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R Street hosting two energy events on Capitol Hill this Wednesday

September 15, 2014, 10:48 AM

The R Street Institute will be hosting two energy events on Capitol Hill this Wednesday, September 17. We hope you can join us for one or both of them! Please see below for more details and how to RSVP for each event.

Wednesday, September 17:


12:00 PM: New Greenhouse Gas Regulations: What Does It Mean for Consumers, Industry and Stakeholders?

The R Street Institute and American Action Forum will host a discussion on the Environmental Protection Agency’s (EPA) new proposal to reduce greenhouse gas emissions from existing facilities across the electricity sector. Our event will focus on the impacts of the EPA’s regulations on consumers, states, industry, and other stakeholders. The event will feature keynote remarks by Council of Economic Advisors Chairman Jason Furman. The panel following will be moderated by Erica Martinson from POLITICO and feature Douglas Holtz-Eakin of the American Action Forum, Lori Sanders of the R Street Institute and Adele Morris from Brookings.

The discussion will take place in the Dirksen Senate Office Building, room G11. This event is open to the public and the press. Please RSVP by clicking here

 

3:00 PM: Forum on the Economics of Civil Nuclear and the Role of Research and Development

The R Street Institute is pleased to invite you to a forum on nuclear energy policy. The House Committee on Science, Space and Technology and the minority of the Senate Energy and Natural Resources Committee are the forum’s honorary co-hosts. Members of Congress, including Rep. Lamar Smith, R-Texas, will be on hand to present their ideas. Participants, in a roundtable format, will exchange views on trends in domestic and global markets, the importance of a dynamic and robust R&D program and international cooperation, and the role in government advancing civil nuclear power. The discussion will provide input to potential legislation. Confirmed roundtable participants include representatives from academic institutions, EnergyWire, Exelon, FirstEnergy, General Atomics, the Japanese Ministry for Economy, Trade and Industry, the Korean Atomic Energy Research Institute, the Nuclear Energy Institute, the Nuclear Infrastructure Council, Nuclear Intelligence Weekly, the U.S. Department of Energy and U.S. National Labs.

The discussion will take place in the Rayburn House Office Building, room 2318. This event is open to the public and the press. A reception will follow at 5:00pm in Rayburn 2325. Please RSVP by clicking here.

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

Hiking the minimum wage won’t help the poor

September 15, 2014, 9:32 AM

The ground has been shifting in the battle over the minimum wage. With President Obama’s proposal to hike the national minimum from $7.25 to $9 an hour stalled in Congress, local labor activists have been aiming even higher, getting behind a vastly higher minimum wage of $15 an hour.

The proposals are gaining steam. The small city of SeaTac, Wash., which includes Seattle-Tacoma International Airport, already has a $15 minimum in force, while Seattle plans to implement one over time. Similar “super-minimum” proposals also are under consideration in cities like San Francisco and Chicago. Recent state-level legislation will phase in a minimum wage of greater than $10 in California, Connecticut, Maryland, Hawaii and Vermont. Massachusetts’ minimum will rise to $11 by January 2017, while the District of Columbia’s is set to rise to $11.50 by July 2016.

Predictably, market advocates and business interests warn that such laws portend disaster: layoffs, benefit cuts, huge surges in consumer prices, mass unemployment and business closures. Just as predictably, labor unions and their allies on the left paint the subject in terms of “fairness,” arguing the higher wages will be paid out of what one SEIU lawyer called “billions and billions” in “extra” profits earned by fast food restaurants and others.

In truth, while the proposals are deeply flawed, the projections of economic catastrophe are at least somewhat overblown. The best reason to oppose a $15 minimum wage is that it’s a bad way to help the very people it is intended to help.

Though the economic literature on the subject is mixed, a comprehensive review done in 2013 by the National Bureau of Economic Research found most studies do find a small but measurable increase in unemployment in response to minimum wage hikes. The effects tend to be concentrated in a few industries that employ lots of low-wage workers, often teens and seasonal employees.

That a rising minimum wage would have only a small impact on unemployment shouldn’t be terribly surprising, because government regulation doesn’t have that large an immediate effect on jobs anywhere. The Bureau of Labor Statistics regularly asks employers the reason behind layoffs. Those attributed to “government regulations/intervention” are routinely less than 0.5 percent of the total.

Both because they want to take care of their employees and because they would lose customers if service levels get cut sharply, business owners will avoid layoffs if they can. Nor are the costs of higher minimum wages simply passed on to customers. While a portion of almost any cost increase will almost certainly be passed on to consumers in the form of higher prices, price competition alone means that consumers will rarely have to pay all of it. Instead, businesses may look to cut the cost of non-labor inputs, or to slow cost-of-living adjustments, cut raises for employees earning more than the minimum wage, or increase employees’ share of health-care costs.  And yes, some will accept lower profits.

Of course, none of this makes a vastly higher minimum wage a good idea.  Higher labor costs will encourage businesses to automate more tasks and, over time, look for creative ways to avoid filling vacancies.  This will encourage elimination of many of the easiest-to-replace jobs.  And while mass insolvencies and rampant unemployment may be unlikely, there will certainly be some effect. Some already teetering businesses will almost certainly be pushed over the edge and some jobs that could have been taken by teenagers, the disabled and those lacking familiarity with work itself will never be created in the first place.

What’s more, raising the minimum wage is simply a terrible way to help the poor. Only about 7 percent of those below the federal poverty line work a full-time job of any sort. Meanwhile, many of those who earn the minimum wage aren’t poor at all. Roughly 42 percent live with a parent or relative, while another 18 percent are married second income earners, which helps explain why the average family income of a minimum wage earner is $53,000 per year.

