Another Federal Mandate—Or, How I Misspent My Summer Vacation

clock question mark_0In 1986, a 19-year-old Lehigh University student, Jeanne Clery, was raped and murdered in her campus residence hall. The reaction against colleges failing to publicize such campus crimes prompted the passage in 1990 of the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act. The Clery Act requires all colleges and universities that—like my employer, Wake Forest University—participate in federal financial aid programs to keep and disclose information about crime on and near their campuses. The Department of Education can impose fines up to $35,000 per violation, on institutions for each infraction and can suspend institutions from participating in federal student financial aid programs. The intent of the law seems very laudable, but like so many other laws its implementation has taken on a life of its own—hungrily gobbling up resources in the process.

The law requires that all Campus Security Authorities be trained to know which crimes and safety issues must be reported—for example, should crimes on thoroughfares through campus be reported or just crimes on campus-owned property; should simple assaults be reported in addition to aggravated assaults? Again this seems reasonable, but it turns out that the definition of Campus Security Authority is very broad. It covers not only campus police, but also resident hall advisors, coaches, and even faculty members who advise clubs. I fall into this last category, so the official in charge of records management at my university emailed me (along with scores of others) notifying me of my responsibility to be trained as a CSA. Unfortunately, the training session mentioned in the email began at 8AM. Worse still, it was to take four hours. Fortunately, I couldn’t attend because of my teaching schedule and luckily there was online training available. Yesterday, I finally found the time to take the online training. All told, it took me about an hour and a half to watch the training videos and then take a 10-question multiple-choice test. I got all ten questions correct (pat on the back)! But I probably would have gotten about 8 correct even without the training—and 8 is enough to pass.


Gross Domestic Product: Is Health Spending Figured Out?

StethMoney_150Relying on a government agency to tell us the value of goods and services produced in our nation may not be the best way to estimate Gross Domestic Product. Nevertheless, it is widely accepted.

Health spending was a non-issue in the Department of Commerce’s release of the advanced estimate of second-quarter GDP, which came in at four percent (annualized). Much of the second quarter’s improvement was business spending and consumer spending on durable goods. Health spending increased by a muted 0.08 percent. The final estimate for first-quarter GDP was improved to minus 2.1 percent, up from minus 2.9 percent.

What is a relief is that the final estimate for health spending in the first quarter, minus 0.16 percent, was unchanged from the previous estimate. Previous estimates of first-quarter GDP were whipsawed by huge changes in the health estimate, and many were concerned that the Department of Commerce had no idea how to measure health spending under Obamacare. Yet more changes in the estimate were feared.

Advanced estimates of GDP are always subject to significant revision, but the previous uncertainty about health spending was unprecedented. If the Department of Commerce has figured out how to measure health spending in the new regime, at least that’s one Obamacare uncertainty that we can stop worrying about.

Technology Can Make the Regulatory State Obsolete

11040316_MThe late American inventor and futurist Buckminster Fuller said: “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.” Ridesharing services are trying to do this, but governments stand in the way.

In a two-minute Perspective aired today on National Public Radio station KQED in San Francisco, former taxi driver Kieran Farr explains why overregulation is making it impossible for San Francisco taxis to compete successfully with ridesharing services such as Lyft, Sidecar, Tickengo, and Uber.

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Farr recommends that government agencies begin cutting taxi regulations and fees to allow cabs to compete; otherwise, taxis will continue to loose customers to app-driven alternatives.

Competition driven by new technology is making existing taxi regulations obsolete. But rather than abandon these regulations, governments are moving in the opposite direction to layer more regulations on ridesharing services (see here and here for examples). The clunkier and more expensive governments can make ridesharing, the more that governments protect the interests of taxi companies and their drivers.

The public should fight back to stop governments from killing ridesharing, because if they do, governments will be emboldened to target other technologies tomorrow that also threaten the regulatory state ( comes to mind). This fight is bigger than one over ridesharing services.

People should be allowed to define their own futures. Technology is empowering people to be in the driver’s seat, if only governments stop being backseat drivers commandeering the future with needless regulations.

