CEI Weekly is a compilation of articles and blog posts from CEI’s fellows and associates sent out via e-mail every Friday. Also included in the weekly newsletter is a brief description of CEI’s weekly podcast and a feature on a major CEI breakthrough made during the week. To sign up for CEI Weekly, go to http://cei.org/newsletters.
CEI Weekly
February 24, 2012
>>Featured Story
FEATURE: Happy Presidents Day!
This Monday, Americans celebrated Presidents Day. Of course, the holiday is scheduled around George Washington’s birthday. In RealClearMarkets this week, CEI Director of the Center for Investors and Entrepreneurs John Berlau explained why George Washington should be remembered not only as our first president, but as a truly brilliant entrepreneur. Read the full piece here.
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Michael Greve’s recently released, The Upside-Down Constitution, traces the evolution of federalism in of our Constitution. He persuasively documents the transition from competitive federalism (a Constitution that protected the citizenry from exploitation by government at all levels) to today’s cartel federalism (one that empowers governments at all levels to exploit the citizenry).
One of several factors that encouraged this upheaval was the Progressive notion that competition encouraged a “race to the bottom”: relentless pressures to maximize profits would force businesses to employ abusive practices (such as child labor). An interesting argument that we still hear often today. It remains the basis for national and international regulation in fields ranging from global warming to religious freedom to human rights: Economic freedom leads to loss of egalitarian justice; political rules encourage a fairer world. But is it true?
Greve provides data on the extent of child labor in the period 1880 to 1930 (p. 188). In the early Industrial Revolution, child labor constituted 6.4 percent of the work force, a figure that began to fall by the turn of the century, reaching 1.4 percent in 1930. He notes it was not until 1938 (by which time child labor had largely disappeared) that federal regulations were enacted. Rising wealth allowed families to forgo putting their children to work (as did the shift away from agricultural employment) and that wealth also led to some prohibitory state rules.
In a world where states must compete for citizens, values other than profits are advanced. There is no race to the bottom. If anything, there is a race to (not the top; utopian ideals are not the stuff of reality) ever higher rungs on the ladder of human progress.
It may have been a short work week, but it was still a busy one in the world of regulation:
- 68 new final rules were published this week. That’s a new rule every 2 hours and 28 minutes, 24 hours a day, 7 days a week. All in all, exactly 500 final rules have been published in the Federal Register this year. If this keeps up, 3,327 new rules will hit the books in 2012.
- 1,545 new pages were added to the 2012 Federal Register this week, for a total of 11,367 pages. At this pace, the 2012 Federal Register will run 76,804 pages.
- There were 15 significant actions this week, as defined by Executive Order 12866. Of those, one is an “economically significant” final rule. That means it costs $100 million or more per year.
- So far this year, 84 final rules affect small businesses. 16 of them are significant rules.
- Economically significant rules published so far in 2012 cost at least $15.01 billion. Two of the nine rules do not have cost estimates. We assume that rules lacking this basic transparency measure cost the bare minimum of $100 million per year. The true cost is almost certainly higher.
Here are highlights from final rules that passed this week:
- The Small Business Administration is changing the size requirements for certain types of businesses to qualify as small. By raising some size limits, the SBA hopes to increase the amount of money that it transfers from taxpayers to private businesses.
- The EPA issued a 123-page final rule designating and revising critical habitats for two types of minnow, each measuring less than 3 inches in length.
- The Pipeline and Hazardous Materials Safety Administration has revised its fireworks approval policy.
- We dare you to read all the way through this regulation that was published today to implement part of the Dodd-Frank financial regulation bill.
For more data, updated daily, go to TenThousandCommandments.com.
America now has a bigger welfare state than most countries, effectively doling out more welfare than Canada, Denmark, Austria, and Italy. As the New York Times’ David Brooks notes today, “When you include both direct spending and tax expenditures, the U.S. has one of the biggest welfare states in the world. We rank behind Sweden and ahead of Italy, Austria, the Netherlands, Denmark, Finland and Canada. Social spending in the U.S. is far above the organization’s average.” Eventually, this welfare state is likely to be a major drag on economic growth (America’s per capita debt is already worse than Greece). But for the time being, America is still richer than most other Western countries, despite the disincentives to work resulting from its welfare spending, which has increased enormously over the last few years. (Work disincentives in Obamacare alone may wipe out 800,000 jobs). It takes time for a huge welfare state to shrink a country’s economy.