Expanding the Earned Income Tax Credit, a direct subsidy for those who work for modest wages, is a much better and much more direct way to help the working poor. Changes to healthcare, nutrition and education programs could do still more to help those in poverty. By comparison, a $15 minimum wage, even if not as disastrous as some market advocates claim, is likely to do more harm than good.

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September 12, 2014, 4:16 PM

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Events

September 12, 2014, 4:13 PM

The Friday Five: Questions to get your conversations going this weekend

September 12, 2014, 2:29 PM
  1. The Alabama Education Association (AEA) in crisis – This week, former AEA head Paul Hubbert penned a bombshell letter to members of the AEA board highlighting a crisis at the organization caused by “both internal and external threats.” The AEA under Executive Secretary Henry Mabry has unsuccessfully waged war against Republicans and a number of education reforms in Alabama. Would the AEA have had better success with different, more collegial, tactics? Does Hubbert’s letter signal the end of an era for a powerful AEA or can AEA’s leadership change direction in time?
  1. The death of an honorable corporate titan – S. Truett Cathy, Chick-fil-A’s founder, died at age 93. Cathy turned a simple chicken sandwich into a multi-billion dollar empire. Cathy has been quoted as saying, “We live in a changing world, but we need to be reminded that the important things have not changed. I have always encouraged my restaurant operators and team members to give back to the local community. We should be about more than just selling chicken, we should be a part of our customers’ lives and the communities in which we serve.” Is there something to Cathy’s vision that businesses should be more than dollar-chasing machines?
  1. Obama details the fight against the Islamic State – On Wednesday, President Obama addressed the nation and clarified his vision for defeating the IS. “Our objective is clear,” said Obama. “We will degrade and ultimately destroy [IS] through a comprehensive and sustained counterterrorism strategy.” He mentioned more than 150 airstrikes already executed against IS and increasing “our support to forces fighting these terrorists on the ground.” Does Obama need congressional approval under the War Powers Resolution? Given America’s history in the region, are we potentially arming our next enemy by supporting the native opposition to IS?
  1. The bigger and biggest iPhones – Apple announced the iPhone 6 and iPhone 6 Plus this week with the catch phrase “Bigger than bigger.” That’s right. The main selling point is that they are bigger phones…like those currently on the market from Samsung and other competitors. Apple expects to sell out of the new phones as soon as they hit the market. Is Apple really the innovative company it was under Steve Jobs, or are you already waiting in line for your new iPhone?
  1. Senate Democrats push constitutional measure to limit speech related to campaigns – Sen. Tom Udall, D-N.M., and many of his Democratic colleagues in the Senate failed 54-42 in their attempt to pass S.J. Res 19 which creates a constitutional amendment to allow government officials more control over political expenditures and contributions. The purely political measure was designed to give Democrats the talking point that Republicans want to protect the ability of major donors to influence elections. Republicans countered by claiming that Democrats are attempting to stifle political opposition in direct conflict with the intent of the First Amendment to the Constitution. Who has the better argument? Which party takes a bigger political hit from the failed legislation?

And that’s your Friday Five. Feel free to discuss the topics in the comments section below. Be safe, have fun and invite the neighbors over for dinner and conversation.

New England Journal of Medicine downplays its error in exaggerating youth e-cigarette data

September 12, 2014, 2:11 PM

Last week, the New England Journal of Medicine inflated a study of mouse brain activity with nicotine into a gateway-to-cocaine claim. This week, I report that the journal never properly fixed an error it made regarding e-cigarette use among children.

I reported on April 9 that “the New England Journal of Medicine and authors of a commentary on e-cigarette use ignored our call for correction of a substantial error regarding e-cigarette use among American schoolchildren in 2011 and 2012.”

The following day, Dr. Fairchild, first author of the commentary and professor of socio-medical sciences at Columbia University, emailed me: “We have, in fact, been talking with NEJM about the graph. I’ll let you know what happens.”

No further communication was received from Dr. Fairchild, but on June 12, the journal published its idea of a correction in the form of a revised bar chart, which appears on the left. The revision involved changing a stacked bar chart to a side-by-side chart, with the entirely insufficient note that “some students may have been included in both categories.”

May have been? It is clear from the CDC reports (here and here) that the original article double-counted a large number of dual users of both e-cigarettes and cigarettes. The journal should have corrected the error by issuing a chart we provided (the chart at right), illustrating the huge proportion of dual use.

Why did the journal “revise” the presentation of data, rather than acknowledge and correct a significant error regarding dual use of e-cigarettes and cigarettes among American youth? One could conclude that an anti-tobacco bias overrode standard editorial policy.

A negative income tax beats both the minimum wage and welfare

September 12, 2014, 1:59 PM

Recently, there have been demonstrations by fast food workers and labor unions calling for an increase in the minimum wage from the current $7.25 per hour to a whopping $15 an hour. This comes as recent reports show that more than 35 percent of Americans receive some kind of welfare benefits, whether they be SNAP, Medicaid, TANF, WIC or some other program.

Raising the minimum wage would likely raise unemployment and having more than a third of the population on public assistance is not sustainable. But there is one idea policymakers could use to combat poverty while encouraging work. Devised by Nobel laureate Milton Friedman, the negative income tax would address low-wage employment while simultaneously steering welfare recipients to work, rather than collecting benefits.

Problems with the minimum wage

The biggest problem of the minimum wage is that arbitrarily raising it can destroy jobs. As businesses’ labor costs increase, they erode profit margins. In order to maintain profits, they will have to raise prices or reduce costs, including labor costs.

