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Updated: 46 min 10 sec ago

Witness list released for anti-online poker hearing

March 24, 2015, 7:47 AM

From Card Player:

A list of witnesses was recently released. Scheduled to testify are John Kindt, professor at the University of Illinois’ School of Law, Les Bernal, National Director of the Stop Predatory Gambling Foundation, Mike Fagan, professor at Washington University’s School of Law, Andrew Moylan, Executive Director at R Street, and Parry Aftab, Executive Director at Wired Safety.

A new witness will highlight inherent hypocrisy of RAWA at upcoming House hearing

March 23, 2015, 1:12 PM

From USPoker.com:

A new name now appears along with the four we originally learned ofAndrew Moylan, the Executive Director of R Street, who will ostensibly be playing the role of states’ rights advocate at the hearing.

The addition of Moylan is the second piece of positive news regarding the hearing, as we learned Friday that the Poker Players Alliance (PPA), along with GeoComply and Caesars Entertainment, will be hosting an online gaming technology demonstration the morning of the RAWA hearing.

Did pressure get Moylan added?

It’s likely Moylan was added due to the initial backlash over the subcommittee’s unofficial witness list. The witness list was so slanted towards anti-online gambling advocates that it had been labeled everything from kabuki theater to a dog and pony show, and even the mainstream media (particularly right wing news sites) were quick to blast Chaffetz and RAWA supporters.

Andrew Moylan has been involved in politics (first with the Cato Institute, followed by National Taxpayers Union, and R Street) since graduating from Michigan University in 2005. Even though he has not personally commented on online gambling, Moylan is a staunch states’ rights and civil liberties advocate who is expected to be a strong witness against RAWA.

If this column from R Street is any indication, Moylan should be an excellent witness for the anti-RAWA crowd. Moylan should round out the witness list quite nicely.

John A. Pappas, Executive Director of the Poker Players Alliance, was pleased to see Moylan added to the witness list, telling USPoker.com:

“Andrew Moylan and R Street are a strong and credible voice in holding Congress accountable on matters of federalism and the 10th Amendment. Given RAWA’s serious implications for the rights of states to authorize and regulate internet gaming, Mr. Moylan will be a welcomed voice on the panel.

While Congressman Chaffetz likes to claim his bill ‘restores’ Congressional intent with respect to Internet gaming, it actually does exactly the opposite. Every bill that Congress considered to prevent offshore and unregulated Internet gaming in the US always preserved the rights of states to authorize the activity.

We hope Mr. Moylan will reinforce this message and correct the Congressman’s mischaracterization.”

Why the ethanol mandate is terrible policy

March 23, 2015, 12:55 PM

You know the campaign season has started when people start talking about ethanol. Various GOP hopefuls have affirmed or reaffirmed their support for existing ethanol mandates, and while there doesn’t seem to be much of a race on the Democratic side at the moment, any candidates who do decide to run against Hillary will probably support it as well. So it’s worth taking a moment to reflect on just how truly awful a program the ethanol mandate is.

First, a note of clarification. It used to be that the federal government subsidized the production of ethanol the old fashioned way: with cash. For every gallon of ethanol blended into gasoline, blenders received a “tax credit” ranging around half a dollar. Foreign imports of ethanol were also subject to a 54-cent tariff. Both of these programs were allowed to lapse at the end of 2011.

Still on the books, however, is the federal Renewable Fuel Standard, or RFS. Like the ethanol tax credit, the RFS came as a result of the Energy Policy Act of 2005 (the Energy Policy Act also extended daylight saving time, so it has a lot to answer for). The RFS mandates a minimum number of gallons of different types of ethanol that must be blended into U.S. gasoline each year. The minimum amount is set to rise over time, and blenders are subject to fines if they do not comply. From the point of view of ethanol producers, tax credits are nice but it’s the mandate that brings home the bacon.

The peculiar nature of the RFS has led to some absurd unintended consequences. For example, cellulosic ethanol (which is made chiefly from grass) isn’t commercially available in the necessary quantities to meet its RFS. Blenders have therefore wound up getting fined for not using a product that doesn’t exist.

Similarly, because the formula used to set the RFS greatly overestimated the number of miles Americans would drive, blenders were required to use more ethanol than could be safely blended into all the gasoline used in American cars. EPA was eventually forced to walk back its own regulations on cellulosic ethanol to better conform with reality, but successfully resisted challenges to lower the overall mandate.

The problems with the ethanol mandate, however, go beyond poor legislative drafting. It is the very idea of the RFS, not just its implementation, that is fatally flawed. The ethanol mandate was billed as an environmentally friendly alternative to gasoline, and a way to wean ourselves off dependence on foreign oil. It is neither. The ethanol mandate has led to the conversion of millions of acres of grassland and wetlands into cornfields. The environmental costs from these conversions swamp any reduced emissions from using ethanol-diluted gasoline. And while oil imports have indeed fallen in recent years, this has been the result of the boom in unconventional oil and gas production, rather than the substitution of biofuels.

