The Heritage Insider: Net neutrality is bad for the Net and bad for liberty, Gruber scores another own goal, a lame duck session means Congress can do what it wants with fearing voters

November 15, 2014

Latest Studies
45 new items, including a Mackinac Center report on how to fix the labor movement, and Mercatus Center report on how the Commodity Futures Trading Commission evades accountability with its rulemaking methods

Notes on the Week
Net neutrality is bad for the Net and bad for liberty, Gruber scores another own goal, a lame duck session means Congress can do what it wants without fearing voters

To Do
Discover what dynamic scoring can do for fiscal policy

Latest Studies

Budget & Taxation
• More Must Be Done for Real Municipal Income Tax Reform – Buckeye Institute for Public Policy Solutions
• From Overstock to Overtaxed: The Dubious Legality of State Click-Through Nexus Taxes – Competitive Enterprise Institute
• Lame Duck Threats Congress Should Avoid – The Heritage Foundation
• Lame Duck Threats in 2014 – The Heritage Foundation
• The Dangers of Lame Duck Sessions in Congress – Unfair and Undemocratic – The Heritage Foundation
• Pensions Case Study: North Riverside – Illinois Policy Institute
• Suggestions for Reversing Rural Population Loss – Public Interest Institute
• Business in America: A Visual Guide to Business, Taxes, and the Economy – Tax Foundation
• Sources of Government Revenue in the OECD, 2014 – Tax Foundation

Crime, Justice & the Law
• The Injustice Department: Eric Holder's Collaboration with the Drug Amnesty Movement – Capital Research Center

Economic and Political Thought
• 25 Years Since the Berlin Wall Was Torn Down – American Enterprise Institute

Economic Growth
• Labor Market Fluidity and Economic Performance – Cato Institute
• Illinois’ Real Unemployment Rate – Illinois Policy Institute

Education
• How Responsive Is Investment in Schooling to Changes in Redistributive Policies and in Returns – Cato Institute
• Teachers Unions and the War Within – Education Next
• The Union that Devoured Education Reform – Manhattan Institute
• A Hidden Cost of Common Core: Teacher Accountability – National Center for Policy Analysis
• Richard C. Trotter’s Expert Report for School Finance Litigation – Texas Public Policy Foundation

Elections, Transparency, & Accountability
• SeeThroughNY Local Government Website Report Card 2014 – Empire Center for New York State Policy

Foreign Policy/International Affairs
• Dependencia, North Korea Style – American Enterprise Institute
• President Obama’s Burma Visit: An Alert Congress Makes All the Difference – The Heritage Foundation
• Chinese-Japanese Tensions and Its Strategic Logic – Hoover Institution
• In This Arab Time: The Pursuit of Deliverance – Hoover Institution
• The End of NATO – Hoover Institution

Health Care
• Nine Questions for the House Ebola Hearing – The Heritage Foundation
• Understanding the CBO’s Change in Medicare Spending Projections – The Heritage Foundation
• The Top 10 Reasons Why Illinois Should Reject a State-Based Health-Insurance Exchange – Illinois Policy Institute
• 14 Ways ObamaCare Is Still a Big Mess – That You Won’t Learn from the Liberal Website Vox – National Center for Public Policy Research

Immigration
• Executive Action for Long-Term Illegal Aliens – Center for Immigration Studies

International Trade/Finance
• 2015 Index of Economic Freedom: Why Trade Matters and How to Unleash It – The Heritage Foundation

Labor
• NY’s Early Retiree Back-to-Work Waive – Empire Center for New York State Policy
• Unionization for the 21st Century: Solutions for the Ailing Labor Movement – Mackinac Center for Public Policy
• New Jersey Supreme Court Set to Rule on Definition of “Independent Contractor” – Washington Legal Foundation

Monetary Policy/Financial Regulation
• Regulating Through the Back Door at the Commodity Futures Trading Commission – Mercatus Center

Natural Resources, Energy, Environment, & Science
• Alabama’s Environment 2014: Six Critical Indicators – Alabama Policy Institute
• EPA’s Section 111(d) Carbon Rule: What If States Just Said No? – Federalist Society
• The BP Gulf Oil Spill Class Settlement: Redistributive “Justice”? – Federalist Society
• Additional Reforms Can Boost Mexico’s Hydrocarbons Industry – The Heritage Foundation
• The Obama Administration’s Climate Agenda: Underestimated Costs and Exaggerated Benefits – The Heritage Foundation
• Definition of “Waters of the United States” Under the Clean Water Act – Mercatus Center

