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Shoring up Florida’s property insurance market

October 26, 2015, 9:53 AM

Hurricane Wilma’s Oct. 24, 2005, landfall in Collier County capped an historic two-year period during which Florida reeled under the unrelenting blitz of seven back-to-back major hurricanes. Six of these storms were, at the time, among the 10 costliest ever to strike the United States.

Florida has subsequently enjoyed a hurricane-free decade, representing the longest period on record without a tropical cyclone making landfall in the state. There are no meteorological explanations as to why Florida has experienced this unprecedented streak of good luck. Florida’s position as a low-lying tropical peninsula jutting 500 miles into the most hurricane-active waters in the world is the same today as it was 10 years ago or 100 years ago. Indeed, many scientists believe climate change will only increase the severity and incidence of storms in the future.

While the state’s geography and risk profile haven’t changed, its built environment and the number of lives and amount of property at risk of hurricanes have grown dramatically. Though the state’s population shrank slightly during the Great Recession, it has almost tripled since 1970 and is continuing to grow. At more than 19.9 million residents, Florida recently surpassed New York to become the third-most-populous state in the nation. Florida’s total coastal exposure now stands at more than $2.9 trillion, with more property at risk than all of the other “hurricane alley” states (Louisiana, Virginia, Texas, North Carolina, South Carolina, Georgia and Mississippi) combined.

This concentration of population and property in high-risk coastal areas, in addition to the costs associated with the 2004 and 2005 storm seasons, all contributed to property insurance premium increases in the years following Wilma. As of 2012, the average Florida homeowner’s property insurance policy premium was $2,084, more than double the national average of $1,034.

More recently, however, events in the global financial markets have had a transformative effect on Florida’s property insurance market. In the aftermath of the 2008 financial crisis, global investors began looking for ways to diversify their portfolios. They discovered that gains or losses in the catastrophe and reinsurance markets were not tied to global economic cycles. In short: hurricanes, earthquakes and other catastrophes strike at random, uncorrelated with the ups and downs of the rest of the economy.

This has resulted in capital flooding into catastrophe markets, which in turn have produced new and innovative risk-transfer products and seen fierce competition among traditional reinsurers. Primary insurers have been able to write more policies, as they are able to transfer more risk to the private reinsurance market at affordable rates. Despite major losses in Japan and elsewhere in recent years, experts believe global reinsurance pricing will continue to soften. Indeed, the catastrophe market is so awash in capital that many reinsurers have announced stock buybacks to return cash to investors, as they simply can’t find enough opportunities to deploy capital profitably.

Florida has benefited handsomely from this “buyers’ market.” The state-run Citizens Property Insurance Corp., for instance, has shed more 1 million policies since 20129 and lowered its overall exposure by more than 60 percent over the past four years. This is due, in large part, to the organic migration of policies to private companies. In 2014 alone, 416,623 Citizens policies were transferred to private companies through Citizens’ depopulation program. Citizens projects that its policy count will be slashed to no more than 450,000 policies by year-end 2016, from a high of 1.5 million in 2012.

Additionally, Citizens itself has taken advantage of low reinsurance rates to transfer some of its enormous hurricane risk to the private market. This investment has almost completely eliminated the once-ominous threat of assessments on state taxpayers. In 2014, Citizens transferred $3.27 billion of its coastal risk to private reinsurers for about $216 million; this year, the total was more than $3.9 billion of risk transfer, at a cost of just $201 million. In sum, Citizens bought $640 million more in reinsurance protection for about $15 million less.

The Florida Hurricane Catastrophe Fund (Cat Fund) also has taken advantage of historically low global reinsurance rates. In early 2015, the State Board of Administration (SBA) approved a $2.2 billion risk-transfer package, which included $1 billion in reinsurance protection.

Provided that Florida’s unprecedented hurricane “drought” extends through the remainder of the 2015 season, the Cat Fund expects to hold an estimated surplus of $12.8 billion, the result of 10 years of fair-weather hoarding. Coupled with its purchase of reinsurance and pre-event bonds, this surplus has for the first time allowed it to be fully funded up to its $17 billion statutory limit without the need for post-hurricane debt or, by extension, taxpayer-funded assessments.

Government has a responsibility to foster a competitive environment among private insurers. To do so, it must regulate the industry sensibly in ways that ensure consumers’ legitimate claims are fully paid in a timely manner. However, a healthy and affordable property insurance market may also be greatly helped or hindered by forces like nature and the global economy, which lie completely outside the control of politicians, insurance companies or policyholders. In this vein, fortune has greatly favored Florida over the past decade.

Ten years ago, Floridians were recovering from the unprecedented series of hurricane strikes and reeling from high insurance and reinsurance rates. No one at the time could predict the state would be granted an unprecedented, decade-long reprieve by Mother Nature, while simultaneously enjoying the most favorable global reinsurance and catastrophe market in memory.

Yet despite this remarkable streak of combined luck, average property-insurance premiums are still on the rise in some parts of Florida. Consumers have legitimate concerns when they ask why this is the case, when insurance companies have had a decade to save up for the next strike.

It appears human behavior and cost drivers disconnected from the state’s most obvious risk factors continue to drive some insurance rate increases. According to the New York-based Insurance Information Institute, non-catastrophe claims have increased roughly 17 percent per year over the past decade, and are growing rapidly both in frequency and in severity.

Storm insurance reforms still needed, expert says

October 26, 2015, 9:27 AM

From FloridaPolitics.com:

The James Madison Institute and R Street Institute released a policy brief last week,”Shoring Up Florida’s Property Insurance Market,” in which the organizations argue for the Legislature to pass reforms to “eliminate cost drivers and ensure fiscal stability in an active storm season.”

“Florida’s total coastal exposure now stands at $2.9 trillion, with more property at risk than all of the other ‘hurricane alley’ states combined,” said the brief’s author, R.J. Lehmann, R Street co-founder and an adjunct scholar at the James Madison Institute.


15 reasons CRS reports should be public

October 26, 2015, 7:00 AM

I worked at the Congressional Research Service for 11 years as an analyst and manager. I greatly enjoyed supplying congressional staff, committees, and members of Congress with nonpartisan research and advice. I got to help conceptualize legislation, assist committees with hearing preparation and testify before Congress. It was fun, heady work.

I also wrote a lot of CRS reports, as did my beloved colleagues. Each year, the agency publishes about 1,000 reports, which cover general subject matter, like advertising by the federal government and cloture in the U.S. Senate. Congress, not the CRS, owns them. That means nobody at the CRS is free to distribute its reports to anyone outside Congress – not without jumping through bureaucratic hoops.

Unfortunately, our national legislature, as a matter of practice, does not publish all CRS reports in one place, like Congress.gov. CRS reports get posted here and there on various congressional webpages. Additionally, any member or congressional staffer can share reports with the public ; it’s a congressional prerogative. As a result, there are CRS reports floating all over the Internet. By one count, there are 27,000 CRS reports scattered over 1,400 U.S. government websites.

It is a bizarre situation: there is not de jure public release of CRS reports, but there sorta is de facto publication.

