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  • International Panel Outlines Problems with EU Interchange Fee Regulation

    March 30, 2015 3:49 PM

    On March 17, an international panel of experts gathered in Brussels to discuss the proposed EU interchange fee regulations that are set to be approved by the Council of Ministers in the next few months. Hosted by the International Alliance for Electronic Payments, experts from France, Austria, Lithuania, the UK, and the USA each outlined different objections to the regulations based on the own countries’ experience and situations.

    Interchange fees are the fees levied by banks and payments card networks from merchants and vendors when a consumer uses a payment card to purchase a good or service. The proposed EU regulation will cap these fees at the rate of 0.2 percent of the transaction value for consumer debit cards and at 0.3 percent for consumer credit cards. For consumer debit cards, the regulation also gives flexibility to Member States to define lower percentage caps and impose maximum fee amounts. Payment card networks will also have to separate their operations and infrastructure businesses.

    The panel, chaired by Daniel Hannan MEP (European Conservatives and Reformists) consisted of:

    • Pierre Garello, Professor of Economics at Aix-Marseille University
    • Barbara Kolm, President of the Austrian Economic Center
    • Zilvinas Silenas, President of the Lithuanian Free Market Institute
    • Matthew Sinclair, Senior Consultant, Europe Economics, and
    • Iain Murray, Vice President of the Competitive Enterprise Institute (USA)
  • Administration's GROW AMERICA Act 2.0 Mixes Bad with Good

    March 30, 2015 12:11 PM

    Today, Secretary of Transportation Anthony Foxx unveiled the administration’s latest surface transportation reauthorization proposal. Like the previous White House bill, the latest iteration of the GROW AMERICA Act is unlikely to go anywhere on Capitol Hill. The president’s proposal to fund much of his increased infrastructure spending relies largely on a one-shot tax repatriation scheme, something that will do nothing to improve the long-run fiscal position of the Highway Trust Fund. In addition, the White House proposal would make the very wasteful TIGER discretionary grant program permanent. See this post for more on what good and bad surface transportation policy looks like.

    But the administration’s GROW AMERICA 2.0 proposal isn’t all bad. In fact, it contains two very smart elements that Congress should attach to their own reauthorization package.

    First, the administration proposal would repeal the current prohibition on states tolling their own Interstate segments, codified at 23 U.S.C. § 129, while also repealing the three-slot Interstate System Reconstruction and Rehabilitation Pilot Program, which was established by the Transportation Equity Act for the 21st Century of 1998 and has failed to promote Interstate reconstruction through tolling. Contrary to popular belief, the states, not the federal government, own and operate the Interstate Highway System. Currently, the only tolled segments of the Interstate system were grandfathered in by the Federal-Aid Highway Act of 1956. No federal-aid funds can be used to maintain these roads, which constitute a little over 6 percent of the Interstate Highway System. Tolling offers a number of advantages over fuel tax or non-user funding. Reason Foundation’s Bob Poole has developed a plan to reconstruct and modernize the Interstate Highway System through the use of all-electronic highway tolling, something policy makers should consider as an alternative to gas tax increases and Highway Trust Fund bailouts.

    Second, the current cap on tax-exempt private activity bonds, which bring financing parity to infrastructure development by allowing the private sector to take advantage of similar debt instruments as the public sector, would be raised from $15 billion to $19 billion (see 26 U.S.C. § 142(m)(2)(A)). Ideally, this cap would be repealed, but increasing it is at least a step in the right direction.

    To be sure, there is little in the latest GROW AMERICA Act for free marketeers to love. But Congress would be wise to take seriously the administration’s recommendations on Interstate tolling and private activity bonds.

    For more on federal surface transportation reauthorization, see CEI's agenda for Congress, Free to Prosper.

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

    March 30, 2015 12:10 PM

    Along with last wwek’s usual slew of final regulations covering everything from power plants to televisions, an additional 55 proposed regulations also hit the books.

