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Avoiding protectionist reinsurance tax key to ensuring low-cost insurance

June 26, 2015, 8:06 AM

As proposals are floated both in Congress and in the White House’s budget plan to change the tax treatment of reinsurance purchased by U.S. insurers from offshore affiliates, R Street hosted a Capitol Hill panel discussion June 18 that looked at the significant negative market impacts such a change would have. The panel — “Ensuring Low-Cost Insurance: Reinsurance & International Tax Reform” — was moderated by R Street Outreach Director Lori Sanders and  featured legendary supply-side economist Art Laffer, the Tax Foundation’s Alan Cole, Mayer Brown’s Timothy Keeler and former U.S. Rep. Tom Feeney, R-Fla.

You can watch the full video below.

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

Interpreting the law in 2015

June 26, 2015, 8:00 AM

Almost any high school textbook on U.S. government will tell you Congress makes the laws, the president approves the laws and the Supreme Court interprets the laws. Based on yesterday’s 6-3 decision in favor of the Affordable Care Act in King v. Burwell, it might be time to rewrite those textbooks.

Chief Justice Roberts had the political left jumping for joy yesterday as he delivered the opinion of the court. The opinion further established how the court must respect the legislature and provide a fair reading of the law in the context of its legislative plan. Claiming to be carrying forward the legislative plan of Congress, the court declared that the Affordable Care Act intended for tax credits to be offered through federal health-care exchanges, despite the law’s language limiting such subsidies to exchanges “established by the state.”

While both sides of the political aisle can agree on respecting Congress and its intentions, there is a clear distinction between making laws and mending laws. In King v. Burwell, the political agenda of saving the Affordable Care Act seemingly superseded a clear, literal interpretation of the text.

Two-thirds of the Supreme Court chose to ignore that language. They used judicial abdication to their advantage, broadened the meaning of the text, and appeased the leviathan state. In his dissent, Justice Antonin Scalia responded to the majority’s interpretation of the statute, stating”

Words no longer have meaning if an Exchange that is not established by a State is ‘established by the State.’

Regardless of the intent of Congress or its unintentional so-called “drafting error,” the Supreme Court has no obligation to bend down to Congress, and no power to rescue it from perceived errors. The court has one job, and that is to interpret the law.

The Supreme Court will be praised by some for preventing 6.4 million from losing health-care subsidies in 34 states, yet few will recall the millionswho lost their previous health insurance because of the ACA. Nor will they mention the rising insurance premiums for healthy Americans, or the emerging evidence of the overall decline in access to and the overall quality of medical care in the United States.

By using judicial abdication to alter the reading of the text of the Affordable Care Act, the court has set precedent for future decisions, allowing for much more than just “interpreting” the law.

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

Members and staff may use official resources to participate in open source projects, procure and publish open source software

June 25, 2015, 4:21 PM

WASHINGTON (June 25, 2015) — The OpenGov Foundation, the Sunlight Foundation and the Congressional Data Coalition (CDC) today announced that members, committees and staff within the U.S. House are now able to use official resources to procure open-source software, to fully participate in open-source software communities and to contribute software code developed with taxpayer dollars back to the public under an open-source license.

Until now, significant uncertainty surrounded whether or not open-source software, communications and code contributions are permitted within the U.S. Congress.  That lack of clarity continues within the U.S. Senate. However, it has been determined that, in general, members and staff in the U.S. House, when conducting official business, now have a choice between using proprietary and closed technology and open-source solutions that are restriction-free, reusable and frequently more cost-effective.

While generally approved open-source software is new to the U.S. House, it is not new to the federal government.  In September 2012, the Obama administration entered the open-source world by joining Github, declaring that:

We believe in using and contributing back to open-source software as a way of making it easier for the government to share data, improve tools and services, and return value to taxpayers. – WhiteHouse.gov/Developers

Within Congress, understanding of and support for open-source software has recently spiked.  Over the coming weeks, Rep. Blake Farenthold, R-Texas and Rep. Jared Polis, D-Colo., plan to launch a House Open Source Caucus.  In May 2015, Rep. Gerry Connolly, D-Va., submitted feedback on proposed procurement reform legislation via Github.  On June 5, 2015, Republican Conference Chair Rep. Cathy McMorris Rodgers outlined her vision for a modern, efficient and effective Congress that is able to:

[C]reate an open-source solution for constituent communications that anyone could add on to.  I would love to see a system that is open-source, with real time analytics, with social media and text messaging integrated in from the beginning.

