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  • Dodd-Frank Conflict Minerals Rules Cause Smuggling, Starvation, and Harm to U.S. Businesses

    June 19, 2015 12:36 PM

    The 2010 Dodd-Frank Act effectively restricted U.S. business’s ability to obtain minerals from the war-torn nation of the Congo and surrounding countries. That caused massive unemployment and hunger in the Congo, and huge job losses in mining communities. By driving out Western buyers, it gave Chinese firms a virtual monopoly on some Congolese minerals. 

    Dodd-Frank imposed costly auditing and reporting requirements on companies that use minerals such as tin, tungsten and gold, requiring them to report on their use of minerals not just from the Congo, but also peaceful neighboring countries like Tanzania, which are effectively punished merely for being next to the Congo. At least 6,000 companies are affected, including Apple, Ford, and Boeing, costing them billions of dollars.

    African smugglers have benefited from Dodd-Frank, notes a recent article in Politico, as “clean miners” in the Congo, the world’s poorest country, simply can’t afford to comply with Dodd-Frank’s certification requirements.

    As Politico reported,

    the boycott prompted by the Dodd-Frank Act put thousands of eastern Congolese miners out of work. The World Bank has estimated that 16 percent of Congo’s population is directly or indirectly engaged in informal mining; in North Kivu in 2006, mining revenue provided an estimated two-thirds of state income. But revenues to the provincial government’s coffers fell by three-quarters in the four years before 2012, in part because of what officials called the “global criminalization of the mining sector” of eastern Congo, as encapsulated in laws like Dodd-Frank. The state’s loss is the smugglers’ gain: When the official routes are closed, the clandestine trade picks up the slack.. . .

    Despite Dodd-Frank and the spate of efforts to curb conflict mineral violence in the early 2000s, it appears unlikely that the certification schemes will ever reliably cover the whole of eastern Congo’s mining trade. Clean miners have been squeezed, as the retreat of Western buyers has let Chinese comptoirs gain a near-monopoly on Congolese coltan, allowing them to dictate prices.  

    The efforts to impose some control on the mineral trade . . . .does so at the cost of weakening the already precarious livelihoods of eastern Congo’s diggers and porters and their dependents.

    This harm was completely predictable. As Walter Olson noted earlier,

    Economic sanctions, when they have an effect at all, tend to inflict misery on a targeted region’s civilian populace and often drive it further into dependence on violent overlords. That truism will surprise few libertarians, but apparently it still comes as news to many in Washington, to judge from the reaction to this morning’s front-page Washington Post account of the humanitarian fiasco brought about by the 2010 Dodd-Frank law’s “conflict minerals” provisions. According to reporter Sudarsan Raghavan, these provisions “set off a chain of events that has propelled millions of [African] miners and their families deeper into poverty.” As they have lost access to their regular incomes, some of these miners have even enlisted with the warlord militias that were the law’s targets.

  • 2015 CEI Dinner Movie: The Magnificent 7

    June 18, 2015 2:23 PM

    Complete with cowboy boots, wagon wheels, lamps made out of whiskey bottles, and wanted posters of the most “notorious” U.S. regulators—if you’re talking to a CEI staffer—this year’s annual dinner embodied the theme: Bourbon and BBQ Bash.

    Dinner guests were not disappointed with this year’s dinner movie production inspired by some of our favorite western movies, featuring some of CEI’s best work, and of course, starring some of CEI’s most beloved staffers.

    Watch the 2015 CEI dinner movie, “The Magnificent 7,” below:

  • Excerpts from Carly Fiorina's Address at CEI's Annual Dinner

    June 18, 2015 2:17 PM

    Keynote address by business and nonprofit leader Carly Fiorina delivered at the Competitive Enterprise Institute’s annual dinner on June 11, 2015.

    Excerpts from text as prepared for delivery:

    When I was a little girl, my mother told me: “What you are is God’s gift to you. What you make of yourself is your gift to God.” My mother and father would encourage me always to work hard, to aim high, to find and make the most of my gifts. I didn’t feel gifted as a young girl or a young woman, but my mother’s words seemed like both a promise and a challenge.

    I would start my career as a secretary in a little nine-person real estate firm. One day, two men who worked there approached my desk and said: “We’ve been watching you and we think you can do more than type and file. Do you want to learn about business?”

    They saw potential and possibilities in me and so I came to see these things in myself.

    Whether it is in business or in charity or in any other human endeavor, my experience tells me that human potential is limitless. Usually, it is underutilized or worse, squandered and wasted. It is the only limitless resource we have in this world, and it is all we need to solve every problem.

