OECD has a history of supporting higher tax burdens and larger government, and the BEPS project represents just the latest salvo in a long-running campaign by global bureaucrats to undermine tax competition and its restraining force on political greed.

Because the OECD is populated by tax collectors and finance ministers, new rules being drafted through the BEPS initiative are necessarily going to be skewed in their favor. Businesses are given only a token voice, while other interests are not considered at all. Consumers, employees, and everyone that benefits from global economic growth are not able to make their preferences known.

The inevitable prioritizing of tax collection over every other political or economic interest ensures that the result of the BEPS project will be economic pain. And based on the OECD’s own acknowledgement that corporate tax revenues have not declined in recent years, that pain will provide little to no real gain to national treasuries.

BEPS recommendations already released further show a troubling trend toward excessive and unnecessary demands on taxpayers to supply data not typically relevant to the collection of taxes. This includes proprietary information that is not the business of any government, and for which adequate privacy safeguards are not and likely cannot be provided.

The Treasury Department should not be the only voice representing U.S. interests during this critical process. We urge members of Congress to get involved before it is too late, and to protect American interests by ensuring that the voices of tax collectors are not allowed to speak for everyone.

Andrew F. Quinlan, President
Center for Freedom & Prosperity

Grover Norquist, President
Americans for Tax Reform

Pete Sepp, President
National Taxpayers Union

Tom Schatz, President
Council for Citizens Against Government Waste

Seton Motley, President
Less Government

Wayne Brough, Chief Economist and Vice President of Research

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

Phil Kerpen, President
American Commitment

David Williams, President
Taxpayers Protection Alliance

Bob Bauman, Chairman
Sovereign Society Freedom Alliance

Karen Kerrigan, President
Small Business & Entrepreneurship Council

Sabrina Schaeffer, Executive Director
Independent Women’s Forum

James L. Martin, Chairman
60 Plus Association

Heather Higgins, President
Independent Women’s Voice

George Landrith, President
Frontiers of Freedom

Lew Uhler, President
National Tax Limitation Committee

Terrence Scanlon, President
Capital Research Center

Tom Giovanetti, President
Institute for Policy Innovation

Andrew Langer, President
Institute for Liberty

Eli Lehrer, President
R Street Institute

Chuck Muth, President
Citizen Outreach

Support civil asset-forfeiture reform in California

July 14, 2015, 11:00 AM

The R Street Institute is a nonprofit, free-market think tank based in Washington, D.C. Our mission is to engage in policy research and outreach to promote free markets and limited, effective government. We view civil asset-forfeiture reform as a crucial step toward limiting the most egregious illustrations of state overreach into the private lives of citizens.

The need for reform in California is borne out by the striking fact that, while the number of state cases has remained consistent, the number of state cases transferred to federal jurisdiction has increased dramatically. This suggests state law-enforcement agencies are circumventing state standards in favor of more permissive federal civil asset-forfeiture standards. S.B. 443 endeavors to correct this pattern of behavior by ensuring that California law enforcement agencies conform their behavior to California law before “equitable sharing” with federal law enforcement occurs.

So long as the twin goals of civil asset-forfeiture law remain to enhance law enforcement while simultaneously maintaining due process, it is necessary to limit perverse monetary incentives that lead some to abuse the tool. Clamping down on interagency forum shopping not only accomplishes that goal, it also bolsters the significance of California’s laws. In an era in which the limits of federal power are often difficult to detect, states must jealously guard those areas over which they retain control.

For these reasons, the R Street Institute is a supporter of S.B. 443 (Mitchell) and urges a “Yes” vote. If you have any questions, please contact Ian Adams at (916)761-5269.