In October 2014, the OpenGov Foundation, Sunlight Foundation and CDC jointly called for rules changes that would permit the use and publication of open-source software by House offices.  Moving forward, we will continue to work with members of Congress, staff, legislative support agencies and all stakeholders to continue these efforts to create a more efficient, effective and open U.S. Congress.

Quotes

“Adding open source options to the Congressional tech toolkit is a major step toward creating a 21st century legislature,” said Seamus Kraft, executive director of The OpenGov Foundation.  “In the face of shrinking budgets and growing workloads, governments across America are increasingly turning to open-source solutions to help them serve better while spending less.  #Hack4Congress showed us all that the open-source community is ready to do its part to help those working to innovate Congress from the inside.  While much work needs to be done before members and staff can fully tap into the power of open source, we are excited to continue supporting those efforts however we can.”

“Purchasing only proprietary and closed technology leads to cost overruns on quickly outdated technologies,” said Rep. Mark Takano, D-Calif.  “Adding open-source software to our list of options will save money and allow Congress to build and improve on what already works, rather than constantly playing catch-up. Our constituents rightly expect more from us.”

“Open-source software presents so many exciting opportunities for members of Congress to more effectively represent and interact with their constituents,” said Rep. Jared Polis (D-CO). “By taking advantage of the newest technology and collaborating with the open-source community, we can improve everything from the accessibility of congressional websites to the efficiency of business on the House floor. Personally, I can’t wait to begin integrating open-source technology into my office’s daily operations.”

“I’m glad that the House of Representatives has finally opened the door to open-source software,” said Rep. Blake Farenthold, R-Texas.  “For over a decade, Individual coders and businesses around the country have been working with open-source software because of cost savings, productivity gains and the ability to modify the code to meet specialized needs. It’s past time that taxpayers see the same benefits. I applaud The OpenGov Foundation, the Sunlight Foundation and the Congressional Data Coalition for their efforts to make this happen, and I look forward to working through the Open Source Caucus to help educate my colleagues on how open-source software can benefit their offices and constituents.”

“We now have clear guidance on the use of open-source software in the House of Representatives,” said Rep. Darrell Issa, R-Calif.  “Members of Congress and the open-source community can work collaboratively to improve online access to the Congress and bring the institution more in line with other flexible, modern organizations that use open-source solutions to realize cost-savings and greater efficiency.”

“For far too long, the halls of Congress have been closed to open source,” said Rep. Seth Moulton, D-Mass.  “That changes today, and our office plans to embrace the open-source community on a range of projects that will enhance our constituents’ experience with our office and their government.”

“Open-source software is an important way to increase congressional transparency and accountability while furthering government efficiency, and we applaud the House of Representatives for its efforts to build a 21st century legislature” said Daniel Schuman, co-founder of the Congressional Data Coalition.

“This is an important step that will enable the House to adapt more quickly to changes in technology,” said Sean Vitka, federal policy manager at the Sunlight Foundation. “Allowing Congress to use open source tools will improve transparency and communication between government and the people.”

“Adoption of open-source software by the House of Representatives will be a force multiplier for the taxpayer dollar, allowing information technology systems to be built once and more easily shared between members’ offices,” said Ben Balter, Government Evangelist at Github. “In doing so, the House joins the hundreds of government organizations around the world that participate in the open-source community each day to deliver services more efficiently, more transparently, and in collaboration with the citizens they represent.”

“I’m so pleased the House has taken this critical step forward in allowing Members and staff to take advantage of the rich, productive—and, most of all, transparent—resources of open-source software,” said Mike Godwin, director of innovation policy at the R Street Institute.  We’ve known for many years that the open-source approach can be a powerful engine for technological advance, economic growth and the creation of new, powerful initiatives ranging from the Open Knowledge Foundation and Creative Commons to Linux and Wikipedia. I’m excited that the House is now empowered to take greater advantage of the fruits of open-source development.”

R Street welcomes bipartisan bills to encourage private flood insurance

June 25, 2015, 2:49 PM

WASHINGTON (June 25, 2015) — The R Street Institute welcomed today’s introduction of bipartisan legislation streamlining the process for private companies to begin offering, and states to begin regulating, flood insurance coverage options outside of the National Flood Insurance Program.

