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Scary armored vehicles aren’t the biggest danger of police militarization

August 21, 2014, 12:30 PM

The problem of police militarization has been in the news for more than a week, as the city of Ferguson, Mo. continues to deal with the aftermath of the police shooting of 18-year-old Michael Brown.

Much of the debate and scrutiny of the police response to the Ferguson protests has focused on the Pentagon’s 1033 program. Created in 1997, the program allows state and local law enforcement to stock up on excess military equipment free of charge. Among the equipment that has been transferred include armored vehicles, assault rifles, aircraft and other military surplus equipment.

Some of these transfers, like the distribution of an MRAP to the Ohio State University Police Department, truly are bizarre, but it is important to note that not all of the equipment transferred from the Department of Defense to local and state police is lethal. Items as mundane as office equipment also are transferred under the 1033 program.

The real problem of police militarization is not, or not primarily, the DOD equipment police can acquire. Many of the arguments against the 1033 program, in fact, sound rather suspiciously like arguments of gun control advocates, in that they presume restrictions on inanimate objects will cause crime – or, in this case, police brutality – to decrease.

In fact, it’s paramilitary-style policing tactics such as “stop and frisk” that really contribute to the distrust of police in minority communities. As I wrote last week in a piece at Rare, police militarization is an attitude in policing that sees itself at war with the people they’re supposed to serve and the community of which they are a part.

We have seen some of this attitude on display in Ferguson. Police have arrested and threatened journalists covering the protests. In some of the most infamous pictures of the violence, police officers confront protesters wearing paramilitary gear and deploy snipers against them. In one instance, a police officer pointed his assault rifle at unarmed protesters and threatened to kill them. When asked for his name and badge number, the officer allegedly replied with profanities. As of this writing, that officer has been suspended, pending investigation.

Another example of the mindset can be found in a Washington Post op-ed written by a veteran Los Angeles cop with the provocative headline: “I’m a cop. If you don’t want to get hurt, don’t challenge me.” Such inflammatory rhetoric from peace officers only serves to separate the police from the people they’re supposed to serve, to make ordinary citizens afraid of the police.

Militarized policing also has led to overuse of paramilitary SWAT teams. The Cato Institute has this interactive map displaying all of the botched SWAT raids that have been conducted over the past three decades. Some of what is defined as “botched raids” include raiding the wrong house, killing a non-violent offender or killing an innocent person.

According to Radley Balko at the Washington Post, it’s estimated there are more than 50,000 SWAT raids in the United States every year. However, only one state, Maryland, requires law enforcement to record when SWAT teams are used and for what purposes. Balko has found that in Maryland, 90 percent of all SWAT raids are used to serve search warrants and that half of all SWAT raids are used in cases where the alleged offenses were non-violent. More states should follow Maryland’s lead and require police agencies keep records on when and why SWAT is deployed.

Many SWAT raids are to enforce “no-knock” warrants, in which a judge allows police to force their way into a residence without knocking or otherwise announcing their presence. No-knock warrants are supposed to be issued only when police believe announcing their presence would result in the destruction of contraband or put their lives in danger. They have led to tragic consequences, both for police officers and people inside the homes.

In May 2014, a SWAT team raid in Habersham County, Ga. – on what turned out to be the wrong house – left a two-year-old in a coma with a hole in his chest, caused by a flashbang grenade that landed in his crib. Incredibly, the county refuses to pay the medical bills of the child who was injured.

No-knock raids can also be deadly for the cops who execute them, as homeowners sometimes confuse them for intruders. In December 2013, Henry Magee’s home in Burleson County, Texas was subject to a no-knock raid by the county sheriff’s office. Magee mistook one of the deputies for a burglar, shooting and killing him. In February 2014, a grand jury declined to indict Magee for murder.

No-knock and SWAT raids need to be reserved for instances where an officer’s life genuinely would be endangered by serving a warrant conventionally. If the raid is botched or an innocent house is raided, there needs to be consequences.

Ultimately, it doesn’t matter how police are equipped, so long as they use the proper tactics and have the proper mindset to serve the public, protect their rights and fight crime. An armed officer with just a revolver and a shotgun can be as abusive as an officer wearing the latest in paramilitary gear and armed with an assault rifle. In the end, what we need most of all is to rebuild the broken trust between the public and the police.

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

Letter to FCC on Comcast-Time Warner merger

August 21, 2014, 11:25 AM



Federal Communications Commission
445 12th Street SW
Washington, DC 20554

Re: Comcast – Time Warner Cable, MB Docket 14-57

Aug. 21, 2014

Dear Commission Members:

On behalf of the R Street Institute, a Washington-based free-market think tank with offices in Sacramento, Calif., Austin, Texas, Columbus, Ohio, and Tallahassee, Fla., I write in support of approving the proposed merger between Comcast and Time Warner Cable (TWC). Our analysis of this merger is that it is a natural response to changing market conditions, offers significant potential benefits for consumers in both the residential and business markets and that potential harms are either minimal or mitigated by other existing regulations or market dynamics.

The proposed $45 billion merger takes place in an environment characterized by two trends that have hit cable television providers particularly hard in recent years – a shrinking subscriber base for pay-television services and the rising cost of content acquisition.

Comcast has been losing video customers, on net, for at least five consecutive years, down nearly 10 percent from 24.8 million at year-end 2007 to 22.5 million at the end of the second quarter of 2014. TWC has also lost net video subscribers in each of the past five years, falling more than 17 percent from 13.3 million at year-end 2007 to 11.0 million at mid-year 2014.

Cable companies also have seen rapidly escalating costs to acquire content, driven in part by competition from a profusion of video on-demand services like Netflix, Amazon Prime and Hulu, of which Comcast is a part-owner. Intense negotiations for content – including a 2013 dispute between TWC and CBS – also have led to a number of service blackouts, which unquestionably harm consumers. Reflecting trends across the industry, TWC has seen its per-subscriber content costs rise 24 percent since 2010, while Comcast has seen a 20 percent jump over the past two years.

Currently, nine companies – AMC, CBS, Discovery, Disney, Fox, Scripps, Time Warner Inc., Viacom and Comcast itself – control about 90 percent of the $45 billion market for television content. While the content creation market is not itself a monopoly, growing demand has contributed to higher prices. The market for sports content – provided by the likes of Comcast’s own NBC Sports, as well as CBS Sports, Fox Sports, Time Warner’s TNT and TBS and, especially, Disney’s ESPN – has proven particularly thorny for cable companies. The trend toward “cord cutting,” in which consumers eschew any pay-television service in favor of streaming video on-demand, has raised the stakes for cable companies to retain consumers of live broadcasts, tilting leverage further toward providers of sports content.

