Filter | only charts
Robert VerBruggen - September 16, 2014

This morning saw the release of the Census's much-anticipated poverty report for 2013. There are plenty of interesting facts and charts to be found in its 60 pages, but the biggest revelation is that the poverty rate ticked down a bit for the first time since 2006 (from 15 percent in 2012 to 14.5 percent in 2013), and here's a graph showing changes since 1959:

Should Governments Control the Internet?

Paul Rosenzweig, Brett D. Schaefer & James L. Gattuso - September 16, 2014

The Internet is now critical to the U.S. economy. A recent Hudson Institute analysis estimated that the information, communications, and technology sector accounted for nearly 10 percent of the total growth of the U.S. economy from 2002 to 2007 – in other words, the sector was responsible for more than $340 billion of the $4.6 trillion increase in real gross output of the U.S. economy over that period. Small wonder, then, that Congress has taken a keen interest in the Commerce Department's March 14 announcement that it intends to end its current supervisory role over ICANN -- the Internet Corporation for Assigned Names and Numbers -- and facilitate the transition to a new, private-sector led, bottom-up system under which ICANN will operate. Most importantly, the U.S. will no longer oversee the Internet Assigned Numbers Authority (IANA), which is responsible for the global coordination of the domain-name system -- the system that, for example, ties "" to this site.

But some of ICANN's recent actions have raised concerns about the corporation's commitment to private-sector control. Last month, ICANN announced a plan to change its bylaws to require its board to accept recommendations from governments, which act through a "Government Advisory Committee" or GAC. Under the proposal, ICANN's board of directors would be required to adopt advice from the committee unless two-thirds of the board members voted against it.

Obviously, the proposed change would enhance the power of governments, many of which are hostile to an open and free Internet, within ICANN. Therefore, it poses a threat to Internet security, stability, and openness. Here are three more specific reasons to reject it.

Wrongful Equation of GAC Advice to Broader Stakeholder Recommendations: Currently, the board can reject GAC advice by a simple majority vote. Supporters of the proposal to increase the threshold to reject GAC advice to a two-thirds majority note that ICANN bylaws currently give favored status to some recommendations from the GNSO Council, which represents a broad group of stakeholders, provided that they are passed by a supermajority.

Governments believe that their advice should be no less privileged than that of the GNSO, but there are good reasons to give GNSO a higher standing. Advice from the GNSO Council is the product of bottom-up development from multiple stakeholders. The vetting done during that process bestows a presumption of legitimacy on the resulting recommendation. By contrast, GAC advice is the product of hierarchical, top-down direction from governments alone, some of which do not even democratically represent their own citizens.

To be sure, governments are also constituents of ICANN. If they were to participate in the development of policy through the GNSO structure, their input would have the imprimatur of the multi-stakeholder process. But standing alone, GAC advice does not have such an imprimatur of legitimacy. Essentially an effort to have a last-word veto, the GAC proposal runs counter to ICANN's commitment to a multi-stakeholder decision-making process.

Risk of GAC Control of ICANN: By raising the threshold for rejecting GAC advice, the proposal would increase the power of governments in determining Internet policy. Since the establishment of ICANN, the U.S. government's stated goal has been to minimize the role of governments in managing the Internet. Government advice is important, as is the advice of other constituents. But the power of governments is such that care must be taken that they not swamp input from other constituencies.

Supporters of the rule change argue that the GAC's role would still be limited, since its recommendations must be adopted by a "consensus" of governments, which is defined in the GAC operating principles as "the practice of adopting decisions by general agreement in the absence of any formal objection." But this requirement could be changed by a majority vote in the GAC. In fact, some governments have already proposed that the consensus requirement be changed so that GAC decisions can be adopted by majority vote. It is possible, perhaps likely, that in the near future a majority of countries will modify the current operating procedures and then, under the new procedures, push through advice from the GAC that is contrary to the broader interests of the Internet community. Raising the bar for rejecting GAC advice, as the proposed change would do, could allow authoritarian governments to dominate ICANN as they dominate other international organizations, such as the U.N. General Assembly.

Inconsistency With the U.S.'s Goals in Turning Over the Management of the Domain-Name System: The National Telecommunications and Information Administration, which is part of the U.S. Department of Commerce and the main U.S. government participant ICANN activities, has set forth a number of conditions for the impending transition, the clearest of which is that the U.S. will "not accept a proposal that replaces the NTIA role with a government-led or an inter-governmental organization solution." The reason for this position is clear: Enhancing the power of governments, many of which are hostile to an open and free Internet, would threaten the security, stability, and openness of the Internet. Instead of moving away from governmental control as the U.S. government has requested, the proposed bylaw change would enhance the authority of governments within ICANN by making it more difficult for the board to reject GAC advice.

The ICANN board should oppose any change to its bylaws that would erode its independence and increase governmental influence in its operations. If the board does adopt the proposed change, the U.S. government should promptly reevaluate its conclusion that ICANN "has matured as an organization and has taken important steps to improve its accountability and transparency" and can be trusted with coordination of the Internet's domain-name system absent U.S. supervision.

Paul Rosenzweig is a visiting fellow in the Heritage Foundation's Allison Center for Foreign and National Security Policy. Brett D. Schaefer is Jay Kingham fellow in international regulatory affairs in Heritage's Thatcher Center for Freedom. James L. Gattuso is senior research fellow for regulatory policy in Heritage's Roe Institute for Economic Policy Studies.

More States Enforce Food Stamp Work Requirements

Jake Grovum, Stateline - September 16, 2014

In the coming months, food stamp work requirements suspended during the Great Recession will be reinstated in at least 17 states, jeopardizing benefits for hundreds of thousands of Americans.

In those states, work requirements will be back in place for able-bodied adults who are 18 to 50 years old and have no children. It's possible the requirements will return in more than 17 states, but the U.S. Department of Agriculture doesn't yet have a full count, even though states were supposed to report their plans by Labor Day.

Hunger advocates worry that fulfilling the work requirements will be a challenge for recipients who live in areas where both work and job training opportunities remain slim. But others note that the suspension of the requirement was always intended to be temporary, and that the economy has improved sufficiently to end it.

Typically, low-income, able-bodied adults without children can receive food stamps for only three months in a three-year period, unless they are working or participating in a training or "workfare" program for at least 20 hours a week. But as part of the 2009 economic stimulus law, the federal government allowed states to suspend the normal work requirements for food stamps, formally known as the Supplemental Nutrition Assistance Program. Nearly every state chose to do so.

The childless adults affected by the requirements comprise 10 percent of the total food stamp population, which was 46.5 million in June, the most recent month for which data are available.

A few years ago, the relaxed standards began to phase out. Some states (Iowa, Minnesota, Nebraska, New Hampshire, North Dakota, Oklahoma, South Dakota, Vermont, Virginia and Wyoming, as of fiscal year 2014) were no longer eligible under the federal government's guidelines, which are based on local economic conditions. For fiscal year 2013, Nebraska, New Hampshire, North and South Dakota, Vermont and Wyoming weren't eligible.

Other states, such as Kansas, Oklahoma, and Utah, reinstated work requirements over the course of the past year despite being eligible for at least partial waivers. Ohio, New York, Texas and Wisconsin all waived the work requirements for only part of the year or in certain areas of their states, even though they were eligible to waive the requirements statewide.