Ethanol is also, of course, costly to consumers. A gallon of ethanol costs more than a gallon of gasoline, and it takes 1.5 gallons of ethanol to get the same mileage as a gallon of regular gas. Ethanol costs motorists approximately $10 billion a year in increased fuel costs.

And the cost of ethanol isn’t just felt at the pump. With 40 percent of America’s corn crop being devoted to producing the fuel, the mandate increases prices for food. And since the mandate encourages farmers to grow corn instead of other crops, the effect isn’t just limited to corn.

That’s harmful not only to Americans’ pocketbooks, but also to our national security. Research suggests that higher food prices increase the risk of instability around the world, as developing countries face riots or even revolutions over higher food prices. The Arab Spring was preceded by a spike in food prices, as were a similar series of riots in 2008.

The worst thing about the ethanol mandate, though, is what it says about our democracy. Ethanol is a rare political issue that is not polarized along ideological lines. From left to right, everyone seems to acknowledge that it is horrible policy. And yet not only does the policy continue, but people seem resigned to its continued existence.

If the United States can’t get rid of a policy that is so manifestly unjustified, how can we expect to solve more contentious issues?

Don’t let the FCC muck up on-demand TV

March 23, 2015, 8:57 AM

Apple’s Web TV plan spotlights the opportunities and challenges ahead in what will be the most dramatic shift in the distribution of television content since the advent of cable. About 8.6 million U.S. households have broadband Internet but no pay TV subscription, according to the latest report from Experian Marketing Services. That’s 7.3 percent of households, up from 4.2 percent in 2010.

This fall, Apple plans to offer a subscription bundle of 25 channels via the Web on its smartphone and tablets, anchored by ABC, CBS and Fox. Notably, however, the line-up will not include NBC, which is owned by Comcast, the nation’s largest cable TV company, against which Apple’s TV will compete.

According to the Wall Street Journal, talks between the two companies broke down, and Apple decided to go its own way.

Apple’s bundled service is but one way studios and networks are using the Internet to deliver on-demand programming, a method also know as over-the-top (OTT). Time Warner’s HBO is already exploring ways to deliver its programming via the Internet via the HBO Go and HBO Now applications, and CBS and ESPN are also planning OTT delivery.

Naturally, the thought that consumers will have even more choices when accessing video programming has Washington in a tizzy. Federal Communications Commission Chairman Thomas Wheeler, as if his hands weren’t already full with network neutrality rulemaking and spectrum issues, suggested in an October blog post that OTT should have regulatory attention.

Lost is the irony that OTT, which emerged from the natural tumult of the unregulated market for broadband content, promises to deliver on a long-desired FCC goal: a la carte programming. Despite pressure from FCC commissioners going back to the Bush administration, cable companies resisted the call, primarily because it wasn’t conducive to their business model. Now that Netflix, Hulu, Amazon and Apple’s iTunes have validated a large on-demand market, and the spread of more robust mobile broadband platforms, OTT has become viable.

The way people watch TV is changing for the better. Consumers are getting multichannel TV in ways that are most convenient for them. The FCC should allow the market the flexibility to change with it. The proper path right now is to let OTT play out. Here are some specific points:

Don’t interfere with programming disputes. This might be the first place the FCC is tempted to step in, because these disputes draw the loudest consumer complaints and get the most media attention. However, OTT creates genuine points of friction between content producers, e.g., studios and networks; and content distributors, e.g. cable, phone and satellite companies (not always mutually exclusive, witnessed by Comcast’s ownership of NBC). When cable network AMC began distributing programming through Netflix, DirecTV threatened not to renew its own agreement to carry the network. Both sides had legitimate interests. AMC has the right to seek alternative channels to viewers. DirecTV was correct in asserting that the Netflix deal diminished the value and appeal of its own service, because it allowed viewers to go elsewhere for the same entertainment. Just like it’s counterproductive for an adult to step in when two siblings argue, the FCC should let these businesses work out their differences themselves. That’s the only way to assure a win-win, as the market adjusts to the reality of OTT. Government action, at this point, can only favor one model over the other and encourage future rent-seeking.

A few years ago, Congress wisely demurred when the NFL asked it to order cable companies to include the fledgling NFL Network in their bundled tiers, instead of asking consumers to pay extra for it. Ultimately, cable companies did so on their own because of customer demand. The FCC should heed this precedent.

No “must carry” rules. This is related to the programming issues above. The FCC should avoid demanding that, if an OTT delivers one network’s programming, it should deliver all networks’ programming. “Must carry” rules and local broadcast obligations derived from the scarcity of spectrum. There is no scarcity issue on broadband. Local TV stations can and do make news and locally produced programs available on the Web. Let OTT providers compete on the basis of differentiation and diversity and not force them all to be identical.