According to SNL Kagan, fees paid by distributors to carry cable channels are expected to grow from $31.7 billion in 2013 to $40.8 billion in 2016. The market is led by ESPN, which takes in about $5.54 per month per subscriber, compared to about $1 per month per subscriber paid to broadcast network affiliates for retransmission consent, another rapidly growing cost driver. SNL Kagan projects the broadcast networks – including Comcast’s NBC and Telemundo – will pull in about $3 billion in retransmission consent fees in 2015, with the networks themselves taking roughly a $1.3 billion cut and network-owned affiliates getting the remaining $1.7 billion.

The additional negotiating power wielded by a combined Comcast-TWC could potentially serve as a check on rising content acquisition costs, both in carriage fees and retransmission consent agreements. It should be noted that the extent to which this would reverse the prevailing trend is uncertain and may depend partially on whether the combination spurs further media consolidation in response. To the extent that the combined company can negotiate across any of these markets to reduce fixed costs, it could translate into consumer benefits in the form of lower service bills.

Consumers also should benefit from operating efficiencies that reduce costs without reducing output, and from network upgrades, in particular to TWC’s relatively older and slower service. Comcast has said it expects the combination initially to yield about $400 million in capital expenditure efficiencies and to save about $1.5 billion in operating expenses within three years. The company also has announced it will accelerate TWC’s planned migration of at least 75 percent of its service footprint to all-digital service.

One under-appreciated consumer benefit of a combined Comcast-TWC is the role the larger company could play in the business services sector. While both Comcast and TWC have a modest presence in the market to provide broadband and voice service to small business, the firms are only marginal players in the market to serve large commercial enterprises. Because of the need for a large national service footprint, the business services market traditionally has been dominated by telecoms like Verizon and AT&T. A combined Comcast-TWC, with at least some footprint in all of the 50 largest markets, could for the first time become competitive, with benefits redounding to business services consumers.

Some have raised concerns that a combined company would have undue market power to discriminate in both the video and broadband markets, for instance by privileging its own content over that of competitors. Some of these concerns are relevant to the commission’s own separate industry-wide deliberations on regulation on net neutrality, a subject on which R Street has not taken any formal position. However, it is incumbent on those who raise such concerns to demonstrate why a combined Comcast-TWC presents any new issues or heightens any existing issues that did not already exist with the companies operating separately.

Comcast is already bound by the FCC’s program carriage rules not to privilege its own content. The company also has already pledged that the seven-year net neutrality agreement it consented to when it purchased NBCUniversal in 2011 would also apply to TWC. What’s more, any incentive a combined Comcast-TWC would have to discriminate against particular content providers operating on its platform would, by necessity, be balanced against consumer demand for that same content. This is a lesson already learned the hard way by TWC, which lost 300,000 customers during its blackout dispute with CBS.

Were it the case that a combined company would leave consumers with fewer choices, concerns about discriminatory treatment of content would have more force. But Comcast and TWC already do not compete with one another for customers in any market in the country. Moreover, Comcast also has stipulated as part of the terms of the agreement that it will divest 3.9 million residential video subscribers to Charter Communications. The combined Comcast-TWC would remain the largest provider of pay-television services, but it would control less than 30 percent of the market, with DirecTV and Dish Network – both of which do compete directly with Comcast and TWC — having 20 percent and 14 percent, respectively. Other services, including the telephone providers that also compete directly with cable and satellite, comprise with the remaining 36 percent.

As believers in pragmatic, free-market solutions, we believe antitrust action should be limited in scope and focus on demonstrable harm to consumers. We do not believe the issues raised by the proposed Comcast-Time Warner Cable merger meet that threshold. We ask that you allow it to go forward without undue delay.

Respectfully submitted,


R.J. Lehmann
Senior Fellow
The R Street Institute


Eli Lehrer
The R Street Institute

As competition between Lyft and Uber grows, questions linger about disruption

August 21, 2014, 8:00 AM

As Americans become more familiar with the concept of “ridesharing,” things are heating up in what the Wall Street Journal last week dubbed the “fiercest battle in the tech capital,” between Uber and its largest competitor, Lyft.

The Journal piece portrays a “bitter war,” featuring “two heavily financed upstarts plotting the demise of the taxi industry—and each other.” The campaign is mostly being waged in the marketplace, with the two firms competing over price, pick-up times, drivers and services offered. But there are also some allegations of dirty tricks:

A Lyft spokeswoman said Monday that representatives from Uber have abused its service in the past several months with the goal of poaching drivers and slowing down its network. Passengers who identify themselves as working for Uber frequently order a Lyft and then ride for only a few blocks, sometimes repeating this process dozens of times a day, she said…A spokeswoman for Uber denied the company is intentionally ordering Lyft rides to add congestion to its competitor’s service.

Competition is at the heart of capitalism, but some might question the wisdom of devoting so much energy to fighting one another when a common set of opponents lurk: regulators, lawmakers and the special interests who have their ear.

In city after city and state after state—from Pittsburgh to Seattle, and Nevada to Virginia—municipal taxi authorities and public-transit commissions have been cracking down and shutting down ridesharing services with claims that they violate rules governing the licensing, insurance, vehicle types, payment systems and handicapped accessibility required of for-hire taxi or limousine services. In some places, the services have managed to carve out at least temporary accommodation, but much work needs to be done if transportation network companies like Uber, Lyft, Sidecar and smaller upstarts like Summon and Wingz are to grow and thrive.

The first and most important question will be the TNCs’ contention that they are “information content providers” (in other words, publishers) and thus should be held immune from most liability under Section 230 of the Communications Decency Act of 1996. The argument is that, like dating sites, the TNCs merely match potential riders and available drivers.

It’s still not certain if the courts will see it that way. Uber already has been sued in a case charging vicarious liability for the behavior of one of its drivers, a charge that usually only would apply in an employer-employee relationship. More recently, an UberX driver was arrested following a fatal New Year’s Eve accident in San Francisco, a case that has become a centerpiece of the California regulatory debate this year.

Among the questions courts will have to weigh is the extent to which the TNC transactions are held at arm’s length. Uber provides a centralized pricing algorithm for its drivers, including the well-publicized “surge pricing” intended to draw more drivers to areas experiencing service shortages. This contrasts with Sidecar, which allows drivers set their own prices and lets consumers choose among nearby drivers. Lyft has implemented its own version of surge pricing, but more recently has experimented with the reverse: “happy hour” pricing with cut-rate fares when a surplus of drivers are on the road. Add to these considerations that Lyft and Sidecar formally regard payments to their drivers as “donations” that are always optional and negotiable.

Why does this matter? Because the more “tools of the trade” the services provide to their drivers—whether pricing algorithms or GPS devices or even the pink moustaches that adorn the fronts of cars operated by Lyft drivers—the more they potentially undermine their Section 230 defense. This may extend even to steps the firms already have taken to accommodate safety and insurance concerns, including beefing up their screening and background-check processes and purchasing commercial insurance to cover their drivers’ liability.