This coming year, just 35 states and the District of Columbia are eligible to waive the work requirements, while last year, 42 states and D.C. could suspend them. In 2010 and most of 2011, 47 states and D.C. met the guidelines to waive the work requirements, and all but Delaware suspended them at some point during the Great Recession. Only Nebraska, North Dakota and South Dakota weren't eligible as of 2011. The stimulus suspended time limits for getting food stamps in all states from April 2009 through September 2010.

At least two of the states eligible for waivers this year, Maine and New Mexico, have said they plan to enforce the requirements anyway, but more could decide to join them, as pressure to reinstate the requirements has grown.

Exact figures for how many people would be affected by reinstated work requirements in each state are hard to come by. In some states, such as Ohio, it is estimated more than 140,000 would be subject to the rules. But in every case, if most or all the adults were able to meet the work requirements — either through finding a job, enrolling in a training program or even volunteering — they could continue receiving benefits as long as they remained otherwise eligible.

Hunger Advocates Worried
While the recession's spike in food stamp enrollment has begun to recede, the USDA reported this month that last year nearly 15 percent of Americans were "food insecure," or were forced by their diminished finances to reduce their food intake or scale back the quality or variety of their diets. Meanwhile, the decrease in food stamp enrollment overall has lagged behind improvement in the unemployment rate, as Stateline has reported.

In Ohio, for example, hunger advocates argue that a dearth of jobs and lack of training activities would make it nearly impossible for some food stamp recipients to meet the requirements, which are being enforced in all but 16 of the state's 88 counties, exempting mainly rural, Appalachian regions. By January of this year, 16,000 recipients had been either suspended or kicked off food stamps due of the requirements.

"In an environment where we have college graduates that are now competing for low-wage jobs, for folks with multiple barriers to employment, it's going to be difficult for them to find work," Lisa Hamler-Fugitt, of the Ohio Association of Food Banks, said earlier this year.

In the ensuing months, the issue grew larger. Food banks joined other advocates to continue to push officials to take up Washington's offer of a waiver. And the coalition has even filed a civil rights complaint with U.S. agriculture officials arguing the 20,000 who have lost benefits are disproportionately people of color.

A Return to Normalcy
Yet officials in Ohio and other states reinstating the requirements cast the move as a return to normalcy for a safety net program that saw enrollment and spending skyrocket during the recession, when some states had as many as one in four residents on the program. In many cases, states have paired the renewed standards with investments in job creation and training programs to help those who can't find work.

"People who are in need deserve a hand up, but we should not be giving able-bodied individuals a handout," Maine Gov. Paul LePage, a Republican, said in a statementannouncing the change in his state in July. "We must continue to do all that we can to eliminate generational poverty and get people back to work. We must protect our limited resources for those who are truly in need and who are doing all they can to be self-sufficient."

Officials in New Mexico pointed to other safety net programs, such as Temporary Assistance for Needy Families (commonly referred to as welfare) that also have work requirements. They stressed that the suspension of the requirement was always supposed to be temporary.

But the move aroused vocal opposition there as well: Officials had to relocate a recent public hearing on the changes to a bigger auditorium because of large crowd expectations.

The New Mexico Conference of Bishops blasted the reinstatement of work requirements in a statement last month. "Some in our state government are poised to strike another blow to our still-weak communities. The administration of the state wants to deny food benefits to those who cannot find a job in a market that isn't producing any."

Despite the protests, a return of the rules is probably inevitable, as the stimulus measure was written to respond to the recession. Work requirements for safety net programs have been a key component of food stamps and other welfare benefits for decades. An Obama administration proposal to waive work requirements for TANF during the recession hit similar roadblocks.

Some in Congress, including many Republicans, have advocated an even quicker reinstatement of the work requirements, although those proposals have mostly failed amid broader sparring between the GOP-controlled House and Democratic-controlled Senate over the food stamp program. Some Democrats in Washington and the states, who tend to be more supportive of the food stamp program, also have called for a reinstatement of the work requirements.

This piece originally appeared at Stateline, an initiative of The Pew Charitable Trusts, where Jake Grovum is a staff writer.

Unseen Toll: Wages of Millions Seized to Pay Debts

Paul Kiel, ProPublica & Chris Arnold, NPR - September 15, 2014

Back in 2009, Kevin Evans was one of millions of Americans blindsided by the recession. His 25-year career selling office furniture collapsed. He shed the nice home he could no longer afford, but not a $7,000 credit card debt.

After years of spotty employment, Evans, 58, thought he'd finally recovered last year when he found a better-paying, full-time customer service job in Springfield, Mo. But early this year, he opened his paycheck and found a quarter of it missing. His credit card lender, Capital One, had garnished his wages. Twice a month, whether he could afford it or not, 25 percent of his pay 2014 the legal limit 2014 would go to his debt, which had ballooned with interest and fees to over $15,000.

"It was a roundhouse from the right that just knocks you down and out," Evans said.

The recession and its aftermath have fueled an explosion of cases like Evans'. Creditors and collectors have pursued struggling cardholders and other debtors in court, securing judgments that allow them to seize a chunk of even meager earnings. The financial blow can be devastating 2014 more than half of U.S. states allow creditors to take a quarter of after-tax wages. But despite the rise in garnishments, the number of Americans affected has remained unknown.

At the request of ProPublica, ADP, the nation's largest payroll services provider, undertook a study of 2013 payroll records for 13 million employees. ADP's report, released today, shows that more than one in 10 employees in the prime working ages of 35 to 44 had their wages garnished in 2013.

Roughly half of these debtors, unsurprisingly, owed child support. But a sizeable number had their earnings docked for consumer debts, such as credit cards, medical bills and student loans.

Extended to the entire population of U.S. employees, ADP's findings indicate that 4 million workers 2014 about 3 percent of all employees 2014 had wages taken for a consumer debt in 2013.

Carolyn Carter of the National Consumer Law Center called the level of wage garnishment identified by ADP "alarming." "States and the federal government should look on reforming our wage garnishment laws with some urgency," she said.

The increase in consumer debt seizures is "a big change," largely invisible to researchers because of the lack of data, said Michael Collins, faculty director of the Center for Financial Security at the University of Wisconsin-Madison. The potential financial hardship imposed by these seizures and their sheer number should grab the attention of policymakers, he said. "It is something we should care about."

ADP's study, the first large-scale look at how many employees are having their wages garnished and why, reveals what has been a hidden burden for working-class families. Wage seizures were most common among middle-aged, blue-collar workers and lower-income employees. Nearly 5 percent of those earning between $25,000 and $40,000 per year had a portion of their wages diverted to pay down consumer debts in 2013, ADP found.

Perhaps due to the struggling economy in the region, the rate was highest in the Midwest. There, over 6 percent of employees earning between $25,000 and $40,000 2014 one in 16 2014 had wages seized over consumer debt. Employees in the Northeast had the lowest rate. The statistics were not broken down by race.

Currently, debtors' fates depend significantly on where they happen to live. State laws vary widely. Four states 2014 Texas, Pennsylvania, North Carolina and South Carolina 2014 largely prohibit wage garnishment stemming from consumer debt. Most states, however, allow creditors to seize a quarter of a debtor's wages 2014 the highest rate permitted under federal law.

