Deregulate to Stimulate

Republican Space Socialism Update

by Rand Simberg on May 9, 2012 · 6 comments

in Deregulate to Stimulate, Space

Last time we checked in on this topic, House Appropriations Chairman Frank Wolf (R-Virginia) was decrying the wastefulness of competition. Well, he’s still at it.

A couple weeks ago, the draft report language for the appropriations bill that includes NASA demanded both a reduction in that pesky competition and a return to the traditional acquisition process, rather than the cooperative use of Space Act Agreements that involves private investment:

Commercial crew.—The Committee supports the goal of achieving independent and redundant access to the International Space Station (ISS) but remains concerned about many aspects of NASA’s approach to the commercial crew development program. First, the Committee believes that the program’s total estimated development costs of $4,868,000,000 are too high given that the current commitment to the ISS leaves NASA with only a few years to make use of commercial crew services and no sufficient additional market has been clearly demonstrated in the absence of NASA as a base customer.

Second, the current structure of the program has insufficient safeguards in place to protect the government’s interests in intellectual or physical property developed with Federal money in the event that companies are terminated from or opt to leave the program. As such, there is a risk of repeating the government’s experience from last year’s bankruptcy of the solar energy firm Solyndra, in which the failure of a high risk, government subsidized development venture left taxpayers with no tangible benefit in exchange for their substantial investment.

Third, the Administration appears to be pursuing potentially inconsistent goals for the program: (1) the achievement of the fastest, safest, most cost effective means of domestic access to the ISS, and (2) the ‘‘seeding’’ of a new commercial spaceflight industry. Given the overwhelming importance of the first of these goals, any funding, time and effort expended in pursuit of the second is potentially a distraction from other necessary work, and, in an environment of fiscal constraint, a dilution of limited resources.

Finally, the program’s current acquisition strategy lacks any defined plan to transition from the planned Space Act Agreement (SAA)-based Commercial Crew Integrated Capability (CCiCap) round of awards to a Federal Acquisition Regulation (FAR)-based certification and service contract. As a result, the strategy presents a significant risk of costly, lengthy delays as NASA attempts to retroactively assess competitors’ designs on safety and other standards and companies attempt to make changes in fully mature integrated designs to address instances in which NASA cannot verify that a necessary qualification criterion has been met. The Committee believes that many of these concerns would be addressed by an immediate downselect to a single competitor or, at most, the execution of a leader-follower paradigm in which NASA makes one large award to a main commercial partner and a second small award to a back-up partner.

With fewer companies remaining in the program, NASA could reduce its annual budget needs for the program and fund other priorities like planetary science, human exploration or aeronautics research. In addition, an accelerated downselect would allow NASA to focus its remaining funds and technical assistance resources on the most promising contender, potentially enabling that competitor to produce a final capability faster than otherwise possible. It would also allow NASA to return to its previous acquisition strategy of holding an open competition (to include current funding recipients and new entrants) and following a more traditional FAR-based management approach, avoiding a complex transition from SAAs late in the development process and allowing the government to better protect its interests in intellectual and physical property developed with taxpayer funds. Finally, this strategy is more consistent with current overarching fiscal guidance included in the fiscal year 2013 House budget resolution. In a climate of decreasing non-defense discretionary spending, the Committee does not believe that the Administration’s proposed budget runout for commercial crew is sustainable. [Emphasis added]

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H-2A Visas: Open in Theory, Closed in Practice

by David Bier on May 7, 2012 · 0 comments

in Deregulate to Stimulate, Economy, Features, Immigration, International, Regulation, Trade

An Immigrant Worker in Idaho

“Our immigration problem’s not going away.” That was the title of my article for Real Clear Policy this weekend. While the Pew Hispanic Center’s conclusion that “the net migration flow from Mexico to the United States has stopped” has some declaring immigration a “non-existent problem,” the reality is that America’s immigration system is as broken as ever. Running near-double digit unemployment in a weak economy may drive a few undocumented workers out of the country, but it is not a solution to America’s immigration problem. The only solution is an immigration system that allows immigrants to come to the U.S.

One response to my article was that there is already a legal way for workers to come — the H-2A visa program. But even Labor Department officials recognize that this program has failed. As President Bush’s U.S. Secretary of Labor Elaine Chao said in 2008:

There are 1.2 million hired agricultural workers in the United States today. Estimates show that between 600,000 and 800,000 are undocumented. There simply aren’t enough U.S. workers to fill the hundreds of thousands of agricultural job openings in this country. Farmers can hire temporary foreign workers to harvest their crops through the H-2A visa program… Yet despite the fact that this program is uncapped, agricultural employers hired only about 75,000 H-2A workers in 2007… Farmers report that the H2A program is burdensome, duplicative and riddled with delays. And many who have tried it report such bad experiences that they stopped using it altogether.