No regulatory fees. Apple is not a cable TV company or a broadcaster. It does not run cable to homes, nor does it use government-granted TV spectrum. Apple, Hulu, Amazon and Google store and serve content, which ranges from popular big-budget Hollywood movies to ten-minute how-to videos posted to a YouTube channel created by a passionate do-it-yourselfer. The idea that they somehow should pay local franchise fees or pay into the Federal Universal Service Fund, implied by Wheeler’s suggestion that OTT providers should be included in the definition of “multichannel video programming distributor,” is ludicrous.

No content regulation. The voluntary ratings systems used by the Motion Picture Association of America and broadcast and cable networks have carried over to on-demand. For example, Netflix places TV-MA on “House of Cards,” even though the series streams via the Web. The FCC should resist calls for mandatory content ratings or other forms of content policing of the Internet, especially in the area of “offensive” speech, restrictions that are all the rage in academic circles right now.

Separately, there should be no “fairness doctrine” for Web content, because the rule failed in broadcasting despite its best intentions. Instead of stimulating debate, broadcasters, choosing not to be liable for airtime to all-comers, backed away from any editorial discourse whatsoever. It wasn’t until the Reagan administration scrapped the Fairness Doctrine that politically oriented public affairs programming began to become common in media.

OTT has ushered in a new era in TV-viewing habits. It’s going to serve consumers better by giving them more choices and value in home entertainment. The FCC needs to step back. Interference now will only sidetrack real competition by forcing companies to make regulatory compliance the measure of their performance, not the meeting of consumer needs.

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

It’s time for real competition in solar markets

March 21, 2015, 7:56 PM

Fights are playing out across the states as regulators try to navigate the introduction of rooftop solar into energy markets.

Over the last few years, numerous pieces of legislation have been introduced, and some have passed, intended to address utility companies’ concerns over grid reliability in the face of dwindling customer demand. A recent article in the Albuquerque Journal raises new allegations, lambasting solar companies for irresponsibly fleecing consumers, painting rooftop solar as a foolhardy investment intended to suck homeowners dry while lining the pockets of solar executives.

Frankly, the risks inherent in solar contracts are no different than risks in other long-term contracts. Any long-term financial commitment deserves careful scrutiny on the part of the consumer. Obviously, regulators should put rules in place to root out fraud. Should solar companies be held accountable for offering clear contracts? Yes. But should consumers also be expected to do due diligence when engaging in a large investment? Also yes. In the end, purchasing rooftop solar is in no way a uniquely dangerous transaction that deserves a higher level of attention.

The troubling portion of the solar industry is government favoritism, whether in the form of subsidies, tax credits or regulations mandating solar’s use. Utilities have spent years crying foul, pointing out the ways they’ve invested over time to provide reliable power in a highly regulated environment, only to be upset by a new power source made competitive by incredibly generous subsidies. But the truth is more complicated. Utilities enjoy a broad variety of state supports and have enjoyed the benefits of being a government-granted monopoly. It’s high time that competition came to the energy sector, ending subsidies and favorable treatment for everyone.

Utilities have a legitimate concern that increased rooftop solar will undermine grid reliability, increasing prices for consumers. Regulators should take this issue very seriously and work to find a solution that ensures access to power while still allowing competition. Unfortunately, rather than dealing with the actual root issue, states are pursuing a variety of paths to limit solar’s implementation, erecting barriers to entry, prohibiting certain financing mechanisms or imposing arbitrary fees.

It’s regrettable that solar is subsidized, but the answer isn’t to make further regrettable decisions out of spite. We should work to end all energy subsidies, while regulators address the true problems, like ensuring grid reliability.

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

Lofgren and Issa take on patent law that inflates repair costs

March 21, 2015, 7:48 PM

In this era of hyper-partisanship, it’s notable that a bipartisan pair of California members of Congress, Republican Darrell Issa and Democrat Zoe Lofgren, are together proposing reforms to a problem that affects nearly every American: the high cost of auto repairs

Their Promoting Automotive Repair, Trade and Sales (PARTS) Act also has bipartisan sponsors in the Senate. Its topic is the little-understood subject of design patents, a form of intellectual property once briefly suppressed during the 19th century, enabling scores of lawsuits against farmers who used patented agrarian equipment, not unlike today’s problem of patent trolls.

The PARTS Act promises to lower the cost of repairs by creating a limited carve-out that reduces the length of time in which a design patent could be enforced against manufacturers of aftermarket cosmetic car parts designed to restore vehicles to original appearance. Similar safe harbors already exist in the United Kingdom, Australia and a number of European countries.

Under the bill, carmakers would still be protected from knockoffs by competitors for up to the 14 years allowed under current law. But the period to bring claims against makers of parts would be capped at 30 months.

