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  • Rep. Tom Petri Invokes Bad Reagan Policy to Justify Increasing the Gas Tax

    December 4, 2014 11:09 AM

    Yesterday, retiring Rep. Tom Petri (R-Wisc.) joined wacky Rep. Earl "United Streetcar" Blumenauer (D-Ore.) to endorse increasing the federal gasoline tax by 80 percent. While it is true that federal fuel excise tax rates have not been increased since 1993, the public, Congress, and the Obama administration remain strongly opposed to gas tax hikes.

    Like many Republicans seeking to justify their actions as conservative, the outgoing chairman of the Highways and Transit panel of the House Committee on Transportation and Infrastructure invoked the spirit and deed of former President Reagan to make his case for highway user tax increases:

    Transportation advocates have frequently cited Reagan’s support for a gas tax increase in 1982 in an attempt to build support among modern Republicans for a 2014 hike, but they have so far been unsuccessful. 

    Petri said Wednesday that the 40th president was right to increase the gas tax in the early 1980s. 

    "Reagan supported raising the gas tax back in 1982 because he believed in funding American infrastructure in a responsible way. I think he was right, and it's the best course of action we can take at this time.”

    There's a lot of Reagan mythology and hagiography on the right, for sure. But the tale of his supposedly brave and principled stand to significantly increase the fuel tax in his first term is one of the more obnoxious examples, as it arguably was one of the first clear instances of President Reagan selling out his fiscally conservative principles in a political horse trade. Here's the real story:

    The pure users-pay/users-benefit principle was not breached until 1970, when PL 91-605 allowed federal highway monies to be used for bus lanes, bus facilities and park-and-ride lots. Many urban and transit advocates wanted to open up the Highway Trust Fund much further, being dissatisfied with the extent of funding available from the Urban Mass Transportation Administration (UMTA), created by 1964 legislation. (UMTA was originally located within the Department of Housing & Urban Development—HUD—but was shifted to the Department of Transportation when the latter agency was created.) Several years later, in 1973, Congress enacted PL 93-87, which (1) allowed Highway Trust Fund monies to be used for capital expenditures for buses and fixed rail facilities and (2) permitted a state to petition the U.S. DOT for permission to withdraw a planned urban Interstate project and build a public transit system instead, using federal general fund monies up to the amount that the Interstate segment would have cost.

    That bill, the Surface Transportation Assistance Act of 1982 (PL 97-424), established the Mass Transit Account within the Highway Trust Fund, to receive “one-ninth of the amounts appropriated to the Highway Trust Fund” from all federal motor fuels taxes. As Jeff Davis’s “History of the Highway Trust Fund” notes, the changes from 1973 through 1982 “represented a shift away from the ‘benefit taxation’ model . . . whereby user fees are levied on system users in proportions that are as close as feasible to the direct benefit that the users get out of the system.” He adds that, “although the votes brought to the table by the transit lobby were the key to getting the biggest ever increase in the ‘user fee’ on drivers and truckers, the addition of mass transit to the Trust Fund made the gas and diesel taxes resemble true ‘user fees’ much less.”

  • Dodd-Frank's Conflict Minerals Rules Increase Misery

    December 4, 2014 7:09 AM

    Earlier, we wrote about the misery inflicted upon the Congo and millions of desperately poor people by the 2010 Dodd-Frank Act’s “conflict minerals” provisions. A December 1 front page Washington Post article shows that the suffering continues unabated. It notes that 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 decent-paying mining jobs due to the Dodd-Frank Act, some of these miners have even enlisted with the warlord militias that were the law’s targets. 

    Under Dodd-Frank, America’s publicly held companies are required to report on their supply connections to “conflict minerals” such as tin, tungsten, and gold mined not just in war-torn areas of the Democratic Republic of the Congo, but also in peaceful neighboring countries like Tanzania, which are effectively punished for their mere proximity to the Congo.

    As the Cato Institute’s Walter Olson notes, “Lawmakers assigned enforcement of the law to the Securities and Exchange Commission – a body with scant discernible expertise in either African geopolitics or metallurgy – and barbed it with stringent penalties for disclosure violations, to which are added possible liability in class-action shareholder lawsuits.”

    As we noted earlier,

    People are going hungry, pulling their children out of school due to poverty, and joining criminal gangs to make ends meet in the poorest region of the Congo, the world's second-poorest country.  Residents of this African nation attribute this economic devastation to what they call "the Obama Law" – provisions of the 2010 Dodd-Frank financial "reform" law backed by Obama that have created a virtual embargo on minerals produced in the Congo's desperately-poor mining towns.