As the brother of Idaho’s Lt. Gov. Jim Little, who is also a grain farmer, recently told The Idaho Statesman, “It seems like they take great joy in piling on minutia and things we have to do.” As Little’s daughter who raises sheep told the Statesman, “we needed four new workers from Peru. I started the paperwork in July and our workers didn’t arrive until February. It’s really hard to depend on a program that takes that long to get workers here. We had to sell most of our sheep last year and this was one of the driving factors. It was just getting too hard to manage the labor situation.”

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Center-Right Coalition Calls For Credit Union Deregulation to Lift Lending

by John Berlau on May 3, 2012 · 3 comments

in Deregulate to Stimulate, Economy, Features

Post image for Center-Right Coalition Calls For Credit Union Deregulation to Lift Lending

The recent viral video sensation “If I Wanted America to Fail” confirms that the regulatory state is a major focal point for the center-right movement, and indeed much of America. Produced by Free Market America, a project of Americans for Limited Government, the video garnered more than 1 million views  in a span of just five days.

While mostly concerned with environmental regulation, the video voiced its objection to all types of mandates. Narrator Ryan Houck posits that if he wanted America to fail, he would “create countless new regulations and seldom cancel old ones.” He surmises correctly, “That way small businesses with big ideas wouldn’t stand a chance — and I would never have to worry about another Thomas Edison, Henry Ford or Steve Jobs.”

It’s this very issue of access to capital for entrepreneurs who could be the next Jobs or Edison that has increased the focus by advocates of limited government on financial regulation. Frequently justified as needed to rein in Wall Street, these countless new and old regulations are having a pernicious effect on Main Street businesses, consumers, and investors.

The crushing accounting mandates Sarbanes-Oxley Act of 2002 raise the cost of capital by making it extremely difficult for smaller companies to raise funds through the public equity markets. Even the Obama administration admitted Sarbox was chilling the entrepreneurial sector when it signed the JOBS Act last month granting limited but significant relief from the law for emerging growth firms.

Similarly, the Dodd-Frank so-called financial reform of 2010 greatly raises the cost of borrowing. The Durbin Amendment provision of that law, imposing price controls on what banks can charge retailers to process debit card transactions, has eliminated free checking and added fees to many consumers’ and entrepreneurs’ accounts at banks and credit unions.

Now, the center-right coalition is focusing a rule that specifically burden credit unions and the entrepreneurs among their members, from veterans to doctors. The cap on a credit union’s member business lending, enacted in 1998, has severely restricted the ability of credit unions to make small business loans to their members. And credit union regulators agree there is no safety or soundness justification for this rule, as business loans are not inherently more dangerous than car loans or — as we’ve seen during the financial crisis — mortgages.

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Student Loans Drive Up Tuition, Create Demographic Time Bomb and Higher-Education Bubble

by Hans Bader on April 30, 2012 · 0 comments

in Deregulate to Stimulate, Economy, Employment, Legal

Professor Glenn Harlan Reynolds writes in the New York Post about how student loan programs have contributed to skyrocketing debt and rising defaults:

The student-debt problem is that too many students are borrowing too much money to finance educations that won’t earn them enough to repay the loans. This leads to misery. A recent Wall Street Journal story noted that many students are postponing marriage, children and home-buying because of the difficulty — in some cases, the impossibility — of keeping up student-loan payments. This is bad for them and the economy, because they won’t be available to soak up the excess houses built during the housing bubble, which also was fueled by cheap government loans. If they postpone having kids, fewer taxpayers will exist to fund Social Security and other programs in a few decades.

If these younger people had gone into debt flipping houses in 2005, they’d be able to declare bankruptcy and get a fresh start — but the law doesn’t allow that. Student-loan debt is treated like child support, meaning that it’s almost impossible to get out of. People who paid six-figure sums to universities that happily pocketed the money in exchange for gender-studies degrees that would never produce a job are now debt slaves, like the coal miners in Tennessee Ernie Ford’s “Sixteen Tons.” Although 37 million adults owe student loans, only 39 percent are actually paying down balances. Some 5.4 million have at least one loan past due; loans totaling $270 billion are at least 30 days delinquent. These numbers are likely to climb in coming months and years as US job-creation remains stagnant.

. . . another Obama policy is adding to the woes. Back when Democrats ran Congress, the president engineered a federal takeover of student-loan processing. Now the Chronicle of Higher Education reports that this is producing huge paperwork screwups that have thrown thousands of borrowers into default, more than doubling the number of defaulters since December.

