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Do Robots Kill jobs? In France, the Answer is, 'Non!' – and 'Oui!'

Brent Orrell - February 20, 2020

In their new paper, Competing with Robots, Daron Acemoglu (MIT), Pascual Restrepo (Boston University), and Claire LeLarge (University of Paris) survey the impact of robotics on levels of manufacturing employment in France. Examining over 55,000 firms, the researchers found that between 2010 and 2015 just 598 firms had adopted robotic technology. While these companies represent just 1 percent of manufacturing firms they account for 20 percent of French manufacturing employment. So what were the effects?

Economic theory and history tells us that while the efficiencies gained through automation cost some jobs they create even more over time by improving productivity and raising aggregate economic demand. The findings in the French economy are curious in this respect. The paper finds that among the large French manufacturing firms that adopted robots, employment actually went up, not down. Further, this increased big-firm employment tended to shift jobs away from production positions. The study does not say what kinds of jobs were created but they presumably skewed up the skills continuum toward research, development, marketing, sales, and finance.

The Case for Trump’s Education Block Grant

Frederick M. Hess & RJ Martin - February 19, 2020

Last week, the Trump administration released its 2021 budget request, which would cut Department of Education outlays by 8 percent while proposing dramatic change in how federal school dollars are allocated. While Trump’s proposed budget was dead on arrival, the proposal to turn dozens of K–12 programs into a block grant merits a closer look.

The administration would consolidate nearly all federal K–12 funding programs (9 formula grants and 20 competitive grants) into a single block grant. This new block grant would be worth $19.4 billion and distributed via the same Title I formula that’s already used to allocate federal dollars to high-poverty schools. The block grant would swallow a host of offerings, including the massive Title I program, the $440 million Charter School Grants, the $2 billion Supporting Effective Instruction State Grants, and a range of smaller programs.

Google is on the Wrong Side of the 'Copyright Case of the Century'

Michael W. Shore - February 18, 2020

On January 6, 2020, Google submitted its brief in the case of Google v. Oracle, kicking off the Supreme Court case that many are calling the “copyright case of the decade.” The suit pits the search engine platform controlling 93 percent of the worldwide search market against Oracle, the owner of the ubiquitous Java program. After attempting and failing to secure the rights to Java, Google decided to cease negotiating and instead replicated 37 API packages from the copyrighted program, a decision that precipitated the years-long lawsuit. 

An API, or application programming interface, is what allows different parts of a computer program to communicate with one another seamlessly. APIs are like the turbocharger in a car engine. They speed up the process of retrieving Google’s search results and enhance the user’s experience. To users of a search engine, speed and accuracy of search results are the most important factors affecting their choice. Oracle’s APIs essentially make Google’s search engine hum.

Are 'Affordability Boards' the Answer to Increasing Drug Prices?

Krisztina Pusok & Janson Q. Prieb - February 17, 2020

A growing number of states are looking to set up prescription drug affordability review boards to reel in soaring prescription drug prices. In most cases, the proposed boards would allow the states to set pricing caps for certain higher-cost drugs, as well as limit price increasing by drug makers. Yet, contrary to expectations, a new report by the American Consumer Institute (ACI) shows that rather than making drugs more affordable, these policies risk threatening innovation and access to certain cutting-edge drugs, as well as potentially penalizing lower priced generic drugs.

According to a 2019 survey from the Kaiser Family Foundation, 79 percent of Americans felt that prescription drug prices were too high. They’re not wrong. Prescription drug expenditures climbed to a staggering $300 billion in 2016. In fact, the average American pays $1,200 for prescription drugs annually, which has led some states to consider price controls.


Five Facts: On Trade and the U.S. Economy

No Labels - February 14, 2020

On Thursday, January 16 the United States-Mexico-Canada Agreement (USMCA) passed in the Senate and was sent to President Trump to be signed into law. Here are five essential facts on the U.S. economy and trade:

1. 27.54% of the U.S gross domestic product (GDP) came from trade in 2018. For comparison, trade accounted for 21.06% of GDP in 1994, the year NAFTA was signed. The total of all exports and imports of goods and services was $5.6 trillion in 2018 and $1.5 trillion in 1994. 