Introduced by Reps. Dennis Ross, R-Fla., and Patrick Murphy, D-Fla., and Sens. Dean Heller, R-Nev., and Jon Tester, D-Mont., H.R. 2901 and S. 1679, the Flood Insurance Market Parity and Modernization Act, would broaden which privately underwritten flood insurance policies may be used to satisfy federal lending requirements.

“Congress made clear in the 2012 flood insurance reform bill that banks and other lending institutions should accept privately underwritten flood insurance on the same terms as coverage written by the National Flood Insurance Program,” R Street Senior Fellow R.J. Lehmann said. “This legislation will aid banking regulators in determining what sorts of coverage should qualify, relying largely on the states, who already take the lead in regulating the business of insurance.”

Under terms of the bill, any company admitted to write policies in a given state, or surplus lines writer not disqualified by that state, could offer the coverage.

Some states have already begun leading the charge of modernizing the flood insurance market. Florida, West Virginia, Connecticut, Pennsylvania and Massachusetts have all created frameworks for state regulators to oversee flood insurance offerings by admitted market companies.

“The private market for flood insurance remains small, but a growing number of insurers and reinsurers have expressed interest in offering more flexible products to consumers,” Lehmann said. “If we are ever to unwind the deeply indebted and unsustainable NFIP, it’s crucial to take these kinds of steps to encourage a vibrant market of private capital to handle this risk in the years ahead.”

 

R Street at SXSW

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  • R Street’s Anniversary Celebration

    June 25, 2015, 1:08 PM
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  • Letter to Washington House Finance Committee on distributed generation

    June 25, 2015, 11:04 AM

    My name is Ian Adams and I am Western region director of the R Street Institute, a free-market think tank headquartered in Washington, with five offices spread throughout the states. As an organization committed to the principles of limited government, we seek pragmatic solutions to the most pressing policy concerns, with a heavy focus on energy and environmental issues. I write today to share our views on H.B. 1912, legislation before your committee related to distributed energy-generation systems.

    As an avowedly free-market institution, we’ve joined with other conservatives to oppose subsidies for wind power and other alternative energies; fought burdensome new command-and-control power plant regulations in the name of mitigating climate change; and supported construction of the Keystone XL pipeline.

    But as an organization committed to responsible environmental stewardship, we have simultaneously written about expanding both our use and our trade of clean hydropower; fought to ensure that BP oil spill dollars are spent on legitimate coastal restoration instead of special-interest boondoggles; and supported restricting subsidies for environmentally damaging farming practices. The unifying theme of our work in this area is the belief that free markets, not heavy-handed government mandates, offer the best solutions to America’s energy challenges.

    It is for precisely this reason that I write to express concern with H.B. 1912. We find the incentive rate schedule established in this legislation appears arbitrary and the additional incentive for in-state manufacture of energy-system components is ill-fitted to this effort. We also would suggest the Utilities and Transportation Commission is not the proper regulatory and oversight institution for distributed-energy leasing companies.

    The legislation includes a large and arbitrary subsidy schedule for distributed-generation sources. The incentive payments laid out in this structure do not appear founded in any documented costs and benefits of distributed-generation services to the grid or to the utilities required to make these payments. In fact, the potential incentive payments range from 16 cents per kilowatt-hour (kWh) to 43 cents per kWh. Those are levels well-above the average March 2015 cost of residential power, cited by the U.S. Energy Information Administration as 8.68 cents per kWh. Just as utilities grapple with the planning and capital costs associated with creating a smarter grid with diverse sources of power, they also are tasked as stewards of a program that disguises those costs for distributed-generation customers.

    Additionally, the legislation would create an incentive structure that gives preferential treatment to wind and solar systems manufactured within Washington State. Aside from the clear violation of the dormant Commerce Clause by prejudicing against interstate trade in wind blades and towers and solar modules, this portion of the legislation is problematic in that it goes beyond the scope of incentivizing distributed generation per se. The source of distributed generation systems has no bearing on the amount or quality of electricity produced and should be irrelevant to this legislative effort. This additional incentive simply adds yet another expenditure to the multitude of manufacturing, renewable-energy manufacturing and renewable-energy production tax credits already in place. Should the State of Washington wish to address incentives for manufacturers, it should do so in separate legislation.

