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Free-market groups support American Manufacturing Competitiveness Act of 2016

April 14, 2016, 11:09 AM

Dear Chairman Brady,

On behalf of our organizations, we write in support of your legislation, the “American Manufacturing Competitiveness Act of 2016,” which would revise and improve the process for consideration of Miscellaneous Tariff Bills (MTBs). For years, MTBs served as an imperfect, yet effective means to reduce unnecessary tariffs on selected goods and materials that are not produced domestically.

By cutting or eliminating tariffs on raw materials and other products, MTBs helped create economic benefits for consumers while bolstering the competitiveness of American companies. In fact, according to the National Association of Manufacturers, passage of a MTB would provide the U.S. with $1.875 billion of economic growth annually.

There are also strict rules as to what is eligible for tariff relief. There could not be domestic production of the imported good, the estimated cost of the waived or reduced tariff could not exceed $500,000 and it had to be implementable by the U.S. Customs Service at the border. The International Trade Commission (ITC) was the arbiter of whether a proposal met the criteria.

Though its economic benefits are clear, since 2010 the MTB process has been halted by concerns about earmarks. Specifically, a provision in the rules of the House of Representatives prohibits the passage of a “limited tariff benefit” that affects fewer than 10 companies – a threshold triggered by many previous MTBs. Your legislation would wisely allow Congress to achieve the positive economic effects of an MTB without violating the ban on earmarks.

The revised process in your bill would require companies to file petitions for tariff relief directly to the ITC instead of to individual Members of Congress. The ITC would carefully analyze these requests and report its recommendations to Congress. Congress could exclude products from the ITC proposal, but could not add to it. This would ensure that all enacted tariff reductions were thoroughly vetted by both the ITC and Congress.

These important procedural changes should serve to eliminate any concerns about the parochialism and unethical behavior that were endemic to the earmarking process. Additionally, they add unprecedented transparency, as all correspondence between businesses, the ITC, and Congress would be made easily available to the public in real time.

Again, we applaud you on creating a revised MTB process that increases transparency, avoids the pitfalls of earmarking, and sets the table for economic growth. Our organizations are pleased to endorse your bill and hope it will be swiftly enacted into law.


Brandon Arnold, Executive Vice President

National Taxpayers Union


Grover Norquist, President

Americans for Tax Reform


Norman Singleton, President

Campaign for Liberty


Jeffrey Mazzella, President

Center for Individual Freedom


Tom Schatz, President

Council for Citizens Against Government Waste


Lisa Nelson, CEO

Jeffersonian Project


Lori Sanders, Outreach Director and Senior Fellow

R Street Institute


Karen Kerrigan, President and CEO

Small Business and Entrepreneurship Council


Steve Ellis, Vice President

Taxpayers for Common Sense


David Williams, President

Taxpayers Protection Alliance

The Washington Post’s neo-prohibitionist movement

April 14, 2016, 10:34 AM

From American Spectator

I enjoy Christopher Ingraham’s writing for the Washington Post. His Wonk Blog posts are data-heavy, which makes them interesting.

Like Ingraham, I have serious concerns about America’s long war on drugs. It strikes me as a losing battle, seeing as it is very hard to stop people from taking intoxicants that are so easy to produce. Worse, the war on drugs has encouraged law enforcement to go to militaristic measures to thwart the illicit drug trade. Like raiding individuals’ homes, sometimes wrongly— then shooting their dogs and refusing to give back their property. And even killing innocent people. Intoxicants are like any other product, in that markets exist for them. Prohibition fosters illicit markets, which are highly profitable and therefore very violent. (Drug gangs slaughter other drug gangs to control market-share. Fast food companies do not.)

Read more…

People deserve second chances, even in the insurance industry

April 14, 2016, 9:58 AM

Two years ago, the online health-insurance broker and human-resources portal Zenefits hired an insurance agent with a criminal record. Now the San Francisco Chronicle is attacking the firm for that decision.

While Zenefits certainly has had some well-documented compliance problems, this hiring wasn’t one of them. If anything, it’s an example from which other insurance brokers and agents might have a bit to learn, when it comes to dealing with ex-offenders.

According to the Chronicle, Zenefits, hired Michael Henry Solomon as an insurance agent despite his having committed a number of relatively minor crimes in the late 1990s – with apparently none that involved insurance sales. Zenefits’ own background check may not have uncovered these events.

But between his brushes with the law and working for Zenefits, Solomon worked consistently and held two jobs working in the insurance industry. He had a valid California state insurance license, which he obtained after an initial rejection. In California, as in all other states, getting almost any sort of professional license after a criminal conviction requires examination of the specifics of past offenses and, almost always, lots of sterling character references.

There’s also no evidence that Solomon committed any sort of illegal act while employed by Zenefits or that he harmed any of its customers. His only recorded crime in the past 15 years was a drunken-driving conviction. Given that Zenefits certainly knew about this when it hired him and that the company’s model strongly suggests that driving wasn’t part of the job, it’s clearly something the company’s hiring managers decided wasn’t disqualifying.

In short, Zenefits gave a second chance to someone who had committed crimes but had shown evidence of reform and had worked in the industry for more than a decade. Solomon seems to have been just the type of person, in other words, who likely deserves a second chance.

People who sell insurance or any other financial product should likely be held to higher standards of financial probity than the public at-large. It is beyond obvious that people convicted of insurance-related fraud should generally be bared from the industry. But a minor criminal record needn’t be a reason to exclude people from the insurance industry altogether.

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

How high does your insurance rate accelerate when you’re caught speeding?