This could be meaningful reform. The American Insurance Association estimates that competitive replacement crash parts are typically 34 to 83 percent less expensive than parts from original manufacturers. This saves consumers between $1.5 and $2.4 billion each year.

Design patents are intended to protect “ornamental designs.” They typically involve intricate drawings to ensure that the likeness of the patented item is clear beyond question. In theory, they are only supposed to protect the look of an item and not its function. But in a world in which function and form often are inextricably linked, design patents are used to exploit the legal ambiguity.

In the case of ornamental car parts, like hoods or fenders, car manufacturers file design patents to prevent third parties from replicating their designs. Under current U.S. law, such designs are protected for a minimum of 10 years and a maximum of 14. Given the short average life of a car, a decade-plus delay effectively insulates manufacturers from competition. That explains why carmakers control more than 70 percent of the collision repair market.

Design patents have another quirk that makes defending claims costly. Where courts do find that a patent has been infringed, the patent owner is entitled to all of the gross profits from the item’s sale, regardless of whether the design feature played any role in a consumer’s decision. No other area of intellectual property works like this.

The phenomenon of design patents killing a market for replacement parts is not limited to cars. Think of razors and ink cartridges, each notorious for otherwise inexplicably high prices. The patented “designs” prevent other parts makers from producing replacements.

Stifling interoperability is not about encouraging innovative design; it’s about keeping out competition. But even if it were about innovation, it’s worth questioning whether protections are necessary. The fashion industry gets by just fine with only limited intellectual property protections. In fact, the development of knockoffs is what inspires the next round of innovation.

While the PARTS Act seeks only to address one issue with design patents, it represents a commendable first step toward broader liberalization of the patent system. Achieving these reforms would prove this Congress can do something after all.


Letter to House Energy and Commerce Committee: RFS is broken

March 20, 2015, 1:00 PM

Dear Chairman Upton and Ranking Member Pallone:

The Renewable Fuel Standard (RFS) is increasingly recognized as a failed policy in need of attention by the Congress. With the exception of the corn and ethanol industries, which continue to benefit from the RFS mandate, nearly everyone else suffers under this unfair and destructive policy. We ask that the committee consider and mark-up legislation to address the RFS as soon as possible.

Although enacted with the best of intentions in 2005 when our nation faced very different circumstances from today’s, the RFS has created perverse incentives to overplant corn, distort food commodity markets and wreak economic and environmental havoc. We thank you for the committee’s serious and thoughtful bipartisan effort in the last Congress to review the RFS and consider possible reforms in light of the many unintended consequences that have resulted from the mandate since its inception. That process was very constructive and laid a foundation for significant changes to the policy.

Since that time the chorus of voices calling for RFS reforms has grown and the case against the policy has become even more convincing. The RFS is now in its 10th year—let us not allow this policy failure to continue to fester when its flaws are so plain to see. Only Congress can solve the problems created by the RFS. Our organizations are committed to working with you on a bipartisan legislative solution to achieve this goal.

Do e-cigarette ads promote vaping?

March 20, 2015, 12:00 PM

The National Cancer Institute is wasting taxpayer dollars on slanted e-cigarette research that didn’t ask or answer an obvious and important question.

Consider the recent NCI-funded study by Drs. Erin Maloney and Joseph Cappella at the University of Pennsylvania Annenberg School of Communication. Maloney and Cappella recruited daily smokers, intermittent smokers and former smokers (there were no significant results in the middle group so I won’t discuss them). They divided smokers into three subgroups: controls who didn’t see an ad, those who saw e-cig ads with vaping (called a cue) and those who viewed ads with no vaping.

Participants answered questions about their inclination to smoke a cigarette, to quit smoking or to continue to abstain. Maloney and Cappella developed a scoring system to measure responses. The results they pitched to the media are in the table below.

All groups had lower urges to smoke after the experiment, but smokers who saw the cue had less of a lower urge, which was significant in the authors’ scoring. Similarly, all former smokers had high scores for continuing to abstain, but those who saw the cue had a lower high score.

E-Cigarette Ads and Urges in Daily Smokers and Former Smokers Daily Smokers Former Smokers Cue No Cue No Ad Cue No Cue No Ad Urge to Smoke Pre-test 3.99 3.83 3.84 1.86 1.69 1.76 Post-test 3.63* 3.14 3.25 1.42 1.34 1.32 Intention to: Quit 2.14 2.15 2.06 — — — Abstain — — — 12.39* 13.10 13.14

*Significantly different than No Cue or No Ad.

The authors acknowledged that “effect sizes reported in this manuscript were not large.” In fact, the differences are so small that they may not be meaningful for actual behavior.  Take 12.39 versus 13.14 in the table as an example.  The authors reported that higher numbers are better, and both numbers look “high” when compared with a previous study by Cappella that used the score.  He showed former smokers anti-smoking ads in that study and got scores around 3.0 to 3.5.  This looks like e-cigarette ads are far better for former smokers than anti-smoking ads.

