WORD ON THE STREET

Does Congress have the capacity it needs to conduct oversight?

LegBranch_5.23.17

Envisioned by the founders as the “first” branch of government, Congress has the responsibility of overseeing and managing the other two arms of our constitutional system. And yet, as the executive branch has grown in power and prestige, Congress has increasingly lost its authority.

What resources does Congress currently employ when overseeing federal agencies? Which current resources are well-used; which are under-utilized? What additional tools and resources does Congress need to engage in truly effective oversight? The Legislative Branch Capacity Working Group recently hosted a panel on these questions, moderated by R Street’s Kevin Kosar and featuring Morton Rosenberg of The Constitution Project and Justin Rood of the Project on Government Oversight. Video of the panel is embedded below:

To keep jobs in Missouri, special session should allow more options for renewable energy

missouri_capitol

As the legislature continues work during the special session, it needs to keep sight of the big picture. The case that motivated Gov. Eric Greitens to call the session—the loss of two plants in southeast Missouri due to high electricity costs—highlights the importance of cheap, reliable electricity to the economic health of the state. But if Missouri politicians are interested in sustainable growth in its energy sector, they need to go beyond legislating single cases and take a broader look at how the electrical system can become more attractive to employers and consumers alike.

Of course, there is an easy way to reform Missouri’s electrical regulations that will increase the state’s attractiveness to business while advancing the free market principles that the legislature—and voters—support.

As things stand, consumers are restricted to buying power from their utility company, local municipality or electric cooperative. This lack of choice can be burdensome, but it is a particular problem for businesses that have internal sustainability goals regarding energy use. Indeed, many large companies have set goals to receive a set percentage of their energy from renewable sources. Businesses adopt these goals to save on costs, satisfy consumer preferences and to underscore good corporate stewardship. In Missouri, however, many companies may not be able to meet their energy goals, because local utilities simply do not offer sufficient renewable electricity. For a business deciding whether to locate or expand facilities in the state, lack of options makes the choice clear.

During the recently ended regular session, the legislature considered the Missouri Energy Freedom Act, by Rep. Bill Kidd, which would have solved the scarcity problem by allowing companies to purchase renewable electricity from someone other than their official local provider. This legal structure has worked in other parts of the country, and has the potential to attract thousands of jobs to the state both from energy conscious employers and from potential renewable generators. Companies save money on their energy bills, but also shoulder the risk of new clean energy projects. That means one simple rule change can bring Missouri huge new investments, more profitable businesses, jobs in the community and clean energy to fuel the economy – all risk free.

Most important, however, this approach would bring more jobs to the state without increasing the role of government. Allowing PPAs involves no mandates, subsidies or government heavy handedness. It simply provides companies with another option. The proposal also requires utilities to be reimbursed for any costs associated with allowing other power generators access to the grid, essentially leveling playing field.

Seven of Missouri’s largest companies – General Mills, General Motors, Nestle, Procter & Gamble, Target, Unilever and Wal-Mart – are on record supporting this approach. Even the Department of Defense is supportive. But, it’s not just the big guys who stand to benefit. As long as you use enough power, you’d be able to lock in long-term, low prices for electricity through this new structure—a benefit small mom and pop firms will appreciate.

By allowing PPAs for renewable energy, Missouri can help keep tens of thousands of jobs in the state by opening up greater access to clean energy and increasing competition and free markets. Adding this element of competition should be part of the final legislative package for the special session.


Image by Gino Santa Maria

Nebraska should be on the cutting edge of spacesharing

shutterstock_486607120

Nebraska’s fame as a place for innovation and leadership is legendary. Even before Warren Buffet became the “Oracle of Omaha,” Nebraskans had invented CliffsNotes, the Reuben sandwich, Vise-Grip locking pliers, T.V. dinners, Kool-Aid and Arbor Day, just to name a few.

But that history makes it even more perplexing why this state, which so often has been on the entrepreneurial leading-edge, suddenly would turn against that heritage and ban useful modern innovations like Airbnb and other short-term-rental platforms that help travelers visit Nebraska’s great and historic cities. These services have helped fill the market gap for people coming to the College World Series and other exceptional crowd-drawing events, who sometimes have trouble finding a place to stay overnight within commuting distance.

The Unicameral, itself a unique feature of Nebraska innovation, has been considering legislation that would prevent local governments from outlawing short-term rentals by those who wish to make a little extra cash and perhaps meet some nice folks from out-of-state. Alas, it is having trouble finding a spot on the agenda.

