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  • The Impending BitLicense and Premature Regulations

    August 19, 2014 3:19 PM

    Last month, the New York State Department of Financial Services (NYDFS) announced its proposed regulations for businesses engaged in “Virtual Currency Business Activity.”The Department defines these businesses as being involved in the following types of activities, according to provision 200.2n:

    “(1) receiving Virtual Currency for transmission or transmitting the same;

    (2) securing, storing, holding, or maintaining custody or control of Virtual Currency on behalf of others;

    (3) buying and selling Virtual Currency as a customer business;

    (4) performing retail conversion services, including the conversion or exchange of Fiat Currency or other value into Virtual Currency, the conversion or exchange of Virtual Currency into Fiat Currency or other value, or the conversion or exchange of one form of Virtual Currency into another form of Virtual Currency; or

    (5) controlling, administering, or issuing a Virtual Currency.”

    It is worth noting at the start that provision 200.3c2 would exempt “merchants and consumers that utilize Virtual Currency solely for the purchase or sale of goods or services,” from needing to obtain a license and thus being subject to these regulations. This is helpful, as otherwise these regulations would probably have prevented any widespread adoption of virtual currency by merchants. However, there are certain other non-consumer functions of virtual currencies that are not covered by this provision, such as charitable donation. It should therefore be broadened.

    The proposals were received with much skepticism and dismay among the virtual currency community, particularly after NYDFS head Benjamin Lawsky had said in January, “Our objective is to provide appropriate guardrails to protect consumers and root out money laundering -- without stifling beneficial innovation.” Unfortunately, the proposed regulations have provisions that will almost certainly stifle beneficial innovation while not doing much to protect consumers. Four provisions in particular stand out as problematic.

  • New RegData Site Makes it Easier to Track Regulation

    August 19, 2014 2:45 PM

    About three years ago, our friends at the Mercatus Center launched a website called RegData that compiles a searchable database on many facets of regulations. For the first time, it also quantified just how many regulatory restrictions are in the 175,000-page Code of Federal Regulations. By doing text searches for terms such as “must,” “shall,” “shall not,” and the like, they found that, as of 2010, there have been more than one million regulatory restrictions. Ten Thousand Commandments turns out to be an understatement, by a factor of one hundred.

    This week a major RegData revamp was released, with more data that is more searchable than before. Head on over and play with the search tools for a bit and see what you’ll find. There is also a short instructional video where Patrick McLaughlin walks you through the site.

  • Red Tapeworm 2014: Are Environmental Protection Agency Regulations Declining? Don't Bet on It

    August 19, 2014 12:56 PM

    This is Part 26 of a series taking a walk through some sections of Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State (2014 Edition)

    Back when the House Oversight committee in 2010 asked businesses, trade groups and think tanks which regulations they considered most burdensome, there were more than 160 responses filled with recommendations. The Environmental Protection Agency (EPA) easily dominated the regulatory burden reported by private enterprise.

    In the bar chart nearby one can see that EPA rules finalized in the Federal Register during the first term of the Obama administration rose steadily from 441 to 635 between 2009 and 2012 (a 44 percent increase). But then they suddenly dropped 19 percent to 514 in 2013.

    In the past year, EPA rules in the Unified Agenda of Federal Regulations pipeline also dropped; 20 percent, from 223 to 179. That’s the lowest level of the decade. And for the second time, the Environmental Protection Agency does not appear among the top-five rulemaking agencies as far as the Unifed Agenda count is concerned. (EPA ranks sixth with 179 rules; refer Table 5 in Ten Thousand Commandments).

    EPA also ostensibly doesn’t rank among the agencies with the most rules in the Unified Agenda impacting small business anymore; note the bar chart’s implausible 88 percent drop from 49 EPA rules impacting small business to only six in 2013.

    A falloff does not square with the level of regulatory impact driven by the EPA. Earlier editions of “Tapeworm” addressed overall rule delays and reporting delays as well as OMB memos affecting reporting policy for the Unified Agenda that reduced rule counts compared to prior years. Also only one Agenda, not the required two, appeared in 2012.