This policy is irrational, inefficient and costly. With the help of some animated GIFs, here are 15 reasons Congress should release all CRS reports to the public:


  • Taxpayers pay more than $100 million to operate the CRS. It only seems fair that they have easy access to CRS reports. But they do not.

  • Beltway insiders easily can access CRS reports through pricy subscription services and get them from people who work on Capitol Hill. The average American cannot. This is grossly inequitable.

  • CRS reports do not contain classified, sensitive or secret information. No harm can come from their release.


  • The Internet is awash in lies and half-truths about government. CRS reports carry nonpartisan, factual descriptions and analyses that explain government agencies and programs. CRS also publishes guides that explain how Congress works. Making CRS reports widely available, then, can serve as an antiseptic to the toxic rumors and misinformation.

  • The media often get things wrong. Allowing broader access to CRS reports would help media avoid needless errors.


  • I have seen members of Congress hold up a CRS report and then mischaracterize its contents. Broad public access to CRS reports would increase the odds of such deception being exposed.



  • Expanding public access to CRS reports is not a partisan issue. It is good government and a matter of fairness. There is bipartisan support for publishing CRS reports on House.gov or one of the other public congressional websites. Reps. Leonard Lance, R-N.J. and Mike Quigley, D-Ill., are the most recent advocates.

  • Forty diverse groups, including those representing librarians, scientists and civil-liberty advocates, support more equitable public access to CRS reports.

  • Contrary to the claims of some individuals, there never has been a policy that CRS reports must stay secret. For decades, Congress has been releasing some CRS to the public. This 1979 CRS annual report shows dozens of CRS reports published as congressional committee prints or introduced into the Congressional Record.

  • Making CRS reports more widely available to the public will not hurt their quality. Rather, it may well improve them, as CRS experts will be freed to share them with outside experts for feedback. That is how experts learn more and produce better work. Besides, CRS already produces information for public consumption, such as the Constitution Annotated, the bill summaries found at CRS.gov, a 400-page volume called The Evolving Congress and even debate materials for high schoolers.

CRS.gov, the Congress-only website where CRS posts its reports, went down for the better part of a week last summer. Congress lost all access to CRS reports. Backing up CRS reports to a public site like Congress.gov would increase the odds that 24/7 congressional access to CRS reports would be maintained.

Retired and former CRS employees with more than 500 years of CRS service signed a letter supporting public release of CRS reports.

The current policy is bad for CRS employees. They cannot freely share their work with peers in academia, think tanks and other research environments. Unlike experts at the Government Accountability Office and Congressional Budget Office, CRS employees cannot list their publications on their LinkedIn pages. CRS Managers, who have much better things to do, are forced to police the release of their analysts’ work, which sows enmity among employees.

Creating a public CRS reports website would save tons of congressional and CRS staff time. Right now, the public writes Congress when it has a problem, the congressional staffer contacts CRS and then a CRS analyst or research librarian will send over a copy of a CRS report that answers the constituent’s question. This is grossly inefficient. The public should be free and encouraged to seek answers to basic questions about government (e.g., “How much is spent on the Department of Agriculture yearly?”) from Congress.gov or another public website that carries CRS reports.

Libraries should not have to pay for government-produced information. But they do. They must pay private subscription services to access CRS reports.


The arguments against expanding public access are outdated and bogus. Congress can and should vote promptly to adopt a resolution, which would not need the president’s signature , to post CRS reports on Congress.gov or another public website. Doing so will cost nearly nothing and it will bring many benefits.

For further discussion of this subject, watch this October 2015 video of a bipartisan discussion on the merits of expanding public access to CRS reports.

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Marco Rubio’s ambition, and sharp elbows, fueled his rise in Tallahassee

October 23, 2015, 3:18 PM

From the New York Times:

Don Brown, a Republican legislator who had been helping the man who was Mr. Rubio’s biggest rival for speaker in Florida, Dennis A. Ross (now a congressman), recalled a similar encounter.

‘I was expecting, of course, to be an outcast,’ said Mr. Brown, who is supporting Mr. Bush in the presidential campaign.

Instead, Mr. Rubio invited him to become a member of his leadership team. ‘He said, ‘I came here today to begin the process of earning your respect,” Mr. Brown remembered, ‘which I found quite astonishing.

Hangout: Don’t Get SLAPP’ed! Protecting Online Free Speech and the Honesty of Opinions

October 23, 2015, 12:55 PM
10/27/2015 - 3:00 pm - 3:30 pm

Coalition letter supporting Leahy-Franken amendment to CISA

October 23, 2015, 12:12 PM

Dear Senator,

We, the undersigned open-government, civil-liberty and privacy groups, write in opposition to the Cybersecurity Information Sharing Act (“CISA”) and to urge passage of the proposed amendments from Sen. Leahy and Sen. Franken. Leahy Amendment No. 2587 would protect the Freedom of Information Act (FOIA) by removing from the bill a new FOIA exemption that is both unnecessary and harmful, and Franken Amendment No. 2612 would take important measures to clarify the definitions of cybersecurity threat and cyber-threat indicator. Both are essential to ensure the bill does not sweep away important privacy protections and civil liberties, increase the difficulty and complexity of information sharing and threaten the integrity of FOIA.

It is of critical concern to our community to protect the Judiciary Committee’s exclusive jurisdiction over FOIA. New exemptions should be enacted only after full and fair consideration by the committee, through proceedings that are open to the public. Allowing the new exemption to be included in the underlying bill sets a dangerous precedent for the future of FOIA. The Leahy Amendment strikes the new “b(3) exemption” from the bill, protecting the integrity of the FOIA framework in the process.

CISA currently contains an overly broad new FOIA exemption that would exempt from disclosure information related to cyber-threat indicators and defensive measures. While we agree that the large majority of the sensitive information likely to be shared under CISA should not be subject to FOIA, this information is already protected from disclosure under existing FOIA exemptions and by other provisions in the bill. Creating new, unnecessarily broad and completely redundant exemptions only weakens the existing FOIA framework and threatens the twin goals of promoting government transparency and accountability. Moreover, the new FOIA language could result in serious unintended consequences, given the overly broad definitions that currently exist in CISA related to cyber-threat indicators and defense measures.

In their current form, the definitions in CISA for “cybersecurity threat” and “cyber-threat indicator” are concerning because they are unnecessarily broad. Technology and civil-liberties groups have highlighted that CISA’s current definition for cybersecurity threat is vague and problematic: it includes some vague categories related to potential harms and “other attributes” that could lead to companies sharing unnecessary or inactionable content or personally identifiable information (PII). Franken Amendment No. 2612 would clarify the definition for cybersecurity threat by establishing that an event or incident constitutes a threat – and triggers CISA’s authorizations – only if it is “reasonably likely to result in” harm. The Open Technology Institute wrote in June that Franken’s amendment would also improve CISA’s operational efficacy and its privacy protections by helping to ensure the information that is shared is actionable threat data, and that it will include less unnecessary content and PII.

