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Letter to Gov. Nixon on veto of tobacco harm-reduction bill

July 31, 2014, 5:13 PM

July 31, 2014

 

Gov. Jeremiah Nixon
P.O. Box 720
Jefferson City MO 65102
Re: Veto of Missouri Senate Substitute for S.B. 841

Dear Gov. Nixon,

As a public health physician, with decades of experience in tobacco control, I write to express deep disappointment with your veto of S.B. 841. I respectfully urge your reconsideration.

This bill would prohibit sale of all non-pharmaceutical nicotine delivery products to minors and provide separate legal categories for alternative and vapor devices. Since nicotine is potentially harmful to the adolescent brain, and more addictive to adolescents than adults, this bill, as proposed, would enhance Missouri’s public health.

The separation of alternative (i.e., non-combustible) tobacco products from combustible tobacco products is appropriate for the protection of public health. The risk of potentially fatal tobacco-attributable illness presented by non-combustible products – chewing tobacco, snuff, snus and dissolvable sticks, strips and orbs – is less than 1 percent of the risk posed by cigarettes. These products have also been shown to be less addictive.

Creating a separate category for vapor products would be appropriate because vapor products contain no tobacco. Their active ingredient, tobacco-derived nicotine, is the same nicotine used in the pharmaceutical patches, gums, lozenges and inhalers. As such, we have reason to believe they present a level of risk similar to the risk posed by these commonly used pharmaceuticals, all of which are endorsed by the health related organizations you reference in your veto message.

Your veto message is laced with technical errors that conflict with the scientific evidence base developed over this past decade. All of the often quoted 480,000 tobacco-attributable deaths in the United States, each year, are due to a single tobacco product, the combustible cigarette. The numbers of deaths from all other tobacco and nicotine products, combined, are so small and so hard to distinguish from background mortality that such deaths are not tracked by federal authorities.

The technical and factual errors in your veto message suggests that few in the public health organizations that encouraged this veto are sufficiently up to date on tobacco-related research to be aware of the differences in risk and addictiveness of the alternative products and the patterns of use of e-cigarettes. Their encouragement of this veto seems based on this lack of current knowledge and a possible commercial bias on their part. In demeaning e-cigarettes, they fail to acknowledge that each of their national parent organizations enjoy generous support from drug companies that make the pharmaceutical nicotine products. These companies have much to lose as people learn that they can secure more than 99 percent of the benefits at less cost and with real nicotine- satisfaction from e-cigarettes.

Vapor contaminants are so low that exhaled e-cigarette vapor does not measurably increase the quantity of chemical contaminants in most indoor air environments. Despite hype, almost all vapor products are used by current smokers to cut down or quit. Teens may experiment with such vapor products, but they rarely continue such use and almost never transition from e-cigarettes to tobacco cigarettes.

Finally, waiting for FDA regulation of these products will be an exercise in futility. Due to circumstances partially out of the control of the FDA, it will be four to 10 years before FDA implements any such regulations.

In June, I published paper dealing with all these issues, with extensive bibliographic references. Copies of this paper can be secured at http://www.rstreet.org/wp-content/uploads/2014/07/20140630FDLI-EcigForum.pdf. This paper also includes a description of who I am, my background, and the nature of my affiliation with the R Street Institute.

I would welcome the opportunity to meet with governmental and health authorities in Missouri for the purpose of bringing them up to date on all these issues, discussing, and otherwise addressing their concerns.

The bottom line is that advising smokers of the difference in risk comparing cigarettes to alternative products and e-cigarettes could secure personal and public health benefits not otherwise obtainable. If skillfully done by public health authorities, this could further reduce teen smoking and teen addiction to other nicotine delivery products.

This veto does not protect the public. It helps ensure continuing high levels of tobacco-attributable illness and death and protects the profits of big drug companies.

Sincerely,

Joel L. Nitzkin, MD
Senior Fellow for Tobacco Policy
R Street Institute

Surveillance Costs: The NSA’s impact on the economy, Internet freedom & cybersecurity

July 31, 2014, 12:14 PM

From the Open Technology Institute:

R Street Institute’s January 2014 policy study concluded that in the next few years, new products and services that rely on cloud computing will become increasingly pervasive. “Cloud computing is also the root of development for the emerging generation of Web-based applications—home security, out-patient care, mobile payment, distance learning, efficient energy use and driverless cars,” writes R Street’s Steven Titch in the study. “And it is a research area where the United States is an undisputed leader.” This trajectory may be dramatically altered, however, as a consequence of the NSA’s surveillance programs…

…As the R Street Policy Study highlights, “Ironically, the NSA turned the competitive edge U.S. companies have in cloud computing into a liability, especially in Europe.”

…According to the R Street Institute study, “It appears the NSA’s aggressive surveillance has created an overall fear among U.S. companies that there is ‘guilt by association’ from which they need to proactively distance themselves.”

R Street joins groups in support of USA FREEDOM Act

July 31, 2014, 8:37 AM
WASHINGTON (July 30, 2014) - The R Street Institute today joined a coalition of groups expressing support for the USA FREEDOM Act, which was reintroduced in the Senate this week by Sen. Patrick Leahy, D-Vt.

In a letter to Congress, coalition members said the Leahy bill is a substantial improvement over a version passed by the U.S. House and addresses many of the earlier bill’s shortcomings. The Senate bill includes more effective prohibitions on bulk record collection, strengthened transparency reporting provisions and reforms to make the FISA Court process more accountable.

“While the bill does not include all of the reforms we’d like to see to the government’s surveillance powers, it is a vast improvement over the House bill and a good first step toward reining in the government’s out-of-control spying apparatus,” said R Street Senior Policy Analyst Zach Graves. “Chairman Leahy and his staff should be commended for their efforts.”

Other members of the coalition include such groups as the Electronic Frontier Foundation, the Center for Democracy and Technology, the Open Technology Institute, Generation Opportunity, the American Civil Liberties Union and Access.

 

Click here to read the letter and its support of key provisions of the bill.

