The Heritage Insider: The union protection racket, competition works in energy, visualizing regulatory power, visualizing regulatory burdens, and more

May 30, 2015

Latest Studies
40 new items, including a Manhattan Institute report on shale 2.0, and a Mercatus Center report on how the sharing economy makes regulations obsolete

Notes on the Week
The union protection racket, competition works in energy, visualizing regulatory power, visualizing regulatory burdens, and more

To Do
Celebrate the Magna Carta

Latest Studies

Budget & Taxation
• House Legislative Branch Appropriations Bill Freezes Pay for Members of Congress but Avoids Further Spending Cuts – The Heritage Foundation
• Mend It, Don’t End It: NYC’s 421-a Affordable Housing Tax Exemption – Manhattan Institute
• Dynamic Scoring and Congress – National Center for Policy Analysis
• Illinois Illustrated: A Visual Guide to Taxes & the Economy – Tax Foundation
• The 1 Percent Property Tax Law – Tax Limitation that Works for the People of Washington – Washington Policy Center

Crime, Justice & the Law
• The True Cost of Inadequate Community Reintegration of State Jail Offenders in Texas – Texas Public Policy Foundation

Education
• Education Spending & Academic Achievement – Commonwealth Foundation for Public Policy Alternatives
• Innovative Teaching Methods Key to STEM Growth – National Center for Policy Analysis

Elections, Transparency, & Accountability
• Federalism and the Constitution: Competition versus Cartels – Mercatus Center

Foreign Policy/International Affairs
• Declines in National Reporting Reveal Failure of U.N.’s Programme of Action on Small Arms – The Heritage Foundation
• Why America Needs International Agencies – Hoover Institution

Health Care
• Medicare Advantage Under the ACA: Replace Payment Cuts with Market-Based Reforms – The Heritage Foundation
• Certificate-of-Need Laws: Implications for Kentucky – Mercatus Center
• Alabama’s Medicaid Drug Program – National Center for Policy Analysis

National Security
• Tomorrow's National Security Landscape – Hoover Institution

Natural Resources, Energy, Environment, & Science
• Bio-Fooled – Empire Center for Public Policy
• Economic Impacts of Industrial Silica Sand (Frac Sand) Mining – Heartland Institute
• Bureaucrats Battle Science – Hoover Institution
• Shale 2.0: Technology and the Coming Big-Data Revolution in America’s Shale Oil Fields – Manhattan Institute

Regulation & Deregulation
• How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the “Lemons Problem” – Mercatus Center
• Principles for Analyzing Distribution in Regulatory Impact Analysis – Mercatus Center
• The Sharing Economy: Issues Facing Platforms, Participants, and Regulators – Mercatus Center

The Constitution/Civil Liberties
• The Other Commerce Clause – Hoover Institution

Welfare
• The Private Sector Can Reform Social Security’s Disability Program – Institute for Policy Innovation

The union protection racket: The unions that have been pushing for raising the minimum wage in cities around the country now want exemptions to those laws for business that are organized by unions. That serves the unions, but not the workers, explains Diana Furchtgott-Roth:

Although the union-funded Raise the Wage campaigned so vociferously in favor of a $15.25 minimum wage, unions are seeking exemptions from the higher wages for their members. The exemption, or escape clause, would allow them greater strength in organizing workplaces. Unions can tell fast food chains, hotels, and hospitals that if they agree to union representation, their wage bill will be substantially lower. That will persuade employers to allow the unions to move in.

One of the leaders of the Raise the Wage coalition, Rusty Hicks, Executive Secretary-Treasurer of the Los Angeles County Federation of Labor, AFL-CIO, stated, “With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them. This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.”

Everyone wants to “negotiate an agreement that works for them both,” in Hicks’s words. Teens that need summer jobs would like to work out such agreements, as Meyer and I show in our new book, Disinherited: How Washington Is Betraying America’s Young, so they can get their foot on the first rung of the career ladder. But unions are only in favor of exemptions for organized labor.