    Last week I was at a fundraising event where donors brought their children: some sons and many, many daughters. At the end of the event, a little girl approached me. She asked: “Have you ever wished you were someone else?” I answered: “I used to sometimes when I was younger, but now I know that I am who God intended me to be. Have you ever wanted to be someone else?” She looked away and said: “I don't know.” She was 10 years old and at that age “I don't know” means “Yes.” So I reassured her: “You are exactly who God wants you to be. Don't wish to be someone you are not. Find out who you are.”

    It has been 95 years since women got the right to vote. 50 years since the Feminine Mystique. 16 years since I was named the first female CEO of a Fortune 50 company.

    There are only 23 female CEOs in the S&P 500. Fun fact: there are more CEOs named John than there are women. Among those same companies, there are only 19 women for every 100 Board members. 84 percent of women strongly agree that women can lead just as effectively as men. Only 43 percent of men agreed with the same statement. Companies headed by male executives receive 98 percent of all venture capital funding in Silicon Valley. That’s $1.88 billion dollars—compared to just $32 million for women. Recent studies from the NYU Child Study Center suggest that a girl's self-esteem peaks at age 9 and declines from there.

    I believe it is time to have a conversation about the state of women in America. Women represent half of all human potential. Women around the world continue to be subjugated and marginalized. Here in this country where women have more opportunities than anywhere else on earth, we still can make our country a better place by fully tapping the potential of every woman.

    Today, women hold nearly 48 percent of all US jobs, up from 37 percent 40 years ago. By 2011, this relatively small increase in the workforce accounted for one-quarter of our GDP. In other words, more than a stunning three and a half trillion dollars was generated by the increase in women’s participation in the economy: greater than the GDP of Germany and more than half of the GDP of both China and Japan. Additionally, companies with more women on their boards outperform their competitors.

    In other words, the facts are in and the data is clear. Realizing the potential of women isn’t just the right thing to do—it’s the smart thing to do.

    **********

  • Negotiators Leave Empty Handed, Greek Bank Withdrawal Begins

    June 18, 2015 12:03 PM

    Greece’s neglected payment to the International Monetary Fund on Friday, June 5, has caused escalated tensions in the negotiation process between creditors and Greek Prime Minister Alexis Tsipras. As the pressure to settle on a deal increases, Greece decided last week that they would take the option, posed to them by the IMF, to settle all four of their June loan repayments at the end of the month. This has spurred unrest for the people of Greece, as well as its creditors and Troika.

    After the announcement that Greece would be missing its scheduled repayment, Tsipras took the stage to address the Greek Parliament on the latest deal proposed by European Commission President Jean-Claude Juncker. The deal would provide Greece with a €7.2 billion bailout, which would require Greece to undergo major economic reforms. Tsipras notably stated that the deal proposed by the European Commission was “absurd” and labeled it as “irrational, blackmailing.” The European Commission officials were surprised by the complete rejection of their proposed deal.

    Soon after, on June 8, President Obama announced in a press conference that, “What [a deal] is going to require is Greece being serious about making some important reforms, not only to satisfy creditors, but more importantly, to create a platform whereby the Greek economy can start growing again.” As pressure builds for Tsipras and Greek creditors, the world waits anxiously for one of them to cave.

    It appeared that Tsipras had no intention of conceding any ground when Athens proposed another deal, on June 9, insistent upon debt relief. However, creditors came back with a stone-walled response: debt relief was off the table, and furthermore, that Greece must accept major economic reforms.

    Tsipras seems to be testing the European Commission’s patience; the term “paperology” has been coined by the Commission to describe the Greek Prime Minister’s actions.

  • Reasons to Oppose the Ex-Im Bank, Part 4: False Economic Catastrophism

    June 18, 2015 9:51 AM

    The Export-Import Bank’s charter expires on June 30. This series of posts makes the case for closing Ex-Im, one argument at a time. See also parts 12, and 3.

    General Electric CEO Jeffrey Immelt is claiming that closing the Export-Import Bank would mean “economic catastrophe.” He must use the term differently than most people do. A bit of math shows why.

    According to page 6 of Ex-Im’s 2014 annual report, the bank did $27.5 billion of business in 2014. The Bureau of Economic Analysis estimates GDP in the fourth quarter of 2014 to be $17.7037 trillion (see Table 3, page 8). This means Ex-Im’s business last year was equivalent to about one sixth of one percent of GDP. This is par for the course.

    Confining the comparison just to America’s $2.35 trillion of exports, everything Ex-Im did all of last year is equivalent to less than 1.2 percent of exports. Seeing as many Ex-Im-financed projects would still happen without the bank’s involvement including GE, by Immelt’s own admission—its true net impact is almost certainly much smaller than that.

    If anything, by redirecting billions of dollars of capital towards the politically connected and away from deserving entrepreneurs, Ex-Im is preventing the economy from reaching its true potential.

