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  • Voxplaining Pew Charts on Highway Funding and Ignoring Transit's Decline

    May 6, 2014 12:42 PM

    Over at, former WaPo blogger Brad Plumer wrote a post about highway funding, largely relying on the good folks over at the Pew Charitable Trusts, who published this analysis of transportation funding and financing yesterday. The numbers are sound. There are major funding challenges facing the federal transportation programs. We can all agree on that. But Plumer ignores a couple of key facts that might color his narrative a bit differently. He writes:

    Ever since the Reagan administration, roughly four-fifths of federal transportation spending has gone toward highways, while one-fifth has been specifically set aside for mass transit projects.

    In recent years, some Republicans have pushed to eliminate the fixed share of federal money for transit, arguing that local bus and subway projects should be financed by user fees rather than federal gasoline taxes. These challenges have been unsuccessful so far, though, and mass transit has maintained its dedicated funding stream.


    For decades, federal highway spending was largely financed by the Highway Trust Fund, paid for by federal gas taxes. The idea was that roads and highways would be paid for by the people actually using them. But this is no longer the case.

    As the first column shows, the federal gas tax only covered about 72 percent of all federal highway spending in 2011. Congress had to scrounge up the rest from the general fund. Indeed, every single state now receives more in federal highway money than it pays in federal gas taxes — with some states receiving significantly more.

  • Warren Buffett: "During the next decade, you will read a lot of news – bad news – about public pension plans."

    May 6, 2014 12:02 PM

    Thus warns Warren Buffett in his latest message to investors, part of Berkshire Hathaway's annual report. And when the Oracle of Omaha speaks, most of the world listens. So here's hoping his warning of the dangers that underfunded public pensions liabilities pose to state and local governments brings some needed public attention to this problem.

    Local and state financial problems are accelerating, in large part because public entities promised pensions they couldn’t afford. Citizens and public officials typically under-appreciated the gigantic financial tapeworm that was born when promises were made that conflicted with a willingness to fund them. Unfortunately, pension mathematics today remain a mystery to most Americans.

    The math being "a mystery to most Americans" is a major factor that has enabled state and local politicians to underfund pensions for years, by calculating contributions using discount rates based on overly optimistic investment return projections.

    Despite reforms in more than 40 states, many pension funds are still in bad shape. As Benefits Pro's Lisa Barron reports, ""Moody's Investor Services estimates that the liability increased 24 percent, from $998 billion in 2011 to $1.2 trillion in 2012, the latest available data with audited results."

  • Finally Free to Leave SEIU, Michigan Home Care Workers Do Exactly That

    May 1, 2014 3:11 PM

    Michigan becoming the nation's 24th right to work state in 2012 appeared to pose a challenge to major industrial private sector unions like United Auto Workers. But it's also posed a major challenge to public sector unions in the Wolverine State --  or rather, a scheme to reclassify as "public employees" a group of people who aren't even directly employed by the state.

    The group in question is home health care workers who receive state assistance. How were they reclassified as state "employees"? The Washington Examiner's Sean Higgins explains:

    In 2005, then-Gov. Jennifer Granholm, a Democrat, created the Michigan Quality Community Care Council -- commonly referred to as "MQC3" -- ostensibly for the purpose of keeping tracking track of program's 45,000 participants. However the entity also made it legally possible for the state to claim the participants were actually employees and therefore eligible for collective bargaining.

    The following year, Granholm signed a collective bargaining contract with SEIU Healthcare Michigan, after a mail-in ballot in which only 20 percent of the program participants voted. It is not clear how many in the program even knew an election was going on or what the ballot represented.

    In short, a union-friendly administration created a state body to pose as the "employer" of home care workers receiving state assistance, and then conducted a stealth organizing campaign by mail. (A similar effort in Connecticut led CEI to partner with the Connecticut-based Yankee Institute to conduct our own mail campaign informing Connecticut home care workers that if they wanted to avoid unionization, they had to return the cards stating so.)

    Unsurprisingly, many home care workers in Michigan were unhappy about having their assistance payments suddenly reduced because of dues payments to which they never consented. So when they could finally exit, they did. As a result, SEIU Healthcare Michigan's membership dropped from 55,000 in 2012 to under 11,000 the next year.

  • 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:

  • 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.