These are the kinds of thorny issues that could torpedo progress on the regulatory front. It’s obviously essential that TNC firms continue to offer the best services at the best prices, which is the only way to build a constituency who will demand regulators allow the companies to operate. But it also would probably be wise for the nascent industry to begin thinking about best practices that demonstrate they can agree to at least some common solutions.

Toward that end, it has been good to see the emergence of Peers, a nonprofit dedicated to taking on issues common to the sharing economy. Lyft also has taken the lead by founding the Peer-to-Peer Ridesharing Insurance Coalition, which could provide a needed dialogue with the insurance industry to develop new products that better fit the kinds of risks that ridesharing presents.

As my colleague Andrew Moylan and I argue in a recent paper, the peer-production economy holds the potential to free billions in trapped and underutilized capital and spur economic growth. But even as these innovative firms look to best each other in the market, they also must work together to keep regulators from strangling their industry while it’s still in the cradle.

Don’t intervene in Azeroth: Thieves in MMOs shouldn’t face criminal charges

August 20, 2014, 9:04 AM

While the world reels from the Ebola epidemic, the instability in Gaza and the intensifying tensions between Russia and Ukraine, one British politician seems to have put his finger on a crisis that no one noticed. Mike Weatherley, MP, proposed that criminal penalties be enforced for the theft of (wait for it) items stolen in the virtual world of Azeroth, home to the popular World of Warcraft role-playing game.

As Weatherly describes it, the law would mean that people “who steal online items in video games with a real-world monetary value receive the same sentences as criminals who steal real-world items of the same monetary value.”

It’s tempting to dismiss this idea as the ramblings of an easily wounded WoW player who just happens to have the capacity for legislation at his back. But Weatherley does point to a significant issue that has arisen in the game world, and which does seem to implicate virtual items as real world property, even if his proposed means of responding to this issue is wrongheaded. Given that this is a policy area that may become more and more relevant the more the popularity of online gaming (especially the sort powered in part by real money) grows, it behooves us to take a look at Weatherley’s proposal.

Let’s start with what Weatherley’s idea gets right, which is that items in video games like WoW do have real world monetary value. This is true even when they aren’t sold directly for real money, because often, the virtual currencies used in these games can actually have their exchange value relative to the dollar calculated and exploited. The practice of “gold farming” in WoW for the purposes of selling virtual gold in online marketplaces for real money has become infamous. So has the case of Anshe Chung, a Second Life character whose real-life player Ailin Graef became the first “virtual millionaire” by turning her virtual prostitute character into a real estate mogul within the game.

What’s more, the practice of buying and selling rare items with real money has a long history in video game culture. This author, for instance, recalls the thriving trade in “Rings of Jordan” from the Diablo II multi-player community, and which exploded with the introduction of World of Warcraft. At this stage, it is beyond doubt that high-value items within online games do have actual real world value. For instance, an “epic mount” in WoW can fetch as much as $500. Faced with sums like this, the question has to be raised: Why shouldn’t theft of such goods be treated as a criminal act?

Well, because despite the value of these virtual items, they still exist within a virtual ecosystem whose rules don’t quite line up with the real world, where private property rights enforcement mechanisms already exist and where the law is singularly ill-equipped to operate. A metaphor that treats the theft of one player’s epic mount as equivalent to stealing a real thoroughbred horse looks persuasive on its face, but when you actually think about how it would be prosecuted, the metaphor breaks down quickly.

In an online game, identity can be far more fluid than in real life. WoW ties players’ identities to their emails, meaning that a player who finds himself banned on one account can easily create a new one with a new email address. This isn’t a complete barrier to enforcement of criminal laws in games like WoW, which operate on a “pay to play” basis and thus gives law enforcement an additional means to track players though their credit cards, although there are privacy concerns and systemic identity theft problems associated with doing so. But in free massively multi-player games like the Guild Wars series, email addresses might be the only clue as to the criminal’s identity. It’s also quite plausible that a parent whose credit card was used in WoW might find themselves on the hook for “crimes” their children committed.

Players who do steal or otherwise violate in-game rules are usually held accountable by a much more efficient system than a legal regime — the moderators of the game itself. These moderators are usually successful at weeding out problematic players by banning their accounts or using other technical solutions that would run afoul of the constitution if employed by law enforcement. Companies like Blizzard, the maker of WoW, are allowed to be more draconian in ways that are more appropriately tailored to the setting and thus more effective than the law enforcement system.

Recognizing video game items as legally protected “property” raises a whole host of troubling legal questions about what is actually happening in games like WoW. For instance, along with selling items, players also sometimes sell epic-level characters to other players (this author even bought one once), which serve as a means for less-experienced players to gain access to perks within the game that would otherwise be off-limits. But if the items are real, then does that make transactions of this nature slavery? Do players who kill each other in-game, especially in games where no resurrection is allowed, face charges of murder or destruction of property? And are “griefers” and trolls to be treated as terrorists? Just how close do the rules of virtual life and real life have to be before the police force gets involved?

Having had my only set of unique armor in Diablo II stolen at age 13, I understand the impulse to seek an authority who can clap an online tormentor in very real irons. However, in this case, the remedy is worse than the disease. A discussion of civil penalties might be more appropriate, but when it comes to the application of criminal law to the world of Azeroth or EVE Online, the only winning move is not to play.

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

For insurers, California’s ‘diverse procurement’ is well-meaning and wrong

August 19, 2014, 2:10 PM

Under Section 927.2 of the California Insurance Code, insurers writing $100 million or more in annual premiums in the state are required to submit reports to the Department of Insurance on what efforts they’ve made to procure business from firms owned by racial minorities, women and disabled veterans.

On the face of it, this “diverse business procurement” policy is laudable, because it seeks to empower historically marginalized communities while being minimally invasive and nominally disruptive to insurers. Deeper analysis yields a different conclusion, especially when one considers the unique degree of government involvement such a policy requires.

The degree to which government should be involved in business judgments should be predicated on the degree of separation between government and private conduct. The closer the private conduct is to the operation of government, or the extent to which the private conduct is dependent upon government sanction, the better the government’s case for substituting its goals for that of the private entity in question.

In the case of California’s diverse business procurement efforts, three tiers of involvement have developed. At the first tier is the state government itself, which is well within its proper scope of authority when it establishes its own procurement framework. Second are quasi-governmental bodies and third are heavily regulated private bodies. The distinction between the final two tiers is important for policy makers to keep in mind when they consider which praiseworthy objectives are to be achieved through disruptive means.

