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A maddening whiskey shortage

March 30, 2016, 10:40 AM

Tennessee is known for many things: country music, Elvis’s Graceland estate, beautiful mountains, and fine liquor. The state produces both moonshine (some of which is now being made licitly) and its own kind of whiskey. Like bourbon, nearly all Tennessee whiskey is made mostly from corn and aged in new charred oak barrels. Distillers in the Volunteer State go a step further and run the liquor through sugar-maple charcoal before putting it in cask.

Tennessee also is a case study in corrupt, consumer-unfriendly alcohol politics. Consider: Jack Daniel’s is an iconic, global brand. The company recently announced a $140 million expansion of its operations, which comes just a few years after a $103 million build-out. More than a quarter-million thirsty tourists come to the distillery each year. Yet, Jack Daniel’s distillery in Lynchburg is located in a dry county. Really. Moore County (population 6,322) generally prohibits the sale of alcoholic beverages by shops and restaurants.

Moore County, it should be noted, is not an oddball. Until 2009, distilleries were permitted to operate in only three of Tennessee’s 95 counties. Perhaps in recognition that distilling jobs are economy-growing manufacturing jobs, the state Legislature lifted the cap to 44 counties.

It is a confounding situation. Every time an effort to make Tennessee’s alcohol laws more consumer-friendly and market-based, a political hullabaloo erupts. Most recently, the state considered making a technical change to its wine law. Under a 2014 statute, grocery stores are allowed to apply for licenses to sell wine as of July 1, 2016. But grocers and wholesalers were unclear whether the law allowed the shops to take delivery of the wine before July 1.

An easy-peasy legislative fix was in order. Instead, everything went bananas.

Rep. Curry Todd, R- Colliersville, moved to amend the bill with a provision that would limit any company from owning more than two liquor stores. Gov. Bill Haslam was annoyed and opponents of the nonsensical proposal accused Todd of being a tool for liquor stores that feared competition from big retailers, likeTotalWine.

Todd proclaimed he was motivated by public safety concerns:

This bill is not about protectionism. We’re selling distilled spirits. We’re not selling a piece of candy. As I was in law enforcement, I saw many families ruined with alcohol and drugs. I’ve seen many in jail or put many in jail myself. I had families that dealt with this issue. I have and others. So I know what it does to you.

Todd also said that he was not in anyone’s pocket except Jesus Christ’s.

The lugubrious cap legislation was first disapproved, then approved by committee, and now may be headed to the governor’s desk. As an apparent slap at Haslam, some legislators got behind a proposal to expand the number of commissioners on the Tennessee Alcoholic Beverage Commission and give the Legislature a bigger say in their appointments. Oh, then the state alcohol board’s head resigned without explaining why, and the acting director is going to quit soon to join a law firm.

Indubitably, some of the wild gyrations of Tennessee’s alcohol politics are due to religious fundamentalism. Old blue laws forbidding Sunday sales of wine and the display of sub-areola breast flesh in bars remain on the books, and some citizens espouse teetotalism.

But most of the political madness is motivated by something far more base—economic protectionism. Tennessee’s alcoholic-beverage-control regime is chock full of rules that protect various businesses from competition. For example, Section 57-3-806(e) of the code forbids a grocery store located within 500 feet of a liquor store from obtaining a permit to sell wine before July 1, 2017. Additionally, grocers may only sell beer and malt beverages (like Smirnoff Ice). Drinks retailers must go through an onerous process to dump one beverage wholesaler and buy beverages from another, etc.

In describing the Todd legislation, House Majority Leader Gerald McCormick, R-Chattanooga, captured the spirit of much of Tennessee’s regulation: “What we’re doing is we’re limiting competition… We’re not keeping people from drinking. What we’re doing is we’re deciding who makes the money off of it.”

And that, plainly, is the very antithesis of free enterprise and fair competition. In a saner world, the Tennessee Legislature would scrap the ABC code entirely and start anew. But that cannot happen until the state’s citizens demand better.

Job Listings

March 29, 2016, 4:00 PM
Director of Justice Policy

The R Street Institute, a pragmatic free-market think tank headquartered in Washington and with offices around the country, is seeking a director of justice policy to work on a variety of issues related to crime, corrections and policing. The position would focus particularly, but not exclusively, on juvenile-justice issues.

The person we hire will be expected to produce original research, write for the popular press and educate policymakers about a wide range of criminal-justice issues. In a typical week, the director of justice policy might write an op-ed; do a series of talk-radio interviews; review a proposal from an outside scholar; meet with Capitol Hill staff to answer questions about pending legislation; and travel to testify before a state legislature.

We favor extensive criminal-justice reforms, but do not want to return to the failed policies of the 1960s and 1970s. Policies that R Street favors include reforms to state laws that allow those under 18 to be tried as adults; changes to increase the effectiveness of sex-offender registries by limiting the number of low-risk offenders (particularly juveniles); and efforts to improve the integration of ex-offenders of all ages back into society. While we have established a significant agenda, the person we hire will be granted the time, support and resources to pursue personal passions and interests within the criminal-justice field and will play a role in shaping R Street’s ongoing work.

Candidates are advised to visit our website and read our work on criminal justice, as well as other issues. There’s no need to agree with everything that anyone at R Street has ever written or said, but the candidate should generally be comfortable with R Street’s positions. Moreover, while there’s no ideological litmus test for this or any other job at R Street, we do want to hire someone who appreciates and understands free markets and can communicate our message effectively to others on the political right.

An ideal candidate will have a record of published work related to criminal-justice issues; a demonstrated ability to create change in public policy; and practical experience in the criminal-justice system as, for instance, an attorney, corrections professional or law-enforcement professional. Having a graduate-level degree in law, criminal justice or a closely related field is a plus. However, accomplishments matter to us far more than credentials and candidates with excellent published written work will receive top consideration.

We don’t discriminate on the basis of race, creed, ethnicity, color, sex, national origin, sexual orientation, gender identity/presentation, veteran status, taste in music or anything else that’s illegal, immoral or stupid to use as a basis for hiring. We also do not inquire about criminal records in the initial stages of our interview process and an individuals’ past criminal record will not, by itself, disqualify him or her from employment at R Street in this role or any other.

The R Street Institute provides a top-notch work environment and salaries and benefits superior to those at similar nonprofits. Currently, our benefits package includes fully employer-paid health insurance (even for families); an employer retirement-plan contribution with no match required; employer-paid disability insurance; gym-membership reimbursement; a very generous vacation policy; and a wide range of other benefits.