In the Boston Globe, Jeff Jacoby notes that tuition has risen in response to rising financial aid: “government outlays intended to hold down the price of a college degree have ballooned, in inflation-adjusted dollars, from $29.6 billion in 1985 to $139.7 billion in 2010, an increase of 372 percent since Ronald Reagan’s day.” “Year in, year out, Washington bestows tuition aid on students and their families. Year in, year out, the cost of tuition surges, galloping well ahead of inflation. And year in, year out politicians vie to outdo each other in promising still more public subsidies that will keep higher education within reach of all. Does it never occur to them that there might be a cause-and-effect relationship between the skyrocketing aid and the skyrocketing price of a college education? That all those grants and loans and tax credits aren’t containing the fire, but fanning it?”

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The Deregulator Who Wasn’t

by Ivan Osorio on April 30, 2012 · 0 comments

in Deregulate to Stimulate, Economy, Politics as Usual, Regulation

Washington Examiner columnist Conn Carroll refutes President Barack Obama’s attempt to blame the nation’s ongoing economic problems on his predecessor. In a recent interview, Obama tried to portray the Bush administration as a deregulatory free-for-all. The reality, however, is that Democrats and Republicans are not that far apart in their shared failure to restrain the federal regulatory behemoth.

Love him or hate him, Bush did not preside over some great era of deregulation. Quite the opposite, in fact. During Bush’s term, money spent by regulatory agencies increased 44 percent, from $27 billion in 2001 to $44.9 billion in 2007. The number of people employed by federal regulatory agencies rose by 41 percent from 172,000 in 2001 to 244,000. And the Code of Federal Regulations grew by more than 4,500 pages.

According to the Small Business Administration, in 2000, the regulatory burden inflicted on businesses was $4,463 per employee. By 2008, that number had almost doubled to $8,086. Whatever caused the financial crisis, it wasn’t Bush-era deregulation.

Unfortunately, Bush wasn’t the first president to let regulatory agencies run wild, and Obama won’t be the last, as CEI’s Wayne Crews shows in his annual survey of the federal regulatory state, 10,000 Commandments. The 2012 edition is due out soon. (Spoiler alert: The growth of government continued unabated last year.)

Alcohol Regulation Roundup: April 27, 2012

by Michelle Minton on April 27, 2012 · 0 comments

in Deregulate to Stimulate, Economy, Features, Nanny State, Personal Liberty

It’s time once again for a review of the ever-changing, increasingly complex, regulation of alcohol around these United States. This should give you something to cheer and/or lament at happy hour tonight.

Connecticut: With only 20 days left in the state’s legislative calendar, supporters of liquor-law reform are getting nervous. Though we learned last month that an edited version of Governor Malloy’s proposal had wide-reaching support, Malloy brought the process to a halt. He says while the new proposal would legalize Sunday sales, the new striped-down version doesn’t do enough to help consumers. He wants to get rid of pricing laws that make liquor in the state more expensive than neighboring territories.

District of Columbia: Mayor Vincent Gray plans to bump up last call to 3 a.m. on weekdays and 4 a.m. on weekends with the hope of making streets safer. Unfortunately, more than 250 bars and restaurants, or 20 percent, will be excluded. During last Tuesday’s discussion of the “bar bill,” we learned that ABRA decided that bars with existing voluntary agreements with their neighborhoods would be exempt. Of the 1,169 liquor licensees in the city, 409 have voluntary neighborhood agreements and 267 of those include closing hour restrictions.

Illinois: Last month, Chicago overturned a 15-year-old ban on alcohol advertising on its transit system. The move will bring an estimated $3.2 million in additional revenue, but anti-alcohol groups are predictably unhappy about the change.

Mississippi: This month, Governor Phil Bryant gave his signature of approval to a bill that would finally raise the cap on the allowable amount of alcohol sold in the state. Bill 2878 raises the cap from 5 percent alcohol by weight (about 6 percent ABV) to 8 percent ABW. While true craft beer enthusiasts will still need to engage in a bit of bootlegging to get the stronger stuff, kudos to folks at Raise Your Pints Mississippi, the grassroots organization that has fought for beer consumers in the state for several years. The law will go into effect on July 1 — just in time for Independence Day.

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SB 1070 Author: “I’m a Civil Libertarian”!

by David Bier on April 25, 2012 · 0 comments

in CEI Projects, Deregulate to Stimulate, Economy

Russell Pearce with white supremacist J.T. Ready

“As a civil libertarian… I don’t want a police state. I want a reason to do something.” That was SB 1070 author Russell Pearce at a Senate hearing on the controversial immigration law in Arizona. As an actual civil libertarian, I laughed when I heard his comments. SB 1070 is about as far from a civil libertarian law as possible. The law was written, not to stop illegal immigration, but as an all-out assault on the Hispanic community. If you don’t believe me, just read the law, which I’ve summarized here.