  • A Victory for Taxpayers and Equal Protection: Supreme Court Upholds Michigan's Proposal 2

    April 25, 2014 1:08 PM

    Taxpayers of all races pay more when government contracts are doled out based on race, rather than awarded to the lowest bidder. That's one reason why it's great news that the Supreme Court reversed a ridiculous lower court decision claiming that it violates the Constitution for voters to ban racial preferences in state government. In its 6-to-2 decision Tuesday in Schuette v. Coalition to Defend Affirmative Action (BAMN), the Supreme Court overturned a contentious, 8-to-7 ruling by the Sixth Circuit Court of Appeals striking down a provision of the Michigan state constitution that rightly banned racial preferences in government contracts and employment, and in state college admissions.

    That provision (Article I, §26) was added to the state constitution by a 2006 ballot initiative, known as Proposal 2 or the Michigan Civil Rights Initiative, which passed easily with 58 percent of the vote. The Supreme Court's moderate and conservative justices, along with one of the court's four liberals (Justice Stephen Breyer), voted to uphold that provision. Justice Sotomayor, who was appointed by President Obama, dissented, joined by liberal Justice Ruth Bader Ginsburg.

    The Sixth Circuit's ruling, which claimed it violated the Constitution's equal protection clause to mandate that people be treated equally without regard to their race, defied common sense: It is nonsensical to argue that the Equal Protection Clause requires that people be treated unequally. The Sixth Circuit's ruling also conflicted with rulings the California Supreme Court and the Ninth Circuit Court of Appeals upholding a materially-indistinguishable provision added to California's state constitution, known as the California Civil Rights Initiative or Proposition 209. That provision, approved by California voters in 1996, was upheld in 1997 by the Ninth Circuit, and later upheld by the California Supreme Court in 2010 in a 6-to-1 vote.

    The Sixth Circuit’s strange ruling that voters cannot limit racial preferences through ballot initiatives risked harming taxpayers by increasing the cost of government contracts. Even fairly mild government affirmative action programs that do not impose racial quotas nevertheless impose substantial costs on taxpayers. For example, in the Domar Electric case, Los Angeles accepted a bid for almost $4 million to complete a contract rather than the lowest bid of approximately $3.3 million, at a cost to taxpayers of more than $650,000. The lowest bidder was rejected solely because it failed to engage in affirmative action in subcontracting. California’s Proposition 209 later limited this sort of racial favoritism by banning racial preferences, voiding a number of state affirmative-action programs, and thus saving taxpayers millions of dollars.

    Justice Sotomayor's dissent purported to rely on the controversial “political restructuring” doctrine, which holds that shifting a decision on a public policy issue from one level or branch of government to another is sometimes unconstitutional if it disadvantages minorities. (The Cato Institute's Walter Olson discusses the incoherent nature of this doctrine at this link.)

    As Justice Sonia Sotomayor put it in her dissenting opinion, the doctrine applies in cases where the state “reconfigur[es] the existing political process… in a manner that burdened racial minorities." But as law professor Ilya Somin notes, this begs the question, since racial preferences harm racial minorities, such as Asian-American college and magnet-school applicants (who often must meet even higher standards than white applicants to be admitted). Thus, Michigan's ban on racial preferences helped, rather than "burdened," many members of racial-minority groups. Like the Asian American Legal Foundation, which filed briefs in support of Michigan's Proposal 2, I look forward to the day when my Asian niece and nephew are judged by the content of their character, not the shape of their eyes or the color of their skin.

  • Driverless Cars, Innovation, and Regulation: Let's Not Mess it Up

    April 23, 2014 8:11 AM
    CEI General Counsel Sam Kazman about to take a spin in Google's self-driving car. (Photo by Marc Scribner) CEI General Counsel Sam Kazman about to take a spin in Google's self-driving car. (Photo by Marc Scribner)

    For the past several years, I've been writing about highly automated vehicles -- widely referred to as driverless cars -- and the huge potential they have in reducing injuries and deaths (over 30,000 Americans die on the roads every year), improving mobility for the disabled and elderly, reducing the drudgery of commuting, and helping the environment... provided policy makers don't mess it up with onerous laws and regulations (see here, here, here, here, here, here, here, and here).

  • CEI Testifies against National Labor Relations Board Rule to Allow Ambush Elections

    April 16, 2014 7:10 AM

    NLRB Ambush Election HearingOn three separate panels, I testified last week against the flaws inherent in the National Labor Relations Board’s (NLRB) latest proposed rule.

    The NLRB benignly purports to re-examine “Representation Case Procedures.” The rulemaking is commonly known as the ambush elections rule, as a result of a key component that could require elections in as few as ten days.


