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OpenMarket: April 2014

  • This Minimum Wage Hike Will Kill Jobs

    April 30, 2014 9:10 AM

    The key thing you need to know about a minimum wage hike is that it will kill jobs.

    About 80 percent of economists surveyed recognize this job-killing reality, points out  former chair of the White House Council of Economic Advisers and current Harvard economics department chairman Greg Mankiw in his popular textbook, Principles of Economics.

    Moreover, 85 percent of econometric studies demonstrate this job-killing fact. U.S. News & World Report explains, “Proponents of a higher minimum wage point to a handful of studies that find no jobs effect to make their case. And it’s true, these studies do exist — but they’re in the extreme minority. Two economists from the Federal Reserve Board and the University of California-Irvine took the time to read all of the most credible research on the minimum wage from the past 20 years, and found an overwhelming 85 percent of it pointed to a decline in employment.”

    James Buchanan, 1986 Nobel laureate in economics, famously wrote in The Wall Street Journal on April 25, 1996:

  • Obama Administration Attacks Cross-Examination and Due Process Rights in Campus Guidance

    April 30, 2014 8:44 AM

    Justice Brandeis once observed that “The greatest dangers to liberty lurk in the insidious encroachment by men of zeal, well meaning but without understanding.”

    However well-meaning they may be, the Obama administration’s guidance and task force recommendations yesterday on campus sexual harassment and rape contain an insidious attack on cross-examination (as KC Johnson discussed at Minding the Campus.) As the Task Force Report notes (pg. 19), "this new guidance clarifies that: . . . the parties should not be allowed to personally cross-examine each other." Similarly, the guidance itself says (pg. 31): "OCR strongly discourages a school from allowing the parties to personally question or cross-examine each other during a hearing on alleged sexual violence." These attacks by the administration ignore the fact that the Supreme Court has lauded cross-examination as the “greatest legal engine ever invented for the discovery of truth.” (See Lilly v. Virginia, 527 U.S. 116, 124 (1999).) The new guidance will create serious legal problems for both public and private colleges, as I will explain in future commentaries.

    As I explained over a year ago, the Education Department’s attack on cross-examination has no legal basis, especially since cross-examination is permitted all the time in sexual harassment cases in court, showing that cross-examination is entirely consistent with the civil-rights laws. While there is no independent constitutional right to cross-examine in campus disciplinary proceedings, the right has sometimes been protected by state education codes, collective bargaining agreements, or other contracts or regulations. Title IX does not require that these be disregarded, contrary to the Obama administration's suggestions. Indeed, as the Supreme Court observed in its Davis decision, a school is entitled “to refrain from" disciplinary action that "would expose it to constitutional or statutory claims,” without risking Title IX liability. Moreover, in a few campus disciplinary cases, such as Donohue v. Baker (1997), judges have ruled that cross-examination was constitutionally required on due-process grounds to test the credibility of the accuser.

  • Johnson-Crapo Delayed; CEI-Coordinated Coalition Letter Cited as a Factor

    April 29, 2014 3:43 PM

    Today, in a surprise move, the Senate Banking Committee postponed the vote it had been set to mark up for Johnson-Crapo. Reports vary as to whether this bill is "dead on arrival" or coming up soon with amendments (mostly to bring around liberal Democrats).

    One thing is clear, though. The bill is losing momentum, and the proverbial Congressional clock is ticking.

    Today's delay is great news for ordinary American taxpayers and shareholders who would have been ripped off by Johnson-Crapo and its creation of the Federal Mortgage Insurance Corportation, or Feddie Mic. The Competitive Enterprise Institute (CEI) has for decades warned about the risk to taxpayers and the economy posed by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. In 2000, CEI founder and then-president (now chairman) Fred Smith warned in Congressional testimony that if anything went wrong, Fannie and Freddie could put taxpayers on the hook for $200 billion. Many thought he was exaggerating then, but he turned out to have underestimated it.

    Needless to say, we would support any true reform of the GSEs that reduces the government's role in the housing market. Unfortunately, after examining the Johnson-Crapo legislation, we have concluded it would actually make the situation worse. It replaces Fannie and Freddie with an even bigger government backstop in the form of the Feddie Mic, which could hold the bag for as much as 90 percent of losses from mortgage-backed securities.

