October 8, 2014 3:34 PM
Last week, Alternet posted yet another bogus smear on the libertarian billionaires Charles and David Koch. It has since been reposted by Salon.com. The article summarizes the “findings” of a report titled, “The Koch Brothers’ Record on Civil Rights and Race,” which was produced by an outfit called “The Bridge Project.” This front group is really an arm of a super PAC called American Bridge 21st Century, which was founded by Democratic party activist David Brock and in 2012 was described as “the hub of the left” by Roll Call.
October 8, 2014 2:05 PM
My colleague Wayne Crews’ Forbes column Monday explained “How Entrepreneurs Can Speak Out About the Cost of Regulation,” but noted sadly that “businesses that never form in the first place because of regulation never get a chance to talk.”
But there may be at least one exception. Next week in San Francisco, a conference will bring together entrepreneurs and investors to discuss, in part, businesses that can’t form because of the thicket of red tape.
Coastal Shows, producer of the annual Crowdfund Global Expo (CFGE), will host the CFGE Crowdfund Banking and Lending Summit at San Francisco’s Grand Hyatt on October 16 and 17. A bevy of prominent speakers, including yours truly, will talk about crowdfunding as a new frontier that could open up opportunities in investing and lending, if only some of the antiquated securities regulations could be trimmed.
When most folks hear the word “crowdfunding,” they think of sites like Kickstarter and IndieGogo in which fans can fund a new project and get souvenirs such as T-shirts. These innovations should be applauded, but they only scratch the surface of what crowdfunding could do. Viewed broadly, crowdfunding could bring together investor and entrepreneurs, allowing them to bypass “middle men” such as Wall Street banks.
But as I wrote recently in Forbes, if one of these crowdfunding projects currently were to offer funders a piece of the potential profits—instead of T-Shirts and other trinkets—it would run “into a brick wall from 1930s-era Securities and Exchange Commission (SEC) rules that treat a promise of a share of a business’s earnings a ‘securities offering.’”
As I explained, “this would subject entrepreneurs making a simple pitch for funding movies or music to the panoply of federal securities laws—including the behemoth Sarbanes-Oxley and Dodd-Frank laws—that publicly traded corporations must contend with every day at a cost of millions of dollars per year.”
October 8, 2014 2:01 PM
The more restrictions and prohibitions are in the Empire, the poorer grow the people. —Lao-Tzu
When it comes to red tape and federal paperwork, the costs of tax compliance for individuals and businesses are said to account for most of the federal paperwork burden.
And according to federal data, the Treasury Department does indeed account for the bulk of federal paperwork. But increasingly, paperwork-heavy compliance in other areas like health (Obamacare), finance (Dodd-Frank), and labor asserts itself.
In any event, paperwork costs associated with non-Treasury federal executive branch regulation are presumably accounted for in the Regulatory Impact Analyses for executive agency rules.
Thus such paperwork should already be reflected in the annual Office of Management and Budget Report to Congress on the Benefits and Costs of Federal Regulations. Whether in actual fact paperwork is adequately accounted for there is another matter.
Unfortunately, these OMB reports only address a handful of major or economically significant executive branch rules, and those having a notable impact on small business. These reports ignore independent agencies like those administering Dodd-Frank altogether, even though that’s where fertile paperwork burdens multiply. The Information Collection Budget, another OMB document, is where one must look for partial answers on these. Regrettably even the paperwork we do know about is duplicative to the tune of tens of billions of dollars annually.
A managerial accounting journal referenced the complex issues involved in simply determining, as an accounting matter, how to even allocate the many varieties of costs in areas like environmental compliance:
As companies feel pressure from consumers and competitors to lower cost while maintaining profits they have found a greater need to accurately allocate environmental cost. There also has been a growing need to trace compliance cost that governmental regulations have caused. These costs, including such items as permit fees, compliance and filing cost, training of personal, and others has been so large in recent years that they can make up a significant cost in some industries. As these environmental and compliance cost rise comparative to other cost, accurate assignment of them will become even more important.
It is doubtful that such costs get accurately reflected in agency Regulatory Impact Analyses, which are prepared worlds away from those actually grappling with the real world effects of regulation and day-to-day business.
October 7, 2014 9:41 AM
“Heads I win; tails you lose.” That essentially sums up the relationship the California Public Employee Retirement System (CalPERS) has long enjoyed vis-à-vis the Golden State’s elected officials. Now it is finally facing a serious challenge.