Coalition urges Congress to support updated USA FREEDOM Act (S. 2685)

July 31, 2014, 8:30 AM

Majority Leader Harry Reid Minority Leader Mitch McConnell United States Senate

Chairman Patrick J. Leahy
Ranking Member Charles E. Grassley U.S. Senate Committee on the Judiciary

Chairman Dianne Feinstein
Vice Chairman Saxby Chambliss U.S. Senate Select Committee on Intelligence

Speaker John Boehner
Minority Leady Nancy Pelosi
United States House of Representatives

Chairman Robert W. Goodlatte
Ranking Member John Conyers, Jr.
U.S. House of Representatives Committee on the Judiciary

Chairman Mike Rogers
Ranking Member C.A. “Dutch” Ruppersberger
U.S. House Permanent Select Committee on Intelligence

July 30, 2014

Dear Majority Leader Reid, Minority Leader McConnell, Chairmen Leahy and Feinstein, Ranking Member Grassley, Vice Chairman Chambliss, Speaker Boehner, Minority Leader Pelosi, Chairmen Goodlatte and Rogers, and Ranking Members Conyers and Ruppersberger:

The undersigned civil liberties, human rights, and other public interest organizations write in support of the USA FREEDOM Act (S. 2685), which Senator Leahy reintroduced on July 29. We urge both the Senate and the House to pass it swiftly and without any dilution of its protections.

On June 18, many of the undersigned groups sent a letter to Senate leadership raising serious concerns about the version of the USA FREEDOM Act (H.R. 3661) that passed the House of Representatives in May, and recommending six specific areas for improvement in the Senate bill.1 The version of the USA FREEDOM Act introduced Tuesday is a substantial improvement upon the House-passed bill, and addresses many of our most significant concerns. While this bill does not include all of the necessary reforms to the government’s surveillance authorities, it is a good first step. Specifically, this version of the USA FREEDOM Act will:

1. Prohibit “bulk” collection. As drafted, S. 2685 will prohibit indiscriminate collection of records under USA PATRIOT Act Section 215 (Section 215) and help curtail other forms of broad or bulky collection as well. It significantly narrows the definition of “specific selection term” as applied to Section 215 orders for call detail records (CDR) and other items, as well as for FISA pen register and trap and trace device orders and National Security Letters (NSLs). Additionally, S. 2685 prohibits large-scale data collections under certain authorities based solely on terms that identify broad geographical regions or name particular Internet or telephone

1 Letter from coalition to Senator Reid, et. al, concerning USA FREEDOM Act (H.R. 3361) (June 18, 2014) (on file with author), available at http://www.newamerica.net/sites/newamerica.net/files/program_pages/attachments/CoalitionLetterOnUS AFreedom.pdf.

services, and more generally requires the government to narrowly limit its data collection. We understand the intent of these provisions is to put an end to bulk or bulky collection programs, whether the NSA’s phone records program or others. The bill also strengthens minimization requirements that would provide additional post-collection privacy protections in instances where a Section 215 order is likely to return records on more than one individual. While it does not include minimization procedures for pen register and trap and trace device authorities, it does clarify the Foreign Intelligence Surveillance Court’s (FISC) authority to impose stronger privacy procedures and review compliance. These reforms are all significant improvements over H.R. 3361. If faithfully implemented, they should ensure the end of bulk collection of Americans’ personal information under domestic national security surveillance collection authorities, thus achieving the USA FREEDOM Act’s primary stated purpose.

2. Strengthen transparency reporting provisions. This bill makes significant improvements to the level of detail that private companies can include in their transparency reports. It locks in the deal made earlier last year between the Department of Justice and Internet companies that gave the companies two different options for publishing information about the FISA and NSL demands they receive, but improves on it by narrowing the range of numbers in which the companies can report, and by shortening the waiting period to report on surveillance orders directed at new technologies from 2 years to 18 months. The bill also provides two additional options for reporting that were not in the original deal: one option that allows companies to report annually on the national security requests they receive in ranges of 100, the narrowest numerical range of all the different reporting options, and another option that allows companies to be more granular in their reporting about specific surveillance authorities including FISA Amendments Act Section 702 (FISA Section 702), which authorizes the PRISM and “upstream” collection programs that are of particular concern to customers and tech companies alike. Additional improvements are still needed, such as authorizing companies to report on the number of accounts actually affected by the government demands they receive rather than just those accounts that are targeted. However, the company reporting provisions in S. 2685 are a strong improvement over the House bill, and will help to start informing the public on the impact that these authorities have on American industry and consumers.

S. 2685 also strongly enhances reporting by the government. Whereas H.R. 3661, as passed, merely requires the Director of National Intelligence to report annually the number of “targets” and “orders” for each relevant authority, S. 2685 also requires disclosure of the number of individuals whose communications are collected, including an estimate of the number of U.S. persons. This is a much more meaningful set of numbers. More transparency is needed, as the bill exempts the FBI from key reporting requirements and allows the Director of National Intelligence to use a certification process to avoid the requirement of estimating how many U.S. persons are affected by FISA Section 702. Nonetheless, the bill materially improves the usefulness of government reporting.

3. Strengthen reforms to the FISA Court (FISC) process to provide more accountability.

S. 2685 expands advocacy within the FISC by creating Special Advocates who may serve as amici. While not all our concerns with this measure were resolved, S. 2685 clarifies that the Special Advocates’ duty is to advocate for privacy and civil liberties, and includes provisions to facilitate access to all relevant materials and precedent. It also increases access to technical and subject matter experts. Additionally, although some loopholes remain, the bill seeks to limit secret law by requiring the Director of National Intelligence to publicly release either a redacted copy or a summary of any significant FISC decision.

In addition to addressing some of our most pressing concerns as explained above, we are pleased that S. 2685 limits the use of CDRs to counterterrorism purposes, and resolves the threat of implicitly codifying controversial “about” searches under FISA Section 702 by removing that section from the bill. We are also encouraged that this bill does not include any form of a mandatory data retention regime. As we mentioned in our June 18 letter, we strongly oppose any such requirement, as it would threaten privacy and civil liberties, impose unnecessary economic burdens on companies, and create risks to data security.