  • CEI Podcast for April 29, 2014: Ten Thousand Commandments

    April 29, 2014 2:03 PM

    Wayne Crews talks about the new 2014 edition of Ten Thousand Commandments

  • Kings, Contracts, and the Rule of Law: Republic of Argentina v. NML Capital

    April 29, 2014 1:04 PM

    Co-authored with John Norton Moore and Robert F. Turner

    Last Monday, April 21, the Supreme Court heard argument in a major case involving issues at the core of the rule of law, sovereign immunity, and the right of contract. The case, Republic of Argentina v. NML Capital, involves Argentina’s attempt to avoid liability for its 2001 default on billions of dollars in foreign debt. The specific issue is whether a group of American bondholders, which won court judgments against Argentina over that default, can seek discovery (that is, legally-compelled information) against Argentinian assets outside the U.S. in order to satisfy these judgments. The Second Circuit upheld this discovery. Argentina, supported somewhat surprisingly by the U.S. State Department, is asking the Supreme Court to overturn that ruling.

    If Argentina were a private party that owed money to others, there is no question that such discovery would be available to creditors who had judgments against it. In this case, however, there are three complicating factors: 1) Argentina’s status as a sovereign country; 2) the Foreign Sovereign Immunities Act (FSIA); and 3) Argentina’s express waiver of sovereign immunity when it issued its bonds, agreeing to subject itself to U.S. court jurisdiction.

    Sovereign states have historically been immune from the judgments of foreign courts, but that is no longer the rule when states engage in commercial activities like selling bonds. Congress embraced this restrictive theory of sovereign immunity in 1976 by enacting the FSIA, and this underlying principle is now settled international law. When it comes to nations engaged in commercial activities, there is no reason to continue the old thinking that, legally, “the king can do no wrong.” As Congress affirmed in the FSIA, when foreign nations engage in commercial transactions in this country, they should be subject to the same rule of law as corporations or private litigants.

    That is made doubly clear in this case by Argentina’s express waiver of sovereign immunity in connection with its bonds, since the waiver’s very purpose was to entice American investors to purchase them. When Argentina later defaulted on the bonds, it pressured American investors to accept new bonds valued at less than thirty cents on the dollar. In fact, it went so far as to enact a law prohibiting any payments to creditors, such as the opposing party in this case, who refused to compromise their claims. Since many state pension funds invest in foreign bonds, and are guaranteed against loss by law, if Argentina succeeds in evading its legal debts they may have to be paid by American taxpayers.

    Even more outrageously, Argentina has made clear its intention to defy any monetary judgment of an American court in this matter, even though the bond agreement expressly provided that disputes would be resolved under the laws of New York. Not surprisingly, Argentina lost the case in both federal district court and in the court of appeals.

  • Ten Thousand Commandments 2014

    April 29, 2014 10:05 AM

    The 2014 edition of Wayne Crews’ annual Ten Thousand Commandments report comes out today

  • Republican Internet Gambling Ban Undermines States’ and Individual Rights

    April 28, 2014 4:19 PM

    Despite rhetoric that we need to “restore” the Federal Wire Act in order to protect states’ rights, Republican lawmakers are pushing a bill that would do the exact opposite. The bills would rewrite a U.S. federal law instituted in 1961, creating a de facto ban on Internet gambling, prohibiting states from legalizing and regulating the activity—something three states have already done with others in the process. Not only does the proposal trample states’ rights, but it will fail to eliminate illegal online gambling and actually make consumers less safe while eliminating millions of dollars in tax revenue for states. Worst of all, it sets an unsettling precedent whereby federal lawmakers can reverse state law if they have a personal problem with the activity.

    Today a coalition of free market groups, including CEI, expressed our opposition to such heavy-handed federal action. In the letter to the chairmen and ranking members of the House and Senate Judiciary Committees we declared our belief that an online gambling at the federal level would have unintended consequences that would be much worse than allowing states to choose if and how to legalize the activity. As we said in our letter:

    The legislation is a broad overreach by the federal government over matters traditionally reserved for the states. H.R. 4301 will reverse current law in many states and drastically increase the federal government’s regulatory power. As we have seen in the past, a ban will not stop online gambling. Prohibiting states from legalizing and regulating the practice only ensures that it will be pushed back into the shadows where crime can flourish with little oversight. In this black market, where virtually all sites are operated from abroad, consumers have little to no protection from predatory behavior.