How Children Shape Parents

Brent Orrell & Caleb Seibert - February 13, 2020

In an age of partisan polarization, any area of bipartisan agreement is a welcome respite. For many years, policymakers across the aisle have found common ground in an understanding that having two parents in a home is the best scenario for children. The data are unequivocal. Across a wide range of measures (financial, mental, physical, educational), kids do better when supported by two parents, ideally in the context of marriage.

But is there evidence to suggest that children and marriage can improve parental outcomes? A new paper by Maxim Massenkoff and Evan Rose from University of California – Berkeley studied birth, marriage, and arrest records for more than a million people in the state of Washington to determine, among other things, what effects childbirth and marriage have on an individual’s likelihood of committing crime. For both fathers and mothers, the results were stark: pregnancy led to significant decreases in crime (over 50 percent for women and 25 percent for men), while marriage was also associated with reductions in criminal activity. And while crime rates went back up slightly after birth and marriage, becoming a parent or getting married appears to make a sustained impact on criminal behavior.

Rethinking Social Justice

Andy Smarick & Bruno V. Manno - February 7, 2020

Two contrasting views of “social justice” are at work in today’s debates about K–12 education. One, frequently invoked by progressives, is geared toward activism. The other, more traditional and modest, is often implicit in conservative approaches to school-reform issues. These divergent frameworks underlie the simmering tensions that beset contemporary education policy, and much else besides.

The first variety of “social justice” implies that much of society’s architecture is fundamentally flawed or even purposely unjust. It sees many relationships as premised on unfair distributions of power and holds that our economic order systematically privileges the advantaged and exploits the vulnerable. Because this worldview is so severe, it often leads to uncompromising proposals to remedy society’s ills and dramatic, militant rhetoric.

How Pols Will Spin Five Key 2020 Issues

Joseph J. Minarik - February 7, 2020

Millions of voters remain undecided about the presidential and congressional candidates. They’ll continue watching this year’s debates, primaries, and town halls with inquisitiveness and confusion. And candidates on both sides will only compound the muddle by addressing the issues with their own combinations of substance and spin.

That isn’t to say that candidates aren’t telling any truths. Many, however, are simply not likely to tell all of them. Voters should be aware of the blind spots in their debate statements and campaign promises and use them as a starting point for further research.

Let's Help Americans Move to Where the Jobs Are

Matt Weidinger - February 5, 2020

The list of supposed inequalities among Americans is long, and getting longer: income inequality, food inequality, housing inequality, education inequality, and even death inequality. Many see unequal outcomes in every facet of American life, and along with them, new government spending programs to alleviate these inequalities, despite the fact that rising federal spending on low-income families seems to never prevent old inequalities from getting worse, or new inequalities from emerging.


The latest, geographic inequality, has been defined by presidential candidate and former New York City Mayor Michael Bloomberg as the “widening gap between wealthy coastal cities and the lagging heartland.” To address that gap, Bloomberg is promoting “place-based policies” to help midtier inland cities catch up with the more prosperous coasts. Though the types of policies he is endorsing — which are similar to enterprise zones, opportunity zones and similar tax subsidies, transit subsidies, and government R&D funds — are not new, and don’t have a great track record.


Not one of these policies addresses a key cause of the “widening gap”: Americans are not moving away from the places where jobs have disappeared to where work is plentiful. Today, Americans are moving at the lowest rate in 70 years.


Historically, Americans have always been willing to move to boost their earnings, especially compared to foreign peers. So why the declining mobility today? Among the key reasons are the increasing share of two-earner households (it’s harder to find two new jobs rather than one) and higher housing costs.


And, in a classic case of unintended consequences, the lure of existing government benefits also may encourage Americans to stay put despite poor job prospects. Researchers in a 2014 National Affairs article noted that “low-income people, especially those born into poverty, have a particularly difficult time moving. This is largely due to…programs that aim to help the poor where they already live.” After struggling to get access to complex safety net benefits, why risk moving and starting the process all over again if a new job doesn’t work out?


Previous welfare and unemployment programs had helped people move to areas with better job prospects.


For example, starting in 1998, the Kentucky Relocation Assistance Program (RAP) offered qualifying households on welfare up to $900 for moving costs. A preliminary analysis of the program found that the average earnings of participants nearly doubled just two quarters after receiving the relocation subsidy. In the 1970s, the “Federal Job Search and Relocation Assistance Program” operated in eight southern states, testing similar relocation subsidies for unemployed workers. Many of them did find new jobs, especially young men, and those with, at most, a high school diploma.