S. 2685 is a substantial improvement over the House bill. It would meaningfully amend the laws that authorize some of the most deeply concerning domestic records collection programs. We must caution, however, that many of the positive steps included in the bill could be undermined through insufficiently targeted cybersecurity information sharing legislation. We also note that S. 2685 does not address the NSA’s cyber operations or its largest surveillance programs: those taking place under Executive Order 12333 and FISA Section 702. After passing S. 2685, Congress should immediately conduct public oversight and work to reform these authorities, which pose grave threats to privacy, civil liberties, and Internet security.

We support S. 2685 as an important first step toward necessary comprehensive surveillance reform. We urge the Senate and the House to pass it quickly, and without making any amendments that would weaken the important changes described above.

Sincerely,

Access
Advocacy for Principled Action in Government American Association of Law Libraries
American Civil Liberties Union
American Library Association
Antiwar.com
Arab American Institute
Association of Academic Health Sciences Libraries Association of Research Libraries
Bill of Rights Defense Committee
Brennan Center for Justice
Campaign for Digital Fourth Amendment Rights Center for Democracy & Technology
Center for Media and Democracy/The Progressive Charity & Security Network
Citizen Outreach
Competitive Enterprise Institute
Constitution Alliance
The Constitution Project
Council on American-Islamic Relations Cyber Privacy Project
Defending Dissent Foundation DownsizeDC.org, Inc.
Electronic Frontier Foundation Free Press Action Fund
Freedom of the Press Foundation FreedomWorks
GenOpp
Government Accountability Project Human Rights Watch
Liberty Coalition
Media Alliance
Medical Library Association
National Coalition Against Censorship National Security Counselors
New America’s Open Technology Institute OpenMedia.org
OpenTheGovernment.org
PEN American Center
Public Knowledge
Republican Liberty Caucus
R Street
Rutherford Institute
TechFreedom

Portable persistency and the Prop 103 roadblock

July 30, 2014, 11:17 AM

The emerging need to develop new insurance products to cover California’s Transportation Network Company operators has spurred a reexamination of the nature of Proposition 103′s quasi-constitutional status. In the name of populism, 1988′s Prop. 103 inserted unwieldy, naïve and vague underwriting rules into California insurance law. As the TNC industry is discovering to its regret, even a cursory inspection reveals that Prop. 103 has a stultifying impact on market flexibility and innovation.

The trouble is that, even with a two-thirds vote of the Legislature, legislation that does not “further the purposes” of Prop. 103 is likely to be held invalid. Thus, before considering any legislative fix, it is necessary to grasp what furthering the purposes of Prop. 103 must entail.

Should existing industries, or disruptive start-ups like the TNCs, be inclined to seek guidance about how best to change Prop. 103 while furthering its purpose, they should start by examining the history of California’s “portable persistency” automobile insurance discount battles.

Prop. 103 lays out with great specificity a list of rating factors that insurers are to use as they develop auto insurance rates. The list of rating factors is divided between mandatory and optional factors. Currently, there are three mandatory factors and 16 optional factors. Additional rating factors may be adopted via regulation by the insurance commissioner, so long as those factors have a “substantial relationship to the risk of loss” (See CIC 1861.02(e)).

Insurers know for a fact that customer “persistency” – that is, how long a customer has maintained insurance without interruption – is predictive. Ignoring this reality, as originally drafted, Prop. 103 proscribed the use of some rating factors. For instance, subsection (c) of Section 1861.02 is a provision that prevents insurers from charging increased rates on the basis of a lack of prior coverage. The rationale for the prohibition is founded on the notion that reducing the number of uninsured drivers depends on preventing insurers from underwriting in a manner that reflects the scientifically determined risk.

In an effort to allow insurers to reap the benefits of underwriting certainty, Insurance Commissioner Chuck Quackenbush promulgated a regulation to increase rating flexibility, in spite of the prohibition articulated in 1861.02. The new regulation allowed insurers to use persistency as an optional rating factor, though only in an affirmative manner. Through this lens, persistency pertains to the amount of time an insured has continuously had coverage. Applied in this way, insurers did not “punish” customers for not having insurance. Rather, insurers rewarded those that did have insurance.

The regulation did not explicitly define persistency and, as a result, different insurers interpreted the optional factor differently. While some insurers chose to interpret persistency as the number of years of continuous coverage the insured enjoyed with a single insurer, others interpreted persistency to entail continuous coverage with any insurer. Subsequently, in 2002, Insurance Commissioner Harry Low sought to clarify what was meant by persistency by promulgating a regulation to make clear that only the length of time that a driver had been with a single company (or an affiliate) counted toward the discount. This meant that persistency was not “portable” for the customer and thus retarded company-to-company movement of insurance buyers. It made it difficult for companies to lure customers from other insurers.

Insurers were unhappy about the elimination of “portable persistency” discounts, so they went to the Legislature seeking a remedy. S.B. 841 of 2003, which ensconced portable persistency discounts in statute, was drafted and passed based on Section 1862.02′s prohibition against making rates on the basis of a lack of previous coverage. The bill’s sponsors ensured that it included intent language making clear that the bill “furthers the purpose of Proposition 103 to encourage competition among carriers so that coverage overall will be priced competitively.”

Upon the predictable challenge, the California Court of Appeal struck down the bill.

The court ruled that the thinking behind 1861.02(c) was that, between rating factors, cost distribution is a zero-sum game. For example, previously uninsured drivers will face higher rates if insured drivers are offered portable persistency discounts, because one factor will need to be adjusted to cover the cost of the other (for an interesting discussion on how rating factors are weighed, i.e.: “pumping” and “tempering,” see Spanish Speaking Citizens’ Found. v. Low 85 Cal.App.4th 1179). By adjusting the rate, the previously uninsured will be made to subsidize the persistently insured. For this reason, S.B. 841 was found not to “further” Prop. 103′s purpose which, ultimately, the court decided is to expand access to auto insurance.

Suffering additional beatings on the matter, since the elimination of portable persistency discounts, two attempts have been made by insurers outside of the Legislature to reinstate their use. Two initiatives, Prop. 17 and Prop. 33, failed.