The minimum wage harms low-skilled workers because it prices their labor out of the market. As the price of labor goes up, employers will seek to streamline or automat processes, and invest payrolls in more skilled workers. This makes it tougher for those entering the workforce, particularly teenagers, and those trying to re-enter the workforce, such as after a stint in prison or in a substance abuse rehabilitation program.

For the most, the minimum wage does not actually help poor families. Economist David Neumark noted in a recent piece that only 17 percent of those who make minimum wage are actually members of poor households. Most are members of families in which their minimum-wage job provides just a small percentage of family income.

Problems with welfare

Studies demonstrate that welfare programs can discourage positive behaviors such as work, marriage and investment in education. Welfare programs tend to be structured with what economists call massive “tax cliffs,” in which benefits phase out as income increases in a way that it becomes more expensive to get off of them by working to improve one’s self. It’s hard to think of a more perverse disincentive to encouraging Americans to become more self-reliant than the current social safety net.

There needs to be a solution that doesn’t discourage work, while at the same time encouraging productive social behaviors such as obtaining an education and getting married. Meanwhile, most citizens believe it is reasonable to provide a basic safety net to prevent Americans from being unable to feed, clothe or shelter themselves for reasons of both compassion and to maintain order in American society. History shows a correlation between people being unable to feed themselves and violent revolution.

Why a negative income tax?

A negative income tax is the best way to eliminate the pitfalls of both the minimum wage and the failed, bureaucratic welfare state. The NIT would function as a basic minimum income that would get cash to the people who need it without the red tape of bureaucracy and benefit rules. Since it is a cash payment that can be spent on anything (rather than a voucher-type system) and it is done through the tax code, there is no need for special welfare fraud enforcement.

The NIT, especially when combined with tax reform that sets a decent-sized gap between the income ceiling to qualify for NIT payments and the income level where income and payroll taxes would apply, can eliminate the perverse incentives in the welfare state against work, education and marriage. Unlike the current welfare state, an NIT can serve both as a safety net and as a springboard to help recipients improve their lives. Since an NIT only covers the gap between between what someone makes and a certain basic income, there is no penalty for getting a raise that puts you over the income threshold.

How would it work? The government would set a basic income amount, perhaps at 130 percent of the poverty threshold as defined by the U.S. Census Bureau. The poverty threshold is essentially the amount of money determined annually to feed, clothe, shelter a person or family in the United States. For a family of four, including 2 children, according to the latest figures available from 2013, the threshold would be $23,624 per year, such that 130 percent of that total is $30,711.20.

The NIT would pay out benefits every month, rather than once a year, as is the case with the current Earned Income Tax Credit. The only paperwork difference would be that W-9s would be submitted monthly instead of annually. For a family of four, basic monthly income would be $2,559.25. If the family earned $2,000, they would receive a check for $559.25. The funds could be deposited directly, like Social Security, without the red tape and restrictions of the current multitude of welfare programs.

The biggest objection that can be articulated is that a NIT still would discourage work by being paid out to the unemployed. Of course, one could retain the unemployment insurance program and count those benefits against the NIT threshold. For those who simply refuse to work, the NIT rate could be adjusted downward, say, for those who report no income for six months straight. If they bring in no income for another three months straight, it could be reduced again.

If crafted correctly, an NIT can replace the welfare bureaucracy and its perverse disincentives and it can actually encourage work and achievement and break a cycle of dependence. Also, by eliminating the minimum wage, an NIT can possibly help increase employment and help low-skilled workers enter the workforce. It’s a public policy solution that policymakers should seriously consider as we consider overhauling the welfare state for the 21st century.

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

From the world’s greatest leaders to an American leadership vacuum

September 12, 2014, 1:54 PM

Take a minute to list the top three American leaders of the past half-century. It does not matter whether they are politicians, religious leaders, or social reformers. Focus on the greatest examples of leadership. For many, names such as Ronald Reagan, John Kennedy and Martin Luther King Jr. come to mind. Other examples might include Billy Graham or even Henry Kissinger.

Now, name the greatest leaders of the last 10 years. The question becomes much more difficult. Part of the challenge is that the passage of time frequently gives way to nostalgia. The more controversial aspects of the leaders are forgotten and their agreed-upon virtues are more easily celebrated.

At the same time, the quality of leadership does seem to have changed markedly. Earlier this year, Fortune magazine released a list of the World’s 50 Greatest Leaders. While it only represents one perspective, President Obama did not make the list at all. How is the “leader of the free world” not an automatic inclusion on virtually every list of great living leaders?

Does former President George W. Bush engender the kind of respect attributed to a great leader? How about John Boehner or Harry Reid? Are George Soros and the Koch brothers inspirational reformers?

We have plenty of smart, capable individuals who helm our government, industry and culture, but we are currently experiencing a leadership vacuum. Many of us have become accustomed to identifying leadership by position rather than character because we have so few examples of the latter.

Many of our government heads and corporate leaders have become predictable functionaries. They perform their roles, stay on message and then move on to the next task. The job is done, the world moves on, but it frequently feels plastic and uninspired.

We might happen to agree with them, but would we follow them into uncharted territory? Do we continue to respect them when they disagree with us? Are they able to convince us to sacrifice our immediate self-interest for grand ideals?

In his famous “Letter from a Birmingham Jail,” Martin Luther King, Jr. critiqued the church for being “a thermometer that recorded the ideas and principles of popular opinion” rather than “a thermostat that transformed the mores of society.”