Today would be a good time to replicate those efforts, with unemployment at 50-year lows and labor shortages in some areas and industries. While a lot of time has passed since the 1970s, reviving and updating such policies wouldn’t have to involve large, bureaucratic, and expensive new programs. For example, the average unemployment insurance payment in Kentucky is $381 per week, available there, as in most states, for up to 26 weeks. Instead, if the state offered half of the unemployment benefits, a laid off worker is eligible to receive, in the form of a lump sum, it would provide the worker who is willing to move for a job almost $5,000 toward moving expenses, a security deposit, and first month’s rent. Some might accept the challenge, and in the process improve their income immediately, and their family’s trajectory in the long run. Companies are increasingly using such payments to attract new workers. If employers are getting creative, why can’t government? Germany does the same, and even some U.S. cities are paying workers to move there.


Moving assistance is not a cure-all. As my AEI colleagues recently noted, high housing costs in big cities pose an increasingly steep hurdle for moving blue collar workers, though these costs may not be as bad in the “lagging heartland,” to use Bloomberg’s term. The Census Bureau notes that most current moves are within the same county, and even those who cross county lines usually stay in the same state. The RAP program in Kentucky also found that most moves for work were within, and not across, state lines. Think rural Kentucky to Frankfort or Louisville, not New York or Boston.


Not everyone can move to where opportunity is greater. But for those willing to do so, now is a great time for policymakers to rediscover past lessons and help workers move to where the jobs are.


Matt Weidinger is a resident fellow in poverty studies at the American Enterprise Institute. He served for more than two decades on the staff of the House Ways and Means Committee, most recently as the deputy staff director.

America's Opinion Journalists Ranked: The Good, The Bad, and The Worst

Patrick Maines - February 4, 2020

Because journalism worth its salt is in short supply, and because everybody loves a listicle, here’s one that rates the journalistic chops of some of the best and worst news and opinion writers. It’s not scientific but it’s fun to do, and the worst have it coming to them.

The Good:

Victor Davis Hanson (American Greatness). It says a lot that the best and most powerful journalist in America today writes mostly for conservative and relatively small-circulation journals like American Greatness. A classicist, farmer, and university professor, Hanson has for several years been laying waste to the media-academic complex, home to much of the country’s most tiresome people. For this reason alone, he will never win a mainstream journalism award.

Mollie Hemingway (The Federalist). The second-best journalist in the country, Mollie Hemingway also writes primarily for small journals, though her greater claim to fame may come her way through book publishing. “Justice on Trial,” the deeply disturbing best-seller she co-authored with Carrie Severino about the Kavanaugh confirmation, is the best non-fiction book published in 2019. If you lived through the confirmation hearings without acquiring a deep contempt for the Democratic members of the Senate, for reporters, and for witnesses like Christine Blasey Ford, read this book and see if you still feel that way.

Michael Goodwin (New York Post). A former New York Times reporter, Michael Goodwin displays all the best sensibilities about Trump and the media. He is shocked and appalled by the complete suspension of objectivity in what were formerly thought of as elite media, but he is no enemy of the press. He understands the importance of the media in its historic role as a check on government, and yearns for a return to better journalism. To quote from a column Goodwin wrote in December: “My view is that top (NYT) editor Dean Baquet made a disastrous mistake by eliminating the traditional standards of fairness and impartiality in a bid to stop Trump and upend his presidency.”

John Kass (Chicago Tribune). Writing from the most corrupt big city in the United States, John Kass employs biting sarcasm and artful wit to great effect in all his columns, especially those about Chicago. His coverage of the Jussie Smollett travesty provides a good example. Referring to the dismissal of the charges against Smollett by disgraced Cook County State’s Attorney Kim Foxx, Kass wrote: “Kim Foxx’s office didn’t merely drop all the charges against Smollett…her office wiped him clean. His record was expunged. The stain of the 16 counts in the indictment was scrubbed right off him…You might say Foxx bathed him in the waters of the Chicago Way, cleansed him, and made a new man out of him.”