    The suffering is all eminently foreseeable. We predicted it, and its harm has been apparent for years. Olson points to “this 2011 account by Prof. Laura Seay (via) of how ‘electronics companies now have a strong incentive to source minerals elsewhere, leaving Congolese miners unemployed,’” and a 2011 account by David Aronson in the New York Times of the “unintended and devastating consequences” that he “saw firsthand on a trip to eastern Congo,” as well as a “more recent paper by law professor Marcia Narine.”

  • "I'll Gladly Pay Future Generations for my Pension Check Today"

    December 3, 2014 3:25 PM

    “I’ll gladly pay you Tuesday for a hamburger today” was the trademark utterance of J. Wellington Wimpy, the mooching character from the old Popeye cartoons. These days, he might find work to pay for his burgers managing a public pension fund—while playing bingo after hours.

    In recent years, state and local governments’ pension shortfalls have gained greater public attention, due in part to the 2008 financial crisis, which left many in even worse shape. But the financial crisis isn’t alone to blame.

    For years, public pension managers have been contributing less than the actuarially recommended contribution, essentially eating the proverbial burger today while leaving a future patron to pay the bill. Then, as the burger bill grows larger and our friend Wimpy gets more worried about ever paying it back, he turns to playing bingo, making ever larger wagers in the hope of clawing his way out of the hole he’s dug for himself.

    At that point, as the American Enterprise Institute’s Andrew Biggs explains in The Wall Street Journal:

    [P]ublic-plan managers may see little option other than to double down on risk. In 2013 nearly half of state and local plan sponsors failed to make their full pension contribution. Moving from the 7.5% return currently assumed by Calpers [the California Public Employee Retirement System] to the roughly 5% yield on a 38%-62% stock-bond portfolio would increase annual contributions by around 50%—an additional $4 billion—making funding even more challenging.

    But the fundamental misunderstanding afflicting practically the entire public-pension community is that taking more investment risk does not make a plan less expensive. It merely makes it less expensive today, by reducing contributions on the assumption that high investment returns will make up the difference. Risky investments shift the costs onto future generations who must make up for shortfalls if investments don’t pay off as assumed.

  • Fraternal Order of Police Once Again Opposes Internet Gambling Ban

    December 2, 2014 3:25 PM

    Once again, the Fraternal Order of Police expressed their staunch opposition to a federal prohibition on Internet gambling. In a letter sent to Sens. Harry Reid and Mitch McConnell, and Reps. John Boehner and Nancy Pelosi, FOP National President Chuck Canterbury writes:

    Congress cannot ban its way out of this problem as this would simply drive online gambling further and further underground and put more and more people at risk. Internet gaming forced into the shadows would exacerbate current difficulties and create new dangers. Not only does the black market for internet gaming include no consumer protections, it also operates entirely offshore with unlicensed operators, drastically increasing the threat of identity theft, fraud or other criminal acts.

    The letter echoes Canterbury’s March op-ed published by The Hill and comes in the wake of growing opposition to a bill written by and for casino magnate Sheldon Adelson. The Restoration of America’s Wire Act (RAWA), would create a de facto prohibition on Internet gambling by rewriting a 53-year-old law that was originally intended to target the mob and help states enforce their sports gambling laws. While it seemed that the bill was making some headway (picking up 18 for House Bill 4301 and four for Senate Bill 2159) at the end of November it seemed to completely lose steam. A hearing on the bill, reportedly scheduled for early December in the House Judiciary Subcommittee on Crime, Terrorism, Homeland Security, and Investigations was cancelled. Earlier in the week former congressman Ron Paul (R-Tex.) published a scathing opinion piece against RAWA, and a few days later 12 free market and conservative groups, including Grover Norquist’s ATR and CEI, sent a letter to Congress opposing the measure.

  • Towards a Humbler Monetary Policy

    December 1, 2014 2:59 PM

    Is it possible for opposite policies to both be wrong? Over at the Washington Examiner, I argue that it is. The U.S. is ending its quantitative easing program just as Japan is ramping its up. Those seemingly opposite policy paths are rooted in the same mistaken philosophy. I argue instead for a humbler monetary policy:

    Both Yellen and Kuroda should move their focus away from stimulus, exchange rates and constant tinkering, and toward stability, honesty and predictability in their price systems. Easing of $1.66 trillion has had almost no effect on the U.S. economy. How reality will stack up against the Bank of Japan’s predictions, no one knows.