In California, in the second tier, state government has long obligated private actors to seek to redress social ills by substituting its policy preferences for private business judgment. Supplier diversity programs are designed to improve the financial standing of historically marginalized communities by channeling specific business expenditures (paper supplies, for instance) to firms that are owned by women, minorities and disabled veterans. The channeling function is created by obligating regulated parties to publicly report the extent to which their business procurement is “diverse.” Since 1986, firms that are subject to regulation by the California Public Utilities Commission have been made to report the extent to which they have achieved “diverse business procurement.”

Public utilities were the first candidates for adoption of diverse supplier requirements because of their close regulatory relationship with the state. Utilities are granted quasi-monopoly status because they meter out public services broadly thought of as essential goods. As a result, public utilities do not function in highly competitive markets. As protectors of the public utilities’ monopolies on public goods, policymakers saw little harm in directing them to seek out diverse suppliers at the admittedly nominal expense of ratepayers.

However, more recently, California’s highly regulated insurers have become entangled in similar treatment. Quickly drawn comparisons between public utilities and insurers give the mistaken impression that the two are not dissimilar. For instance, like public utilities, insurers are heavily regulated. Like public utilities, insurance products are purchased by virtually all Californians. Where the similarities end and where the meaningful distinctions between the two begins is the point at which consumer choice enters the equation.

The government-protected quasi-monopoly status enjoyed by public utilities and the competitive marketplace in which insurers operate requires that the two approach their consumers differently. While public utilities rely on tangible materials subject to physical scarcity or decay, insurers offer services of a non-physical nature, which are capable of rapid change and innovation to meet consumer demand. This has led to a voluntary insurance market in which market advantages are sought by attempting to maintain low rates through innovation and hard-fought proprietary advantage – not through state protection.

Were policy makers interested, they would find that their heavy-handedness is working at cross purposes with their stated objective. By imposing their own priorities on the insurance market, California’s policymakers have not only prevented policy holders from realizing their lowest possible rates – many of whom are themselves historically marginalized – but they have also encumbered the robust procurement diversity programs that insurers already have in place at a national level by subjecting them to state requirements.


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Republicans’ lukewarm climate warrior

August 18, 2014, 2:09 PM

From Bloomberg View:

Across the street from the Washington Convention Center, through a narrow door tucked between a bar and what used to be a furniture rental store, up two flights of rickety stairs, Eli Lehrer is sitting in his small, sparsely decorated office, drinking a Diet Coke and explaining how to sell the Republican Party on a carbon tax. After listening to him for an hour, I start to think it might work.

Lehrer is an odd candidate for the job of saving the planet, not least because he doesn’t seem that enthusiastic about it. Where liberals talk about climate policy in near-messianic terms of protecting future generations, Lehrer calls climate change real but relatively unimportant, blames Democrats for making it part of the culture war and points out that carbon dioxide is “not intrinsically harmful to human health.”

In other words, Lehrer, a 38-year-old Chicagoan who runs a think tank called the R Street Institute, seems as if he could talk climate change with most Republicans without tripping any alarms. His bona fides are good: He was a speech writer for Republican Bill Frist when he was Senate majority leader and was later vice president of the libertarian think tank the Heartland Institute, until he quit over a billboard that made questionable reference to the Unabomber, Ted Kaczynski

Republicans’ lukewarm climate warrior

August 18, 2014, 12:13 PM

From Bloomberg View:

Across the street from the Washington Convention Center, through a narrow door tucked between a bar and what used to be a furniture rental store, up two flights of rickety stairs, Eli Lehrer is sitting in his small, sparsely decorated office, drinking a Diet Coke and explaining how to sell the Republican Party on a carbon tax. After listening to him for an hour, I start to think it might work.

Lehrer is an odd candidate for the job of saving the planet, not least because he doesn’t seem that enthusiastic about it. Where liberals talk about climate policy in near-messianic terms of protecting future generations, Lehrer calls climate change real but relatively unimportant, blames Democrats for making it part of the culture war and points out that carbon dioxide is “not intrinsically harmful to human health.”

In other words, Lehrer, a 38-year-old Chicagoan who runs a think tank called the R Street Institute, seems as if he could talk climate change with most Republicans without tripping any alarms. His bona fides are good: He was a speech writer for Republican Bill Frist when he was Senate majority leader and was later vice president of the libertarian think tank the Heartland Institute, until he quit over a billboard that made questionable reference to the Unabomber, Ted Kaczynski

Climate change and the intellectual decline of the right

August 18, 2014, 7:50 AM

From Inside Story:

The billboard fiasco led to the departure from Heartland of Eli Lehrer’s insurance policy group, one of the few areas in which Heartland research had any credibility. Unsurprisingly, insurance industry cannot afford to let tribal affiliation get in the way of a realistic assessment of the risks of climate change. Lehrer has founded a new group, the R Street Institute, which explicitly endorses mainstream science.

The billboard fiasco led to the departure from Heartland of Eli Lehrer’s insurance policy group, one of the few areas in which Heartland research had any credibility. Unsurprisingly, insurance industry cannot afford to let tribal affiliation get in the way of a realistic assessment of the risks of climate change. Lehrer has founded a new group, the R Street Institute, which explicitly endorses mainstream science. – See more at: http://inside.org.au/climate-change-and-the-intellectual-decline-of-the-right/#sthash.Tr6ylrv5.dpuf The billboard fiasco led to the departure from Heartland of Eli Lehrer’s insurance policy group, one of the few areas in which Heartland research had any credibility. Unsurprisingly, insurance industry cannot afford to let tribal affiliation get in the way of a realistic assessment of the risks of climate change. Lehrer has founded a new group, the R Street Institute, which explicitly endorses mainstream science. – See more at: http://inside.org.au/climate-change-and-the-intellectual-decline-of-the-right/#sthash.Tr6ylrv5.dpuf The billboard fiasco led to the departure from Heartland of Eli Lehrer’s insurance policy group, one of the few areas in which Heartland research had any credibility. Unsurprisingly, insurance industry cannot afford to let tribal affiliation get in the way of a realistic assessment of the risks of climate change. Lehrer has founded a new group, the R Street Institute, which explicitly endorses mainstream science. – See more at: http://inside.org.au/climate-change-and-the-intellectual-decline-of-the-right/#sthash.Tr6ylrv5.dpuf

Sanders on Paul Ryan’s poverty plan

August 15, 2014, 12:42 PM

R Street Senior Fellow Lori Sanders joined Lowman Henry of American Radio Journal to discuss the anti-poverty agenda put forth recently by House Budget Committee Chairman Paul Ryan, R-Wis. You can hear the full clip below.

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.http://www.rstreet.org/wp-content/uploads/2014/08/ARJ_HENRY.mp3

North Carolina physicians endorse e-cigarettes

August 14, 2014, 10:46 AM

A survey of North Carolina physicians documents that many understand the benefit of e-cigarettes and some actively recommend that their smoking patients switch. The results were published in PLoS One by Kelly Kandra of Benedictine University and colleagues from Family Medicine at the University of North Carolina.