Matt Taibbi (Rolling Stone). It is the rare liberal journalist who will criticize the MSM. Conservative reporters do it frequently, of course, but liberals almost never rise to that challenge. Enter Matt Taibbi of Rolling Stone, whose criticism of media coverage of the Trump/Russia canard rates among the best, if not the very best, whatever the politics of the reporter. Taibbi’s terrific piece titled “It’s Official: Russiagate is this Generation’s WMD,” begins with this explosive sentence: “Nobody wants to hear this, but news that Special Prosecutor Robert Mueller is headed home without issuing new charges is a death-blow for the reputation of the American news media.”

The Bad:

Juan Williams (Fox). In 2010, Juan Williams was fired from NPR for nuanced comments he made about Muslims on a Bill O’Reilly program. The CEO of NPR at the time, Vivian Schiller, relieved herself of the following dainty explanation for his firing, “Williams should have kept his feelings about Muslims between himself and his psychiatrist or publicist.” In consequence of NPR’s hypocrisy, a number of people, including yours truly, rallied to Williams’ side, a group that included FOX News, which offered him a contract. Given this background, it is jarring to see what he has become since Trump’s election as he pens pieces like his 2019 column in The Hill, titled “Why does Trump fear GOP Voters?” (Answer: He doesn’t.) Or his article, published in December, “Pelosi is my politician of the year.”

Frank Bruni (New York Times). A former restaurant critic at the Times, and before that a movie critic for the Detroit Free Press, Bruni parlayed those gigs into his current job as a Times Op-ed columnist. This platform has allowed him to display his many shortcomings, including his juvenile sense of right and wrong, as in his piece titled “Senate Republicans are bathed in shame.” Quoth the man: “The majority of the party’s senators have said outright or clearly signaled that they have no intention of finding the president guilty and removing him from office. Yapping lap dogs like Lindsey Graham and obedient manservants like Mitch McConnell have gone further, mocking the whole impeachment process.” Bruni’s first cookbook was titled “A Meatloaf in Every Oven.” Better a meatloaf in the oven than in the New York Times.

E.J. Dionne (Washington Post). If E.J. Dionne had been employed not by the Post, but by the Democratic National Committee, none of the pieces he has written for years would read even a little bit differently. The gentleman practices partisan flackery without surcease or distinction. Check out the headlines on several of his latest columns and see if you can find a pattern there: “Hey Republicans, demagoguery won’t hide Trump’s incoherence;” “Democrats understand moderation. Republicans don’t;” “Impeachment and the lost art of persuasion /Pelosi knows that opinion about impeachment is still fluid. It’s why she chose to answer partisanship with prayerfulness.” This last bit, suggesting Pelosi’s piety overwhelms her partisanship, is quite possibly the single most ludicrous thing Dionne, or anyone, has ever written.

Don Lemon (CNN). At a network that features not a single distinguished reporter or commentator, but lots of propagandists, Don Lemon fits right in. Though he sports perhaps the thinnest journalistic credentials of any network anchor, Lemon knows exactly how to push the levers, in an age of political correctness, available for self-aggrandizement. So it is that he has called Trump a racist, even as he has declared, without evincing a hint of irony, that “the biggest terror threat in this country is white men.” On other occasions he whines about criticism he receives, often blaming it on his race or homosexuality, and he laments the arduousness of his life (except when he is at his $3.1 million home in Sag Harbor). “One doesn’t have to be in a war zone,” he says, “to have post-traumatic stress from this particular administration.”

Dana Milbank (Washington Post). There must be some reason Dana Milbank has been allowed to write for the Washington Post for lo these many years, but nobody has yet been able to figure it out. It’s certainly not because of his trenchant political insights or his way with words. Indeed, much of the stuff he writes reads like Zen koans for liberals, never really saying much of anything that anybody cares about. The very titles of some of his columns demonstrate the problem: “This has to be one of the most successful failures in modern political history;” “As Trump is impeached, Trumpism prevails;” “Impeachment is rare. Republicans’ histrionics are historic.” It would be in keeping with his journalistic style if Milbank’s grave marker carries an inscription like “Here lies Dana Milbank, so far as you know.”