To apply for this job, submit a resume, a brief cover letter in the body of an email and at least one writing sample on a topic related to criminal justice (a published writing sample is strongly preferred). You do not have to submit references with your initial application but candidates should be prepared to cite as a reference at least one person engaged in the world of criminal justice in a practical sense, such as a corrections official, law-enforcement official, prosecutor or public defender.

We will accept applications until April 29. We’ll reach out to candidates who appear promising for telephone interviews within a week or so of receiving their applications. Candidates who seem like good fits based on initial telephone interviews will be asked to do a short writing test and provide references.

For those with excellent writing tests and references, in-person interviews will be scheduled in our Washington offices May 9 and, if necessary, May 10. We expect to make a decision shortly thereafter. Candidates should be ready to start work no later than June 6, 2016, although we are willing to discuss other start dates with a selected candidate.

These dates may change based on the quality of applicants received and other factors. The email address for applications is justicecandidates@rstreet.org.

Neeley talks net metering on Bloggingheads.tv

March 29, 2016, 10:10 AM

R Street Texas Director Josiah Neeley sat down recently with Kevin Glass of the Franklin Center for Government and Public Integrity to chat at Bloggingheads.tv about net energy metering and the potential for other states to follow Texas’ relatively deregulated system for energy (a topic covered extensively in our recent policy study from Lynne Kiesling). The discussion ends with some thoughts on what a potential Donald Trump presidency might mean for energy markets, a topic Josiah blogged about here.

You can stream the full video below.

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

U.S. should look to Canada and Australia as examples of robust global energy markets

March 29, 2016, 8:08 AM

WASHINGTON (March 29, 2016) – Congress’ decision to lift the decades old ban on exports of U.S. crude oil should make the U.S. energy sector an attractive target for foreign investors. The next step for policymakers is to ensure those investments can be realized without compromising either free-market principles or national security, according to a new study from the R Street Institute.

“Fuel-supply insecurity is a thing of the past. Unrestrained export of crude oil embraces the free market and U.S. strategic interests,” authors Ariel Cohen and John Roberts write. “Allowing American oil companies to sell light crude overseas will encourage greater investment in U.S. domestic production, boosting oil revenues and creating jobs in exploration, production, transportation and shipping.”

Compared to peers like Canada and Australia, the United States is not especially hospitable to prospective foreign investors, particularly in critical sectors like energy, Cohen and Roberts note. In particular, the Committee on Foreign Investments in the United States (CFIUS) imposes an onerous application process that can be daunting to prospective foreign investors.

While supportive of elevated scrutiny for investments by government-controlled entities – particularly those from hostile or corrupt states or with links to terrorism – the authors argue the system should be streamlined to be less adversarial and more transparent. For instance, while elevated scrutiny is appropriate for foreign investments in energy-related transportation, refining and related infrastructure, which are tied closely to security concerns, it should be easier to attract foreign capital to upstream resources and activities, like exploration and production.

“Canada and Australia have similar foreign-investment consideration processes, yet have taken a less protectionist approach,” the authors wrote. “This has helped draw significant energy investment from foreign enterprises, bolstering resource development, energy security and job creation.”

In the current low-price oil environment, the U.S. energy industry will struggle to invest properly in the kinds of research and innovation that maintain improved domestic and global oil security in the future, Cohen and Roberts write. Mobilizing international sources of capital to fund development of and novel approaches to resource extraction will strengthen the industry over the long term.

“The U.S. government’s historic decision to overturn the export ban was an important victory, but more needs to be accomplished,” the authors wrote. “The gains in geopolitical strength, trade development and global oil security are already being realized. For national interests, the economy and global energy markets, free trade is the right choice.”

Predatory foreign investment and domestic energy security

March 29, 2016, 8:00 AM

The attached paper was co-authored by John Roberts.

U.S. energy markets started 2016 with good news. The 40-year-old oil-export ban, which long has hamstrung one of the world’s leading oil-and-gas producers, is now defunct. As of New Year’s Day, the first tankers of American crude oil left for Europe.

A relic of a bygone era, the ban initially was a response to the economic trauma of the 1973 Arab Oil Embargo, during which oil prices nearly quadrupled over the course of just six months. The embargo caused a dramatic global economic and security crisis and prompted many of the whiplash measures that were embedded in the Energy Policy and Conservation Act of 1975. It did not help that energy policy at-large, and oil policy in particular, were at the time still in thrall to a protectionist mindset that sought to preserve domestic resources and weaken the influence of foreign trade.

Times have changed radically in the proceeding four decades. With the advent of hydraulic-fracturing techniques and a better understanding of tight geologic formations, the North American oil-and-gas industry is booming. That boom has translated into a sea change in international energy markets. The Organization of Petroleum Exporting Countries (OPEC), dominated by Saudi Arabia, has been ineffective in its recent attempts to manipulate oil prices. Security crises in the Middle East no longer translate to price spikes at the gas station.

Lifting the oil-export ban is widely expected to boost U.S. gross domestic product, household incomes and job creation, not least by raising the value of U.S. oil-and-gas resources and stimulating fresh investment in the U.S. oil-and-gas industry. But the work now begins to ensure the domestic benefits of repealing the ban are realized fully. As this paper attempts to demonstrate, U.S. policymakers would be well-served to look to the examples of major energy producers, such as Canada and Australia, who have managed to attract massive foreign investment in their domestic energy sectors without compromising either free-market principles or national security. The United States must do no less.

SXSW Policy Happy Hour

February 22, 2016, 10:22 AM
03/12/2016 - 5:00 pm - 8:30 pm


Oklahoma ponders ‘California model’ for earthquake insurance

February 22, 2016, 9:00 AM

Oklahoma lawmakers are in the early stages of considering legislation to create a state-level “earthquake reinsurance program” that its author claims will be modeled on the California Earthquake Authority.

S.B. 1497, sponsored by Sen. Clark Jolley, R-Edmond, was introduced early in the legislative session and already has progressed through the Senate Insurance Committee. The bill authorizes the state’s elected insurance commissioner to create and organize a quasi-governmental reinsurance entity to assume losses Oklahoma residential property insurers might incur after a damaging earthquake.

Jolley argues the bill is needed because of what he fears will be a disruption in the state’s insurance market. After all, like California, Oklahoma is an earthquake-prone state. Of late, the Sooner State actually has experienced larger and more frequent temblors.