There are now a record 47 million people on food stamps. To cash in on generous federal subsidies that reward states for increasing the number of people on food stamps, some states are deliberately qualifying for food stamps millions of non-poor people who are lucky enough to receive state housing, heating, or other subsidies despite being able to support themselves.
The Obama administration is busy cracking down on states that attempt to reduce food stamp fraud, as James Bovard noted earlier in The Wall Street Journal. Food stamp fraud costs America billions of dollars. This is remarkable, since eligibility requirements are so lax that no fraud is even needed for many undeserving people to collect food stamps. As Bovard noted, the Obama administration has encouraged states to abolish asset tests for food stamps, leaving even unemployed millionaires able to qualify: “Millionaires are now legally entitled to collect food stamps as long as they have little or no monthly income. Thirty-five states have abolished asset tests for most food-stamp recipients. These and similar ‘paperwork reduction’ reforms advocated by the United States Department of Agriculture (USDA) are turning the food-stamp program into a magnet for abuses and absurdities.” The Obama administration’s $800 billion stimulus package also largely repealed the 1996 welfare-reform law, as Slate’s Mickey Kaus and the Heritage Foundation have noted, making it easier for many people to go on welfare.
OPINION
JACOB SULLUM: “Distorting the Economy is the Whole Point”
“Distorting the economy is not, as NPR suggests, an unwanted side effect of Obama’s proposals; it is his avowed aim, because he thinks he knows how resources should be distributed better than the market does. ”
REP. AARON SCHOCK: “Where’s the Change Behind the Rhetoric?”
“As the campaign season heats up, I can’t help but notice President Barack Obama is dusting off the same old sweeping rhetoric and speechwriting skills that catapulted the first-term senator to the presidency three years ago. Unfortunately, despite promising us all that ‘change was coming,’ this president has fallen back on his tried-and-true platitudes that are shrouded in anti-business oratory.”
JORDAN WEISSMAN: “The Dis-United States of Gas Prices: Why Fuel is So Cheap in Denver”
“Gas prices have been on the rise for the past two months, as the international game of chicken between the West and Iran over Tehran’s nuclear program has sent global price of crude oil up above $120 a barrel. [...] Yet up in the Rockies, as well as in parts of the Midwest, motorists have been getting spared, relatively speaking.”
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Political campaigns are rarely useful in raising the level of public discourse. The current one is no exception. There is great concern over the “loss” of U.S. manufacturing capacity, a charge often blamed on “outsourcing to other nations.” Few consider whether state or federal tax, regulatory, or other policies might have encouraged this “loss.” Rather, most assert it’s due to exploitation of developing countries and demand “fair” trade policies or some form of national industrial policy (bolstered by similarly misinformed claims that this is the policy of once Japan, now China — and IT WORKS!).
Capitalism is a vibrant system and continually finds new ways to meet old needs and new ways to do old things better — which sometimes results in the decline of certain sectors of the economy. All market sectors trend towards fewer inputs (labor, energy, materials) to produce a unit output. Thus, while output increases, employment (or energy use, for that matter) may decrease. This is not a “loss” but the natural consequence of the creative destruction of capitalism. Even employment “losses” are often illusory. Note that for a period, many manufacturing sectors (steel, auto) were organized vertically — everyone associated with that sector was classified as a “manufacturing” worker. Over the last few decades, this vertical structure has transformed into a series of contractually linked firms with some (transportation, office services, maintenance) now classified under separate categories. Jobs weren’t lost (although the dominance of unions is probably less), they’ve simply been renamed.
Manufacturing is less dominant element in the U.S. economy and this decline might well increase. We’ve also experienced a shrinking agricultural sector. The economy does change over time but why do those changes create such political outcries?
Let me suggest a demographic explanation: Established industries are better understood. Of note are their relationships with politicians. Those working in the most prevalent sectors are known constituents who vote and pay taxes. Politicians also take note of the novel firm promising a breakthrough in an industry. Thus, we often have a competing mix of politicians promoting “grandfather” clauses to protect older industries from new legislation and subsidies to “infant” industries.
Those left out of this process (thriving established firms — too new to be pitied, too old to be viewed as “exciting” — and entrepreneurial firms that would threaten the existence of the Grandfathers) bear the costs of supporting others.
Have a listen here.