While there is another persistency discount skirmish in the offing with the appearance of a Trojan horse, in the form of Prop. 45, will there ever be a way around the courts’ unfortunate readings of what furthers the purposes of the resiliently malignant Prop. 103?

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

Today in Liberty: Treasury Department halts Ex-Im deals with Russia, federal court grants D.C. a stay on gun rights ruling

July 30, 2014, 9:23 AM

From UnitedLiberty:

“Peer production” could be huge for the economy if left alone by bureaucrats: A new study from the R Street Institute explains that the emerging “peer production” economy — think Lyft and Airbnb — could “add trillions of dollars to the economy of the next several decades,” making it important for policymakers to back off. “[T]he development of these new modes of doing business has been threatened by legislators and regulators – particularly on the state and local level – who in too many cases attempt to apply regulatory models developed in an earlier era to the individuals and small firms that are innovating through peer production,” write Andrew Moylan and R.J. Lehmann in the study, Five Principles for Regulating the Peer Production Economy. “These actions do little to protect consumers, but rather they prevent innovative ideas from coming to market and keep potential service providers sidelined.” Moylan and Lehmann say that policymakers “should consider the risk of ‘government failure’” and regulate with a “light hand” to prevent suppressing this emerging part of the economy.

NAF report quantifies cost of NSA snooping

July 29, 2014, 3:42 PM

In the year since Edward Snowden began disclosing the scope of National Security Agency’s programs to use cell phone networks, the Internet and various commercial websites to spy on both American citizens and foreign nationals, there has been considerable speculation about the cost of these programs to the U.S. information technology industry in terms of money and trust.

The New America Foundation has released a report that attempts to quantify these costs, concluding that over the past 12 months the NSA’s actions “have already begun to, and will continue to, cause significant damage to the interests of the United States and the global Internet community.”

In the executive summary, authors Danielle Kehl, Kevin Bankston, Robyn Greene and Robert Morgus discuss detrimental effects on four specific areas:

  • Direct economic costs to U.S. businesses: American companies have reported declining sales overseas and lost business opportunities, especially as foreign companies turn claims of products that can protect users from NSA spying into a competitive advantage. The cloud computing industry is particularly vulnerable and could lose billions of dollars in the next three to five years as a result of NSA surveillance.
  • Potential costs to U.S. businesses and to the openness of the Internet from the rise of data localization and data protection proposals: New proposals from foreign governments looking to implement data localization requirements or much stronger data protection laws could compound economic losses in the long term. These proposals could also force changes to the architecture of the global network itself, threatening free expression and privacy if they are implemented.
  • Costs to U.S. foreign policy: Loss of credibility for the U.S. Internet freedom agenda, as well as damage to broader bilateral and multilateral relations, threaten U.S. foreign policy interests. Revelations about the extent of NSA surveillance have already colored a number of critical interactions with nations such as Germany and Brazil in the past year.
  • Costs to cybersecurity: The NSA has done serious damage to Internet security through its weakening of key encryption standards, insertion of surveillance backdoors into widely-used hardware and software products, stockpiling rather than responsibly disclosing information about software security vulnerabilities and a variety of offensive hacking operations undermining the overall security of the global Internet.

Among the recommendations the authors make are strengthening privacy protections for both Americans and non-Americans, within and outside the U.S. borders; increased transparency around government surveillance, both from the government and companies; renewed commitment to the Internet freedom agenda in a way that directly addresses issues raised by NSA surveillance, including moving toward international human rights-based standards on surveillance; and development of clear policies about whether, when and under what legal standards it is permissible for the government to secretly install malware on a computer or in a network.

The entire 64-page report can be downloaded here. A summary version is here. Also check out my own R Street white paper on the potential cost of NSA computer spying here.

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

The left’s case against Ex-Im

July 29, 2014, 1:48 PM

Efforts to finally kill the $140 billion federal boondoggle that is the Export-Import Bank — led by House Financial Services Committee Chairman Jeb Hensarling, R-Texas — are getting characterized in some quarters as another round of impractical, rabble-rousing tea party invective.

The truth is, just as the bank has more than its share of apologists within the Republican Party, some of its more eloquent critics actually come from the left.

Of course, those critics at one time included the president himself, who on the campaign trail in 2008 called Ex-Im “little more than a fund for corporate welfare.” Alas, Obama nonetheless signed a 2012 reauthorization bill and is now backing Senate Democrats like Mary Landrieu and Mark Warner as they try to make the bank’s pending reauthorization a campaign issue.

But some on the left still see clearly through the haze. Particularly noteworthy is today’s takedown — by Dean Baker of the Center for Economic and Policy Research — of an op-ed published in yesterday’s New York Times by former U.S. Sen. William Brock, R-Tenn. Not only does Brock pull out all the usual tired claims for Ex-Im reauthorization, but he even has the brass to invoke the ghost of Ronald Reagan:

The bank is not perfect. It could do more to increase efficiency and transparency, and to better leverage partnerships to reach even more small businesses. But as President Reagan understood, that is a reason to reform it, not end it. Opponents of the bank say that it supports just 2 percent of all exports. Still, 2 percent amounts to $37.4 billion of American products made by American workers in American plants. That translates into tens of thousands of jobs from every state in the country.

Baker does an effective job of fisking this claim, noting that ending the bank would not actually cause Boeing, which receives 30 percent of Ex-Im’s subsidies, to stop selling planes abroad :

For the most part this would be a story of lower profits, but there would be some reduction in exports, probably in the range of 10 to 30 percent of the amount being subsidized. That translates into $3.7 to $11.2 billion in exports that we would lose without the Ex-Im Bank.

Is that a big deal? We can compare this to another export number that has been in the news recently. A new study showed that because of the sanctions against Iran, the United States has lost $175.4 billion in exports since 1995, with the estimated losses coming to $15 billion in 2012, the latest year covered by the study. So the jobs at stake with the Ex-Im Bank are about 75 percent of the number that could be gained if we ended the sanctions against Iran. In other words, if we think the ending of loans from the Ex-Im Bank would be a hit to the economy, then we must think the sanctions to Iran are an even bigger hit.