In a recent interview, Jolley described his vision for the bill. As he sees it, Oklahoma “would adopt a California-model earthquake reinsurance market, administered by the insurance commissioner upon a finding from him that there…[is] inadequate coverage.”

In the most general sense, that idea does have some likeness to the CEA. Like California’s authority, the proposed Oklahoma program is a statutorily created, privately funded entity that would bear earthquake risk. But that’s where resemblances to the CEA stop.

Though it may be counterintuitive, the CEA was not actually founded to provide earthquake insurance. Instead, it was designed to facilitate real-estate transactions that were subject to California’s long-standing regulation requiring homeowners insurers to offer earthquake coverage. The California residential real estate market went into “vapor lock” shortly after the massive 1994 Northridge earthquake nearly bankrupted several property insurers. No one could buy or sell a home because homeowners insurers largely pulled out of the market. No homeowners insurance meant no mortgage loans could be finalized. The real estate market was frozen.

The CEA was created to lift the burden of offering earthquake policies off the backs of homeowners insurers. The basic earthquake policies offered by the CEA in the wake of the Northridge quake were a means toward that end. Almost 20 years later, the CEA has grown beyond its humble genesis to provide competitive products to an undersaturated market, but its existence was never predicated on the outright absence of earthquake insurance.

And while Oklahoma wants to create “an earthquake reinsurance program,” that’s not exactly what the CEA does. The CEA certainly makes use of reinsurance, along with other risk-transfer mechanisms, but it largely serves as a coordinating body for its participating insurers to sell primary earthquake policies. It does not serve as a reinsurer of earthquake policies sold by other insurers.

Conversely, Oklahoma’s model would create a public reinsurer to offer earthquake protection to the insurance industry. If the bill’s aim is to have an impact similar to the CEA, providing the insurance commissioner with the authority to found a reinsurance program to protect private insurance companies will not accomplish that objective.

In fact, there could not be a less auspicious time to create a new quasi-governmental reinsurance entity to compete with private reinsurers. Private risk-transfer prices are at historic lows. The industry is going through a phase of consolidation, not growth, as it faces novel competition from the catastrophe bond market and other forms of insurance-linked securities. Adding a single-state, government-controlled reinsurer to the market will not drive rates down in a sustainable way. In fact, it may not drive rates down at all – at least, not for homeowners.

In those ways, Oklahoma’s effort to grapple with earthquake risk can’t really be said to be based on the “California model.” But if the Sooner State embraces lessons from the CEA’s history and current organization, it could yet address Jolley’s concerns about an availability crisis.

Jolley should be commended for being on the cutting edge in getting Oklahoma lawmakers to think about ways to address the affordability of earthquake insurance. Even short of an availability crisis, of which Insurance Commissioner John Doak says he sees no evidence, an uptick in seismic activity will surely drive Oklahoma’s earthquake insurance rates up. That’s a consumer problem, requiring a consumer-facing solution.

Legislation tackling either the causes of those quakes or means to prepare structures to withstand them may be the surest ways to drive those rates back down.

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

Why scientists shouldn’t make laws

February 19, 2016, 2:51 PM

A century from now, the great evolutionary biologist, paleontologist, and historian of science Stephen Jay Gould may be best-remembered for his 1997 essay “Nonoverlapping Magisteria.” In it, Gould argues that science and religion deal with entirely different fields of inquiry and therefore each has a unique “magisterium,” or area of teaching authority.

Science dispassionately describes the world, while religion offers ideas about why the world exists, how humans relate to the divine, and, in most modern faiths, what standards we should adopt for moral behavior. Under these circumstances, Gould writes, “if religion can no longer dictate the nature of factual conclusions properly under the magisterium of science, then scientists cannot claim higher insight into moral truth from any superior knowledge of the world’s empirical constitution.”

One can infer from this thesis that perhaps we also should reevaluate the role that science—climate science, in particular—ought to play in shaping public policy. Raw scientific data can tell us quite a bit about what is and is not possible, but they say very little about what we ought to do. As Gould would put it, science and public policy, like science and religion, have different magisteria.

We do need facts, of course

The debates about the role of science in either religion or public policy aren’t entirely analogous, of course. While a scientist probably doesn’t need any knowledge of religion to do effective work in the lab, a clearheaded understanding of some climate science is vital to making good public policy.

Such an understanding might be summarized like this: Human activity, particularly livestock agriculture and burning fossil fuels, releases greenhouse gases (GHGs) into the atmosphere. Accumulating GHGs increases the atmosphere’s ability to retain heat. This, in turn, leads to higher average global temperatures. Because a warmer climate affects a number of natural systems, there already is modest indirect evidence that warming is happening. It also may cause a number of potential future results that we can model but won’t ascertain with any certainty for some time.

Acknowledging the facts of climate science in this dispassionate way provides almost no specific guidance about what public policy ought to be with regard to greenhouse gas emissions. It therefore follows that the people who determine facts about the climate should have no special say in emissions-control policy or, indeed, any other public policy related to climate change.

Scientists can’t decide for us

Scientists have the same rights to participate in the policy process as anyone else in a democracy, and they may well have good ideas. But those ideas should be judged on their merits, not accorded higher status because they emanate from people who spend time in laboratories. Even if all of the world’s top climate scientists came out to support larger solar-power subsidies, a carbon tax, or any other specific policy, this shouldn’t be considered dispositive as to what actions are needed to deal with climate change.

The real question isn’t what scientists think we should do, but rather, what is the most effective policy prescription to deal with the current and potential effects of climate change. Opinions on this question naturally will be informed, at least in part, by political ideology. Those who mistrust market-driven outcomes, value equality over liberty in close cases, and favor more government control over property naturally will favor policies that reflect these values. Those who mistrust government-driven outcomes, value liberty over equality in close cases, and favor more private property—conservatives, in other words—likely will favor different policies.

In general, conservative public policies will reflect more skepticism of government intervention and may seem more timid. But given the complex problems that could result from climate change and the wide range of possible future outcomes debated in the scientific literature, one might argue that humble, even cautious policies probably would be the best course, over the long run. These include policies like a revenue-neutral carbon tax, limits on regulations, ending subsidies for fossil fuels, and cautious, directed public investments in basic research.