April 14, 2016, 9:08 AM

From Dallas Morning News

“The bottom line is that the riskier a driver is, the more expensive he or she is to insure,” said Eli Lehrer, president of R Street Institute, a nonprofit research group.

Regulators requested data on 12M Uber riders and drivers, transparency report shows

April 14, 2016, 9:02 AM

From SC Magazine

“Uber’s transparency report doesn’t add much fuel to the fire in terms of general criticism from the EU regarding Privacy Shield,” said Mike Godwin, director of innovation policy and general counsel for the R Street Institute, speaking with SCMagazine.com. If is determined that other government agencies were given access to this user data, that may change the equation, added Godwin. “But that is not what we’re seeing now.”


It’s time for Uber’s regulators to be as transparent as the company is

April 13, 2016, 2:20 PM

This post was coauthored by R Street Policy Analyst Nathan Leamer.

Recent years have seen a range of internet companies release “transparency reports” that attempt to detail, to the extent allowed by law, law-enforcement and national-security demands for user data. Most of these reports have been issued by companies that either are primarily internet service providers or internet-focused communications companies – such as Google, AT&T, Verizon, Twitter and CloudFlare – or longstanding, consumer-facing tech firms like Apple and Microsoft.

Uber, the internet-based ridesharing company, this week joined the ranks of companies to publish transparency reports, a move R Street applauds. Moreover, there are some key aspects to Uber’s first transparency report to which we should all pay attention.

In the final six months of 2015, Uber reports it received “33 requests from regulatory agencies, 34 from airport authorities, and 408 requests for rider account information and 205 for driver account information from law enforcement agencies.” These numbers need some unpacking.

First and foremost, Uber’s report includes aggregated data on information it’s provided to state regulatory agencies. State regulators gathered information, including GPS coordinates for pickups and drop-offs, on more than 12 million individuals (drivers and riders) just in the last half of 2015.

By comparison, Uber received only 415 warrants or subpoenas from law-enforcement agencies in all of 2015. Those 415 warrants or subpoenas covered only 613 drivers and riders, total. The company reports it hasn’t yet received any National Security Letters or any orders from the Foreign Intelligence Surveillance Court, but we may reasonably expect that to change over time as our intelligence services become more interested in the question of what logistical and other data they can recover from ridesharing services.

Turning our attention back to the roughly 11.6 million riders and 650,000 drivers whose data was swept up by state regulators, it wouldn’t be surprising to learn that federal agencies (as well as other state agencies) already have access to this information. There’s no standard set of rules that would illuminate what state agencies are doing with this data – whether it’s kept forever or erased at some point, or anything else. While it’s good that Uber is committed to transparency in what it shares with government agencies, this transparency report underscores the need for state regulators to be just as transparent about what they do with the data they collect from Uber and other ridesharing companies.

Another way that Uber’s duties under the law differ from (and arguably are greater than) those of other internet companies is the airport-reporting requirements. Everyone knows Uber drivers (in those states and localities that allow ridesharing companies to operate relatively freely) may pick up and drop off riders at airports. But what you may not know is that U.S. airports often operate as their own separate jurisdictions and may impose their own reporting requirements on Uber and similar companies. As Uber’s report puts it:

In order to operate at airports, regulated transportation companies and other similar services are required to enter into agreements created and enforced by each airport authority. These agreements vary by airport and require transportation services to report information such as trip volumes on a monthly basis; when vehicles enter and exit the airport area; where vehicles pick up and drop off within the airport area; and/or each vehicle’s registration information, license plate and driver. The statistics here show the number of riders and drivers affected by airport reporting requirements.

Not every airport chooses to impose such requirements, but from those that do, Uber received 34 requests for data that included information about more than 1.6 million riders and more than 150,000 drivers. As with the state regulators, we don’t know what the airports ultimately do with this information, the extent to which it’s protected or whether it’s ever deleted. In an age of cyber-security hacks and loads of potentially compromising information in government hands, there really is cause for concern that state and local agencies have the wherewithal to protect the details shared in these reports. These are questions worth raising now, since airports, like all government entities, ultimately ought to be accountable to citizens.

Unlike companies in other areas of internet-based commerce who previously have complied with mandated transparency reports, Uber is compelled to share extremely sensitive data about their drivers and users. We understand that, in some sense, Uber is simply meeting requirements that taxis and limo and courier services long have been required to meet.

But with Uber, there’s at least one important difference – the company’s business model relies on GPS, on in-depth customer reviews of drivers and even drivers’ review of riders.  All of that means the information transportation network companies must share may be vastly more detailed and intimate than, say, a taxi service would provide. Plus, taxi companies can (and typically do) accept cash rather than credit cards for payment.

Despite what we don’t yet know about what government agencies ultimately are doing with TNC data, we nonetheless have to praise Uber for taking the initiative to make this first transparency report public. We look forward to Uber’s efforts to adapt and evolve this transparency report over time. Not only do we expect federal and state law-enforcement, national-security and regulatory demands from companies like Uber to grow, but Uber and other international internet-based companies likely will be compelled to turn over information to other governments around the world. Uber has been operating internationally since 2012. Google and other pioneers of the transparency-report movement have made a point to include data about demands from other governments under whose jurisdiction they operate. In the long run, we’d like to see Uber publish transparency reports that include compliance with foreign governments’ demands, as well.

Uber’s transparency report marks a major milestone in the dialogue over data integrity and what should and should not be shared with government agencies. As internet-based companies continue to expand into traditional commerce, we look forward to other companies – as well as state regulators, federal agencies and other nations’ governments – following the examples set by Google, Apple, Twitter and now, Uber.