The Worst:

Paul Krugman (New York Times). If pomposity were diamonds, Paul Krugman would be the shiniest person in journalism. Ever since the Nobel Committee gave him an economics award (just one year before they preposterously gave the Peace Prize to Obama), Krugman has written one imperious piece after another. Days after Trump’s election, for instance, he forecast ruin for the nation’s economy, and he has become an over-the-top climate change alarmist. But Krugman is mostly notable for the hatred he displays for everyone who disagrees with him. In his review of Krugman’s 2007 book, “Conscience of a Liberal,” economist David Kennedy wrote “Like the rants of Rush Limbaugh or the films of Michael Moore, Krugman’s shrill polemic may hearten the faithful, but it will do little to persuade the unconvinced.” And as evidence that the beat goes on, just this month Sebastian Mallaby wrote in the Atlantic that Krugman is a prime example of Trump Derangement Syndrome.

Brian Stelter (CNN). Which is funnier, that Brian Stelter has his own show on CNN, or that the show is called Reliable Sources? Stelter brings to TV the uncommon attributes of personal unattractiveness, 100-proof pugnacity, and a complete unawareness of why gibberish is to be avoided. Examples abound of his journalistic shortcomings, but because of space restrictions I offer just this one, my personal favorite. Michael Avenatti, the former lawyer for stripper Stormy Daniels and would-be Trump conqueror, appeared on CNN over 100 times during his salad days. And his greatest admirer there was Stelter who, during one memorable interview, said: “And looking forward to 2020, one reason I’m taking you seriously as a contender is because of your presence on cable news.”

Chuck Todd (NBC/MSNBC). You have to hand it to Chuck Todd. Alone among the crackpots at MSNBC, he appears to have successfully brainwashed himself into actually believing the claptrap he spouts. So it is that, eighteen months ago, he wrote a piece for the Atlantic titled “It’s Time for the Press to Stop Complaining—And to Start Fighting Back.” The thrust of that opus is that the mainstream media always try to be fair and accurate, and to correct errors, but that because of FOX News and the late Roger Ailes, they need to adopt a more aggressive strategy in confronting their critics. Earth to Chuck: Time to come home now.

Chris Cuomo (CNN). One might think that the son of a distinguished former governor like Mario Cuomo, a Yale graduate with a law degree from Fordham, and a long and well-traveled history as a TV reporter, would be one suave dude. But in Chris Cuomo’s case, one would be wrong. Cuomo is the opposite of suave; he’s an oaf, and not a very smart one at that. Among the tells: He has astonishingly averred that hate speech isn’t protected by the First Amendment; and exploded in profane and bully-boy rage when a guy referred to him as Fredo. One clue to his greatest fondness may be the many online videos of him working out, leading to an admiring New York Times story headlined “How Chris Cuomo Looks Buff Without Bodybuilding.”

Jane Mayer (New Yorker). Like her colleagues at the New Yorker, Jane Mayer practices left wing tendentiousness at every opportunity. Take, for instance, the role she and Ronan Farrow played in the Kavanaugh hearings when they introduced to the nation one Deborah Ramirez who, after 6 days of concentrated recollecting (and the hiring of a lawyer) said that she thought, but couldn’t be absolutely certain, that it was Kavanaugh who, years earlier, had waved his penis in her face at a party. Neither the New Yorker, nor any other news organization, could find anyone who could provide first-hand corroboration of the claim, and it raised, and raises still, the obvious question: If the alleged incident actually happened and was as traumatic as Ramirez contends, wouldn’t you think she could recall with certainty whose penis it was?

Patrick Maines is President Emeritus of The Media Institute, one of the country’s leading First Amendment think tanks.

Do Subprime Auto Loans Threaten the U.S. Economy?

Douglas Holtz-Eakin & Michael Mandel - January 31, 2020

With partisan divisions as deep as ever, both sides can agree on one thing: Everybody wants to avoid another financial crisis. And forecasters have recently identified subprime auto loans as an existential threat to the economy. 

The headlines are eye-catching and scary: “A $45,000 Loan for a $27,000 Ride: More Borrowers Are Going Underwater on Car Loans,” “Underwater: Consumers Are Treating Cars A Lot Like Houses During The Subprime Mortgage Crisis,” and more of the same. But is it true? Are subprime auto loans the new financial cancer threatening households and the economy, much like the subprime mortgage crisis did in 2007? 


Worries about subprime auto loans — which offer higher interest loans to riskier borrowers — are ill-founded and based on misleading data and faulty analogies, our new research finds. 

To begin, auto loans are simply not significant enough to threaten the economy. Auto loans make up only 7.4 percent of household debt, roughly the 40-year historical average. Increases in auto loans amount to less than 9 percent of the overall increase in domestic debt (excluding that of financial institutions) over the past 5 years.