Many of our positional leaders have become thermometers for popular opinion rather than courageous visionaries. People are rarely disturbed or inspired by those who operate in such a manner. We would be just as well to have a direct democracy if polls were an effective method of guiding our nation. Regrettably, history has demonstrated that public popularity is no safeguard against destructive ideas or institutions.

For that reason, America was established as a republic with divided power, checks and balances, and safeguards against runaway public sentiment. Yet such a model requires leaders willing to cut against those popular opinions, win the hearts and minds of many, and suffer the slings and arrows of the rest.

Perhaps the greatest challenge to filling America’s leadership vacuum is finding those willing to accept its cost. With constant exposure, endless criticism and a tumultuous world stage, it is hard to blame anyone reluctant to serve as a thermostat for our nation, rather than solely a thermometer for their constituents, customers or congregations.

While a nation of free people should have a healthy suspicion of its leaders, we find ourselves in desperate need of men and women with character, a clear perspective on a brighter future, and a patient resolve to help us see and strive for it.

Auto insurance is cheaper in St. Louis

September 11, 2014, 4:52 PM

From St. Louis Post-Dispatch:

“There is definitely correlation between population density — and thus traffic density — and insurance rates,” said Eli Lehrer, president of the R Street Institute, a free-markets research group, said in a press release. “That’s why you see really crowded cities like Los Angeles and New York near the top of the list, while cities like Charlotte and Cleveland are near the bottom.”

What’s new with TRIA? Nothing at all

September 11, 2014, 4:46 PM

From PropertyCasualty360:

R.J. Lehmann, editor-in-chief and a senior fellow of the R Street Institute, a conservative Washington think-tank, said House Republicans appear to have been unable to secure enough votes to push through legislation reported to the floor by the House Financial Services Committee in July over the next two weeks.

That legislation, H.R. 4871, is already onerous, effectively phasing out terrorism risk insurance for anything over than for nuclear, biological, radiological, and/or chemical (NBCR) events.

There appears to be some momentum in the House, according to Lehmann, to support passage of legislation in the current session that would raise the threshold for a federal backstop for terrorism risk insurance from the current $100 million to $250 million.

Reform and renew terrorism risk insurance

September 11, 2014, 11:42 AM

With Congress returning from its August recess this week for an abbreviated two-week session, one of the lingering bits of unresolved business is the fate of the 12-year-old Terrorism Risk Insurance Program, which is set to expire at year’s end.

Established in the wake of the Sept. 11 terrorist attacks, when many insurers and reinsurers pulled back on the availability of terrorism coverage, TRIP is a $100 billion federal backstop. The program was created by the Terrorism Risk Insurance Act of 2002, which also requires insurers in commercial lines of business to make terror cover available to clients who wish to purchase it. The act has been extended twice before, in 2005 and 2007, both times with modifications that shifted more of the burden from taxpayers to the private sector.

As the reauthorization debate plays out once again – a fight that unites conservative budget hawks with those on the left concerned with corporate cronyism, just as it unites both Democrats and Republicans from big city districts with the insurance and commercial real industries – we believe a responsible middle ground can be found to extend the program with reforms that further shrink its size and scope.

The global insurance and reinsurance industries have changed dramatically in the past decade, and the federal terrorism insurance program should be updated to reflect those changes. Faced with record levels of capital, the reinsurance industry has been clamoring for the opportunity to take on more catastrophe business, including coverage for terrorism.

In a report issued earlier this year, reinsurance broker Guy Carpenter found that multiline terrorism reinsurance capacity is now about $2.5 billion per program for conventional terrorism and about $1 billion per program for coverages that include nuclear, biological, chemical and radiological attacks. That far exceeds not only the $100 million threshold that currently triggers coverage under TRIA, but it even exceeds the more aggressive $500 million trigger for non-NBCR events proposed in legislation passed in June by the House Financial Services Committee.

Indeed, as the Financial Times noted earlier this summer, it has become increasingly common for reinsurers to withdraw the terrorism exclusion clauses on which they once insisted. More recently, the head of war and terrorism coverages at the insurance brokerage Lockton Cos. observed that the London market “remains highly capable and willing to offer capacity to almost any country in the world, with 158 countries enjoying the comfort of terrorism cover currently.”

These changes in the fundamental market dynamics suggest a significant shift of risk to the private sector is in order. Among the changes we at the R Street Institute have proposed are that Congress require private insurers pay an upfront premium for the terrorism reinsurance they receive from the federal government. Currently, the only payments required are post-event reimbursements for a portion of the funds expended, which in the case of a particularly large attack may be waived by the Secretary of the Treasury. We also believe TRIP should cease offering coverage for commercial liability insurance, as there may be moral hazard involved in subsidizing firms that are reckless in their preparations for terrorism.

Alas, neither of those ideas are currently on the table, either in the TRIA extension bill under consideration in the House or the one passed by the Senate in July. Of these, the House bill comes much closer to the kinds of significant but responsible reforms needed to protect taxpayers and ensure a functioning private market. In addition to raising the trigger level for conventional terrorism attacks, the House bill would lower the federal government’s share of payouts and peg the amount of risk the industry retains to the amount of coverage private insurers write.

In an early test of the House bill’s prospects, it reportedly failed to pass a whip count, suggesting it will be challenging for leadership to find a balance between members who believe the reforms go too far and those who insist they do not go far enough. More recently, reports have emerged that members on converging on a compromise that would raise the trigger level to $250 million.

Whatever numbers Congress ultimately agrees to, lawmakers should be aware of this: markets are fully capable of taking on more terrorism risk and it clearly would be in taxpayers’ interest to let them.