Once the higher minimum wage bill is signed into law, with the exemption for unions, then organizing becomes a win-win for employers and unions. Unions get initiation fees of about $50 per worker and a stream of dues totaling 2 percent to 4 percent of the workers’ paychecks. Employers get a lower wage bill.

The losers in this scheme are employees, who have to pay union dues out of their paychecks. Jobs become more scarce as wage levels rise and some less-skilled workers become unemployed. [Economics 21, May 28]

Speaking of protection rackets … Don Boudreaux here captures the zeitgeist of current commentary on the political class:

We humans have a remarkable ability to adjust our expectations to reality. Overall, this ability serves us well. When serious illness strikes or when we suffer an unexpected downturn in our financial prospects, most of us don’t collapse into a state of pathetic helplessness; after the initial shock, we spring into action to deal with the situation as best as we can.

This capacity to adjust our expectations to prevailing reality, though, serves us poorly when it comes to politics. Political reality is full of politicians who refuse to take principled stands out of fear that doing so will lose them votes, or who dissemble and even lie in efforts to bolster their prospects at the polls. Yet because such unprincipled behavior and deceit are so commonly practiced by politicians, we’ve grown accustomed to reprehensible behavior by politicians and accept it as being simply a feature that we must tolerate.

An irony that would be comical if its consequences weren’t so dire is that government’s power expands as voters demand that politicians protect them from being deceived and cheated in private markets. Ponder this strange fact: Politicians whose deceptions in elections are readily tolerated are asked by voters to police against possible deceptions by entrepreneurs in private markets. It’s like asking the brute who just robbed you at gunpoint to serve as your personal bodyguard. [Pittsburgh Tribune-Review, May 26]

Competition works—in energy, too. The idea that the production of shale oil would collapse if Saudi Arabia pursued a strategy of expanding production has been proven wrong, observes Mark Perry:

The Saudis assumed the $80 break-even price for U.S. shale was a firm floor. They further assumed that the American innovation and ingenuity that had suddenly turned shale rock — long deemed unproductive — into the source of an energy revolution, was complete. They assumed wrong. […]

For the shale producers, the fall in prices was a shock, but then came the response. Spending on new production was reined in. Contracts were renegotiated with oil service companies, reducing the cost of equipment, and only the best drilling and fracking crews were retained.

Statoil, for example, reported that just in a few months it cut its drilling time for new wells in Texas’ Eagle Ford formation from 21 days to 17. That kind of efficiency gain has helped “petropreneurs” reduce the cost of drilling wells from $4.5 million to $3.5 million.

Other companies are experimenting with new fracking fluids and different types of sand to create better shale-rock fractures. Some are effectively incorporating Big Data to better understand the sweet spots of geologic formations and optimal well-spacing to increase productivity.

The result is a rapid decline in the break-even price across shale plays. Already, analysts believe it is now $60 per barrel and before long will fall to $50.

Goldman Sachs now predicts that prices will likely hold at $50 for at least the next five years. Shale efficiency and innovation have created a new ceiling for the price of oil. This certainly was not the Saudis’ aim. [Investor’s Business Daily, March 26]

Visualizing the regulatory state:

thf 2015-05-30 insider RegulationReadTime.png

[Mercatus Center, April 1]

At this point, they’d have to cut almost all of the Code of Federal Regulations just to make it Kafkaesque.

