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  • More Bipartisan Opposition to Obama Administration's Move to Block Airline Merger (Including Rahm Emanuel)

    October 23, 2013 1:59 PM

    Another day, another round of public bipartisan opposition to the Obama Department of Justice's lawsuit to block the pending American Airlines and US Airways merger. In today's edition, a coalition of big city mayors wrote to Attorney General Eric Holder expressing their collective concern that blocking the merger will harm their cities' economic growth and airline industry employees. The letter concludes:

    By attempting to block the proposed combination, the Department has needlessly added to the uncertainty that these employees and their families must endure and has put jobs at risk.

    Our cities rely on the airline industry to support existing businesses, attract new businesses and to keep our local economies moving forward. e health and well-being of our cities and our citizens depends on this combination moving forward.

    For these reasons, we ask you to settle your lawsuit with American Airlines and US Airways and allow the combination to proceed.

    It was signed by seven mayors: Patsy Kinsey (D-Charlotte), Michael Nutter (D-Philadelphia), Greg Stanton (D-Phoenix), Mike Rawlings (D-Dallas), Betsy Price (R-Fort Worth), and Carlos A. Gimenez (R-Miami-Dade County). In a surprising twist, former Obama White House chief of staff and current Democratic Chicago Mayor Rahm Emanuel also signed the letter.

    It was announced this afternoon that Oklahoma Attorney General Scott Pruitt (R) intends to file an amicus brief supporting the merger, which will likely be joined by other states.

  • The NSA: Upgrading from Privacy Destruction to Job Destruction

    October 22, 2013 10:56 AM

    At a recent Cato Institute event on NSA spying activities, the ACLU’s Chris Soghoian stated that NSA activities were not only a threat to privacy but were also a direct threat to businesses.

    On a panel that included Jim Burrows of Silent Circle, Soghoian lamented that NSA data collection amounts to a prohibition of certain business models. Silent Circle is a Web service that provides encryption software text and voice messages -- and, until recently, emails. A similar company, Lavabit, is best known as the email provider used by Edward Snowden.

    Lavabit was forced to close its services entirely due to NSA requests to build backdoor access to data. Silent Circle chose to discontinue its own email service in response to Lavabit’s closing. Lavabit’s founder explained the situation on their blog post announcing the shutdown:

    I have been forced to make a difficult decision: to become complicit in crimes against the American people or walk away from nearly ten years of hard work by shutting down Lavabit.

    The choice was not easy: go against the very principles that are the center of your business model, or close up business for good. Lavabit chose the latter option and shut down its services. Silent Circle did not receive a request from the NSA, but preemptively shutdown its own services as well.

  • Public Pensions Are Not Property

    October 21, 2013 3:13 PM

    Across the nation, state and local governments in dire financial straits face great difficulty in their efforts to bring their budgets under control. Pensions are one of the biggest drivers of deficits, and therein lies the problem. Many states treat pensions not as a form of compensation, but as a contractual obligation to the employee. As a result, states and cities that have tried to bring pension obligations under control have seen roadblock thrown up in court by government employee unions. As the Manhattan Institute's Steven Malanga explains:

    In the private sector, pensions are governed by the federal Employee Retirement Income Security Act. Although a private employer may not cut benefits that a worker has already earned, ERISA allows a business to change the rate at which a worker accrues future benefits.

    ERISA, however, doesn’t apply to government employee pensions. Instead, in the states, local laws and court decisions govern how public-worker retirement systems are treated, and in many cases the states depart, sometimes radically, from the standard set by the law.

    In many states, that means that pension promises are treated as sacrosanct.

    Many legal protections given to public-sector pensions arise from court decisions that treat laws governing public retirement systems as a contract between the state and a worker. That puts pensions under the jurisdiction of the contract clause of the U.S. Constitution, or under state contract law.

    In California, a state teetering on the fiscal precipice due in large part to pension liabilities, San Jose Mayor Chuck Reed is leading an effort to amend the Golden State's constitution to give governments there greater flexibility to make changes to employee retirement benefits. Reed faces a tough fight -- Malanga describes his effort as "an uphill campaign" -- but he already deserves plaudits for bringing needed attention to this issue.

  • Loosened Laws in New Jersey Result in Brewery Boom

    October 18, 2013 4:43 PM

    Only a year after New Jersey Governor Chris Christie signed a bill into law that would allow breweries in the garden state to sell beer on their premises, the Garden State has experienced a growth spurt in its craft beer scene.