Like similar bills around the country, the Nebraska bill would continue to allow local governments to prohibit sexually oriented businesses, unlicensed liquor sales, sales of street drugs and anything else in a short-term rental that would constitute a genuine public-safety hazard. Municipalities also could still regulate for noise, animal control, fire and building codes, nuisances and the like.

The crux of the resistance to statewide regulation seems to be that hotels, motels, resorts, inns, licensed bed and breakfasts and other clearly commercial operations are just flat-out opposed to what they view as additional competition unburdened by many of the fees and requirements of commercial hospitality. One of the compromises suggested is that the legislation be amended to require short-term-rental customers to pay the applicable hotel tax when they book, which companies like Airbnb already collect in many other communities.

Indeed, there are lessons for Nebraska in how these conflicts already have been resolved elsewhere around the country. New York City recently settled a lawsuit that challenged its statute setting fines of up to $7,500 for hosts who illegally list a property on one of a short-term-rental platforms, with the platforms concerned that the vague language could leave them on the hook.

A more recent settlement with the City of San Francisco could set a pattern for future legislation, in that two of the major short-term-rental platforms agreed to a registration process with the city, allowing hosts to know the requirements and giving them confidence that they are operating legally. Processes in Denver and New Orleans similarly work to pass host registrations through to the local governments.

There can be reasonable regulations to protect neighborhoods and public safety that stop well short of prohibition. Lawmakers and regulators should craft targeted rules that allow opportunities for people with a room to spare to match with tourists who can take advantage of an overnight stay. Nebraska—a reservoir of both good sense and an innovation ethic—has the chance to be a great model for other states with a well-crafted new law.


Image by paulrommer

 

WannaCry underscores a need for cyber hygiene and insurance

“Oops, your important files are encrypted” read the pop-up message on hundreds of thousands of Windows operating systems across the world. The ransomware cyberattack, infamously labeled “WannaCry,” paralyzed computers by encrypting their data and holding it ransom pending payments from the afflicted.

In the days following, headlines bemoaned the arrival of the long-feared “ransomware meltdown,” while critics jumped to blame Microsoft for product insecurities and condemned the National Security Agency for stockpiling vulnerabilities. While it’s easy to assign blame and stoke fear, policymakers should, instead, use the attack as an opportunity to encourage better cybersecurity behavior and sensible risk management practices – including cyber insurance.

Cyber insurance was first touted during the dot-com boom of the early 2000s, but has only recently grown in popularity. Like other types of insurance, cyber insurance offers financial protection from sudden and unexpected losses.

For instance, in addition to coverage for WannaCry-like ransom attacks, many policies now encompass a wide range of possible costs businesses may face associated with a breach, including regulatory fines, legal costs, public relations services and costs associated with internet downtime. Because cyberattacks can result in all sorts of unexpectedly large expenses, coverage designed to insulate a business from the financial shock of a cyberattack is vital.

In the case of WannaCry, the total illicit haul of the ransom is projected to be less than one hundred thousand dollars. Yet, downstream damages are expected to tally in the billions. In fact, one firm is projecting that up to $8 billion in global computer downtime costs may accrue to services ranging from hospitals and government agencies to car companies.

The consequences of that damage may, for some, be ruinous. According to the National Cyber Security Alliance, 60 percent of small businesses fail within six months of a cyberattack. That’s a sobering reality when one considers that, according to Symantec, ransomware attacks have increased 36 percent from 2015 to 2016, while the average ransom has increased 266 percent in that time to $1077.

With the number of attacks on the rise, it is important to note that cyber insurance can both facilitate resilience and can also assist in the maintenance of system security. That’s because the underwriting process, during which the insurer assesses the risk it considers taking on, often requires a cyber risk assessment. Once a policy is written, specific policy terms often require adherence to basic security practices such as patching or regular network assessments. Companies that do not meet a threshold of cyber preparedness may not be eligible for coverage, may face higher premiums and could risk losing their coverage entirely. Put another way, cyber insurance coverage contributes to a culture of preparedness.

Cyber insurance take-up rates are growing, but the market is still evolving and penetration is uneven. According to a recent survey by Aon, only 33 percent of companies worldwide had cyber insurance coverage. Foreign countries are at a particular disadvantage when it comes to recovery because they hold less than 10 percent of all cyber insurance policies.