Who needs businesses clamoring to make better products when you’re trying to help people? Remy sends up Bernie Sanders’s plan to solve poverty:

EPA power grab: How much regulatory power will the granted by the “Waters of the United States” rule that the Environmental Protection Agency and the Army Corps of Engineers have recently proposed? Daren Bakst has written of the rule:

[The] proposal could cover almost any type of water. Almost all ditches, including man-made ditches, could be regulated. Depressions in land that only sometimes have water in them could be deemed a tributary and covered under the rule, even if the depression is bone-dry almost every day of the year. […]

Under the Clean Water Act, property owners are often required to obtain costly and time-consuming permits if engaging in activities that affect jurisdictional waters. We’re not talking toxic waste disposal being required to trigger the need for a permit. The statute would even prohibit actions that cause absolutely no environmental harm. For example, someone might need a permit for kicking some sand into a jurisdictional water. [Daily Signal, May 16]

The EPA’s own set of water inventory maps that it released last year (under pressure from Congress) provides a visual representation of the extent of control the EPA would have over economic activity. Rob Port, reporting on the opposition to the rule by North Dakota’s congressional delegation, notes the EPA’s map for Idaho: “Lakes are in dark blue. Streams and rivers are in light blue. Intermittent bodies of water are in yellow. Obviously, all that yellow is a concern.”

thf 2015-05-30 insider EPAWaterMapIdaho.png

[SayAnythingBlog, May 27]

If collecting metadata is a problem … There’s been a lot of discussion lately on whether government collection of telephone metadata violates civil liberties. As Congress considers reform options, here’s a reminder that the government has been perpetrating a much more intrusive data collection scheme since the 1970s, one for which there isn’t even a national security justification:

To Do: Celebrate the Magna Carta

• Celebrate the 800th anniversary of the Magna Carta, the “Great Charter of Liberties” that limited the power of the English Crown. To mark the occasion, the Cato Institute will host a short conference on the Magna Carta’s influence on the development of the rule of law around the world. The conference will begin at 9 a.m. on June 4. [Cato Institute]

• Students, get ready to learn the ethical and economic principles of a free society. The Independent Institute still has spaces available for its upcoming Challenge of Liberty Seminars. One session will be held June 8 – 12 at the University of Colorado in Boulder. Another session will be held July 6 – 10 at the University of California at Berkeley. The program will take applications until the slots are filled. Get your applications in. [Independent Institute]

• Assess the capabilities of Iran’s missile program. A panel at the Hudson Institute will discuss the extent of Iran’s missile program and its relationship to its nuclear program. The discussion will begin at 10:15 a.m. on June 2. [Hudson Institute]

• Name a subsidized sports stadium. In its weekly contest, Reason has challenged readers to come up with a stadium name that reflects the taxpayer-funded model of stadium financing. (Seems to us the Cleveland Indians have already come up with a good entry: They named their stadium Progressive Field in 2008.) Send your entries to contest@reason.com with “STADIUM” in the subject line by 11 p.m. ET, May 31. [Reason, May 29]

• Have some laughs while helping the Center of the American Experiment celebrate its 25th anniversary of battling for liberty in Minnesota. The Center will host its annual dinner on June 2, beginning with a cocktail reception at 5:30 p.m. at the Hilton Minneapolis. Keynote speaker: P.J. O’Rourke. [Center of the American Experiment]

• Learn what life after combat is like for American soldiers. The Heritage Foundation and National Review will host a screening of the documentary The Last Patrol. The film follows four veterans who decide to honor a fallen friend by taking a 300-mile march from Washington, D.C., to Pennsylvania. The screening will begin at 6 p.m. on June 4 at The Heritage Foundation. [The Heritage Foundation]

• Figure out if citizens in a free society have a right to privacy in charitable giving. That question will be debated by James Huffman, Dean Emeritus of Lewis & Clark Law School, and Dan Meek, a public interest lawyer based in Oregon. The event, hosted by the Cascade Institute, will begin at 7 p.m. on June 1 at the Multnomah Athletic Club in Portland, Ore. [Cascade Institute]

• Examine the state of drone traffic in the United States. Tyler Collins will talk about the safety issues that will arise when 30,000 drones are flying over the United States at once. Collins’s talk will begin at noon on June 1 at the John Locke Foundation in Raleigh, N.C. [John Locke Foundation]

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