Pursuing these policy goals won’t necessarily do more to reduce carbon emissions now, but this strategy leaves open many future options. By contrast, future options could be foreclosed by a big-government cap-and-trade scheme, which could send the economy into a tailspin, or by direct subsidies to politically favored companies, which involve the government picking winners and losers and perhaps making it difficult to achieve true breakthroughs.

Science offers few answers about what mix of policies offers the optimal outcome, given the political economy facts of divergent preferences, ideological commitments, and a need for consensus. Nor should it be asked to provide them.

Why Is the Post Office Still a Thing?

February 19, 2016, 11:53 AM

From Vice

Kevin Kosar is a senior fellow at the D.C. think tank R Street Institute, but before that he covered postal issues for the Congressional Research Service for over a decade. He said that while the postal service needs reform, the country isn’t ready to let go of it completely.

“I’m not sure [the USPS] can be completely privatized or dismantled,” he told me. “America is such an immense country that if you want to have paper mail delivery for a very low price…you’re not going to find a private company that’s going to do that—or at least, it’s highly unlikely.”

New Mexico lawmakers beat clock to pass ridesharing

February 19, 2016, 8:40 AM

The New Mexico Legislature closed out its 2016 session Feb. 18, but not before passing legislation to legalize and regulate ridesharing services like Uber and Lyft.

Just hours after the state Senate voted 33-5 to approve H.B. 168 and S.B. 254 early on the final morning of session, the House concurred with a 63-4 vote. The measure now moves to Gov. Susana Martinez, who has said she supports the bill.

If signed by the governor, the bill would define “transportation network companies” as a new kind of service. They would not be covered under the state Motor Carrier Act that regulates taxicabs, but would nonetheless be subject to oversight by the state Public Regulation Commission. In order to do business, TNCs would be required to pay for a $10,000 annual permit and perform background checks on prospective drivers.

The measure also sets a $1 million primary liability insurance requirement for death, bodily injury and property damage for any period from the moment a driver accepts a prearranged ride via a smartphone or other mobile app. During any period when the driver is logged in to the app, but not actively engaged in a ride, the minimums are $50,000 per-person and $100,000 per-incident for death and bodily injury, and $25,000 for physical damage. The insurance requirements may be met by the company, the driver or a combination of both.

Passage of the measure could mean Lyft’s return to New Mexico after an eight-month absence. Lyft exited the New Mexico market in May 2016 in the wake of an earlier set of rules for TNCs, currently being challenged by the state’s taxi companies, that were promulgated by the PRC under the Motor Carrier Act.

An earlier version of the bill passed the Republican-controlled state House by a 58-8 margin in early February. It would have explicitly defined ridesharing drivers as independent contractors, a subject on which the final version is silent. The bill had been stalled in the Democratic-controlled Senate until the Senate Judiciary Committee voted Feb. 16 to pass an amended measure.

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

The invisible wounds of occupational licensing

February 19, 2016, 8:00 AM

At the same time the Buckeye State was celebrating the 200th anniversary of Columbus as the state’s permanent capitol last week, the Ohio Senate unanimously passed bipartisan legislation to fix the beauty-school overregulation problem we’ve endured for decades.

It’s not that cosmetologists have come around to embrace the idea of freedom from government interference. Those of us who have been around state government remember the day when a reported 25,000 of them surrounded intimidated Florida lawmakers who were about to try to “sunset” the state cosmetology board.

A particular area of focus has been the topic of hair braiding, a 5,000 year-old craft taught generally from one generation to the next. Many states had, and some still have, laws that require hair braiders to possess a license to practice cosmetology, even though they don’t cut, brush, apply heat or use chemicals on hair. It doesn’t require much capital to get started and, even with the strong legislative interference, has been a valuable skill for entrepreneurs – particularly African-American women.

Thankfully, a vast right-wing conspiracy that includes the Institute of Justice, the Buckeye Institute, Forbes magazine and others has been working on the hair-braiding issue for quite a while and is moving to take on the entire cosmetology empire.

Ohio addressed the hair-braiding issue in 1999, when our braiders were freed from mandatory training on the entire cosmetology syllabus. The number of training hours was reduced to 450 for a special hair-braiding license. Texas just last year eliminated its law requiring braiders to be trained as barbers. The training in most cases was expensive and irrelevant, in that little or often none of the coursework involved learning to braid hair. It is an archaic curriculum that arose out of the period of American history, which last until well after passage of the 19th Amendment, when only men were allowed to cut hair.

On average, a cosmetologist requires 1,555 hours of training and the cost of schools that provide this training varies from about $5,000 to over $20,000. In Ohio, every licensed hair salon also is required to have a person on site during all business hours with a “manager’s license,” which requires 2,000 hours of practice and 300 additional hours of training.

“Ohio is the only state in the nation that has a manager’s license and it’s the only industry I’m aware of that requires a manager’s license,” state Rep. Kristina Roegner, R-Hudson, said at a news conference to introduce her bill to strike the hair salon manager’s license requirement. She pointed out that even emergency medical technicians only have to undergo 150 hours of training in Ohio.

Excessive occupational licensing is a problem in every state of the union. When I was in grade school, only about 5 percent of jobs required a government license. The number today is closer to 25 or 30 percent. More than 1,100 occupations that require a government license in at least one state.

There may have been good reasons to create some of the earliest licenses, to ensure those working in public health, with high-voltage electricity and handling legal documents were competent and did not take advantage of public trust.

But public health and safety frequently are merely pretexts for the proliferation of licenses we see today. More often than not, licensing is initiated by those who want to erect barriers of entry to new business plans that may disrupt the market. The result is to harm consumers by crowding out competition.

These are invisible wounds to the economy that we can no longer afford. Hopefully, when the current sweepstakes to replace President Barack Obama gets serious enough for the candidates to put forward detailed plans to fix some of the nation’s less intractable problems, a genuine effort at occupational-licensing reform will be on their list.

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

Saloon Series: The resurgence of Irish whiskey

February 19, 2016, 7:56 AM

Midway through 2015, something remarkable happened in Dublin—a whiskey distillery opened. The city, which is world renowned for its bibacity, had been without an operating distillery since the 1970s. Teeling distillery’s arrival in the city’s ancient Newmarket Squarewas greeted warmly, not least for the droves of spending tourists it has lured.

For much of the 20th century, Irish whiskey was a dead man walking. Jameson’s pleasant, fruity whiskey was known worldwide, as was Belfast’s more grainy Bushmills. But few other brands found their way off the Emerald Isle, and only a handful of whiskey distilleries were in operation. Scotch whisky and American bourbon were held in far higher esteem most places.