Evans had the misfortune to live in Missouri, which not only allows creditors to seize 25 percent, but also allows them to continue to charge a high interest rate even after a judgment.  

By early 2010, Evans had fallen so far behind that Capital One suspended his card. For months, he made monthly $200 payments toward his $7,000 debt, according to statements reviewed by ProPublica and NPR. But by this time, the payments barely kept pace with the interest piling on at 26 percent. In 2011, when Evans could no longer keep up, Capital One filed suit. Evans was served a summons, but said he didn't understand that meant there'd be a hearing on his case.

If Evans had lived in neighboring Illinois, the interest rate on his debt would have dropped to under 10 percent after his creditor had won a judgment in court. But in Missouri, creditors can continue to add the contractual rate of interest for the life of the debt, so Evans' bill kept mounting. Missouri law also allowed Capital One to tack on a $1,200 attorney fee. Some other states cap such fees to no more than a few hundred dollars.

Evans has involuntary paid over $6,000 this year on his old debt, an average of about $480 each paycheck, but he still owes more than $10,000. "It's my debt. I want to pay it," Evans said. But "I need to come up with large quantities of money so I don't just keep getting pummeled."

Companies can also seize funds from a borrower's bank account. There is no data on how frequently this happens, even though it is a common recourse for collectors.

The garnishment process for most debts begins in local courts. A company can file suit as soon as a few months after a debtor falls behind. A ProPublica review of court records in eight states shows the bulk of lawsuits are filed by just a few types of creditors and companies. Besides major lenders like Capital One, medical debt is a major source of such suits. High-cost lenders who deal in payday and installment loans also file suits by the thousands. And finally, an outsized portion comes from debt buyers 2014 companies that purchase mostly unpaid credit card bills.

When these creditors and collectors go to court, they are almost always represented by an attorney. Defendants 2014 usually in tough financial straits or unfamiliar with the court system 2014 almost never are. In Clay County, Missouri, where Capital One brought its suit against Evans in 2011, only 7 percent of defendants in debt collection cases have their own attorneys, according to ProPublica's review of state court data. Often the debtors don't show up to court at all: The most common outcome of a debt collection lawsuit in Missouri (and any other state) is a judgment by default.

In a Clay County courtroom recently, the court was filled with creditors, but debtors were in short supply. Attorneys for hospitals, debt buyers, and lenders milled about, approaching the podium when their cases were called. Often they simply asked for default judgments when debtors failed to show.

Christopher McGraugh, an associate circuit court judge in St. Louis, said the system is designed to give debtors a chance to dispute allegations in suits against them. But in debt collection cases, "it just doesn't happen that much."

Some debtors, he said, may believe that they had no reason to attend since they owe the debt. For others, unable to afford an attorney, handling the case on their own is "beyond their sophistication," he said. As a result, the facts of most cases are never questioned, leaving the plaintiff with a judgment and the ability to pursue a garnishment.

McGraugh, who has presided over thousands of debt collection cases, said when defendants do obtain lawyers, particularly in cases involving debt buyers, they can point to possible holes in the suit. Those cases, he said "are rarely pursued."

Millions of debt collection lawsuits are filed every year in local courts. In 2011, for instance, the year Capital One went to court against Evans, more than 100,000 such suits were filed in Missouri alone.

Despite these numbers, creditors and debt collectors say they only pursue lawsuits and garnishments against consumers after other collection attempts fail. "Litigation is a very high-cost mechanism for trying to collect a debt," said Rob Foehl, general counsel at the Association of Credit and Collection Professionals. "It's really only a small percentage of outstanding debts that go through the process."

"Legal action is a last resort," said Capital One spokeswoman Pam Girardo, and the bank only filed suit after Evans "didn't complete the payment plan we agreed to."

Experts in garnishment say they've seen a clear shift in the type of debts that are pursued. A decade ago, child support accounted for the overwhelming majority of pay seizures, said Amy Bryant, a consultant who advises employers on payroll issues and has written a book on garnishment laws. "The emphasis is now on creditor garnishments," she said. Today, only about half the seizures are for child support, she said.

To illustrate the rise overall, Bryant provided ProPublica and NPR payroll statistics from a major retailer with approximately 250,000 employees nationwide. The company allowed the data to be used on the condition its name was not used. Since 2007, the number of employees who had their pay seized for consumer debt roughly doubled. As of June of this year, 2 percent 2014 about 5,000 employees 2014 had ongoing garnishments for consumer debt and just under 1 percent for student loan debt.

ADP's analysis also found that the rate of garnishment for child support was most common (3.4 percent), but closely followed by consumer debt, including student loans. The next most common reasons for garnishments were tax levies and payments for bankruptcy plans. (Disclosure: ProPublica retains ADP to provide it with professional employer organization services.)

Wage seizures for student loan debts are governed by different laws than other consumer debts. Collectors can obtain a garnishment after an administrative procedure set by federal rules. Borrowers must also be more than nine months behind before a collector can seek one. Finally, such seizures are capped at 15 percent of disposable income.

Department of Education data shows that approximately $1 billion has been collected each year over the past several years through these garnishments. The amount is up by about 40 percent since 2006, even after the figures are adjusted for inflation. ADP's analysis did not break out student loans from other types of consumer debt.

Bryant said the rise in garnishments has become an unanticipated burden for employers.

"It becomes very complicated," she said, particularly for national employers who must navigate the differences in state laws. "It's very easy to make a mistake in the process." If an employer does not correctly handle a garnishment order, she said, they can become liable for a portion or even the entirety of the debt in some states.

The burden was enough to prompt the American Payroll Association to request in 2011 that the Uniform Law Commission draft a model state law on wage garnishment. Bryant said employers are hoping that the new law, which is still being drafted, will be adopted by a large number of states and reduce complications.

This piece originally appeared at ProPublica and was co-published with NPRProPublica asked readers to share their experiences being sued over debt. Here are a few of their stories. Have you been pursued by debt collectors? Share your story here.

The Demographics of Newsweek's Top Schools

Robert VerBruggen - September 12, 2014

Newsweek has a list of 500 high schools that are "beating the odds" -- meaning that their students have good outcomes despite high poverty rates.

Unfortunately, the magazine's methodology does not address the fact that all poor children are not interchangeable. Charter schools are often accused, for example, of skimming off the brightest kids and then claiming success when those kids get high scores. And it's well-known that race still predicts educational achievement after parental income has been removed from the equation.

So, are these schools really "beating the odds," or are their student bodies disproportionately made up of lower-risk poor kids? I don't have the energy to look at all 500, but I did analyze the top 20 using the real-estate site Zillow, which provides an impressive array of data about high schools -- including the ethnic breakdown of student populations (not that any home-buyer would desire such information in this post-racial era of ours).

Even setting aside the fact that some of these schools are charters, most of them are not exactly educating a demographic cross-section of the nation's low-income kids. Poor children in this country are about 24 percent black, 35 percent Hispanic, and 3 percent Asian. But on average, by my count, Newsweek's top 20 schools for poor kids are 16 percent black, 20 percent Hispanic -- and 25 percent Asian. (Spreadsheet here.)