    Finally, the Utilities and Transportation Commission is the wrong institution to serve as the regulatory body for third-party vendors that make distributed-energy systems affordable and accessible for energy consumers. The UTC portfolio is geared toward regulation and oversight of utility-scale corporations that are in the business of providing power and natural gas and have a clear public-interest designation. Third-party vendors like those captured under this legislation are power providers only in the most attenuated sense. Their product is not units of power, but the option for individual consumers to become power producers in their own right. It is more appropriate to leave regulatory control and oversight with the Office of the Attorney General, which has authority over other similar service providers.

    No power source, solar included, should benefit from an extensive system of subsidies and preferences. Nor should any power source, solar included, be saddled with an extensive system of regulations and restrictions that artificially reduce its use. While well-intentioned, our view is that H.B. 1912 imposes unnecessary and potentially expensive rules on distributed generation to the detriment of consumer freedom and competition in the marketplace.

    How to fix the federal prison system

    June 25, 2015, 9:49 AM

    From the Washington Times:

    And grass-roots conservatives are enthusiastic about this movement, too. At this year’s Conservative Political Action Conference the session on state criminal justice reforms was packed. Activists stood along the walls and sat on the floor in the aisles. They expressed whole-hearted support for the effort to reform the justice system. Eli Lehrer wrote in the Weekly Standard that criminal justice reform is “perhaps the most important conservative domestic policy initiative in decades.”

    Why can’t the federal government sell unneeded real property more quickly?

    June 25, 2015, 7:00 AM

    This piece was co-authored by R Street Governance Project Director Kevin Kosar.

    Consider the hut. Its real name is unknown. For all anyone knows, it might have been used as a storage shed or for some other purpose. The U.S. Department of Interior sought to get rid of the squat, 95-square-foot stone pile in 2010. It was crumbling and had not been used in years.

    Alas, the DOI had no such luck. The federal land-disposal process requires buildings more than 50 years old, including this pile of rocks, to be evaluated for historic designation. The department was stuck using its limited resources to restore a structure that served no purpose.

    Then there’s the confounding situation that surrounds the David W. Dyer Federal Building and U.S. Courthouse. Built in 1933, the Miami structure “is a skillful example of Mediterranean Revival architecture that combines Renaissance Revival elements with regional Florida architectural features,” according to the General Services Administration, which owns and manages real estate for most government agencies.

    The feds cleared out of the Dyer building after the new $163 million Wilkie D. Ferguson Building opened next door in 2007. Over the following six years, Miami-Dade College repeatedly attempted to buy or lease the property. The Dyer building was never brought to market and the extended vacancy has caused damage that the GSA estimates would cost $60 million to correct. Tired of the delay, Rep. John Mica, R-Fla, introduced legislation two years ago to give the property to the college. The bill died in committee. Though the ornate courthouse remains empty today, taxpayers spend $1.2 million annually to maintain it.

    These aren’t just anecdotes. The federal government’s property management problem is both longstanding and significant. Getting rid of unused and underutilized property is a particularly big problem, as was underscored at a Senate hearing this past week. The Government Accountability Office has had the GSA portfolio on its “high risk” list since 2003, a designation indicating vulnerability to “fraud, waste, abuse and mismanagement.”

    According to the GAO, the federal government owns or leases 900,000 buildings and structures. GSA data from Fiscal Year 2014 report 735,000 buildings and structures. A Congressional Research Service report from 2010 estimates around 77,000 of them are vacant or underutilized. We can’t be sure if these numbers are right, the GAO told the Senate Homeland Security and Governmental Affairs Committee, as the GSA’s Federal Real Property Profile is not entirely reliable. The GSA’s property database is not readily accessible to either Congress or the public, although the GSA does post FRPP reports and some summary data.

    Removing excess property from federal ownership should have broad appeal. Conservatives like shrinking government and everybody supports responsible stewardship of tax dollars. Entrepreneurs and the public can benefit from the redevelopment of federal properties, many of which are quite nice. (Some, like the 140-year-old pink octagonal monkey house in Dayton, Ohio, are more of an acquired taste.) Transferring federal property to private hands makes it taxable by local and state authorities, and when sold, it delivers additional funding to the treasury. Real property disposition also plays well in western states, where the feds control nearly half the land.

    With budget caps in effect and appropriators threatening cuts, one might think that agencies would be in a hurry to offload unneeded buildings and property. Alas, such efforts have been halting. The GSA sold off just 342 unwanted properties in FY2014, according to testimony by Norman Dong, commissioner of the agency’s Public Buildings Service. That this number does not match the figure GSA reports in Table 15 here underscores the data-reporting mess.