It was quite a fall-off from the glory days. In the late 1800s, Ireland was the world’s biggest whiskey-maker, churning out even more alcohol than Scotland. Dublin alone had a few dozen whiskey distilleries, such as John Power and Son’s massive John’s Lane distillery. It belched forth 900,000 gallons of liquor per year, employed 275 men and had its own fire-suppression crew. (Alcohol and its vapors are very flammable.) Back then, Irish whiskey was highly regarded, and it was served as far away as San Francisco, where wharf bars put it in coffee.

Irish whiskey’s terrible fall began before the fin de siècle. Scottish distillers proved to be tough competition. Many of them replaced or supplemented their pot stills (which look like gourds) with more efficient and productivecolumn stills. A whiskey glut ensued, and prices plummeted. Liquor firms in both nations went bankrupt.

Then there was the small matter of politics. The eruption of World War I brought prohibition to England, croaking a big market for Irish whiskey. Some Scottish distillers weathered the plummet in demand by making industrial alcohol (used as a solvent and for other purposes) for the Allies’ war effort. The Irish, whose relations never had been good with England, were not afforded that opportunity. Matters grew even worse when America went dry in 1919. With too much Irish whiskey and too few drinkers, nearly every Irish whiskey distiller went out of business in the ensuing two decades.

For the Teeling family, setting up shop in Newmarket Square was a bit of a homecoming. His ancestors had a distillery on nearby Marrowbone Lane in 1782. John Teeling made a splash in the whiskey world in 1987 when he opened Cooley Distillery in Louth, which is an hour’s drive north of Dublin. Cooley shook up the complacent, duopolistic Irish whiskey industry by bringing to market innovative and prize-winning spirits. Its Connemara whiskey, for example, is smoky like Scotch. The big brands upped their game and brought better products to market, such as Jameson’s 1780, a whiskey aged in sherry casks. Teeling sold its distillery to the Beam Suntory conglomerate for $95 million in 2012.

Presently, Teeling offers five different types of whiskey, none of which were produced at the Newmarket distillery, which is run by John’s sons Jack and Stephen. (The modest-sized plant has not had enough time to produce and age sufficient stocks.) The three Teeling whiskeys I tasted are very interesting and have distinct taste profiles. Teeling Single Grain is mostly corn-based and has been aged in red wine (cabernet sauvignon) barrels. It is light-bodied and tastes of honey and fruit. The Small Batch is a much bolder drink. This grain and barley spirit was aged in both bourbon and rum barrels. Teeling Single Malt is confoundingly intriguing, as it only could be. It’s a mixture of whiskeys aged in barrels that previously held sherry, port, Madeira and more. None of these Teeling products would be confused with the typical oily-bodied Irish whiskey.

Teeling is not the only new Irish whiskey-maker. Alltech, Blackwater, Dingle and a few other small distilleries have fired up their stills in the past four years. Additionally, Teeling refurbished the Harp Brewery in Dundalk into the Great Northern Distillery, which began making whiskey last year. All of which means consumers can expect to see more and more new Irish whiskeys on bar and shop shelves.

With CPP on hold, what’s next?

February 18, 2016, 5:19 PM

A fortuitous 5-4 judgment by the Supreme Court puts on hold the centerpiece of President Barack Obama’s greenhouse-gas-reduction program until the court has a chance to review the rule. This doesn’t preclude the plan eventually taking effect, but it does stop the clock on implementation and buy time to address climate change more meaningfully, at lower cost and without expanding government.

For the Supreme Court to issue a stay before the lawsuit is heard by a federal appellate circuit is extremely unusual, if nonetheless fortunate. The decision suggests the court finds there would be significant and irreparable harm if the rule went into effect while the legal challenges play out. This likely reflects their decision in Michigan v. EPA last term, in which the Supremes found the Environmental Protection Agency had been unreasonable in its decision to limit mercury from power plants. By the time the court issued its decision, the compliance window had closed and power plants had already paid the costs of compliance. In this decision, it appears that the court is unwilling to let the EPA operate unchecked once again.

And with good reason. Under the Clean Power Plan, the EPA charges states with reducing greenhouse-gas emissions from existing power plants to 32 percent below 2005 levels by 2030. This would remake the power system entirely and present a material challenge to a low-cost, reliable electric supply.

The immediate backlash was unsurprising. Some states find their targets to be excessively ambitious and costly, burdening low-income consumers with high electricity rates. Utilities and coal interests fear it’s a death knell for the country’s most abundant and historically reliable fuel source. Small government interests caution that it’s an excessive power grab, moving far beyond the bounds of the EPA’s authority. The result is a massive lawsuit calling for the rule to be struck down, which has been joined by 29 states and state agencies, utilities, mining companies and allies of all of the above.

Though the ruling undoubtedly marks a victory, there’s no guarantee that we’re out from under the threat of EPA regulation. Challenges to the CPP will now move through the courts, where the rule may survive or be struck down in whole or in part. No matter the resolution, we must be ready.

If the rule is upheld, the clock starts on compliance. States will have to design their own plans to reduce emissions or will face the prospect of the EPA stepping in to impose its own reduction scheme. R Street has identified the opportunity for states to comply with the CPP and lower existing tax burdens through a direct price on carbon. That opportunity will stand.

If the rule is overturned, the agency will try again. The court’s 2005 decision in Massachusetts v. EPA found the agency is required by law to regulate emissions that endanger public health or welfare. Standing precedent dictates the EPA is bound under the Clean Air Act to curb greenhouse-gas emissions. The CPP was just the agency’s first attempt to comply with that ruling. There are still a number of other authorities the agency could exercise, and none is as flexible or as deferential to state authority. Subsequent regulatory attempts may well be far more restrictive.

No matter how the courts ultimately decide, this stay buys us time. Let’s use that time wisely. Congress must intercede to restrict the EPA’s authority and mitigate the future threat of damaging regulations. This is not to say we should ignore the material threat of climate change, but we should rethink the tools used to achieve that end. A direct price on carbon emissions would be far more effective than clumsy regulations. Better yet, dedicating that revenue stream to reduce or eliminate growth-slowing taxes would ensure that limiting emissions won’t due excess harm to the economy or expand the size of government.

The EPA is a helpful political boogeyman, but it’s time for serious consideration of our alternatives. Agency regulation is not the only or the best way to reduce emissions. Let’s build a cleaner environment and a smaller, more effective government.