To be clear, there's a fair amount of variation. Two Georgia schools are heavily black, one almost exclusively so, for example. (Though singling these schools out for praise requires us to note that when they're excluded, the average percentage of top-20 schools that's black falls by half.) One in South Dakota is one-third Native American.

By and large, though, however high these schools' poverty rates may be, they are benefiting from a serious demographic skew. Every last school on the list might be doing great things for its students. But the rankings don't prove it.

Robert VerBruggen is editor of RealClearPolicy. Twitter: @RAVerBruggen

Robert VerBruggen - September 10, 2014

Are too many people going to college? I tend to think so -- and I've suggested that, rather than trying to prod more kids into higher education, we should focus on improving the situation for the ones who already go. Around 40 percent of them don't graduate in six years, and many of those who do graduate end up in jobs that don't even require a degree.

Today, Inside Higher Ed has a piece covering a new study about the "murky middle" -- college kids who aren't lost causes, but who are still at a substantial risk of not graduating. Here's a chart of freshman-year grades and six-year graduation rates:

Basically, by the end of their first year, more than a tenth of college students have shown they almost certainly don't have what it takes to graduate, earning a C average or less -- and fewer than half of students have at least a two-thirds chance of making it, which corresponds to an A to B average.

Remember, these kids are self-selected -- they're the ones who decide, based on their performance in high school and the incentives in front of them, that going to college is a good idea. If we change the incentives to push even more kids into college, those kids will be even worse off, on average.

Much better to see what we can do for that "murky middle."

Robert VerBruggen is editor of RealClearPolicy. Twitter: @RAVerBruggen

Milwaukee's Taxi Monopoly Comes Crashing Down

John Kerr - September 10, 2014

As taxi and limo owners confront the reality that the cozy regulatory cocoon they've spun over the past several decades won't protect them from the twin elements of consumer preference and technological progress, their entreaties smack of desperation.

To hear the cabbie interests tell it, the arrival of services such as Uber and Lyft, which use smartphone apps to match willing drivers with ride seekers, will lead to all manner of fraud, assault, and carnage against unsuspecting passengers. A less shrill critique -- articulated in a July 18 Washington Post commentary by two members of the D.C. Taxi Operators Association's leadership council -- holds that these new competitors aren't following "the same rules and regulations" that govern existing cab and limo companies.

Of course, driver misconduct isn't unique to ride-sharing outfits. And it is far from clear in many jurisdictions that the regulatory apparatus governing taxis -- designed in large part to ensure the viability of existing operators and discourage new entrants -- applies to these modern business models.

But as these arguments fail to sway many riders searching for more convenient options, opponents of transportation freedom have unveiled another approach: In Milwaukee, they argue that they have a legal right to be shielded from competition at the expense of taxpayers, consumers, and entrepreneurs. The city offers an instructive case on the stifling effects of overzealous regulation -- and the lengths to which the taxi cartel will go to preserve it.

In 1991, Milwaukee imposed strict limits on the number of cabs allowed to operate within its boundaries. Those seeking to enter the market were out of luck unless they could purchase a permit from somebody who already held one. Earlier this year, Milwaukee had only 320 cabs, one for every 1,850 residents. Just 90 miles down Interstate 94, Chicago had one cab for every 424 residents. Denver and Phoenix had similar ratios -- 480 and 319 people per cab, respectively.

This dearth of taxis in Milwaukee did not reflect a lack of demand. In little more than two decades, the price for a Milwaukee permit on the secondary market had skyrocketed from $85 to $150,000, an indication that the arbitrary limit on supply had created a boon for cab companies at the expense of customers.

Enter Ghaleb Ibrahim and two other taxi drivers, who sought to own and operate cabs without paying six figures for a license. Represented by the Institute for Justice -- a public-interest law firm and my employer -- the three men filed suit in 2011. In 2013 a Milwaukee judge ruled in their favor, finding that the cap had no rational basis and violated the Wisconsin constitution.

The Milwaukee Common Council responded in July of this year by voting unanimously to abolish the cap on licenses and simply require that drivers meet basic guidelines on insurance and other health and safety standards. The move, effective September 1, also opened the door for Uber, Lyft, and others to enter the market.

But the industry has kept swinging, filing suit in federal court on August 25 seeking to block implementation of the ordinance or, failing that, to secure financial damages. Among other claims, the cab companies contend that, by dismantling the barriers protecting them from competition, Milwaukee has violated the federal Constitution's Takings Clause, which prohibits the government from seizing private property without just compensation. They argue that the value of their cab permits will be "destroyed" under the new system, so the city -- or, more accurately, the taxpayer -- owes them millions of dollars to make them whole.

The argument, while imaginative, ignores the inconvenient fact that the taxi permits were not a property right. Rather, the system was a gift from lawmakers at the expense of consumers -- and one that violated the Wisconsin constitution, a court has found. The lawsuit is akin to "the last gasp of the gaslight industry trying to hold off electricity 100 years ago," Milwaukee alderman Bob Bauman told the Milwaukee Journal Sentinel.


For too long, the cab and limo industries have employed political cronyism and protectionist regulation to fend off competitors -- all at the expense of innovation, efficiency, and service. Whether clearing the way for men and women such as Ghaleb Ibrahim to earn an honest living, allowing upstart endeavors to test the market, or awakening the entrenched interests to the realities of an evolving economy, Milwaukee's approach represents a victory for liberation over subjugation and holds the promise of increased choice for consumers.

The city's ordinance deserves to go forward.

John Kerr is a communications fellow with the Institute for Justice, a public-interest law firm in Arlington, Va., and a former editorial-page editor of the Las Vegas Review-Journal.

Why Gun Control Groups Have Moved Away From an Assault Weapons Ban

Lois Beckett, ProPublica - September 10, 2014

The morning after the Sandy Hook shootings, Shannon Watts, a mother of five and a former public relations executive, started a Facebook page called "One Million Moms for Gun Control." It proved wildly popular and members quickly focused on renewing the federal ban on military style assault weapons.

"We all were outraged about the fact that this man could use an AR-15, which seemed like a military grade weapon, and go into an elementary school and wipe out 26 human beings in less than five minutes," Watts said.

Nearly two years later, Watts works full-time as the head of the group, now named Moms Demand Action for Gun Sense in America, is a significant player in a coalition financed by former New York Mayor Michael Bloomberg. But while polls suggest a majority of Americans still support an assault weapons ban, it is no longer one of Watts' top priorities.

"We've very much changed our strategy to focus on public safety measures that will save the most lives," she told ProPublica.

It's not just that the ban proved to be what Watts calls a "nonstarter" politically, gaining fewer votes in the Senate post-Sandy Hook than background check legislation. It was also that as Watts spoke to experts and learned more about gun violence in the United States, she realized that pushing for a ban isn't the best way to prevent gun deaths.

A 2004 Justice Department-funded evaluation found no clear evidence that the decade-long ban saved any lives. The guns categorized as "assault weapons" had only been used in about 2 percent of gun crimes before the ban. "Should it be renewed," the report concluded, "the ban's effects on gun violence are likely to be small at best and perhaps too small for reliable measurement."