    It would be easy to attribute the slow pace of federal property sales to bureaucratic gaffes and that is one factor. The larger issue is that federal real property disposition is a mess because of well-intended policies that have aggregated over decades.

    • The Federal Real Property and Administrative Services Act of 1949 forbids most agencies from putting up their properties for sale. Instead, they must work through GSA, which first offers the property to other federal agencies. This policy is intended to encourage rational management of the total federal real estate portfolio.
    • The National Historic Preservation Act of 1966 directs agencies to register historic properties with GSA, a designation that means agencies must consult with assorted stakeholders as to what can be done with the structure.
    • The National Environmental Protection Act of 1969 obliges agencies to assess the environmental impacts of a property disposal before disposing of the property.
    • The Comprehensive Environmental Response, Compensation and Liability Act of 1980 mandates agencies either clean up contaminated federal property before offloading it, or get assurance the new owner will do so. The Small Business Liability Relief and Brownfields Revitalization Act of 2002 amended CERCLA and established a brownfields rehab program. Unwanted federal properties with contamination may be slated into this program.
    • The Stewart B. McKinney Homeless Assistance Act of 1987 requires agencies to offer surplus property for use by entities aiding the homeless. Since 1987, only 122 properties of the 40,000 buildings that were screened ended up being transferred to nonprofits aiding the homeless.

    These are just some of the statutes that come into play. Collectively, these policies mean it takes years to dispense with unwanted federal buildings. Offloading them necessitates surmounting numerous hurdles and can inflict upfront costs for repair and clean-up. Agencies often face incentives to do nothing.

    An unintended and particularly distressing effect of this policy aggregation is demolition by neglect. Shuttered properties crumble, meaning agencies face higher repair costs before they can dispose of them. This makes them less likely to be repaired and sold. The Department of Veterans Affairs, for example, has numerous derelict properties that cost money to maintain. This destruction of public wealth has fueled more than a few media horror stories.

    Congress has been working on a number of bills to improve matters for some years. There has been discussion of a BRAC-type commission, a fast-track process for removing the most valuable properties or devoting 2 percent of the proceeds from property sales to homeless assistance. Some members have introduced legislation directing agencies to convey specific properties to private hands.

    None of the systemic reforms have come close to enactment. Real property reform is a complex, “good government” issue that does not strike legislators as an election-winner. Any real property reform bill also must respect, or at least not offend, the various values at play (such as historic preservation) while giving agencies clear incentives to participate and making the whole process more prompt and less wasteful.

     

    Honor our Southern heritage by leaving the Confederate flag behind

    June 24, 2015, 1:26 PM

    It’s easy to condemn a mass murderer fueled by hate; it’s much harder to root out symbols, conventions and comments masquerading as innocuous relics of a time gone by.

    The murders in Charleston at the hand of a racist madman have again sparked conversations about race relations in the United States.

    The Civil War was romanticized throughout my childhood in the South. The horrible bloodshed of brother against brother wasn’t about slavery. It was about states’ rights against the federal government. I was even told that the driving reason for the war was that the Yankees wanted control of the South’s raw materials.

    As a young man, the stories fit a convenient rebel narrative. Cowboy boots, faded jeans, and an attitude went well with the tale of fighting against an oppressive, impersonal government.

    Like it did for so many of my peers, the Confederate flag came to represent pride in the South. I love the Southland; I love its people. It’s my home.

    It also happens to be home to many people I care about who have a different color skin than me.

    The same fairytale of my ancestors was instead their nightmare.

    As much as I support the rights of states to govern themselves, no man has the right to own another. Sometimes states get it wrong—deeply wrong.

    My forefathers fought for the Confederacy. Today, they’re long dead and buried. The lost causes of the Confederacy are less relevant to my Southern identity than sweet tea and seersucker suits.

    Yet we can’t wipe past wrongs away so easily. They left indelible scars on our nation that linger.

    Racism and hatred have been defeated time and again, but they leave hollow shells we refuse to discard. We look past them because they’re not a seen as a threat. We tell ourselves that putting away flags or changing our social habits won’t stop racism.

    What we fail to realize is that those shells of the past become refuges for monsters like Dylann Roof.