    On the first panel, I addressed the election date at the heart of the proposal. Approvingly quoting a letter from eighteen United States Senators who commented against the proposed rule, I noted that, “then-Senator John F. Kennedy stated that it was essential to allow ‘at least a 30-day interval between the request for an election and the hold of an election’ in order to ‘safeguard against rushing employees into an election where they are unfamiliar with the issues.’”

    The crux of then-Senator Kennedy’s statement is a focus on safeguarding employees and on ensuring that effectively educating employees remains the Board’s focus.


    Pointing out that the median times for elections are on the order of 40 days and that the proposal could call for elections in as few as ten days, I asked, “Would your students benefit from a 75-percent reduction in study time?”

    I pointed out that workers, who already have a job and many of whom have families and hobbies, are challenged with essentially learning a crash course in labor law and labor economics—two arcane and intricate areas normally pursued by highly trained specialists with advanced degrees.

    An absolute minimum of 30 days and really a routine minimum of sixty days are appropriate to learn such material.

  • CEI's Scores Paycheck Fairness Act

    April 10, 2014 9:28 AM

    The Competitive Enterprise Institute scored Wednesday’s vote in the U.S. Senate on the passage of S. 3772, The Paycheck Fairness Act, a bill that would fundamentally change the Equal Pay Act of 1963, which prohibits employers from paying women less than men for performing the same work in the same workplace.

    The score will be incorporated into CEI’s Congressional Labor Scorecard that can be seen in full on CEI’s labor policy website,

    CEI opposes numerous provisions of the proposed bill:

  • EEOC Loses Hypocritical Lawsuit against Employer over Background Checks

    April 9, 2014 10:07 PM

    "In this case the EEOC sued the defendants for using the same type of background check that the EEOC itself uses." So began a 3-to-0 ruling Wednesday by the Sixth Circuit Court of Appeals in EEOC v. Kaplan Higher Education Corp. (Apr. 9, 2014). CEI joined the Pacific Legal Foundation's amicus brief in support of the employer sued by the EEOC, the federal civil-rights agency. (EEOC stands for Equal Employment Opportunity Commission.) As former assistant attorney general Roger Clegg (now at the Center for Equal Opportunity) notes,

    The Obama Administration sued Kaplan for running credit checks on employee applicants – similar, by the way, to the ones the EEOC itself uses. Kaplan had learned that some of its employees had misappropriated student payments and, to provide safeguards against this behavior, it began screening its applicants for major red flags in their credit history. The EEOC sued Kaplan, arguing that it cannot use credit checks, because use of credit checks has a disparate impact on black applicants.

    Anyway, putting aside the inherent dubiousness of the whole lawsuit, there were also severe methodological problems with the Obama Administration’s evidence, which relied on “race raters” to determine, by scrutinizing driver’s license photos, the race of the applicants. So the trial judge threw out the case. Today, I’m happy to report, the court of appeals affirmed that decision – and in no uncertain terms, I might add, much I’m sure to the Obama administration’s chagrin.

    At the Washington Post, UCLA Law Professor Eugene Volokh provides these excerpts from the court's ruling:

    The EEOC’s personnel handbook recites that “[o]verdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations.” Because of that concern, the EEOC runs credit checks on applicants for 84 of the agency’s 97 positions. The defendants (collectively, “Kaplan”) have the same concern; and thus Kaplan runs credit checks on applicants for positions that provide access to students’ financial-loan information, among other positions. For that practice, the EEOC sued Kaplan. Specifically, the EEOC alleges that Kaplan’s use of credit checks causes it to screen out more African-American applicants than white applicants, creating a disparate impact in violation of Title VII of the federal Civil Rights Act. See 42 U.S.C. § 2000e-2(a)(1), (a)(2), (k). Proof of disparate impact is usually statistical proof in the form of expert testimony; and here the EEOC relied solely on statistical data compiled by Kevin Murphy, who holds a doctorate in industrial and organizational psychology. For two reasons, however, the district court excluded Murphy’s testimony on grounds that it was unreliable. First, the EEOC presented “no evidence” that Murphy’s methodology satisfied any of the factors that courts typically consider in determining reliability under Federal Rule of Evidence 702; and second, as Murphy himself admitted, his sample was not representative of Kaplan’s applicant pool as a whole. The district court therefore granted summary judgment to Kaplan. The EEOC now argues that the district court “erred” — a telling, oft-repeated, and mistaken choice of word here — when it excluded Murphy’s testimony. We reject the EEOC’s arguments and affirm.

      . . . . . . . .

    The EEOC brought this case on the basis of a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself. The district court did not abuse its discretion in excluding Murphy’s testimony.


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