Politics as Usual

Post image for Bad Highway Policy Is a Bipartisan Affair

Two major pieces of surface transportation policy news dropped this week. President Obama is readying the release of his budget, which will contain over $300 billion in transportation funding. Across the aisle, Rep. David Camp, R-Mich., the powerful chairman of the House Committee on Ways and Means, released a sweeping proposal to overhaul the U.S. tax code, which includes a component that would direct $120 billion in tax savings into the Highway Trust Fund.

The president’s latest budget is far from surprising, as it differs very little from his previous surface transportation proposals. Of the combined highways and transit spending ($278 billion), he proposes to allocate 25 percent ($72 billion) to mass transit — a mode that makes up about 5 percent of trips.

Thankfully, neither proposal has any chance of being enacted, at least as standalone comprehensive packages. Unfortunately, most of Congress’s “business” is recycling and repackaging previous proposals, which means some aspects might well find their ways rolled into future legislation. With the current highway bill, MAP-21, expiring at the end of September 2014, Congress will begin the reauthorization process in the coming months. It is likely that some of these bad ideas will pop up again.

First, the president’s budget. He wants a $302 billion, four-year transportation bill. Half of that would supposedly come from tax reform, amounting to a massive bailout of the Highway Trust Fund. This is par for the course for President Obama, who has long advocated eliminating the Highway Trust Fund in favor of a slush fund that would enable additional gimmicky projects such as high-speed rail and urban streetcars.

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Post image for CEI Files Comments against IRS Proposed Rules That Would Illegally Restrict 501(C)(4) Speech

Today, CEI filed comments against the IRS’s proposed rules restricting speech by 501(c)(4) groups (which the IRS has suggested could be expanded in the future to also restrict speech by 501(c)(3) groups like think-tanks).  Our comments focus on the Treasury Department’s improper attempt to redefine non-partisan criticism of non-elected government officials, including communications with lawmakers about executive-branch and judicial nominations, as “candidate-related political activity,” in order to restrict such activity by 501(c)(4) groups. We also discuss how the proposed rule would also unconstitutionally restrict non-profits’ advice to the executive branch about nominations. CEI also agrees with the Heritage Foundation that the Treasury Department lacks statutory authority to impose the proposed rules.

As I earlier noted in The Wall Street Journal,

Those rules restrict even truthful, nonpartisan criticism of IRS and bureaucratic wrongdoing by classifying it as “candidate-related political activity.” For example, if an IRS official subjects citizens to incredibly burdensome demands for irrelevant information just to harass them for their political or religious beliefs, no 501(c)(4) group could later criticize that official’s nomination to be IRS commissioner, without engaging in restricted activity. That’s because the IRS’s proposed regulation defines even unelected government officials, like agency heads and judges, as “candidates” if they have been nominated for a position requiring Senate confirmation. The IRS’s proposed rules are an attack on the First Amendment that will make it easier for the government to get away with harassing political dissenters and whistleblowers in the future.

The proposed rules are even more dangerous than they appear, since the IRS notice containing the proposed rules expressly raised the possibility that these speech restrictions will later be expanded, in two disturbing ways, as we described earlier. First, the IRS suggests that this broad definition of the restricted category of speech (“candidate-related political activity”) in its proposed rule may later be applied to 501(c)(3) groups (which are not permitted to engage in candidate-related political activity at all, unlike 501(c)(4)’s, which can currently engage in it as a minority of their overall activity). That would effectively gag 501(c)(3) groups from discussing a wide range of judicial and executive nominations or speaking out about wrongdoing by nominees for such posts. Second, the IRS suggests that it may curb 501(c)(4)s’ ability to engage in such expressive “activity” even a minority of the time, by not just broadly defining such activity as inimical to social welfare, but also requiring them to “exclusively” promote this narrow IRS definition of “social welfare.”