    How careless we are to leave them scattered about. Are flags more important than our friends? Is honoring the dead we never met worth inflicting pain on the living?

    I love the South, but I don’t show my affection by flying a rebel flag. I can’t be serious about caring for our people when I hold my tongue in the face of racist jokes and sweeping generalizations. I degrade my home when I choose to clutch a historical fiction rather than the hands of my black friends and colleagues.

    It’s shameful that it’s taken me so long to understand that my obtuse revisionist perspective on a lost war is a source of pain for those I love and a haunt for those with hate in their hearts.

    I see that now, and realize the greatest way to honor our Southern heritage and secure our future is to leave the symbols of our past wrongs behind.

    Letter to California Legislature supporting S.B. 602

    June 24, 2015, 11:00 AM

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

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

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

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

    S.B. 602 (Monning) is PACE for earthquakes made real – but, by another name. The “Property Secured Mitigation Program” combines the scale and reach of government without warping the private price signals necessary to transmit a full understanding of risk. In concrete terms, that means that the program could lead to more Californians with earthquake insurance in three distinct ways:

    • First, since a retrofitted home is less likely to sustain large amounts of damage during a seismic event, it is less expensive to insure. As a result, earthquake insurance premiums on retrofitted properties can be lower, while also being actuarially sound.
    • Second, because homeowners and earthquake insurance are linked in California, homeowners that opt for seismic retrofits could enjoy meaningful discounts on their homeowners insurance if they purchase earthquake insurance, which would further incentivize earthquake insurance.
    • Third, as the sheer number of retrofitted properties increase, earthquake insurance premiums will go down across the board.

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

    The moral case for fossil fuel taxes

    June 24, 2015, 8:00 AM

    One of the downsides of working in policy is that you end up hearing the same arguments over and over again. So I was excited to read Oren Cass’ recent piece in City Journal, “The Carbon Tax Charade,” which at least develops a new angle on arguments against a carbon tax. Unfortunately, what the argument offers in originality it fails to match in persuasiveness.

    In his article Cass offers a response to the recent announcement by a number of major oil and gas companies that they support a carbon tax. In response, he runs through a number of standard arguments about why this is not as surprising as it first seems (e.g., it’s really about hurting coal). But it is what follows these economic considerations, that Cass raises another benefit that oil and gas companies might get from a carbon tax: moral legitimacy. According to Cass, “paying the tax buys legal, economic and moral permission for the very activity that the tax is designed to discourage.”

    Of course, oil and gas companies already have legal and economic permission to burn greenhouse gases. But what about moral permission? Here Cass relies on a famous study of Israeli day-cares which counterintuitively found that imposing a $15 charge on parents who were late in picking up their children actually increased the number of late pick-ups. Most speculate that the fine framed the decision as one of economics, rather than morality. When there was no fine, parents felt guilty about making the day care workers wait, and so worked harder to avoid that outcome. Once it was clear the day care was compensated for the extra time, the guilt was alleviated, which more than outweighed the disincentive of having to pay the fine.

    According to Cass, the case of fossil fuel companies is not so different:

    For energy producers, and all users of fossil fuels, a similar dynamic is at work. If a carbon tax is established at a price that economists and policymakers agree compensates society for the potential dangers of climate change, then anyone who wants to pay the price is implicitly welcome to emit the carbon dioxide.

    Even Cass isn’t willing to argue that a carbon tax would result in higher carbon emissions. Unlike the decision of whether to rush to pick up your child from day care promptly, fossil fuel companies’ production decisions are already economic. They are businesses, after all. Nor is it necessarily the case that putting a fine or tax on an activity gives moral legitimacy to people who are wiling to pay it. If I get caught speeding, I’ll get a ticket. The fact that I pay the ticket doesn’t give me permission to speed. Higher taxes on cigarettes have gone hand-in-hand with increased social stigma for smoking.

    However, my main rejoinder to Cass is that, even if carbon taxes did lend moral legitimacy to fossil fuel emissions, that wouldn’t be a bad thing. Burning fossil fuels isn’t evil. It isn’t like eating kittens, something that is just plain wrong and no one should do it ever. Energy is the foundation of modern civilization, and at least for the time being, there are many vital activities that can’t be done without some reliance on fossil fuels.