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

Searching for loyalty and prudence

April 13, 2016, 1:07 PM

In his provocative and knowledgeable new book, Other People’s Money: The Real Business of Finance, John Kay considers the complex ways that financial systems operate in between the real savers, on one hand, and the real investments, on the other.

He observes disapprovingly how very large contemporary financial systems have become, how much talent they absorb, how big are the bonuses they pay, how they often have lost sight of their basic fiduciary duty, and especially that “volumes in trading in financial markets have reached absurd levels.” Considering these unimaginably vast amounts of paper (electronic records) constantly being bought, sold and borrowed against among principal financial actors, he reasonably asks, “What is it all for?” He doubts that it really advances the fundamental purposes of financial systems.

Most of this activity involves somebody doing something with somebody else’s money.  To make this a “serious and responsible business,” in Kay’s intentionally old-school, and sound, view:

the guiding purpose of the legal and regulatory framework should be to impose and enforce the obligations of loyalty and prudence, personal and institutional, that go with the management of other people’s money.

This can be effective “only when the values appropriate to the handling of other people’s money are internalized by the market participants themselves.”  

Banks taking the deposits of the public, he adds, “are intended to be rather dull institutions.” They should be “limited in their choice of assets” to conservative ones. This recalls what Walter Bagehot observed in the greatest book on banking, Lombard Street, in 1873:

There is a cardinal difference between banking and other kinds of commerce; you can afford to run much less risk in banking. . . . A banker, dealing with the money of others, and money payable on demand, must be always, as it were, looking behind him, and seeing that he has reserve enough in store if payment should be asked for.

In Bagehot’s memorable summation: “Adventure is the life of commerce, but caution . . . is the life of banking.”

That sounds like the approach of the solid and careful Scottish bankers of Kay’s youth in the 1960s, whose virtues appeal to him far more than do the greater intelligence, quickness, and sparkle of the bankers of 50 years later.

About those former days, Kay reflects, “Banking was then a career for boys whose grades were not good enough to win admission to a good university.” If they joined the Bank of Scotland or the Royal Bank of Scotland, “they might, with appropriate diligence, after twenty years or so, become branch managers,” who were “paternalistic, notorious for their caution.” The branch manager of sober judgment “was a respected figure,” and “it never crossed his mind, or the minds of his customers, that the institution he had joined at the age of seventeen would not continue for ever.”

Instead of going on forever, these big Scottish banks both failed in 2008 and were taken over by the British government. By then, their leadership had degrees from elite universities. However, the “cleverer people managed things less well—much less well—than their intellectually less distinguished predecessors. Although clever, they were rarely as clever as they thought.”

This brings to mind a wonderful lesson taught me by an older banker years ago: “Remember Alex, that it is easier to be brilliant than right.” How right he was.

Kay likes old-fashioned banks. He most distinctly does not like traders or trading banks, especially those “people with an exaggerated idea of their relevance and of their own competence” whom he holds responsible for the 2007-2009 financial crisis.

When he was a director of a formerly old-fashioned institution, the Halifax Building Society, the board approved expanding trading activities. Kay asked where the Treasury profits would come from. He was told the institution would make money “because our traders were smarter,” he writes. “But the people I met did not seem particularly smart. And not everyone could be smarter than everybody else.”

However much an accomplished intellect like Kay may be irritated by the pretensions of the traders, was trading the fundamental cause of the financial crisis? Or was the real problem the more old-fashioned mistake of making a mass of bad loans, especially bad real estate loans? It seems clear to me that it was the latter: bad loans. Of course, trading activities did spread the bad loans around in the form of securities.

Kay poses a key question: Why did banking look so profitable before the crisis? He correctly answers that it is a business that combines “a high probability of a small profit with a low probability of a large loss.” When highly leveraged, the small profit looks big, and the large loss becomes catastrophic.

As an example of the problems this poses—in my words, not Kay’s—suppose we gamble in a statistically fair game with such a probability structure. For an equity investment of $10, it returns a $2 profit 90 percent of the time, but an $18 loss 10 percent of the time. I set the second probability at 10 percent because the average recurrence of financial crises is about once a decade. You might get a 20 percent return on equity for eight or nine years in a row, seeming to confirm how smart you are and triggering big bonuses, high dividends, and stock buybacks besides. Then comes the $18 loss, which wipes you out.

As Kay says, banking can only be meaningfully measured over a credit cycle, and in this game, the net profit for the 10 years as a whole is zero. But the bonuses from the nine 20-percent-return years are not paid back in the disastrous tenth year.

Whatever the problems were and are, Kay sees that the answer is not more reams of detailed financial regulations. “There has not been too little regulation, but far too much,” he writes. “We should put an end to the seemingly endless proliferation of complex rulebooks which are even now beyond the comprehension of the far too numerous regulatory professionals.”

Considering “the comprehensive failures of regulation before and during the global financial crisis,” and “why this approach was bound to fail,” he rightly cites the Austrian school’s critique of central planning.  He might have added, as Ludwig von Mises and F.A. Hayek would, that the ever-more-complex regulations serve the will to power of the regulatory bureaucrats and central bankers who write them. He might also have added that when the U.S. politicians and bureaucrats mandated making risky mortgage loans to promote home ownership, they obviously had no idea what they were really doing or how it would turn out—just as von Mises and Hayek would have said. (For an in-depth analysis of this, see Brian Domitrovic’s recent Law and Liberty post.)

Solutions are naturally more difficult than even the most insightful discussion of the problems.  Among his suggested reforms, Kay wants to make the lines between savers and investments clearer and more direct, to “re-establish short, simple linear chains of intermediation,” and to “restore specialist institutions with direct links to financial users.” These are interesting suggestions, but must make us skeptically think of the collapse of the specialist savings and loans and the specialist subprime lenders.