And the portion of auto loans associated with “financial engineering” — the auto asset-backed securities market — is likewise dwarfed by the mortgage-backed securities market. As of the second quarter of 2019, there was a mere $264 billion in auto-related securities, which included only $55 billion in subprime auto securities. By comparison, the amount of outstanding mortgage-related securities came to almost $10 trillion.

In short, subprime auto loans are not a threat to the economy. But perhaps they are a threat to households? Wrong again. Americans are spending less of their budgets on car purchases today, including finance charges, than they were before the recession. 

One reason is that cars are (relatively) cheaper. The price of new motor vehicles has risen by only 1.1 percent over the past 5 years, compared to 6.7 percent for the overall price level. This has permitted the share of consumer spending on new and used vehicles to fall from 5.4 percent of spending in 2000 to 3.6 percent.

Skeptics might argue we are missing the point. Subprime loans are tailored to low-income households, so maybe the distress lies there?

The data say no. Low-income households saw motor-vehicle purchases and finance taking a smaller share of their budgets. In the bottom quintile of pre-tax income, motor vehicle purchases and finance charges fell from 8.5 percent of household budgets in 2000 to 4.9 percent in 2018.

Delinquencies are not rising, either. Starting in 2005, 30-day auto delinquencies as a share of all auto-loan balances began to rise each quarter, from 6.7 percent to 9.4 percent at the end of 2007. By contrast, newly delinquent auto loan balances as a share of current balances fell to 6.9 percent in the second quarter of 2019, their lowest level since 2015.

Further, young borrowers (age 19 to 29) — the demographic most at risk of auto delinquency — show no special distress. The percentage of their loans that are newly 90 days or more delinquent has drifted down from 4.9 percent in the second quarter of 2017 to 4.4 percent in the second quarter of 2019, and young people have made up a steady percentage of all auto loans.

The numbers are compelling. Subprime auto loans are not a threat to young borrowers, low-income borrowers, households overall, or the economy in general. Upon reflection, this should not be a surprise. Subprime auto loans differ significantly from subprime mortgages in key respects that make them less likely to pose a serious threat to financial stability. Cars and trucks depreciate steadily over time, so the value of the collateral diminishes. As a result, lenders can't afford to offer teaser rates, or excessive levels of negative equity, to buyers with low credit scores in the hopes that higher resale values will bail them out.

Subprime auto loans are a form of risk-based pricing. Far from being a threat, this pricing means that low-rated borrowers are not frozen out of the auto-loan market. Risk-based pricing is one reason that the share of low-income households with a vehicle held steady at 66 percent in both 2000 and 2018.

That's good news, since, in many parts of the country, a car or truck is a necessity, even for low-income households. There is little or no public transit outside of densely populated urban areas, and ride-sharing services are not viable alternatives in many places. Subprime auto loans appear to be keeping low-income borrowers in the market without driving up delinquencies, while not posing the same risk that the subprime mortgage market did.


Douglas Holtz-Eakin is president of the American Action Forum and former director of the Congressional Budget Office. Michael Mandel is chief economic strategist for the Progressive Policy Institute.

Bloomberg's Big Money Shenanigans in Virginia

Kerri Toloczko - January 30, 2020

Virginia is a petri dish for liberals and far-left Democrats to develop strategies that advance their progressive agenda and strip individuals of their Constitutional freedoms through legislative and executive fiat. 

Republicans currently hold 59 out of 99 state legislative chambers. Backed by George Soros and other leftist donors, the Democratic Legislative Campaign Committee has already pledged at least $50 million to try to turn state houses blue. Virginia was their first test case before 2020 national elections. 

The California Contagion Infecting Entrepreneurialism in America

Luke Wake - January 29, 2020

Political gridlock in Washington, D.C. is nothing new. While it’s frustrating for those who want to see real regulatory reforms, it offers some relief to those of us worried about Congress making new laws that would further complicate our lives. That is especially true for America’s small business community and the entrepreneurs who must navigate through a dense regulatory thicket. That said, a prolonged stalemate in Washington means we should be watching individual states more closely.