    On to the data:

    • Last week, 58 new final regulations were published in the Federal Register, after 68 new regulations the previous week.
    • That’s the equivalent of a new regulation every two hours and 54 minutes.
    • So far in 2015, 674 final regulations have been published in the Federal Register. At that pace, there will be a total of 2,856 new regulations this year, which would be nearly 1,000 fewer rules than the usual total.
    • Last week, 1,398 new pages were added to the Federal Register, after 1,157 pages the previous week.
    • Currently at 16,531 pages, the 2015 Federal Register is on pace for 70,047 pages.
    • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Six such rules have been published so far this year, one in the past week.
    • The total estimated compliance cost of 2015’s economically significant regulations ranges from $693 million to $746 million for the current year.
    • Sixty-two final rules meeting the broader definition of “significant” have been published so far this year.
    • So far in 2015, 137 new rules affect small businesses; 23 of them are classified as significant. 
  • Human Achievement Hour: An Honorable Choice for Saturday Night

    March 27, 2015 4:07 PM

    Earth Hour vs. Human Achievement Hour—two irreconcilably opposed events scheduled for the same time: 8:30-9:30 pm EST, Saturday, March 28, 2015. Earth Hour protestors will turn off their lights to express solidarity with the Earth and “raise consciousness” about climate change. Human Achievement Hour partiers will turn on their lights and, in countless individual ways, celebrate the creativity of an energy-rich civilization. I may join some friends at a pub—or just stay home, plug in the Telecaster, crank up the tube amp, and let the good times roll.

    The Earth Hour crowd would have you believe that our mostly fossil-fueled civilization is unsustainable. I know of no better antidote to their ideology than energy analyst Alex Epstein’s new book, The Moral Case for Fossil Fuels. Epstein presents the big picture Earth Hour types ignore, belittle, or deny. Human beings using carbon dioxide (CO2)-emitting energy did not take a safe climate and make it dangerous. Rather, they took a dangerous climate and made it dramatically safer.

    Building on the work of economist Indur Goklany, Epstein examines aggregate mortality and death rates related to extreme weather in the International Disaster Database (EM-DAT) maintained by the Brussels-based Centre for Research on the Epidemiology of Disasters (CRED).

    He appropriately begins with drought, historically the leading source of climate-related deaths. Drought can decrease the two most essential commodities of human life—water and food.

    In the 1920s, drought killed an estimated 472,000 people worldwide. What’s happened since then? Fossil fuel consumption skyrocketed. Carbon dioxide concentrations increased by almost one-third. The world warmed by approximately 0.8C. Deaths related to drought declined by an amazing 99.8 percent even though population in drought-prone areas tripled or quadrupled.

    What caused this remarkable improvement in the human condition? Affordable energy, the lion’s share of which comes from fossil fuels, reduces drought risk in manifold ways.

  • Human Achievement of the Day: The Sharing Economy

    March 27, 2015 3:44 PM

    It’s the most wonderful time of year! Human Achievement Hour is once again upon us, giving us reason to pause and consider recent innovations that have or will significantly improve the human condition. I usually like to focus on some development in medicine or environmental tech, but this year I feel compelled to highlight what may be the most significant advancement in the modern economy. What began with eBay—the digital garage sale—has now blossomed into an entire economy and a way of life. You may have heard it called the “sharing economy,” or “collaborative consumption” is actually about efficient resource allocation.

    Instead of leaving rooms or homes empty and unused families can make extra money by renting them out to vacationers or business people through Airbnb or VRBO. Instead of paying to leave your car at the airport—you can now have someone pay you to use your car while you’re away. The sharing economy allows just about anyone to instantly turn his or her otherwise underused or unused resources or skills to turn a profit. The result is an economy with highly personalized goods and services that are cheaper, higher quality, and more efficient.

    Collaboration allocates resources efficiently: For most people living in a city with public transportation and limited parking, it may not make sense to own a car. However, there are certain times when a car becomes necessary to run certain errands or get to locations not accessible by public transportation. Luckily, services like RelayRides and Getaround connect people who need cars with their neighbors who have cars, but aren’t using them. Spinlister and Liquid offer a similar sharing-service for bikes.

    Time is also a resource, and when you’re busy preparing for a party it’s a resource that might be in short supply. Nobody likes to make that third trip to the liquor store for those few bottles they forgot to pick up. Luckily there are platforms like Klink, an alcohol delivery app operating in DC, Ann Arbor, and Central Florida. It allows customers to use their smart phone to shop local liquor stores which then deliver it (without a markup) to their door.

    Similarly TaskRabbit allows you to outsource errands to qualified people in your area for an hourly rate. You can use the app to find people to help you move, clean your home, do repairs, and staff your events, among other things. Similarly, Zaarly is a peer-to-peer marketplace for services.

    For those hurt by the economic downturn in 2008, services like VRBO and Airbnb provides an opportunity to rent out a room in their home—or the entire house—and to make a little extra money from a resource that would otherwise have remained unused. Customers benefit by getting lower rates, a place with “character,” or a rental in a location where hotels might not be available.