Congress should act to ensure e-cigarettes aren’t pulled from the market

February 18, 2016, 9:32 AM

WASHINGTON (Feb. 18, 2016) – Congress should act to pass legislation to keep e-cigarettes and other vaping products on the market, as their removal would jeopardize millions of smokers’ ability to switch to less harmful alternatives, according to a new policy short published by the R Street Institute.

The Food and Drug Administration does not currently regulate e-cigarettes or selected other tobacco-related products. However, the agency could exercise its jurisdiction under a 2009 law that would force products introduced since February 2007, even those currently on the market, to undergo an extensive and costly approval process before they could be sold.

“Because today’s e-cig and related vapor products were all introduced to the market after 2007, each and every e-cig product – categorized separately by brand, flavor and strength of nicotine – will be required to incur substantial costs to avoid removal from the market,” writes Dr. Joel Nitzkin, senior fellow of the R Street Institute. “Congress should act now to shift the grandfather date from 2007 to the effective date of the new deeming regulations to allow these lifesaving products to remain on the market without interruption.”

A bill currently before the U.S. House, H.R. 4371 would accomplish this by setting the grandfather date to coincide with the final deeming regulation. It also would bring currently marketed e-cigarettes under FDA jurisdiction without requiring costly applications and interruptions to consumers.

“Laying a destructive and undue cost burden on less harmful and less addictive products that could draw consumers away from cigarettes does not protect public health,” Nitzkin writes.

H.R. 4371 and the regulation of e-cigarettes

February 18, 2016, 9:00 AM

H.R. 4371, recently introduced by U.S. Rep. Ken Buck, R-Colo., draws the attention of policymakers to the structure of the Food and Drug Administration’s regulatory regime for tobacco products. One must ask if the process truly is designed to protect public health or if it is instead designed to protect the sales and profits of the major “Big Tobacco” cigarette companies.

H.R. 4371 and the regulation of e-cigarettes

February 18, 2016, 9:00 AM

H.R. 4371, recently introduced by U.S. Rep. Ken Buck, R-Colo., draws the attention of policymakers to the structure of the Food and Drug Administration’s regulatory regime for tobacco products. One must ask if the process truly is designed to protect public health or if it is instead designed to protect the sales and profits of the major “Big Tobacco” cigarette companies.

SCOTUS relieves nation from an EPA power grab

February 17, 2016, 2:39 PM

Last week, while all attention was focused on the New Hampshire primary, the U.S. Supreme Court issued an order that could have far-reaching consequences for the destiny of the republic.

With just one succinct paragraph, the Supreme Court stayed the Environmental Protection Agency (EPA) from implementing its so-called “Clean Power Plan,” which mandates a 32 percent reduction in carbon-dioxide emissions from the nation’s power plants. The order halts those rules from taking effect until the legal challenges have been fully resolved.

It’s hard to overstate the significance of this order. While not a final ruling on the merits, the high court will typically not halt a challenged rule unless they think it is likely to ultimately be struck down. This means that a majority of the justices take the legal arguments against the Clean Power Plan very seriously.

Even more importantly, the EPA can’t begin to force compliance with the rule before its legality is resolved, a major relief to generators. In the past, the EPA has sometimes been able to win even when its regulations lose in court.

Last year, for example, the Supreme Court invalidated an EPA regulation governing mercury emissions from power plants. But by the time the rule was invalidated, power plants had already made the expenditures necessary to comply with the rule. Given the extent to which electrical generators have to make long-term plans to decide how to expand or retrofit their plants, it’s likely the same thing would’ve happened if the Clean Power Plan had gone ahead before the lawsuit was resolved.

A limit to executive tyranny

But perhaps the biggest implication of the court’s order is what it means for the growing tendency of presidents to govern via executive order. Over the last few years, President Obama has employed a conscious strategy to use executive action to circumvent the legislative branch. “We’re not just going to be waiting for legislation in order to make sure that we’re providing Americans the help they need,” the president told his cabinet in 2014. “I’ve got a pen and I’ve got a phone, and I can use that pen to sign executive orders and take executive actions.”

He wasn’t kidding. Despite supermajorities in Congress during the beginning of his term, Obama was unable to get his cap-and-trade plan passed through Congress. So instead came the Clean Power Plan, which allows states to comply with federally imposed emissions targets by enacting a cap-and-trade program. Similarly, Obama announced in 2012 that he was taking executive action on immigration, refusing to deport illegal immigrants who had come into the country as minors. The specifics of the action were broadly similar to parts of the DREAM Act, which Congress had rejected.

For a while, this strategy seemed to be working. Congress’ attempts to stand up for its legislative prerogatives went nowhere. Both supporters and critics of the Obama administration were writing about Congress as if it were a vestigial organ, something that had once served a purpose but was no longer needed for the government to function.

Writing in Vox, Dylan Matthews predicted “a continuation of the executive’s gradual consolidation of power until the presidency is something like an elective dictatorship.” Former state judge Andrew Napolitano similarly wondered whether the administration’s increasing resort to rule by executive order would “deliver us to tyranny.”

Congress should stop relying on courts

The courts, however, have taken a dimmer view of these bold exercises of executive power. Last November, a federal appeals court halted the administration’s executive action on immigration, and that case too will be decided by the Supreme Court. Should the court strike down one or both of the regulations, this will be a clear indication that there are limits to executive-made law, and that the president can’t treat legislative approval of his plans as optional.

Congress, however, shouldn’t be content to let states and the courts fight its battles. In the long run, the only way to ensure that the legislature plays its intended role in the constitutional balance of powers is if Congress itselfreasserts its role as the source of legislation.

The temptations of housing finance bubbles

February 17, 2016, 1:23 PM

A version of this policy short originally appeared in the Winter 2015 issue of the journal Housing Finance International.

Running up the leverage is the snake in the housing finance Garden of Eden. It is a constant set of alluring temptations to enjoy the fruit of increased risk in the medium term, while setting ourselves up for the inevitable fall.

Let us view this famous painting by Lucas Cranach:

The woman is Fannie Mae. The man is Freddie Mac. The snake is whispering, “If you just run up the leverage of the whole housing finance system, you will become powerful and rich.” Fannie and Freddie are about to eat the apple of risk, which will indeed make them very powerful and very rich for a while, after which they will be shamed, humiliated and punished.