The War on Poverty and the War on Drugs

drug_war_crimes_180x270As an apparently war-minded people, Americans (or at least, our American political leaders) have been comfortable framing parts of the domestic policy agenda as wars for decades. Two of the most prominent have been the War on Poverty and the War on Drugs.

Despite the similarity in their names, there is an important difference between the two. The War on Poverty is not a real war. The War on Drugs is.

The War on Poverty is not a real war because there is no enemy that we are attacking to fight poverty. Quite the opposite. The War on Poverty identifies poor people and them gives them stuff. Sometimes it is income. Other times it is food, or health care, or education.

If some analogy to war is made, the War on Poverty is more like the Marshall Plan that provided aid to the victims of war regardless of any fault in causing the war. If people are victims of poverty, the War on Poverty gives them stuff, perhaps with the idea that the stuff can help them escape poverty.

The official poverty rate in the United States has not fallen since the late 1960s, so if the idea of the War on Poverty was to reduce poverty, then according to the government’s own statistics, it hasn’t worked. But that’s a different issue. The point here is that the War on Poverty is not actually a war.


Muckraker or Special Pleader?

titan-chernowIn “A Brief History of Media Muckraking”, the Wall Street Journal’s Amanda Foreman traces the contributions of “reform-minded journalists from Ida Tarbell to [Bob] Woodward” and a few others who spilled newspaper ink writing about abuses of power by the private and the public sector.

Obviously a fan of the progress made during the Progressive Era (“the golden age for crusading journalism”), Ms. Foreman, like virtually everyone who shares that political view, gets some key facts wrong and misses the big picture when it comes to thinking about the origins of reformist spirit.

Foreman credits Ida Tarbell’s History of the Standard Oil Company (1904) and her earlier series of articles published in McClure’s magazine with helping push the federal government into initiating antitrust action against the Standard Oil “trust”, which ultimately led the U.S. Supreme Court to order the company’s dissolution in 1911. Here, Foreman mistakenly says that the dissolution order was issued under “the 1911 Sherman Anti-Trust Act” (the Sherman Act was passed and signed into law in 1890).

More seriously, Ms. Foreman does not mention that Ida Tarbell was far from being a disinterested observer of John D. Rockefeller, Sr.’s allegedly anticompetitive business practices. Ida’s brother William was treasurer of the Pure Oil Company, a major rival of Standard Oil; he supplied possibly biased information to his sister and helped vet her articles for McClure’s. Ida also nursed a longstanding grudge against the company, blaming Rockefeller for ruining her father’s business as a maker of the wooden barrels used early on to transport crude oil from the field to refineries. Replacing wooden barrels with railroad tanker cars and underground pipelines was one of Rockefeller’s many cost-cutting innovations, which drove down the prices of kerosene to final customers and ended the then-looming shortage of whale oil, but made wooden barrels obsolete.

Information about those and other personal axes Tarbell had to grind is readily accessible in Ron Chenow’s Titan, his monumental biography of John D. Rockefeller, Sr.—a volume I have relied on heavily in my own work, in collaboration with Michael Reksulak and others, on the origins and effects of the government’s case against Standard Oil (our most recent contribution to that literature is “Tarring the Trust”).

One interesting, still unexplained, consequence of Tarbell’s and the Justice Department’s antitrust attack on Standard Oil is that Rockefeller’s wealth tripled (to almost $1 billion) soon after the company was broken up. I hesitate to call this “crony capitalism”. It nevertheless is another example of how progressive ideas backfire, achieving results that were perhaps “unintended”, but the actual effects of the dissolution could have been, as George Stigler taught us long ago, the intended effects.

Sweatshops: Misunderstood Paths Out of Poverty

41IeZrEszcL._SY344_BO1,204,203,200_The collapse of a garment factory in Bangladesh’s Rana Plaza last year killed more than 1,100 workers and reignited an international movement calling for the regulation of so-called sweatshops in the developing world. Unfortunately, the activists often try to promote better working conditions the wrong way because they overlook the harm that boycotts and costly regulations impose on factory workers. They also fail to recognize the positive role that low-wage factory jobs played in the West’s rise from poverty.