This is particularly worrying because WannaCry revealed a geographic gap in cyber preparedness. Russia and China saw the largest incidence of infected computers, suggesting that lax patching practices and overreliance on pirated or outdated systems is more common abroad. Those companies without coverage today face the full brunt of the costs associated with the WannaCry attack.

Though the domestic cyber insurance picture is better, more should be done to encourage coverage. For instance, while the White House’s recent cybersecurity executive order reiterated that cybersecurity is a priority area for the Trump administration, it was silent on the role cyber insurance can play in incentivizing agencies and their contractors to internalize cyber preparedness. This is a missed opportunity. The government can use the power of the purse to promote cyber insurance adoption in the market as a whole by requiring federal contractors to acquire certain types of cyber risk coverage.

High-profile cyberattacks like WannaCry highlight the need for cyber preparedness and cyber insurance. A policy approach that emphasizes both—and cyber insurance in particular as a market solution to the global ransomware problem—will be a boon for companies and consumers alike.

Another bright idea from Mitch Daniels

Mitch-Daniels

Purdue University President Mitch Daniels was in Washington last week to receive the Order of the Rising Sun, Gold and Silver Star from the government of Japan at an embassy ceremony. The award is one of Japan’s highest, and was given for “significant contributions to the strengthening of economic relations and mutual understanding” between the two countries.

During his time as governor of Indiana, Daniels saw 70 new direct investments in the state from Japan, including a Honda assembly plant that was the biggest “greenfields” investment in the United States in 2006. Over the following six years, Japan brought more than $2.6 billion of new investment and 8,400 jobs to the Hoosier State, as the governor led five economic missions to the country.

Since Daniels came to Purdue in January 2013, nearly $5 million of Japanese corporate research has come to campus. Largely because of the groundwork he laid, Indiana ranks second this year among the 50 states for best economic outlook, as measured through 15 important state fiscal policy variables laid out the 10th annual edition of the American Legislative Exchange Council’s “Rich State, Poor State” study.

He’s also accomplished a number of significant milestones at Purdue, including a six-year tuition freeze. There may not be another university in the country that plans to charge students less tuition in 2019 than was paid in 2012. The student loan default rate for Purdue graduates hovers around 1 percent. The Milken Institute ranked Purdue No. 1 for technology transfer among public universities without a medical school.

Now, the university is going to expand its offerings to millions of people online. Instead of committing to a multiyear project to build a significant online learning university, Purdue announced April 27 that it is creating a new public university (temporarily named “New U”) by acquiring most of the assets of Kaplan University, a competency-based online learning business of 15 campuses in the United States, 32,000 nontraditional students and nearly 80 years of remote-learning experience.

Kaplan offered the nation’s first totally online law school and has created study courses to review vast amounts of material for various accreditation and professional certification exams. It is a global provider of education programs in more than 30 countries and has forged partnerships with many colleges, universities, school districts and more than 2,600 corporations. The educational networking possibilities are nearly limitless. A whole new chapter of efforts to produce more affordable post-secondary opportunities, particularly for working adults, is likely to be launched by this marriage of a top public research institution and an online juggernaut in competency-based education.

According to reports, the Purdue faculty is not yet prepared to give its blessing to New U, which is an endemic feature of both disruptive initiatives and university faculties generally. Quick to embrace every progressive policy fad, it is less likely that the Purdue management will get an immediate pass from those participants in higher education with sinecures anchored in the traditional business model. But it is a model that deserves more consideration as workplace needs drive absorption of sophisticated technical knowledge and skills and leans toward affordable learning for the benefit of its students and the good of the country.

 

Sessions’ charging memo underscores need for Congress to pass reform

shutterstock_544448989

Attorney General Jeff Sessions’ memorandum instructing federal prosecutors to “charge and pursue the most serious, readily provable offense” against defendants signals a desire to return to a tough-on-crime stance. From the perspective of criminal justice reform, the most daunting aspect of these developments is a likely resurgent dependence on mandatory minimums.

As has been noted by John Malcolm, a criminal justice expert and director of the Heritage Foundation’s Edwin Meese III Center for Legal and Judicial Studies, reinstatement of stricter charging and sentencing policies is fully within the attorney general’s authority. We’ve seen it before from Attorney General Richard Thornburgh, who issued his own guidelines in 1989 requiring strict enforcement of all provable offenses. In the years since, there’s been back-and-forth directives from Thornburgh’s successors Janet Reno, John Ashcroft, Eric Holder and, now, Sessions.