Bubbles in housing finance have occurred in many countries and times. They always end painfully, yet they keep happening. As the prophet said (slightly amended), “There is nothing new under the financial sun. The cycle that hath been, it is that which shall be.” Why is this?

Consider this quotation: “The [banking] failures for the current year have been numerous…In many cases, however, the unfavorable conditions were greatly aggravated by the collapse of unwise speculation in real estate.” What year was that? It could have been 2008, to be sure, but it is actually from 1891, as the then-U.S. comptroller of the currency looked sadly at the wreck of many of the banks of his day.

Some people say the problem is that housing lenders who go broke need to be personally punished, to get their incentives right. Economists are big, not without reason, on worrying about economic incentives. But a bigger problem is that it is so hard to know the future. Housing lenders don’t create housing-finance collapses on purpose, but by mistake.

The city of Barcelona in the 14th century decided to manage the incentives of bankers by decreeing that those who defaulted on their deposits would be subject to capital punishment. And as one financial history tells us, “at least one banker, Francesch Castello, was beheaded directly in front of his counter in 1360.” But this did not stop banks from failing.

One of the most important reasons that housing-finance bubbles are so hard to control is that they make nearly everyone happy while they last. Who is making money from a housing-finance bubble? Almost everybody. This is why the experience of a bubble is so insidious.

For example, take the most recent American experience. For a long time, the seven years of 2000-2006, the housing-finance bubble generated profits and wealth. A lot of the profits and wealth turned out to be illusory in the end, but at the time, some of it was real and all of it seemed real. As house prices rose, borrowers made more money if they bought more expensive houses with the maximum amount of leverage. Property flippers bought and sold condominiums for quick and repetitive profits, even if no one was living in them. Housing lenders had big volumes and profits. Their officers and employees got big bonuses. Numerous officers of Fannie Mae and Freddie Mac made more than $1 million a year each. Real estate brokers had high volumes and big commissions. Equity investors saw the value of their housing-related stocks go up. Fixed-income investors all over the world enjoyed the returns from subprime mortgage-backed securities, which seemed low risk, and from Fannie Mae and Freddie Mac securities, which seemed to be, and actually were, guaranteed by the U.S. government.

Most importantly, the 75 million households that were homeowners saw the market price of their houses keep rising. This felt like, and was discussed by economists as, increased wealth. Of course, this was politically popular. The new equity in their houses at then-market prices allowed many consumers to borrow on second mortgages and home-equity loans, so they could spend money they had not had to earn by working. Then-Federal Reserve Chairman Alan Greenspan smiled approvingly on this housing “wealth effect,” which was offsetting the recessionary effects of the collapse of the previous bubble in technology stocks in 2000.

Homebuilders profited by a boom in new building. Local governments got higher real-estate-transaction taxes and greater property taxes, which reflected the increased tax valuations of their citizens’ houses. They could increase their spending with the new tax receipts. The investment banks, which pooled mortgages, packaged them into ever more complex mortgage-backed securities, and sold and traded them, made a lot of money and paid big bonuses to the members of their mortgage operations, including the former physicists and mathematicians who built the models of how the securities were supposed to work. Bond-rating agencies were paid to rate the expanding volumes of mortgage-backed securities and were highly profitable. Bank regulators happily noted that bank capital ratios were good, and that zero banks failed in the United States in the years 2005 and 2006 – the very top of the bubble. In the next six years, 468 U.S. banks would fail.

The politicians are not to be forgotten. The politicians trumpeted and took credit for the increasing home ownership rate, which the housing finance bubble temporarily carried to 69 percent, before it fell back to its historical level of 64 percent. The politicians pushed for easier credit and more leverage for riskier borrowers, which they praised as “increasing access” to borrowing. (The snake had most certainly been whispering to the politicians, too.)

The bubble was highly profitable for everybody involved – as long as the house prices kept going up. As long as house prices rise, the more everybody borrows, the more money everybody makes. This general happiness creates a vast temptation to keep the leverage increasing at all levels.

This brings us to two essential questions.

The first is: What is the collateral for a mortgage loan?

Most people answer, “That’s easy – the house.” But that is not the correct answer.

The correct answer is: Not the house, but the price of the house. The only way a housing lender can recover from the property is by selling it at some price.

The second key question is: How much can a price change? To this question, the answer is: A lot more than you think. It can go up a lot more than you expected, and it can then go down a lot more than you thought possible. It can go down a lot more than your worst-case planning scenario dared to contemplate.

So the temptations of housing-finance bubbles generate mistaken beliefs about how much prices can go down. American housing experts knew that house prices could fall on a regional basis, but most were convinced that house prices would not fall on a national average basis. Of course, now we know they were wrong, and that national average house prices fell by 30 percent. And they fell for six years.

By then, Fannie Mae and Freddie Mac had been banished from their pleasant housing finance Garden of Eden. Here they are, being sent into government conservatorship, as depicted by Michelangelo:

In conservatorship they remain to this day, more than seven years after their failure. Having played a key role in running up the leverage of the whole system, they had suffered a fall they never thought possible.

 

A revived Congress?

February 17, 2016, 12:12 PM

Since arriving in the U.S. Senate in 2011, Sen. Mike Lee, R-Utah, has made many of his colleagues crazy. Unwilling to go along to get along, Lee has called out publicly our nation’s legislature for its profligacy and habit of showing up for work barely half the year. Six months into his time in office, Lee published a book advocating a balanced-budget amendment. All of which offended the stuffed shirts who think of their chamber as“the most exclusive club.”

The Senate has a habit of grinding down nonconformists. Chamber leaders and committee heads have plenty of tools to neuter the legislative ambitions and generally marginalize black sheep.

To date, Sen. Lee has refused to keep quiet. Last year, he published another book, a jeremiad dubbed Our Lost Constitution. And two weeks ago, he unveiled the “Article 1 Project“ at Hillsdale College’s D.C. outpost. A1P, as it is being hash-tagged, aims to unite Senate and House members to claw back power over the purse and to rein in executive-branch regulators.

It’s a worthy endeavor. Congress, for all its faults, is the most democratic of the three branches. It comprises 535 individuals chosen by voters to represent their interests. Congress —not the president or the judiciary— is the branch that is most connected to the average Joe. On paper, it is the mightiest branch. The Constitution’s Article I gives Congress “all legislative power,” and empowers it to set the value of money, regulate interstate commerce and declare war.

