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  • State Department Tells 28 Senators To Go Pound Sand

    April 29, 2016 5:23 PM

    The U. S. State Department replied this week to the 18th April letter to Secretary John Kerry from 28 Senators that pointed out that Palestine was recognized as a full member of the UN Framework Convention on Climate Change as of 17th March and therefore the United States must stop all funding of the UNFCCC as required by laws enacted in 1994 and 1990.  State’s snotty response to the Senators can be summarized thus: Go pound sand.

    Assistant Secretary of State for Legislative Affairs Julia Frifield wrote to Senator John Barrasso (R-Wyo.):

    “It is our view that neither the restriction referenced in your letter, section 410 of Public Law 103-236, nor the restriction contained in section 414 of Public Law 101-246, have been triggered by the Palestinians’ purported accession to the UNFCCC.  The UNFCCC is a treaty, and the Palestinians’ purported accession to it does not involve their becoming members of any UN specialized agency or, indeed any international organization.”

    Frifield makes two points.  First, by calling the membership of Palestine in the UNFCCC “purported,” she seems to be implying that it really isn’t so.  This is preposterous.  The UNFCCC issued a press release titled, “State of Palestine Joins UNFCCC.”  And the Palestinian delegation issued a press release that they have signed the Paris Climate Treaty, which is a part of the UNFCCC.

  • Power Plant Rule: EPA Defies Stay to Develop Legally Dubious Incentive Program

    April 28, 2016 3:18 PM

    The EPA yesterday took another step to advance the Obama administration’s flagship domestic climate policy, the so-called Clean Power Plan (CPP).

    As Politico reported:

    The EPA is moving forward with a component of the Clean Power Plan, sending proposed details and language for the optional Clean Energy Incentive Program to the White House Office of Management and Budget today, according to an EPA statement set to be released today. The CEIP would provide credit for power generated by new wind and solar projects in 2020 and 2021, as well as double credit for energy efficiency measures in low-income communities over that same period.

    “But,” Politico asks, “didn’t SCOTUS stay the Clean Power Plan?” Of course it did. On February 9, the Supreme Court told EPA to halt further proceedings on the rule. So how does EPA justify its continuing work on the CEIP? According to Politico:

    EPA will argue that advancing this piece of the rule doesn't violate the stay. “Many states and tribes have indicated that they plan to move forward voluntarily to work to cut carbon pollution from power plants and have asked the agency to continue providing support and developing tools that may support those efforts, including the CEIP,” the statement says. “Sending this proposal to OMB for review is a routine step and it is consistent with the Supreme Court stay of the Clean Power Plan.”

  • Why Is Employee Involvement an Unfair Labor Practice?

    April 28, 2016 3:16 PM

    U.S. labor law is largely based on the false narrative of an inequality of bargaining power between employees and employers. The theory goes that an employer will extort an employee down to their reservation wage, or lowest acceptable wage that is better than being unemployed.

    Tyler Cowen and Alex Tabarrok, both professors at George Mason University, dispel this myth. As they explain, “[B]uyers compete against other buyers (and sellers compete against other sellers). Firms buy labor and they are competing primarily not against workers but against other firms. Firms versus Firms! Now that is a real battle!”

    Meaning when companies are trying to determine what compensation to pay an employee, they are not thinking about shaking down an employee, but how much another company may pay the employee. Interestingly, the data show it is more likely that an employee leaves a company than an employer breaks off the relationship (see data here on quits vs. layoffs).

    Even still, labor unions and Democrats commonly argue workers need stronger voice in how a company is run. Yet, there is an obvious reason why employees are not given much of a say in company matters. The only voice an employee can have under American labor law is from a union. Other kinds of “employee involvement,” sometimes referred to as a “company union” or simply a formal system that gives employees input on how the company runs, have been illegal for decades. This is just another flaw in the outdated, 80-year-old National Labor Relations Act.

  • CEI Supports Vote to Block Labor Department's Fiduciary Rule

    April 28, 2016 10:49 AM

    Today, the U.S. House of Representatives is expected to vote on H.J. Res 88, the resolution pursuant to the Congressional Review Act to disapprove the Department of Labor fiduciary rule, which was introduced by Reps. Phil Roe (R-Tenn.), Charles Boustany (R-La.), and Ann Wagner (R-Mo.).

    The Competitive Enterprise Institute strongly supports this legislation. Congress must disapprove this regulation for many reasons, the first being the Obama administration’s blatant disregard of the statute that Congress wrote. The Employee Retirement Income Security Act of 1974 gives the Department of Labor very limited authority over employment-based pensions. It in a way authorizes the Labor Department to redefine the term “fiduciary”—much less in a way that differs from decades-old interpretations of the term from the Securities and Exchange Commission and state common law precedent—in order to bring a broad swath of financial professionals under its jurisdiction.

    In the proposed rule, the Labor Department didn't even bother to try to disguise its contempt for the intelligence of American savers. It says, most individuals “cannot prudently manage retirement assets on their own,” and that improved disclosure won’t help because savers “generally cannot distinguish good advice, or even good investment results, from bad.” The Labor Department has never disavowed this outrageous justification for the rule.