There is a glaring defect in the report. The researchers collected a lot of basic information (e.g., education, quitting history and time since last cigarette) that could affect how participants responded to questions, but the results weren’t adjusted for these important characteristics. It is possible that the cue, no-cue and no-ad groups had important differences in basic information that affected their scores.

The study’s biggest weakness is that no data was collected on urges and intentions to “vape.” After all, that is the most important goal of e-cigarette ads, and it is an obvious outcome to measure.

Who owns the U.S. Post Office?

March 20, 2015, 10:53 AM

From Angry Bear:

Initially the Act provided for some public support of the Postal Service through appropriations to support the universal service obligation and preferential rates for periodicals and non-profits. (Kevin Kosar, formerly of the Congressional Research Service, wrote a couple of reports that are quite useful: here and here.)  But those subsidies were intended to be phased out.

Obama champions mandatory voting

March 20, 2015, 10:41 AM

Apparently, not enough people vote in this country for President Barack Obama’s taste, and he knows just how to make voting both more palatable and more appealing to the 60 percent or so of Americans with the right to vote, but who seem to lack the ability.

Make it mandatory. Because if there’s anything that Americans respond to positively, it’s being told what to do.

Obama floated the idea of mandatory voting in the U.S. while speaking to a civic group in Cleveland on Wednesday. Asked about the corrosive influence of money in U.S. elections, Obama digressed into the related topic of voting rights and said the U.S. should be making it easier — not harder— for people to vote.

Just ask Australia, where citizens have no choice but to vote, the president said.

“If everybody voted, then it would completely change the political map in this country,” Obama said, calling it potentially transformative. Not only that, Obama said, but universal voting would “counteract money more than anything.”

Disproportionately, Americans who skip the polls on Election Day are younger, lower-income and more likely to be immigrants or minorities, Obama said. “There’s a reason why some folks try to keep them away from the polls,” he said in a veiled reference to efforts in a number of Republican-led states to make it harder for people to vote.

There are a few reasons why mandatory voting won’t work, aside from the fact that it still only produces about a 66 percent to 70 percent turnout, depending on country (though, that’s an improvement over our current system, I suppose). One, it would embroil people who already fear authority and are often the subject of abuse at its hands, into yet another system that penalizes them in a disproportionate way to the crime they’ve committed: simply not caring about elections. Two, holding mandatory elections assumes a fallacy that is at the heart of almost everything Obama proposes: that people will automatically avoid something just because they hear it’s illegal. Three, encouraging more people to vote doesn’t necessarily mean that less money would be spent on politicking, just that the direction and flow of money would change.

And lastly, he’s vastly underestimating the power of stupid people in large groups. While urban centers can and do vote reliably Democratic, there’s a lot of flyover country to contend with.

Testimony to Texas Senate Committee on Natural Resources

March 19, 2015, 3:54 PM

Chairman Fraser, members, my name is Josiah Neeley and I am the Texas director of the R Street Institute. R Street is a non-profit, free-market think tank headquartered in Washington, D.C., though I am based out of Texas. I’m here today to speak in favor of S.B. 931.

The wind industry has received substantial favors and subsidies in recent decades from both the state and federal governments. More than $7 billion has been spent building transmission lines under the competitive renewable energy zone system, and renewable energy credits under the state’s renewable portfolio standard have cost another $500 million. All of these costs, by law, will be passed on to Texas power consumers.

The effect of these programs on renewable electricity capacity has been minimal. The CREZ lines are only now coming online, and Texas currently has double the installed capacity for renewable electricity required by 2025, which suggests the increase is being driven by other factors. It is worth noting, in this regard, that the subsidies Texas wind producers have received from the federal production tax credit for renewable energy dwarfs anything the state has provided.

In any event, wind electricity is a mature technology, and should stand or fall on its own, without continued government support. Texas is blessed with plenty of wind, and wind electricity will undoubtedly continue to be a part of Texas’ energy mix. But the amount and location of wind generation should be determined by market forces, not by government fiat. S.B. 931 rightly recognizes this by sunsetting the RPS and CREZ programs.

I would be happy to answer any questions.

Letter to Minnesota House Commerce and Regulatory Reform Committee

March 19, 2015, 9:28 AM

Rep. Joe Hoppe, Chair
Rep. Tim O’Driscoll, Vice Chair
Rep. Joe Atkins, DFL Lead
Commerce and Regulatory Reform Committee
Minnesota House of Representatives
100 Rev. Dr. Martin Luther King Jr. Blvd.
Saint Paul, MN 55155

RE: H.F. 1783 – Auto insurance requirements for transportation network companies

Dear Members of the Committee,

My name is R.J. Lehmann and I am co-founder, editor-in-chief and senior fellow of the R Street Institute. R Street is a D.C.-headquartered free-market think tank devoted to developing pragmatic solutions to public-policy challenges. Since our founding, we have been recognized as perhaps the leading independent source of policy research concerning property/casualty insurance. More recently, we also have distinguished ourselves with some of the first in-depth reports looking at challenges facing the burgeoning market for transportation network companies.