In 1841, the Scottish writer Charles Mackay observed, ” the cup of life is not bitter enough to our palate, and we distill superfluous poison to put into it, or conjure up hideous things to frighten ourselves at, which would never exist if we did not make them.” CEI Warren Brookes Fellow Matt Patterson believes this glass-half-empty aspect of human nature applies directly to today’s global warming debate.
On Tuesday and Wednesday, representatives from 23 nations gathered in Moscow to discuss their response to the European Union’s mandatory airline carbon taxes. CEI’s Fran Smith has covered this story here and here. Based on the contents of the joint letter that came out of the Moscow meetings this week, the EU (and the airline traveler) is in for a world of pain. Unless the EU backs down, this will likely turn into a trade war. China is already forbidding that its airlines pay carbon fees to the EU Emissions Trading System, and they have threatened in the past to impose either high tariffs or outright landing bans on EU airlines.
Here’s the attached list of possible actions being considered against the EU:
- Filing an application under Article 84 of the Chicago Convention for resolution of the dispute according to the ICAO Rules for the Settlement of Differences (Doc 7782/2);
- Using existing or new State legislation, regulations, or other legal mechanism to prohibit airlines/aircraft operators of that State from participating in the EU ETS;
- Holding meetings with the EU carriers and/or aviation-related enterprises in their respective States and apprise them about the concerns arising out of the EU-ETS and the possibility of reciprocal measures that could be adopted by the State, which may adversely affect those airlines and/or entities.
- Mandating EU carriers to submit flight details and other data;
- Assessing whether the EU ETS is consistent with the WTO Agreements and taking appropriate action;
- Reviewing Bilateral Air Services Agreements, including Open Skies with individual EU Member States, and reconsidering the implementation or negotiation of the ‘Horizontal Agreement’ with the EU;
- Suspending current and future discussions and/or negotiations to enhance operating rights for EU airlines/ aircraft operators;
- Imposing additional levies/charges on EU carriers/ aircraft operators as a form of countermeasure;
- Any other actions/ measures.
All of this spells bad news for international travel, trade, and the fragile domestic economies in Europe and the United States.
New York City’s Administrative Code requires all of the city’s 330 newsstands to be located at least 9 feet 6 inches away from buildings. That way pedestrians will have a clear path to walk by. Marilyn Louie has run a newsstand in Chinatown since 1982. Before that, her father ran it. All in all, her newsstand has sat in the same spot for 35 years — precisely 9 feet 3 inches away from the nearest building. It took inspectors a few decades to get around to measuring, but now they want Louie to tear down her newsstand, citing the three-inch shortfall. Louie’s newsstand is also 4 inches closer to the curb than regulations allow.
There have been no pedestrian complaints.
Politics may play a role here. A Spanish company named Cemusa must have friends in high places, because the city government is in the process of requiring all newsstand owners to tear down their existing structures and replace with them with new ones – made by Cemusa. The New York Post reports that the new newsstands are “prone to leaks and break-ins,” so Louie’s reluctance to go along with the plan is understandable.
Cemusa is also installing new bus stop shelters and public bathrooms throughout New York City.
The city government has offered to let Louie move her business to one of several other spots by the end of the month. Louie, who struggles to make $40,000 per year despite working 7-day weeks, scouted out the proposed locations. They either lack foot traffic, or there are already numerous competitors already there selling similar merchandise.
Football is often called a game of inches. When it comes to regulation and the right to make a living, so is the game of life. What a shame that Marilyn Louie is finding this out the hard way.
The California Legislature is considering a “Public Employee Bill of Rights” that (among other things) would restrict the state’s ability to hire outside contractors and swell SEIU’s membership in the Golden State.
California’s public employee union, SEIU Local 1000, is actually co-sponsoring the bill according to Assembly member Roger Dickinson’s website.
The irony is that SEIU Local 1000 currently stands accused of violating the First Amendment rights of the public employees it is supposed to represent.
The First Amendment reads “Congress shall make no law…abridging the freedom of speech.” Legally speaking, that’s pretty cut-and-dry. That’s why the Supreme Court has so roundly rejected prior restraint, flag-burning laws, and campaign finance restrictions.
It’s clear that the court respects the individual voice, especially in a political context. But what if an individual prefers to remain mute?
Political speech permeates every activity of a union, and since unions are statutorily mandated in many states and enjoy the protection of federal law, they argue that their political activities are essential to ensuring their survival.
So essential, they argue, that they are entitled to use agency fees (paid by non-union workers represented by the union in collective bargaining cases — also known as “fair share fees”) for political purposes.
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