Regulation & Deregulation
• Higher Wages, More Jobs and Business Growth Due to State Moratorium on Regulation – American Action Forum
• The Balance Between Public Protection and the Right to Earn a Living – Council on Licensure, Enforcement & Regulation
• Federal Government Crossfire: Fix the “Catch-22” Businesses Face from Conflicting Agency Demands – Washington Legal Foundation

The Constitution/Civil Liberties
• Brief of Amicus Curiae Cato Institute in Support of Petitioners: Liberty Coins, LLC v. Goodman – Cato Institute

Welfare
• How the ABLE Act Would Expand the Welfare State – The Heritage Foundation

Notes on the Week

Will the Internet continue to be awesome after the regulators get their hands on it? On Monday, President Obama called on the Federal Communications Commission to put Internet Service Providers under common carrier regulation. The President wants the Commission to enforce net neutrality, the idea that Internet Service Providers shouldn’t favor some content over other content in pricing or service quality. In practice, as Nick Gillespie explains, that set-up means heavy-handed regulation that will stifle innovation and leave consumers worse off:

Clemson University economic historian Thomas W. Hazlett defines Net Neutrality as “a set of rules…regulating the business model of your local ISP.“ The definition gets to the heart of the matter. There are specific interests who are doing well by the current system and they want to maintain the status quo via government regulations. That’s understandable but the idea that the government will do a good job of regulating the Internet (whether by blanket decrees or on a case-by-case basis) is unconvincing, to say the least. The most likely outcome is that regulators will freeze in place today’s business models, thereby slowing innovation and change.

That’s never a good idea, especially in an area where new ways of bundling and delivering content are constantly being tried. It’s a historical accident that cable companies, who back in the day benefited from monopoly contracts with local governments, have morphed into ISPs. That will not always be the case, as the rise of Verizon (originally a phone company) and Google’s rollout of its own fiber system, attest. Just a few years ago, the FCC frowned on the cell-phone company MetroPCS’s discount plan that allowed access to the World Wide Web but denied users multimedia streaming. The FCC and Net Neutrality proponents thought that was a bad thing. Customers on a budget had a different opinion.

According to the FCC’s own findings, the speed and variety of American Internet connections are growing substantially every year. Despite claims that monopolistic ISPs don’t have to listen to customers, 80% of households have at least two providers that can deliver the internet at 10Mbps or faster, which is FCC’s top rating. It’s in the increasingly intense battle over customers that a thousand flowers will bloom; all sorts of interesting, stupid, and dumb innovations will be tried; users will be empowered; and tomorrow’s Internet will look radically different from today’s. [Time, November 11]

Indeed, common carrier regulation did not make the customers of the telephone companies better off, as Andy Kessler observes:

But the Internet cannot function as a public utility. First, public utilities don’t serve the public; they serve themselves, usually by maneuvering through Byzantine regulations that they helped craft. Utilities are about tariffs, rate bases, price caps and other chokeholds that kill real price discovery and almost guarantee the misallocation of resources. I would know; I used to work for AT&T in the early 1980s when it was a phone utility. Its past may offer a glimpse of the broadband future. Innovation gets strangled.

Bell Laboratories—owned by AT&T—invented the transistor in 1947, the basic building block of today’s telecommunications and computing. But AT&T was one of the last businesses to use the innovation. Why? Because the company had a 10-year supply of the old technology—vacuum tubes—and waited until they ran out before converting to using AT&T’s own invention.

It was much the same with touch-tone dialing, which was invented in 1941 but not rolled out until the 1970s. Though touch-tone was easier to use than rotary-dial phones, and cheaper, AT&T charged $10 a month extra for the service—because the company could. Bell Labs funded a study to decide the size, color and coding of the touch-tone buttons. The study’s director received a report with hundreds of ideas but didn’t like any of them. Instead, he insisted on gray buttons, and just 12 of them.

More utility follies? The first cellphone call was made in St. Louis in 1946 with AT&T’s Mobile Telephone Service, but the company let the innovation wither. It took until 1983 for Motorola to introduce the now comically unwieldy DynaTAC, a cellphone that weighed more than 2 pounds—but that private-sector effort is what ultimately led to today’s 4-ounce iPhone.

Oh, and data. I worked in a group at Bell Labs that developed the early 300 and 1200 bit-per-second modems. We wanted to test them by sending data from our Western Electric factory in Illinois to our site in New Jersey. But no luck, because Illinois Bell hadn’t set tariffs for data. We had the technology, but regulators lagged far behind. [Wall Street Journal, November 10]

Net neutrality threatens liberty, too. Aside from the fact that government isn’t very good at knowing which business models best serve the consumer interest, net neutrality will trample free speech rights and threaten privacy values, too.