    Washington Post headline summed up: “White House Delayed Enacting Rules Ahead of 2012 Election To Avoid Controversy.”

  • CEI’s Battered Business Bureau: The Week in Regulation

    August 18, 2014 7:14 AM

    75 new regulations, from tax delinquents to spectrum auctions.

  • Red Tapeworm 2014: The Government Accountability Office Reports More Regulations in Obama Era

    August 15, 2014 1:10 PM

    This is Part 25 of a series taking a walk through some sections of Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State (2014 Edition)

    Executive Orders, guidance documents, memoranda and other “non-rules” evade notice-and-comment and the federal Office of Management and Budget’s review mechanisms.

    Yet even when rules do undergo notice and comment prodecures it may not be sufficient. A new study finds that over the past couple years, final rules increasingly are not being submitted to the Government Accountability Office (GAO) and to Congress as is required under the 1996 Congressional Review Act (CRA).

    The CRA requires agencies to submit reports to Congress on their major rules—defined roughly as those costing $100 million or more. Owing to such reports, maintained in a database at the GAO, one could more readily observe which of the thousands of final rules agencies issue each year are major and which agencies are producing the rules.

    The neglect of this submission is a significant lapse. The reports are essential in case Congress opts to introduce a formal Resolution of Disapproval of an agency rule under the CRA.

    The CRA gives Congress a 60 legislative day window in which to review a major rule and, if desired, pass such a resolution of disapproval. The reports are required for this very reason.

    Despite the issuance of thousands of rules since the act’s passage, including many dozens of major rules, only one has been rejected: the Labor Department’s rule on workplace repetitive-motion injuries in early 2001. This is one of the reasons some support a required affirmation of major rules by Congress, not merely the option to disapprove one, to re-establish congressional accountability for agency actions. 

  • Executive Order Pressures Employers to Capitulate to Baseless Demands and Meritless Claims

    August 15, 2014 7:39 AM

    A July 31 executive order from President Obama, E.O. 13,673, will make it very costly for employers to challenge dubious allegations of wrongdoing against them, if they are government contractors (which employ a quarter of the American workforce). It will allow trial lawyers to extort larger settlements from companies, and enable bureaucratic agencies to extract costly settlements over conduct that may have been perfectly legal. That’s the conclusion of The Wall Street Journal and prominent labor lawyer Eugene Scalia.

    The order allows the government to cut off the contracts of contractors and subcontractors that do not "consistently adhere" to a multitude of complex federal labor, antidiscrimination, harassment, and disabilities-rights laws. Never mind that every large national business, no matter how conscientious, has at least one successful lawsuit against it under federal labor and employment laws, which is inevitable when a company has thousands of employees who can sue it in hundreds of different courts that often have differing interpretations of the law. Liability under federal labor and employment laws doesn’t require a showing of wrongdoing by a company’s senior management (a violation can be treated as “willful” even when committed by an employee the CEO has never met), and many laws are vague or expansive enough that even well-intended employees or managers can inadvertently run afoul of them (such as disabilities-rights laws that require costly, murky “reasonable accommodations” that trigger disagreements even among veteran judges as to what is “reasonable,” and overtime laws that are vague about what employees are covered versus exempt). Moreover, agencies often find violations based on perfectly legal conduct; the Obama NLRB has often found companies guilty, only to have federal appeals courts overturn its ruling years later.

    If a company can lose a billion-dollar contract over a discrimination or harassment claim, it may settle the claim even if it is baseless. This executive order creates incentives for just such extortionate settlements, driving up the long-run cost of government contracts by making them more risky and less desirable. That reality is at odds with the justification given for past executive orders dealing with contracting, which was to “promote efficiency in federal contracts.”