We earlier discussed how the IRS violated the First Amendment by targeting Tea Party and other groups for costly and burdensome investigations, and demanding lots of burdensome and irrelevant information from those groups that had nothing to do with whether they actually were eligible for 501(c)(4) status. As we explained, such investigative harassment would have violated federal appeals court rulings like White v. Lee, 227 F.3d 1214 (9th Cir. 2000), even if it had not been aimed at conservative groups, but rather at both conservative and liberal groups alike. (Note that donations to 501(c)(4) groups are not tax-deductible, unlike donations to 501(c)(3) groups).

CEI’s comments can be found here.

Post image for Here Are the Obama Administration’s 191 Big-Dollar “Economically Significant” Rules and Regulations

If you pay any attention to the debate over federal regulation (there are at least three or four of you), you inevitably hear about “economically significant” rules, and are then told that they have economic impacts (usually costs rather than liberalizations) of at least $100 million annually.

The technical definition is actually different, but such rules are also often referred to as “major” rules. In any event, while the total number of rules and regulations each year tops 3,500, the number of them in the economically significant category over the past decade has ranged from as low as 127 to as high as 224 in the Unified Agenda of Federal Regulatory and Deregulatory Actions each Fall.

The Agenda is like looking at a year-end pipeline, a flow of rules at the “Active” (pre-rule, proposed and final rule states), “Completed” and “Long-term” stages. Often rules are repeats from the year or years before. The Fall edition also includes a so-called “Regulatory Plan” for some agencies that singles out some rules for attention.

Items that get featured or prioritized in the Agenda vary over the years. For example, the Obama administration recently told agencies not to talk so much anymore about their languishing “Long-term” rules, which can be good or bad. It is also the case that Agencies are not legally bound to limit themselves only to what they present in their annual Agendas.

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bush-obamaThe 1996 Congressional Review Act (CRA) requires agencies to submit reports to Congress on their major rules — frequently defined as those costing $100 million or more. Owing to such reports, which are maintained in a database at the Government Accountability Office, one can more readily observe which of the thousands of final rules agencies issue each year are major and which agencies are producing the rules.

The CRA gives Congress a window of 60 legislative days in which to review a major rule and, if desired, pass a resolution of disapproval rejecting the rule. Despite the issuance of thousands of rules since the act’s passage, including many dozens of major ones, only one has been rejected: the Labor Department’s rule on workplace repetitive-motion injuries in early 2001.

There were 77 major rules in 2013 (the list may be seen here), 67 in 2012 and 80 in 2011. The 99 rules in 2010 had been the highest number since this tabulation began following passage of the CRA. The following, derived from the GAO database of major rules, depicts the number of final major rule reports issued by the GAO on agency rules through 2013:

BUSH (Avg: 63)
2001, 70
2002, 51
2003, 51
2004, 66
2005, 56
2006, 56
2007, 60
2008, 95

OBAMA (Avg: 81)
2009, 84
2010, 99
2011, 80
2012, 67
2013, 77

President George W. Bush averaged 63 major rules per year during his eight years in office; Obama’s five years so far have averaged 81. President Obama has talked about regulatory lookbacks and reducing regulation in his executive orders on the topic, but his major rulemakings average 29 percent higher than Bush.

The rise isn’t much of a surprise in the wake of the Affordable Care Act and the Dodd-Frank financial regulation law. The Department of Health and Human Services, the Securities and Exchange Commission and the Commodity Futures Trading Commission are becoming increasingly active in terms of major rules.

The federal departments and agencies responsible for the major rule load mirror the most active executive and independent agency rulemakers in general (see Ten Thousand Commandments).

There were 3,659 rules and regulations last year once we look beyond the few dozen majors. This is far from a record level, but what is interesting is the trend in the more costly rules. And, no one really accounts for the costs of the non-major ones.

France and England may have higher minimum wages than most of the U.S. does, but things cost so much there that minimum-wage workers can afford less stuff than a U.S. minimum wage worker can (due partly to consumption taxes like the VAT that finance the European welfare state). One example is provided at the liberal-leaning blog The Daily Dish: beer. A minimum wage worker can buy a beer with 0.4 hours of labor in the U.S., compared to 0.5 hours in the United Kingdom, and 0.6 hours in France. It’s a graph of “How many hours of minimum wage work it takes to buy a beer” in countries across the world. The graph actually understates the advantage enjoyed by the American minimum wage worker, since it uses the U.S. federal minimum wage, which is lower than the state minimum wage in many states.