Randolph May has been talking about the tension between net neutrality and the First Amendment since at least 2006:

Even if net neutrality mandates made good policy sense, which they do not, there is another, more fundamental reason why they should not be adopted. Because they require an ISP to send or post content which the ISP otherwise might prefer not to send or post, net neutrality mandates are, in effect, speech restrictions that impinge on the ISPs’ constitution al rights. The First Amendment’s language is plain: “Congress shall make no law … abridging the freedom of speech.” ISPs like Comcast and Verizon possess free speech rights just like newspapers, magazines, movie and CD producers or the man preaching on a soapbox. They are all speakers for First Amendment purposes, regardless of the medium used. While the medium—technological platform employed—may impact the degree of First Amendment protection accorded, calling forth, at least for now, one standard of review or another, there should be no doubt that broadband ISPs possess First Amendment rights as speakers.

There also should be no doubt that under traditional First Amendment jurisprudence, it is just as much a free speech infringement to compel a speaker to convey messages that the speaker does not wish to convey as it is to prevent a speaker from conveying messages it wishes to convey. As the Supreme Court proclaimed in the Pacific Gas & Electric case: “Compelled access … both penalizes the expression of particular points of view and forces speakers to alter their speech to conform with an agenda they do not set.” There the Court explained that the “essential thrust of the First Amendment is to prohibit improper restraints on the voluntary public expression of ideas. … There is necessarily … a concomitant freedom not to speak publicly, one which serves the same ultimate end as freedom of speech in its affirmative aspect.”

In perhaps the most notable compelled access case, Miami Herald Publishing Company v. Tornillo, the Supreme Court held unanimously that a Florida statute requiring a newspaper that published an editorial critical of a political candidate to print the candidate’s reply violated the First Amendment. In doing so, the Court acknowledged—and rejected—Tornillo’s argument that the Florida mandatory access statute does not amount to a restriction of the newspaper’s right to say whatever it pleases[.] […]

Although little commented upon to date, the proposed neutrality mandates are eerily reminiscent of the Federal Communications Commission’s Fairness Doctrine, which the agency jettisoned two decades ago in light of the new media proliferating even then. The Fairness Doctrine required that broadcasters must present adequate coverage of public issues and do so in a balanced way. When the Supreme Court upheld this form of compelled access regulation against First Amendment challenge in 1969 in Red Lion Broadcasting Co. v. FCC, it did so on the basis that it considered broadcasters different from other speakers because they use the radio spectrum, which the court characterized as a scarce public resource. Apart from whether the Court today would reach the same result regarding broadcasters’ free speech rights, it has refused to extend such scarcity-based reasoning to other media. We certainly do not want to import Fairness Doctrine-type speech restrictions into the newly-competitive environment of broadband ISPs. [Internal citations omitted.] [Free State Foundation, September 2006]

Indeed, the idea of a fairness doctrine for the Internet is motivating some of the net neutrality advocates, observes Brent Skorup:

[M]any advocates who cheer this announcement have made no secret that their aims stretch beyond economic regulation of the Internet. They also seek government oversight of media, websites, and political speech online. To that end, Title II instantly politicizes the Internet and puts significant power over this dynamic technology in the hands of unelected FCC officials, lobbyists, opportunistic industry players, and well-funded activists.

Market participants in Silicon Valley and at technology companies would increasingly rely on their risk-averse regulatory compliance officers instead of their creative engineers and designers. The complex Title II proceedings that ensue will be largely invisible and unintelligible to the public and their representatives in Congress. [Emphasis in original.] [Mercatus Center, November 10]

Grant Babcock explains the privacy problem:

We know, indisputably, thanks to the heroic disclosures by Edward Snowden and the tireless work of journalists like Laura Poitras and Glenn Greenwald, that the federal government is attempting to use the Internet to build a global Panopticon, capable of accessing everyone’s personal information at any time for any reason or no reason.

We also know that one way the government is trying to accomplish this is by securing the cooperation of private companies. You can attempt to thwart surveillance by using encryption—but encryption only protects data in transit. Once it’s received and decrypted, it’s an open book. If the government can compromise private data custodians, encryption loses a lot of its efficacy. This is exactly what happened to Google, which had its internal traffic bugged by the NSA.