  • CEI Challenges Illegal "Vapes on a Plane" Regulation

    April 28, 2016 8:30 AM

    Today, CEI, the Consumer Advocates for Smoke-free Alternatives Association (CASAA), and CEI employee Gordon Cummings, as a private individual, filed a lawsuit challenging the Department of Transportation’s (USDOT) recent regulation extending the existing statute prohibiting smoking aboard aircraft to cover electronic cigarettes. The reason is simple: Congress never gave regulators the power to prohibit e-cigarette use aboard aircraft.

    The agency is inventing authority it clearly does not have. Congress granted USDOT power to implement its law under 49 U.S.C. § 41706 prohibiting “[a]n individual from smoking” during a scheduled flight and to “require all air carriers and foreign air carriers to prohibit smoking.” Yet, as even USDOT conceded in its proposed rule, electronic cigarettes do not combust any material or produce smoke. Thus, it is impermissible to rely on Congress’s no-smoking statute to promulgate a regulation outlawing e-cigarette use on aircraft. Anyone concerned about government wrongfully trampling on the rule of law should be worried by this abuse of power.

    As CEI and CASAA noted in comments to the agency in 2011:

    Statutes should be construed under their ordinary and plain meaning. Merriam-Webster defines smoke as “the gaseous products of burning materials especially of organic origin made visible by the presence of small particles of carbon.” An e-cigarette produces no smoke and no combustion is involved in its operation. As the D.C. Circuit panel noted in Sottera, e-cigarettes “are battery-powered products that allow users to inhale nicotine vapor without fire, smoke, ash, or carbon monoxide.” 627 F.3d at 893 (emphasis added). DOT’s arguments that the use of e-cigarettes resembles smoking have nothing to do with the fact that their use does not involve smoking. For example, the fact that this use involves “an inhalation and exhalation similar to smoking cigarettes” (76 FR 57,009) means nothing. Blowing air through a straw (such as the hollow plastic coffee stirrers handed out by flight attendants, which passengers occasionally play with in this manner) also involves inhaling and exhaling, but it hardly constitutes smoking.

    As I noted last year in an article for

    The DOT states that Congress’ intent in prohibiting smoking in the skies was to “improve air quality within the aircraft, reduce the risk of adverse health effects on passengers and crewmembers, and enhance aviation safety and passenger comfort.” The law was intended to address secondhand smoke, and the department concedes “a vapor, rather than smoke, is produced.” So how does the Department of Transportation justify its proposal? By noting, that e-cigarettes “require an inhalation and exhalation similar to smoking cigarettes.”

    So, by DOT’s logic, when Congress referred to “smoke” and “smoking,” it meant anything that might vaguely resemble smoke and smoking, rather than smoke itself and its resulting harms, even though Congress enacted a clear law in which the terms “smoke” and “smoking” are not ambiguous.

    The Department of Transportation has no authority to regulate vaping, an area over which it has no jurisdiction. It may claim that it is simply interpreting “smoking” to cover the use of e-cigarettes, but as the Supreme Court has made clear, an “agency may not bootstrap itself into an area in which it has no jurisdiction” by stretching the language of a statute.

    Fundamentally, this is a rule of law issue. Regardless of your views on vaping on planes, the statute USDOT is attempting to illegally rewrite does not cover smoke-free vapor products. As had been the case until the final rule, airlines voluntarily prohibited vaping aboard their aircraft. This should be their right and it should be preserved and respected.

  • Congress Must Pass Email Privacy Act

    April 27, 2016 11:06 AM

    This week, the U.S. House of Representatives will vote on the Email Privacy Act (H.R. 699) sponsored by Rep. Kevin Yoder (R-Kan.). The Competitive Enterprise Institute strongly supports this legislation, which would amend the 1986 Electronic Communications Privacy Act (ECPA) to require that the government obtain a warrant, based on a showing of probable cause, to compel a cloud computing provider to divulge the contents of a user’s private electronic communications. The Email Privacy Act enjoys strong bipartisan support, with well over 300 House cosponsors—a majority of House Republicans and Democrats.

    Yesterday, CEI joined dozens of public interest groups, companies, and activists in a coalition letter urging members of Congress to vote for H.R. 699. Reforming ECPA isn’t a new priority for CEI. We first urged Congress to rewrite the statute in written testimony to the House and Senate Judiciary Committees in 2010.

    Existing law doesn’t adequately protect Americans from warrantless searches of their private data stored with cloud and mobile providers. Congress must make clear that law enforcement cannot access users’ private information—such as stored emails and backup files—without showing probable cause or even notifying users that the government has accessed their private data. The Email Privacy Act would protect Americans’ privacy by making clear that the Fourth Amendment to the Constitution, which protects the “right of the people to be secure … against unreasonable searches and seizures,” applies in the digital world.  