Kay also makes a proposal that would be excellent if it were politically possible: to “treat financial services as an industry like any other” and withdraw “public subsidies, state guarantees, and other mechanisms of government support.” If only we could. But we cannot even reform Fannie Mae and Freddie Mac, which continue to live entirely on government guarantees and support.

Finally, he stresses the central principle: that “anyone who handles other people’s money” should demonstrate “standards of loyalty and prudence in client dealings.”

This is worthy of constant effort, by precept and example.

2253 Rayburn House Office Building

April 13, 2016, 12:29 PM
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    April 13, 2016, 12:28 PM
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    April 13, 2016, 12:28 PM
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    45 Independence Avenue SW - Washington
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  • Blocking remittances wouldn’t make America great again

    April 13, 2016, 12:12 PM

    Donald Trump has become the Republican frontrunner based on a promise to build a giant wall on the U.S.-Mexico border. However, candidate Trump has until recently been vague on the details of the second part of his plan – how, exactly, he planned to compel Mexico to pay for it.

    Now Trump has a plan to force Mexico to build his wall. Trump would use powers granted under the Patriot Act, which was passed after the Sept. 11 terrorist attacks, to block remittances to Mexico sent from the United States and to block any non-U.S. citizens from wiring money abroad from the United States.

    While a country-by-country breakdown isn’t available, total remittances sent to Mexico by Mexican nationals working and living abroad is estimated to be just under $25 billion and is the largest source of foreign income for Mexico.

    The Mexican government, to be sure, is not very happy about this proposal. The head of the Mexican central bank denounced Trump’s proposal as a violation of the property rights of income earners.

    While the proposal is morally dubious, there are other problems with restricting remittances. From a practical perspective, the plan is flawed for many reasons. The restriction of remittances ultimately wouldn’t just harm Mexico, it would harm the United States, as well.

    Remittances are sent back home by foreign workers – those here both legally and illegally – from money they earn in the United States. Some have gone as far to call remittances a private form of foreign aid. Unlike economic assistance administered by foreign governments, nearly all of it directly reaches the people it is intended to aid. The money strengthens local communities and families instead of an autocrat’s offshore bank account. Also, remittances have shown steady growth, whereas aid provided by governments and private nonprofits varies with economic conditions and the political winds.

    If remittances dry up, in order to prop up Mexico and avoid even more dangerous instability at our southern border, the United States likely would be forced to devote more foreign aid. Such aid would not make it directly to the Mexican people as efficiently as remittances would. Much of it would be tied up in bureaucracy.

    A crackdown on remittances would be terrible for the United States, as well. Depriving Mexico or any of our major trading partners of such large sums could spark major recessions. In addition to harming the interests of American companies that do extensive business in Mexico – think financial services firms and major Hollywood studios – the reality is, if people cannot feed their families in Mexico, they almost certainly will be forced to migrate to the United States, both legally and illegally. An unstable Mexico would likely breed more violence on the border.

    Finally, a crackdown on remittances would damage some American financial institutions. American banks and financial services companies charge fees based on a percentage of the money sent abroad. A remittance ban, no matter how temporary, will have a substantial impact on the bottom line of money-transfer companies like Western Union and MoneyGram. There would also be the fear that a remittance ban could be extended to other countries.

    If you believe building a big wall on the Mexican border to deter illegal immigration is a positive public policy idea, then ironically, banning remittances to Mexico could make the problem of illegal immigration worse. Walls can be climbed over with ladders, tunneled under, bypassed or simply breached. Desperate people will do anything to support their families and likely won’t be deterred by a wall.

    The first rule of public policy should be “do no harm.” Proposals to ban or significantly curtail remittances violate that simple rule.

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

    Suggested guidelines for state and local regulation of e-cigarettes

    April 13, 2016, 11:08 AM

    Tobacco cigarettes are by far the most addictive and hazardous nicotine-delivery products. The tar in cigarette smoke, not the nicotine, causes cancer and heart and lung disease. E-cigarettes and related vapor products (e-cigs) contain no tobacco. There is no combustion, no tarry smoke. E-cigs contain the same nicotine as pharmaceutical gums, patches, etc. The traces of tobacco-related toxins in e-cigs and these pharmaceutical products are too small to be of public-health significance.

    No nicotine-delivery product can be considered 100 percent risk-free. When compared to the risk posed by cigarettes, both e-cigs and the pharmaceutical nicotine products present less than 5 percent of the risk posed by cigarettes; most likely less than 1 percent of such risk, to both users and bystanders.

    The question here is one of alternatives. The real-life alternative for smokers who are unable or unwilling to quit is either to continue smoking and suffer the consequences or to switch to a much lower-risk nicotine product that will satisfy their urge to smoke. The fact that cigarette smoking is still our number one preventable cause of death, after a half-century of tobacco-control programming, suggests the time has come to consider adding a new element to tobacco-control programming.

    E-cigs represent a disruptive technology. Before the advent of these products, no one ever considered the possibility that there might be a product that could satisfy the urge to smoke for large numbers of smokers, and do so without attracting large numbers of teens to nicotine addiction. While e-cig marketing has attracted significant numbers of nonsmoking teens to experiment with these products, very few have continued their use; none or almost none have transitioned from consistent use of e-cigs to cigarettes. Nearly all teen (and adult) use of these products has been by smokers who use them as an alternative to cigarettes, or to step down to eventual zero nicotine consumption.

