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  • Democrats vs. Government Unions

    December 29, 2014 2:22 PM

    If late House Speaker Tip O’Neill’s famous saying that all politics is local has a corollary, it may be that politics is at its most substantive at the local level. While the people’s elected representatives in Congress—many from safe districts—trade ideological barbs, state and local elected officials often have to deal in the language of dollars and cents, as they weigh policy decisions that directly affect their constituents.

    That in turn creates different conflicts than those found on Capitol Hill. And nowhere is that more visible than in the growing conflict between state and local Democratic elected officials trying to put their governments’ finances in order. As the Manhattan Institute’s Daniel DiSalvo explains:

    Public sector unions create a genuine political conundrum for Democrats. On the one hand, they are genuinely powerful, and Democrats rely on their money and manpower during elections. Teachers unions, AFSCME, and SEIU are among the biggest donors to Democratic candidates and are organizationally braided into the party apparatus. However, public employee unions drive up government costs and depress productivity, weakening the state’s capacity to assist the poor and middle class.

    There’s the rub. Insofar as public unions secure for their members better pay, more generous benefits, and work rules shielding them from management discretion government doesn’t perform as well—and, consequently, neither do Democrats. Therefore, some Democrats are under pressure to take policy actions their union allies oppose. But taking such action puts them at odds with the most powerful and best-organized segment of their coalition.

    How does it happen that citizens of modest means suffer as public sector unions gain? A big part of the problem is that many states and cities have been providing more public services and promising to pay for them later by back-loading public employee compensation into retirement. And as the share of state and local budgets devoted to public employee pension and health benefits increases, the latter “crowds out” government spending on parks, education, public safety, and other services on which the poor and middle class rely. Democrats find themselves in the difficult position of defending governments that spend more but do less.

    This conflict has been brewing for some time, as my colleague Trey Kovacs and I outlined three years ago, and the rift between government unions and pragmatically-minded Democrats only keeps growing wider, as pension underfunding has grown worse.

    For more on pension reform, see “Best Practices for Reforming State Employee Pensions.”

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

    December 29, 2014 8:24 AM

    The federal government took Thursday and Friday off to celebrate the holidays. Despite the rare three-day work week, agencies still published 25 proposed regulations, more than 40 final regulations, and an average of more than 500 Federal Register pages per day—much of which consisted of the overdue Unified Agenda, an important transparency document collection compiling upcoming regulations from every agency at various stages of the rulemaking process. If past years are a guide, the Unified Agenda’s holiday timing, precisely geared to when even many of us watchdogs are on vacation, is not a coincidence. CEI scholars will soon have much to say about this repeated transparency failure.

    On to the data:

    • Last week, 41 new final regulations were published in the Federal Register. There were 69 new final rules the previous week.
    • That’s the equivalent of a new regulation every four hours and 6 minutes.
    • So far in 2014, 3,487 final regulations have been published in the Federal Register. At that pace, there will be a total of 3,529 new regulations this year.
    • Last week, 1,605 new pages were added to the Federal Register.
    • Currently at 77,810 pages, the 2014 Federal Register is on pace for 78,756 pages. This would be the 6th-largest page count since the Federal Register began publication in 1936.
    • Rules are called “economically significant” if they have costs of $100 million or more in a given year. 44 such rules have been published so far this year, none in the past week.
    • The total estimated compliance costs of 2014’s economically significant regulations currently ranges from $6.48 billion to $9.95 billion. They also affect several billion dollars of government spending.
    • 281 final rules meeting the broader definition of “significant” have been published so far this year.
    • So far in 2014, 655 new rules affect small businesses; 98 of them are classified as significant. 
  • NLRB Advances against McDonald’s

    December 23, 2014 12:21 PM

    By issuing complaints against McDonald’s on December 19, 2014, the National Labor Relations Board gave unions a boost and further riled business groups. On July 29, 2014, the National Labor Relations Board’s (NLRB’s) Office of the General Counsel had set the labor and employment world on fire by authorizing these complaints, which needed Friday’s Board approval to move forward.

    In essence, the Board itself has now preliminarily determined that the franchisor McDonald’s is a joint employer with McDonald’s franchisees and thus is liable for the actions of the franchisees, beyond just the opinion of the NLRB General Counsel.

    In a press call, the International Franchise Association joined the U.S. Chamber of Commerce, National Restaurant Association, and National Retail Federation to address last Friday’s issuance of complaints against McDonald’s.                      

    Robert Cresanti, Executive Vice President of Government Relations and Public Policy for the International Franchise Association explained that holding franchisors liable for the actions of their franchisees, as the NLRB General Counsel has proposed in an amicus brief, would move the franchise system toward large, corporate-owned outlets and away from independently owned operations.

    On the call, Cresanti pointed out two important, real-world impacts such a decision would entail: 1) Minorities would be disproportionately disadvantaged as minority ownership is notably higher among franchise businesses than non-franchise businesses, and 2) Job growth would be constrained as business resources are sapped and franchise expansion curtailed.