 

Lehmann: It’s time to both renew and reform terrorism risk insurance

September 11, 2014, 9:49 AM

From PropertyCasualty360:

R.J. Lehmann, the editor-in-chief and a senior fellow with th R Street Institute, a conservative think tank in Washington, DC, writes in Thursday’s edition of The Hill, that the Terrorism Risk Insurance Program not only needs to be renewed this session, it needs to be reformed as well.

The problem? The program as it stands is simply too big.

Metro Denver has sixth-least expensive car insurance in the nation

September 11, 2014, 8:50 AM

From the Denver Post:

Eli Lehrer, president of the nonprofit research group The R Street Institute, said there is a correlation between insurance rates and population density — and thus traffic density. “When you have more cars on the road, you have a greater likelihood of accidents and claims.”

This explains why cities like Los Angeles and New York have among the highest insurance rates, he said.

New York ranked second among the 25 cities with premiums that averaged 36 percent above the average. Los Angeles ranked fourth with premiums 25 percent above average.

State regulations also influence prices, Lehrer said in the study.

“Metropolitan areas centered in Illinois — where there’s no rate regulation — and Ohio — where there’s very little — have lower average rates than those in California, where rates are regulated in a great detail,” said Lehrer.

 

Nicki Minaj and the rule of law

September 10, 2014, 2:34 PM

Conservatives have long stood for the principle that the state ought to abide by the rule of law. Application of the law ought to be uniform across all actors and it should sufficiently transparent that pleading ignorance is equivalent to pleading negligence.

This has been true throughout history, from Edmund Burke denouncing the English throne’s violations of the American colonists’ rights right on through to modern conservatives’ jeering of Nancy Pelosi;s infamous “we have to pass the bill to find out what’s in it” gaffe. As Justice Antonin Scalia observed in Crawford v. Washington:

We have no doubt that the courts below were acting in utmost good faith when they found reliability. The Framers, however, would not have been content to indulge this assumption. They knew that judges, like other government officers, could not always be trusted to safeguard the rights of the people; the likes of the dread Lord Jeffreys were not yet too distant a memory. They were loath to leave too much discretion in judicial hands. 

Judge George Jeffreys, to whom Scalia alludes, was famous as the “Bloody Judge,” known to hand out death sentences for practically any offense. So iconic is Jeffreys’ menacing image that Christopher Lee even played him in an exploitation horror film which centered on the judge as the villain.

Were he alive today, one imagines Judge Jeffreys would have felt perfectly at home with the thoroughly nontransparent and often arbitrarily applied copyright damages regime. Not only do U.S. courts frequently hand out draconian punishments to those who fall afoul of copyright law, but they do so with neither predictability nor transparency. In line with Rep. Pelosi’s thoughts on Obamacare, the theory underlying copyright damages seems to be “you have to steal the property so you can find out who owns it.”

By way of example, consider Nicki Minaj’s song “Anaconda,” which currently stands at number the on the Billboard Hot 100 chart. The tune samples heavily from Sir Mix-a-Lot’s sleeper 1992 hit “Baby Got Back,” which itself drew from the 1986 single “Technicolor” by Channel One. The most prominent borrowing in Minaj’s song can be found in the chorus, which repeats Mix-a-Lot’s line: “My anaconda don’t want none unless you got buns, hun.”

Minaj’s army of agents, lawyers and other entertainment professionals no doubt were able to track down the rights-holder for Mix-a-Lot’s music, and there’s almost no doubt that Minaj could afford the rights to the song in question. However, if Minaj had been an independent artist and mixed exactly the same song – which, I repeat, is currently number three on the Billboard Hot 100, and so clearly has been judged to have artistic value by the market – the process might have taken an entirely different turn. She might never have found who owned the rights, and could have been sued for anywhere from $0 to a life savings’ worth of money for infringing this inaccessible owner. One of the year’s most popular songs likely could only have been made by an already-wealthy celebrity.

Unlike other forms of intellectual property, like patents, copyright claims in the United States do not have to be registered. That’s been true since 1989, when the United States signed onto the 19th century Berne Convention for the Protection of Literary and Artistic Works. Even for those copyrights that are registered, unlike patents, there is no comprehensive database where ownership can be checked.

As a result, the ownership of most copyrighted works – including songs, films, or even novel – cannot be publicly verified. In the case of music, private licensing agencies do maintain databases, but there is no guarantee that these are comprehensive or up-to-date, nor any requirement that they be. If you plan to sample music either as a musician, in your place of business or even on a karaoke machine, the only way to be absolutely safe is to pay membership fees to all three performing rights organizations – ASCAP, SESAC and BMI — even if you’ll never use the music that one provides. If you make a mistake, all the liability is on you.

This wouldn’t be so bad if it was possible to know how much you’d be expected to pay for violating a copyright, however unintentionally. But as Mitch Stoltz of the Electronic Frontier Foundation points out, this is exactly what you wouldn’t know if you got sued for a copyright violation:

U.S. law lets copyright holders ask for “statutory damages” in an infringement lawsuit. If a copyright holder proves its case, and asks for statutory damages, a jury decides how much the defendant must pay—anywhere from $750 to $30,000 per copyrighted work.1 If the court finds that the infringement was “willful,” the maximum per work jumps to $150,000.

A copyright holder who asks for statutory damages doesn’t have to show any evidence of harm, or that the defendant made any profit from the infringement. A copyright holder can, if she chooses, simply ask the jury to come up with a number…

The Copyright Act doesn’t give judges and juries any guidance on how to choose a number within the $750-$150,000 range. It only says that the amount should be “as the court considers just.”