Accordingly, we urge you to support Amendments 2612 and 2587 to CISA. Please do not hesitate to contact Patrice McDermott, executive director of OpenTheGovernment.org (202-332-6376 or pmcdermott@openthegovernment.org) or Robyn Greene, policy counsel for the Open Technology Institute (202-596-3609 or greene@opentechinstitute.org).


American Civil Liberties Union
American-Arab Anti-Discrimination Committee
American Library Association
American Society of News Editors
Association of Alternative Newsmedia
Brennan Center for Justice
Campaign for Accountability
Citizens for Responsibility and Ethics in Washington (CREW)
Council on American-Islamic Relations
Constitution Project
New America’s Open Technology Institute
National Coalition for History
National Security Archive
National Security Counselors
Niskanen Center
PEN American Center
People For the American Way
Project On Government Oversight
Reporters Committee for Freedom of the Press
Restore The Fourth
R Street
Society for Professional Journalists
Sunlight Foundation
Transactional Records Access Clearinghouse, Syracuse University

An open debate about compulsory voter registration is critical

October 23, 2015, 7:00 AM

Assembly Bill 1462, signed earlier this month by Gov. Jerry Brown, will utterly transform California’s electorate, adding 6 million new voters overnight. Whether this transformation will be for the better remains very much an open question.

Sponsored by Assemblywoman Lorena Gonzalez, D-San Diego, the new law requires that drivers who obtain or renew their licenses are registered to vote automatically. Supporters of the compulsory registration measure have hailed it as a way to increase voter turnout. It would, they say, empower the state’s disenfranchised and help overcome historical prejudices against minority groups who have a lower propensity to vote.

In practical terms, the political case for and against A.B. 1562 is clear. Democrats generally favor the bill, and Republicans oppose it, because the newly registered voters are more likely to support Democratic candidates. Both geographically and historically, the Democratic Party enjoys a substantial structural advantage over the Republican Party with the constituencies that currently are less likely to be registered.

California Democrats’ desire to exploit this advantage – follow the lead of their peers in Oregon, which also introduced compulsory registration – is hardly surprising. As recently as four years ago, Oregon had split legislative leadership. In the wake of compulsory registration, and in the political blink of an eye, the Beaver State has elected Democratic super-majorities.

But the question must be raised, is higher voter turnout an unalloyed positive? In the United States, we have the distinct privilege and responsibility to select our own leaders. Gradually, the nation has dispensed with all of the explicitly discriminatory practices that once limited the franchise to landowning white men, as tenants, African-Americans and women were extended the right to vote.

We also have done away with restrictions that were not explicitly discriminatory, but had discriminatory effects. Citizens do not have to pass poll tests or pay poll taxes. With no discriminatory barriers to civic participation remaining, the American electorate is more diverse than at any point in history.

Nonetheless, supporters of A.B. 1462 have pointed to the one basic requirement that does remain: the affirmative step of registering to vote. This, they claim, also has a discriminatory impact. That claim begs a fundamental question about the balance to be struck between accessibility and civic engagement.

It is not illegitimate to believe that the balance that existed before A.B. 1462 was appropriate. The threshold for political involvement has been that voters demonstrate just a minimum of interest and forethought before going to the polls. Indeed, a strong claim can be made that showing interest and forethoughtshould be a meaningful barrier to entry for those unengaged with the political process.

The response to this assertion from Democrats in the Capitol has been to resort to calls of prejudice. Instead of engaging on the merits, the bill’s supporters attributed nefarious and discriminatory motives to those who opposed their efforts. Armed with utter moral certainty, the bill’s supporters silenced debate.

More voters may well improve our democracy, but stifling dissent can only hurt it.

Kosar talks transparency in CRS reports

October 22, 2015, 3:30 PM

R Street Governance Project Director Kevin Kosar joined a panel with former U.S. Chris Shays, R-Conn.; Prue Adler, associate executive director of the Association of Research Libraries; and Stan Brand, a senior counsel with the firm Akin Gump, to discuss proposals to grant greater public access to Congressional Research Service reports. The forum for the discussion was the Congressional Transparency Caucus, and was kicked off by opening remarks from Rep. Leonard Lance, R-N.J., and Caucus Co-Chairman Mike Quigley, D-Ill. Video is below:

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Cameron Smith talks Ryan, Clinton on Matt Murphy Show

October 22, 2015, 3:20 PM

R Street State Programs Director Cameron Smith made another of his regular appearances this week on The Matt Murphy Show on 1070 WAPI-AM in Birmingham, Ala. to discuss Hillary Clinton’s appearance before the House Select Committee on Benghazi and the prospects and controversies surrounding Rep. Paul Ryan’s run to become speaker of the House. Here the full show below

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Finding a path to fix unsustainable federal spending

October 22, 2015, 2:18 PM

Some time next month, the federal government is set once again to hit its debt limit. If Congress does not agree to raise the statutory debt ceiling, the government will be forced to default on payments owed.

The debate over whether and under what condition to raise the limit offers budget hawks another opportunity to address unsustainable federal spending.

One option – introduced this week by Rep. Bill Flores, R-Texas, chair of the Republican Study Committee – the Terms of Credit Act. The bill’s text highlights that it would address the “root drivers” of the growing national debt with “reforms that will bolster the budget process, keep Congress hard at work and spur economic growth.”

The Terms of Credit Act would raise the statutory debt limit by about $1.5 trillion, which at current taxing and spending levels would be sufficient through about March 2017. However, it also calls for reforms to the budget process, such as:

  • Forcing House committees to produce legislation that complies with Congress’ Budget Resolution assumptions. It also would authorize committees to produce legislation to hit their target spending reduction levels.
  • Keeping Congress in session until its fiscal work is complete. After Sept. 1 of each calendar year, neither the House nor the Senate could adjourn unless it had passed next year’s appropriations.
  • Freezing all new regulations (subject to health, safety and national security waivers) otherwise set to take effect between Jan. 1, 2015 and July 1, 2017.

Many Hill watchers would not expect this bill to make it through the Senate or be signed by the president, even if it does manage to earn approval of the House. But it does set a bold precedent for how Congress should evaluate its current approach to spending, the federal deficit and the national debt.

If “Republican Study Committee” and “debt ceiling” sound familiar, it’s because the caucus led the charge in in 2011 to address our spending addiction by introducing Cut, Cap and Balance. That plan set the terms of the debate over what eventually became the Budget Control Act of 2011. Four years later this bipartisan compromise is seen as an effective check on government spending, decreasing our deficit and capping spending levels.

One hopes the RSC’s leadership will once again result in further conservative reform to rein in spending and address our debt limit in a responsible fashion. For too long, Congress has continued the same approach. It’s time for a shuffle to fix our still-unsustainable spending trajectory.

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Support the Sentencing Reform and Corrections Act

October 22, 2015, 11:42 AM

We are writing to voice our support for the Sentencing Reform and Corrections Act of 2015 (S.2123). As conservative and faith-based organizations, we applaud your thoughtful deliberations resulting in this important reform legislation.

