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OpenMarket: April 2013

  • 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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