Yet the executive branch has displaced Congress in our constitutional scheme. Presidents, beginning with Theodore Roosevelt, have snatched away much legislative power. But as Yuval Levin has observed, Congress mostly has diminished itself: “[M]embers (of both parties) would rather avoid responsibility for hard policy choices.” Levin notes that our lawmakers have fallen into a parliamentary mindset: members of the president’s party will carry his water and allow him to do via executive action what they should be doing via legislation.

Unbelievably, Congress has shoveled larger and larger piles of funding to the executive branch and, simultaneously, weakened itself by cutting legislative-branch staff. Today, the United States has an executive branch that can do just about anything it pleases, over the objections of the people’s representatives, and sometimes to spectacularly bad effect.

But maybe things have gone so far that a counter-movement is rising. Nine other members of Congress have lent their names to Lee’s A1P effort. There also are other groups at work in Washington on this very issue. The Federalist Society has its own Article I project, which hopes to reconceptualize the role of a member of Congress the same way the group did the role of judges. When my think tank partnered with both conservative and liberal tanks to host a Capitol Hill event on strengthening Congress last autumn, more than 100 congressional staff and others attended. Bills have been introduced to reassert congressional authority over regulation and spending.

It will take a lot of work to “make Congress great again.” A strong Congress needs many legislators who care about the institution and aggressively deploy its immense powers. Such institutionalists tend to be few, notes Louis Fisher, a constitutional scholar who served Congress for four decades. Most congressmen feel they will not get re-elected for defending Article I or the Constitution.

So it all comes back to “we, the people.” If we don’t tell our legislators to stand up for Article I, they probably won’t.

Apple’s pro-user, pro-privacy stand gets the issues right

February 17, 2016, 11:55 AM

A federal magistrate took the unprecedented step yesterday of issuing a court order for Apple Inc. to create, out of thin air, a mechanism in iPhone firmware that would allow law enforcement the ability to access to an iPhone that allegedly may have been used by one of the San Bernardino, Calif. terrorists.

Apple was quick to argue publicly that it will continue to oppose this order. Apple CEO Tim Cook issued a lengthy public letter explaining the order’s many problems – both technological and as a matter of public policy.  As he wrote:

Specifically, the FBI wants us to make a new version of the iPhone operating system, circumventing several important security features, and install it on an iPhone recovered during the investigation. In the wrong hands, this software — which does not exist today — would have the potential to unlock any iPhone in someone’s physical possession.

Compliance, Cook argued, would undermine the privacy and integrity of every iPhone user’s data, not just from government surveillance but from hackers as well. “Compromising the security of our personal information can ultimately put our personal safety at risk,” he wrote.

Keep in mind that some sectors of law enforcement and intelligence agencies have opposed strong privacy technologies, such as digital encryption, for decades. Fortunately, in recent years, the public’s interest in privacy technologies has grown. When FBI Director James Comey testified at a hearing in July 2015 calling for a “golden key” to enable the government to access encrypted information (and to sidestep other privacy measures), his wish list was met with widespread public criticism.

But law-enforcement and intelligence agencies also know public opinion can change swiftly in response to events like terrorist attacks. Not unexpectedly, the usual government agencies reasserted long-standing concerns after last fall’s Paris and San Bernardino attacks, arguing that strong privacy technologies should have their limits. Comey may have met a cold reception from legislators last summer, but by this summer – particularly if it’s in the aftermath of another terrorist attack – the call to provide special access to our private data could resurface. (For those who care: there’s no indication yet that encryption technology or any other privacy measure played any particularly important role in recent attacks.)

It’s not that government concerns about encryption are completely irrational; encryption can be used and likely will be used by terrorists and other law-breakers. Terrorists make use of all manner of technology that happen to be essential to our daily lives: cars, phones, planes and, yes, secure digital privacy. Among the areas where encryption makes our lives better are online banking, connecting to your office computer from home and purchasing a product on Amazon. On a larger scale, consider how missionaries who help religious minorities and charitable groups who assist pro-democracy activists in far-off lands are strengthened and empowered by strong privacy technologies.

If we let fear of terrorism drive holes into our digital security, wouldn’t that mean…the terrorists will have won?

Opening a backdoor – in effect, allowing governments to sidestep your privacy protections by creating technological weaknesses – wouldn’t measurably improve how police can investigate crimes that have already occurred. (No government agency has provided numbers to suggest otherwise.) What it would do is expose users to vulnerabilities from hackers and other entities wishing to do harm.

Every right we have under the Constitution is a thing bad guys might use against us. We still hold on to those rights and think they’re worth preserving. Yes, we face crime and terrorism, but if we hold fast to our principles as a free society, we have to conclude that there is no argument for security “backdoors” like the one the FBI is seeking to compel Apple to create. When truly secure encryption is outlawed, only outlaws will have secure communications. That’s a crazy outcome.

As we have previously explained, directives like this eviscerates privacy as we know it. In fact, many in the intelligence community also recognize the problems with undermining the integrity of encryption. During a May 2015 address to the Joint Service Academies Cyber Security Summit at West Point, Admiral James A. Winnefeld Jr., vice chairman of the Joint Chiefs of Staff, answered a question from “security guru” Bruce Schneider on the balance between security and surveillance:

I think we all win if our networks are more secure. And I think I would rather live on the side of secure networks and a harder problem for [NSA Director Mike Rogers] on the intelligence side than very vulnerable networks and an easy problem for Mike. And part of that — it’s not only the right thing do, but part of that goes to the fact that we are more vulnerable than any other country in the world, on our dependence on cyber.

This defense of encryption was emphasized by Rep. Will Hurd, R-Texas, at a recent discussion on privacy protections hosted by the R Street Institute. The former CIA agent and current member of Congress explained that “encryption is an essential for national security and essential for our economy.”

This divide in the intelligence community should give policymakers pause as they consider calls to create backdoors for law-enforcement agencies.

R Street is encouraged by Apple’s defense of strong encryption and its leaders’ reluctance to abide by the recent court’s undue burden. Encryption is an essential tool that preserves the integrity of personal data and provides needed security of international banking and online commerce. Any effort to undermine encryption in one case will have irrevocable damage to the Internet.

As Tim Cook concluded in his statement:

While we believe the FBI’s intentions are good, it would be wrong for the government to force us to build a backdoor into our products. And ultimately, we fear that this demand would undermine the very freedoms and liberty our government is meant to protect.

Cook has this balance right. Let’s hope our law-enforcement establishment comes to understand that balance, as well.

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