Crime demands accountability. It’s not a question of whether to punish wrongdoing, but for how long and for what purpose. Punishment should be proportionate to the offense and prisons should embrace a constructive culture that reflects the pro-social values we expect men and women to practice upon release. This legislation reflects these goals and aims to restore all parties impacted by crime and incarceration.

The Sentencing Reform and Corrections Act takes a targeted approach to expand the federal safety valve and limit the application of mandatory minimums to more serious offenses. These reforms uphold our values of liberty and justice, without impeding our ability to combat drug violence and protect victims. We also applaud the retroactive application of these reforms as a moral imperative for those prisoners who are currently serving disproportionate and unjust sentences.

These sentencing changes will help address the unsustainable growth in the federal prison system. The federal prison population has increased from approximately 25,000 in 1980 to over 205,000 today. Federal prisons have a 30 percent overcrowding rate and even higher overcrowding exists in high security facilities. As a result, the inmate-to-staff ratio has increased, putting corrections officials and prisoners at risk and making it more difficult to operate effective faith-based and other recidivism-reduction programs. The large prison population also comes at a price. The Bureau of Prisons’ budget has doubled over the past decade, reaching approximately $7 billion and nearly 25 percent of the Department of Justice’s total budget.

Recognizing this great expense, the legislation also aims to improve our prisons’ rate of return. The bill directs the Department of Justice to expand recidivism reduction programming, such as drug rehabilitation, education, skills training, faith-based classes and work programs, for all federal prisoners in partnership with nonprofit and faith-based organizations. The Bureau of Prisons is directed to use risk and needs assessment tools to assign the most effective amount and type of programming to each prisoner and provides incentives for program participation.

All federal prisoners who complete programs are eligible for incentives developed by the Bureau of Prisons, such as increased telephone or visitation privileges. If prisoners reach a moderate or low-risk classification, they may use time credits earned from program completion toward prerelease custody in a residential re-entry center, on home confinement or on community supervision. Additionally, the bill authorizes U.S. Probation to conduct a pilot program in which individuals with substance-abuse issues are subject to high-intensity community supervision, and swift, predictable and graduated sanctions for breaking program rules. The pilot is modeled after the HOPE program in Hawaii, which has been highly successful in curtailing participants’ substance abuse.

We believe these changes will improve public safety, strengthen families and communities, restore proportionate sentencing, and improve the effectiveness and culture of our prisons. We thank you for your leadership and urge your colleagues to support the passage of this legislation.


Melissa Ortiz
Principal & Founder
Able Americans

Rabbi Aaron Lipskar
Executive Director
Aleph Institute

Alex-St. James
Executive Director, Blacks Economic Security Trust (BEST)
Chairman Emeritus, African-American Republican Leadership Council

Abby Skeans
Senior Associate for Justice and Child Welfare
The Clapham Group

Timothy Head
Executive Director
Faith & Freedom Coalition

Dean Nelson
Frederick Douglass Foundation

Harry R. Jackson Jr.
Bishop International Communion of Evangelical Churches

Craig DeRoche
Executive Director, Justice Fellowship
Prison Fellowship Ministries

Leith Anderson
National Association of Evangelicals

Willes K. Lee
Executive Vice President
National Federation of Republican Assemblies

Eli Lehrer
R Street Institute

Marc Levin
Policy Director
Right on Crime

Russell Moore
Southern Baptist Ethics & Religious Liberty Commission

Don’t strangle the cyber insurance market in its cradle

October 22, 2015, 7:30 AM

We live in an era of disruption. Technology redefines our world on a regular basis, as the wonders of networks that allow data to be transferred virtually without restriction have enmeshed knowledge and commerce into our lives on an uninterrupted basis. The value of the digital environment that enables our modern existence continues to increase.

With value, comes risk. Just as the frontier settlers who improved their land for farming purposes erected flood protections, so too have businesses sought to protect their virtual terrain. Digital firewalls and anti-virus utilities are now ubiquitous. But like the farmers, firms are finding that strictly defensive measures are not sufficient to secure the value of their assets.

The average cost of a cyber breach is now $674,000, according to a recent study by NetDiligence. Allianz Global Corporate & Specialty pegs the figure at $3.8 million. High-profile data breaches at firms like Anthem and Target – the latter of which suffered $252 million in losses – have led many firms to consider alternative strategies for managing their risk. The principle means of doing so is through specially tailored insurance products – cyber insurance.

At the moment, there is no standard form cyber-insurance policy, but they share the common characteristic of covering Internet-based risks. Within that broad category, policies can provide coverage for a range of losses, from direct and expected harms, like first-party liability associated with lost or destroyed data, to further attenuated damages, like the reputational injury brought about by a breach.

While cyber-insurance policies have been around since the turn of the century, they only recently have begun to proliferate. A combination of a heightened sense of vulnerability and recently affirmed certainty that existing commercial general liability policies exclude cyber losses has seen the takeup rate at relevant firms rise all the way to 52 percent, according to insurance consultancy Advisen.

That growth is a positive trend. Quietly, there has been a brewing political movement to shift risk into public hands, onto the backs of taxpayers. Now $25 billion in the red, and with no hope of ever escaping that state, the National Flood Insurance Program should be a prime example of how not to handle erratic and expensive risks.

But three obstacles currently confront the cyber-insurance market and must be overcome to prevent a backslide: capacity, underwriting experience and regulatory interest.

The Federal Insurance Office, a U.S. Treasury Department advisory office established by the Dodd-Frank Consumer Protection Act, reported in September that there is a need for policies with $1 billion coverage limits. That’s double the current highest-limit cyber insurance policies. Among competitively priced products, limits tend to hover between $100 and $200 million.

It’s undoubtedly the case that higher-limit policies must become available to cover the largest cyber claims. Among the difficulties is the comparatively limited pool of actuarial experience with cyber losses, which leaves underwriters struggling to price the product. As time goes on, experience will grow, and firms will be able to price these new products with greater certainty. Until that time, we should expect heightened regulatory interest.

Insurance regulators are properly charged with monitoring insurer solvency, and it’s totally appropriate them to keep a close eye on the development of cyber coverages. But regulators’ instinct to direct market outcomes could have a hugely problematic influence on this new line of business. Right now, the space for creativity and even some limited room for product failures should be granted to insurers as they make their way into this new area.

The Internet may well be the world’s most valuable public resource; it’s the platform on which the economic well-being of billions rests. The next step in protecting that resource is encourage private innovators to develop the products needed to facilitate their next great idea.

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On Back to the Future Day, eight bold predictions for 2045

October 21, 2015, 5:56 PM

Oct. 21, 2015 at 4:29 p.m. marks the date and time 30 years in the future that Marty McFly and Doc Brown arrive in Stephen Spielberg’s “Back To The Future: Part II.”

The “Back to the Future” trilogy introduced America to hover boards, the DeLorean and the flux capacitor. More importantly, it made children across the nation think about what the future might hold.

In many respects, the movie’s predictions were correct. 3D movies? Check. Video glasses? Check. Even hover boards actually exist.