    The problem with burning fossil fuels currently is that people who do it don’t bear the full cost of their actions. Since producers get the full benefit of burning fossil fuels, while bearing only some of the costs, we tend to burn too much of it. If a carbon tax is set at a level that compensates society for the potential dangers of climate change, then anyone who wants to pay the price should be welcome to emit carbon dioxide. To do otherwise would be to treat pollution not as an externality, but as a taboo.

    Don’t cast CloudFlare as copyright/trademark enforcer

    June 24, 2015, 7:00 AM

    You may be used to thinking of the Internet as being built of:

    1.  Services that directly connect you to the Internet;
    2. Services that offer their own content to the Internet; and
    3. Services that host your content (or someone else’s) on the Internet.

    But of course, today’s Internet ecology is more complicated than that. A “content delivery network” (CDN) service like CloudFlare, which offers a specific combination of services that both speeds up its clients’ websites and makes them more secure, doesn’t fall neatly into any of those three broad categories.

    What CloudFlare absolutely doesn’t do is host other people’s content, filter anybody’s content or block other people’s websites. Yet a federal court has insisted that CloudFlare must now act as a censor of alleged infringers of a particular trademark: something a service like CloudFlare is not designed to do and shouldn’t be ordered to do.

    The underlying federal case, Arista Records et al. v. Vita Tkach, didn’t even include CloudFlare as a defendant at the outset. Although the record-company plaintiffs in the case generally take an expansive view of who qualifies as an infringer of its intellectual property, they never argued that CloudFlare was an infringer. Their original case, a copyright case, was brought against a defendant called Grooveshark which, when it settled the case, turned over the “Grooveshark” trademarks to the record companies.

    So how did CloudFlare, which was named TechCrunch’s “Best Enterprise Startup” this year, find itself in the plaintiffs’ crosshairs? Good question! It turns out that copycat websites using the word “Grooveshark” appeared quickly in the aftermath of the Grooveshark settlement. It’s been a sort of trademark-law variant of the Streisand Effect. At that point, the record companies responded by obtaining a court order—now available here, though it was issued in secret—compelling CloudFlare to actively filter for and block these wannabe Grooveshark clones.

    Once it received the order, CloudFlare felt compelled, rightfully, to argue that the implications of the order would burden not only CloudFlare, but also any infrastructure service provider (think AT&T or Comcast) to act as an intellectual-property enforcer. Remember that CloudFlare is not itself a content provider, trademark infringer or copyright infringer. The startup simply speeds up secure access to its clients’ websites (even offering a basic speedup plan for free).

    Late last week, CloudFlare (and the Electronic Frontier Foundation, arguing on CloudFlare’s behalf) filed a motion asking the court to modify its order to exclude CloudFlare, which the motion underscores is a “non-party” in the underlying case. The principle here is bigger than the question of whether CloudFlare itself should be subject to a court order as a “non-party.” The question is whether infrastructure services, at any level, should be converted by court order into proactive enforcers of copyright and trademark.

    Under American law, the answer to this question generally has been “no.” Both the Digital Millennium Copyright Act (for copyright) and Section 230 (for everything else) created frameworks that limit secondary liability for Internet service providers, ranging from Comcast and Verizon to website and blog-hosting services…and, ideally, to companies like CloudFlare and Akamai, whose services making the Internet faster and more responsive.

    These two legal frameworks have given rise to today’s Internet. They are what has made it economically viable for providers to offer access (or speed that access) to Internet services; the laws prevent providers from automatically becoming legally responsible for unlawful content from or conduct by those services. Any court order that turns this legal balance on its head deserves to be challenged, both in federal court and in the court of public opinion. Let’s hope CloudFlare ultimately prevails in both courts.

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

    The GOP needs its own plan for climate change

    June 23, 2015, 1:03 PM

    The Obama administration’s ongoing campaign to regulate climate-change causing pollutants under the Clean Air Act deserves all of the withering criticism it has gotten from the political right. That said, the GOP’s current efforts to undo the administration’s bureaucratic power grab without offering a substantive alternative will do little more than delay an all-out Democratic Party victory on climate change. Republicans need a strategy that lets them both win the climate change policy debate and advance other small-government conservative goals.

    The facts first: For all the talk of climate change “denial” on the right, nobody who has looked at the issues seriously doubts that global temperatures have risen. Indeed, not even Charles Koch, the bête noir of the environmental movement, actually denies the impact of human carbon dioxide emissions on the climate. Every serious scientific assessment of the problem indicates that the negative consequences of climate change are likely to outweigh the positive ones.

