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OpenMarket: April 2014

  • CEI Podcast for April 3, 2014: Clean Air Act Costs and Benefits

    April 3, 2014 4:31 PM

    Senior Fellow William Yeatman is skeptical of an EPA report claiming the Clean Air Act will have nearly $2 trillion in annual benefits by 2020.

  • Is the Stock Market Really Rigged?

    April 2, 2014 5:30 PM

    Everyone seems to be jumping into the debate about high-frequency trading, now that Michael Lewis is peddling his new book, Flash Boys.

    Lewis contends that the stock market is rigged, and that the culprit is high-frequency traders. But not everyone agrees that they are to blame, or that the stock market is even rigged to begin with.

    Cliff Asness, founder of AQR capital, suggests that high-frequency traders have in fact made trading cheaper for hedge funds. And this, in turn, benefits clients, such as pension funds or university endowments:

    What is good for us is lower trading costs because it translates into better investment performance and happier clients, which makes our business slightly more valuable. How do we feel about high-frequency trading? We think it helps us … we devote a lot of effort to understanding our trading costs, and our opinion, derived through quantitative and qualitative analysis, is that on the whole high-frequency traders have lowered costs.

    So the hedge funds that benefit from these lower transaction costs are able to pass those savings along to their investors. And their investors are made up largely of pension funds and university endowments.

    In short, the savings that high-frequency traders generate get passed on to a very broad base of consumers, including those who only participate in the market indirectly -- via a pension plan or as the beneficiary of a university endowment.

  • Consumer's Guide to Chemical Risk

    April 2, 2014 3:40 PM

    Will these chemicals make me fat? That sounds like a weird question, but some consumers may actually have such worries, thanks to a constant barrage of news headlines suggesting that synthetic chemicals—an even some naturally occurring ones—are responsible for nearly every public health problem imaginable.

    My website and CEI's recently released booklet, A Consumer's Guide to Chemical Risk: Deciphering the 'Science' Behind Chemical Scares,” are tools designed reduce both the confusion and fear about chemicals. These tools provide consumers with some insights on the science and the politics behind the headlines.

    For example, when confronted with a new claim, consumers can evaluate the underlying science by asking the following questions:

  • Taxable Bitcoins: Property or Money?

    April 1, 2014 3:54 PM

    Is Bitcoin currency or property? It depends on which parts of the federal government you ask. Last week the Internal Revenue Service (IRS) announced that bitcoins are taxable and how it would implement such taxation. While the rule could have been much worse, the manner in which the IRS went about doing so brings up many more legal questions.

    In context, the fluctuating exchange rate between bitcoins and dollars does cause the cryptocurrency to behave more like property in terms of valuation. The IRS merely took its explanation on "virtual currencies" from the current definition of taxable bartering:

    Bartering is an exchange of property or services. You must include in your income, at the time received, the fair market value of property or services you receive in bartering. If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise.

    This is clearer when seeing the IRS’s answer to how Bitcoin values must be calculated for tax purposes:

    …A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received.

    This classification of Bitcoin as non-currency for tax purposes isn't that new. Back in January 2014, Sweden's Tax Agency moved to classify bitcoins as assets rather than currency itself. In Australia, this month, the tax authority announced Bitcoin transactions person-to-person would be subject to a "goods and services" tax, similar to the IRS classification, as well as a capital gains tax for profits made through Bitcoin. It is not unusual for bitcoins to be treated as non-currency for tax purposes.

  • Why Is Obama's Report to Congress on the Benefits and Costs of Federal Regulation Delayed?

    April 1, 2014 3:05 PM

    In April 2013, the White House Office of Management and Budget (OMB) issued its Draft 2013 Report to Congress on the Benefits and Costs of Federal Regulations, which covered rules and regs issued in fiscal year 2012. The final 2013 edition never appeared; now, the Draft 2014 edition is due. I'm not holding my breath.

    President Obama claimed again as recently as February 2013 that "this is the most transparent administration in history."

    But getting this important document, as well as the oft-delayed Unified Agenda of Federal Regulatory and Deregulatory Actions, is like pulling teeth. Part of the recent House-passed ALERRT Act addressed the Agenda's tardiness; it's naturally stuck in the Senate. (The Agenda is an obscure but important document wherein federal departments and agencies reveal their priorities along with disclosing recently completed rules.)

    The 2013 Draft Report revealed that costs of major rules jumped under Obama; The 14 rules added during the fiscal year ended September 2012 imposed costs of from $14.8 billion to $19.5 billion (that's in the 2001 dollars OMB uses, which look better than 2012 dollars).

    The OMB breakdown incorporates only benefits and costs of a handful of major rules which the OMB or agencies have expressed in quantitative and monetary terms. It omits numerous categories and cost levels of rules altogether, and rules from independent agencies are entirely absent.

  • Ryan FY 2015 Budget Calls for Transportation Funding Rationalization

    April 1, 2014 11:28 AM

    House Budget Committee Chairman Paul Ryan, R-Wisc., released his FY 2015 budget today. In just three pages, he calls for surprisingly sensible reforms to federal transportation programs. Unlike the Obama and Camp budgets -- which I earlier criticized for continuing trust fund bailouts and merely kicking the can down the road -- Ryan makes an attempt to fix the Highway Trust Fund's revenue/outlay imbalance by refocusing transportation funding on core programs, while allowing states more flexibility to experiment with self-funding and -financing mechanisms.

    As Ryan notes:

    The budget recommends sensible reforms to avert the bankruptcy of the Highway Trust Fund by aligning spending from the Trust Fund with incoming revenues collected. The budget also includes a provision to ensure any future general-fund transfers will be fully offset, while at the same time providing flexibility for a surface-transportation reauthorization that does not increase the deficit. The budget includes a reserve fund to provide for the adjustment of budget levels for consideration of surface-transportation legislation, as long as that legislation is deficit neutral.

    In addition, Ryan recommends the following positive transportation policy changes:

    • Eliminate Amtrak's billion-dollar-plus annual subsidy;
    • Reduce the Transportation Security Administration's outlays; and
    • Eliminate the Essential Air Service.

    With highway bill reauthorization around the corner, it is great to see some real positive reforms being put on the table. Many free market transportation advocates would certainly like to see more, but we need to start somewhere, and Ryan's budget appears to be that starting point.


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