    The order also prohibits the use of certain mandatory arbitration agreements, a prohibition that lacks a valid fiscal or taxpayer-protection rationale or any logic under the Procurement Act. The Supreme Court has repeatedly upheld binding arbitration of employment-law claims, and arbitration clearly saves taxpayers money (arbitrators’ fees are paid by the parties, whereas judges’ and court employees’ salaries are paid for by the taxpayers, making arbitration much cheaper for taxpayers). The justification commonly given for executive orders regulating contracting is that such regulations save taxpayers money by promoting efficiency in contracting, which is plainly not true here. Thus, this executive order is of doubtful validity under the Procurement Act.

  • Honeybee Population in Decline—Or Not?

    August 13, 2014 4:14 PM

    If you read the news about honeybee survival, it’s all very confusing. Some sources sound the alarm by pointing out that the number of honeybee hives has dropped significantly in recent decades. Others say just the opposite: There are more hives today than ever before.

    Which is it? Actually, both.  Some regions of the world have fewer hives, while globally there are more commercial hives now than there were in 1960. The key here is to understand which dataset is more important to the debate about sustaining these helpful creatures.

    The Hoover Institution’s Dr. Henry Miller notes in a Wall Street Journal op-ed: “The reality is that honeybee populations are not declining. According to U.N. Food and Agriculture Organization statistics, the world's honeybee population rose to 80 million colonies in 2011 from 50 million in 1960.” Meanwhile Jennifer Sass of the Natural Resources Defense Council responds in a letter to the editor: “The number of managed honeybee colonies in the U.S. has dropped from four million hives in 1970 to 2.5 million today, according to White House statistics.”

    Surprisingly, both of these claims are correct. Miller points to the “global” commercial honeybee-hive count, which has grown considerably. Sass points to domestic colony numbers only, which have in fact declined.

    Miller’s numbers are more relevant because if honeybee survival is really at stake, we would see declines on a global scale. Miller also points out that U.S. and European hive numbers are relatively stable, and Canadian numbers increased. Miller is certainly correct to point out that honeybees are not about to disappear.

  • Michael Grunwald's High-Speed Rail Fantasies

    August 13, 2014 1:55 PM

    Perhaps the one thing Time magazine's Michael Grunwald loves more than drone assassinations of American citizens and dissident journalists is heavily subsidized passenger rail. This is not the first time I’ve criticized Grunwald’s sloppy high-speed rail reporting, and it probably won’t be the last.

    Over at Time, Grunwald takes issue with a recent New York Times story on President Obama's high-speed rail initiative. In particular, Grunwald attacks the Times article for referring to the over $10.5 billion in high-speed rail obligations as "$11 billion." Grunwald also argues that the Times' use of "spending" is an inaccurate way to describe the total obligations since actual outlays so far are only around $2.5 billion.

    First, rounding up from $10.5 billion to $11 billion does not work against the main thrust of the Times article. And note that if Grunwald wanted to be really accurate, he would have noted, as the federal government has, that “approximately $10.6 billion” has been made available for high-speed rail projects.

    Second, Grunwald doesn't seem to fully grasp budget lingo, yet spends much of his piece attacking the Times for supposedly misusing it. Now, "spending" is an imprecise term that could mean either apportionments, obligations, or outlays—or it could simply refer to the spending process, which involves apportionments, obligations, and outlays.

    Grunwald is equating “spending” to mean “outlays,” i.e., funds disbursed by the Treasury. But it is unclear that the Times was referring to anything beyond the apportionments and obligations. Indeed, these appear to be the two offending sentences in the Times article:

    High-speed rail was supposed to be President Obama’s signature transportation project, but despite the administration spending nearly $11 billion since 2009 to develop faster passenger trains, the projects have gone mostly nowhere and the United States still lags far behind Europe and China.

    And the second:

    Instead of putting the $11 billion directly into those projects, critics say, the administration made the mistake of parceling out the money to upgrade existing Amtrak service, which will allow trains to go no faster than 110 miles per hour.