    Even without tobacco and e-cigs, our lives are not nicotine-free. Potatoes, tomatoes, eggplant, peppers and other common vegetables contain enough nicotine for someone easily to consume the nicotine equivalent of a cigarette a day. Thus, it makes no sense to speculate that traces of exhaled nicotine from e-cigs present any risk of concern to bystanders.

    For a detailed discussion of the case in favor of promoting e-cigs to reduce addiction, illness and death from cigarettes, please download and read through this paper I wrote for legislators and other non-technical federal, state and local policymakers.

    The opposition to e-cigs relies mainly on tradition, the goal of “a tobacco-free society” and tobacco control’s partnership with the pharmaceutical industry. These concerns, in the minds of tobacco-control leadership, rule out any possibility of ever considering any potential public-health benefit to any non-pharmaceutical nicotine-delivery product. The following link provides some insight into the unreasonable nature of the opposition. Dr. Peter M. Sandman, an expert in risk communication, excoriates the Centers for Disease Control and Prevention leadership for purposely misinterpreting CDC’s own survey data and misleading the public on e-cigs.

    The bottom lines are these:

    1. Imposing restrictions and increasing taxes on cigarettes and smoking will reduce tobacco-related addiction, illness and death.
    2. Imposing these same restrictions and taxes on e-cigs will have the opposite effect. It will discourage smokers who would otherwise switch to keep smoking.
    3. Vaping is not smoking and should not be defined as such.

    Puerto Rico bill proceeds with oversight board and no bailout

    April 13, 2016, 10:16 AM

    The House Natural Resources Committee is taking testimony today on its bill to address the Puerto Rico debt crisis, and could send a finished bill to the full U.S. House as early as tomorrow. As the Puerto Rican government’s finances continue to unravel rapidly, it is decidedly time for Congress to act.

    The bill gets two fundamental issues right. It takes the essential first step: creating a strong emergency financial control board to oversee and reform the Puerto Rican government’s abject financial situation and operations. The oversight board the bill provides should be put in place as soon as possible. (See “Puerto Rico needs a financial control board.”)

    Second, it provides no bailout for the bondholders. Should U.S. taxpayers provide a bailout to those who unwisely lent money to the Puerto Rican government? Clearly not. When governments spend and borrow themselves into insolvency, those who provide the debt should bear the risk on their own. Since the citizens of Puerto Rico themselves pay no federal income taxes, this imperative is even stronger.

    Objections are raised that these losing investments were made while relying on the Puerto Rican government’s inability to enter bankruptcy proceedings. But the fact that you cannot enter bankruptcy does not stop you from going broke. When you are broke, and the cash is gone, and the lenders won’t lend to you any more, the question becomes how big a loss the various parties will take. Nobody knows the right answer at this point: that’s one of the reasons we need the oversight board.

    The Puerto Rican government has now made settlement offers for outstanding debt which would pay, on average, about 66 cents to 75 cents on the dollar. For the debt held by its own residents, it offers a special deal: you could be paid at par, starting 49 years from now, and get an interest rate of 2 percent. Discounted at 5 percent, this implies a value of about 45 cents on the dollar. Presumably, this would be a way to avoid recognizing losses for Puerto Rican credit unions which would not mark to market.

    There are three contenders for the vanishing cash of the Puerto Rican government: the creditors, the ongoing operations of the government and the beneficiaries of the large and virtually unfunded government pension plan. How to share the losses among the claimants is the fight at the center of all insolvencies and will be so in this one, too.

    There is no pleasant way out of the current situation. We won’t even know how deep the component insolvencies are until the oversight board gets in there and figures it out. In the meantime, we also should wrestle with the third fundamental issue: how to create a successful market economy to replace Puerto Rico’s current failed government-centric one.

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

    R Street urges House Judiciary Committee to pass Email Privacy Act

    April 13, 2016, 10:06 AM

    WASHINGTON (April 13, 2016) – As the House Judiciary Committee moves today to mark up electronic privacy legislation, the R Street Institute believes the manager’s amendment forwarded by Chairman Bob Goodlatte, R-Va., represents a reasonable compromise that preserves key aspects of the original bill.

    H.R. 699, the Email Privacy Act, enjoys broad support from privacy advocates and the technology industry and has attracted 315 bipartisan cosponsors. The bill would update the Electronic Communications Privacy Act of 1986 to ensure law enforcement must obtain a warrant to access citizens’ online messages and other electronic content during a criminal investigation.

    “This legislation represents a balanced, bipartisan approach to restore the privacy millions of Americans expect to enjoy in their email and other forms of online communication,” R Street Policy Analyst Nathan Leamer said. “We urge the committee to forward the legislation to the House floor for consideration as soon as possible.”

    Leamer noted that while the amendment language is not perfect, it largely preserves what was already a very popular and widely supported bill. R Street is disappointed that the amendment removes a key provision that required law enforcement to provide notice directly to users that investigators are seeking their online data. However, it also takes protection one step further by applying the warrant requirement to all law enforcement, rather than exempting civil agencies from the measure.

    “Most of our lives are on our screens,” Leamer said. “It’s about time we expand essential Fourth Amendment protections to our phones and computer correspondence.”