Sometimes instead of outright sabotage, the government pressures companies into turning over information about their customers. See, for example, the brave efforts of Ladar Levison, head of now-defunct secure email provider Lavabit, to protect his customers—including Edward Snowden—from the government’s prying eyes.

But not all tech companies have the spine of Lavabit. What we risk doing by ramping up the government’s regulatory authority over the Internet is to make it easier for the government to pressure ISPs, many of which are data custodians, to get what they want. [Reason, November 12]

Gruber scores another own goal. Jonathan Gruber has been called the architect of ObamaCare, but in the past few months he has been more like a wrecking ball to the law. In July, several videos surfaced showing Gruber saying in 2012 what conservatives now say in a number of key lawsuits against ObamaCare: that the law by design withholds exchange subsidies from states that do not create exchanges in order to incentivize them to do so. One of those cases is going to be heard by the Supreme Court; if the conservative argument holds up, then not only will there be no exchange subsidies in the 34 states that didn’t set up their own exchange, there won’t be any individual and employer mandates either.

Now a 2013 video has been published showing Gruber saying ObamaCare was written in a convoluted way in order to hide its real costs from the voters. He went on to say that the bill passed because of the stupidity of the American voter:

This bill was written in a tortured way to make sure [the Congressional Budget Office] did not score the mandate as taxes. If CBO scores the mandate as taxes, the bill dies. OK. So it was written to do that. […] If you made it explicit that healthy people pay in and sick people get money, it would not have passed. […] Lack of transparency is a huge political advantage. And basically, you know, call it the stupidity of the American voter or whatever, but basically that was really, really critical to getting the thing to pass. […] Yeah, there’s things I wish I could change, but I’d rather have this law than not.

And here is the clip:

Is it true that ObamaCare benefited from the stupidity of the American voter? There were plenty of ObamaCare critics who pointed out at the time that ObamaCare was going to cost the federal government more than advertised, that it would raise health insurance premiums, and that it would transfer wealth from the young and healthy to the old and sick. And these criticisms were not only made by many commentators, they were generally understood by the public at the time. Writing at The Foundry (now Daily Signal) just weeks after ObamaCare became law, Conn Carroll noted the results of a poll taken by the Washington Post:

The top line numbers are bad but not daunting for the pro-Obamacare forces: 50% of Americans oppose the changes in the new law while 46% support them. But the numbers also show that most Americans believe the new law will cause “the overall health care system in this country” to get worse, “the quality of the health care you receive” to get worse, and “your health insurance coverage” to get worse. The poll also shows that most Americans believe the law will weaken Medicare and that there is “too much government involvement in the nation’s health care system.” And strong majorities of Americans believe Obamacare will increase the federal budget deficit (65%), increase “your health care costs” (55%), and increase “overall costs of health care in this country” (60%). [Daily Signal, March 29, 2010]

ObamaCare’s architects may have fooled some people, but not the majority of voters. That is to say, they weren’t stupid. The law passed in spite of public opinion.

How open is your city to competition in vehicle-for-hire services? The question isn’t just whether regulators let Uber and Lyft into the market, but also how heavily taxis and limos are regulated as well. The R Street Institute has surveyed 50 cities to assess the regulations on ride-sharing, taxis, and limousines. Their report gives a composite score for each city. R Street found that the cities whose regulatory regimes are least open to competition are Portland and Las Vegas, which received Fs in the report. Kansas City, San Antonio, and Philadelphia also scored poorly, receiving D minuses. On the other hand, Fresno; Minneapolis; and Washington, D.C., received As. Here is what R Street had to say about Las Vegas:

[…] Las Vegas had the worst ride score in the nation. Its overall score was just 55, for an F grade. It achieved this distinction by combining an extremely harsh approach to TNCs, which are completely frozen out of the market, with perhaps the country’s most burdensome taxi regulations, and among the worst structures for limos as well. The result is a regulatory morass that makes for poor transportation in the city.

The economic threat posed by such oppressive regulation is substantial. Officials already have begun to worry that Las Vegas may lose out on conventions and other major events because of its inadequate transportation services, particularly carrying passengers to and from its major airport. If the city doesn’t move to liberalize its transportation controls, including a legal structure for TNCs, it may lose out on millions of dollars in economic activity as more inter-connected cities draw away large gatherings. [Internal citations omitted.] [“Ridescore 2014; Hired Driver rules in U.S. Cities,” by Andrew Moylan, Ryan Xue, Evan Engstrom and Zach Graves, R Street Institute, November 2014]

You can learn more about the ride regulations of the cities in the report by visiting the report’s companion map at www.ridescore.org.

