January 2012

Costs and Benefits of Regulation

by Ryan Young on June 30, 2011

in Regulation

One of the major developments in regulation over the last 30 years has been the rise of cost-benefit analysis. At first, agencies squirmed and resisted. But then they realized something: they’re in charge of their own accounting. It’s not an independent audit. There’s no third-party involved. An agency is free to use its own standards and its own measures when calculating its own regulatory costs and benefits.

When it’s that easy to game the system, of course agencies are going to lowball their costs and highball their benefits. This is on full display in the Office of Management and Budget’s pithily titled “Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities.” [PDF]

On page 13 of the report, Table 1-1 lists cost-benefit numbers for selected agencies for their major rules (costing $100 million or more) over the last ten years. It can be hard to quantify costs with precision, so agencies typically report a range estimate. EPA, for example, estimates that its major rules cost from $23.3 billion to $28.5 billion over the last decade.

Benefits are much trickier to calculate. EPA estimates that its major rules have had benefits of $81.8 billion to $550.7 billion — a range of nearly a factor of 7. They might as well say they have idea. Why such a large range? Because EPA is trying to put dollar figures on items such as its air quality rules lowering the number of premature deaths. To do that, they have to pull numbers out of thin air.

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An Economic Paradox: SelectUSA, Government’s Expansion, and Private-Sector Growth

by Matthew Melchiorre on June 30, 2011

in Deregulate to Stimulate, Economy, Stimulus to Nowhere

President Obama signed an executive order on June 15 to create SelectUSA, a new bureaucracy that acts as a one-stop-shop for government subsidies, in the hopes of attracting foreign investors with the promise of free taxpayer money. Through SelectUSA’s creation, the absurd paradoxical nature of the president’s economic philosophy is apparent, which is the misguided notion that government expansion stimulates long-term private sector growth. It’s truly disappointing that this awfully Keynesian notion still persists after the massive failure of the fiscal stimulus, because if there is anything we should have learned from the $787 billion government spending spree, it is that public spending comes at the expense of private spending.

Bryan Riley from the Heritage Foundation had some scathing but truthful words regarding SelectUSA:

I imagine a bunch of government bureaucrats were asked to come up with a way to promote foreign investment. Instead of recommending anything to actually make the United States a more attractive environment for investors, the best they could come up with is a website listing all the government incentives (handouts) that are available and promoting the United States to foreign investors.

Instead of borrowing more money to finance a new bureaucracy, thereby reducing the amount of loanable funds available for private entrepreneurs, the administration ought to think proactively about how to best improve the business climate within the U.S. Reducing the 70,000 pages of burdensome regulations that cost our economy a whopping  $1.7 trillion every year would be a start. However, such action is anathema to the ethos of Progressives and Keynesians alike — as they see the success of the private sector contingent upon the guidance of enlightened bureaucrats in Washington.

In Wisconsin, Smaller Class Sizes through Fiscal Restraint

by Ivan Osorio on June 30, 2011

in Economy, Employment, Labor

Of the various hyperbolic leftist talking points against the recently enacted Wisconsin collective bargaining law, the “war on teachers” was easily the most shrill, dumb, and tiresome. It was also flat wrong.

Now a similar collective bargaining reform by the Kaukauna Area School District (part of the Appleton metro area) is projected to shift the District’s budget from a substantial deficit to a large surplus. The Appleton Post Crescent reports:

As changes to collective bargaining powers for public workers take effect today, the Kaukauna Area School District is poised to swing from a projected $400,000 budget shortfall next year to a $1.5 million surplus due to health care and retirement savings.

The Kaukauna School Board approved changes Monday to its employee handbook that require staff to cover 12.6 percent of their health insurance and to contribute 5.8 percent of their wages to the state’s pension system, in accordance with the new collective bargaining law, commonly known as Act 10.

“These impacts will allow the district to hire additional teachers (and) reduce projected class sizes,” School Board President Todd Arnoldussen wrote in a statement Monday.

Teachers unions have been advocating reduced class sizes for years. Whatever the merit of smaller classes — and there is no universally accepted definition of what constitutes an “ideal” classroom headcount — they would require the hiring of more teachers, resulting in more dues-paying union members.