Last week, a federal bankruptcy judge ruled that cities must treat bondholders and pensions in like fashion. Judge Christopher Klein of the Eastern District of California said he would decide by the end of October how to apply the ruling to the bankruptcy of the City of Stockton, but it seems unlikely that pensions will escape cuts altogether, while bondholders are forced to take haircuts.
As The New York Times reported on the case:
Calpers is a powerful arm of the state, with statutory powers that include liens allowing it to foreclose on the assets of a city that fails to pay its pension bills.
Calpers had argued that if Stockton stopped making payments and dropped out of the state pension system, the lien would let it claim $1.6 billion of its assets. But Judge Klein said those statutory powers were suspended once a California city received federal bankruptcy protection.
“Why should I take that lien seriously?” he asked a lawyer for Calpers, Michael Gearin. “I may avoid it as a black-letter matter of bankruptcy law,” he said, referring to well-established legal principles.
He did not dispute that Stockton would be billed $1.6 billion to leave Calpers and said such a termination fee “can be seen as a golden handcuff.” But in bankruptcy, he said, Stockton could legally refuse to pay the bill because it arose from the city’s contract with Calpers, and contracts are broken routinely in bankruptcy.
“The bankruptcy code provides that the lien can be avoided and be treated as an unsecured claim,” Judge Klein said.
Judge Klein also said that Stockton had many options other than Calpers for retirement benefits: a private provider, like an insurance company; a multiemployer pension plan affiliated with a union; one of California’s county-run pension plans; or it could even offer no pensions at all.
October 7, 2014 9:40 AM
While vacationing in Germany recently, I noted many beautiful and now largely untenanted churches. Elegant, majestic against the sky, they are potent symbols of a religious system no longer observed by many. They are maintained now largely as historic and cultural artifacts. I also noted, framed against the German landscape, the “temples” of today’s eco-theocrats—gigantic engineering marvels dominating almost all ridge lines, the modern version of the technologies of the 15th Century—windmills. As a technocrat, I did appreciate their aesthetic nature and can only marvel at the deep beliefs that have encouraged the German government to spend hundreds of billions on their construction and on the electrical interconnections necessary to get that power to market.
As a result, energy costs have gone up dramatically, threatening the competitiveness of German industry (particularly the chemical and manufacturing sectors), encouraging firms to expand in nations with more affordable energy and raising consumer energy bills. Understandably, political opposition has mounted to Chancellor Angela Merkel’s grand “Energiewende” plan for moving Germany to greater dependence on wind and solar power. The current system is non-sustainable.
October 7, 2014 9:26 AM
Under the American Recovery and Reinvestment Act of 2009 (commonly called "the stimulus"), a $300 million program to subsidize consumer purchases of energy-efficient appliances called the State Energy Efficient Appliance Rebate Program was established. A recent working paper from the National Bureau of Economic Research analyzes the results of the "Cash for Appliances" subsidy scheme. It turns out that "Cash for Appliances" was an incredibly inefficient energy-efficiency program. From the conclusion:
We estimate freeriding rates of 73% to 92% across our three appliance categories. As a result, our measures of cost-effectiveness, ranging from $0.44 to $1.46 per kWh saved, are an order of magnitude greater than the $0.06 per kWh average cost-effectiveness estimated for utility-sponsored energy efficiency programs. Even after generous assumptions about accelerated replacement, the cost per kWh saved of C4A remains 4 to 16 times greater than this average in the literature.
October 6, 2014 10:14 AM
The New York Times reported Friday on the David-and-Goliath battle of businessman Shihan Qu, the last of the rare earth magnet renegades. Mr. Qu’s company, Zen Magnets, is the last U.S. company selling the popular sets of unusually strong magnets that first became popular when marketed under the name Buckyballs® (named after inventor and designer R. Buckminster Fuller). These sets allow scientifically-curious customers to creatively experiment with different geometric forms. When Craig Zucker and Jake Bronstein started selling Buckyballs® through their company Maxfield & Oberton in 2009, they were immediately successful.
Magnets this strong do have safety concerns, however, and some children have swallowed them and been injured as a result. This is why the companies selling them covered them in warning labels and didn’t supply the product to stores whose inventory is primarily targeted to children, like Toys R Us. Since the magnets require a fair amount of manual strength and dexterity to use, they were never marketed to children, gaining their following largely from popular science and geek-themed outlets.