With more information, Watts decided that focusing on access to guns, not types of guns, was a smarter approach. She came to the same conclusion that other gun control groups had reached even before the Sandy Hook shootings: "Ultimately," she said, "what's going to save the most lives are background checks."

While many gun control groups still officially support the assault weapons ban 2014 "we haven't abandoned the issue," as Watts said 2014 they're no longer actively fighting for it.

"There's certainly a lot of public sentiment around high capacity magazines and assault weapons," Dan Gross, the president of the Brady Campaign to Prevent Gun Violence, said in an interview this summer. "It's easy to understand why people feel so passionate about it."

But, he said, "when you look at this issue in terms of the greatest opportunity to keep guns out of the hands of dangerous people and prevent gun violence, background checks are a bigger opportunity to do that."

Bloomberg's umbrella group, Everytown for Gun Safety, has also deemphasized an assault weapons ban. A 10-question survey the group gave to federal candidates to measure their stances on gun policy did not even ask about a ban.

"We acknowledge that assault weapons put the 'mass' in mass shootings," Erika Soto Lamb, the group's communications director, said. But "we feel like it's a more productive use of our time, effort, money, voices, and votes [to focus] on the policies that are going to save the most lives."

The most common criticism of the weapons ban 2013 which was signed into law Sept. 13, 1994 -- was that it focused too much on the cosmetic "military-style" features of guns, like pistol grips or folding rifle stocks, which made it easy for manufacturers to turn banned guns into legal guns by tweaking a few features. During the ban, some manufacturers added "PCR" to the name of these redesigned guns, for "politically correct rifle."

But the more profound criticism of the ban is that "assault weapons," a politically charged and imprecise term, have never been the weapons that contribute the most to American gun violence. Gun rights groups have pointed out for years that the campaign against assault weapons ignores the data. (The National Rifle Association did not respond to our requests for comment.)

While assault weapons do appear to be used more frequently in mass shootings, like the ones in Newtown and Aurora, Colorado, such shootings are themselves rare events that are only responsible for a tiny fraction of gun homicides each year. The category of guns that are used in the majority of gun murders are handguns.

Despite this data 2014 and perhaps because many Americans do not have an accurate understanding of gun violence statistics 2014 an assault weapons ban has continued to have broad public and political support.

In January 2014, a Rassmussen poll found that 59 percent of likely voters still favored an assault weapons ban, even after the measure failed in the Senate in April 2013, along with the rest of the White House's push for tougher gun laws.

Sen. Dianne Feinstein, D-Calif., the author of the original ban, has repeatedly re-introduced it, most recently in 2013, after the Sandy Hook shootings. Obama made the policy part of his post-Sandy Hook platform for gun violence prevention, though the White House's central focus was on passing universal background checks.

Experts say that a smarter way to approach the assault weapons ban might be to focus on the ammunition, not the design of the guns themselves. The 1994 gun ban included a ban on magazines with more than 10 rounds of ammunition. Unlike "assault weapons," high-capacity magazines were used in as much as 26 percent of gun crimes before the ban. Limiting magazines to a smaller number of rounds might mean shooters, particularly in mass shooting situations, could not hit as many victims as quickly.

But even this focus on banning high-capacity magazines, rather than guns, suffers from a lack of data. "It is not clear how often the outcomes of gun attacks depend on the ability of offenders to fire more than 10 shots (the current magazine capacity limit) without reloading," the 2004 evaluation concluded.

There is some evidence that the ban was preventing violence outside the U.S.: Mexican politicians have long blamed the end of the assault weapons ban for contributing to drug-related violence in Mexico. In a 2013 study, three American academics found that the end of the ban brought about "at least 238 additional deaths annually" in areas of Mexico near the U.S. border.

Meanwhile, as gun control groups have moved their focus away from gun bans, Americans are buying fewer assault weapons than they did when a ban seemed imminent, Bloomberg News reported last month.

This piece originally appeared at ProPublica, where Lois Beckett is a reporter.

Beating Back Bureaucracy

Rich Tucker - September 9, 2014

When something goes wrong, the federal government has a knee-jerk reaction: Hire more people. Did airport security personnel (working under strict federal regulations) make mistakes on September 11? Well, the answer must be to create the TSA and staff it with many of the same people. Now, as federal employees, they'll do a better job.

If you say so.

Writing in the Washington Post, former George W. Bush-administration official John DiIulio takes the same point even farther down the road. The problem, he insists, isn't that today's federal government is too large. It's that today's federal government is too small.

"We don't need fewer federal workers; we need more of them -- a lot more. More direct public administration would result in better, smarter, more accountable government," he writes. DiIulio points out that much of the work being done by the federal government these days is actually done by contractors, not federal employees.

DiIulio seems to think that's a major problem. He highlights the failures of FEMA and -- the former poorly staffed, the latter too reliant on contractors, he says -- and points out that contractors often lobby for favorable spending policies in Washington. If the federal government would just hire more people, he reasons, it could replace all those contractors.

But that's looking at things the wrong way.

To begin with, the examples DiIulio employs do not hold up to scrutiny: FEMA's problem wasn't a lack of personnel; it was poor leadership ("heck of a job Brownie") and an impossible mission (trying to save a city that's below sea level from flooding during a hurricane). As for, the president and his secretary of health and human services didn't seem that engaged with it last fall. There's no reason to assume lesser federal employees would have been.

So, turn the question around: Why do we have so many federal employees if contractors are able to do the same jobs?

DiIulio writes that "the Energy Department spends about 90 percent of its annual budget on private contractors, who handle everything from radioactive-waste disposal to energy production." So why have an "Energy Department" at all? The federal government's tail is too long as it is. We could give private contractors the remaining 10 percent of the budget, give them 100 percent of the work, and reduce the federal bureaucracy.

Ah, but that's one thing that (almost) never happens.

"The percentage of federal workers fired every year by agencies fell from 0.57 percent in fiscal 2009 to 0.46 percent in 2013," reports the Federal Times, a newspaper aimed at federal workers. Meanwhile the private sector (where most of us toil) "fires nearly six times as many employees — about 3.2 percent." Want job security in these uncertain times? Go to work for Uncle Sam.

That fact undermines another of DiIulio's points: that federal employees would be more accountable than contractors. Contractors can be fired at any time if they're not getting the job done, just as those of us in the private sector can. Contracts can be canceled or not renewed -- and in fact, a key contractor involved with has been fired. A federal bureaucrat, though, is (almost) forever.

Clearly the U.S. needs bureaucratic reform. But that doesn't mean hiring more people who will remain on the payroll until they retire or die. Here's an idea: The Economist reports that New Zealand "has recast its civil service, creating departmental chief executives who sign three- or five-year contracts to meet specified targets." That's a way to force civil servants to produce without making the government larger.

Another reform would be for citizens to insist that government do less.

DiIulio writes that "beginning in the 1960s, the War on Poverty, the Vietnam War, and growing public demands for Washington to do more on issues from street crime and health care to environmental protection and veterans affairs led to government's expansion."

Well, the Vietnam War has been over for some decades now. We can end the federal portion of the War on Poverty by turning responsibility for welfare back over to states and private charities. Washington isn't capable of dealing with street crime, and seems to be making a hash of health care as well.

We should take a different lesson from DiIulio's piece than the one he tries to impart. The United States needs a smaller, more limited federal government.