Imagine if this were applied to any other system. Say you walked into an unlocked house, thinking it was abandoned. A stranger then walks in, has you arrested by claiming it’s his house (but produces no deed to this effect), claims you broke in (but never shows any sign of a broken lock) and the court not only believes him, but sentences you to between one year in prison and life in prison, leaving it up to your accuser to make the decision for them.

Judge Jeffreys couldn’t have designed a more dysfunctional system. Conservatives understand that, if copyright is going to be respected in the same way as other forms of property, its violation must be treated with the same predictability and transparency as other violations of property.

One excellent first step in this regard would be to at least add some guidance for courts on what damages should be. At least then, if any independent artists write the next “Anaconda,” they’ll know whether the rights holder will take a pound of flesh or their whole body.

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

Turkish rights and digital delights: an IGF recap

September 10, 2014, 11:13 AM

The annual Internet Governance Forum was established to foster an open, inclusive dialogue among the parties that “govern” the Internet. IGF is a conference designed, somewhat counter-intuitively, to maintain a unified Internet by decentralizing control. This year’s conference, held Sept. 2-5 in Istanbul, itself prompted spinoff events — the Internet Ungovernance Forum and the “Bye Bye Internet Freedom” press conference — that focused on government efforts to use the Internet to violate freedom of expression and rights to privacy, particularly in Turkey, the IGF host country.

Though they featured less than a quarter as many sessions as the official IGF, the spinoff events and Turkey’s free speech violations dominated the online narrative emanating from Istanbul last week. The most popular Tweets from the conference focused on the Turkish government’s censorship of the Internet:

Sad to learn of 51,000 websites currently blocked in #Turkey – not just Twitter, YouTube and sexual sites – and no transparency. #IGF2014

— Neelie Kroes (@NeelieKroesEU) September 2, 2014

Twitter users on trial while #Turkey hosts key UN Internet summit http://t.co/Nqd3B5usWm #IGF2014 #humanrights

— AmnestyInternational (@AmnestyOnline) September 2, 2014

Rogue cell phone base stations? Welcome to Turkey. #IGF2014 HT @ioerror pic.twitter.com/4R6JQWBML9

— Kevin Bankston (@KevinBankston) September 3, 2014

The Turkish government’s increasingly intense violations of freedom of expression and privacy rights were covered comprehensively at the “Bye Bye Internet Freedom” press conference organized by Reporters Without Borders. Representing the Turkish Association of Journalists, Human Rights Watch, Reporters Without Borders, Amnesty International and Turkey’s Alternative Informatics Association, the panelists itemized the government’s laundry list of human rights violations, both on- and offline. These include increased censorship of media, massively expanding powers of the national intelligence agency (MIT), increased surveillance of citizens and other privacy violations.

Amnesty International’s Andrew Gardner emphasized that Turkey’s increased censorship of social media platforms such as Twitter and YouTube should not be viewed in isolation; they are merely the online manifestation of a government that is intolerant to dissent in any format. His point, reiterated throughout the conference, was that we can’t talk about Internet freedom without talking about basic political freedoms and holding governments accountable for violating them. Cynthia Wong of Human Rights Watch warned that digital technologies leave citizens much more vulnerable to surveillance, as we leave digital trails that can be used as tools for greater government control. Turkey’s current prosecution of 29 Twitter users for nonexistent incitements to violence nicely illustrates the points.

Many at the spinoff events criticized that main IGF as too exclusive, purportedly having rejected nearly all workshops proposed by Turkish activists to advocate for freedom of speech. One attendee with organizing experience explained the proposed workshops did not follow IGF protocols, which place priority on panels and sessions that represent people from multiple countries with diverse viewpoints.

Garnering publicity by being staged “in protest,” the IUF and the press conference were more supplementary than incendiary in practice. They both provided more appropriate platforms to lodge pointed, critical attacks at government programs, notably in Turkey, that violate an open Internet and free expression.

Can a unified, global information network be maintained when we can’t even have a unified discussion about it? Does the fragmentation of the IGF discussion portend dangerous fragmentation of the Internet, in which splintered groups have separate but unequal access to information? Is the freewheeling multi-stakeholder ecosystem crumbling before our eyes and becoming too fractured to function?

I would argue no. Steeped in comedy, irony and identity crises, the IGF remains a place for players in all areas of Internet governance to come together in a necessary dialogue. With no cost to participate, the vast majority are truly there to build and grow a free and open information network. If only the same could be said for the ITU Plenipotentiary Conference.

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

Ray Rice’s knockout punch is ample reason to teach boys never to strike a woman

September 09, 2014, 2:13 PM

This week, the Baltimore Ravens released Ray Rice, their star running back, after additional video emerged of him knocking out his future wife, Janay Palmer, in an elevator altercation in Atlantic City, N.J. The National Football League also suspended Rice indefinitely.

The irony is that the NFL only suspended Rice for two games after a previous video of the same incident showed Rice dragging the unconscious Palmer from the elevator. After public backlash, NFL Commissioner Roger Goodell conceded that Rice’s punishment was too lenient and subsequently strengthened the NFL’s domestic violence policy.

Sadly, the difference between the two responses highlights the failed reaction to domestic abuse by many Americans.  It was not until Rice was caught on camera actually hitting Palmer that he truly felt the consequences of his actions.

Rice’s violent act is a more public example of a larger problem in our society. How many Americans have seen bruises and the look of fear in a woman’s eyes and thought of every plausible explanation other than the obvious?

Is that the best we can do for our wives, sisters and mothers?

If callously dragging someone’s unconscious body can plausibly be interpreted as “an argument that got out of hand,” then we need to reconsider our perspectives. Do we really need to see the blows on tape before we can respond?