    Along the way there are discussions of Keynesian liquidity traps, the Taylor rule, NGDP targeting, and Bitcoin. The larger point is that central bankers are barking up the wrong tree. Instead of manipulating various economic indicators with activist policies, they should concentrate on creating a stable, predictable, and honest price system that enables more investment, better investment decisions, and more innovation. That, not interest rate tinkering, is what causes economic growth and mass prosperity.

    Read the whole thing here; see also a facsimile of the print edition here, starting on p. 26.

  • United Streetcar: The Solyndra of Transportation

    December 1, 2014 2:56 PM

    Over the weekend, The Washington Post published a fascinating article about the rise and fall of United Streetcar, an Oregon-based manufacturer that owes its very existence to the worst kind of Washington politics.

    Back in 2005, Rep. Peter DeFazio (D-Ore.) managed to secure an earmark requiring that a Portland rail transit project funded in part with federal funds procure U.S.-manufactured streetcars. This was the brainchild of another Oregon transit booster, Rep. Earl Blumenauer (D), who was a champion of the imploding “Portland model” of urban redevelopment and transportation planning when he sat on the city council. When former pork-barrel Rep. Ray LaHood (R-Ill.) was tapped to be President Obama’s first secretary of transportation as the token Cabinet Republican, the Oregon delegation knew it had found the perfect accomplice in the most unqualified DOT chief in history.

    What happened was the same mix of cronyism and incompetence that has followed the Obama administration’s efforts to promote fuzzy-sounding objectives such as “alternative energy” in the case of Solyndra, and “livability” in the case of United Streetcar. From the Post:

    A day or two after the new president nominated LaHood as secretary of the Department of Transportation in late 2008, the former Republican congressman from Illinois got a call from Blumenauer inviting him to his office.

    “Portland was more than just automobiles. It was cycling, it was streetcars, it was walking paths,” LaHood said. “Earl really convinced me DOT really needed to do more than build roads and bridges. We, in a sense, followed Earl’s lead.”

    Then Washington started taking actions that looked promising for streetcar backers broadly — and United Streetcar in particular.

    LaHood’s department changed internal rules that had been thwarting streetcar projects during the George W. Bush administration. Those rules used travel time as a key criteria for certain federal dollars.

    […]

    But with $48 billion in transportation projects as part of the economic stimulus, “we didn’t have to pick and choose,” LaHood said.

    The Obama administration seized on United Streetcar’s story. In April 2011, administration officials promoted the firm on the White House Web site with a glowing Department of Transportation-produced marketing video.

    “President Obama has challenged Americans to dream big and build big. United Streetcar has risen to that challenge, and they’re doing it all with American parts, labor, and ingenuity,” LaHood wrote in the accompanying blog post.

    The administration was in the midst of ratcheting up the pressure on local officials to adhere to “Buy America” rules for federally funded projects. Those rules meant that more than 60 percent of the value of a streetcar’s components had to be from the United States, and they had to be assembled in the country.

    Despite all the special privileges it received from its backers in government, United Streetcar built only 16 vehicles for three customers and it currently has no new orders. Traditional supporters of high-cost/low-value rail transit have even become skeptical of streetcar hucksterism. The progressive Washington Post editorial board recently called on the District of Columbia to halt the expansion of its planned streetcar network while neighboring Democratic Party stronghold Arlington County, Va., just canceled its streetcar projects.

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

    December 1, 2014 8:18 AM

    Regulators had much to be thankful for during the short Thanksgiving work week, with new rules covering everything from grocery store ads to wireless signal boosters to greenhouse gas reporting requirements. The Federal Register also passed the 70,000-page mark on Monday.

    On to the data:

    • Last week, 58 new final regulations were published in the Federal Register. There were 59 new final rules the previous week.
    • That’s the equivalent of a new regulation every two hours and 54 minutes.
    • So far in 2014, 3,254 final regulations have been published in the Federal Register. At that pace, there will be a total of 3,551 new regulations this year.
    • Last week, 1,236 new pages were added to the Federal Register.
    • Currently at 70,994 pages, the 2014 Federal Register is on pace for 77,505 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. 39 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 $7.60 billion to $10.85 billion. They also affect several billion dollars of government spending.
    • 259 final rules meeting the broader definition of “significant” have been published so far this year.
    • So far in 2014, 609 new rules affect small businesses; 89 of them are classified as significant. 

    Highlights from selected final rules published last week:

  • Thanksgiving and Markets

    November 26, 2014 4:03 PM

    When the Pilgrims of Plymouth Colony celebrated the first Thanksgiving on Massachusetts’ Cape Cod, they shared a feast with the Pokanoket tribe, in thanks to God for the colony’s bountiful harvest. As Plymouth Governor William Bradford explained in his memoirs, ending the colony’s initial communal system produced the abundance of the first Thanksgiving, and marked the end to famine and plague, during which half the colony died. Governor Bradford explained that initially, “The strong…had no more in division of victuals and clothes than he that was weak and not able to do a quarter the other could...”