The law requires that police officers check immigration status during “any lawful contact” if “reasonable suspicion” exists that the individual is undocumented. What is reasonable suspicion? Well, according to the Arizona Police Training Manual, reasonable suspicion includes factors like “difficulty speaking English,” “dress,” locations where ”unlawfully present aliens are known to congregate,” and “demeanor” including “unexplained nervousness” and “refusal to make eye contact.” What exactly does an undocumented immigrant dress like? What would constitute “unexplained nervousness”? Is there any doubt that Hispanics would be more nervous than non-Hispanics in such a situation?

Why might a legal resident be nervous? Consider that while the U.S. Constitution protects the rights of citizens from having to carry their papers — as in a police state — Arizona’s immigration law is a de facto “papers-please” law, which requires aliens to “carry an alien registration document” under fear of arrest. A local CBS News affiliate reported the case of an Arizona commercial truck driver’s detention, even before the law was technically supposed to take effect. Abdon who has some difficulty speaking English well was detained at a truck weight scale and asked for his papers, and despite handing over his driver’s license, he was taken to a federal Immigration and Customs Enforcement center and forced to show his birth certificate. Abdon isn’t alone — other Hispanic Americans report similar treatment in Arizona.

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SB 1070 Summary: Read Arizona’s Controversial Immigration Law!

by David Bier on April 24, 2012 · 3 comments

in CEI Projects, Deregulate to Stimulate, Economy, Features, Immigration, International

Arizona’s controversial immigration law — SB 1070 — heads to the Supreme Court this week. One can only hope that the Justices do a better job reading the law than much of the media. False claims about the law abound, so here’s an overview directly from the law’s text. Recognizing that this is an artificial distinction, I’ve divided my summary in half by “anti-immigrant provisions” and “anti-business provisions.”

Anti-Immigrant Provisions

SB 1070’s intent is “to make attrition through enforcement the public policy of all state and local government agencies in Arizona… to discourage and deter the unlawful entry and presence of aliens and economic activity by persons unlawfully present in the United States” (Section 1). To that end, the law expressly forbids any state or local agency from adopting “a policy that limits or restricts the enforcement of federal immigration laws to less than the full extent permitted by federal law” (Section 2(A)).

In application of these goals, police must make “a reasonable attempt when practicable to determine immigration status” during “any lawful contact” if “reasonable suspicion” exists that the individual is undocumented. This provision expressly forbids police from considering “race, color, or national origin” and allows individuals to use “any valid United States federal, state or local government issued identification” (Section 2(B)). The same section allows local governments to maintain immigration databases for the purposes of “determining eligibility for any public benefit,” “verifying any claim of residence,” and “determining whether [an alien] is in compliance with federal registration laws” (Section 2(E)).

If any “political subdivision” or “official” “adopts or implements a policy or practice” that violates these provisions, any legal resident “may bring an action to challenge” (Section 2(I)). Police officers are specifically “indemnified by the officer’s agency for costs incurred in connection with any action” (Section 2(J)). The penalties for violation are $1,500 “for each day that the policy has remained in effect after the filing of an action” for “the entity” (Section 2(I)). The section concludes ironically with the assertion that “this section shall be implemented in a manner consistent with federal laws regulating immigration, protecting the civil rights of all persons and respecting the privileges and immunities of United States citizens” (Section 2(K)).

The following section makes  the “willful failure to complete or carry an alien registration document” (Section 3(A)) a class 1 misdemeanor with a $500 fine (plus jail costs)—it is considered a class 4 felony for a second offense or if within five years, the individual “has been removed from the United States” (Section 3(D, H)). Section 6 adds to this provision by allowing police “without a warrant” to make an arrest “if the officer has probable cause to believe that the “person to be arrested” has committed a deportable offense (Section 6(A)).

Section 4 outlaws “human smuggling,” and allows police to “stop any person who is operating a motor vehicle if the officer has reasonable suspicion to believe that the person is in violation of any civil traffic law and this section” (Section 4(D)). Section 5 also makes “transporting or harboring” undocumented aliens or “encouraging” them to enter the state a class 1 misdemeanor or a class 6 felony for more than 10 undocumented aliens. Similarly, Section 10 allows police to seize any vehicle that is “transporting” an undocumented alien. Section 11 creates a “gang and immigration intelligence” fund that consists of fines on businesses and immigrants to be “used for gang and immigration enforcement and for country jail reimbursement” (Section 11(A)).