The things working-class people buy are cheaper in the U.S. than in Europe. That is especially true for electricity, heating, and clothing, which are much more expensive in Europe. To a lesser extent, it is also true for things like fast food. When I visit my French relatives, I pay a lot more for a hamburger than I do in the U.S., although the gap is less now that McDonald’s has curtailed its (U.S.) dollar value menu, a discount option that never existed in France. Until late 2013, an American could buy a double cheeseburger with as much meat as a Big Mac for $1.29, or even as little as a dollar, in U.S. McDonald’s franchises. No such deep-discount option existed in France, and Big Macs are more expensive in France and most of Europe than in the U.S. In January 2012, a Big Mac cost $9.63 in Norway, $8.14 in Finland, $7.29 in Sweden, and $6.81 in Switzerland, much more than in the U.S.

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Post image for New York Alcohol Bill Benefits Big Business at Consumers’ Expense

New York’s consumers and small alcohol retailers could soon be paying more for their tipples, for the benefit of big wholesalers. A bill now making its way through the New York legislature would require all wine and liquor sold in the state to be warehoused in in-state for 24 hours prior to sale. While the bill would be a boon to the state’s two largest wine wholesalers, who already store their products in-state, it will significantly raise the cost of business for small and mid-sized wholesalers who warehouse in New Jersey—possibly even putting them out of business. Consumers will see prices increase not only right away, but also in the future as competition dwindles.

The bill’s (S3849-2013) author, Senator Jeffrey Klein (D-Bronx), touts it as a way to even the playing field and protect warehouse jobs in the state, while pointing out that 33 other states have similar laws. But so what? In practice, the bill will do nothing to help consumers, either in the short or long term. Right away, prices will increase, as wholesalers are forced to rent space in New York’s more expensive warehouses.

Small and medium-sized liquor and wine dealers will pay an additional $10 per case—a cost increase that, as Connie Oehmler of Verity Wine Partners estimates, will result in an extra $2 per bottle for consumers. And that’s assuming these small and medium wholesalers remain in operation. For many, the cost increases may mean they have to close shop. Over the long term, the reduced competition will give largest wholesalers and warehouse owners little incentive to reduce their prices.

While the bill would provide little benefit to New York consumers, it would prove lucrative for the state’s two largest wine and liquor wholesalers—Southern Wine & Spirits and Empire Merchants–which have put a lot of money into bolstering the bill’s chances. Empire Merchants, which has warehouses in Queens and Brooklyn, has contributed a total of over half a million dollars over the last eight years to key lawmakers in the state, including Gov. Cuomo, state Senate co-leader Dean Skelos, and Assembly Speaker Shelly Silver. Klein, who has received $33,000 in campaign donations from the Empire Merchants, reportedly met with Empire on the legislation, according to a New York Post source. Oehmler is right to call the bill a “blatant, bald-faced attempt to put all their competition out of business.” And this isn’t the first time that a New York lawmaker or Klein, specifically, has been wrapped up in a proposal that appears to be written for the exclusive benefit of a few big New York businesses.

In addition to raising raising alcohol prices, the bill will also likely encourage cross-border alcohol purchasing, as consumers seek out cheaper products in neighboring states, resulting in a lost tax revenue for New York. Despite all the negatives, Klein likely will not back away from his flawed proposal.

“The new healthcare law will slow economic growth over the next decade, costing the nation about 2.3 million jobs and contributing to a $1 trillion increase in projected deficits, the Congressional Budget Office said in a report released Tuesday. The non-partisan group’s report found that the healthcare law’s negative effects on the economy will be ‘substantially larger’ than what it had previously anticipated,” reports The Hill. “The CBO is now estimating that the law will reduce labor force compensation by 1 percent from 2017 to 2024, twice the reduction it previously had projected. This will decrease the number of full-time equivalent jobs in 2021 by 2.3 million, CBO said. It had previously estimated the decrease would be 800,000.”

