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OpenMarket: April 2013

  • CEI Podcast For April 4, 2013: Reining In The CFAA

    April 4, 2013 5:36 PM

    Under the CFAA, it is currently a federal crime to enter an incorrect age on your Facebook profile or an incorrect weight on a dating website profile. Associate Director of Technology Studies Ryan Radia suggests that the CFAA should be reined in.

  • Lessons From Dutch Regulatory Reform: How The U.S. Could Save $450 billion Per Year

    April 4, 2013 11:18 AM

    In 2003, the Dutch improved their regulatory situation through the “Dutch Administrative Burden Reduction Programme.” This program sought to reduce the cost of regulatory burdens on businesses by 25 percent cumulatively in just four years.

    To put this in domestic terms, for the United States to meet such a goal, it would have to cut about $450 billion in business regulation – quite an ambitious goal.

    To meet the 25 percent target, the Dutch established two new organizations: the Interministerial United for Administrative Burdens (IPAL) and the Advisory Board on Administrative Burdens (ACTAL).

    IPAL was created to organize the process between various ministries and to overcome political obstacles. IPAL performs its function in part through the Standard Cost Model, which measures administrative costs and burdens to businesses from regulations. This ensures the regulatory cost measurement process is accurate and consistent across agencies.

    The SCM requires each government ministry to measure the burdens traced to legislation that falls under its purview, according to the SCM handbook. Each ministry hires consultants to identify regulations, survey and hold discussions with business representatives to get feedback and conduct experiments to accurately measure the cost of regulation (such as the stopwatch-method). The consultants are coordinated by the Ministry of Finance to ensure all agencies are consistently measured.

    IPAL measures regulatory costs; ACTAL then advises the Dutch government on regulatory reduction efforts and works to ensure ministries meet their reform goals.

    By 2006, the Netherlands was on track to meet the 25 percent reduction in regulatory costs according to the World Bank. Now, many European countries, including the UK, Germany and Norway, use the SCM.

  • Mercantilism Is An Outdated Concept

    April 3, 2013 2:44 PM

    There’s an excellent Letter to the Editor in the Financial Times today (“Trade is now about participation, not competition”), which points out that the mercantilist approach to trade “exports good, imports bad” is an antiquated view given the globalized supply chain for products and services.

    The letter states:

    Conventionally, nations tend to believe that export is a virtue and import a vice.  This mercantilism has lost its relevancy these days since an increasing number of companies, not states, must import various components to export their final products in the global value chains.  After all, it is not that nations compete against each other in a game of trade, but that private companies participate in a collective project of trade.

    Lots of important points in that one paragraph including  the importance of imports  for inputs in manufacturing and the fact that it is companies that engage in trade, not countries.

    CEI has long pointed out the dangers of promoting trade by promoting mercantilism here, here, and here, for example.

  • Unions Seeing Green In The Green Mountain State

    April 3, 2013 2:42 PM

    In Vermont, the right to own one’s own business, in particular in home care work is coming under attack. Small business owners, and independent contractors are in the sights of a Vermont bill that will force them into a union as well as to pay union dues. CEI Labor Policy Analyst Trey Kovacs explains further over at the VT Digger:

    Well, the state of Vermont believes it and its union partners know best when it comes to providing care for the elderly and disabled. Senate Bill 59, which already passed the Vermont Senate, puts elected officials and union bosses in charge of setting standards for in-home care. If enacted the bill would force the more than 6,000 home-care workers — comprised of small business owners, independent contractors and family members — to pays dues to a union whether they like it or not.

    These attempts to forcibly unionized America’s home care workers is not novel to the Green Mountain State, but is a fight being played out across America:

    For example, SEIU union boss Tyrone Freeman, president of a Los Angeles-area local representing 190,000 home-care workers, recently was found guilty of 14 counts of embezzlement. According to the Los Angeles Times, the low-wage caregivers also sued Freeman – who made $200,000 per year – demanding restitution of more than $1.1 million in dues money he reportedly on high-end liquor, parties and expenses from his Hawaii wedding in 2006.

    Forced unionization of home-care workers in the Midwest has produced sadly similar results. In 2006, SEIU, taking advantage of Michigan law that deemed home-care providers government employees, organized a stealth campaign to unionize those workers. Its tactics produced a voter turnout of just 20 percent, and SEIU won a landslide victory. Then, from 2006 to 2013, the SEIU took in more than $34 million in union dues from those members – and provided zero in the way of tangible benefits.

  • The Origin Of Interest Groups

    April 3, 2013 10:20 AM

    If the amount of money in politics disturbs you, then you should advocate for less politics. Just as bank robbers go where the money is, so do rent-seekers.

  • The Myth Of Welfare Reform

    April 3, 2013 10:19 AM

    Welfare reform is largely a myth. Many people who used to be on welfare have since gone onto Social Security Disability. That benefits states by shifting their welfare costs to the federal government. Moreover, people who were never on welfare in the past are now going onto Social Security Disability in droves, which makes the Obama administration happy, since it helps mask persistently high unemployment by reclassifying unemployed people as "disabled" instead. The number of people on Social Security Disability has skyrocketed, at tremendous cost, as an NPR report by Chana Joffe-Walt chronicles:

    The federal government spends more money each year on cash payments for disabled former workers than it spends on food stamps and welfare combined. . .