We must keep a special eye on California, which remains our nation’s leading exporter of bad and kooky ideas. Every year California lawmakers pile-on more regulatory burdens. For small business owners in California, the urge to flee must be especially high every January when a host of new laws go into effect. This year was no different. But there was one enactment in particular that is causing major headaches, and arousing attention across the country. To be sure, the most pernicious of all of California’s newly effective enactments is AB 5: A law that prohibits entrepreneurs from working as independent contractors, even if they have established themselves as a legitimate business enterprise through active marketing and incorporation. 


I’ve talked to dozens and dozens of businesses both inside California and beyond who are concerned about the impact the law has on them. For example, I’ve heard from numerous truckers who want to be allowed to continue operating as independent businesses. I’ve heard from photographers who want to continue working with beauticians and videographers who want to continue working with movie studios. And I’ve heard from businesses that refer customers to locksmiths or that work with other service providers who must now treat those workers as their own employees — even if they want to remain independent.


So, it is highly concerning to see this new California contagion spreading. Already we’ve seen bills in Oregon, Washington and New Jersey. And now legislators in other states — Colorado, New Mexico and Virginia — are considering AB 5 as a potential model. There is even a bill in Congress.


Under California’s law it doesn’t matter how little control the hiring entity exerts over the work performed, or what steps the entrepreneur has taken to establish him or herself as an independent business. The cold fact is that entrepreneurs are now prohibited from offering their services to another business if the work to be performed is “within the usual course of business” for the hiring entity. Even if they have established themselves as an LLC and or have numerous clients, if their work is viewed as essential to the hiring company’s business model the worker must be treated as an employee — which means a lot of red-tape for everyone involved. So, it is not surprising that some businesses are now cutting ties with entrepreneurs in California to avoid complications and major liabilities.


Perhaps the most frustrating aspect of this whole affair is that these legislative proposals are often talked about as “gig economy” bills, when in fact they are sweeping-up a wide array of businesses. Even with a multitude of haphazard exceptions for favored groups, California’s draconian independent contracting rules are impacting small business entrepreneurs in all sorts of industries. To illustrate the point, NFIB recently released a list of nearly 50 professions and occupations that are hurt by AB 5 — from tour guides and catering services to interior decorators and home-based construction companies.


But this is just the latest example of lawmakers using a sledgehammer where a scalpel would suffice. Even if legislators have concerns about the “gig economy,” it doesn’t make sense to impose disruptive new rules that sweep-up other industries. And we should be concerned that if the California contagion spreads to other states we will be destroying the livelihood of many individuals who currently enjoy the flexibility, freedom and higher pay that comes as a contractor.


If America is to remain a land of opportunity, where anyone with vision and drive can succeed, its vital that we reject California’s model and allow individuals to freely market their services if they so desire. Rather than further complicating independent contracting rules, lawmakers should be looking to make things easier for entrepreneurs to launch, grow and manage their own businesses. For example, states could simplify independent contracting rules by aligning their rules with the standards used by the U.S. Department of Labor or the Internal Revenue Service.


In any event, we should hope that the states will not snuff-out the entrepreneurial drive that makes America great. Sadly, that is precisely what lawmakers in California have chosen. But as this battle now shifts to other states, entrepreneurs are speaking-up in their fight for independence. And I can attest, from many conversations with affected businesses, that much is at stake.


Luke A. Wake is a senior staff attorney at the NFIB Small Business Legal Center and a chairman of the Federalist Society’s Regulatory Transparency Project.

The Government Agency Standing in the Way of Trump's New Roaring Twenties

Jerry Rogers - January 28, 2020

Donald Trump’s presidency has been a time of economic prosperity, wage increases, and record low unemployment. After decades of economic policy that prioritized Wall Street over Main Street, and trade policy that favored corporatism and Big Labor at the expense of America’s working men and women, Trumponomics has righted our economic ship — the economy is roaring and the future of Main Street is hopeful anew.

Tax and regulatory reforms have created an environment in which businesses, entrepreneurs, and start-up firms can flourish — American workers have the opportunity again to succeed on their own merit. A recent piece from Investor's Business Daily revealed that under President Trump “regulations are being slashed at a record rate,” and a report by the American Action Forum (AAF) shows that President Trump is exceeding his own remarkable deregulation goals.

Reactionary Populism Will Tear Us Apart if We Don't Address Income Inequality

Ro Khanna & Francis Rooney - January 27, 2020

Reactionary populism in its most dangerous form will tear at the very fabric of our society if we do not address the challenge of economic inequality. We see the scourge of authoritarian populist movements across the globe and believe there is a moral and economic imperative to reduce this widening gap.