    Bills S-641 and A-1277, which were signed into law in September 2012, make a number of changes for both microbreweries and brewpubs that enthusiasts had hoped would put the state in a better position to compete with its neighbors. New Jersey is ranked as the 34th state in the nation for craft beer production, while Pennsylvania takes the number two spot, New York is sixth, and Delaware is 16th.

    Unsurprising for those of us who study of free market economics, the relaxed laws have spurred growth. At least 15 new beer-producing businesses are set to come online in New Jersey by next summer! This makes sense since starting up a production brewery or a brewpub is risky and has a large initial investment; the old rules made it difficult for a start-up brewer to make ends meet and limited existing breweries’ ability to grow.

  • More than a Third of House Dems Oppose Obama's American-US Airways Merger Lawsuit; What Real Pro-Competition Policy Looks Like

    October 17, 2013 1:17 PM

    Bipartisan opposition to the Obama administration's reckless assault on the pending merger of American Airlines and US Airways is growing. While the end of the partial government shutdown dominated yesterday's news cycle, 68 House Democrats (over one-third of the House Democratic caucus) signed a letter to President Obama urging him to end his administration's opposition to the airline merger. Led by Reps. Marc Veasey, D-Texas, and Ed Pastor, D-Ariz., the members of Congress "believe that DOJ’s concerns as outlined in the complaint filed last month are not an adequate representation of all of the facts" and call on the administration "to reconsider its efforts to prevent the American and US Airways merger from going forward." I previously noted organized labor's strong opposition to the lawsuit and one of the six state attorneys general that joined the DOJ lawsuit has since dropped out.

  • More Myths About the Government Shutdown

    October 10, 2013 2:29 PM

    Young people often don't realize that government shutdowns used to be common, until the middle of the Clinton administration. The George W. Bush presidency was an exception to the rule. The Miami Herald's Glenn Garvin debunks some of the myths promoted by "the chattering classes" (such as left-leaning Washington Post and New York Times columnists) to people too young to remember earlier shutdowns, and people with bad memories.

    • This kind of thing never used to happen. Actually, it used to happen all the time. What’s unusual is the quiet stretch since the last shutdown, when Newt Gingrich and Bill Clinton were facing off in 1995. Before that, there were 18 shutdowns in 19 years as various Congresses and presidents squabbled over raising the national debt limit. My personal favorite is the one in 1982, when Congress didn’t feel like working late to pass a spending bill the night before the new fiscal year started. The Republicans were all going to a barbecue at the White House, while the Democrats had a $1,000-a-plate fund-raising dinner to attend.

    • Well, it wouldn’t happen if not for all these crazy ideologues who’ve been elected the last few years. In the old days, Ronald Reagan and Tip O’Neill would have just had a drink after work and settled everything.

    More likely they would have broken some bottles over one another’s heads. The federal government shut down seven times while Reagan was president and O’Neill speaker of the House. No wonder, the way they talked about each other.

    O’Neill called Reagan “an absolute and total disgrace” and added that it was “sinful that this man is president of the United States.” Reagan, in his diary, wrote that budget negotiations with the speaker were an ordeal because “Tip O’Neill doesn’t have the facts of what was in the budget. Besides he doesn’t listen.”

    • Maybe arguments over spending are inevitable. But it’s just plain wrong to hold laws on other subjects hostage to debt-ceiling negotiations, the way the Republicans are doing with Obamacare.

    Over the years, government shutdowns have been triggered by attempts to change the laws on, among other things, abortion, civil rights, welfare, oil-drilling and which government agency’s economic forecast should be used for budget planning. And even if you think debt-ceiling fights should be restricted just to spending issues, the fact is that virtually everything Congress or the president does can be turned into a spending issue, because it all requires funding. . . . The Founding Fathers not only foresaw but approved of this tactic. . . . James Madison, one of the principal authors of the Constitution, was quite explicit: 'This power over the purse may, in fact, be regarded as the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people, for obtaining a redress of every grievance, and for carrying into effect every just and salutary measure.'”

    (Boldface added for emphasis; more myths discussed at this link). People who think government used to be better at avoiding shutdowns and defaults are forgetting about past episodes of government dysfunction, like in 1979 "when the Treasury defaulted for two weeks over a debt limit increase delay and technical problems with its computers. It caused a 60-basis point rise in interest rates that lasted for years, according to academic research." In 1979, Democrats controlled the presidency and both houses of Congress, so you can't blame that default on the Tea Party.

  • Labor Department Imposes Disability Hiring Quotas, Even in Divisions that Don't Get Federal Contracts

    September 23, 2013 3:13 PM

    The Obama Labor Department has just finalized rules that will effectively require businesses that get federal contracts to adopt a 7 percent hiring quota for the disabled. Much of the American workforce is employed by a federal contractor, since most large companies have federal contracts. So this will affect much of the economy, and impose massive new costs on American business.