  • Grover Norquist and Americans for Tax Reform Are Wrong about Passenger Facility Charge

    March 26, 2015 5:24 PM

    I saw some unfortunate news today: Grover Norquist’s Americans for Tax Reform sent a letter to Congress opposing a possible increase in the cap of the airport Passenger Facility Charge (PFC). ATR is often an ally in CEI’s libertarian battles, but here they are both wrong on the facts and inadvertently supporting a tax-and-spend federal regime that the PFC and other facility user charges can help counter.

    Before I get to why ATR is completely wrong on federalist and free-market grounds in opposing a PFC cap increase, let’s be clear about what a PFC is, why it exists as it does, and what Congress may (or may not) do with the cap.

    First, the PFC is a local user charge. Congress authorized its creation in 1990 and it allows airports to charge per-passenger enplanement fees. The revenue raised can then only be used for a very narrow class of airport improvement projects. These funds are collected locally and never touch the federal Treasury.

    Second, the only reason the PFC exists is because Congress outlawed user-based airport charges in the Airport Development Acceleration Act of 1973 (widely known as the “Anti-Head Tax Act” and codified at 49 U.S.C. § 40116). Why, you might ask, would Congress intervene? Well, this was a case of pure cronyism. In 1970, Evansville-Vanderburgh Airport Authority enacted an ordinance requiring that airlines using their airport collect and remit a $1 per passenger fee, minus any administrative costs the airlines assumed in the collection process. Delta Air Lines sued, challenging the charge on Commerce Clause grounds. Ultimately, the U.S. Supreme Court accepted the case and rejected Delta’s rent-seeking arguments in 1972. In response to their loss before the Supreme Court, Delta and other carriers then lobbied Congress to outlaw airport user fees, only taking one year to get their terrible law enacted.

    Third, the PFC cap currently stands at $4.50. This was last raised in 2000 and inflation has eroded its buying power by approximately half since then. While CEI supports uncapping PFCs (and ideally repealing both the Anti-Head Tax Act and the PFC-creating section of the Aviation Safety and Capacity Act of 1990, and then letting airports decide their user-fee regimes without federal approval), this is unlikely in this Congress. Instead, we agree with the airports that raising the PFC cap to $8.50 and then indexing it to inflation is a sound move. Note that the PFC cap is not a charge itself, only the limit at what airports can locally decide to charge per passenger. This distinction is important in understanding why ATR’s opposition to the PFC makes no sense.

  • Arsenic in Wine: Dangerous or Beneficial?

    March 26, 2015 2:23 PM

    Dan Nosowitz in Modern Farmer offers some insights on the recent class action lawsuit filed against California winemakers. The plaintiffs found that some inexpensive wines contained arsenic at levels exceeding the federal drinking water standard for this substance. Nosowitz rightly points out that the standard is for water, not wine and “people don’t, or shouldn’t, drink as much wine as water.”   

    Well, let’s not go that far… kidding of course! Moderation is surely a good idea when it comes to alcohol consumption. Yet even if you drank as much wine as you do water, there’s still no reason to be alarmed about arsenic. The levels in wine are still too low to have any significant adverse impacts, and ironically, such small amounts might even have health benefits. 

    Arsenic is an element that naturally occurs in the earth’s crust, so traces of arsenic inevitably appear in food and water. Certainly, high levels of arsenic are not healthy and concentrated exposures can be immediately deadly. But the trace levels found in water and food are rarely an issue. Problems have emerged primarily in developing nations like Bangladesh where poor people drink from untreated water sources with arsenic levels that range in the hundreds of parts per billion (ppb), and sometimes more than 1,000 ppb.

    It’s worth noting that the levels allegedly found in wine are reportedly just five times greater (or 500 percent higher as noted in the press) than the federal drinking water standard of 10 ppb. So, some number of samples—we don’t know how many—tested by the plaintiffs in this case had some level of arsenic near the 50 ppb level. But did you know that until 2006, that was the allowable level in drinking water in the United States and it had been for decades?

    The U.S. Environmental Protection Agency (EPA) changed the standard to 10 ppb in 2001 with full compliance not required until 2006. The 10 ppb standard for arsenic in drinking water is excessively overcautious. When EPA proposed it, it was very controversial because the cost to small drinking water systems was substantial and the benefits highly questionable. EPA’s Science Advisory Board highlighted lots of problems with EPA’s science and maintained that the change could actually undermine public health. The SAB explained that the costs might cause some small communities to disconnect their water systems, forcing people to use untreated well water, but EPA finalized the rule anyway. 