Our backgrounds could not be more different, but we are motivated by our faiths to tackle this growing problem. One of us is a Republican Catholic representing a very conservative district in Florida and was the U.S. Ambassador to the Holy See from 2005-2008. The other is a Democratic Hindu, representing a very progressive district in California and had a grandfather who spent time in jail as a freedom fighter in Gandhi’s independence movement.

Congress has a Prescription for Health Care's Sickly Status Quo

Chad Savage - January 27, 2020

Despite the problems that plague American health care, innovative ideas exist to cure what ails it. But many transformative approaches are languishing in obscurity compared to insurance-based, big-government alternatives. One idea, reforming Health Savings Accounts (HSAs), is a powerful antidote to the sickly status quo. And Senator Ted Cruz’s Personalized Care Act (S. 3112) would implement this much-needed solution. S. 3112 — which has a companion bill in the House, Congressman Chip Roy’s HR 5596 — would lift unnecessary HSA restrictions, let Americans spend HSA dollars how they see fit, liberate employers, and unleash Direct Primary Care.

Created in 2003, HSAs are already powerful tools that empower patients. Individually owned, these plans allow patients to place pre-tax dollars into an account and use the funds for certain medical expenses. Frequently confused with the much less advantageous Flexible Spending Accounts (FSAs), HSAs are the ultimate tax-advantaged savings modality. That’s because they are not taxed on contribution, growth or use for an “Eligible Medical Expense.”

The Conservative Case for Expanded National Service

Luke Nathan Phillips - January 24, 2020

I had the great honor of working one summer at Philmont Scout Ranch in New Mexico, doing conservation work and helping Boy Scouts get the experience I had in my youth. During those weeks of hacking trails out of mountainsides and moving stumps and boulders off the tread, I reflected that eight decades ago, young men like me were doing this kind of work not just for the heck of it, but because the country was in economic crisis.

Through the Civilian Conservation Corps, the federal government under Franklin D. Roosevelt was trying to offer Americans a way out of the cycle of poverty and despair and into community and useful service during the depths of the Great Depression. The legacy of the CCC is still all around us, in our national parks and forests and the walls and cabins built by those young men. It also lives on in the various conservation-oriented service programs run by local and state governments and civic organizations.

Want to Save Our Environment? Curb Overpopulation.

Gary Wockner - January 24, 2020

America's population is soaring. Our nation currently houses 330 million people. And each year, that number grows by 2 million. By 2065, more than 440 million people may call the United States home.

This explosive growth threatens everything Americans hold dear, including our open spaces, pristine air and water, and abundant wildlife. Much of the natural landscape around us is being subdivided and paved over. Farms are turning into shopping centers. Meadows are giving way to housing developments.

Counting the Homeless. Searching for Solutions.

David S. Lucas - January 23, 2020

During the last 10 days of January, public officials, nonprofit employees, and volunteers in thousands of communities will tromp through alleyways, parks, and culverts to conduct the 2020 annual census of the homeless. Their efforts, combined with tallies of the people in shelters, will produce the “Point in Time” counts that tell us the extent of homelessness in America.

The 2019 census data were released by the U.S. Department of Housing and Urban Development, in the agency’s Annual Homeless Assessment Report to Congress, on January 7.  The report found there were about 568,000 homeless people nationwide on a winter’s night in January 2019. Nearly two-thirds of the homeless were in shelters or transitional housing programs. Over one-third were “unsheltered” — sleeping in cars or abandoned buildings, or camping on sidewalks and in parks.

A Carbon Tax Remains the Best Incentive For a Low-Carbon Planet

Ike Brannon - January 22, 2020

A clean-energy startup called Heliogen announced last month that it had managed to use artificial intelligence and a large field of mirrors in the desert to reflect and focus enough sunlight to exceed 1,000 degrees Celsius. Achieving such a high heat intensity is significant, the company says, because extreme temperatures are necessary to produce steel, concrete, and glass, as well as various other industrial processes.

All of these happen to be extremely carbon-intensive products — the production of cement alone creates 7 percent of all greenhouse gases. If solar energy could be integrated into these production processes it has the potential to significantly reduce greenhouse gases.