Now Kaukauna is poised to give the unions that, in exchange for some modest increases to their health insurance and pensions. Yet I  doubt the state’s NEA affiliate will be celebrating (hat tip: Iain Murray).

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

Planning to Disaster: The Zoning Apparat vs. Paula Deen’s Chickens

by Marc Scribner on June 30, 2011 · 1 comment

in Agriculture, Nanny State, Personal Liberty, Property Rights

Those who know me are aware that one of the two weird — so I’ve been told — policy issues I’m obsessed with is urban homesteading (the other is bunker fuel — see here, here, and here). Urban homesteading is a back-to-the-land, “buy local” movement. Essentially, it’s when green yuppie types play farmer in the city (complete with ironic hipster overalls!), which includes but is not limited to: beekeeping, aquaculture (paging Karl Hess), and raising poultry.

Keeping animals for slaughter, milk, and eggs in the city used to be quite common, which is why big-city codes across the country have specific provisions that explain exactly how they must be housed or moved. In Washington, D.C., for instance, “Horned cattle may be led singly by a rope or halter through any of the streets in the District.” While there are few people living in dense urban areas with the time, money, or land to raise cattle, building a chicken coop and keeping chickens is certainly more doable for many. Zoning now often stands in their way.

But zoning, which originally existed only in large, dense cities, has since moved out to the suburbs, small towns, and rural areas. Enter celebrity TV chef Paula Deen, most famous for drowning anything remotely edible in butter. Ms. Deen keeps chickens on her property in Savannah, Georgia. In fact, she rescued the birds from the county after they had been used as canaries during the West Nile virus scare. Her neighbors were aware, and indeed many people across the country were aware of her chickens, as they had been featured on her TV show. But it turns out that Ms. Deen’s property is zoned for non-agriculture uses. Recently, a zoning administrator decided to crack down on chickens in non-agriculture zones and send stern letters to other residents:

The Lynes received a letter in early June from Chatham County Zoning Administrator Robert Sebek citing two violations: They built the chicken coop without a permit and they were “keeping chickens in a zoning district that does not permit that use.”

Only properties zoned agricultural are allowed to keep chickens, said Gregori Anderson, director of Building Safety and Regulatory Services for the county. Anderson is Sebek’s supervisor; Sebek was not available Monday.

“This initial violation came in through a neighborhood complaint,” Anderson said. “The zoning that allows chickens is the agricultural zoning district, R-A, (the Lynes’ property is zoned R-1-C) so the gentlemen was cited. He gave us the names of other folks (who keep chickens), which we are pursuing. If they’re in violation they’ll get the same notice.”

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Alabama’s Dangerous Crackdown on Undocumented Workers

by Will Tew on June 30, 2011 · 2 comments

in Employment, Labor, Politics as Usual

You might’ve read about the unintended consequences of Georgia’s crackdown on undocumented workers. Well, the same thing is about to happen in Alabama. A few weeks after Governor Bentley’s signing of a bill that will attack undocumented workers, Hispanic immigrants are already fleeing the state. The Alabama law is one of the harshest in the recent spate of anti-worker and anti-business legislation. It criminalizes assisting undocumented workers and imposes harsh penalties on businesses employing them. Businesses will be forced to use the intrusive and wasteful E-Verify system, putting immigration enforcement costs on entrepreneurs. It makes all public officials into immigration agents too by requiring them to constantly enforce the law. More disturbingly, it allows for the arrest of individuals suspected of being in the country illegally, effectively making Alabamians guilty until proven innocent.

Practically, the law is just as stupid as Georgia’s. After tornadoes swept through the state, devastating large areas, including the city of Tuscaloosa, you’d think rebuilding would be a priority. But apparrently not if cheap, skilled, undocumented workers are doing the rebuilding. Contractors are predicting labor shortages, which will drive up the price of reconstruction. In a state that already suffers from tornadoes and hurricanes, making it more expensive to live in Alabama doesn’t sound like the brightest idea.