    Glenn Spencer, Vice President of the Workforce Freedom Initiative at the U.S. Chamber of Commerce, discussed how the direction of the NLRB leaves businesses with an uncertain standard for compliance.

    Angelo Amador, Vice President & Regulatory Counsel with National Restaurant Association, noted the breadth of the issue goes far beyond McDonald’s and even far beyond restaurants.

    David French, Senior Vice President of Government Relations for the National Retail Federation talked of the retail industry’s concern about the NLRB’s action today.

    Indeed, the NLRB General Counsel’s brief in the BFI case speaks directly to franchising, staffing/temp agencies, and contracting/subcontracting. All of these industries must be concerned with the NLRB’s march against McDonald’s.

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

    December 22, 2014 9:56 AM

    69 new regulations, from washing machines to plants for planting.

  • Besting a Billionaire: How a Grassroots Campaign Stopped a Ban on Internet Gambling

    December 17, 2014 3:13 PM

    This week we get to say goodbye to the 113th Congress. For those who believe in free markets and individual liberty, it was a doozy. There were some losses, but also some big wins. One victory in particular is worth noting because the battle involved one of the worst aspects of politics: entrenched and connected special interests, versus one of the best aspects: a pro-liberty grassroots uprising of individuals against cronyism.

    Like all so-called vices, gambling has always had its foes, from religious leaders who believe it is evil to public health professionals and social advocates worrying exploitation of young, ill, and poor. For the most part, these interests have been unable to stop the demand for or rise in legal gambling throughout the United States. But when one of the world’s richest men says he’ll spend what it takes to ban Internet gambling, all bets are off.

    Intrastate online gambling does not violate federal law: that was the conclusion the department of justice came to in 2011 after two years of consideration. So long as the gambling was not sports related, no federal laws prohibited states from allowing online gambling within their borders. Within the next two years three states, Delaware, New Jersey, and Nevada, began offering licensed and regulated online gambling.

    Not long after that, in November 2013, Sheldon Adelson—CEO of Sands Casino—announced his plan to stop the spread of legal online gambling in the U.S. Coming from the man who almost single-handedly funded Newt Gingrich’s 2012 presidential campaign and who donates millions more to members of Congress—it was a threat that nobody considered empty.

    • December 23, 2011: DOJ declares no federal law preventing intrastate online gambling
    • November 2013: Nevada, New Jersey, Delaware offer legal online gambling
    • November 2013: Adelson announces Coalition to Stop Internet Gambling
    • March 20, 2014: Draft bill written by Adelson’s lobbyist circulated through Congress—on March 26, Sen. Lindsey Graham (R-S.C.) and Rep. Jason Chaffetz (R-Utah) officially introduce the Restoration of America’s Wire Act (S. 2159, H.R. 4301)
  • Poll: Two-Thirds of Americans Oppose Federal Gas Tax Increase

    December 16, 2014 1:16 PM

    new poll from Benson Strategy Group and SKDKnickerbocker found that 67 percent of Americans oppose increasing the federal gasoline tax by 15 cents, or an 80 percent increase from the current 18.4 cents per gallon tax. This is broadly in line with previous polls that found Americans strongly oppose fuel tax increases.

    But this poll posed a question that is nominally on the table. Rep. Earl Blumenauer (D-Ore.) introduced the Update, Promote, and Develop America's Transportation Essentials (UPDATE) Act, which would increase the federal gasoline excise tax 14.9 cents from 18.4 cents per gallon to 33.3 cents per gallon, and the federal diesel excise tax the same amount from 24.4 cents per gallon to 39.3 cents per gallon. This has little chance of going anywhere and the only co-sponsor is retiring Rep. Tom Petri (R-Wisc.), who mangled his Reagan history in a lame attempt to justify his actions as fiscally conservative.

    Along with typical Americans, members of Congress and President Obama also oppose fuel tax increases. Proponents argue that the fuel tax has not been raised since 1993 and that inflation has eroded much of its buying power. This is true, but it also assumes the federal government has and will continue to be a positive force in surface transportation. It has not, is not, and will not be. Count me among the supporters of devolving federal responsibility to the states.

  • Activist Science Undermines Research on Honeybees and Pesticides

    December 15, 2014 11:27 AM

    As reported in a blog post by David Zaruk, some of the “science” on the impact of neonicotinoid pesticides on honeybees appears to have resulted from a pre-orchestrated campaign, rather than an unbiased scientific process. The researchers involved are members of the International Task Force on Systemic Pesticides, which is part of the International Union for Conservation of Nature (IUCN). 

    The task force was ostensibly set up “to bring together through research an integrated assessment of the worldwide impact of systemic pesticides on biodiversity and ecosystems, based on articles published in peer-reviewed scientific journals.” But Zaruk explains that he discovered a document indicating that the effort was more political than scientific.