I write you regarding H.F. 1783, legislation dealing with the financial responsibilities and auto insurance requirements of TNCs like Uber, Lyft and Sidecar. We have grave concerns that this bill would have significant negative consequences both for the development of TNC services and for the insurance market that is developing to serve this emerging sector.

Minnesota traditionally performs well in our surveys of efficient, effective regulation at the state and local level. The state earned an “A” or “B” grade in each of the three years that we have published our Insurance Regulation Report Card. More directly relevant, the City of Minneapolis ranked second only to Washington, D.C. in our inaugural survey of vehicle-for-hire regulations in the 50 largest U.S. cities, published in November 2014. Passage of H.F. 1783 likely would have negative consequences for both of those scores in next year’s reports.

Among the most significant concerns with this piece of legislation are:

  1. The bill would require TNCs to provide primary commercial insurance during the so-called “Period 1,” when a driver is logged in to the TNC application but has not matched with a potential rider. In addition to the reasonable debate that exists over whether this period should truly be considered “commercial” in nature, the requirement creates an obvious opportunity for fraud, by providing incentive for a driver to remain logged in even when he or she has no intention to accept a fare. Moreover, this requirement would preempt existing rules already in place in Minneapolis and St. Paul, Minnesota’s largest ride-sharing markets. Finally, and most crucially from a free-market perspective, it would effectively crowd out the new, innovative personal auto insurance products designed and priced to cover drivers who provide TNC services that already have been brought to market in several states by such major insurers as GEICO, Progressive, Farmers and USAA.
  2. The bill requires comprehensive and collision coverage during all three phases of the ride-sharing process. Comp and collision ordinarily are optional coverages that are not required of either personal or commercial drivers in any state. That includes taxis and limousines, which are not required to carry comp and collision in Minnesota or anywhere else. There is no possible public policy rationale for this requirement.
  3. The requirement that TNCs provide $1.5 million of uninsured and underinsured motorist coverage during all three periods is excessive and significantly exceeds the requirements set in leading jurisdictions like California, Colorado, the District of Columbia and nearby Illinois. This requirement is particularly problematic in Period 1, when one considers that Minnesota’s state minimums for UM and UIM are ordinarily $25,000 and $50,000, respectively.
  4. The bill makes no provision for coverage sold by surplus lines carriers to be eligible as qualifying insurance. The surplus lines market exists to provide coverage for unusual or difficult-to-insure risks. As a new market that has not yet produced troves of data, transportation network companies offer a textbook example of the kind of risk that surplus lines is intended to cover. Indeed, all of the current major TNCs have commercial liability coverage procured in the surplus lines market. It is imperative that the bill be amended to clarify that surplus lines carriers are eligible to provide qualifying coverage.

We commend the committee for exploring ways to provide a baseline framework that will allow TNCs to operate safely and effectively. However, as currently drafted, H.F. 1783 could crush the market by imposing draconian requirements far beyond those currently required of taxis and limousines. This would not serve the interests of either consumers or the market at large.


R.J. Lehmann
R Street Institute

The EPA wants to watch you shower

March 19, 2015, 9:00 AM

If you’re like me, a night away at a hotel means one thing: a long, hot shower. It’s not that I want to deliberately drain a Holiday Inn’s water heater of its supply. It’s just that it’s rare, when you live in an urban area and pay out the nose for your own water, to want to spend time cleaning yourself in it. And there’s the added benefit, at hotels, of not being stared at awkwardly by a group of cats who don’t understand the concept of bathroom doors, or why you would willingly subject yourself to water.

But the luxury of the long, hot hotel shower may be yet another thing lost to the prying eye of Uncle Sam. Thanks to a new proposal from the Environmental Protection Agency, a couple of fascinated felines may be the least of your worries. In an effort to get Americans to adjust their shower behavior, the government wants to cut you off and, in service of that goal, they’ll be watching you shower.

The Environmental Protection Agency (EPA) wants hotels to monitor how much time its guests spend in the shower.

The agency is spending $15,000 to create a wireless system that will track how much water a hotel guest uses to get them to “modify their behavior.”

“Hotels consume a significant amount of water in the U.S. and around the world,” an EPA grant to the University of Tulsa reads. “Most hotels do not monitor individual guest water usage and as a result, millions of gallons of potable water are wasted every year by hotel guests.”

“The proposed work aims to develop a novel low cost wireless device for monitoring water use from hotel guest room showers,” it said. “This device will be designed to fit most new and existing hotel shower fixtures and will wirelessly transmit hotel guest water usage data to a central hotel accounting system.”