From the published paper:

Over two-thirds (67.2%) of the physicians indicated that e-cigarettes are a helpful aid for smoking cessation, and 35.2% recommended them to their patients. A majority (64.8%) believed that e-cigarettes lower the risk of cancer for patients who use them instead of smoking cigarettes.

It is exceptionally good news that, despite a tsunami of misinformation about e-cigarettes from federal and state health officials and major medical societies, a majority of the state’s practicing physicians know that the devices are helping smokers quit and reducing risk exposure.

Kandra and colleagues attempt to blunt the impact of their data, writing that “physicians should remain cautious until more data is available about recommending e-cigarettes as tobacco cessation tools in clinical practice in favor of more effective modalities.” What are those “more effective modalities”? Nicotine replacement therapy (with a success rate of 5 percent, only slightly higher than placebo), varenicline (Chantix, percent success rate), and bupropion (5 percent success) (reference here).

One of the study’s authors, Dr. Adam Goldstein, declared in a press release:

Physicians may choose to use FDA-approved medications rather than devices and products not approved by FDA.

In reality, physicians may also choose e-cigarettes after “approved medications” fail. Doctors are well equipped to weigh the risks and the benefits of consuming nicotine in smoke-free forms, and counseling their patients accordingly.

Poll finds bipartisan opposition in Tennessee to online sales taxes

August 14, 2014, 10:04 AM

From Nashville Business Journal:

Those are the findings from the survey conducted by National Taxpayers Union, a conservative tax advocacy organization, and R Street Institute, a nonprofit, free-market think tank.

Poll finds Georgians against online sales tax bill

August 13, 2014, 10:55 AM

From the Atlanta Business Chronicle:

The R Street Institute, a free-market think tank, worked with the National Taxpayers Union on the poll.

Christian Camara, the institute’s state affairs director, said he sympathizes with small brick-and-mortar business owners worried about losing out to online retailers who don’t have to collect sales taxes on the merchandise they sell to out-of-state customers.

But Camara said the proposed legislation would create a bookkeeping burden that would severely hamper all but the largest businesses that rely on online sales.

“If you’re a small- to medium [company] that transacts most of its business online, you’re going to have to change the system you have to comply with the law,” he said. “It could be quite a drain on resources, even a disincentive to get into business.”

Legal fiction and fictional legality

August 12, 2014, 2:07 PM

The Case of the Speluncean Explorers,” a 1949 Harvard Law Review essay by Lon L. Fuller, may prove instructive to the ever-growing number of Americans who follow with keen interest the machinations of the U.S. Supreme Court. Explorers illustrates how jurists go about reaching their conclusions.

The facts of the hypothetical case are straightforward. Five explorers venture into a cave to explore its hidden contents. Once inside, they become trapped. With no means of escape, the explorers learn via radio contact they are likely to be rescued, but only long after their supply of food was depleted.

Faced with this fate, the explorers decided among themselves that one of their number should be sacrificed to function as repast, so that the others might live. Once the unlucky explorer was dispatched, the others were able to sustain themselves until rescue arrived – at which time the four remaining speluncean explorers were charged with murder.

In lower court, the explorers were found guilty of murder. Upon appeal, the case was brought before the Supreme Court of the fictional nation of Newgarth. Since fanciful Newgarth’s Supreme Court is not dissimilar in composition to that which currently our highest U.S. bench, examining its activities may prove prescient.

Newgarth’s statute relevant to the speluncean explorers reads: “Whoever shall willfully take the life of another shall be punished by death.” While legislation can create powerful and life-changing rules, this particular statute is blunt and devoid of nuance or exception.

Unlike cases heard in a judicial context, commands promulgated by the legislative branch seek to shape the behavior of the masses to conform with universalizable principles. The creation of legislatively adopted rules of general applicability hinges on a process in which the odds of success are small. Legislation that does finally emerge from the process’ many opportunities for failure tends to reflect the varied input of hundreds of active interests.

Here’s the question: Should the residue of the efforts of those varied interests to create the law be considered in subsequent efforts to interpret and apply the law? When tasked with divining the purpose of legislation in the course of rendering a legal judgment, courts have changed their approach to such residue over time.

It was once the case that courts held to an economical practice of consulting a defined corpus of authority – namely, the text of the statute and limited contextual clues. In part, courts did so in the name of predictability and with a sense of institutional restraint. Still, there were costs associated with such a penchant for reservation.

By refusing to investigate in a less-inhibited manner the purpose of legislation, courts sometimes were compelled to offer opinions resting upon words devoid of their generalized context and, thus, appearing as simulacra. Decisions borne of this approach have been subsequently painted as synthetic results designed to advance a staid – right-wing – normative vision.

In Fuller’s tale, such are the decisions of Chief Justice Truepenny and Justice Keen. The chief justice affirms the explorers’ conviction because he interprets the statute to be unambiguous in what it requires. Still, the chief justice is mindful of a non-legal imperative to articulate a request for clemency to the chief executive of Newgarth. Justice Keen gives no such quarter. Keen on circumscribing the role of the judiciary, Justice Keen both affirms the conviction AND remonstrates the chief justice on separation of power grounds for using his official position to influence the application of the law.

There are two votes for death.

In response to this mostly unforgiving approach, the 20th Century legal academy presented a new method of accounting for, if not satisfactorily marshaling, the assortment of discrete “truths” which underpin the creation story of any statute. The new method sought to accomplish its goal by eschewing literal readings when a literal reading was believed to confound the statute’s actual “purpose,” as discovered by a court.

In the story, fictional Justices Foster and Handy wrote decisions embodying this approach, though on comically divergent grounds. Justice Foster found a result in which the explorers survived, only to be killed later, absurd. So, he created his own legal rule from the spirit of the statute and it provided an exception narrowly tailored to the explorers’ scenario. Seeming to ignore the law totally, Justice Handy reasoned that public opinion and common sense demanded that the explorers be exonerated.

There are two votes for life.

Today, the legacy of the interpretive approach exemplified by Foster and Handy has been a corpus of statutory construction dizzying in the constructive gymnastics that it is willing to tolerate. At its worst, courts have rendered the process of opinion writing a matter of blithe and perfunctory convention, by seemingly doing away with the need for legal analysis. Instead, they favor divination of goals at a “higher level of generality.”

Though the results are sometimes politically or philosophically satisfying, the consequences of naive and extra-legal constructionism are costly.

The ranks of adherents to such an approach have swelled. As a result, the legitimacy of the judiciary as an impartial, or at least something less than overtly political, decision-making body has suffered. The problem is no longer harsh legal formalism, but rather, the harsh subjective positivism of legal informality.