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Going to Jail for Linking? What Sen. Amy Klobuchar’s S. 978 Could Mean for You

by Luke Pelican on June 30, 2011 · 24 comments

in Features, Intellectual Property, Tech & Telecom

Post image for Going to Jail for Linking? What Sen. Amy Klobuchar’s S. 978 Could Mean for You

Earlier this month, the U.S. Senate Judiciary Committee unanimously approved S. 978, a bill that would expand the scope of felony criminal copyright infringement under federal law. While the legislation enjoys broad congressional support, a number of bloggers have slammed the bill on the grounds that it would allegedly impose criminal liability on lots of innocent U.S. Internet users.

In this essay, I’ll answer a few “Frequently Asked Questions” about the legislation — and explain why you should care.

Here are some links to get you up to speed:

  • Text of S. 978 as reported by the Senate Judiciary Committee on June 16
  • TechDirt’s latest commentary on S. 978
  • Electronic Frontier Foundation’s analysis of S. 978

If I embed on my website a YouTube video that turns out to be infringing and ten people watch it, in what circumstances could I be charged with a felony under S. 978?

Mike Masnick at TechDirt recently posed this question. To begin, federal law defines “public performance” in two ways:

  1. performing or displaying the protected material in a place open to the public or  in which it can be viewed by a “substantial number of persons” (not a small family or friends setting); or
  2. to transmit or communicate to such a place by using “any device or process,” regardless of whether the people viewing the material are in different locations and viewing it at different times, or in the same location viewing it at the same time

Streaming appears to fall under the second prong, as a recent White House Intellectual Property White Paper argued. This also comports with a 2010 case from the Second Circuit, in which the court observed that “[a] stream… like a television or radio broadcast, is a performance because there is a playing of the song that is perceived simultaneously.”  Thus, each stream of a copyrighted video could well constitute a public performance for the purposes of 18 USC 2319(b). As Masnick points out, under S. 978, you may be open to criminal liability in such a situation.

However, that only answers part of the question.  Embedding a video is linking to content which is potentially hosted elsewhere, so the act of embedding would not likely be direct infringement through reproduction or distribution of that protected content, though this is far from certain.  If you post copyrighted works and host them yourself for streaming, you could be charged provided you meet the other statutory criteria.

Terry Hart of Copyhype has a more nuanced view, arguing that even if the law would technically make criminals out of individuals who post infringing videos online, the chances of prosecution would be slim, especially given the limited resources of federal prosecutors and other considerations. Hart further notes that the higher standard of proof in criminal cases compared to civil infringement cases will serve as a check on rampant prosecutions.  But this sounds an awful lot like, “just because they can doesn’t mean they will.” Hart’s arguments, therefore, are unlikely to alleviate the concerns raised by skeptics of S. 978.

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Morning Media Summary

by Lee Doren on June 30, 2011

in Odds & Ends

Tech:

The Cloud Darkens:
“The Internet is getting scary. In recent weeks, hackers known as Lulz Security attacked the Web sites of Sony, the United States Senate, the C.I.A., PBS, among others. They stole names, e-mail addresses and passwords of millions of users and published them online. Then, last weekend, they regrouped under a new name.”

Amazon: associates program in California to be terminated (Update: Gov. signs tax law:
“Amazon announced today that its Associates program is to be terminated in California, in response to a new sales tax bill there. The move appears to be pre-emptive hardball to try and avert the bill being signed into law.”

Global Warming / Environment / Energy:

Why The Global Warming Agenda Is Wrong:
“Dr. Roy W. Spencer, former NASA climatologist and global warming expert, reveals why Obama’s global warming agenda is misguided and wrong.”

Insurance / Gambling:

D.C.’s internet gambling plans legal, attorney general says:
“The D.C. Attorney General says plans to create hot spots in city restaurants and hotels for Internet gambling comply with federal laws.”

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Tyranny in Farmville

by Will Tew on June 30, 2011 · 1 comment

in Features, Regulation, Tech & Telecom

Post image for Tyranny in Farmville

Two days ago, the advocacy group Consumer Watchdog filed an anti-trust complaint with the FTC seeking an investigation of Facebook’s allegedly anti-competitive practices. These incude Facebook’s plan to implement new rules for game developers using its platform and Facebook’s deal with the largest social gaming developer, Zynga, Inc.