The key phrase here is “EPA grant to the University of Tulsa,” which, of course, means that you, the person who just wants to take a hot shower in peace, will be paying for someone to come up with a way to put an end to your ability to take a hot shower in peace. Congratulations! Thankfully, it’s only a $15,000 grant. If a project like this had been spearheaded by the NIH, for example, like the famous “Origami Condom” concept, it could cost in the millions (though even origami condoms were too absurd for the NIH). As it stands, you’re only paying five figures for the government to modify your shower behavior, though I suspect you’ll make that up in the “room fee” you’ll now pay when you overuse.

There are, of course, ways to address the topic of water conservation that don’t immediately involve “behavior modification” but I suppose that’s not the point, is it?

Are casinos the solution to TWIA’s woes?

March 18, 2015, 1:44 PM

When it comes to hurricane insurance, Texas is in trouble. The state-run Texas Windstorm Insurance Association has more than $77 billion in potential liabilities, but only a few hundred million in its catastrophe relief fund. The last time a big storm hit, the agency was driven to the brink of bankruptcy, and even with Texas’ recent hurricane dry spell, TWIA remains one big storm away from ruin.

There have been a number of solutions proposed to fix TWIA’s fiscal woes, but perhaps none are more inventive than legislation recently filed by state Rep. Joe Deshotel, D-Port Arthur:

The plan is fairly simple. Full Las Vegas-style casinos will be permitted within a first-tier coastal county or second-tier county or in a county where its county seat is within 100 miles from a first- or second-tier county.

Jefferson County is a first-tier, or coastal, county. Hardin County is a second tier county. Huntsville, for example, in Walker County, could be within 100 miles of Jefferson County.

Resulting net tax revenues would be earmarked for the Catastrophe Reserve Trust Fund in TWIA to keep it out of deficit. Funds in excess of the amount needed to erase the deficit would go to general revenue.

While this approach is certainly creative, it’s worth noting that Texas’ current plan for dealing with TWIA also involves gambling. The state is betting that it won’t face a serious storm in the near future, so that TWIA’s underfunding won’t matter. The main difference is that, with the current approach, it’s ratepayers and taxpayers throughout the state who may end up footing the bill.

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Repeal law that forces expensive burdens on retailers selling adult beverages

March 18, 2015, 12:58 PM

In Florida, you can buy beer and wine at your local supermarket. Some even sell it straight out of the tap and allow you to taste it before you buy it. But if you want to take home any other type of alcoholic beverage, you’ll have to visit a different store.

Florida is one of only 16 states that require just about every type of alcohol other than beer and wine to be sold in a separate, dedicated location. Grocery stores and other retailers that wish to sell such beverages are forced to either erect a wall within their stores with a dedicated entrance, or establish a completely separate store altogether to comply with Florida law.

However, lawmakers in Tallahassee are considering a repeal of the 1935 statute requiring this separation. Senate Bill 468 and House Bill 107 would allow supermarkets, big-box stores and other retailers that already sell beer and wine to also sell distilled beverages.

A repeal of this law, passed just after the end of the Prohibition Era, makes sense. Rather than suppress business activity, government should explore ways to reduce barriers to competition and make it easier for willing consumers to transact business safely and legally.

Opponents of the proposal cite public safety concerns, claiming it would increase underage drinking. The facts do not support this claim.

The protocols already employed by stores that sell beer and wine are essentially the same as those that sell other kinds of liquor. Their policies and procedures ensure they do not sell to minors, while there are also loss-prevention safeguards to impede shoplifting.

In fact, research shows that convenience stores, supermarkets and other retailers that sell alcohol are marginally better than liquor stores at preventing sales to minors. This is especially true among large retailers, which devote millions to their loss-prevention programs and have a lot more at stake if they are caught breaking the law. If you’re a minor, it’s not any easier to buy beer at a supermarket than it is to buy liquor at a liquor store.

Others claim the proposal would put liquor stores out of business. On the contrary, it would encourage that industry to innovate by allowing them to sell other goods and products the law bans. Consumers likewise would benefit, because they would have more options and reap the benefit of lower prices brought on by competition.

Industry protectionism is not the proper role of government. The state has a duty to ensure public safety, and that includes preserving safeguards that prevent minors from accessing alcohol. Businesses that sell alcoholic beverages and already abide these safeguards should not be required to incur needless major expenses just to sell other kinds of alcoholic beverages.

Hydrazine speculation can end: It’s not in snus, snuff or chewing tobacco

March 18, 2015, 9:24 AM

From Science 2.0:

Because anything could be connected to tobacco without question, it has been unchallenged since 1974 but a new study actually decided to find out. Professor Brad Rodu of the University of Louisville and colleagues from British American Tobacco did a comprehensive survey of toxicants in smokeless tobacco products developed a method for determining levels of hydrazine in them.