Baker goes on to note that, if promoting exports were actually the policy goal, the clearest way to do that would be to devalue the dollar, most likely through a negotiated arrangement with those countries that have been bidding up its value. It turns out that option isn’t so popular, not only because it would raise the prices of imported goods that retailers like Wal-Mart have come to rely on, but also because it would “hurt major manufacturers like Boeing and GE who now do much of their manufacturing overseas,” Baker writes.

Time magazine’s Michael Grunwald — author of the decidedly non-tea party tome The New New Deal: The Hidden Story of Change in the Obama Era — lays out the progressive case against Ex-Im perhaps as well as anyone:

The fate of the Ex-Im Bank…will not affect the fate of the planet. It probably won’t even affect the fate of Boeing, which is perfectly capable of doing deals with Arab petro-states without government-guaranteed financing. So what’s the point of keeping it around and enduring its periodic scandals? Those of us who believe that government should do a lot of important things, like defend the nation and fight climate change and ensure universal health insurance, ought to recognize that government shouldn’t try to do everything. Opposing the Ex-Im doesn’t mean agreeing with the Tea Party notion that government shouldn’t try to do anything—just that it should stop trying to do this.

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

The peer production economy should be allowed to succeed without heavy regulation, R Street study finds

July 29, 2014, 8:14 AM

WASHINGTON (July 29, 2014) – Emerging “peer production” markets could unlock trillions in previously dormant capital, making it essential that lawmakers and regulators do not strangle these new business models before they have the opportunity to develop, two R Street Institute senior fellows write in a new paper.

Co-authored by R Street Executive Director Andrew Moylan and Editor-in-Chief R.J. Lehmann, “Five principles for regulating the peer production economy” finds that new technologies and changes in the way we communicate have created more opportunities for individuals and small groups either to develop and build upon innovative ideas or to bring their marginal capital and labor into productive use.

With new services like Lyft, Airbnb and Etsy connecting buyers directly to sellers, the peer production economy has helped to democratize production, liberate underutilized capital and reduce costs for consumers and producers.

“In some cases, this shift has allowed small startups to threaten dominant market incumbents, as long-standing asset-intensive firms now must compete with new firms than can tap the resources of privately held assets by individuals who aren’t using them fully,” Moylan and Lehmann write. “Overall, the effect has been to eliminate many of the benefits of being big.”

“Alas, the development of these new modes of doing business has been threatened by legislators and regulators – particularly on the state and local level – who in too many cases attempt to apply regulatory models developed in an earlier era to the individuals and small firms that are innovating through peer production,” they add. “These actions do little to protect consumers, but rather they prevent innovative ideas from coming to market and keep potential service providers sidelined.”

The authors lay out five principles for legislators and regulators to take into consideration when thinking about how to regulate the peer production economy.

Regulators should tread lightly, allowing firms and industries to self-regulate to the extent practical. They also should consider using existing market-regulating instruments, such as insurance contracts and surety and fidelity bonds, rather than prescriptive regulation.

The authors also recommend reduced reliance on occupational licensing and that regulators exercise extreme caution before any attempt to determine the “right” balance of buyers and sellers. Finally, regulators and legislators should strive for neutrality in regulation, so as not to benefit either incumbent or emerging business models at the expense of others.

“At a minimum, regulators should think very carefully about banning any peer production activity that isn’t already banned and should review existing laws to assure that policies created for one purpose do not place an undue burden on the sharing economy,” the authors write. “With a sensible, minimal regulatory structure, the peer production economy can and will create enormous new wealth, generate jobs and put previously underutilized resources to work,” said Moylan.

The full paper can be found here:

http://www.rstreet.org/policy-study/five-principles-for-regulating-the-peer-production-economy/

Five principles for regulating the peer production economy

July 29, 2014, 8:00 AM

 

The attached paper was co-authored by R Street Executive Director Andrew Moylan.

Economic history over the last 200 years is largely the story of the industrial move from small-scale domestic production and piece work to systems dominated by economies of scale: factories, big businesses and multi-national corporations. But over just the past two decades, new technologies have radically altered this trend,disaggregating physical assets in space and time and employing digital platforms that allow for more individually tailored pricing, matching and exchange. Changes in the way we communicate and transact business have reduced economies of scale in some industries, shifting value to producers who have access to distributed capital.

In some cases, this shift has allowed small startups to threaten dominant market incumbents, as long-standing asset-intensive firms like car rental giants Avis and Hertz now must compete with new firms like RelayRides and Getaround that can tap the tens of millions of privately owned cars that currently sit idle in American driveways. Overall, the effect has been to eliminate many of the benefits of being big.

These changes have led not only to a greater diversity of products to meet niche demands, but to a panoply of divergent business models in sectors previously dominated by a just a handful of options, whether the consumer need is to find lodging or to get across town, to take just two notable examples.

As a result, there are more opportunities for individuals and small groups either to develop and build upon innovative ideas or to bring their marginal capital and/or labor into productive use. This phenomenon goes by a number of names, including the “sharing economy” and the “mesh economy.” We will use the phrase “peer production” as the hallmark of this emerging economic phenomenon. To be sure, the participants in this market aren’t necessarily peers, but we feel this label better describes the underlying dynamics. Peer production is not sharing, per se, nor is it a seamless mesh of production. Rather, it is about harnessing technological platforms to connect buyers and sellers who otherwise would not have connected, either because of supply- or demand-driven constraints.

Alas, the development of these new modes of doing business has been threatened by legislators and regulators — particularly on the state and local level — who in too many cases attempt to apply regulatory models developed in an earlier era to the individuals and small firms that are innovating through peer production. These actions do little to protect consumers, but rather they prevent innovative ideas from coming to market and keep potential service providers sidelined. Too often, the presumption is to “ban first; ask questions later.”

In exploring how to regulate new firms that shake up existing markets — especially those who develop entirely new business models — or what rules should apply to individuals who develop smartphone apps or rent out their power tools over the Web, legislators and regulators should step back and reexamine the first principles of consumer protection. Consumer-oriented regulation should be about providing basic standards to market players and should not serve as a barrier to entry, either for those who seek to compete with incumbent producers or for those with innovative ideas that redefine markets.