I teach my boys that physical violence is never acceptable except to protect themselves or others from bodily harm. Admittedly, that exception is a hard line to walk and an even harder concept to convey to growing boys. The same strength that can be used to protect can quickly turn into a dangerous weapon.

That protective maxim has a further clarification: NEVER strike a woman. My boys ask all sorts of follow-up questions. What if she makes me mad? NEVER strike a woman. What if she hits me first? NEVER strike a woman. What if she takes my toys? NEVER strike a woman.

That life lesson is may not be politically correct or gender sensitive, but a man has no business ever striking a woman. Period.

The lesson carries important corollaries. If you see a man hitting a woman, stop him. If you suspect abuse, confront it. Men can have a significant impact on reducing domestic violence by setting an example and being willing to oppose domestic abuse as they encounter it.

We cannot afford to accept more excuses or continue to believe that a victim’s contributions to a conflict somehow mitigate extremely violent physical responses.

Tempers flare, people yell and they sometimes do things to hurt one another. That is a sad reality of humanity. At the very least, men should hold onto one rule no matter how tough situations become:

NEVER strike a woman.

Letter to U.S. Congress on the Electronic Communications Privacy Act

September 09, 2014, 2:06 PM

 

 

The Honorable Harry Reid
Majority Leader
U.S. Senate
Washington DC 20510

Dear Leader Reid,

We write to urge you to bring to the floor S. 607, the bipartisan Leahy-­Lee bill updating the Electronic Communications Privacy Act (ECPA).

Updating ECPA would respond to the deeply held concerns of Americans about their privacy. S. 607 would make it clear that the warrant standard of the U.S. Constitution applies to private digital information just as it applies to physical property.

The Leahy‐Lee bill would aid American companies seeking to innovate and compete globally. It would eliminate outdated discrepancies between the legal process for government access to data stored locally in one’s home or office and the process for the same data stored with third parties in the Internet “cloud.” Consumers and businesses large and small are increasingly taking advantage of the efficiencies offered by web‐based services. American companies have been leaders in this field. Yet ECPA, written in 1986, says that data stored in the cloud should be afforded less protection than data stored locally. Removing uncertainty about the standards for government access to data stored online will encourage consumers and companies, including those outside the United States, to utilize these services.

S. 607 would not impede law enforcement. The U.S. Department of Justice already follows the warrant‐for‐content rule of S. 607. The only resistance to reform comes from civil regulatory agencies that want an exception allowing them to obtain the content of customer documents and communications directly from third-party service providers. That would expand government power; government regulators currently cannot compel service providers to disclose their customers’ communications. It would prejudice the innovative services that we want to support, creating one procedure for data stored locally and a different one for data stored in the cloud. For these reasons, we oppose a carve‐out for regulatory agencies or other rules that would treat private data differently depending on the type of technology used to store it.

S. 607 was approved by the Judiciary Committee last year. We urge you to bring it to the floor. We believe it would pass overwhelmingly, proving to Americans and the rest of the world that the U.S. legal system values privacy in the digital age.

 

Sincerely,

 

Adobe
ACT | The App Association
American Association of Law Libraries
American Civil Liberties Union
American Library Association
Americans for Tax Reform
AOL
Apple
A Small Orange
Association of Research Libraries
Automattic
Autonet Mobile
Blacklight
Brennan Center for Justice at NYU Law School
BSA | The Software Alliance
Center for Democracy & Technology
Center for Financial Privacy and Human Rights
Cheval Capital
CloudTech1
Code Guard
Coughlin Associates
Competitive Enterprise Institute
Computer & Communications Industry Association (CCIA)
The Constitution Project
Council for Citizens Against Government Waste
Data Foundry
Digital Liberty
Direct Marketing Association
Disconnect
Discovery Institute
Distributed Computing Industry Association (DCIA)
Dropbox
DuckDuckGo
Endurance International Group
Evernote
Electronic Frontier Foundation
Engine Advocacy
Facebook
Foursquare
FreedomWorks
Future of Privacy Forum
Gandi
Golden Frog
Google
Hewlett‐Packard
Information Technology Industry Council (ITI)
The Internet Association
Intuit
Internet Infrastructure Coalition (i2Coalition)
Kwaai Oak
Less Government
LinkedIn
Media Science International (MSI)
Microsoft
NetChoice
New America’s Open Technology Institute
Newspaper Association of America
Oracle
Peer1 Hosting
Personal
Rackspace
Records Preservation and Access Committee
R Street Institute
reddit
ScreenPlay
Servint
Software & Information Industry Association (SIIA)
Symantec
Taxpayers Protection Alliance
Tech Assets
TechFreedom
TechNet
Tucows
Tumblr
Twitter
U.S. Chamber of Commerce
Yahoo! Inc.

The inequality of unisex pricing

September 09, 2014, 12:34 PM

Equality before the law is a foundational principle of American democracy. Many policymakers are proud to pursue efforts to realize that principle. Perhaps that is why, cloaked by a sense of constitutional righteousness, California legislators have adopted a high level of deference for proposals intended to achieve equality.

As a matter of politics or philosophy, their devotion is laudable. As a matter of policy development, their enthusiasm is sometimes misdirected.

One such equality-inspired proposal, A.B. 1553, seeks to prohibit long-term care insurance premiums from reflecting the cost differences between insuring men and insuring women. Authored by Assemblymember Mariko Yamada, D-Davis, AB 1553 may be well meaning, but by restricting insurers from using actuarially sound rating factors, it does more harm than good.