“Poor countries today would be better served if anti-sweatshop scholars and activists had a better understanding of how the historical process played out in wealthy countries,” Independent Institute Senior Fellow Benjamin Powell writes in the Summer 2014 issue of The Independent Review.

Before workplace safety regulations were enacted, textile and apparel factories with poor working conditions were economic springboards to prosperity in what is now the developed world, Powell explains. Sweatshops contributed to economic development for about 100 years in the United States (and 30 to 60 years longer in Great Britain), but they eventually closed down largely because the progress they helped foster made them obsolete: by contributing to capital accumulation in the West, the sweatshops helped shift the demand for labor toward higher-productivity jobs. In addition, the rising prosperity meant that fewer and fewer workers were willing to take lower-wage jobs with less-desirable workplace conditions.

Other countries, particularly in East Asia, followed the path out of poverty pioneered by the West—a trail paved with low-wage factory jobs, property-rights enforcement, a market price system, and economic freedom. One difference, however, is that they often attained in only two generations the same general living standards that it took the United States and Great Britain several generations to reach. Sadly, activists who fail to heed this history lesson inadvertently act to hold down workers in the developing world struggling to make ends meet.

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Meet the Old Sweatshops: Same as the New, by Benjamin Powell (The Independent Review, Summer 2014)

Out of Poverty: Sweatshops in the Global Economy, by Benjamin Powell

Making Poor Nations Rich: Entrepreneurship and the Process of Economic Development, edited by Benjamin W. Powell

The Independent Review: Please be sure to take advantage of our special offer of your choice of a FREE book when you renew or order a new subscription online.

[This post first appeared in the July 29, 2014, issue of The Lighthouse. For a free subscription to this weekly newsletter of current affairs, public-policy analysis, and event announcements, enter your email address here.]

Ban Government—Not Sweets—in Schools to Combat Bureaucratic Obesity

12050387_SIn recent weeks states have been grappling with a host of unintended consequences stemming from new USDA regulations affecting food and beverages available in schools. Chocolate milk was a near casualty in Connecticut. Earlier this month one Washington state school district threw in the towel and banned birthday cupcakes in classrooms. Instead of baked treats, students can share gifts of pencils with their classmates instead, according to school officials.

Just weeks after the new food rules went into effect on July 1, schools in 12 states are working their way around them. As the National Journal reports:

Twelve states have established their own policies to circumvent regulations in the Healthy, Hunger-Free Kids Act of 2010 [here] that apply to “competitive snacks,” or any foods and beverages sold to students on school grounds that are not part of the Agriculture Department’s school meal programs, according to the National Association of State Boards of Education. Competitive snacks appear in vending machines, school stores, and food and beverages, including items sold at bake sales.

Georgia is the latest state to announce an exemption to the federal regulations, which became effective July 1 for thousands of public schools across the country. Its rule would allow 30 food-related fundraising days per school year that wouldn’t meet the new healthy nutritional standards. ...

Tennessee also plans to allow 30 food-fundraising days that don’t comply with federal standards per school year. Idaho will allow 10, while Illinois is slowly weaning schools off their bake sales, hoping to shrink them from an annual 36 days to nine days in the next three years. Florida and Alabama are considering creating their own exemption policies.

Under the new regulations, there are some exemptions for school fundraisers (p. 7), including allowing state education agencies to define what constitutes “a limited number “of school fundraisers (p. 39).

However, it’s worth considering why the USDA has any authority over foods offered outside of its school lunch and breakfast programs (p. 8), and why it has the power to ban fundraisers foods that compete with its meals to be sold during breakfast or lunch time (p. 41). As the school year approaches, expect more news reports about absurd policies resulting from this latest government intrusion into schools.

Maintaining a healthy weight is a goal we can all share, but burying schools, students, and parents in tons of red tape is no way to combat obesity. Perhaps the best way to shed some pounds at school is to shrink the federal government’s involvement back down to its constitutional size.