As the markets for peer production services evolve, it is the welfare of consumers that most concerns us and that should most concern policymakers. Innovation and “creative destruction,” as the economist Joseph Schumpeter termed it, are not prized because of their effects on incumbent producers, which are in many cases negative. Nor are they prized because of their “jobs created” or similar workforce metrics frequently espoused by politicians. Rather, they are valued because, from the perspective of the consumer, they improve on existing goods and services, reduce costs for households and create a host of new options to increase consumer utility.

In many cases, regulators charged with defending consumers’ interests instead work to protect incumbent producers from innovative market forces. This phenomenon, known as “regulatory capture” in public choice literature, not only impedes innovation and economic growth, but is profoundly unfair to consumers.

The national security social contract

July 28, 2014, 9:11 AM

Of all the news outlets that covered the mysterious replacement of the U.S. flags on one of the towers of the Brooklyn Bridge, only the New York Post got the lede right. While other media pondered what the “message” of the flag switch was, the Post identified the true significance of the story: a stupefying breakdown in the security of critical infrastructure.

Under the classical liberal idea of social contract, people hand over certain rights to the state in return for a degree of safety and security. Implied is that the cost-benefit ratio of this trade-off favors the average citizen. That is, the sense of well-being I gain is substantially exceeds the pain of losing a few freedoms.

But the social contract ceases to be of value when the costs in freedom and privacy outweigh any benefit in security. Or, to put it less delicately, why should we grant the government the power to track and record all our public movements, 24 hours a day and seven days a week, when it can’t use those assets to act fast enough to stop a small group of people from gaining access to a secure area on one of the America’s most iconic landmarks?

Today’s news has police and politicians speculating how the trespassers got past gates, fences, cameras and police officers stationed at either end of the bridge. The real question isn’t how they did it. It’s that they did it. And believe me, any explanation that emerges as to how these guys pulled it off is only going to reflect worse on the system. As a test of national, state and city terror readiness, this incident earns a bright red F.

In the name of protecting us, we have granted our government unprecedented intrusiveness in our personal space. In addition to widespread surveillance, the government eavesdrops on phone conversations, tracks our locations via cellphones, evaluates our web-surfing habits and monitors our purchases—and this is just what we know from the Snowden disclosures.

Innocuous activities – such as photographing public art, meeting a friend at a train station or buying more than one computer at Best Buy – can put you on a government terror watch list. The watch list itself has swollen to 1.5 million people, a level of dilution that pretty much makes it useless as an analytic tool, but could present enormous headaches for someone at an airport or a routine traffic stop.

The government asks us to accept on faith that numerous threats were detected and neutralized by way of these methods, but refuses to provide any examples. That the Brooklyn Bridge trespassers, whatever their motive, were able to accomplish their act is bad enough. There is no credibility to the claim that such ultra-high levels of surveillance are necessary when the government proves inept at containing what would have appeared to be an overt threat.

Citizens and their elected representatives should be demanding more accountability from the White House, the National Security Administration, the Department of Homeland Security and all other agencies who have the power to listen, watch and search Americans without due process. What quantitative metrics and specific cases can you show us to prove these programs work?

Until that question is answered, the government will be asking too much in privacy and return for too little in security.

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Open letter to the House and Senate: Keep the caps

July 28, 2014, 8:47 AM

 

We, the undersigned organizations, representing millions of Americans dedicated to fiscal responsibility, urge you to strictly abide by the discretionary budget caps originally established by the Budget Control Act of 2011 (BCA) and subsequently modified by the Bipartisan Budget Act of 2013, or “Ryan-Murray,” as it is commonly known. In particular, our organizations and members are concerned about efforts to circumvent these spending restraints through the use of budgetary gimmicks.

Many of us were disappointed by and opposed to last year’s Ryan-Murray agreement that allowed for an additional $63 billion in discretionary spending for fiscal years (FY) 2014 and 2015—well over the amounts initially provided for by the BCA. Despite our concerns, some lawmakers supported the deal because its near-term spending increases were intended to be offset by longer-term deficit-reducing measures. Nevertheless, if Congress is to have any credibility on fiscal restraint, it should not further alter the caps and allow spending to exceed the already-revised discretionary figure of $1.014 trillion for FY015. Maintaining this level appears to be in jeopardy, which is cause for serious concern.

In particular, we urge members to be vigilant about the potential misuse of the Overseas Contingency Operations (OCO) account. These funds should be used exclusively for their intended purpose—not as a backdoor means to increase resources for the base defense budget or for other, unrelated spending items. As military operations in Afghanistan wind down, so too should OCO, as this off-budget account poses a threat to fiscal responsibility.

Additionally, we are concerned about budgetary gimmicks often called “changes in mandatory programs” or CHIMPs. CHIMPs are sometimes used to shift spending outside the budget window on paper without actually saving taxpayers any money. Doing so should not be permitted because it would disingenuously hide spending and undermine budget caps.

Again, we encourage you to exercise fiscal discipline, avoid CHIMPs or other budgetary gimmicks, and oppose any spending legislation that would violate the BCA or of the modest limits established in Ryan-Murray.

Sincerely,

Brandon Arnold
National Taxpayers Union

James L. Martin
60 Plus Association

Phil Kerpen
American Commitment

Grover Norquist
Americans for Tax Reform

Norman Singleton
Campaign for Liberty

Brian Garst
Center for Freedom and Prosperity

Jonathan Bydlak
Coalition to Reduce Spending

Lawson Bader
Competitive Enterprise Institute

Peter J. Thomas
The Conservative Caucus, Inc.

Mattie Duppler
Cost of Government Center

Tom Schatz
Council for Citizens Against Government Waste

Jim Babka
DownsizeDC.org

Coley Jackson
Freedom Action

Matt Kibbe
FreedomWorks

Andrew Moylan
R Street Institute

Matt Nye
Republican Liberty Caucus

Dave Wallace
Restore America’s Mission

Paul Gessing
Rio Grande Foundation

Ryan Alexander
Taxpayers for Common Sense

David Williams
Taxpayers Protection Alliance

Ryan’s opening bid

July 25, 2014, 3:07 PM

Rep. Paul Ryan, R-Wis., unveiled his draft “opportunity agenda” in a speech this morning at the American Enterprise Institute, offering a plan broad and bold enough to give both sides much to like, hate and quibble over.