Here are a few serious—and not so serious—predictions for Oct. 21, 2045:

  1. On Demand Driverless Automobiles – The latest innovation in transportation is the emergence of transportation network companies like Uber and Lyft. Even still, those companies are limited by driver availability and quality. By 2045, we’ll have automobiles on demand without human drivers. Press a button on your phone, day or night, and they’ll transport you wherever you please. Such a change will radically alter the automobile market as most Americans begin to see driving cars as a backup option, especially in urban centers.
  2. Zero Emission Energy Generation – We’re already on the verge of battery technology that has the potential to make renewable energy like wind and solar more than an intermittent energy source. Wind, solar and hydro energy have the market advantage that their fuel is free. If we also advance our nuclear technology beyond the 1970s, we might just have a scenario where American energy generation is largely pollution free by 2045, and it will cost less than it does today.
  3. Seamless Life Technology – In 2045, you might literally be taking your life in your own hands by going without your personal technological device akin to our current smart phones. Our personal devices will monitor vital signs and remember preferences, passwords and identification numbers. They’ll even track our behavior and make suggestions that align with our prior decisions. Think that Amazon advertisement on Facebook is cutting edge? Wait until 2045 when your personal device tells you what you want for dinner and warns you of a pending heart attack before it happens.
  4. The End of Grade Leveled Education – By 2045, we’ll discover that our education system grade levels, based on arbitrary age and time restraints, are holding back some our most promising young minds while rushing many students who might need more time and instruction. Educational progress will move along lines of mastering subject matters and demonstrating capacity to take on additional lines of learning.
  5. Coalition American Government – The two-party system in America isn’t producing the results most Americans really want. No later than 2045, a viable third party and possibly a fourth will emerge. They will amass enough size that they’ll effectively be able to block either Democrats or Republicans from unilaterally controlling the House or the Senate. That, in turn, will mean that executive branch positions will be bargaining chips for the president rather than partisan ideologues.
  6. Abortion Debate Changes Radically – Nearing 2045, we’ll have witnessed several successful transfers of an unborn fetus to an artificial womb resulting in a live birth. Through technological advances, the current legal “viability” standard at which abortion restrictions become legally permissible moves to a matter of weeks after conception. The cost of such transfers declines significantly as many working mothers and those with difficult pregnancies utilize artificial womb technology to bear children.
  7. Pick-a-Pet and Lazarus Kennels – In 2045, Pick-a-Pet and Lazarus Kennels have cornered the market on domestic animal companionship. With advanced genetic technology pioneered at HudsonAlpha in Huntsville, pet owners are able to select behavioral traits and aesthetic qualities of their home companions. Always wanted a Yorkie with a desire to fetch or a cat that liked to cuddle? Now you can design it. In addition, Lazarus Kennels will clone your favorite companion after they pass, so you can teach them not to eat your shoes all over again.
  8. BARF – By 2045, national hunger is largely ended due to the development of BARF (Biologically Adequate Rationed Food) packs. Overreaching Food and Drug Administration (FDA) marketing regulations require the terrible moniker. BARF is edible, cheap and nutritionally adequate as the name suggests. It becomes an everyday staple for many Americans between cooking meals. As a result of public outcry, the FDA loosens marketing restrictions. In a rush to market, the leading BARF producer renames their product Fancy Feast.

A whole generation of us wanted to ride hover boards, and we were actually able to turn our science fiction into reality. So what does Back to the Future Day mean in terms of gazing ahead?

According to Doc Brown, “It means your future hasn’t been written yet. No one’s has. Your future is whatever you make it. So make it a good one.”

How Johnnie Walker became India’s whisky of choice

October 21, 2015, 1:01 PM

From Eater:

Frank Coleman, the senior vice president of the Distilled Spirits Council of the United States, a trade group, told Time, “Indians are preordained whisky drinkers. They’ve developed a taste for whisky.” Kevin R. Kosar, a senior fellow at the R Street Institute and author of Whiskey: A Global History, agrees adding that their palate is due in part to English imperialism. He explains, “Wherever the Empire went, Scotch whisky would go to.” However, Irish whisky “was not nearly as popular [in India] despite the fact that there was more of it being produced in the late 19th century than Scotch whisky. This is because the Irish did not get along well with the crown.” While the Scots he continues, “had a positive working relationship with the mainland early on.”

Johnnie Walker became a big whisky brand by “aggressively marketing itself,” says Kosar. “It was everywhere, the way Budweiser is everywhere. Budweiser is drunk a lot in part because it is always available. You go to a ball game or something and when you want a beer, they have Budweiser, so you just drink Budweiser.” That is how ubiquitous Johnnie Walker was. However, unlike Budweiser, Kosar notes, “Johnnie Walker is also an exceptionally good product … and the quality was there.” While the whisky has been around for over 200 years, the drink really took off in 1908 when it underwent an art direction shift, which resulted in its very recognizable logo known as “the Striding Man.”

The Striding Man was a crucial part of Johnnie Walker’s rise to the top. The Pittsburgh Post- Gazette notes that while most other brands played up traditional Scottish imagery like bearded men, kilts, and bag pipes, the Striding Man was a “gentleman on the move.” The logo solidified Johnnie Walker’s place as an “aspirational brand,” says Kosar. “[The rise of Johnnie Walker] fits in neatly with India as a rising economic power over the course of the twentieth century. Everybody was going up brand.” Plus, the logo was easy to identify, says Junoon’s Pathak. Combined with the “simple color coding of the blends” — i.e. Johnnie Walker Black, Johnnie Walker Blue, and Johnnie Walker Red — the logo “helped the brand resonate with, and be understood by, everyday people.”

Serving as a luxury drink also helped Johnnie Walker overtake gin — another popular British export. “There was plenty of gin sloshing around in India thanks to the British Empire,” Kosar explains. But gin was sold at a lower price point and it didn’t quite “carry the same cache as Scotch whisky.” He adds, “It wasn’t seen as luxurious.” Essentially, gin didn’t have the marketing campaign around it that Johnnie Walker had…

…Johnnie Walker has always had a good reputation and it’s a spirit that “… at least three generations of Indians are familiar with,” says Kosar.  “The company itself has generally operated in a way that is above the board. It has not had any major scandals, or any incidents that would sully its reputation. Johnnie Walker has not been implicated in any bribery schemes, either.” He explains, “This is not often true about other companies in the spirits business.” In addition to having a pristine moral reputation, Johnnie Walker is also considered to be a “safe” spirits brand.

India has a major issue with bootleg liquor, and “illicit, poisonous moonshines are a real peril in India,” states Kosar. In June, toxic moonshine killed 102 people in Mumbai and “sickened scores of others,” writes CNN. Just a few months earlier, 25 people were killed and 125 were hospitalized in the state of Uttar Pradesh after drinking an illegal home-brewed spirit. These deaths from “cheap, illegally brewed liquor,” which often contain methanol — a toxic chemical — are unfortunately not uncommon in the country. Johnnie Walker, however, has never had such issues during its “long footprint” in India. Per Kosar, this is what has enabled the company to “not have its spirits pulled from the shelf.”

