January 2012

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
December 10, 2010

>>Featured Story

As officials in the Obama Administration wax poetic about job creation, federal agencies are generating new regulations that are killing American jobs. CEI Associate Fellow Ben Lieberman had an op-ed in The New York Post this week on industries that are being forced to cut jobs because of the federal government. Read the op-ed here.

>>Shaping the Debate

Daffy Ducks
Vincent Vernuccio’s citation in The Wall Street Journal Blogs

The Environmental Impact Subterfuge
Greg Conko and Henry I. Miller’s article in Nature Biotechnology

Legalizing Online Gambling is a No-Brainer
Michelle Minton’s op-ed in Forbes

Sniffing Out Injustice
Iain Murray’s blog post at The Washington Examiner

Obama Goes Rogue in Cancun, Putting U.S. Interests at Risk
Chris Horner’s op-ed in The Daily Caller

The Food Industry Plays Regulatory Roulette
Greg Conko’s citation in The Washington Examiner

Despite Strong Opposition, Ethanol Subsidies Set to be Renewed in Tax Deal

CEI’s citation on Yahoo News

Well-Educated
Hans Bader’s citation in National Review Online

>>Best of the Blogs

The College Debt Bubble: Is it Ready to Explode?
By Hans Bader

Lame Ducks Need Some Backbone to Let Ethanol Subsidy and Tariff Expire
By Fran Smith

Pro-Trade Country Songs–Oak Ridge Boys Beat Brad Paisley
By John Berlau

Can EPA Regulators “Solve” the Obesity Problem?
By Angela Logomasini

Why Insurance Rates Rise in Calm Seasons
By Michelle Minton

>>CEI Podcast

December 8, 2010: What’s Driving Ethanol Subsidies

CEI Research Associate Brian McGraw talks about the federal government’s multi-billion dollar subsidies for ethanol, which is now dismissed even by environmental groups as an inferior alternative to gasoline. He also explains what lies in ethanol’s near future. Brian was also recently interviewed on RTV’s Thom Hartmann Show, which you can watch here.

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Public outrage at the TSA’s new policies has died down. That’s a real shame. If people stop pressing the issue, full-body scanners and pat-downs aren’t going anywhere. People are still having experiences like this:

I told her I had never undergone this process and was a bit afraid, and she laughed at me and told me I didn’t know what I was talking about.

The woman grabbed my wrist and said she had to look at my plastic watch. I tried to take it off and hand it to her, and she yelled at me not to interfere with her search.

Then, with no explanation, she pulled up my shirt, exposing my stomach and the top of my underwear, and stuck the top half of her fingers inside the waistband of my pants. I yanked my shirt down and told her she was not showing the top of my underwear and my naked stomach to anyone.

She put her hand up in front of me, threatened to call security and have me arrested if I “tried to get away from her again,” and called security for a private screening.

It is well past time to abolish the TSA. The resources it squanders on security theater would be better used on security.

It was announced today that the U.S. Supreme Court will not take up a challenge to the Empire State Development Corporation’s property takings in Manhattan’s West Harlem neighborhood. The notorious ESDC, also responsible for the Atlantic Yards land grab in Brooklyn, wishes to seize property near Columbia University in order to allow the university’s planned expansion to move forward. Standing in the way are several small businesses, who object to their properties being included in ESDC’s area blight condemnation.

New York State, which has one of the worst eminent domain statutes in the nation, has long abused the broad blight standard established in Berman. Area blight condemnations allow a government agency, or a public corporation authorized by a state or municipality, to declare private property “blighted” even when the parcels in question are not themselves blighted. This puts lower- to middle-income urban entrepreneurs and homeowners at a significant disadvantage, as they often live or operate in neighborhoods with some abandoned or dilapidated property.

Earlier this year, I argued in my paper, “This Land Ain’t your Land; this Land Is my Land: A Primer on Eminent Domain, Redevelopment, and Entrepreneurship,” that the present legal landscape is incredibly biased against lower-income entrepreneurs and households, and that local officials’ ongoing drive for “urban redevelopment” often results in killing off wealth creation and job opportunities for the very people most sensitive to changes in the real estate market: the urban poor.

Image credit: wallyg’s flickr photostream.

A ruling in Virginia’s constitutional challenge to Obamacare’s individual mandate is expected later today.  The Competitive Enterprise Institute joined in an amicus brief filed in support of Virginia’s lawsuit by the Cato Institute and constitutional law professor Randy Barnett.  You can find that amicus brief at this link.

Earlier, I discussed why the health care law’s individual mandate (requirement that individuals buy health insurance) exceeded Congress’s power under the Interstate Commerce Clause.  You can find that discussion at this link.  (I was a lawyer in the last Supreme Court case that struck down a federal law under the Commerce Clause, United States v. Morrison, 529 U.S. 598 (2000).)