The many individual proposals contained in the agenda are held together by the theme of solving complex problems through pairing local knowledge with the immense power of the federal purse. This marks a welcome return to the central conservative tenets of community and federalism, which Ryan applies to six different areas of public life.

Federal and state governments currently spend more than $900 billion annually on more than 80 means-tested assistance programs. But as even many on the left will concede, we have little to show for these efforts in terms of transformative change. As we look for ways to turn around this dismal performance, conservatives are right to insist on a modest role for the federal government and for more programs to be tied to work requirements and other means of shared responsibility.

But Ryan grasps something deeper: that the plague of institutional breakdown and intergenerational poverty means some communities still require additional help to get effective programs off the ground. After years of formulaic welfare spending, the unfortunate victims of well-intentioned policies might have the resources to live above the poverty line, but too few have the means to move themselves up the ladder.

Ryan’s plan acknowledges a necessary role for the federal government, but confines it to what the federal government does best, which is provide resources. Even in the proposal that most clearly would be directed by the federal government – expanding the Earned Income Tax Credit for childless workers – Ryan justifies the idea on grounds that it will better help those in poverty, particularly unmarried men, return to work and participate in other local initiatives designed to put their lives back on track.

The most ambitious part of the plan would see billions in bureaucratic, uncoordinated spending replaced by “Opportunity Grants” to the states. The grants would fund local, personalized case-management providers who take a holistic approach to bettering the lives of the poor. These changes would allow service providers to assess individuals where they are, coordinate the services they need and track progress to ensure real results.

The public policy literature is thick with studies and experiments extolling the virtues of individualized care and rigorous accountability, but large-scale implementation of such programs has been elusive. In part, this is because it requires huge upfront investment, but also because of the many ways it would gore the sacred cows of current social services spending. It’s worth noting that pulling off this shift would be difficult, as it requires participating states to set up entirely new systems. Ryan’s proposal is unfortunately thin on details as to how this transition would take place.

The Ryan plan is not perfect. Conservatives will charge that it really does not reduce spending, and that’s true. But the harsh reality is that years of family and community breakdown inevitably require spending some money on targeted reforms if we ever hope to break the cycle. The end goal is to strengthen families and communities so that, in the next generation, far fewer Americans need this type of assistance. Given economic and social trends, we’re unlikely to get there without radical change.

For its part, the left should, but probably won’t, acknowledge that the Ryan plan leaves the social safety net very much intact, while making it more flexible to local and individual needs. States would be free to place priority wherever it’s most needed, whether child care, nutrition, job training or what have you. The services would be the same. It is how they are delivered that could be altered radically.

Ryan’s understanding of poverty in America has certainly advanced from when he controversially attributed poverty to “a tailspin of culture in our inner cities.” To be sure, the reforms called for in this plan will only be successful if they do have a lasting effect on culture. But Ryan now is offering concrete ideas on the structural drivers of poverty and how to address them.

Conservatives would need to accept that, perhaps, it is not quite time for federal spending on social services to shrink; and liberals would have to accept that the formulaic, often one-size-fits-all programs Ryan is attempting to overhaul have failed to help Americans living in poverty. Could a shift toward results-oriented programs delivered by those closest and most able to solve the problem bring both sides together?

Hopefully, it can. After all, as Ryan states in the agenda’s opening paragraphs:

 A key tenet of the American dream is that where you start off shouldn’t determine where you end up. If you work hard and play by the rules, you should get ahead. But the fact is, far too many people are stuck on the lower rungs.

Detroit: A city in transition

July 24, 2014, 5:26 PM

From Watchdog Wire:

Starting a business in Detroit is still difficult – Real estate costs may be low but apparently the red tape is still very thick. I attended a panel discussion on Friday morning where some policy analysts were discussing Detroit. Andrew Moylan of the R Street Institute remarked that due to all the regulations and bureaucracy, it’s easier to open a restaurant in New York City than it is in Detroit. That needs to change and it has to change for people to make investments in the city.

Anti-tax groups take online sales tax campaign to Idaho

July 24, 2014, 5:24 PM

From the Times-News:

The National Taxpayers Union and R Street say their poll of 400 Idahoans showed from 52 to 68 percent opposed to the “Marketplace Fairness Act,” depending on how the question was worded, with 20 percent to 32 percent in favor. Although conservatives and independents were the strongest opposed, a majority of self-described liberals opposed the legislation too. The poll had a 4.9 percent margin of error.

“When it comes to Internet tax schemes like the Marketplace Fairness Act, Idaho overwhelmingly support the common sense position that the Internet should exist to improve their lives and their communities, rather than plug the budgets of other states,” said Andrew Moylan, executive director and Senior Fellow at the R Street Institute.

Poll: Idahoans don’t want taxes collected from online shopping

July 24, 2014, 3:35 PM

From Idaho Business Review:

Most Idaho voters, whatever their political stripes, don’t want a sales tax on online purchases. That’s the finding of a new poll commissioned by free market public policy organization the R Street Institute and the National Taxpayers Union, a nonpartisan advocacy group that promotes lowering taxes. The groups polled Idaho voters on a federal effort to extend…

Taxpayers Union releases poll on online taxes, Idaho retailers, lawmaker dispute results

July 24, 2014, 3:32 PM

From the Spokesman-Review:

That’s the legislation the National Taxpayers Union opposes. In announcing its poll today, which the group said was conducted June 3-4, included 400 likely Idaho voters and has a margin of error of 4.9 percent, the group said, “When it comes to a federal law allowing out-of-state tax collectors to reach into the pockets of Idaho’s online merchants, by a 52-32 percent margin Gem State voters have a resounding and simple answer: Just, no!” The poll results were announced today by the NTU and the R Street Institute, a Washington, D.C.-based “free-market think tank” that’s in the midst of a 20-state tour to announce similar poll results.