The very nature of insurance demands concessions to distinctions based on immutable physical realities. For instance: women live longer than men.

In the case of long-term care insurance, the product is designed to provide insurance coverage to people as they age and become infirm. It does so by spreading the cost of their care among a pool of similarly situated individuals. The fact that policyholders are charged a premium that reflects the risk of similarly situated individuals ensures that those who pose a greater risk of utilizing the coverage do not inflate the premiums of others, whose risk is less.

Because women live longer than men, and are more likely to utilize their coverage, their rates must be higher. In fact, according to the Society of Actuaries, their premiums should be between 15 and 30 percent higher than men. Failing this, adverse selection can occur.

Adverse selection is what happens when insureds have more knowledge about the likelihood of loss than an insurer does. Even the best case outcome of adverse selection – one group paying to subsidize the risk of another, more expensive group – is problematic. The worst case outcome is a “death spiral,” which becomes progressively more expensive until the market simply collapses.

The risk that unisex pricing poses to long-term care insurance is different than the doomsday scenarios espoused by the right concerning the Affordable Care Act. Unlike the health-care market under the ACA, which compels participation and in which the possibility of a death spiral is contingent upon the failure of the law’s penalties and subsidies, the long-term care market is structurally vulnerable to a death spiral as a result of its voluntary participation.

Consider the following scenario. Faced with prices that do not reflect the true cost of their risk, lower-risk individuals (men) choose not to purchase long-term-care insurance. They steadily abandon the market. When only high-risk candidates (women) enter or remain in the pool, policy premiums inevitably increase, since those providing subsidies are gone. Higher prices result in a cascading decrease in both demand and product availability, as companies withdraw from unprofitable lines of business.

Because there is such a strong actuarial case for treating men and women differently in long-term care, the consequence of not doing so is the potential removal of the product from the market. Therein lies the great calamity of Yamada’s bill.

Sham equality hurts those that it claims to help. Thus, in the context of long-term care rating, treating men and women differently is not pernicious – it is essential. Fortunately for California women, the bill died in the Assembly Insurance Committee, for lack of a second motion to proceed to a vote.

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

Official policy on ninjas

September 09, 2014, 8:42 AM

The R Street Institute, a free market think tank located in Washington, D.C., stands opposed to ninjas. Firmly. We believe that excessive fanboy/fangirl interest in ninjas is inconsistent with our free market ideology.

While we acknowledge that some ninjas may have a number of reasonably cool attributes—such as the ability to use shuriken and fukiya to carry out silent assassinations of those who opposed their daimyo—we do not encourage ninjas to work here. We will never hire an office ninja to carry out assassinations or offer employee training in ninjitsu. While we reimburse gym membership for employees, the reimbursement may not be used for any type of ninja training. Those who hold college degrees in ninja arts need not apply for any jobs that R Street offers.

In short, we discriminate against those who work as professional ninjas.

Our reasons for opposition to ninjas are many:

  1. Ninjas were not involved in the market economy. They swore oaths of fealty to their liege lords, usually daimyos. Since daimyos represented the state, they were basically just government bureaucrats. And we favor fewer bureaucrats, not more.
  2. Ninja’s covert ways of waging war were not consistent with our desire to get ourselves in the media. A ninja would not do well during a talk radio interview, for example.
  3. Pirates are much, much, much cooler than ninjas in all respects. We explain why here.

We have likewise refused to swear fealty to any daimyo and, indeed, maintain a firm policy against any participation in the four-tier system of Japanese feudalism.

Local governments should reform to encourage broadband investment

September 09, 2014, 8:03 AM

WASHINGTON (Sept. 9, 2014) – Local governments should explore ways to cut taxes, fees and regulations to spur renewed investment in broadband infrastructure, according to a new paper released today by the R Street Institute.

The paper, “Alternatives to Government Broadband,” authored by R Street Associate Fellow Steven Titch, argues that government-run broadband projects have largely failed. By contrast, the recent example of cities cutting through red tape for the roll-out of Google Fiber serves as a model that should be expanded to all competitors in the broadband market.

While the U.S. broadband industry invested $1.2 trillion in capital expenditures from 1996 through 2012, investment plummeted during and following the dot-com crash of the early 2000s, falling from a peak of $118 billion in 2000 to just $57 billion in 2003. Annual nominal capital expenditures have been roughly flat since 2005, still coming nowhere near their turn-of-the-century peaks.

“As service providers make decisions about where and when to build or add broadband capacity, upfront and ongoing costs are a significant factor,” writes Titch. “Cities and towns that make adjustments and reforms to their legacy utility regulations and fees will reduce barriers to investment and signal they want the private sector to succeed.”

Titch lays out several ways municipalities can achieve this goal, including abolishing unnecessary taxes and fees to enter the market; to the extent feasible, making requirements uniform across all broadband technologies; and making it easier to use the existing infrastructure and build new infrastructure where needed.

Google Fiber has been able to strike attractive deals with cities it has chosen for its new 1 Gbps broadband service, and 34 new cities have applied to lure Google Fiber to their area in the next round of development. Municipalities would do well to extend similar breaks on franchise fees, right-of-way costs and other regulations to incumbent service providers and any other new competitors who can provide the same level of service.

“Perhaps the ideal solution is being missed because it is so obvious. Reduce or repeal taxes, eliminate outdated regulations and bureaucracy, and broadband investment will increase,” Titch wrote. “Competitors will be willing to enter a market against entrenched incumbents. Incumbents will raise investment.”

The full paper can be found at:

http://www.rstreet.org/wp-content/uploads/2014/09/RSTREET27.pdf