  • FCC Ignores Rule of Law in Attempt to Fine AT&T for Throttling Wireless Users

    June 17, 2015 8:37 PM

    Today, the Federal Communications Commission (FCC), on a three-to-two vote, found that AT&T violated federal regulations by failing to disclose that it was throttling certain wireless customers on an “unlimited” data plan. The FCC claims AT&T owes a $100 million fine. This announcement follows a lawsuit filed in October 2014 by another federal agency, the Federal Trade Commission (FTC), arguing that AT&T violated federal consumer protection law by throttling its unlimited data plan customers. AT&T has pledged to take both agencies to court to defend itself against these allegations.

    By way of background, for many years, AT&T and many other wireless providers offered data plans—used for Internet browsing, email, video, and so forth—on an all-you-can eat, unlimited basis. These plans let customers transmit and receive as much information as they wish, without facing overage charges for downloading too much data.

    However, in mid-2010, AT&T stopped offering unlimited data plans to new customers. For existing customers on an unlimited plan, AT&T allowed them to stay “grandfathered” on their old plans. Then, in 2011, AT&T began throttling the throughput—commonly known as “speed”—of its highest users of unlimited data plans. This throttling didn’t stop any customers from using as much data as they wanted, but it did substantially degrade a fraction of AT&T customers’ connectivity.

    Had AT&T not told anybody about this throttling, it would clearly run afoul the FCC’s transparency rule, which was issued in 2010 and upheld on judicial review by the Court of Appeals for the D.C. Circuit in 2014.

    Yet AT&T did disclose its behavior to customers and the public through various means:

    • AT&T issued a press release in 2011, which over 2,000 news outlets covered;
    • AT&T included an insert explaining its new policy in the bills of unlimited data customers;
    • AT&T posted an informational page on its website explaining the throttling, and linked to this page on the AT&T Wireless homepage;
    • AT&T modified its service contract in August 2012 to mention the potential throttling of heavy users;
    • AT&T sent text messages to heavy unlimited data users in the months before it began throttling to warn such users that they would face throttling in future months; and
    • AT&T sent text messages to heavy unlimited data users after it began throttling, warning such users that their usage was approaching the threshold where throttling would begin and explaining how to change to a different plan to avoid throttling

    A majority FCC, however, found that none of these disclosures were enough, because some customers might have missed all of them and simply assumed that “unlimited” meant not only unlimited usage, but unlimited throughput, too. But as dissenting FCC Commissioner Ajit Pai argued in his dissent, unlimited data and unlimited speed aren’t the same—and AT&T never promised its customers they would enjoy both. 

  • The IRS, Obamacare, and the English Language

    June 17, 2015 11:06 AM

    In the days just before the March 4 Supreme Court hearing in King v. Burwell, I got a number of calls from total strangers who had read about the case and who wanted to be plaintiffs in it. I explained to them that it was too late to join the case then, but listened to their stories of cancelled insurance policies and jobs jeopardized by Obamacare. One call stood out in particular. It was from a woman in California who had moved to the U.S. years ago from the Ukrainian city of Donetsk. After explaining her health care predicament, she asked me: Do you understand how crazy this is? I left a totally dysfunctional country to come here, and now I find myself trapped in this insanity!

    That’s an interesting contrast to the disaster stories that we’ve been hearing for months, about what will happen if the Supreme Court rules in our favor in King. At issue in the case is an IRS rule that provides nationwide health insurance subsidies. The question for the Court is whether that rule is legal, since the underlying statute authorizes subsidies only in those states that set up their own health insurance exchanges—something only 14 states have done. We argue that the IRS rule is contrary to the clear language of the law Congress enacted. The government argues that invalidating the rule will frustrate Congress’s alleged purpose of making health care available to everyone. 

    This is where the disaster stories come in—about how, without nationwide subsidies, millions of people will be left uninsured and without medical treatment. But the Obamacare insurance subsidies aren’t some long-established fixture of medical care; they only took effect in 2014. And for several years before then Obamacare was delayed by purely political decisions made by the White House. Where were the cries of disaster back then? There weren’t any, in large part because we had a sizable array of medical entitlements aimed at preventing such disasters. We still have them. To the extent that state or federal fixes are necessary to ease transition problems that might be caused by a court ruling, nothing would stand in their way. States that chose not to set up exchanges could, for example, change their mind.

    One thing the disaster stories leave out is the fact that, for millions of Americans, Obamacare itself has been a disaster. These victims of Obamacare—yes, victims—include people who, like the woman from Donetsk, can no longer buy low-priced catastrophic insurance, or who find that the cost of their current policies have increased steeply, or who can’t keep their doctors. They include workers pushed into part-time status by companies trying to avoid Obamacare’s dictates, and companies that shelve their expansion plans due to its regulatory burdens. They include the taxpayers who foot the bill.