    Mindy Finn Project

    April 12, 2016, 10:14 PM

    From Politico

    Empowered Women, founded by Mindy Finn (formerly of Twitter and the RNC), [will announce] today it will host its first Leadership Retreat, #OwnYourPower, June 6-8 … featuring U.S. Rep. Elise Stefanik, Elise Whang of SnobSwap, Katie Biber of Thumbtack, Poppy MacDonald of National Journal, and many more. The Retreat will focus on women leading change in politics, media, and the new economy. Empowered Women also announced its new board with Lee Carosi Dunn … Laura Cox Kaplan … Diane Tomb … Jessica Dahl … Amy K. Mitchell … Lori Sanders … and Bettina Inclan.” Retreat info http://bit.ly/23qKfp8 … Board announcement http://bit.ly/1qFlBiM

    Mississippi AG to ‘re-evaluate’ Google probe after 5th Circuit vacates injunction

    April 12, 2016, 10:13 PM

    From Washington Internet Daily

    Hood will need to make a “political decision” whether to continue to pursue his office’s Google investigation, Electronic Frontier Foundation (EFF) Senior Staff Attorney Mitch Stoltz told us. Stoltz filed a pro-Google amicus brief for EFF, the Center for Democracy and Technology, New America’s Open Technology Institute, Public Knowledge and R Street Institute. Hood will need to carefully consider his office’s investigation given what critics view as damaging documents made public in the 2014 Sony Pictures Entertainment data breach (see 1412170050) that claimed to show MPAA influenced Hood’s criticism of Google’s practices, Stoltz said. Google claimed in its lawsuit that a “substantial lobbying effort” by MPAA prompted Hood’s subpoena (see 1412190045).

    Regulatory Dark Matter: Why Regulatory Reform Efforts Must Address Interpretive Rules

    April 12, 2016, 8:00 AM

    WASHINGTON (April 12, 2016) – While increased national debate surrounding regulatory reform is commendable, recent discussions have focused largely on the traditional rulemaking process that includes publication in the Federal Register and a requisite period of public comment. But a new R Street policy brief suggests that, if true reform is the goal, policymakers need a broader perspective.

    Noting that reform efforts like the REINS Act and SCRUB Act focus on traditional “legislative rules,” report authors Kevin Kosar and Daniel Richardson write that “much federal regulatory activity happens outside the formal procedure these reforms presuppose.”

    “This other activity has gone by many names. Agencies refer to these actions as guidance documents, ‘no action letters’ and public notices,” Kosar and Richardson write.

    The belief that these “interpretive rules” are largely inconsequential is misguided, the authors contend. As Supreme Court Justice Antonin Scalia argued in an opinion penned shortly before his death: “If an interpretive rule gets deference, the people are bound to obey it on pain of sanction, no less surely than they are bound to obey substantive rules, which are accorded similar deference. Interpretive rules that command deference do have the force of law.”

    In light of this reality, the authors urge a more comprehensive approach to regulatory reform that recognizes and seeks to alleviate the current lack of a unifying standard governing interpretive rules.

    “Congress should take steps to move interpretive rules out of the realm of regulatory dark matter,” the authors write. “This can be done by setting government-wide standards for the formats of interpretive rules and by requiring such rules be deposited in a central, searchable online repository. Individuals and firms regulated by such guidance should be able to locate such rules, and to comment on them.”

    Interpretive rules are missing piece in regulatory-reform debate

    April 12, 2016, 8:00 AM

    The attached policy short was co-authored by Daniel J. Richardson.

    Regulatory reform has garnered significant attention lately, both in Congress and on the campaign trail. Republican nominees for president each have released plans to tackle regulatory overreach, while congressional Republicans have advanced a variety of reform bills.

    Much of the attention to this issue is driven by research finding an increase in the overall federal regulatory burden. In arriving at this conclusion, researchers have used different measures of regulatory activity. Some have looked to the number of pages published in the Federal Register. Others have considered the number of major rules promulgated in recent years or the total costs of regulations as a monetary sum. Most scholars recognize that none of these measures are perfect, given the wide disparity in effects different sorts of rules have and the disparate reasons that agencies publish in the Federal Register.

    However, there is a more fundamental reason these numbers do not paint the full picture. Many regulatory-reform initiatives focus on the traditional rulemaking process, which includes publication in the Federal Register, opportunities for public comment and codification in the Code of Federal Regulations. Rules promulgated through this process often are referred to as legislative or substantive rules. For instance, legislation introduced in recent sessions of Congress as the Searching for and Cutting Regulations that are Unnecessarily Burdensome (SCRUB) Act would require reviewing current regulations captured in the CFR, while the Regulations from the Executive In Need of Scrutiny (REINS) Act would raise the procedural hurdles before agencies could implement a subset of legislative rules that are shown to have significant economic impact.

    While these steps certainly would erect barriers to new regulations and could help cull some old ones, much federal regulatory activity happens outside the formal procedure these reforms presuppose. This other activity has gone by many names. Agencies refer to these actions as guidance documents, “no action letters” and public notices. Clyde Wayne Crews of the Competitive Enterprise Institute has labeled this kind of activity the “dark matter” of the regulatory state. Regardless of the label applied, the impact of these rules comes through their classification as “interpretive” in nature.

    Testimony on ‘raising the age’ in Louisiana

    April 12, 2016, 7:30 AM

    Thank you Chairman Gary Smith, Vice Chairman Ronnie Johns and the rest of the committee for allowing me to submit the following testimony in support of S.B. 324, the Raise the Age Louisiana Act of 2016. My name is Nathan Leamer and I am a policy analyst with the D.C.-based think tank the R Street Institute. We work alongside federal and state legislators to develop conservative, free-market solutions to a wide array of issues in a number of different policies areas, including the juvenile-justice system.