Originally, the Congressional Budget Office had wrongly concluded that Obamacare would reduce the deficit. It reached that incorrect conclusion by allowing supporters of Obamacare to hide its costs through accounting gimmicks and dodges. But in 2010, after Obamacare passed, it began increasing its cost projections for Obamacare, and also admitted “that Obamacare includes work disincentives likely to shrink” the economy.

Obamacare contains massive marriage penalties that discriminate against married people, and huge work disincentives for some older workers. It has slashed hiring, cut economic growth, and induced employers to replace full-time workers with part-time employees, driving even unions that once backed it to seek its repeal or replacement. Obamacare’s medical device tax has caused layoffs by medical manufacturers.

Due to Obamacare, millions of health insurance policies have been canceled, or replaced by policies with higher premiums and deductibles. In November, the president announced a supposed “fix” that was illegal, didn’t restore the canceled policies, and was designed to scapegoat insurers rather than restore lost health insurance. In December, the president announced another “fix” that made things even worse, by illegally violating property and contractual rights, in a way that may drive up insurance premiums in the future. The administration’s illegal 2013 suspension of reporting requirements mandated by the healthcare law may lead to billions of dollars in fraud.

Have a listen here.

Vice President for Strategy Iain Murray analyzes the president’s 2014 State of the Union address.

The trade debate is heating up in the wake of President Obama’s nod to trade in his State of the Union address, the introduction this month of a Trade Promotion Authority (TPA) bill, and the on-going negotiation on two major trade deals.

A major schism among Democrats on trade broke out January 29, when Senate Majority Leader Harry Reid, D-Nev., said in an interview that he was against TPA, commonly known as “fast-track” legislation, which gives the president authority to negotiate trade agreements that are then voted on by Congress without amendments. Without fast-track, it’s difficult to negotiate final trade deals with other countries when they know Congress can change the terms. Reid was quoted as saying: “Everyone would be well-advised just to not push this right now.”

Reid’s opposition is in contrast to President Obama’s endorsement of fast-track authority in his State of the Union address earlier this week when he said:

We need to work together on tools like bipartisan trade promotion authority to protect our workers, protect our environment, and open new markets to new goods stamped “Made in the USA.” China and Europe aren’t standing on the sidelines. Neither should we.

Reid’s stance is at odds too with some leading Democrats, such as Senate Finance Committee Chairman Max Baucus, D-Mont., who joined with Ranking Member Orrin Hatch, R-Utah, and House Ways and Means Committee Chairman Dave Camp, R-Mich., to introduce a TPA bill on January 9. However, Baucus’ active leadership on TPA may be in question, since he was nominated to be Ambassador to China.

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Post image for New Farm Bill Will Deliver the Pork to Farmers

Last night House and Senate conferees agreed on a nearly $1 trillion farm bill that would eliminate long-standing direct payments to farmers but beef up the heavily subsidized crop insurance program. Farmers are pretty happy about that because federal crop insurance covers farmers’ crop losses or revenue losses, while the government pays a high percentage of the premiums’ costs and underwrites most of the insurance companies’ administrative costs.

The five-year farm bill replaces the 2008 farm bill, which had expired and was extended because Congress could not reach agreement on components of a new bill.

The command-and-control sugar program remains in place, with its combination of controls on domestic supply, price supports, and restrictions on sugar imports. It has been estimated that the sugar program costs consumers up to $4 billion a year in increased costs, while driving many confectionery companies out of business or out of the country.

The bill would also continue U.S. country of origin labeling requirements for meat – COOL – even though the protectionist program is being challenged by Canada and Mexico as being discriminatory under World Trade Organization rules. COOL requires labeling that indicates where the animal was born and raised, where it was slaughtered and processed.

The conference agreement would include modest cuts to the food stamp program – about a one percent cut over 10 years or about $9 billion. Originally the House had pushed for more extensive cuts, but the Senate balked at those.

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