    A person on welfare costs a state money. That same resident on disability doesn’t cost the state a cent, because the federal government covers the entire bill for people on disability. So states can save money by shifting people from welfare to disability. And the Public Consulting Group is glad to help.

    PCG is a private company that states pay to comb their welfare rolls and move as many people as possible onto disability.

  • Regulatory Lessons From The United Kingdom (Continued)

    April 3, 2013 10:16 AM

    Overview of the Red Tape Challenge

    In early 2011, the UK started the Red Tape Challenge to gather ideas as to how it could improve its regulatory state. Every few weeks, the UK government publishes regulations relating to a specific “theme” on this government website. People and businessmen alike can then comment as to which regulations are unnecessary or overly-burdensome in any given theme. Furthermore, people can recommend how regulations can be fixed, or recommend that a regulation be eliminated.

    The relevant department that administers a regulation then collects these thoughts and makes regulatory policy proposals using the “evidence” obtained in the comments section of the Red Tape Challenge website. Department ministers have three months to justify the existence of a regulation and are “challenged” by relevant stakeholders.

    The “Star Chamber,” which consists of Cabinet Office members and various ministers, then decides if a regulation is justified. If a regulation is not justified, the Star Chamber makes a regulatory policy recommendation to the relevant department. The relevant department responds to this recommendation in a proposal.

    The “Reducing Regulation Committee” and other Cabinet sub-committees then consider the Star Chamber’s proposal against the relevant department’s proposal. These committees ultimately decide which proposal to accept and their decision is then implemented.

  • Cyprus Is A Lesson For U.S. Policy Makers: Too Big To Fail Is Not Inevitable

    April 2, 2013 11:31 AM

    American financial regulators could take a lesson from their European counterparts. The recent EU bail-in/bailout of Cyprus, despite its dangers, shows that reducing moral hazard in the banking industry without provoking bank runs is possible.

    As I write in Forbes, Cyprus is one of the most insolvent Euro member states.

    Non-performing loans [in Cyprus] (NPLs) are 15.5 percent of gross loans, which is comparable to Italy (13 percent), Ireland (19 percent), and even Greece (21 percent). But the real problem is Cyprus’s staggering inability to absorb losses. NPLs account for an enormous 264 percent of tier 1 capital—a level so high that not even basket case Greece, at 217 percent, can compare.

    Cyprus got this way because of the risky actions of its banks, which were heavily invested in Greek debt. Once Greece hit the wall, so did the Cypriot banking system.

    Unlike larger countries like France, Italy, and Spain, the little Mediterranean island’s fate does not have great effects upon the Euro in purely economic terms. But its precedent matters because markets extrapolate future EU actions (for example, what the EU will do when larger economies come under financial scrutiny) from present ones. Accordingly, Cyprus represented a low-stakes means through which to change expectations for the future. In February, before the drama and media hype surrounding Cyprus began, I wrote about this opportunity in the Global Post.

    Europe should think twice before simply handing out a bailout package equal to the entire Cypriot economy.

    As Ireland’s current plight shows, burdening the taxpayers to save the banks and bondholders imposes unnecessary and long-lasting pain. Once the European Union provides the stabilization funding needed to prevent Cypriot contagion to the rest of the euro zone, the EU ought to set a new precedent going forward: that inefficiency has the freedom to fail.

  • Incentives Matter, Even For Transportation

    April 2, 2013 5:00 AM

    CEI’s Marc Scribner previously commented on how advocates for greater investment in transportation infrastructure frequently disregard the infrastructure measure that really matters -- the rate of return on investment. Supporters of greater federal involvement in the provision of roads and transit continue to view these productive assets as utilities. If only they were properly funded, they say, the American public could once again enjoy a world-class travel experience. Even if the federal government threw trillions of dollars into the inefficient bureaucracy that distributes funding for transportation improvements and expansions, the nation’s population will continue to put pressure on our transportation networks in the future.

    Marc and others have observed that this congested state of affairs offers an opportunity: if such high demand for motorways carried a price, these assets could be more effectively managed by the private-sector in providing the infrastructure for millions of commuters, but at a fraction of what is currently being paid. While attention has recently been placed on how much of the motorways’ congestion problems lies in their status as free public commons, the same vacuum of incentives for investment and maintenance plague our country’s ports and airports as well.

    When paying for long-term investments, airports issue tax-exempt bonds. Because airports lock in long-term fixed costs, they take measures to lock in fixed incomes by forcing airlines into rental contracts for runway space for 25 to 30 years. All else being equal, no rational business would lock themselves into contracts of such duration. Unfortunately, state and local government in the U.S. hold a monopoly on the provision of runways, barring private airports from offering more reasonable terms to carriers. Airlines have no choice but to sign on to these generation-long contracts.

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

    April 1, 2013 10:37 AM

    100 new regulations, from collisions at sea to electronic forms.


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