October 6, 2014 7:40 AM
The Federal Register topped the 60,000-page mark on Friday, and is on pace for the 6th-highest page count in its 79-year history. Along the way, new regulations cover everything from 5K races to how magnets work.
On to the data:
- Last week, 79 new final regulations were published in the Federal Register. There were 84 new final rules the previous week.
- That’s the equivalent of a new regulation every two hours and eight minutes.
- So far in 2014, 2,756 final regulations have been published in the Federal Register. At that pace, there will be a total of 3,589 new regulations this year. This would be the lowest total in decades; this will likely change as the year goes on.
- Last week, 1,814 new pages were added to the Federal Register.
- Currently at 60,035 pages, the 2014 Federal Register is on pace for 78,171 pages. This would be the 6th-largest page count since the Federal Register began publication in 1936.
- Rules are called “economically significant” if they have costs of $100 million or more in a given year. 33 such rules have been published so far this year, none in the past week.
- The total estimated compliance costs of 2014’s economically significant regulations currently ranges from $7.62 billion to $10.87 billion. They also affect several billion dollars of government spending.
- 227 final rules meeting the broader definition of “significant” have been published so far this year.
- So far in 2014, 527 new rules affect small businesses; 78 of them are classified as significant.
Highlights from selected final rules published last week:
October 3, 2014 2:20 PM
Being a journalist is not an easy job; it demands fast paced and high volume production. For those “wonk” journalists tasked with analyzing data-heavy reports for laymen readers, the task is even more difficult. A new post from Forbes’s Trevor Butterworth scrutinizes some recent articles from The Washington Post’s Wonkblog, highlighting how some journos aren’t exactly rising to the challenge. And the consequences go beyond a misinformed public.
On September 25, Wonkblog posted an article claiming that 24 million American adults are consuming a shocking average of 74 drinks per week. Butterworth delves into the source of those data and points out the numbers aren’t exactly accurate. The data were pulled from a 2007 report which used information from a survey of Americans’ consumption during 2001-2002. Of course, self-reporting surveys are notoriously flawed. Participants misremember what they ate, miscalculate how much, or outright lie about their consumption habits. Butterworth states that if people really consumed what they tell researchers in self-reporting surveys, “life for almost two thirds of Americans would be biologically implausible.”
Cook, understanding these flaws, attempted to correct for underreporting by multiplying the reported number of drinks by 1.97 which, as Butterworth noted, “requires us to believe that every drinker misremembered by a factor of almost two. This might not much of a stretch for moderate drinkers; but did everyone who drank, say, four or eight drinks per week systematically forget that they actually had eight or sixteen? That seems like a stretch.”
Furthermore, the study also requires us to believe that those reporting no consumption didn’t drink a drop and even more significantly problematic that those under 18 years old—who were not included in Cook’s study—never consumed alcohol. Plenty of data demonstrates that even though they aren’t legally supposed to drink, a fifth of 12th graders are consuming alcohol. Additionally, Cook’s study, which was trying to account for a discrepancy between how much people said they consumed versus how much alcohol was sold in America, did not account for waste. As Butterworth points out, “…waste is a huge issue with food, with estimates running from 30-40 percent of calories produced; we do not know how much alcohol is, if you’ll forgive the pun, wasted.” Lastly, he notes that other studies looking at consumption patterns “[a]ll converge on a similar proportion; none come remotely close to Cook’s estimate; none are mentioned in Wonkblog.”
October 2, 2014 3:42 PM
Over at The Washington Post's Wonkblog, urban affairs reporter Emily Badger has a post up on the recently released U.S. Census Bureau American Community Survey 2013 commuting data. The title of the post, "The share of Americans driving to work is declining for the first time in decades," seems to suggest that a smaller share of commuters are driving themselves to work. Badger relies almost exclusively on a Brookings Institution blog post that makes similar claims.
However, what neither blog post mentions is that between 2007 and 2013, the share of Americans driving to work alone actually increased.
While the Brookings authors at least note that "the vast majority of [those commuting by private automobile] travel alone rather than in a carpool," they don't point to the large decline in carpooling as a major source of the slight decline in private vehicle commuting. Below is a table containing the 2007 and 2013 ACS data cited by Brookings (and reblogged by Badger):