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Gag Rule for Hedge Funds Challenged in Supreme Court on First Amendment Grounds in Bulldog Investors v. Galvin

by Hans Bader on April 24, 2012 · 0 comments

in Deregulate to Stimulate, Economy, Features, Legal

Post image for Gag Rule for Hedge Funds Challenged in Supreme Court on First Amendment Grounds in <i>Bulldog Investors v. Galvin</i>

Usually, you can advertise and discuss a product, even if not everyone is allowed to buy it. Thanks to the First Amendment, you can advertise a prescription drug even though most people don’t have a prescription for it, as the Supreme Court ruled in 1976. You can advertise liquor and guns, even if minors can’t buy them, and gambling. The First Amendment has been held by the courts to protect advertising of all these things. But Massachusetts securities regulators think you shouldn’t be allowed to advertise your hedge fund on a website, if it is accessible to Massachusetts residents, even though hedge funds are perfectly legal.

Massachusetts fined Bulldog Investors, an out-of-state hedge fund, $25,000 because it had a website promoting the hedge fund, and emailed information about the hedge fund to a Massachusetts resident, even though neither he nor the hedge fund intended to enter into a securities transaction, and Massachusetts admits the hedge fund was not trying to sell him anything. Massachusetts argues in essence that the hedge fund needs to shut up to avoid “conditioning the market” for its product, an investment that only “sophisticated” investors with lots of money are legally allowed to buy. Massachusetts’ ban is based on the paternalistic desire to keep people in the dark about hedge funds for their own good. (The practical effect of such bans is that even journalists like Deirdre Brennan of FINalternatives have had difficulty reporting on hedge funds and accessing basic information about them, since hedge fund managers are scared to even talk to journalists.)

Keeping people in the dark for their own supposed good obviously doesn’t measure up under the Supreme Court’s First Amendment commercial-speech jurisprudence, so Massachusetts disingenuously justified the ban in court as a roundabout way of forcing hedge funds to register with government agencies and provide specified disclosures in the course of doing so (a rather ineffectual way of promoting such disclosures, judging from the fact that Bulldog blocked public access to its website, rather than registering, after Massachusetts fined it; Massachusetts relied on the conclusory assertions of a hired expert, Professor Franco, who admitted he had no empirical evidence, and could not even quantify how effective the ban is in forcing hedge funds to register). Amazingly, the Massachusetts Supreme Judicial Court bought this argument hook, line, and sinker, upholding a trial court ruling in which the judge herself admitted that “Professor Franco does not purport to quantify the effectiveness of the regulatory scheme, and the Court is not in a position to do so.” Apparently, speech restrictions do not need to achieve anything useful to pass muster in Massachusetts. They just need to be based on a dubious rationale that is invented in response to a First Amendment challenge.

As CEI explained in an amicus brief I submitted on behalf of journalists, academics, and think tanks, that pretextual rationale, invented after-the-fact in litigation, cannot survive the “intermediate scrutiny” that applies to commercial advertising restrictions, which forbids “hypothesized justifications” and post hoc rationales for a regulation that did not actually motivate the challenged regulation. See, e.g., Thompson v. Western States Medical Ctr., 535 U.S. 357, 373 (2002); United States v. Virginia, 518 U.S. 515, 533, 535-36 (1996).

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$15 Trillion for… What, Exactly?

by Ryan Young on April 24, 2012 · 0 comments

in Deregulate to Stimulate, Economy

In a new study, Cato’s Michael Tanner finds that “Despite nearly $15 trillion in total welfare spending since Lyndon Johnson declared war on poverty in 1964, the poverty rate is perilously close to where we be­gan more than 40 years ago.”

Poverty relief is one of the noblest and most important projects in any society. The only question is how to go about it. Right now, the federal government has 126 different welfare programs; Tanner is kind enough to list them all in a 5-page appendix. Their combined annual cost is $668 billion. That’s a lot of money – about $14,848 for every person in poverty.

The trouble is that the results have been disappointing. The poverty rate is currently 15.1 percent, the highest it’s been in a decade. If the chosen means aren’t achieving the end, then it’s time to choose some different means.

One solution is to make it easier to find a job. About one third of all occupations require a license. The people in charge of handing out licenses are typically members of the occupation, and have a vested interest in keeping potential competitors out. By removing licensing requirements from most occupations, more people can find jobs in fields ranging from interior decorating to hair-braiding to driving a taxi. More competition also means lower prices for consumers, so their dollars go further. That’s important for people who don’t have a lot of dollars.

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