    The document summarizes a workshop held at the University of Paris back in 2010 at which task force members outlined a strategy designed to make the case that neonicotinoids do in fact harm bees—drawing that conclusion before completing an unbiased, scientific assessment. To that end, it appears that they planned out where they would place studies condemning the chemicals to gain political impact, rather than exploring how they would critically review the body of research.

    IUCN is in fact an activist group, so their desire to undermine chemicals is not all that surprising.  But this case does show how activism has permeated scientific research, confusing the world about the state of science on many issues. While we all have opinions, there needs to be a clearly defined line between policy goals and scientific research. 

    As Zaruk notes: “[N]o credible scientist starts with a campaign strategy and then conjures up some evidence as an afterthought to fit his or her activist agenda. That is not science!”

    Indeed, legitimate scientific discovery requires that researchers try to keep their biases in check, rather than plan studies and placements to garner a desired political objective. In fact, researchers are supposed to begin with a hypothesis and conduct experiments aimed at disproving that hypothesis. So researchers do not leap to conclusions too quickly, scientists are trained to search extensively for reasons to reject their hypotheses. That means that rather than try to prove their theory, they act as a sort of devil’s advocate, attempting to show no effect. In that case, biases may be kept in check and positive associations should be more robust.

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

    December 15, 2014 10:05 AM

    While Congress was busy with the 1,603-page Cromnibus bill (full text), agencies added nearly that many pages to the Federal Register with new regulations for everything from dropped calls to migratory birds.

    On to the data:

    • Last week, 63 new final regulations were published in the Federal Register. There were 71 new final rules the previous week.
    • That’s the equivalent of a new regulation every two hours and 40 minutes.
    • So far in 2014, 3,377 final regulations have been published in the Federal Register. At that pace, there will be a total of 3,532 new regulations this year.
    • Last week, 1,475 new pages were added to the Federal Register.
    • Currently at 74,014 pages, the 2014 Federal Register is on pace for 77,421 pages. This would be the 6th-largest page count since the Federal Register began publication in 1936.
    • Rules are called “economically significant” if they have costs of $100 million or more in a given year. 43 such rules have been published so far this year, none in the past week.
    • The total estimated compliance costs of 2014’s economically significant regulations currently ranges from $8.18 billion to $11.65 billion. They also affect several billion dollars of government spending.
    • 272 final rules meeting the broader definition of “significant” have been published so far this year.
    • So far in 2014, 640 new rules affect small businesses; 96 of them are classified as significant. 
  • Political vs. Market Regulation: Uber Edition

    December 12, 2014 11:48 AM

    Earlier this week The Washington Post’s Catherine Rampell suggested that new entrants in the transportation market, like Uber, should face greater government regulation—despite having fueled much of their initial success by their ability to offer services free of existing taxi regulations. She’s right that commercial enterprises do need a form of regulation that offers corrective discipline, but she’s incorrect that that discipline need be provided by the government.

    Market competition itself provides the best corrective to consumer harm and dissatisfaction—if it is allowed to work. Firms in competition with each other must also simultaneously seek the cooperation of their customers, workers, and investors. Maintaining those relationships encourages firms to monitor their performance with these constituencies and compare themselves with their current and new entrant competitors. But that pressure to improve will only arise when there’s a credible threat of someone else coming along and luring one’s customers away. The more existing rules burden and restrict new entrants, the less effective that threat will be.

    The rationale for political regulation is often based on outmoded ideas, including that the information needed for markets to function is not available to enough consumers. New technology, in particular in the case of urban ridesharing, has undermined many of these arguments, and the future innovations birthed by competitive pressures will eliminate even more. To the extent that taxi and rideshare drivers and being treated unequally, the answer is to liberate the cabbies, not to shackle Uber.  

  • Lame Duck Quacks Needed Dodd-Frank Relief

    December 12, 2014 10:29 AM

    Waaaah! That’s the sound of former House Financial Services Committee Chairman Barney Frank (D-Mass.) crying about stinging, bipartisan rebukes to his legacy of the Dodd-Frank financial regulatory monstrosity rammed through the Democrat-controlled Congress in 2010.

    And it must be all the more painful to Frank that enough members of his own party had turned against provisions of the legislation that a couple much-needed rollback are on the verge of being signed into law in this month’s “lame duck” session.

    According to the Boston Globe, Frank called some of these rollbacks “the road map for stealthily undoing all this in the future.” We can only hope this is the case! Because even liberal Democrats are now discovering that Dodd-Frank did nothing to lessen the problem of too-big-to-fail banks and instead punishes “Main Street” business, investors, and consumers who had nothing to do with the crisis.

    As this is being written, it looks like three modest but significant measures of relief from Dodd-Frank are on the verge of passing; one by itself in a separate bill and two will be the proverbial “ponies” in the manure of subsidized terrorism insurance and “crominbus” spending bills.

    There is a fight brewing with measure of derivatives relief in the cromnibus, with progressive Sens. Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio), leading the charge against it. This is a good modestly deregulatory measure and will be discussed in a follow-up blog.


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