The judge in the Virginia case, U.S. District Judge Henry Hudson, earlier rejected the government’s motion to dismiss Virginia’s lawsuit at a preliminary phase (a Rule 12(b)(6) motion to dismiss).

Update: Judge Hudson rules against the Obama administration, finding that the individual mandate is unconstitutional.

Earlier, I discussed some of the bad effects of Obamacare on patients, employers, consumers, and the insurance market.

Thanks to food stamps, Medicaid, and housing subsidies, and other welfare benefits, many “poor” people have far more disposable income than self-supporting households earning $40,000 to $60,000 a year.  Veronique de Rugy points to a finding that “a one-parent family of three making $14,500 a year (minimum wage) has more disposable income than a family making $60,000 a year” — even excluding benefits from Supplemental Security Income.  “America is now a country which punishes those middle-class people who not only try to work hard, but avoid scamming the system.”

These disincentives to work were expanded in the job-killing $800 billion stimulus package, which largely repealed welfare reform and increased the refundable tax-credits given to non-taxpaying “poor” households.  These refundable credits are being perpetuated in the costly $900 billion deal recently reached between Obama and congressional leaders.

The analysis de Rugy cites actually understates the disincentives to work, because it ignored the fact that many households that are “poor” in terms of taxable income are not poor at all once you factor in tax-free income from non-governmental sources.  For example, child support is tax-free to the recipient family, no matter how huge the payments they receive (for example, a billionaire may pay several million dollars a year in child support to each of his ex-girlfriends with kids, leaving them in tax-free luxury, and under New York’s child support guidelines, everyone is supposed to pay at least 17 percent of their gross income in child support for just one child, regardless of how high that income is.  In Massachusetts, middle-income households pay 25 percent of gross income for just one kid — which is around a third of their after-tax income — under that state’s child support guidelines).

The stimulus package contained provisions encouraging states to temporarily ratchet up their child support guidelines to reap more federal matching funds.  Maryland recently increased its child support guidelines to excessive levels, permanently.  Ohio is now weighing a massive proposed child-support increase, also apparently based on erroneous reasoning.  However, these increases probably will not provide a net benefit to state budgets, because increased federal funding is offset by incarceration and other direct and indirect costs associated with enforcement of excessive child-support guidelines).

Federal matching funds are having a negative effect on child welfare in other contexts, such as unwarranted CPS seizures.  (The federal government is increasingly using matching funds to meddle in areas of tort, criminal, family and domestic violence law traditionally handled by the states, sometimes in ways that actually increase domestic-violence-related deaths and injuries.) Financial obligations imposed by divorce courts are also harming soldiers and small businesses.

Federal food stamp allotments are so generous that they clearly exceed the amount needed to actually feed a family on a bare-bones budget.

Government employee unions have long been renowned as one of the Democratic Party’s most loyal and dedicated supporting constituencies. For years, Democratic politicians have supported public employee unions’ agenda of increased government spending, leading to more government jobs and thus more potential union members.

For teachers unions — which are among the most politically powerful government unions — Democrats have helped them resist popular school reform efforts that could threaten the government-school monopoly, including school choice and charter schools.

That was great deal for the unions and their political allies, but a dead weight on everybody else, as taxpayers funded a continually expanding government sector, while a growing number parents saw their children stuck in underperforming schools. Now cracks are finally starting to show in that alliance — and they may get wider in the near future.

It is perhaps no coincidence that some of the nation’s boldest education reformers have been Democrats. From outgoing Washington, D.C. Mayor Adrian Fenty to New York Mayor Michael Bloomberg (who was a Democrat before he re-registered Republican and is now an Independent), it is mayors in Democrat-controlled cities who have faced the most dire conditions in the schools they were elected to oversee.

Both Fenty  and Bloomberg saw the need for drastic action, thus their appointment and strong support for their respective school chancellors — Michelle Rhee and Joel Klein — both of whom pursued an aggressive reform agenda.

Now Los Angeles Mayor Antonio Villaraigosa, also a Democrat, has joined the pro-reform chorus. Not surprisingly, his city’s teachers union, United Teachers of Los Angeles (UTLA), wants no part of Villaraigosa’s reform efforts. Moreover, Villaraigosa himself has a teachers union background. To his credit, the mayor is striking back.  In a speech this week, Villaraigosa criticized the UTLA leadership in no uncertain terms:

Over the past five years, while partnering with students, parents and non-profits, business groups, higher education, charter organizations, school district leadership, elected board members and teachers, there has been one, unwavering roadblock to reform: UTLA union leadership.

While not the biggest problem facing our schools, they have consistently been the most powerful defenders of the status quo. I do not say this because of any animus towards unions. I deeply believe that teachers’ unions can and must be part of our efforts to transform our schools. Regrettably, they have yet to join us as we have forged ahead with a reform agenda.