    If you look at the history, you can see that EPA did not change the standard for safety reasons; they did it for political ones. You may remember, environmental activists attacked the Bush administration for taking time to reconsider changing the standard, which the Clinton administration rushed out during the final hours of the Clinton presidency. Green groups made it sound like the Bush administration was adding arsenic to the water supply. And this bad press made a rational and scientific debate impossible.

  • Human Achievement of the Day: Bitcoin

    March 26, 2015 7:51 AM

    On the eve of the financial crisis of 2007-8, financial systems had grown extremely sophisticated, but were still essentially based on a model of trust. When two people engaged in a transaction, they generally relied on a trusted third party to process the payment. This meant that there was room for fraud at worst and at best a transaction cost to the parties.

    The transaction cost arises because there is the possibility of the transaction failing to go through, or, in payments-speak, being “reversed.” A reversed payment can occur because the paying party doesn’t have the money he says he does, or because he is over his credit limit, or because she isn’t who she says she is, among many other examples.

    Over the years, third parties have developed extremely sophisticated ways to handle these problems, but they have never been able to eliminate the transaction cost entirely. Bridling at the transaction cost from merchants has led to punitive regulations on the payments industry, such as the Durbin Amendment to Dodd-Frank and the harassment of payment processors called Operation Choke Point. These are extremely unfair given the nature of the problem.

    On October 31, 2008, a pseudonymous poster styling himself Satoshi Nakomoto on the Cryptography Mailing List hosted at metzdowd.com released a white paper that summarized the problem and proposed a solution. He or she argued:

    The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for nonreversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.

    In one of the most brilliant applications of lateral thinking ever seen, Nakamoto proposed the use of cryptography to solve the problem:

    What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.

    The electronic payment system was dubbed “Bitcoin.” This is unfortunate as this had led people to believe that the point of the system was to create a new currency. It was not. The currency is a means to the end of a payments system that eliminates the transaction cost of third parties. What is more important than the value of an individual bitcoin is the public ledger system known as the blockchain that records every transaction. Being based around distributed computing and cryptography, there is no central authority to control or corrupt it.

  • A Bright Future

    March 24, 2015 2:58 PM

    The following is a guest post by Chelsea German, Researcher and Managing Editor of HumanProgress.org.

    When Homo erectus first learned to control fire a million years ago, humanity gained the ability to light up the night. From fire to electricity to LEDs, lighting technology has advanced unceasingly ever since. Yet every year, the Earth Hour campaign calls on millions of people to forgo this remarkable achievement by turning off their electricity. Earth Hour even discourages the use of smoke-emitting candles, plunging many participants into the same impenetrable darkness that surrounded our ancestors before fire was first harnessed. (Only soy and beeswax candles are deemed acceptable, because they do not emit smoke. It is unclear how many Earth Day participants use such candles and how many go without light altogether.)

    Earth Hour justifies itself as a symbolic act to raise humanity’s commitment to reducing its ecological footprint. Instead of engaging in symbolic action, participants might better spend their time by joining the many innovators who are continuously making technology more efficient. To quote bestselling author Matt Ridley, “A car today emits less pollution traveling at full speed than a parked car did from leaks in 1970.” Unsurprisingly, given such rapid advances, worldwide CO2 emissions are decreasing per person.

    http://www.humanprogress.org

  • Human Achievement of the Day: Guitars

    March 24, 2015 9:14 AM

    When Human Achievement Hour rolls around each year, I make sure to do two things. One is to play an electric guitar. The other is to play an acoustic guitar.

    Guitars are simple things. Stretch some thin metal wires over a plank of wood, and you’re most of the way there. Electric guitars add a few magnets wrapped in copper wire mounted underneath the strings, called pickups. This deceptively simple invention is one of the pinnacles of human achievement. Music made on guitars has brought unfettered joy to billions of people, most of whom have idea how to play one. Whether you like jazz, punk rock, flamenco, blues, death metal, or classic rock, guitars have enhanced your life. In a way, the guitar is one of the defining objects of modern Western culture.

    Regular readers will likely be familiar with CEI’s “I, Pencil” video from a few years ago, inspired by Leonard Read’s famous pamphlet. Nobody can make a pencil on their own. It takes a network of literally millions of people cooperating to make something you can buy in a store for less than a dollar. The network of human cooperation surrounding guitars is arguably even greater.

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