    The key to the Pilgrims’ success? Embrace of the market. Bradford observed the commune overcame its problems:

    The experience…may well evince the vanitie of that conceite of Plato & other ancients, applauded by some of later times; that ye taking away of propertie, and bringing in comunitie into a comone wealth, would make them happy and florishing; as if they were wiser then God. For this comunitie (so farr as it was) was found to breed much confusion and discontent, and retard much imploymet that would have been to their beneflte and comforte...

    So they begane to thinke how they might raise as much corne as they could, and obtaine a beter crope then they had done, that they might not still thus languish in miserie.

  • Washington's Thanksgiving Turkeys: Here Are All of the White House's 200 Economically Significant Rules

    November 26, 2014 1:44 PM

    As usual, the president will pardon a turkey again this year for Thanksgiving; For us turkey eaters, though, our federal holiday treat is lots and lots of federal red tape.

    In fact, the Holiday was just used as cover for what some news reports called a White House dump of 3,415 regulations just before the break. You could stuff a lot of turkeys with that.

    It’s really not unusual though; there are thousands of rules every year, in every administration.

    A portion of these rules, though, are “economically significant” ones with impacts (usually costs rather than liberalizations) of at least $100 million every year.

    The technical definition is actually different, but such rules are also often referred to as "major" rules. In any event, while the total number of rules each year exceeds 3,500, the number in the “economically significant” category over the past decade has ranged from as low as 127 to as high as 224 in each Fall’s Unified Agenda of Federal Regulatory and Deregulatory Actions (the document just released).

    The Agenda is like a year-end pipeline, a flow of rules and regulations at the "Active" (pre-rule, proposed and final rule states), "Completed" and "Long-term" phases. Very frequently the rules listed are holdovers from the year or years before. Each Fall edition, this one included, also includes a so-called "Regulatory Plan" from some agencies that highlights certain rules for attention.

    Items that get featured or prioritized in the Agenda vary over the years, creating confusion and making it hard to compare Agendas. For example, the Obama administration recently told agencies not to talk so much anymore about their "Long-term" rules, when those are actually very important to know about for planning purposes.

    Moreover, Agencies are not legally bound to limit themselves only to what they present in their annual roundups.

    In any event, here we put a face on the current batch of "economically significant" rules: There was a total of 3,415 rules in the Fall 2014 Unified Agenda, as we’ve noted, with 200 of them designated as economically significant.

    Of these, 131 are “active,” 31 recently “completed,” and 38 “long-term.” The full list appears down below the break, with plenty turkeys in the lineup like these.

    Herein you may find such delights as:

    • The Department of Energy's totalitarian drive to regulate everything that uses energy (from dehumidifiers to vending machines to ice makers); It’s less expensive and invasive to just use solid state controls to turn things off when they’re not used.
    • The Department of Health and Human services regulation of labels on pet food; requirements for calorie count postings for vending machines and restaurants; and rules for school lunch contents.
    • The Environmental Protection Agency's campaign against ordinary wood fires and of course, all fossil energy.
    • FDA’s portion size regulations for things like breath mints.
    • Several rules implementing parts of the Dodd-Frank financial reform law.
  • Michael Mann Case Is about First Amendment, Not Global Warming

    November 25, 2014 3:07 PM

    This morning the D.C. Court of Appeals heard oral arguments in Michael E. Mann v. Competitive Enterprise Institute, National Review, et al. CEI General Counsel Sam Kazman gave the following comments about the case:

    Regardless of where one stands on global warming, this case is about the First Amendment. Michael Mann’s defamation lawsuit is an unfounded attempt to chill speech on a major issue of public concern. Professor Mann is a high-profile figure in the global warming debate, and he himself is responsible for much of the overheated rhetoric in that debate. His complaint about CEI’s criticism of his statistical methods belongs in the arena of public discussion and scientific inquiry, not in the courts.

    This is precisely the type of First Amendment lawsuit that the District of Columbia’s Anti-SLAPP law was designed to stop at the outset, and it is for this reason that CEI and National Review’s position is supported by a wide range of amici, including the Reporters’ Committee for Freedom of the Press, the Electronic Frontier Foundation, the Cato Institute, and dozens of other organizations. We are hopeful that the Court of Appeals will agree.

    Legal briefs in the case can be found at cei.org/michaelmann.

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