    The bills, titled the Restoration of America’s Wire Act (S. 2159 and H.R. 4301) were introduced last month by Sen. Lindsey Graham (R-S.C.) and Rep. Jason Chaffetz (R-Utah), respectively. The bills would change the language of the Federal Wire Act, which in 1961 criminalized certain types of “wire” communications related to sports gambling. While Graham, Chaffetz, and others supporting the “restoration” bill claim that the original intent of the Wire Act was to ban all types of gambling, the U.S. Court of Appeals for the Fifth Circuit and the Department of Justice criminal division analyzed the letter of the law and came to the conclusion that insofar as it related to online communication it only prohibits gambling on sports.

    When the DOJ released its opinion on the Wire Act in 2011, it opened the door for states to begin legalizing the activity within their borders. Republicans, like Lindsey Graham are trying to sell their bill as a defense against Obama’s DOJ eroding existing law—but what they are doing is re-writing a 50 year old law to suit their own purposes. As Reason’s Jacob Sullum noted, “If you pay close attention to a statute's actual words, according to Graham, you are ignoring the law. Being true to the law evidently requires excising the inconvenient parts.”

  • Google's Self-Driving Cars Approach 700,000 Miles of Crash-Free Driving

    April 28, 2014 1:31 PM

    In a report released last week for CEI, I noted that developers need to be able to demonstrate automated vehicle safety benefits in order to justify releasing them to consumers. Based on road use and crash data, the critical milestone to reach is about 725,000 miles of crash-free driving in order to be 99 percent confident that automated vehicles are safer than manually driven ones.

    Today, Chris Urmson, director of Google's Self-Driving Car Project, announced the company had reached nearly 700,000 miles of crash-free driving across its fleet of self-driving cars. Google's self-driving fleet has been involved in a couple of minor accidents, but they either occurred when the self-driving car was being manually driven or were due to the fault of another driver.

    Google will be able to demonstrate safety benefits later this year when it hits the critical milestone. Once this occurs and research is published, expect even more private-sector investment and general public interest in automated vehicles to occur. But, as I've warned, this will also bring increased lawmaker and regulator attention.

    As I detailed in my report, policy makers should take care to exercise great restraint in regulating automated vehicle technologies. Overregulation, particularly at this very early stage, risks locking in inferior first-generation technologies, delaying consumer availability, and increasing prices. The results of these good faith but foolish efforts would be increased property damage, injury, and death, as consumers are stuck in less safe, manually driven vehicles for longer than they otherwise would be.

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

    April 28, 2014 9:10 AM

    84 new regulations, from spearmint oil to hot air balloons.

  • FCC's Internet Fast Lanes Should Outrun Net Neutrality Bias

    April 25, 2014 1:10 PM

    The Federal Communications Commission (FCC) will issue proposed rules May 15, rules expected expected to allow premium pricing for Internet fast lanes alongside the lane we have now, for those willing to pay.

    The open-access tech utopians aren't amused; They see the Internet as some kind of magical public resource, as something that popped fully formed out of nowhere, and need never change. In the modern style, they have demands that others must fulfill, and want to set the terms for others' property deployment.

    The New York Times wrote,

    Dividing traffic on the Internet into fast and slow lanes is exactly what the Federal Communications Commission would do with its proposed regulations, unveiled this week. And no amount of reassurances about keeping competition alive will change that fact.

    There's nothing wrong with many fast and many slow lanes on the "Splinternet" of tomorrow. We should have those without new FCC rules setting the terms as both content and infrastructure firms expand and can discipline one another. Anyone who stands in the way of that evolution is the threat to openness and information flow.

    As ever escalating premium services in multimedia emerge, particularly in tomorrow's world of 3D and holograms, today's average speed will pale in comparison. A mere background hum.

    That hum will resonate louder as the premium lane and lanes escalate, making everyone better off. All FCC is going to do is bog the process down.

    No, neutrality advocates seek their own control over the Internet's infrastructure and content, explicitly demanding common carriage (and presumably an end to investment). And the new rulemaking's veneer of liberalization aside, the real problem is that FCC actually seeks broader new forms of regulation over Internet technologies as such, and was granted that authority in court early this year.

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