    Before my work in the policy, I earned a secondary education degree and taught high school history in Michigan. My experience with teenagers has informed my understanding of the obstacles they face, as well as the challenges faced by communities in guiding them to fulfill their potential. In or out of the classroom, I never treated 17-year-olds differently from fellow students who happened to be 16 or 15. I didn’t give them more or less classwork, grade on a curve or approach classroom behavior standards differently because of my students’ age. Instead, I collaborated as best I could with each student, their parents, other educators, coaches and/or community mentors to help each kid achieve their full potential. I feel the state justice system could benefit from this approach employed by educators.

    Instead of subjecting 17-year-olds to the one-size-fits-all approach of the adult penal system, “raising the age” would end the arbitrary practice of treating of 17-year-olds in a class all themselves, in which they are adults only in the eyes of the court but in no other aspect of their lives. It would give all of Louisiana’s minors access to the holistic rehabilitative services of the juvenile-justice system. Passing S.B. 324 is an opportunity to make legislative reforms with long-lasting financial benefits to taxpayers, while also improving public safety.

    Before I continue, I should note that there is a danger to going too far in the other direction. In a limited number of cases, teenagers really do commit adult crimes. Those individuals should serve adult time. However, the default approach should not be to ship all teens to the adult court but to utilize the multiple tools available through the juvenile system.

    Raising the age will reduce recidivism and improve public safety

    Automatically prosecuting youths charged with criminal offenses as adults originally was thought to improve public safety. But an overwhelming body of research shows the emphasis on harsh measures as a form of deterrence has not accomplished its intended purpose. Across the nation, a steady stream of research unequivocally demonstrates that trying and sentencing children in adult court does not reduce crime. In fact, it does just the opposite.

    Juveniles prosecuted in adult court are more likely to recidivate than their counterparts in the juvenile-justice system. Over the long term, this leads to more victims of crime, not fewer. Children under the age of 18 who are in the adult system are, on average, 34 percent more likely to be rearrested for a felony than youths who stay in the juvenile system. The adult system does not provide the age-appropriate programming and interventions critical for youth rehabilitation. Trying youths as adults has both a detrimental impact on children and harms public safety.[1]

    Raising the age is fiscally sound policy

    While the annual per-detainee cost of juvenile facilities is generally higher than comparable facilities for adults, other associated costs tend to more than cancel out the differences. In one of the more comprehensive studies of the topic, a 2012 University of Texas analysis found that Texas would save about $90 million a year by ending the automatic sentencing of offenders under age 18 as adults.[2] Louisiana is much smaller, but plausibly can expect savings in the tens of millions of dollars.

    The Prison Rape Elimination Act of 2003 established federal mandates to ensure the safety of all inmates. This law makes it more costly to house children in state prisons and parish jails.[3] Compounding the cost is concern over the long-term effects of solitary confinement[4] that makes housing juveniles in adult facilities an expensive tightrope to walk. States like Rhode Island, which attempted to lower the age of adult jurisdiction from 18 to 17 in hopes of saving money, have found the change had the opposite effect, forcing the state to spend more on 17-year-old offenders than it was previously.[5]

    Collateral consequences of a criminal record

    As participants in the adult system, 17 year-olds lose confidentiality in court proceedings and typically cannot generally have their court records sealed or their offenses expunged. Information about their offenses is also, in practice, often searchable on the public Internet. The Vera Institute of Justice estimates that youths with adult criminal records could lose more than $61,000 in lifetime earnings. They may face denial of jobs, vocational licenses, educational loans and access to public housing as a result of a criminal court conviction. Some collateral consequences like these are appropriate for some adult offenders but they are deeply unfair for people who can’t buy tobacco, much less alcohol; cannot exercise their Second Amendment rights; cannot sign most contracts; and cannot serve in the military or vote.

    Raising the age is supported by research on adolescent development

    A significant body of scientific research supports the idea that we should establish a developmentally appropriate and informed juvenile-justice system. Over the past decade, research on adolescent brain development has shown the teen years to be marked by distinct characteristics that differentiate them from childhood and adulthood, including cognitive and behavioral traits such as poor self-control, sensitivity to peer influence and a tendency to be especially responsive to immediate rewards, while failing to take into account long-term consequences.[6]

    The combination of these traits can lead adolescents to engage in high-risk behavior, with little consideration of the long-term consequences of their actions. Studies have also demonstrated that during emotionally charged situations with limited time to react, adolescents are most prone to poor decision-making. Typically, this behavior peeks during the late teenage years and dramatically reduces by the time a young person is age 21, with rates of offenses dropping continually through age 25.[7]  So-called “desistence” studies support these data, pointing to a natural “aging out” of criminal behavior by the mid-to-late twenties.[8]

    In short, 17-year-olds are not the same as adults, in terms of their culpability. They are much more likely, if treated properly, to “age out” of criminal behavior and become productive, successful adult citizens. Research on adolescents that identifies environmental factors likely to enhance their healthy development suggest that youth who are connected to a positive, authoritative adult; who have access to healthy and positive peer groups; and who have access to activities that promote critical thinking and autonomy are more likely to come through adolescence successfully.[9]  The design of the juvenile-justice system, while not perfect, better supports these environmental factors than the adult criminal-justice system.


    Louisiana’s 17-year-olds face a deeply unfair situation under current law. They have none of the rights typically accorded to adult citizens, but are treated as adults when they commit crimes. Policymakers should change this status immediately. Increasing the age for trying individuals in an adult court is an evidence-based approach that holds the promise of changing the behavior of juvenile offenders who would otherwise be lost in the adult system. “Raising the age” is a win-win approach, saving taxpayers money and increasing public safety.