But perhaps most importantly, Kosar notes that above all, Johnnie Walker appeals to the Indian palate. “Scotch whisky puts a lot of people off,” due to its potent flavor. “But in India? Scotch whisky is not going to strike as overwhelming.” The bold flavors common in Indian food means that generally Indians don’t have to “overcome” the taste of the whisky.

GAO opens up about secret reports

October 21, 2015, 12:45 PM

Most of the U.S. Government Accountability Office’s reports are freely available to the public via GAO.gov. For decades, however, the agency has kept a minority of these reports secret.

These so-called “restricted reports” are withheld from the public, according to the GAO, because they contain “either classified information or controlled unclassified information by the audited agencies and cannot be publicly released.” Some of these reports eventually do get released publicly in redacted form, such as this 2011 GAO study on the Internal Revenue Service and whistleblowers.

Keeping the reports under lock and key for a time is understandable. Slapping a PDF of GAO’s “Library of Congress: Information Security Review” online shortly after its publication may well be counterproductive to the objective of securing the agency’s network.

Remarkably, GAO did not publicize the existence of these reports until last week. As reported by Secrecy News, anyone now can go to GAO.gov and click the “restricted products” link to see a list of the restricted reports’ titles, but not the reports themselves.

The list currently includes only reports published since 2014. Those who wish to see the titles of earlier GAO restricted reports can consult GovernmentAttic.org’s list, which covers the period 1971 to 2011.

The GAO’s list of restricted products is useful, not least in that it allows Congress, the media and the public to see what sort of issues are being examined by the government’s watchdog. Few outside the congressional committees of jurisdiction, for example, knew the “Federal Retirement Thrift Investment Board Needs to Address Program and Privacy Weaknesses.” Now, any of the millions of federal employees and retirees with federal Thrift Savings Plan accounts will know there is at least a potential issue and contact their congressman for more information.

Releasing the titles also permits us to see which restricted reports have been released and which have not. A 2011 GAO report on IRS whistleblowers has been published online. Oddly, a 1979 report titled “Need for a Reassessment of DOD’s Laser Guided Weapons Programs” still is not available on GAO.gov.

GAO does good work, and one hopes the agency’s next step will be to release a report detailing exactly how many of its restricted products remain hidden, why and when they will be released.

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

Asset-forfeiture reform: No more margarita machines!

October 21, 2015, 11:15 AM

We can neither confirm or deny if we have the mayor’s possessions.” That was reportedly the statement from the U.S. Attorney’s Office in Sacramento to Stockton, Calif. Mayor Anthony Silva last month.

Silva has been returning to the United States from a conference of mayors meeting held in China when he says he was robbed…by the U.S. Department of Homeland Security.

According to Silva, agents of the federal government, acting without a search warrant or any documents from a court, seized his electronics at the airport, including his cellphone.

They indicated that this action to confiscate personal property at the airport was in fact routine and not unusual. They promised to return my items within a few days. They also mentioned that I had no right for a lawyer to be present and being a United States Citizen did not entitle me to rights that I probably thought.

Perhaps one of the more interesting aspects of this particular case was the agents’ demands that the mayor provide his passwords for every one of his electronic devices, before they were all seized.

Very few people realize their property can be taken under conditions in which there is no presumption of innocence or right to an attorney. Since civil asset-forfeiture proceedings are not criminal, property owners who are not actually engaged in any crime can have various possessions confiscated at whim (requiring only a judge’s rubber stamp) and they face certain difficulties in reacquiring it. Not only that, there are clear incentives for law enforcement to maximize seizures to fund their own operations.

Civil forfeiture is a practice with a long history. It has been used extensively in maritime law for centuries to keep the offending property from sailing off. During the Prohibition Era, it was used to seize equipment and vehicles from bootleggers. It seems fair to most of us that late-model vehicles purchased with illegal drug revenues might be better employed for the public good by law enforcement surveillance of suspected illegal activity. Especially in cases where the subjects might otherwise notice that they were being followed by a car with “General Services Agency” stamped on the tires or bearing other government identification.

On the other hand, there doesn’t seem to be much support for the government grabbing things, mainly cash, from people who present no probable cause profile except that they carry unusual amounts of cash. Asset forfeiture is generally supposed to target instrumentalities of a crime, but the connection appears to be eroding. There have been, at least anecdotally, a rash of seizures by governments where criminal culpability has not been established and there was never any attempt to prove it.

According to the State of Michigan’s 2014 Asset Forfeiture Report, $23.9 million was seized last year just from suspected drug-related forfeitures. Some of the cases make interesting reading. The 2008 report included $900 in fees that 44 patrons of the Contemporary Art Institute of Detroit were required to pay to get their cars back after attending “Funk Night” at the museum. They were able to recover their cars, but not their fees, even after a judge eventually said they lacked criminal intent when they parked at the museum, which had failed to obtain a liquor license for the party.

Two highlights of the Michigan report illustrate elements of the problem. The report notes that 12 percent of forfeiture revenues were used for personnel and benefits. In other words, these funds – some pillaged from people who’ve done nothing wrong – are used to support law-enforcement personnel whose jobs are funded by the seizures.

The second eyebrow-raising statistic is that 80 percent of the cases last year – 8,558 – never went to court. All of these transactions were with law-enforcement agencies. State and federal agencies share the plunder. The Heritage Foundation reports the revenues from Michigan’s civil seizures were used to fund all manner of new toys for the police, sheriff’s deputies and agents, including helicopters, armored personnel carriers and even a margarita machine.

A couple of weeks ago, the Michigan Senate unanimously passed a series of bills that would make critical reforms to the system, referred to as “policing for profit.” The major change in Michigan, Ohio and several other states considering reform would be to deny civil forfeiture unless a person has been found guilty of a crime. Other provisions would require more disclosure from law-enforcement agencies when seizures of property are processed.

This seems like a wise thing to do.

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

How should libertarians think about intellectual property?

October 21, 2015, 9:16 AM

Watch R Street’s Sasha Moss along with Brink Lindsey of the Cato Institute, Wayne Brough of FreedomWorks and Eli Dourado of the Mercatus Center in a panel moderated by Reason’s Nick Gillespie about how libertarians should think about intellectual property. The event was co-hosted by R Street and Reason and took place Oct. 8 at Reason’s Washington, D.C. offices.

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

So… this is Nixon’s fault?

October 21, 2015, 7:35 AM

Anyone watching Congress trying to negotiate the U.S. budget might wonder who could possibly have designed such a process. Thanks to an endlessly complicated scheme of resolutions and committees, Washington every year cycles through a charade of planning, followed by brinksmanship over spending, followed by shutdown threats and debt-ceiling showdowns and some kind of after-deadline scramble to prevent a globally humiliating default.

How did we get this system?

The surprising answer is that the American budget process was born as a thoughtful reform. The Budget Act was written 40 years ago, and was supposed to fix a few big problems—in particular one caused by President Richard Nixon.

The president had been antagonizing Congress by blaming it for budget deficits and inflation. John Ehrlichman, a top Nixon adviser, loudly denounced the“credit-card Congress,” and likened it to a derelict relative who impoverished a family by running up bills. Nixon upped the pressure by telling Congress to spend no more than $250 billion, and by threatening to veto appropriations bills that exceeded this cap.