Are Lawsuits Ending or Mending Teacher Tenure?

teacher-tenure-largeLast month Los Angeles Superior Court Judge Rolf M. Treu handed down a landmark decision in Vergara v. California. A group of student plaintiffs supported by a Silicon Valley entrepreneur argued that state tenure laws violated the State Constitution, kept bad teachers on the job, and deprived them of a quality education.

A similar lawsuit is making its way through the State Supreme Court in New York and other state courts across the country, according to the New York Times:

Challenges to teacher tenure laws are moving to the courts since efforts in state legislatures have repeatedly been turned back. Critics of the existing rules say tenure essentially guarantees teachers a job for life. According to the New York suit, only 12 teachers in New York City were fired for poor performance from 1997 to 2007 because of a legally guaranteed hearing process that frequently consumes years and hundreds of thousands of dollars in legal fees. ...

In New York, teachers can earn tenure after a three-year probationary period, which city school officials can extend for another year, and often do. That represents one big difference with California, where teachers can win tenure after 18 months, and even before being certified.

Larry Sand, a retired teacher and president of the California Teachers Empowerment Network explains that even if an anticipated Vergara appeal by the California Teachers Association fails, a new law will have to replace the stricken one. One may already be in the works based on a pending Los Angeles legal settlement, Reed v. the State of California. Seniority-based teacher layoffs, also referred to as last-in, first-out or LIFO, disproportionately affected teachers in 45 of LA’s poorest schools, since the newest teachers are often assigned to schools where more experienced teachers don’t want to work (a longstanding teacher union practice).


Obamacare Architect Warned That Tax Credits Would Be Available Only in States with Exchanges

ObamacareScreenHartWebHalbig versus Burwell is the famous lawsuit that claims that Obamacare federal health-insurance exchanges cannot pay tax credits to health insurers. The plain language of the law is that only state-based Obamacare health-insurance exchanges can channel these tax credits. The real champions of this argument are Michael Cannon and Jonathan Adler of the Cato Institute, who recently encapsulated their argument in the Wall Street Journal.

The question is still unsettled. Last week, two different Circuit Appeals Court panels came to different conclusions: The DC Circuit agreed that the subsidies could go only to insurers in state exchanges; while the 4th Circuit ruled that they could go through federal exchanges too.

The Obama administration is horrified that the Supreme Court could decide that it is illegal to subsidize insurers in federal exchanges. Most states have declined to set up their own exchanges. Further, some of those that did are closing up shop.

So, imagine the surprise when a researcher at the Competitive Enterprise Institute dug up a 2012 video of Jonathan Gruber, who earned about $400,000 from taxpayers as the “architect” of Obamacare, stating the obvious:

“What’s important to remember politically about this is if you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits...”

Of course, Mr. Gruber is now trying to wriggle out of his previous comments. Read the whole story at the CEI blog.

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For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.


A Hundred Years of War

WWImontage2One hundred years ago today, Austria-Hungary fired the first shots of World War I, sparking its conflict with Serbia. Gavrilo Princip, a Bosnian Serb, had assassinated Archduke Franz Ferdinand. Mutual defense agreements ensured that the political clash did not remain regional. Austria-Hungary got support from Germany, the Ottoman Empire, and Bulgaria. Serbia found allies in Britain, France, Belgium, Greece, Romania, Italy, Russia, Portugal, Montenegro, Japan, Brazil and the United States. The global war likely qualified as the worst bloodbath the world had yet to see, certainly in such a short duration. Fifteen million or more died in less than five years. Tens of millions were wounded, displaced, or orphaned. Disease spread. The international trade and exchange that existed before the war never fully recovered.

World War I was a low point for liberties within the United States, once America finally got engaged in the battle. People went to prison for criticizing the military or opposing the draft. Surveillance of the citizenry and crackdowns on dissent became normal. Domestic regulation and taxation skyrocketed. Almost nothing that happened during the New Deal did not have some precursor in Wilson’s wartime domestic governance. There was hope for the United States becoming freer and freer in the early 20th century. World War I altered that picture dramatically. Almost everything the federal government has done in the last century has roots in the 1910s.