    [1] Centers for Disease Control and Prevention. (2007) Effects on Violence of Laws and Policies Facilitating the Transfer of Youth from the Juvenile to the Adult Justice System: A Report on Recommendations of the Task Force on Community Prevention Services. Richard E. Redding, Juvenile transfer laws: An effective deterrent to delinquency? (Washington, D.C.: U.S. Department of Justice, Office of Justice Programs, Office of Juvenile Justice and Delinquency Prevention (June 2010).

    [2] http://ajclonline.org/wp-content/uploads/2013/03/40-1-Deitch.pdf

    [3] http://www.maciverinstitute.com/2013/10/mandatory-sentencing-17-year-olds-in-adult-court/

    [4] https://www.aacap.org/aacap/policy_statements/2012/solitary_confinement_of_juvenile_offenders.aspx

    [5] http://www.nytimes.com/2007/10/30/us/30juvenile.html?_r=0

    [6] National Research Council (2013). Reforming Juvenile Justice: A Developmental Approach.  Committee on Assessing Juvenile Justice Reform, Richard J Bonnie, Robert L Johnson, Betty M. Chemers and Julie A Schuck, Eds. Committee on Law & Justice, Division of Behavioral and Social Sciences and Education. Washington, DC: The National Academies Press, p89.

    [7] Ibid. page 92.

    [8] Mulvey, E.P., Steinberg, L., Piquero, A.R., Besana, M., Fagan, J., Schubert, C.A., and Cauffman, E. 2010. Longitudinal offending trajectories among serious adolescent offenders. Development & Psychopathology 22:453–475.

    [9] Steinberg, L, Chung, HL, and Little, M (2004) “Reentry of young offenders from the justice system: A Developmental Perspective.” Youth Violence and Juvenile Justice, 2 (1), 21-38.

    Iowa’s ridesharing bill is good for bankers, bad for Iowans

    April 12, 2016, 7:00 AM

    When I was a child, the notion of “staying up all night” was a sort of Holy Grail. In my elementary school-aged mind, successfully doing so was tantamount to attaining adulthood – a state that, as I understood the rumors, consisted primarily of never having to go to bed and eating pizza whenever one so desired.

    My dad, being as supportive as he was, had no qualms about my grand vision. There was only one caveat: I had to agree spend my sleepless night lying down on a bed of blankets and pillows carefully assembled by my mom in the living room. And the lights had to remain off, while I watched TV. I never made it past midnight.

    As anti-ridesharing forces around the country have sought to stymie companies like Uber and Lyft, their approaches often resemble my dad’s sinister ingenuity: stipulations that initially seem benign ultimately turn out to be significant barriers to entry, intended to lead to the failure of the entire initiative. The latest example has appeared in Iowa, where pending legislation in the state House of Representatives would require ridesharing drivers with liens on their vehicles to maintain comprehensive and collision insurance policies.

    Like most examples of its kind, the regulation doesn’t initially sound all that egregious, until one realizes that no other driver on the road has to abide by such a standard – not even limousine and taxi drivers. Nor is there any particularly good reason for the arbitrary distinction between ridesharing drivers, who are simply using their own vehicles as a means of additional income, and other drivers.

    But like other logically inconsistent measures around the country, including Massachusetts’ duplicative inspection requirements and cab-only airport access; Corpus Christi, Texas’ onerous background-check requirements; or Austin, Texas’ call for fingerprinting of rideshare drivers, the clear purpose behind the regulation has nothing to do with public safety. Instead, it has everything to do with lining the pockets of various interests and impeding the growth of ridesharing.

    Iowa’s new measure has been vocally supported by the banking industry, which wishes to use the sledgehammer of legislation to protect the loans they issue, rather than the much more relevant scalpel of negotiating the terms where they belong: in the contracts that already exist between lender and lendee.

    Some estimates suggest that nearly three in four Americans currently finance their vehicles, so the bill’s effect would impact the vast majority of individuals driving for ridesharing services. And the difference between the legally mandated level of coverage and a plan that also includes comprehensive and collision coverage isn’t trivial. A recent Nasdaq article highlighted just how significant the cost can be:

    A 25-year-old woman living in Oakland, Calif., would pay about $610 a year for minimum liability coverage on a paid-off 2002 Ford Taurus, assuming a clean driving record and no accidents. But upgrading to a shiny 2013 BMW 3-series and appropriate full coverage (comprehensive, collision and 100/300/50 liability) would cost her about $3,285 a year.

    It thus should come as no surprise that Iowa’s insurance industry also has chimed in their support, given the significant increase in revenue they could expect under such a proposal.

    It is also important to note that a significant percentage of Iowans – perhaps one in four – leases their vehicles. All leasing companies already require not only comprehensive and collision insurance policies on their vehicles, but policies that usually far outpace state requirements. As Nasdaq notes:

    Some states require as little as $12,500 in bodily injury liability insurance and as little as $5,000 in property damage liability. But leasing companies demand much more, usually $100,000 per person to cover those injured and $50,000 to repair damage to other cars or property.

    For some ridesharing drivers, the position is an opportunity to bring in extra money and pay a few bills. For others, it’s a livelihood. Such an egregious increase in the out-of-pocket expenses necessary to become a driver has a dramatic impact on the net financial benefit for hard-working Iowans looking to make ends meet.

    Uber, for its part, has promised to cease operations in Iowa, if the measure is successful, just as the company did in Kansas when that state’s Legislature sought to enact a similar requirement. That’s an outcome that’s great for cab companies, and soothing, perhaps, for fretful bankers. But it’s very bad for the hundreds of thousands of Iowans who will end up losing beneficial options as consumers, and entire sources of income as workers, due to their Legislature’s decision to find out just how much it can squeeze out of a burgeoning new industry.

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