Rich Tucker is a writer living in Northern Virginia. You can e-mail him at

Why the Wait on Renewable Fuels?

Byron Dorgan - September 9, 2014

Our government's policy on renewable fuels has been clear for a decade, since the Renewable Fuel Standard (RFS) became law in 2005 with overwhelming bipartisan support in Congress and the signature of President George W. Bush. These standards required fuel makers to blend renewables into the products they sold. "Believe in it, invest in it, and count on it!" That's what the American people heard from both political parties.

I, along with Senators Jim Talent and Tim Johnson, offered the legislation creating the RFS. President Obama, while serving in the Senate, was also a leader in the cause: He helped strengthen standards for biodiesel in legislation he wrote in 2007 with former Republican senator Dick Lugar.

But late last year, while the EPA was working to establish the 2014 guidelines for the RFS, a tentative proposal leaked that would reduce previously established targets for renewable fuels. To this day -- months after a final decision should have been made -- the administration has not signaled what it intends to do other than to vaguely suggest that the initial proposal will be strengthened.

The proposal was met with aggressive criticism, not just from the renewable-fuels industry but also from lawmakers in both parties who knew that the proposal threatened thousands of jobs in their states. Just before the August congressional recess, ten senators pushed back, asking the White House why it would propose cutting volumes of biodiesel, the most successful EPA-designated advanced biofuel. This is a renewable fuel that the EPA says reduces carbon emissions by more than 50 percent relative to conventional diesel.

In the meantime, the administration's delays have spooked investment and raised questions about the government's commitment to renewable energy, particularly advanced biofuels. A survey by the National Biodiesel Board released in May showed that 78 percent of the nation's biodiesel producers have cut back production and more than half have been forced to idle production or shut down plants altogether.

And, contrary to a popular belief, backing a strong renewable-fuels industry is in no way at odds with supporting continued growth in domestic oil production. The new oil-and-gas discoveries and increased production here at home are good news for our country. But so is the work we've done to build a renewable-fuels industry, which provides fuel diversity and environmental benefits while strengthening our energy security and national security.

I am hopeful that the administration will tell the world that America's goals have not changed and will make the adjustments necessary to further America’s leadership in the renewable fuels industry.

Byron Dorgan represented North Dakota in the U.S. Senate from 1992 to 2011 and in the U.S. House from 1981 to 1992. He now is senior policy adviser at Arent Fox, whose clients include the National Biodiesel Board.

Hispanic Success and School Choice

Jonathan Butcher & Jorge Lima - September 8, 2014

Angela Ramirez, a stay-at-home-mom living in Arizona, is trying to find a great education for her children -- and herself. She sends her two adopted sons to a private school using an education savings account, a flexible debit card that allows her to pay for private-school tuition and other educational services like tutoring. At the same time, Angela studies health-care administration at Northern Arizona University.

"At their old school, if they had extra time, everyone wanted to play," Ramirez says of her kids. "Here, the other students want to study."

Ramirez is one of a growing number of Hispanic parents navigating the U.S. education system. In 2000, according to Pew, there were eight states where 20 percent or more of the kindergartners were Hispanic. In 2012, that number had more than doubled to 17 states. This fall, for the first time, minority students in U.S. public schools will outnumber non-Hispanic white students.

Yet as Hispanic students account for more and more of public-school enrollment, parents, teachers, and policymakers must be aware of another sobering fact: Hispanic students have high dropout rates. A third of Hispanics who start as freshmen in public schools don't graduate in four years, roughly double the white rate.

For some states, the relationship between a growing Hispanic population and dropout rates is even starker. Colorado, for example, has one of the nation's ten largest Hispanic populations at 1.1 million -- and also one of the lowest graduation rates for Latino students at 57 percent.

The statistics are worse for Hispanic males around the country. An annual survey of graduation rates and high-school dropouts notes that in states with large Hispanic populations, the trend is consistent: "For Hispanics in seven of the 13 states where the overwhelming majority of Hispanics attend high school, on-time graduation rates for males are likely in the low 60s" (that is, around 60 percent).

Every child is unique and has different learning needs. Dropout rates and the achievement gap between white and Hispanic students are troubling. Even more troubling is the fact that the national achievement gap has not closed over the last decade in math or reading for these students. As Hispanics continue to believe education is key to achieving the American Dream, many are seeking new alternatives and more options when it comes to their children's' education.

Angela's story is an example of the ways in which many Hispanic families are responding to these challenges.

First, they are taking ownership of their children's future. Since 2000, the percentage of charter-school students who are Hispanic has increased about eight points, to 28 percent. Parents select these schools when their neighborhood traditional schools are not meeting their children's needs.

Charter-school results are strong across the country. Recent studies using charter school lotteries are able to account for factors that otherwise weaken studies of student achievement, giving parents and researchers solid evidence on charter schools’ performance. For example, in New York, charter schools helped students in grades K-8 close the “Scarsdale-Harlem achievement gap” in math and English. In Boston, researchers found “large one-year gains in student proficiency” among charter-school students on the state exam, and the “gains [were] particularly large for English language learners.”

Polling data indicates that 68 percent of Hispanic respondents favor charter schools, a higher percentage than found among white or black individuals.

Likewise, Hispanic families also want the opportunity to send their child to a private school or challenge them with unique learning opportunities through education savings accounts. Sixty-eight percent of Hispanics support education savings accounts, 72 percent are in favor of private school vouchers, and 80 percent support private-school scholarships funded by charitable organizations.

In Arizona, home to the nation's longest-running education savings accounts, the Goldwater Institute found that Hispanic students are overwhelmingly eligible for the accounts. Students attending Arizona's failing schools are eligible to apply, and among the 20 largest failing public schools in the state, nearly 71 percent of the students are Hispanic (students with special needs are also eligible, along with adopted children and children in military families).

Angela is excited for her adopted sons' opportunity, but she regrets not knowing about education savings accounts and other scholarship opportunities for her biological children, who are now grown.

"I didn't know there were any scholarships. If I would have known that a long time ago, I would have sent all my kids to private school," Angela says. "I'm looking out for their education, for their future."

Jonathan Butcher is education director at the Goldwater Institute and senior fellow with the Beacon Center. Jorge Lima is the policy director at The LIBRE Institute.

Food Stamp Error Rate Declined as Rolls Grew

Jake Grovum, Stateline - September 6, 2014

Despite a Great Recession-fueled expansion in food stamp rolls, the percentage of Americans mistakenly receiving too much or too little under the program is at an all-time low.

In 37 states, error rates fell between fiscal year 2008 (the recession officially began in December 2007) through fiscal year 2013, according to a Statelineanalysis of U.S. Department of Agriculture (USDA) data for the Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps.

During the downturn, many Republican lawmakers argued that billions could be saved by cutting waste, fraud and abuse in the program. A GOP-backed bill in Congress last year promised $30 billion in such savings, but the declining error rates cast doubt on that claim.

"The fact is that there are so many different levels on which the program is performing very strongly right now," said Dottie Rosenbaum of the left-leaning Center on Budget and Policy Priorities. "It's performing the way it was designed to."