  • Obama Administration Pressures Colleges to Adopt Unconstitutional Speech Codes

    June 17, 2015 11:05 AM

    Under the Obama administration, the Education Department has pressured schools and colleges to restrict speech, including off campus speech, even when it is protected by the First Amendment, and is not severe and pervasive. It claims this is required by federal anti-discrimination laws such as Title IX and Title VI. It also expects colleges to investigate off-campus sexual misconduct by students, even though most federal appellate court rulings say schools have no such duty under Title IX. 

    As I recently noted in The Wall Street Journal, “the Education Department, where I used to work,” is

    pressuring colleges to adopt unconstitutional speech codes in the name of fighting sexual harassment. It has disregarded many court rulings in doing so.

    For example, the Education Department has wrongly ordered schools to regulate off-campus speech and conduct. That contributed to the harassment charges against Prof. Laura Kipnis, who was accused over a politically incorrect essay she wrote in the Chronicle of Higher Education and statements she made on Twitter. Court rulings like Roe v. Saint Louis University (2014) reject Title IX claims over off-campus conduct, but the Education Department ignores them. It also ignores court rulings like Klein v. Smith (1986) emphasizing that the First Amendment usually bars public schools from restricting off-campus speech. For example, the Education Department told schools to regulate comments “on the Internet” in an October 2010 letter. In 2014, it demanded that Harvard regulate off-campus conduct more.

    At Northwestern University, Professor Laura Kipnis was subjected to a bizarre Title IX investigation over an essay in the Chronicle titled “Sexual Paranoia Strikes Academe” (which hypersensitive students claimed offended them and constituted sexual harassment) and her subsequent statements defending herself on Twitter (which the students claimed constituted “retaliation” in violation of Title IX, even though she did not identify them by name). Kipnis was ultimately found not guilty.

    Although it eventually became clear that nothing Kipnis did violated Title IX, Northwestern probably felt obligated to subject Kipnis to that chilling, lengthy, and extensive investigation due to improper mandates issued by the Education Department’s Office for Civil Rights (OCR), which make it hard to summarily dismiss weak or baseless Title IX complaints.  

  • Reasons to Oppose the Ex-Im Bank, Part 3: It Favors Big Business

    June 17, 2015 9:17 AM

    The Export-Import Bank’s charter expires on June 30. This series of posts makes the case for closing Ex-Im, one argument at a time. See also parts 1 and 2.

    Ex-Im officials claim the vast majority of its lending activities go to smaller businesses. This is true by number of loans—in 2013, 2,160 out of 2,775 businesses receiving Ex-Im financing were small businesses, or just more than 78 percent. But Ex-Im’s claim is false by the more important metric of dollar value of loans. In most years, more than 80 percent of Ex-Im financing, measured in dollars, goes to big firms. Also worth noting: Ex-Im’s in-house definition of “small business” covers firms with up to 1,500 employees.

    Ex-Im’s charter states “the Bank shall make available, from the aggregate loan, guarantee, and insurance authority available to it, an amount to finance exports directly by small business concerns … which shall be not less than 20 percent of such authority for each fiscal year.”

    Small business’ actual share of Ex-Im financing has failed to meet that 20 percent threshold in 2011 (18.45 percent), 2012 (17.11 percent), and 2013 (18.96 percent). 2014 was the first year Ex-Im met that threshold since at least 2010.

    Small business advocates who favor keeping or expanding Ex-Im should note that Ex-Im gives financing to approximately one in 10,000 small businesses. Considering approximately 20 other agencies give subsidies to small business, Ex-Im’s closure would have very little effect on the amount of subsidies small businesses receive. Most of its closure’s impact would be felt by its top ten beneficiaries, all of which are large companies by anyone’s definition of the term.

  • Significant Labor and Employment Issues in FY 2016 Labor-HHS-Ed Appropriations Bill

    June 16, 2015 4:21 PM

    Stamped June 15, 2015 (5:55PM), the U.S. House of Representatives Appropriations Subcommittee Department on Labor, Health and Human Services, Education, and Related Agencies has produced a draft bill for Fiscal Year 2016 (FY16).

    Virtually every year this Labor-HHS-Ed bill faces significant challenges for individual enactment. However, every year the bill is enacted, albeit normally as part of a larger appropriations act.

    In every case, the initial draft of the bill sets the tone for the eventual enactment and frames the issues for debate.

    This initial FY16 draft contains the following significant verbatim provisions for increasing employment, bettering incentives for workers, reducing deadweight loss to the economy, augmenting workers’ income growth, and improving worker freedom:

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