  • Wind Energy Industry Suffers Fuel Shortage in 2015

    April 27, 2016 11:05 AM

    Wind energy can’t compete. Instead, it exists only by the grace of favorable politics. On the supply side, the industry enjoys the federal production tax credit, which awards tax equity to owners of wind power for each megawatt hour of generated electricity. On the demand side, the industry enjoys Soviet-style production quotas in 30 states that force ratepayers to use increasing amounts of wind power.

    Yet even with all this political “wind” at its back, sometimes the industry nonetheless falls short—because nature won’t cooperate. According to James Osborne at Fuel Fix

    Last year might have been a banner year for wind turbine construction, but not for the wind itself.

    According to new data from the U.S. Energy Information Administration, the amount of electricity generated from wind turbines grew by less than 10 million megawatt hours last year, the smallest increase since 2007.

    In a report Thursday government analysts attributed the slow down to decreased wind speeds across the western half of the United States during the first six months of 2015.

    “The same weather patterns resulted in stronger winds in the central part of the country, where wind generation growth in 2015 was most pronounced,” the report read.

    The fall off came even as wind energy capacity grew by its highest level in three years, as more than 8,000 megawatts worth of new turbines were installed on the grid, according to EIA.

    To recap: Due to the wind not blowing, there was a paradox for the wind energy industry in 2015 whereby capacity installment was historically high, while generation was historically low. By my back-of-the-envelope calculation, the new wind power capacity operated 13 percent of the time in 2015, which is hardly the hallmark of reliability.

  • FSOC Misunderstands Leverage, Threatens Risk Management

    April 27, 2016 9:43 AM

    The Financial Stability Oversight Council recently released its “Update on Review of Asset Management Products and Activities,” in which it questions “how certain asset management products and activities could pose potential risks to U.S. financial stability.”

    One aspect of the report focuses on hedge funds’ use of leverage, and the purported increase in risk associated with an increase in leverage:

    The relationship between a hedge fund’s level of leverage and risk, and whether that risk may have financial stability implications, is highly complex. Leverage is not a perfect proxy for risk, but there is ample evidence that the use of leverage, in combination with other factors, can contribute to risks to financial stability. These risks are likely to be greater if an elevated level of leverage is employed…

    While the report strikes an appropriately cautious tone about using leverage as a proxy for risk, and lists the shortcomings of such an approach, it also cautiously endorses this method of measuring risk, which was written into a proposed rule change by the SEC last December that would limit the amount of leverage 1940 Act funds may obtain through derivatives.

    The above passage quoted from the report refers to hedge funds, though the same logic drove the SEC’s proposed rule change that would affect other much more heavily regulated funds, including mutual funds and exchange traded funds. It is important to examine how this simplistic approach may potentially harm average investors if it is used to impose limits on the amount of borrowing by 1940 Act funds.

  • The Proliferation of Federal Agency Guidance Documents

    April 27, 2016 9:16 AM

    Recently we looked at some prominent recent examples of federal agency guidance—costly to-dos for the private sector. Today I wanted to say just a quick a word about the proliferation of guidance overall.

    Recall that agencies use guidance documents and other regulatory dark matter to get around the rule-making process. The Mercatus Center’s Hester Peirce described how “agencies opt for short-cuts”:

    Rather than bothering with the burdensome rule-making process, they use faster and more flexible means of imposing mandates. To avoid running afoul of the letter of the Administrative Procedure Act, these mandates are often couched in tentative, temporary or voluntary terms. Regardless of the language and the format, the effect is the same for regulated entities. The agency suggests that you do something—even if it says that it might suggest something different later—and you do it.

    Guidance is growing and duplicitous. Executive branch agencies sometimes highlight “significant guidance,” a nod toward compliance with a 2007 OMB memo on “Good Guidance Principles,” but usually not (here’s my “quick and dirty” inventory of what exists). Otherwise, guidance documents, memos, bulletins, circulars, and more can take up considerable space in the Federal Register and on agency websites.

  • The Chilling Effect of Dark Matter

    April 26, 2016 1:29 PM

    Here at CEI, we know all about the chilling effect of executive power. We also know quite a bit about the extent to which the executive uses what we call “regulatory dark matter” to go beyond the normal legislative and rulemaking processes to impose more burdens on citizens and businesses. Today we have an example of both happening in the same issue, the Department of Labor’s final Fiduciary Rule.

    The rule will place huge burdens on the insurance industry, and will likely lead to middle class Americans losing access to personal investment advice (and all of this is supposed to be in their interests). Normally when a government agency imposes a huge burden on an industry at a whim, the response by those disadvantaged is to turn to the courts to redress their grievances (which is the entire point of the court system).

    Today, however, we learn from a PoliticoPro report (subscription needed) that the industry is concerned that a court case will invite reprisals from the Department of Labor in the shape of a lack of guidance favorable to the industry:

    Additionally, a lawsuit might make the Labor Department less willing to issue interpretive guidance that would help businesses implement the rule, the memo said.

    It is surely an implicit abuse of power if an agency, owing to its discretionary power to issue interpretative guidance on a rule, is able to deter affected parties from pursuing a redress of grievance through the court system.


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