    So why all the skepticism? The fact is, the environmental movement has a terrible track record when it comes to predictions of apocalypse. Although it’s a far more measured document than many give it credit for, even a few passages of Pope Francis’ recent encyclical on climate change veer into this territory. Conservatives have good reason to be concerned when the president and his allies use the threat of catastrophe to expand the size and scope of government.

    And what they want to do is pretty bad from a conservative perspective. The Clean Power Plan the administration has proffered under the Clean Air Act is a disastrous mix of unfunded state mandates and economy-killing regulation. The other proposed “solutions” to climate change offer huge production subsidies for trendy forms of power and restrictions on traditional energy development. Both of these policies deserve a quick and merciful death. So do “green jobs” efforts that are just a vehicle to provide handouts to unions, academics and environmentalists connected to the Democratic Party.

    At the same time, several court decisions have made clear that the Environmental Protection Agency use of existing laws to limit emissions are not only legal, but more-or-less mandatory. Senate Majority Leader Mitch McConnell and Republican leaders have expressed optimism that the courts will somehow swing their way. Such a dramatic reversal is quite unlikely and Congress appears equally impotent to get the president to back down. If Republicans actually want to stop the Obama administration’s damaging policies, they’re going to need more than blind faith in the eventual arrival of some landmark future decision or clean electoral sweep.

    That’s why conservatives need to offer their own solution. It should start with getting government out of the way. The agenda must include an absolute end to bureaucratic rules to regulate greenhouse gases, the administration’s ever-growing restrictions on energy development, and “green jobs” efforts of all stripes.

    It also should include tax cuts on both labor and capital. We should cut both the payroll tax, which penalizes working Americans, and the corporate income tax, which is the highest in the world and hurts our global competitiveness.

    Once they’ve cut taxes, reduced spending and trimmed regulations, Republicans can concede a simple, transparent tax on greenhouse gas emissions with every dollar above budget baselines recycled into additional, automatic tax cuts. The result would be a much smaller government that charges lower taxes on productive activity. In short, it’s a repeal-and-replace plan similar to what Republicans want to do with the president’s bloated health-care bill.

    Obviously, the political left does not have a history of supporting less regulation, fewer subsidies and lower taxes. But if the climate change alarmists actually believe what they say, they should be willing to give up far more than this in exchange for a strong national climate change policy. Indeed, conservatives concerned about climate change can and should ask for much more, from repeal of gasoline blend standards to federal preemption of state limits on natural gas development.

    Conservatives have a lot to gain and nothing to lose by offering their own credible solution to climate change. Their current strategy is a loser that, at best, will just delay a liberal victory. Conservatives can win if they offer a climate change solution that also advances the key priorities of conservative governance.

    Internet consumers beware!

    June 23, 2015, 10:30 AM

    From FreedomWorks:

    Language in the bill also includes a provision that entangles all users of platforms such as Amazon or eBay. It specifies any use of an “electronic marketplace,” no matter the sales volume. This means even an individual selling a few clothing items on Amazon is subject to the provision. Ultimately, the bill disrupts the principles of federalism and complicates tax policies. beyond what the norm. Chaffetz’s attempt to remedy inequality creates gradual elimination of state boundaries and empowers states to tax beyond their borders. R Street executive director Andrew Moylan criticized the the Marketplace Fairness Act and the current bill stating, “[t]his was a bad bill in the last Congress and it’s still a bad bill now. By wiping away geographic limits to state tax authority, the legislation would impose serious burdens on Internet retail and undermine basic tax policy principles.”

    Freeing investor capital for small business

    June 23, 2015, 8:00 AM

    Something has gone wrong with small business in America. For the first time since statistics were kept, the rate of business failure now exceeds the rate of business creation. It isn’t that businesses are failing more often than usual; rather, new business creation has slowed markedly and the rate continues to slow further. At a time when the labor-force participation rate is at multi-decade lows, the moribund state of small business is alarming.

    As with any large problem, there are many contributing factors. A critical one has been the shortage of capital for business investment, particularly for small businesses. Without sources of capital, new businesses with irregular cash flow (or none at all) often are unable to meet payroll, invest in research or product development or seek out new customers. Enabling small businesses to access the capital they need is an urgent priority of public policy. Yet small businesses are having a harder time getting capital through the traditional financial system.