By partnering with the Los Angeles School Board, we created the Public School Choice program that is now allowing non-profits, charters, teacher groups — anyone with a proven track record of success — to compete to run new or failing schools. By 2012, over 50 low-performing schools will be under new leadership, with a new chance for success.

UTLA leadership fought against this reform.

Partnering with the School Board and the charter school community, we doubled the number of charter schools in an effort to raise our test scores and alleviate overcrowding.

Partnering with the Parent Revolution, we successfully passed legislation here in Sacramento, empowering communities to shut down, reopen or takeover a failing school if a simple majority of parents petition to do so.

Working with LA Unified, I founded the Partnership for Los Angeles Schools to turn-around 21 of the lowest-performing schools.

And partnering with civil rights organizations and the ACLU, we filed a lawsuit to take a stand against the practice of seniority-based layoffs, which were disproportionately affecting our poorest schools and students of color.

At every step of the way, when Los Angeles was coming together to effect real change in our public schools, UTLA was there to fight against the change and slow the pace of reform.

Now let me pause to underscore the point once again that I come from an organizing background. I vociferously believe in the fundamental right for a worker to organize, to have a voice and a seat at the bargaining table. But union leaders need to take notice that it is their friends, the very people who have supported them and the people whom they have supported, who are carrying the torch of education reform and crying out for the unions to join them.

UTLA boss A.J. Duffy angrily dismissed Villaraigosa’s remarks, saying that, “Pointing fingers and laying blame does not help improve our schools.” Yet pointing fingers at those responsible for the dire state of public schools is what is needed.

Duffy’s reaction, while unfortunate, is not surprising. For he and other government union bosses to change course, the incentive structure under which the UTLA, and government employee unions in general, operate needs to change.

As the late president of  American Federation of Teachers, Albert Shanker, so honestly put it, “When school children start paying union dues, that’s when I’ll start representing the interests of school children.” Until they do, Villaraigosa’s call on UTLA leaders to drop their opposition to his administration’s reform efforts and join him in making L.A.’s public schools better is likely to continue falling on deaf ears.

Likewise, government employee unions exist to represent the interest of their members, not of taxpayers. And government employees benefit from the growth of government, so the interests of public sector unions and those of taxpayers are fundamentally at odds.

Adding to the problem is the fact that it is on union-friendly politicians’ interest to give the unions what they want, since — in the classic concentrated benefits/diffuse costs public-choice problem — they’re more likely to protest at being denied greater compensation than taxpayers are likely to protest seeing their taxes go up gradually. Former San Francisco Mayor Willie Brown, also a Democrat, recognized this, though unfortunately once he was safely out of office:

The deal used to be that civil servants were paid less than private sector workers in exchange for an understanding that they had job security for life. But we politicians — pushed by our friends in labor — gradually expanded pay and benefits . . . while keeping the job protections and layering on incredibly generous retirement packages.

In government, unionization is greater at the state and local levels. For years, state and local governments were able to sustain their unionized employees’ generous compensation packages, as long as their economies continued growing. But since the nation’s economy went south, states and localities are struggling, and state and local politicians — Democrat and Republican alike — must face this crisis.

Indeed, in New York, Governor-elect Andrew Cuomo — yes, also a Democrat — may be headed for a showdown with government employee unions over wages and pensions. The unions won’t like it, but the taxpaying public will. In that regard, I think left-leaning Mother Jones blogger Kevin Drum gets it right:

I sometimes wonder if [UTLA head A.J.] Duffy understands just how widely his union is loathed? Somebody should correct me in comments if I’m wrong, but as near as I can tell UTLA literally has no support anywhere from anybody that it doesn’t directly give money to. Everybody else hates them with a passion. That doesn’t mean Villaraigosa can win a big public battle with UTLA, of course, since they give lots of money to lots of people, but he might. If Villaraigosa plays his cards right, he’ll have about 90% of the city on his side. Pass the popcorn.

Indeed, this and other similar fights will be worth watching.

For more on public sector unions, see here and here.

New fast-food restaurants are now banned in South Los Angeles.  Say goodbye to many entry-level jobs in that poor urban area. The cockamamie idea behind this ban is that since minorities are disproportionately obese, and since they disproportionately patronize fast-food restaurants, such restaurants are thus guilty of  “food apartheid.”  (Never mind that many fast-food entrees are not particularly fatty, that baked goods are a bigger source of calories for kids than fast-food items like pizza, and that it is possible to lose weight while regularly eating at McDonald’s, as various people have, including me, Soso Whaley, and a Richmond man who lost 86 pounds.)

On the other hand, a federal judge recently refused to certify a class-action lawsuit against McDonald’s over claims it made people obese.