Subjective positivism brings any inquiry regarding meaning no closer to capturing the “purpose” of legislators in crafting and compromising their way through the various “vetogates” than does dogmatic formalism. Because both attempt to do too much, both fail.

When a court creates law, it simultaneously distorts law. Nonetheless, critics must maintain a certain sympathy for the difficulty of the project courts are asked to complete. To the extent that the “original intent” of a statute’s language is hopelessly lost, courts are left with few satisfactory alternatives. They are seemingly trapped in a binary.

Jurists must choose whether it is preferable to aver to a fiction of text, standing on its own, or to shoulder the burden of omniscience and seek to account for the practically unknowable completeness of a statute’s history. Both approaches, to the extent that they purport to channel the “purpose” of the legislature, can be confounded by a horrendous and even more basic obstacle – that though a legislature speaks, and means what it says, it sometimes does so not knowing what it means!

A hilarious, awful and mind-blowing example of this is the recent passage of major national legislation of which a prominent leader said that it must pass without close inspection since only afterwards could legislators and others find out what it means. No wonder life can be hard for courts, independent of their own self-generated and self-defeating proclivities.

Returning to the Fuller scenario, this is the choice that confronted and confounded the final and dispositive Newgarth Supreme Court vote, belonging to Justice Tatting. The justice authors an opinion sharply critical of the purposive approach taken by Justice Foster. Yet, faced with competing legal rationales and personally mixed emotions, Tatting opts to cast no vote at all and to withdraw from the case.

Two votes for death, two votes for life and one vote for the impossibility of the situation.

Since a tie is not sufficient to overturn the lower court’s conviction, Justice Tatting’s decision dooms the explorers.

Left with the sad death of the imaginary explorers, one is stuck with a few prospective thoughts. First, that absurd results in the name of consistency can, and do, lead to unjust consequences. Second, that the flexibility necessary to overcome formalistic textualism requires such violence to reason that it requires intellectual laxity, or worse, intellectual dishonesty. And third, that not acting at all, as Justice Tatting did, provides no escape from the dire consequences of reality.

Fundamentally, what is necessary to avoid these problems is a reevaluation of the sort of clarity the judiciary is able to provide when tasked with interpreting statute. We must face the fact, if the best we can hope for is the limited application of isolated and descriptive facts, then it is there that the basis of the new interpretive goal should lie. Nothing less than the foundation of jurisprudence is at stake.

Unfortunately, today, a humble and well-circumscribed judiciary which tailors the scope of its rulings to the limits of its understanding may be beyond the scope of wild imagination.

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Vote for R Street at SXSW 2015

August 11, 2014, 2:19 PM

We’ve put together four awesome panels for SXSW Interactive. Your vote can help us bring free market ideas to Austin’s annual gathering of 30,000 technologists, activists, and entrepreneurs. Please take a moment and give each panel a thumbs up in SXSW’s PanelPicker system before voting closes on September 6th.

Your Laws, Your Data: Making Government More Open http://panelpicker.sxsw.com/vote/35484

When Should Privacy Trump Free Speech? http://panelpicker.sxsw.com/vote/35595

How Big Data Can Transform Poverty Policy http://panelpicker.sxsw.com/vote/36257

Has Copyright Gone Too Far? http://panelpicker.sxsw.com/vote/33432

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Lehmann talks Uber and Lyft in Virginia

August 11, 2014, 1:50 PM

R Street Senior Fellow R.J. Lehmann, co-author of our recent white paper on principles for regulating the peer production economy, discusses a recent deal struck by the Commonwealth of Virginia temporarily lifting its ban on transportation network companies like Uber, Lyft and Sidecar. You can hear the clip below.

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Fla Citizens’ business travel saves Florida money

August 08, 2014, 3:53 PM

A recent article by the Palm Beach Post blasting Citizens Property Insurance Corp. executives for traveling overseas casts a negative image onto the state-owned and operated insurer. However, what the article fails to establish is that such travels are a necessary function of any insurance company similar in size and scope to Citizens.

As a condition to sell an insurance product, insurance companies are required to prove that they have secured enough surplus (cash in the bank) and risk transfer (reinsurance) to be able to pay their claims. Otherwise, an insurer selling coverage that it can’t realistically make good on would be engaging in criminal fraud, from which the government rightfully should protect its residents.

Reinsurance is one of the ways insurers pay their claims. It is essentially insurance for insurance companies. If a tornado damages or destroys a handful of homes, those claims are usually paid for by insurance companies directly; if a hurricane causes billions of dollars of damage to an entire region, reinsurance kicks in.  As such, insurers are required to carry reinsurance in order to sell the coverage they offer consumers, especially in risky places like Florida.

Despite the potential of billions of dollars in claims, reinsurance companies make their money by spreading risk around the globe, which is something a typical primary insurance company simply cannot do on its own. So while they may be paying out money for claims stemming from a hurricane in Florida, they are also collecting premiums for separate, unrelated risks elsewhere, such as earthquakes in New Zealand.

But reinsurance is a complex and expensive product that is not easy to price or negotiate. Several factors are taken into account, including an insurer’s finances, exposure (how at risk the properties they cover are), claims-paying patterns, litigation history and so forth. Investors backing up the reinsurance transactions usually ask questions of the insurance executives.  As such, these negotiations, even in today’s digital world, are done mostly in person wherever the reinsurer is based, which is usually places like London, Zurich and Bermuda. This is how virtually every insurer around the world has to do it, and Citizens is no different.

It must be noted that Citizens is not legally required to carry reinsurance, because it has the unilateral authority to levy assessments (read: hurricane taxes) on virtually every policy issued in the state (property, auto, renters, commercial, boaters, etc.) if it ever encounters a deficit in its surplus due to a sufficiently bad hurricane season.  However, Citizens made the responsible decision a few years ago to begin purchasing reinsurance coverage to reduce the likelihood or severity of post-hurricane assessments, which could increase the overall cost of insurance on Floridians by up to 40 percent for multiple years in a worst-case scenario–during which time another hurricane could strike and compound the situation.

So this year, Citizens negotiated with reinsurance companies to provide the same kind of coverage every other private insurer must buy as a matter of law. Thanks to the deals reached by Citizens executives during the business trips that the Post and others have demonized, Citizens was able to purchase $3.1 billion in reinsurance coverage for $300 million. This is nearly twice as much coverage as it purchased last year for almost the same price.  This reduces the assessment risk on Floridians from $11.6 billion to $2.3 billion. The state’s other government-run insurance entity, the Florida Hurricane Catastrophe Fund, might well want to consider purchasing its own reinsurance coverage to further protect Florida taxpayers.