With a 2012 IPO looming, Facebook has been looking to revise its policies.The new rules prohibit developers from charging lower fees for virtual goods outside Facebook. The social media company would also require developers to exchange with users through Facebook Credits, Facebook’s virtual currency. Third, Facebook would deduct 30 cents of every dollar from payments made through the system. Consumer Watchdog goes so far as to say that Facebook is seeking a monopoly.

But are Facebook’s policies really that evil? Are Americans going to see “Mark Zuckerberg’s face replacing George Washington’s on the dollar bill. Or rubbing out all the dead presidents on every bit of American currency,” as Consumer Watchdog says? Probably not.

On the first count, Facebook’s new rule seeking what almost amounts to exclusivity might be tight-fisted, but it’s not that bad. It won’t dictate prices in browser-based games, and I doubt it will even dictate prices in social gaming. Even if every game developer used the Facebook platform, there would still be competition among games and developers. Fortunately, that scenario isn’t even realistic; not every developer works through Facebook. Many developers work outside the Realm of Zuckerberg, and the more Marky Z. tries to control his content providers, the more they will begin to move away.

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Farm Workers Win in California

by Adam Michel on June 29, 2011 · 2 comments

in Labor, Regulation

Late last night Governor Jerry Brown vetoed the California farm workers “card check” bill SB 104 for.

The bill would have abolished workers right to a secret ballot. The right to vote on whether to join or not to join a union by secret ballot was granted to farm workers in California during Gov. Brown’s first term in 1975. The Agricultural Labor Relations Act was the nation’s first act of its kind. A top legislative priority for the newly elected Governor and the United Farm Workers (UFW), Brown advocated for this monumental change first inaugural speech:

I also believe it is time to extend the rule of law to the agriculture sector and establish the right of secret ballot elections for farm workers. The law I support will impose rights and responsibilities on both farm worker and farmer alike. I expect that an appropriate bill that serves all the people will not fully satisfy any of the parties to the dispute, but that’s no reason not to pass it.

Thirty-six years later Brown, who once marched with UFW founder Cesar Chavez and his farm workers, seems to have distanced himself from the union. SB 104 has been a top UFW legislative priority for years. This legislation is a last attempt by the union to stem its dwindling membership numbers. A decade ago the UFW had 26,000 members, a year ago that number was just over 5,200.

The lessening clout of the UFW in California politics may be an isolated insolent, however last night workers rights prevailed. In his veto message the governor said, “I am not yet convinced that the far reaching proposals of this bill . . . are justified.” These far reaching provisions would have taken away a workers right to a secret ballot. Farm workers can thank Jerry Brown for protecting them from invasive union card check.

Dodd-Frank Interchange Fee Price Controls Less Draconian, But Still Destructive

by John Berlau on June 29, 2011 · 5 comments

in Deregulate to Stimulate, Economy

Today, at around 3:30 pm, the Federal Reserve will vote on a final rule that will make price controls from the Durbin Amendment of Dodd-Frank less of a train wreck — but still very destructive — for community banks, credit unions, and consumers.

The Durbin Amendment puts price controls on the interchange fees — or “swipe fees” as the something-for-nothing retailer lobby calls them — that banks and credit unions charge merchants to process debit process debit transactions. Retailers pay a fee averaging 1.19 percent on each card purchase.  In return they get more sales and the guaranteed payment for all purchases that was lacking in the “good old days” of bounced checks.

But despite the benefits ATMs and payment card technology have brought to them, big retailers such as Wal-Mart and Home Depot have taken an entitlement mentality to this technology. They successfully lobbied to get — with assistance from both Senate Majority Whip Dick Durbin and 17 Senate Republicans — price controls in the Dodd-Frank “financial reform” bill stating that banks and credit union can only charge fees that are “reasonable and proportional to cost.” Never mind that there are no such requirement that retailers charge consumers prices that are “reasonable and proportional” to the cost of goods they sell.

In December, the Fed went beyond what the Durbin Amendment required in setting 7-to-12-cent fee cap for every debit card transaction, whether it be for $50 or $5,000. By the Fed’s own admission, these fees would not come close to covering the debit card infrastructure.

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