While liberal busybodies are attacking McDonald’s and other fast-food chains, they are simultaneously using federal tax dollars to subsidize the opening of an International House of Pancakes in Washington, D.C., and the Agriculture Department is subsidizing the development of even higher-calorie entrees at a major restaurant chain.

Lynne Nowick, a legislator in Suffolk County, New York, wants to ban energy drinks for anyone under the age of 19 years old. Why? She says it’s because the drinks “could potentially be dangerous to teens” and some parents don’t know the risks. She seems to believe that it is her duty to assess the risks and make the decision for teens and their parents. After all, nanny state knows best, right?

According to a “nutrition expert,” whatever that means, at the Cornell Cooperative Extension: ”Energy drinks can cause sleeplessness and high blood pressure in teens.”

Personally, government sticking its nose into my morning coffee gets my blood boiling and keeps me up at night; perhaps we can ban government bans for a while.

During the Four Loko/alcoholic energy drink row of last month, some made “what next?” jokes, asking if the government would try to ban energy drinks altogether. It was a joke that I and most of my colleagues shied away from because we knew that it was a very real possibility. This is one reason we fight so vehemently against any kind of regulatory restriction on consumer products; once you have given government the power to regulate and ban products, it is difficult to draw the line.

First it’s alcohol, then it’s alcoholic energy drinks, then it’s energy drinks… what’s next? In a statement, the American Beverage Association, which represents energy drink companies, stated: ”To be consistent, coffeehouses would have to start carding customers before serving them coffee.”

They may have been facetious, but it isn’t out of the realm of possibility that the next step could be a limit on caffeine consumption for everyone. There is no science that shows energy drinks, when used in moderation, adversely affect the health of consumers. Once we let regulators limit how much of a “potentially dangerous” food item teens or anyone can ingest, we give away the right to make that decision for ourselves.

Even if a product does have some adverse side effect — whether it’s energy drinks, alcohol, or coffee — it should up to each individual to weigh the costs and benefits of the good and bad effects and decide for him or herself whether it’s worth it or not. This appears to be the bottom of a very slippery slope, but I assure you it can go further downhill from here.

Image credit: z3taa’s flickr photostream.

Despite opposition from academics, environmental organizations, libertarian organizations, editorial boards across the country, and dozens (PDF) of other groups, the ethanol tax credit and resulting tariff is said to be locked into the tax bill that will be passed before the end of the year. The good news is that, as of now, it is only extended through the end of 2011.

Predictable cheerleading ensued from the ethanol lobbyists:

While this legislation is not as long as we had hoped, it is a common sense approach that will ensure American ethanol production continues to evolve and new technologies commercialized. We urge Congress to move expeditiously to pass the legislation. Then, honest and good faith discussions about how we reform all energy tax policy – including for all oil and ethanol technologies – can occur.

Which means that as we saw earlier this fall the RFA, etc., will just be asking for different ways to spend our money. Of course, as Consumer Energy Reports energy blogger Robert Rapier has documented numerous times (here, here), the RFA doesn’t concern itself much with honest good faith discussions.

Given the uproar over a relatively small issue (the VEETC will cost about $6 billion next year), I’m looking forward to the honest and good faith discussions where they ask for more money to be spent on all sorts of ethanol goodies, and how each side reacts to these discussions.

Here’s a whole new spin to “assembly required.” It is against New York State law to ship wine and cheese in one box, basket, or any package. Ditto for wine and chocolate. In fact, if you want to ship any food item along with wine to someone in the state, make sure you ship them in separate boxes. Recipients can then assemble them upon opening.

This is just one of a host of silly state-level regulations. This particular rule is a byproduct of the state’s ban on supermarket sales of wine and spirits. To achieve that end, state a law bans the sale of wine and spirits in places that sell food and wine for off-premise consumption. Supposedly, such rules protect us from ourselves — keeping consumers from over-indulging by making the purchase of alcohol less convenient.

In reality, these laws are designed to provide special-interest protections for existing wine retailers. To ensure liquor stores get all the profits, you must go to the supermarket for your food and make a separate stop at the liquor store (if you can find one) for your wine or spirits. And you must assemble your gift baskets at home.

Last year, legislators in New York considered revising this law, but changes never materialized. The same goes for Colorado and Tennessee. And a number of other states impose bans on food retailers from selling alcohol for off-premise consumption. Some states at least allow beer and some allow wine and beer in supermarkets. And a good number allow all alcohol to be sold in supermarkets – proving that convenience doesn’t promote immorality and alcohol abuse.

Let’s hope 2011 rings in both cheer and change. Just maybe New York, Colorado, and Tennessee legislatures will reconsider legislation that would allow consumers to buy wine and cheese all in one convenient location!

Image credit: swanksalot’s flickr photostream.