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OpenMarket: March 2014

  • How Matt Drudge (and Other Obamacare Victims) Can Escape the "Liberty Tax"

    March 25, 2014 4:59 PM

    Former Competitive Enterprise Institute Research Associate Michael Mayfield provided invaluable assistance with this post.

    Matt Drudge's widely discussed tweet that he has already paid Obamacare's "liberty tax" highlights the uncertainties the self-employed face both from the health care law and the tax code in general. As pointed out by an editorial in Investor's Business Daily, "self-employed entrepreneurs ranging from Drudge to small-shop proprietors and independent contractors have long been aware of the requirement to estimate their tax liability and send a quarter of it in every three months, and that this amount includes 'other taxes' such as the ObamaCare opt-out penalty."

    The threat of the IRS penalty from Obamacare's individual mandate, perhaps more than the president yukking it up with comedians like Zach Galifianakis, may be driving the apparent pickup in enrollment in advance of the law's March 31 deadline. "Worries over fines aid health insurance sign-ups," reads the headline of a March 23 Wall Street Journal article. Even if the penalty this year is relatively small for many Americans, fear of the IRS can be a great motivator.

    The good news -- for Drudge and other Americans who don't want to buy an Obamacare-compliant plan due to personal objections or just plain cost -- is that in many cases there is a practical escape hatch from the IRS penalty. And this option may end up offering better and more affordable care than Obamacare. The only catch is you've got to have a little faith.

    Buried in Section 1501 on page 148 of the so-called Patient Protection and Affordable Care Act is an exemption from the individual mandate for a “health care sharing ministry,” a group whose members “share a common set of ethical or religious beliefs and share medical expenses among members in accordance with those beliefs.” For any member of such group, the law says, "No penalty shall be imposed."

    It's somewhat of a mystery how those pushing the law allowed such a potentially large exemption to the individual mandate to be inserted in the first place. This is definitely a case in which the law's supporters, four years after the law has passed, don't seem to know what's in it. But fortunately, many Americans are finding and utilizing this escape hatch.

  • CEI Appeals Agency's Withholding of Documents about Its 2013 Government Shutdown Shenanigans

    March 25, 2014 12:32 PM

    Earlier, I wrote about how Obama administration officials have been very “tight-lipped in response to FOIA requests" about their “government shutdown shenanigans," such as closing private businesses and non-profit tourist attractions out of spite, and blocking access to private homes and tourism sites within or merely next to public land. I have now appealed the National Forest Service's very scanty response to my FOIA request about the planning and implementation of those closures both before and after the shutdown, in an administrative appeal you can view at this link.

  • Human Achievement of the Day: Breakthrough toward Unlimited Clean and Cheap Energy

    March 25, 2014 10:56 AM

    sun-epaShocking as it might seem, some of us at CEI agree with environmentalists that reducing personal waste is a good idea. Voluntarily reducing our individual energy consumption and waste material can have a number of benefits, including saving your household money!

    However, we also believe that the solutions to global environmental issues will not come from taxes or limitations on consumption, but rather from scientific advancement—whether it’s finding new ways to feed the world, methods of providing unlimited clean water, or by creating an energy source that is cheap, safe, unlimited, and “green.”

    Researchers in California made a great leap toward creating a source of virtually unlimited energy this past year as they strive to harness the power of nuclear fusion—the same process that powers stars like our sun.

    Scientists at the National Ignition Facility (NIF) at the Lawrence Livermore National Laboratory (LLNL) announced that in the last year “for the first time the energy released through the fusion reaction exceeded the amount of energy being absorbed by the fuel.” This is a significant step toward an energy source that would be plentiful and environmentally friendly.

    Currently, nuclear energy is produced through fission, where the nucleus of an atom is split apart, releasing enormous amounts of energy. In nuclear fusion, the nuclei of atoms fuse together and create massive amounts of energy. While scientists can create fusion; for example, a hydrogen bomb which is also known as a fusion bomb uses the power of nuclear fission—so, a nuclear bomb—in order to achieve fusion. The holy grail in nuclear fusion research is to find a method of causing fusion that takes less energy than the fusion reaction creates, which they call “ignition.” Perhaps unsurprisingly, attempting to replicate the condition inside of a star has been no easy task for scientists.

  • Kicking off Human Achievement Hour 2014

    March 24, 2014 9:41 AM

    Annually since 2009, my colleague Michelle Minton has organized a celebration of economic liberty for one hour at the end of March, known as Human Achievement Hour. (See here, here, here, and here.) This year, the holiday falls on Saturday, March 29, from between 8:30 – 9:30 p.m. in your respective time zone.

    Observing Human Achievement Hour is about paying tribute to the human innovations that have allowed people around the globe to live better, fuller lives, while also defending the basic human right to use energy to improve the quality of life of all people.