More dramatically, Nixon also used a power he had as president: He impounded—simply refused to spend—funds appropriated by Congress.

Presidents since the founding had done this, including Lyndon Johnson. It seldom was a big deal, so long as the amounts were small, the rationales for impoundment were sound, and appropriators were consulted. Nixon, however, didn’t keep it small: He impounded tens of billions of dollars, often to gut programs he did not like. Gallingly, Caspar Weinberger, his deputy director of the Office of Management and Budget, told Congress the Constitution empowered the president to decide whether to spend money. All of which precipitated a constitutional crisis, since the Constitution gives Congress the power of the purse.

The architects of the 1974 Congressional Budget and Impoundment Control Actthought they had fixed the nation’s pocketbook, starting by limiting the power of Nixon to disrupt it. And in a way, it worked. But it also turned into a powerful lesson about unintended consequences, and the risks of assuming too much of Congress.

Looking back on that moment in Washington history, Rep. Bill Archer (R-Texas), a budget hawk who served in the House from 1971 to 2001, later remarked: “The culture then was that the president has too much power. We don’t like the president. The president is abusing his power…. The idea was that we’re going to take power away from the president and constitute it within the Congress.”

To take back control of the budget, Congress formed a new committee in 1972, held hearing after hearing, and produced a 4,600-page record of testimony and reports. Less than two years later, a new budgeting scheme became law: the CBA, for short, passed on July 12, 1974, with little dissent. Nixon, mired in Watergate and a month from resigning, signed the legislation.

The budgeting process the CBA replaced was vague and little understood outside of Congress. The president would send Congress a budget, which would pass appropriations acts in response. The process was dominated by powerful committee chairmen. Appropriations often were late, and supplemental spending bills were passed ad hoc. Pork-barrel projects were many. Nixon trolled Congressfor this “hoary and traditional” appropriations process, which failed to “consider the total financial picture when it votes on a particular spending bill.”

By comparison, the 43-page CBA mandated a rational—if complicated—process. New budget committees in both the House and Senate, assisted by the newly created nonpartisan Congressional Budget Office, would actually plan according to data. The committees receive spending and revenue data from the president’s budget, CBO reports, and the “views and estimates” of the various committees that authorize government spending. The budget committees then are to report a spending resolution that Congress as a whole adopts. This would be, officially, the budget; thereafter, the appropriations committees can move bills to spend the portions of the budget authority allocated to them. As initially enacted, the CBA required a second budget resolution to update the budget as needed—say, if tax revenues didn’t come in as projected. The entire process would start in February and conclude in September before the new fiscal year commenced. The intended result: a federal spending program that came in on time and within budget.

Instead, the very first budget resolution arrived a month late in 1975 and proposed higher spending than President Gerald Ford had requested. It augured the fiscal future.

To its credit, the CBA did fix the main problem it set out to solve: it curbed excessive presidential impoundments. No president can do what Nixon did. Title X of the act limits when and how an executive can not spend funds. And it created the much-needed office of the CBO, which helpfully brought nonpartisan brains to the budget process. Today, CBO cost estimates—known as “scores”—helpfully serve as a price tag on new legislation.

But in all other respects, the CBA has failed. Congress has run deficits 36 of the 40 years since adopting it. The national debt is $18 trillion, and it has tripled as a percentage of GDP since 1974.

Since the enactment of the Congressional Budget and Impoundment Control Act, Congress has adopted a budget resolution on time only six times. It blows the deadline by an average of nearly 40 days. Congress virtually never passes the 12 appropriations bills by the CBA’s deadline, and often passes none at all. Instead, chamber leaders rush through omnibus spending bills and continuing resolutions whose contents are unknown to most legislators.

Ignominiously, the budgeting process established by the CBA—that guideline document written by both chambers—has devolved into a time-sucking, deceptive messaging exercise based upon dubious or outright bogus assumptions. The FY2016 budget that the GOP boasted about in April is a case in point. It balances the budget in part by claiming that its tax reforms would generate $1 trillion in revenue. The budget also assumes Obamacare will be abolished, that roaring economic growth will boost tax revenues; it dodges budget caps by slipping $94 billion in defense spending into an “Overseas Contingency Operations” fund, and uses a cost-shuffling gimmick called “CHIMPS” (changes in mandatory spending programs) to claim illusory savings that are then spent on other government initiatives.

To be clear, Republicans are not the only ones guilty of fiscal legerdemain. Former Rep. David Obey, (D-Wis.), who served two stints as chairman of the House Appropriations Committee, remarked in 1982: “Under the existing conditions the only kind of budget resolution you can pass today is one that lies. We did it under Carter, we have done it under Reagan, and we are going to do it under every president for as long as any of us are here, unless we change the system, because you cannot get members under the existing system to face up to what the real numbers do. You always end up having phony economic assumptions and all kinds of phony numbers on estimating.”

The CBA was a serious attempt to reform federal budgeting, but in hindsight there were any number of reasons it was doomed to fail—and they offer a powerful window into the gap between what we expect of Congress, and what it can actually get done.

Some of these reasons are procedural. The CBA mandates a baroque budget-producing process that the legislature must complete in a little over 70 weekdaysand which can easily be tripped up. And the budget resolution can be adopted by a simple majority of both chambers, but appropriations acts, as budget guru Stan Collender points out, need 60 or more votes in the Senate and a presidential signature. This difference encourages politicized budget resolutions that only occasionally get enacted into actual taxing and spending policies.

Budgeting, at bottom, is about making tough choices, and the CBA doesn’t empower the budget committees to make them. Making a budget resolution acceptable to Congress means the budget committees must placate the appropriators and every other legislator who has taxing and spending preferences. The budget committees also have no control over the costs of entitlements, which account for 70 percent of federal spending.

In a bigger sense, you could say the CBA’s flaws are the flaws of democracy. Its most basic conceit is the supposition that 535 legislators could decide annually the nation’s spending priorities, and commit themselves to it. The CBA threw out the old president-led and appropriator-controlled system, replacing it with a less hierarchical, more inclusive process. As such, it invited more conflict among legislators, and created more access points for proliferating interest groups. The CBA also wrongly presumed public pressure would curb Congress from running up deficits.

Critically, the law fails to unify the three portions of the budgetary process. When it was working on the CBA, the Joint Study Committee on Budget Control advocated a budget process with a trigger. If Congress failed to adopt a budget on time, the president’s budget would serve as the budget resolution. Appropriators then could go ahead and appropriate. Instead, CBA’s budget process is an uncoordinated hurly-burly. Each year, the president issues his budget, which Congress is free to ignore (Nothing in the CBA requires legislators to do anything with the president’s budget). Then Congress may or may not produce its own budget. The budget resolution it not a straitjacket. It is little more than a guide, and its enforcement mechanisms can be dodged to permit additional spending. Eventually, appropriators or leadership will move spending bills. It is the very antithesis of rational fiscal planning.