Nevertheless, the Post unfairly attempts to link consumer horror stories of denied coverage and unpaid claims to “lavish” travels by some employees, as if Citizens made a practice of denying claims to use that money to pay for expensive junkets. Never mind that these are totally unrelated to one another, that they are paid for by different pots of money or that these trips were necessary to seal multi-million dollar deals that may potentially save Floridians billions of dollars. It is the kind of comparison a slick politician would use to demagogue an adversary.

Citizens is Florida’s largest property insurer, due in part to government policies supported by many politicians who today attack Citizens. If they find it unacceptable for Citizens to operate like a regular company and make decisions that rely less on a taxpayer bailout, they should join those of us who support actions to reduce its size and restore it to its original role as an insurer of last resort.

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How many Americans use smokeless tobacco?

August 08, 2014, 3:52 PM

I recently described how the federal government is all thumbs when it tries to count how many Americans smoke. Further evidence of the government’s ineptitude is seen in the fact that the National Health Interview Survey, the CDC’s official source for smoking statistics, only measures smokeless tobacco use every five years or so. That leaves the National Survey on Drug Use and Health as the government’s only annual source of data on smokeless use.

I analyzed NSDUH data from 2012 and found that 7.1 percent of adult men (roughly eight million) use smokeless tobacco, and the prevalence of smokeless use among women is minuscule (about one-half of one percent). For obvious reasons, I’ll limit this discussion to men.

NSDUH asks participants if they use “chewing tobacco” or “snuff.” Over two-thirds of smokeless users in the survey, about 5.5 million, said they used only snuff, 1.2 million used only chewing tobacco and 1.4 million used both. However, participants’ responses to questions about smokeless brands used most often suggest that NSDUH misclassified some users. The problem stems from the fact that consumers of smokeless products often use the terms “chew” or “dip snuff” interchangeably.

The most common brands among “snuff” users were Copenhagen (29 percent), Skoal (26 percent) and Grizzly (25 percent). Other than Red Seal (4 percent) and Kodiak (4 percent), no other brand registered above 2 percent. It is interesting to note that Camel Snus, the first pouched product that introduced the Swedish experience to American smokers, was the preferred brand for 1.7 percent of snuff users.

The misclassification problem is evident because 16 percent of “chewing tobacco” users favored Skoal, 11 percent picked Grizzly and 7 percent listed other moist snuff brands. Red Man (25 percent), Levi Garrett (10 percent) and Beech-Nut (5 percent) were the top chewing tobacco brands.

Although 35 percent of smokeless users in this survey never smoked and 27 percent are former smokers, it is a tragedy that 38 percent are current smokers (a figure that is consistent with my previous research). That percentage means that 2.8 million smokeless tobacco users don’t recognize or are ignoring the significantly greater hazards of smoking.

Any ignorance on their part may be traced to the deliberate campaign by the CDC, FDA NIH and other tobacco prohibitionists to deny Americans vital facts about the relative risks of smoking and smokeless use. This misinformation campaign conflates risk data to damn equally all forms of tobacco. The FDA declares:

Tobacco products are harmful yet widely used consumer products that are responsible for severe health problems…[including] cancer, lung disease, and heart disease, which often lead to death.

The CDC asserts:

Tobacco use is the leading preventable cause of death in the United States.

A decade after Charley, Florida’s still paying the bill

August 08, 2014, 1:58 PM

Tomorrow, Aug. 9, marks the ten-year anniversary of the formation of Hurricane Charley. The third named storm of the 2004 hurricane season, Charley did $13 billion of damage, nearly all of it in Florida.

But the bad news for the Sunshine State didn’t end there. Charley was followed three weeks later by Frances, a $12 billion storm that wrought havoc across Central Florida. Then September brought both Ivan, an $18 billion storm that struck Pennsacola, and Jeanne, a $6.8 billion storm that, like Frances, made landfall near Port St. Lucie.

The following year, Pennsacola was hit again, this time by Hurricanes Dennis, which caused $4 billion in damage. Then, the capper to this 15 months of misery in the Sunshine State came in the form of October 2005′s Hurricane Wilma, the strongest Atlantic hurricane ever recorded, which did $29.1 billion of damage.

Here we are, a decade later, and just last month, Florida’s Office of Insurance Regulation announced that the Florida Hurricane Catastrophe Fund would finally end a 1.3 percent assessment that has been imposed on nearly every property insurance policy to pay for borrowing the Cat Fund incurred in the wake of the 2004 and 2005 storm seasons. OIR noted the charge will be ended 18 months earlier than originally expected, and there was much rejoicing.








And justifiably so. The assessments had been a burden on Floridians since 2007, when they were first initiated at a level of 1 percent. Through May 31, the fund had raised a total of $2.9 billion through these post-storm “hurricane taxes” just to cover shortfalls from those two record storm years.

Alas, Florida still isn’t quite done paying the bill. While the Cat Fund’s charges will go away entirely for new policies taken out with the state-run reinsurer, multi-year policies issued or renewed between Jan. 1, 2011 and Dec. 31, 2014 will still see a 1.3 percent assessment, and those issued or renewed between Jan. 1, 2007 and Dec. 31, 2010 will still pay a 1 percent assessment.

Even more crucially, the state-run primary insurer, Citizens Property Insurance Corp., also continues to levy its own hurricane taxes tied to the 2004 and 2005 seasons, and is projected to continue the assessments until 2017. Citizens thus far has collected $1.5 billion in assessments to finance its post-2004/2005 borrowing. It continues to collect $162 million a year, 84 percent of it from non-Citizens policyholders.

Citizens has made great strides in reforming its operations, both in shrinking its book of business and in investing in risk transfers that now include $3.1 billion of private reinsurance. But the state-run entity remains the largest residential property insurer in Florida, with 14.5 percent of the overall homeowners/farmowners market in 2013, according to SNL Financial. And with $292.6 billion in total exposure, it is a matter of when, not if, Citizens will have to dig itself out of another fiscal hole, the moment Florida’s now nine-year-long streak of good fortune ends.

It’s good news that both Citizens and the Cat Fund are in better fiscal shape than they’ve been in years, but much more work needs to be done. In the short term, Florida needs to take advantage of the remarkably good terms that can be had in the current soft market to shift as much risk to the private global reinsurance market as possible. In the longer term, we need market reforms that will encourage primary insurers to return to the Sunshine State by giving them the freedom to charge appropriate rates.

Don’t let the lessons of 2004 and 2005 be forgotten. Florida can’t afford another decade of hurricane taxes.

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Gingrich advises state lawmakers not to kill innovation

August 07, 2014, 5:54 PM

Former Speaker of the House of Representatives Newt Gingrich is known as a font of ideas, even by detractors who don’t necessarily approve the product of all his ratiocination. Many of his ideas have to do with transforming the way we look at certain kinds of processes, institutions or approaches to public policy, and every form of extant public policy has its defenders.