    To be precise, Human Achievement Hour is a cheerful response to the depressing alarmism of modern environmentalism. The gloomy greens propagate a message that virtually all economic development  is evil, because it necessarily despoils pristine ecology. We give ascendancy to mankind, and readily recognize that the surest path to both human and environmental well-being is wealth creation. The latter, in turn, is most efficiently engendered by markets unfettered by political meddling.

    Is this materialistic? Y-E-S!

    The editors at Ad Busters and Mother Jones may experience self-loathing whenever they buy a pair of sneakers, but not me. And I sleep well at night and have no problem looking in the mirror, because I know that material preoccupations are inherent to a vibrant market economy, which, again, is the essential mechanism of human development. Put simply, I am an unabashed materialist, insofar as schools and hospitals are filled with materials.

  • Draconian Dodd-Frank Durbin Debit Controls Need Not Be More Destructive, Court Rules

    March 21, 2014 3:16 PM

    As the weather finally turns to spring, the D.C. Circuit Court of Appeals today blew a nice cool breeze of common sense.

    A bipartisan three-judge panel unanimously overturned district Judge Richard Leon's July 31 ruling that the Federal Reserve had not made the price controls stemming from Dodd-Frank's Durbin Amendment draconian enough. Today's decision by Clinton-appointed Judge David Tatel found that the Federal Reserve "reasonably construct[ed]" the law in considering costs in setting the price caps, and the ruling in fact opens the door to allowing banks and credit unions make retailers pay more of the costs of processing debit cards.

    In the wake of cybersecurity attacks on credit and debit cards, this ruling came in the nick of time. In what I had called incredible chutzpah, the trade associations for some of the nation's largest retailers argued in federal court even after the Target breach that retailers should pay less for fraud prevention and cleanup after fraud losses. That, of course, would mean that innovation would continue to lag behind and even more of the costs of payment processing would be shifted to consumers, as they had ever since the passage of this amendment, which had been inserted into the 2010 Dodd-Frank financial overhaul by Senate Majority Whip Dick Durbin.

    The interchange fees that banks and credit unions charge merchants for debit card transactions — what retailers pejoratively call “swipe fees” — have been subject to price controls ever since then. Dodd-Frank’s Durbin Amendment, which came about as a result of heavy lobbying by Target, Wal-Mart and other big retailers, states that the debit interchange fees charged to retailers must be “reasonable and proportional to the cost incurred by the issuer [bank or credit union issuing the card] with respect to the transaction.”

    CEI opposed the Durbin Amendment from the start, because we believe price controls are a violation of individual property rights and turn out to be impractical. But many who voted for the Durbin Amendment believed that the price-setting process would be similar to rate regulation of electricity and phone service, in that the fee set would allow for infrastructure and service costs plus what is judged as a “reasonable rate of return.”

  • Agencies Withhold Documents about Closures of Private Businesses in Government Shutdown

    March 21, 2014 1:19 PM

    In last October's government shutdown, the Obama administration closed down, or blocked access to, many private businesses that had been allowed to operate in earlier shutdowns, such as during the Clinton administration.  After lawyers and legal commentators suggested that these closures of private businesses were illegal, and pointed out that they were an unexplained departure from past agency practice, I filed a series of Freedom of Information Act (FOIA) requests with the agencies that carried out these closures -- the National Forest Service, the National Park Service, and the Department of the Interiors -- seeking to find out which officials were responsible for these improper closures, and how the decision to close them was made.

    (Testimony by CEI's Myron Ebell suggests that the National Park Service was probably the worst offender among all the agencies. A judge later ruled in favor of parents' legal challenge to the National Park Service's closure of a state park used by their children, and other judges apparently issued temporary restraining orders against things like the suspension of timber operations. A Federal judge was apparently about to issue an injunction against the closure of private concessions in National Forest Recreation Association v. Tidwell when the shutdown finally came to an end on October 17.)

    In FOIA requests submitted on October 9 and 10, I sought information about the orders closing down these businesses, how the targeted private businesses were selected (some politically connected businesses were spared being closed), and about the policies the government relied upon in shutting them down. Months later, long after the legal deadline for responding to my FOIA request, the National Park Service and the Department of the Interior still have not produced any documents at all, even though they were legally required to respond within 20 working days after I made my request.

    In March, the Forest Service did finally respond, but its response -- producing only agency communications that occurred after the shutdown ended -- suggests that it has withheld, or failed to search for, the most interesting (and potentially incriminating) documents.

  • Johnson-Crapo Is Phony Fannie-Freddie Reform

    March 20, 2014 8:57 AM

    Ever since the phrase appeared in Shakespeare's Romeo and Juliet, "A rose by any other name would smell as sweet," and its variations, have become familiar expressions. A corollary is that garbage by any other name would stink just as badly, if not worse.