Over the years, Congress has made various repair efforts. Sensibly, it got rid of the CBA’s demand that Congress pass a second budget resolution each autumn. As deficits got worse in the 1980s and 1990s, Congress tried bigger fixes: the 1985 Gramm-Rudman-Hollings Act, which set decreasing annual deficit targets, and the1990 Budget Enforcement Act, which toughened enforcement of deficit reduction. In desperation, Congress effectively resurrected Nixon’s old impoundment power by establishing a line item veto (1996) to permit the president to zero out programs. The Supreme Court promptly struck it down.

None of these efforts fundamentally changed the budget process set by the CBA, but remarkably, Congress may have stumbled onto a model for a more workable Congressional Budget Act. The 2011 Budget Control Act came after Republicansrefused to raise the debt ceiling without budget cuts. The BCA is less than 30 pages in length, and its provisions are far easier to understand and obey than the CBA and its budget resolution.

The BCA is potent policy that packed a big trigger. A joint committee had to report a plan for cutting the federal deficit by $1.5 trillion over 10 years. If the committee (popularly known as the “super committee”) failed to report—which it didn’t do—or if Congress did not approve this plan under expedited procedures, the BCA’s $1.2 trillion in automatic cuts (“sequestration”) would kick in. The statute also provided a joint executive-legislative process to increase the debt ceiling.

Today, the Budget Control Act, slightly modified, remains the law of the land. Effectively, it supplanted the CBA by taking from Congress’ hands the CBA’s annual question, “How much should we spend?” The BCA locks in annual spending levels that Congress cannot exceed without passing a law. The sequester was never even supposed to go into effect—it was supposed to be so appalling that nobody would allow it to happen. Instead, Congress proved unable to steer around it, and now sequestration is doing what the Congressional Budget Act never did: controlling spending and deficits. 

Forty years after the Congressional Budget Act, we find ourselves in a strange place. Clearly, allowing a president to thwart Congress’ spending decisions willy-nilly was a problem. Few today would trust Congress enough to return to the pre-CBA, leave-it-to-the-appropriators approach. Sticking with the CBA’s byzantine process would be nuts. Four decades of failed budgeting shows that the CBA should be blown up. Yet, nearly everyone on Capitol Hill hates the BCA’s sequestration. Its cuts are not rationally apportioned among spending priorities. It chops spending across the board, with half falling on defense and the rest on non-defense. Failed, wasteful programs get nicked the same as smart ones.

Any effort to improve the federal budget process is going to have to find a middle road between the CBA and the BCA. A better budget process would give the president and Congress skins in the budget game, and force their hands to make hard decisions. Annual spending caps are effective, but they cannot be set too stringently. Pace Dick Cheney, deficits do matter, so budgeting should empower both tax and entitlement policy reform. Congress needs to participate in budgeting decisions, but plainly the CBA has asked too much of it.

The estranged legislative and executive branches

October 21, 2015, 7:11 AM

Hugh Heclo’s A Government of Strangers, published 40 years ago, described the very different worlds of high-level federal appointees and the civil-servant worker bees they purportedly manage. Today that sort of estrangement has spread beyond agencies to the first and second branches of government, with toxic results.

Government Disservice: Overcoming Washington Dysfunction to Improve Congressional Stewardship of the Executive Branch reports that the legislative and executive branches are badly discordant: “There is a pervasive sense that those running executive branch agencies and those serving in Congress often live in parallel universes—a condition that many believe has grown worse over time.”

This estrangement has real consequences because, as the nonprofit Partnership for Public Service note in their report, the two branches share responsibility for governing:

Congress influences executive branch action in four primary respects: budget and appropriations; legislation to shape policies and programs; oversight of the agencies and the programs and policies they administer; and political appointee confirmation. Breakdowns or lapses in each of these areas have contributed to consequential dysfunction of the executive branch, playing out in many ways that have hindered government from carrying out domestic and foreign policies, and serving the needs of our country’s citizens.

The report is based upon dozens of interviews with congressional and bureaucracy veterans. Intense partisanship within Congress certainly is creating problems. For example, when the House and the Senate cannot agree on appropriations, the bureaucracies suffer. It is they who bear the brunt of preparing for furloughs, disruptions in operations, delays in contracting and the like.

But equally problematic is that the two branches have gone beyond rivalry to hostility. The report explains that agencies feel Congress has turned oversight into a game of “gotcha.” A former federal executive groused: “It’s really hard for me to think of Congress as serious. There is a partner on the other side of the executive-legislative interaction that in general is focused overwhelmingly on politics.”

There also are those in the executive branch who think Congress tends to be policy ignorant. Some staff, said a former Obama administration official, are policy fluent, “[b]ut they are overwhelmingly in the minority. Congress isn’t incentivized to be experts; they’re not accountable for policy outcomes.”

Meanwhile, some in Congress feel the agencies disrespect them and forget to whom they are accountable. “Agencies don’t tend to come up to Capitol Hill and be completely transparent,” observes a former Capitol Hill aide and political appointee. “They often provide marketing materials instead of direct answers.” Agencies do themselves no favors when they forbid civil servants to testify before Congress and send only appointees, who mouth the administration’s positions.

Government Disservice suggests a number of reforms. For instance, agency leaders should remember that interpersonal relationships matter. Top bureaucrats should meet with members of their oversight committees and their staff. Legislators, for their part, should visit agencies to “interact with political and career staff and learn more about management and program challenges.” Adopting biennial budgeting, the report suggests, could stop the trauma inflicted on agencies by government shutdowns and threatened funding gaps.

Rebuilding trust between the branches is critical to reestablishing good governance. However, much of that work will have to be done by Congressional staff. Representatives and senators are outside Washington, D.C., more days than not. Today’s federal government is huge and extraordinarily complex, a $3.9 billion conglomerate of 120 agencies and dozens more affiliated commissions, boards and panels. Understanding something so large and complex requires many legislative staffers equipped with the proper time and encouragement from their bosses.

In recent debates, Congress has cut the size of its staff and those at support agencies (like the Government Accountability Office). Adjusted for inflation, the legislative branch has reduced its own funding over the past decade. Why? Because nine out of 10 members of the public mistakenly believe that Congress is overstaffed. In fact, Congress is severely understaffed. Ironically, more and more of what legislative staff are left spend their days responding to the public’s emails and tweets and burnishing their bosses’ brands. That means fewer and fewer are working on policy.

To reverse the poisonous estrangement between the branches, Congress first needs to quit being penny-wise and pound-foolish and beef up its staff and support agencies. Then, both Congressional and executive branch staff should schedule regular meetings to discuss which policies are working and which are not. In a time of high national debt and tight budgets, it is all the more critical to weed out failed programs and allocate funds to those that work. With time and effort, both branches can see that good governance can be a win-win proposition.

Benghazi and shopping for health care

October 20, 2015, 12:56 PM

From Bloomberg:

Kevin Kosar and Anthony Madonna look at a Senate that is increasingly difficult to govern without sharp restrictions imposed by the majority leader — measures that Republicans blamed on Harry Reid, but which Mitch McConnell has adopted as well.