    The second sentence implies the projects funded by the federal government have yet to be completed—“which will allow trains…” Anyone familiar with the budget process knows reimbursements are generally how the federal government involves itself in infrastructure investment. It works a little like this: a state applies for a grant, the federal agency approves a grant, the state builds whatever project is supported by the grant, the state is reimbursed by the federal government when the project is completed. This is why the Federal Railroad Administration wrote in its 2011 announcement regarding the availability of funds rejected by Florida for the Tampa-Orlando I-4 rail corridor that “[t]he funding provided under these cooperative agreements will be made available to grantees on a reimbursable basis.”

    While it is possible some readers of the Times believed, despite language to the contrary, that $11 billion is gone and all work funded by that money is completed, I am skeptical. The main point of the Times article is to compare President Obama’s lofty claims a few years ago to the reality today. Objectively, very little has happened and very little is likely to happen in terms of huge future high-speed rail investments necessary to support the president’s plan to give 80 percent of Americans access to high-speed rail by 2025, a project that would likely cost between $600 billion and $1 trillion to deliver. This simply isn’t going to happen and that's why the president's plan has been a complete failure.

  • The Ex-Im Bank’s Unilateral Disarmament Fallacy

    August 12, 2014 12:12 PM

    One of the weakest arguments against free trade is the "unilateral disarmament" fallacy--that a country should refuse to liberalize its trade policies until other countries liberalize theirs. If your opponent uses it, you almost automatically win the debate. The Export-Import Bank's defenders must be getting desperate, because they are now having to resort to the unilateral disarmament fallacy. Here's a letter I sent to the Cleveland Plain-Dealer setting the record straight:

    Editor, Cleveland Plain-Dealer:

    George Landrith’s argument that the U.S. should subsidize certain businesses because other countries subsidize some of their businesses is equivalent to saying the U.S. government should stop ripping off its citizens only when foreign governments stop ripping off their own citizens (“Why keep the Ex-Im Bank? Unilateral economic disarmament is as unsound as unilateral defensive disarmament,” August 10).

    The Export-Import Bank’s special favors make U.S. businesses less competitive by rewarding political connections over customer service, and have led to 74 corruption allegations during the last five years. If other countries want such problems, fine. But the U.S. can, and should, do better by closing the Ex-Im Bank this fall, regardless of what other countries do.

    Ryan Young

    Fellow, Competitive Enterprise Institute

    Author of the study, “Ten Reasons to Abolish the Export-Import Bank.”

  • Red Tapeworm 2014: Tell Us -- Which Regulations Hurt Your Business as You Grow?

    August 12, 2014 11:59 AM

    This is Part 24 of a series taking a walk through some sections of Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State (2014 Edition)

    The number of federal regulations for which the Regulatory Flexibility Act requires a so-called “Regulatory Flexibility Analysis” to asses burdens on small business is on the upswing.

    The level under President Barack Obama is higher than that of his predecessor, despite the strategic reporting of fewer regulations in the semi-annual Unified Agenda of Federal Regulations

    Sustainble, robust economic health is not about artificial stimulation of favored industries while simultaneously overruling prices and plans in crucial sectors like telecommunications, energy and finance.

    Every intervention has been tried, and more are touted. For a change, political leaders should better appreciate the increase in regulation as firms grow, and seek to liberalize the economy rather than inflict ever more “management. We can cut regulations that impede wealth creation and job prospects.

    I’ve been interested in inventorying laws and regulations that impact a business as it grows. It’s a useful exercise on the road to rolling back excesses.

    Below is a rough inventory I’ve compiled, but, it does not address industry-specific rules, which are themselves desperately in need of reform and probably dominate in most sectors (also, the tally doesn't address that which will issue from new financial reform and Obamacare legislation).

    Such industry-specific information is all too rare: I came across a superb survey done by the National Automobile Dealers Association, polling their members on an array of costs. There’s one by the American Aviation Institute that’s less comprehensive but very useful.

    We need many more bottom-up assessments for the entrepreneurial community to send a collective outburst to Washington D.C. about addressing the federal regulatory burden.


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