    The latter phrase seems applicable to the "reform" of the government-sponsored housing enterprises Fannie Mae and Freddie Mac just introduced by Senate Banking Committee Chairman Tim Johnson (D-S.D.) and Ranking Member Mike Crapo (R-Idaho). The media often describe this plan as "ending" Fannie and Freddie.

    And yes, it does "end" them in the sense that there will no longer be entities named Fannie and Freddie. But most of their functions would simply be transferred to a new giant government entity called the Federal Mortgage Insurance Corporation. Not only would the government's role in subsidizing and micromanaging housing not be reduced, in some ways it would substantially be increased.

    The legislation would create, for the first time, an explicit taxpayer guarantee of the GSEs' $5.6 trillion in debt. The "affordable housing trust fund," a slush fund for "housing advocacy" groups such as ACORN with political agendas until it was closed due to Fannie and Freddie's financial woes, would be reopened and parked in the new FMIC.

    Worst of all, and sending the worst possible signal to potential private sector investors in the housing market, Fannie and Freddie common and preferred shareholders would be wiped out permanently under the bill's Section 604.

  • The Wrong Way to Regulate High-Frequency Trading

    March 20, 2014 7:24 AM

    Last week, Maryland State Senator Delores Kelley said, “[T]he general public is not smart enough to know when they’re about to be fleeced.” She was referring to Uber, but her sentiments are nearly universal among regulators. Yesterday, Scott Patterson in The Wall Street Journal continued his series on high-frequency traders and the supposed threats they pose to the markets. He writes:

    Regulators are concerned that less-savvy or less-influential investors aren't aware of the benefits and advantages that exchanges are providing to certain clients, making it difficult for them to compete fairly…

    Substitute the euphemistic “less-savvy” for Senator Kelley’s “not smart enough,” and regulators’ condescension toward the average investor becomes readily apparent.

    The “benefits and advantages” Patterson mentions are volume discounts that some exchanges provide to their best customers. It is a routine practice that helps reduce transaction costs for the investors who comprise the bulk of the volume for U.S. markets on any given day.

    Customers of exchanges -- all of them -- ought to be eligible to receive the type of discounts that exchanges currently offer to those who comprise a significant share of their business. The average investor is smart enough to realize that, just as with any business, when you buy in bulk, you get a discount.

    A reasonable debate can be had about high-frequency trading, but attacking exchanges’ customer retention techniques isn’t part of it.

  • Beekeeper Speaks Out against Anti-Pesticide Campaigns

    March 20, 2014 7:21 AM

    Anyone worried about honey bee survival should read the piece by Canadian beekeeper Lee Townsend in the Guelph Mercury newspaper. In recent years, beekeepers have seen some of their hives disappear without much explanation, a phenomenon referred to as"colony collapse disorder."

    Green activists have used this situation to randomly initiate bans on various pesticide products in the name of saving the bees, and their latest target is a class of chemicals called neonicotinoids. But we can't help the bees if we continue to address the wrong causes. As Townsend points out, honey bees do just fine in many places where neonicotinoids are used, such as Canada. This suggests that neonicotinoids are the wrong target. Not only will bans divert our focus from finding the real cause or causes of colony collapse disorder, it will harm the ability of farmers to produce food.

    Reading Townsend's entire article on this topic is highly recommended, but here are some highlights that you shouldn't miss:

    No, the newest and most preventable threat comes from the mistaken alliance some beekeepers are forming with environmental activist groups who would turn farmers into enemies and drive a wedge between the farming and beekeeping communities that depend on each other for their livelihoods. ...

  • MtGox is Dead, Long Live MtGox!

    March 18, 2014 4:27 PM

    MtGox, once a pillar of the Bitcoin exchange market, filed for bankruptcy on March 10. In February, the website had ceased withdrawals before ceasing all transactions at the beginning of March. The fallout from the Mt. Gox collapse will bring up many debates about the need for bitcoin exchange regulations, not to mention the bitcoin network’s long-run viability. It is best to understand what actually occurred with MtGox before jumping into action.

    MtGox enabled account holders to exchange bitcoins for dollars and vice versa. Within the bitcoin currency network, there are many different exchanges, but MtGox, at one point, controlled about 80 percent of the market, giving it significant influence over the bitcoin market.

    MtGox was created back in 2011, with its name as an acronym for Magic the Gathering Online Exchange, named after a trading card game by the same name. From the beginning the site had trouble with security, and was subject to a series of attacks.

    One of the most significant events for the exchange occurred in May 2013 when the U.S. Department of Homeland Security (DHS) seized $5 million worth of bitcoins. DHS argued that MtGox had failed to properly register as a money service business. MtGox followed up by registering with the Financial Crimes Enforcement Network (FinCEN), a government agency that regulates monetary industries such as banking to counteract crimes like money laundering and trade in illegal goods.

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