Avoiding accountability: A lame duck session of Congress is coming up. There was a time when such things were rare, notes Hans von Spakovsy:

Since the Twentieth Amendment, which specified that the terms of Members of Congress begin and end on January 3 of odd-numbered years, took effect in 1935, there have been 19 lame duck sessions including most recently in 2012 during the 112th Congress. Many of these lame duck sessions have been pro forma with no important business taken up. On the other hand, lame duck sessions have also dealt with matters vital to the republic when events have intervened. Lame duck sessions occurred frequently during World War II and the Korean War between 1940 and 1954 (six sessions). It was during the 1942 lame duck session that Congress passed a military draft for 18-year-old and 19-year-old men.

The lame duck session in 1950 occurred as Chinese troops were crossing into Korea and “General Douglas A. MacArthur warned Congress that the United Nations faced ‘an entirely new’ war in the region.” In 2010, Congress passed the ill-advised new Strategic Arms Reduction Treaty (New START) arms control treaty with Russia and a number of other bills including a defense authorization funding bill, a repeal of the “don’t ask, don’t tell” policy in the military, and an extension of income tax cuts that would otherwise have expired at the end of the year.

There was a 12-year gap from 1956 to 1968 with no lame duck sessions and only six such sessions in the next 30 years. In 1994, the modern era of almost constant lame duck sessions began. The number of actual days in the lame duck sessions has also varied greatly, from only one day in 1948 to as many as 48 calendar days when both houses were in session in 1970.

Prior to the past two decades, with the exception of times when the United States was facing great adversity or participating in armed conflict, lame duck sessions were both rare and inconsequential. Legislators seemed to understand—as did the public—that having legislators who had been turned out of office and were no longer accountable to voters make decisions on appropriations, nominations, and other substantive matters was both undemocratic and dangerous. [Internal citations omitted.] [The Heritage Foundation, November 13]

Five young conservatives who are doing good things for liberty: This week, the Young Conservatives Coalition gave its Buckley Award to five young conservatives who are making a difference for liberty. The Buckley winners this year are expose video maker James O’ Keefe, Washington Free Beacon Editor-in-Chief Matthew Continetti, America’s Future Foundation Executive Director Roger Custer, political strategist Dan Backer, and Claremont Institute Chief Operating Officers Ryan P. Williams.

What we’ve lost: This chart from the National Chamber Foundation, via Dan Mitchell, illustrates both how the economy has underperformed since 2008 and how that performance is dragging down expectations of future growth:

[International Liberty, November 11]

To Do: Discover What Dynamic Scoring Can Do for Fiscal Policy

• See how dynamic scoring can help policymakers understand the real economic consequences of fiscal policy choices. The Tax Foundation and the American Action Forum will host a discussion on dynamic scoring featuring Sen. Orrin Hatch (R-Utah). The event will begin at noon on November 17 at the American Action Forum in Washington, D.C.

• Find out what’s great about fossil fuels. Alex Epstein will talk about his new book, The Moral Case for Fossil Fuels at The Heritage Foundation at noon on November 17.

• Assess the future of American missile defense. The American Enterprise Institute will host a panel discussion and address from Sen. Kelly Ayotte (R-N.H.). The event will begin at 11:30 a.m. on November 19.

• Help recognize two women of valor at the Women of Valor Dinner. The Independent Institute will honor Rep. Marsha Blackburn (R-Tenn.) and Ayaan Hirsi Ali. The dinner will start at 6 p.m. on November 19 at the National Museum of Women in the Arts in Washington, D.C.

• Learn why people tend toward pessimism in spite of progress. The Cato Institute will host a discussion featuring author Steven Pinker. The discussion will begin at 11 a.m. on November 19.

• Help the Pacific Research Institute celebrate 35 years of working for liberty. PRI’s annual gala, featuring Brit Hume and Gov. Pete Wilson, will begin at 6 p.m. on November 19 at the Fairmont Hotel in San Francisco.

Have a tip for InsiderOnline? Send us an e-mail at insider@heritage.org with "For Insider" in the subject line.

Follow us on Twitter: http://twitter.com/InsiderOnline.

Looking for an expert? Visit PolicyExperts.org.

The Heritage Foundation | 214 Massachusetts Ave NE, Washington, DC 20002 | 202.546.4400

You are subscribed to Heritage Foundation e-mails as johnmhames@comcast.net. If you want to change your e-mail preferences, please click here to update your subscription.

Search This Blog

Diogenes-Light