Questioning lethal injection

July 24, 2014, 2:27 PM

What appears to be a rather horrifically botched execution in Arizona should give additional pause to those (me included) who continue to support the death penalty. This and other significant problems with lethal injection — including the growing evidence that it probably isn’t anywhere close to painless — means that it’s simply a barbaric practice that really ought to be ended posthaste. Given ongoing problems — and the existence of many surer, less error-prone methods of execution — there’s no reason to continue it. If shooting, hanging and other forms of execution make people queasy, well, that’s fine; the death penalty should be used very rarely and only for people who have committed truly horrific acts.

Insofar as some people who want to abolish the death penalty are trying to use the problems with lethal injection to advance their goal, I’d say, “all power to them.” Problems with the way we execute people are, indeed, a pretty good reason to rethink the death penalty overall. I’m more of the “mend it don’t end it” school, and on that front, NYU’s Robert Blecker has some very good ideas. They’re well worth reading.

Iipay Nation of Santa Ysabel launches online gambling in California

July 24, 2014, 10:39 AM

In the spirit of the adage that it’s better to ask for forgiveness than beg for permission, the Native American Iipay Nation of Santa Ysabel, Calif., has launched a real-money online poker site open to California residents.

The move comes as legislation remains stalled in the state Legislature, even though California is viewed as arguably the most profitable state for online wagering.

The actual legality of the site may come down to the murky laws of tribal sovereignty, which, when read broadly, grant federally recognized American Indian tribes substantial independence from state jurisdiction. This permits tribal nations to operate their own councils, police and courts and, of course, casinos. Tribes, however, are not completely exempt from all state laws, and, like all states, are subject to federal law. The Iipay Nation, part of the Kumeyaay tribe, argues that it is permitted to offer online gambling based on its sovereignty, as well as the provisions of the federal Indian Gaming Regulatory Act (IGRA).

Its poker site, privatetable.com, reportedly launched Monday, July 21. A visit to the site shows that there is a mechanism for depositing money. Online poker analyst Marco Valerio reported he was able to register. After doing so, he received a notice that deposits would only be accepted from California residents logging in within the state. This differs slightly from online sites legal in New Jersey, Nevada and Delaware, where your residency does not matter, only your location.

The Iipay Nation’s decision to move forward adds some excitement to the push for online poker and, ultimately, house-banked casino games. The poker situation has been contentious in California, because tribal interests have been in conflict with owners and operators of smaller poker rooms, which fear being put at a disadvantage if online licensing requirements are set too high. But if other tribes attempt to follow the Iipay’s example, online poker may fast become a fait accompli on the Golden State. I say let’s get those virtual cards in the air!

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Federal judge to FDA: Tobacco advisory panel tainted by conflicts of interest

July 23, 2014, 3:16 PM

“The presence of conflicted members on [the FDA Tobacco Products Scientific Advisory Committee, TPSAC] irrevocably tainted its very composition and its work product” and “the committee’s findings and recommendations…are, at a minimum, suspect, and at worst, untrustworthy.” So ruled federal judge Richard Leon this week.

A lawsuit by Lorillard et al. claimed the FDA appointment of TPSAC members Neal Benowitz, Jack Henningfield and Jonathan Samet was “arbitrary, capricious, an abuse of discretion and otherwise not in compliance with the law” because they had conflicts of interest. The evidence was abundant and uncontested. Here are excerpts from the judge’s opinion:

Since the 1980s, Dr. Benowitz has consulted for numerous pharmaceutical companies about the design of the NRT and other smoking-cessation drugs. He consulted for affiliates of Pfizer, Inc. and GlaxoSmithKline (GSK) as to such products, even while serving on the TPSAC…Dr. Benowitz has also served as a paid witness for lawyers suing tobacco-product manufacturers. He testified as a paid expert witness while serving on the TPSAC, and…he was designated to testify in 585 pending tobacco cases.

 

Before and while serving on the TPSAC, Dr. Henningfield consulted for GSK and other drug companies as to NRT and other smoking-cessation drugs. He also had ownership interest in a company that was developing a patented NRT drug. Dr. Henningfield has testified as an expert for GSK and for lawyers suing tobacco-product manufacturers… he was designated to testify in 350 pending tobacco cases.

 

Dr. Samet received grant support from GSK at least six times, including in 2010. He also led the Institute for Global Tobacco Control, funded by GSK and Pfizer. Dr. Samet also testified for lawyers suing tobacco-product manufacturers…he was designated to testify in two pending tobacco cases.

Judge Leon’s ruling notes that the composition of TPSAC is different from other FDA advisory committees, because the enabling legislation bans any expert “who received ‘any salary, grants, or other payment or support’ from any tobacco company in the 18-month period prior to serving on the TPSAC.”

TPSAC was structured to exclude qualified authorities who have had industry support. Experts with industry support are not precluded from serving on other FDA advisory committees, in which scientific issues are more important than industry demonization.

Judge Leon noted that the provision should apply evenly to any conflict of interest:

If Congress deemed that past remuneration from tobacco companies constituted a conflict of interest, it stands to reason that past remuneration from direct competitors of those companies, such as manufacturers of smoking-cessation drugs, would also constitute a conflict of interest.

Judge Leon’s ruling bars the FDA from using a 2011 TPSAC report on menthol, and it also “enjoins the FDA to reconstitute TPSAC’s membership so that it complies with the applicable ethics laws.” Dr. Samet is the only conflicted member remaining on TPSAC, as chair (until 2016). Another member, Claudia Barone, may have a conflict, because she received a Pfizer Educational Grant through 2013 and was appointed to the TPSAC on April 1, 2014.

Although the ruling applies specifically to committee actions on menthol cigarettes and dissolvable products, it is relevant to all TPSAC activities until conflicted members are removed.

It is common for experts to be co-opted by financial support from organizations committed to a tobacco-free society, a euphemism for the obliteration of the tobacco industry (an objective that is at odds with the principle of regulation).  Any individual who is funded by organizations such as the American Cancer Society, the American Heart Association, the American Lung Association, the National Cancer Institute, the Centers for Disease Control and Prevention, or the Robert Wood Johnson Foundation should be ineligible for membership on TPSAC.