R Street applauds introduction of Preserving American Privacy Act

March 17, 2015, 4:05 PM

WASHINGTON (March 17, 2015) – The R Street Institute praised Reps. Ted Poe, R‐Tex., and Zoe Lofgren, D-CA,  for reintroducing the Preserving American Privacy Act today.
This important legislation will bring constitutional privacy protections into the 21st century by addressing new and emerging technologies – specifically unmanned aircraft systems ‐ and their effects on privacy. Among other regulations, the bill clarifies that law enforcement must get a warrant to use a drone for targeted surveillance of an individual’s person or property.

“Laws that focus on drones must strike the right balances between promoting technological advance and maintaining our legal and Constitutional protections,” said Mike Godwin, general counsel and director of innovation policy at R Street. “The Preserving American Privacy Act doesn’t just aim right for that balance – it also answers the questions that need to be asked whenever our government embraces any new technology that can impact citizens’ privacy, lives and liberty.”

The bill is an important step towards ensuring that Americans are subject to the civil liberties enumerated in the Bill of Rights.

“We believe that protection from warrantless drone surveillance should already be understood to exist in our law,” said Godwin. “Regrettably, our courts have not always drawn those lines.”

“Reps. Poe and Lofgren have made this bill an excellent example of thoughtfulness and farsightedness when it comes to regulating drone technology and protecting Americans,” he said.


Sens Lee, Durbin and Booker participate in colloquy on the Smarter Sentencing Act

March 17, 2015, 10:15 AM

From Sen. Mike Lee, R-Utah:

It is supported by advocacy groups across the political spectrum and has been endorsed by conservative leaders such as Grover Norquist and Americans for Tax Reform, Eli Lehrer and R Street Institute, Pat Nolan, Former President of Justice Fellowship, Marc Levin of the Texas Public Policy Institute, and Freedom Works.

Hydrazine speculation can end: It’s not in snus, snuff or chewing tobacco

March 17, 2015, 9:02 AM

From Science 2.0:

Because anything could be connected to tobacco without question, it has been unchallenged since 1974 but a new study actually decided to find out. Professor Brad Rodu of the University of Louisville and colleagues from British American Tobacco did a comprehensive survey of toxicants in smokeless tobacco products developed a method for determining levels of hydrazine in them.

It’s time for insurance reform in Louisiana

March 17, 2015, 8:00 AM

Louisiana is vulnerable to extreme weather and natural catastrophes in ways only a few other states experience. By all indications, that exposure will only grow worse, as a combination of sea rise, erosion and subsidence causes Louisiana to lose a football field’s worth of land each hour.

But thanks to government suppression of price signals, the dangers posed to coastal Louisiana have been purposely rendered invisible to those most vulnerable.

Regulation of Louisiana’s insurance market keeps companies from charging rates that reflect the actual risk of catastrophe. The result is that insurers understate natural disaster risks, ostensibly to make coverage more affordable. While maintaining affordability is important, state policymakers must adopt a long-term view, which is tough, given the short-term nature of the campaign cycle.

Underpricing risk pushes more and more of the cost of recovery onto the backs of government and, ultimately, the taxpayers. It also misaligns the incentives for where and how to build. Coastal residents are well aware that they are confronted by a special type of risk. But without accurate prices, it is difficult for those residents to judge just how vulnerable they really are.

Risk-based pricing goes a long way to determine how consumers will pay for their risky choices. By not allowing prices to communicate risk accurately, policymakers build foundation of economic sand that will wash away in a catastrophe.

It is past time for policymakers to apply free-market principles to disaster planning and preparation. A big step would be to scrap a requirement that compels insurers to maintain premium-distorting homeowners’ insurance policies. Today, insurers may not cancel or non-renew a policy that has been in force for three years, even if it’s certain that the insurer will lose money on the continuing coverage. Such rules inevitably and unfairly inflate the cost of insurance for those who choose to live in less risky parts of the state.

This well-meaning requirement was motivated by the belief that insurers rush to leave markets after a catastrophe. While it is true that some companies may pare back their book of business following an extreme hurricane, this has more to do with an insurer’s solvency and ability to pay claims than it does an insurer’s uncertainty about their underwriting performance.

The great irony of the three-year rule is that, if insurers are unable to limit their exposure to risk in the future, they’re much more likely to limit how much coverage they offer today, or never start offering it in the first place. Clearly, it’s hard to measure how many companies aren’t competing in the Louisiana market today due to the three-year rule, but the results can be felt not only in the homeowners insurance market, but in the lending, real estate and building industries, as well.

Last session, the state Legislature signaled it fully supports the three-year rule by updating a number of its provisions. To the extent they did so under the impression their actions would improve the long-term viability of the state’s insurance market, they acted against the interest of Louisianans.

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