    Disturbingly, the new rules require a 7 percent quota not just for the division of the company that receives a federal contract, but for the company as a whole. And they require that the 7 percent quota be met not just for the company as a whole, but also in each line of business in the company. That means they effectively must be met even in job categories where the number of disabled people is lower than average, either because the qualified labor pool is disproportionately able-bodied (like those that require hard physical labor) or because the job is not compatible with certain mental or psychological impediments that qualify as disabilities.

    As the Cato Institute's Walter Olson notes, the rules impose quotas in all but name; the director of the Office of Federal Contract Compliance Programs

    insists the initiative should not be described as quotas, since contractors falling short will not suffer automatic penalty. Instead, they’ll be thrown into a process of auditing and having their internal procedures put under review and having to demonstrate progress and that sort of thing. Nothing penalty-like about that! Also, if their willingness to go along with this process doesn’t please the federal overseers, they can eventually be debarred from any future contract work, a devastating economic sanction for many firms. Crucially, the feds are applying the regulation to firms’ entire workforce even if only a single divisions has federal contracts, so that if, say, a food company has one line of business that caters to the military, and nineteen others that do no federal contracting whatsoever, all twenty lines must adopt the quot… sorry, benchmarks. [Cleveland Plain Dealer, OFCCP, Government Executive, Federal News Radio]

  • Private Lobbyists and Public Pensions Don't Mix

    September 20, 2013 5:05 PM

    Government officials mismanaging public funds is nothing new. But giving public pensions to private lobbyists is a new low.

    A recent Associated Press report uncovered that at least 20 states supply private lobbyists with public pensions and sometimes health care benefits. In some cases, the states have provided this absurd benefit for decades. Worse, but not surprising, much of the activity these lobbyists carry out conflicts with taxpayer interests.

    In today's Milwaukee-Wisconsin Journal Sentinel, I note that government has a long history of inappropriately spending public funds:

    For example, in the 19th century many states went on a spending binge by investing heavily in private railroads, canals and other infrastructure projects that ultimately went bankrupt and left taxpayers stuck with the bill. States defaulted on their debt obligations 17 times. Municipalities were also in the same spending game.

    But at one point in U.S. history, state elected officials realized the error in their ways:

    Finally, state lawmakers sought options to protect taxpayers from the temptation of legislators to give away taxpayer funds to private interests. Their solution, in at least 45 states, was to enact a constitutional provision known as the "Gift Clause," which forbids public subsidies to private entities.

  • More Harm from "Disparate Impact" Regulations

    September 18, 2013 10:35 AM

    Earlier, we wrote about the Obama administration's attempt to inject a race-conscious "disparate impact" provision into colorblind anti-discrimination laws like the Fair Housing Act, and how that could lead to risky, race-conscious lending, bad loans, and future bank failures, mortgage meltdowns, and financial crises. Now, Ohio University economics professor Richard Vedder highlights an additional area where disparate-impact rules may be having a negative impact: higher education. (“Disparate impact” is a term in anti-discrimination law for when a neutral policy happens to affect minorities more than whites. One example is a standardized test that whites pass at a higher rate than some minority group, even though test scores are calculated the same way for members of all races. Some civil-rights laws contain language authorizing "disparate-impact" claims, but others do not, and are phrased in colorblind terms.)

    Vedder and others like George Leef of the Pope Center for Higher Education Policy believe the disparate-impact concept is fueling the college-tuition bubble and artificial competition for unnecessary paper credentials. At Minding the Campus, Vedder notes that disparate-impact regulations in the employment setting

  • Update on American Airlines-US Airways Merger: Judge Approves American's Bankruptcy Plan

    September 12, 2013 1:46 PM

    Today, Judge Sean Lane of the U.S. Bankruptcy Court for the Southern District of New York approved American Airlines's reorganization plan to exit bankruptcy protection, predicated on approval for the proposed American Airlines-US Airways merger.

    Last month, many were caught by surprise when the Department of Justice and a handful of states filed suit in an attempt to block the merger. This puts the Obama Justice Department to the left of the European Commission, which had approved the merger. I previously highlighted some of the absurdities of the DOJ's case and noted that President Obama risks alienating his labor union allies by proceeding with its foolish attack on the airlines.

    The airlines are also looking to extend their merger deadline from December 17 to a future date yet to be determined, signaling that American and US Air believe they will likely win their fight with the Justice Department. The DOJ originally tried to push back the start date of the trial on their lawsuit until March, in a clear effort to derail or at least dramatically increase the costs of the merger.


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