At last week’s annual meeting of the American Legislative Exchange Council, a national organization whose members are (mostly) conservative lawmakers and nongovernment public policy specialists, attendees from around the country were treated to a breakfast and a workshop at which Gingrich sketched out a theme that addresses many of the hottest issues in the nation. “Breakout,” his 2013 book detailing “the epic political battle of our age,” describes a critical contest between the “pioneers of the future” and the “prison guards of the past.”

Gingrich, John Stossel and many others have cautioned that unlike when, with little resistance, mankind was allowed major leaps forward due to the invention of alternating current, light bulbs, steamships, internal combustion engines, refrigeration, antibiotics and computers, we face delays or might actually lose the chance to take advantage of today’s advances in medicine, transportation, education and energy production. The ever-more powerful and omnipresent government at nearly every level is gaited to preserve privileges and to fit everybody with one size, rather than to facilitate the future. This process goes by a lot of different names – “fairness,” “leveling the playing field,” and “protecting the public.”

Under this line of thinking, the public is protected by laws that favor government-run schools; keep experimental but promising drugs out of reach for Americans who are dying of diseases but willing to try anything; and that prohibit innovative services by everyday folks in the fast-growing “shared economy.” “If it moves, tax it,” was Ronald Reagan’s explanation of the government’s view of the economy. “If it keeps moving, regulate it. And if it stops moving, subsidize it.”

Of course there is a new wrinkle since Reagan, and that is to subsidize something to get it moving, at least long enough to let the politically connected insiders sell out at a nice profit.

Just to pick one example of the challenge faced by innovators today, marvel at the updated status of the college rideshare board. Worldwide, dramatically expanded networks of late-model cars and carefully selected drivers at Lyft, Über and Sidecar have been essentially banned in whole states, and are being arrested and fined this week in Madison, Wisc. The taxicab industry has organized to eliminate this competition in many of the nation’s cities. A taxi medallion in nearby Chicago is currently valued at about $350,000. The value has doubled since 2009. According to the Washington Post, where medallions exist, they have outperformed even the S&P 500-stock index, and there are roughly 6,900 of them in Chicago. In New York, where most vehicles on view at any particular time on the avenues are taxis, the medallions have sold for more than $1 million.

In Dallas last week, the hotel doorman told me that the taxi flat rate to the airport was $50. Summoning ride-sharing on my smart phone got me a ride in about two minutes and the surge (higher when demand spikes) pricing I agreed to pay still saved me $20. This is really disruptive technology, and citizen demand has prompted at least one state, Colorado, to regulate, rather than ban it. While arresting network company drivers in the meantime, Madison is working on an ordinance. Houston and my hometown, Columbus, Ohio, enacted ordinances in the last two weeks, and numerous other cities — including Minneapolis, Milwaukee, Oklahoma City and St Louis — are trying to “level the playing field” by regulating insurance coverage, street hailing, vehicle safety and a multitude of other issues.

Does it make sense that a government obsessed with alternative energy would try to crush alternative transportation? If you lived on Long Island in New York and were reading that Long Island Railroad workers were considering a strike to secure a 17 percent benefits increase, would you be interested in another way to get to work? LyftLine and UberPool, the carpool versions of the popular peer-to-peer services, are being tested now. Sidecar announced this week that it has already serviced 13,000 customers with discounted shared rides.

I happen to think that a huge benefit of network transportation services is in the rural areas of the state and smaller towns where there are no taxicabs. There, many people are seriously challenged, particularly on weekends, in getting to hospitals and doctor appointments, work or any number of places they would drive if they had serviceable transportation of their own.

Many people my age remember the classic case of the firemen who were kept on the railroad even when there were nothing but electric and diesel trains to ride. People with commercial experience know that sometimes a business must pay for 365-day-a-year air conditioning under lease agreements, even though it is only available from May or June until September or October.

Even worse, it is possible that the breakthroughs on customized medicine particular to the DNA and biochemistry of individual patients will be foreclosed to Americans because no company can afford to do whatever tests the U.S. Food and Drug Administration directs based on protocols that apply to medicines for entire populations. The threat of taxing access to the Internet seems to always be “on the table.”

In the end, the public should demand policy that works for customers, as well as licensed providers. Alas, entrenched interests, with all of the manipulative tools, legal causes of action and government authority that now exists, may stifle many of the innovations that could transform the economy before most people get a chance to try them out.

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Pending gas price hikes make California lawmakers skittish

August 07, 2014, 4:21 PM

As the California Legislature wraps up its last few weeks of this year’s session, some lawmakers are anxious to head off a scheduled gas price increase set to take effect next January under the state’s cap-and-trade program.

Responding to pleas from consumer groups and the oil industry, Assemblyman Henry Perea, D-Fresno, has put forth A.B. 69, which would postpone for three years the requirement to purchase permits for transportation fuels. Perea says he supports the cap-and-trade emissions-reduction program overall, but noted in a statement that a report he commissioned from the Legislative Analyst’s Office found that significant hikes in gas prices would hurt average Californians.

“There is widespread agreement that including transportation fuels in the cap-and-trade program will increase the retail price of gasoline,” Perea said.

The rules stem back, ultimately, to A.B. 32, passed by the Legislature in 2006, which called on the California Air Resources Board to reduce the state’s greenhouse gas emissions. Under an executive order originally signed by former Gov. Arnold Schwarzenegger, fuel producers will be required to decrease carbon intensity across the board by 10 percent by 2020. Part of that order calls for a low-carbon fuel standard, which is estimated to increase gas prices by 15 cents per gallon.

Polling released last month by the Public Policy Institute of California found that Californians still broadly support A.B. 32, particularly regulations to limit or ban off-shore drilling, the building of nuclear power plants or hydraulic fracturing. The poll even finds that 76 percent of Californians favor the law’s requirement that the state’s oil companies either produce lower emissions transportation fuels or buy offsets. But that support drops to 39 percent if the result is higher fuel prices.

Californians already pay some of the highest gas prices in the nation. Further restrictions to the energy industry would naturally result in those regulations hitting the average Californian’s wallet. Naturally, lawmakers fret that the impending price hikes will further cripple the state’s poor, putting yet another burden on their economic recovery.

But is it fair to exclude one segment of the energy industry from cap-and-trade when others have been complying since 2012? The utilities industry, among others, argue it is time oil companies be held to the same standards. Recently, a group of 32 members of the state Senate and Assembly wrote to Gov. Jerry Brown warning that:

A fundamental redesign of A.B. 32 that allows oil companies to play by different rules than other industries would not only unacceptably delay action to reduce climate pollution, but could also disadvantage those industries that have already made investments to comply with the law.

California has always struggled to find the balance of environmental protection and economic prosperity. If the cap-and-trade rules are implemented and gas prices shoot up significantly, it will be incumbent on the Legislature to explore alternatives to cut the cost of living in California for all residents.

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