During the recession, enrollment and spending in food stamps skyrocketed nationwide. In 2008, the monthly average number of Americans enrolled was 28.2 million, and the cost of the program that year totaled $37 billion. By 2013, monthly average enrollment topped 47.6 million, and total spending for the year neared $80 billion. In the depths of the recession, a quarter of all residents in some states were enrolled in the program.

Yet for all the increasing stress on the program, the average error rate among all 50 states and the District of Columbia declined nearly 4 percentage points. Eight states saw their error rates fall more than that, including a decline of more than 6 percentage points in Alaska, and decreases of more than 5 percentage points in Louisiana, Maine, Texas and Virginia.

Compared to the decline in error rates (an average of 2.4 percentage points among the 37 states that saw a decrease), the average increase in the remaining 13 states and D.C. where the error rate rose was just 1.7 percentage points. The error rate in some states, such as Nebraska, increased just a tenth of a percentage point. Those with larger increases include Rhode Island and Vermont, where rates climbed more than 4 percentage points between fiscal year 2008 and fiscal year 2013.

For error rates in each state over time, see Stateline's data visualization.

The overall payment error rate includes both overpayments to those enrolled in the program, and underpayments. The Center for Budget and Policy Priorities estimates that accounting for 2013's underpayments (which in theory save the government money), the mistake-related net losses to governments were just 2 percent of the amount spent on benefits. The USDA estimates that compared to improper payments in the year 2000, mistake-related net losses declined by $4.34 billion in 2013.

Mix of Federal and State Steps
Error rates for the program have been falling for more than a decade, thanks to a mix of state and federal steps to reduce payment errors. In 2002, the national error rate topped 8 percent. In fiscal year 2013, the rate was just 3.2 percent.

Those steps include streamlining paperwork and simplifying the way potential recipients are screened for eligibility. Washington also levied penalties on states with persistently high error rates. And states have been allowed to crosscheck applications with asset tests for other safety-net programs, cutting the administrative burden and the potential for errors.

The federal government also has awarded grants to the best-performing states. That program was on the chopping block during the last debate in Congress over the farm bill, which funds the food stamp program. House Republicans wanted to end the grants, which were expected to cost $480 million over the next decade, as part of their broader effort to reduce spending on food stamps. The GOP bill promising $30 billion in savings would have eliminated those grants as well. Supporters argued that states shouldn't have to be rewarded for cutting down on errors.

Senate Democrats refused, however, and the grants ultimately survived. In 2013, $30 million in awards were sent to some states, including more than $7 million to Florida and more than $6 million to Texas. Missouri received $1.6 million for reducing its error rate from its 2012 rate of 7.18 percent to 1.62 percent in 2013.

The next round of performance grants will be announced at the end of this month.

State Differences a Mystery
There's no clear explanation for why some states have been so successful in reducing error rates while others have not. Vermont, for example, has an error rate of more than 9.6 percent, nearly double its 2008 rate of 5.5 percent. Enrollment there topped 100,000 in 2013, a 33 percent increase over its pre-recession level.

Sean Brown, deputy commissioner at Vermont's Department for Children and Families, blamed the state's budget squeeze during the recession and a huge expansion in enrollment. But, he said, the state has made progress: For the current fiscal year, the state is on track to see an error rate in the mid-3 percent range.

Rhode Island had the second-highest error rate in 2013, with 8.25 percent. In 2008, it was under 4 percent. That figure was down from 8.94 percent in 2003.

Enrollment in Rhode Island was close to 180,000 during the last fiscal year, a 123 percent increase compared to 2008. For some staffers, caseloads quadrupled because of ballooning rolls and a shrinking workforce, according to the state's Department of Human Services. In response, the state has changed the way staffers handle the administrative side of the program, and it has made other personnel and technical changes to address the elevated error rate.

The lowest 2013 error rate belonged to Virginia, at 0.44 percent. That was a significant improvement over its 2008 rate of 5.75 percent. Last year, an average of 940,000 Virginians collected food stamps each month, compared to 650,000 a few years earlier.

The second-lowest error rate was in Florida, where the monthly average food stamp enrollment jumped more than 1.5 million during the recession. The state's 0.81 percent rate was nearly identical to its 2008 rate. In 2003, nearly 8 percent of Florida's food stamp payments were made in error.

Praise from Both Sides
The reduction in errors has prompted praise from both food stamp defenders and critics of the program.

"A careful look at the facts disproves critics' claim that SNAP is riddled with waste, showing instead that USDA and states have achieved impressive results in recent years, racking up the lowest error rates on record," CBPP said in a report on error rates. "This success is no accident."

Added Rachel Sheffield of the conservative Heritage Foundation: "It's definitely a good thing that overall mispayments and fraud have declined."

Yet the good news won't preclude further debate over the future of the program, which conservatives continue to view as unsustainable, even as the recession-driven spike of recent years has started to recede.

"The fraud always gets a lot of attention, and of course it is an issue, you want the program to have integrity," Sheffield said. "The question now is how do we reform this program so it's on a more prudent course?"

For some in Congress and the states, the answer to that question includes boosting work requirements -- which some states have done -- and closing a "loophole" that lets some recipients in certain states receive extra benefits, the so-called "Heat and Eat" provision. Congress did eliminate that tactic, but states have found ways to continue it anyway.

This piece originally appeared at
Stateline, an initiative of the Pew Charitable Trusts. It was updated (before being reprinted here) to clarify that changes in food stamp error rates are measured in percentage points.

Robert VerBruggen - September 5, 2014

In a new Voxsplainer on gun violence, Dylan Matthews claims:

Protestations of gun rights supporters aside, public health researchers who study firearms generally agree that increased firearm ownership rates are associated with higher rates of homicide. ... Developed countries with more guns generally have more homicide; states within the US with more guns have more homicide ...

The two assertions at the end are not true, and the first sentence explains why: If you want to give a good account of a debate about gun statistics, you don't treat the consensus of "public health researchers" as gospel. The field is notorious for its anti-gun bias, and there's a whole literature of work outside of it.

It's true (as Matthews notes) that there are some studies showing guns to be associated with increased homicide once other factors have been statistically "controlled" (a highly subjective process that can be manipulated, even subconsciously, to make the data say whatever the researcher wants them to say). But there is no simple relationship between gun ownership and homicide rates as such, either among developed countries or among states in the U.S.

I did the math on developed countries last year. Looking at a collection of countries that had been featured in a poorly conducted anti-gun study, I found that there were two major outliers: South Africa (which has a pretty typical gun-ownership rate but an astronomically high homicide rate) and the U.S. (which, as Matthews notes in a different "card," is high in both gun ownership and homicide -- though Matthews does not mention the biggest explanation for the high homicide rate, which is that the U.S., like South Africa, has a large, historically oppressed black population with high crime rates). When those two countries are booted from the analysis, this is what we end up with:

There's no statistically significant relationship, though I'm sure you can get one if you mess around with which countries are included (especially the U.S., which by itself can swing the data quite a bit, because that's what outliers do).

What about states? I took these 2001 gun-ownership numbers from the Washington Post (based on a risk survey) and crossed them with 2001 murder and nonnegligent manslaughter rates (per 100,000) from the FBI's Uniform Crime Report. (Spreadsheet here.) The result:

Jack squat.

Again, if you want to go beyond asking whether "places with more guns have more homicides" (as Matthews's card is titled), you can control for other factors as well, or try using other methods. (For example, "public health researchers" seem awfully fond of "case-control" studies, which don't even work that well in epidemiology, the field they come from.) Then you can make a case that guns increase homicide -- but it's not that difficult to make the opposite case instead, if that's what you want to do. This just tends not to be the case for "public health researchers."

Robert VerBruggen is editor of Twitter: @RAVerBruggen

Socialized Costs of Misadventures

Alan Daley - September 5, 2014

In gaps between hard-news stories, TV networks remind us of the missionaries and explorers detained by despotic regimes. Naive adventurers who "lose track of their direction" near hostile countries may expect polite guidance toward home, but they are sometimes held for political or financial ransom. Missionaries who preach in belligerent lands might feel a gush of righteousness, but they may also be sentenced to hard time. Adventurers and missionaries routinely ask for government help in obtaining their release, as if it is their right to impose that cost and sacrifice on American taxpayers.

This summer, two young aviators attempted to fly around the world. A 19-year-old aviator succeeded. But a 16-year-old aviator and his father, who had hoped to make their trip in 30 days, crashed in the Pacific Ocean. The 16-year-old died, and after a three-day Coast Guard search, the father was listed as missing but presumed dead. The failed rescue effort was very costly. By the hour, Coast Guard helicopters run $4,400 and cutters about $1,550. The American public was dragooned into rescuing those whose quest for glory ended badly.

Circumnavigation by solo sailors is also popular and dangerous. The attempt by a 16-year-old California woman to be the youngest to sail around the world failed when her mast broke in high waves. Australia rented a commercial airliner to search for her. When she was located, a French fishing boat was diverted to rescue her. An airliner like a Boeing 737 can cost $190,000 per month to rent, and the large fishing boat's cost of fuel and wages for this Good Samaritan junket must have been substantial. Again, unrelated people were asked to risk their own safety and absorb huge expenses to rescue an adventurer on a quest for glory.

Mountain climbers and extreme skiers and snowboarders similarly take on adventures that imperil lives. Each year Alaska's Mt. McKinley draws 1,200 climbers, who each pay the Park Service a $200 climbing "recovery" fee. In the first five months of 2011, a total of seven climbers were killed. Forty-four bodies have been left on Mt. McKinley when conditions were too hazardous to safely recover them. The Park Service has lobbied to increase its climbing fee closer to the actual cost of $500, but it has faced too much resistance. Climbers can certainly afford it: The full cost for training, outfitter supplies, guide, and accommodations can run $5,000 to $15,000. It's not a poor man's sport.

Washington's Mt. Rainier is easier to reach for most Americans, and its climbing fee of $44 is tiny considering the danger its annual 10,500 climbers face. Even rescuers can be hurt or killed. Similar dangers lurk in Colorado, where locating climbers can require special gear -- helicopters, dog sleds, snowmobiles, and sophisticated communications. The private helicopters suited to this task can cost $300 per hour to operate. Search and rescue can go on for days.

Big-ticket and high-risk adventures like long-distance solo flying, solo sailing, and rock climbing offer thrills, potential glory, and danger. We can admire these daredevils' infectious enthusiasm, athletic prowess, and sense of adventure, but when adventures work out badly, it shouldn't become our problem. Rescuers are asked to put their own lives in peril, and far too often the cost of rescue exceeds the thrill seekers' ability to reimburse the public.

Under U.S. common law, there is "no general duty to come to the rescue of another," though an obligation exists in cases where there's a special relationship between the parties (e.g. between spouses or between parent and child, or between a common carrier and its patrons). Emergency workers have no general duty to rescue people, and they cannot be sued for a failure to protect people who are not in their custody. Minnesota, Rhode Island, and Vermont created a duty to rescue, but there are few or no prosecutions under those laws. Many foreign countries have laws that require an attempt to rescue people in peril, but not if it risks the rescuer's life.

Limited public funds are available for treating severely ill children or others with no culpability in their desperate plight. But our Good Samaritan behaviors toward thrill seekers appear to have no cost limits. If the public were asked to choose where to focus scarce funds, it would not favor these subsidies.

There should be an enforceable obligation for thrill-seekers to reimburse the public for all rescue costs. They may need insurance.

Alan Daley writes for the American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization. For more information, visit  

The Underlying Causes of Tax Inversions

Gordon Gray - September 5, 2014

Over the last year, the tax-policy debate has really taken a dive. Where once there was cautious optimism for an overhaul of the tax code, now there is discussion of "corporate deserters" and tax inversions. In part, this is the inevitable march of time towards a midterm election, when the opportunity for genuine policymaking diminishes in the face of campaign-season messaging.

The prevailing discussion of tax inversions -- driven by the recent spate of announcements by U.S. multinationals of their intention to merge with overseas partners -- is a nod to the latter over the former, and no one should be fooled into thinking otherwise. The president's budget and several proposals in Congress contain policies that seek to artificially arrest a trend that is driven by far larger forces: uncompetitiveness in a global economy.

The United States is outstanding, and not in a good way, in terms of how it taxes businesses. First, the Treasury Department subjects U.S. firms to the highest corporate tax rate in the world. And second, the U.S. maintains a "worldwide" tax system, applying that high rate to income earned abroad by U.S. multinationals (though credits are given for any taxes paid overseas). The U.S.'s major trading partners have a different approach: lower rates and "territorial" tax systems -- meaning that income earned abroad is largely or entirely exempted from taxation at home. The reasoning is pretty straightforward: Overseas income has already been taxed in a foreign country, so why tax it again? Couple these factors with growing overseas markets, and it's easy to understand why companies start to think about hopping the proverbial fence.

Under current law, a company can't simply weasel its way onto the books in the Bahamas or some other tax haven and act like nothing happened. A series of regulatory and legislative changes have pretty much put an end to that practice, the so-called "naked inversion." Instead, what we see now are companies merging with overseas partners. These are costly undertakings, so firms avoid inverting unless doing so is really beneficial. But inversions happen for a host of reasons, tax considerations being one of them.

Congress and the administration have failed to address these underlying forces in a positive way -- reforming the tax code to make the U.S. more competitive. The president literally off-shored the chairman of the Senate tax-writing committee at a time many thought there was genuine hope for tax reform. So instead of real reform, some lawmakers are attempting to make campaign fodder out of these corporate mergers. Invoking populist rhetoric and maintaining blithe ignorance of the structural reasons for these moves abroad, the president and some members of the House and Senate have proposed nibbling around the edges of this issue by trying to make these mergers harder. The only problem is the structural incentives to leave U.S. shores remain. Some of the proposed "fixes" would exacerbate this flight by incentivizing firms to move their headquarters-based jobs abroad -- placing, as I estimate in a new paper, 42,000 U.S. jobs at risk.

This is an example of the pitfalls of reactionary policymaking. The U.S. has been in a sluggish economic recovery since 2009, with little promise of a gear change. Instead of reacting to headlines or trying to chase a few extra tax dollars to spend, Congress and the administration should be working to fix what's broken with the U.S. tax code -- not just to keep these companies at home, but also to make them more competitive abroad.

Gordon Gray is fiscal-policy director at the American Action Forum.

Blog Archives