But over that interim, experts have gathered evidence against mandatory minimums, finding that heavy use of these sentencing laws failed to reduce drug use or recidivism. Mandatory minimum sentences are fixed prison terms applied to specific crimes, which can range from five years to life imprisonment. They strip judges of the ability to use their own professional discretion to determine sentencing based on the facts at hand.

The aim of mandatory minimums during the height of the 1980s crack epidemic was, of course, to target drug kingpins and cartel leaders, in order to improve public safety. Prison populations surged, but it was primarily due to an increase of low-level offenders. With prisons now bursting at the seams and calls for the construction of newer prisons to house an ever-growing population of prisoners, taxpayers have had to shoulder the costs.

The most notable portions of Sessions’ memo are where he instructs that “the most serious offenses are those that carry the most substantial guidelines sentence, including mandatory minimum sentences,” which marks a deviation from the “smart-on-crime” approach under Holder. Sessions’ memo would ensure the U.S. Justice Department “fully utilizes the tools Congress has given” the agency.

But to the extent that it is Congress that provides the DOJ tools to enforce federal laws, Congress itself needs to reassess those tools. Sen. Rand Paul, R-Ky., has taken that exact strategy. Alongside Sen. Patrick Leahy, D-Vt., Paul has introduced the Justice Safety Valve Act in the Senate, while Reps. Thomas Massie, R-Ky., and Bobby Scott, D-Va., have done the same in the House. The legislation authorizes federal judges to provide more fitting sentences outside of a mandatory-minimum requirement.

During a press call Wednesday, Paul noted that momentum for change is likely to build if more members introduce more criminal justice reform bills. While acknowledging that reform advocates face an “uphill battle,” he also indicated that he is “having conversations with people” within the Trump administration willing to listen.

The call to enforce harsher charging and sentencing methods is a serious concern, especially the goal to revive the one-size-fits-all use of mandatory minimum sentences. However, seeking ways for Congress to set the tone and dictate what tools are available for judges and parties at the DOJ is currently the most effective way to remedy this recent course of events. It’s checks and balances at its finest.


Image by Brad McPherson

OPEN Government Data Act moves to Senate floor after markup

shutterstock_208794031

Legislation requiring federal agencies to publish their data online in a searchable, nonproprietary, machine-readable format has been cleared for the Senate following a May 17 markup by the Senate Homeland Security and Governmental Affairs Committee.

Sponsored by Sen. Brian Schatz, D-Hawaii, S. 760, the Open Public Electronic and Necessary Government Data Act is identical to an earlier Schatz bill that passed the Senate unanimously last year after analysis by the Congressional Budget Office determined it wouldn’t cost taxpayers any money.

What it would do is modernize government agencies and increase their effectiveness, while also allowing taxpayers to see how their money is spent. For these reasons, R Street joined more than 80 organizations—including trade groups, businesses and other civil-society organizations—in urging the Senate committee to pass these badly needed reforms.

The status quo makes it difficult for engaged citizens to view the spending data of the agencies they fund. A taxpayer interested in viewing the companies and organizations that receive federal grants and contract awards would need to have a license for the proprietary Data Universal Numbering System (DUNS). Dun & Bradstreet Inc., the company that owns DUNS, functions as a monopoly with respect to government contractor data.

In a 2012 report, the GAO claimed the costs of moving away from DUNS to a different system would be too great, but that was in a time of fewer alternatives. More recently, a Government Accountability Services 18F technology team study showed that government agencies across the world are beginning to use a 20-digit code called the Legal Entity Identifier (LEI). LEI is free for organizations and companies to use, as it is managed by the Global LEI Foundation, a nonprofit organization based in Switzerland. It would require no expensive upgrades.

Both the current and previous administrations have publicly supported transparency reforms for federal agencies. President Barack Obama introduced an Open Data Policy in 2013, and Matt Lira, a special assistant to President Donald Trump for innovation policy and initiatives, told an audience in April that financial transparency is still a priority for the White House.

Vested interested likely will still oppose the bill, which also has companion legislation, H.R. 1770, in the U.S. House. But given that it has support from both parties—an incredibly rare thing these days—as well as from the present and prior administrations, transparency advocates have room for optimism. The case for nonproprietary data standards and government transparency will now be in the hands of Congress.


Image by zimmytws

Big names weigh in on FCC’s net-neutrality rules

shutterstock_398393776

We seldom see a cadre of deceased Founding Fathers petition the Federal Communications Commission, but this past week was an exception. All the big hitters—from George Washington to Benjamin Franklin—filed comments in favor of a free internet. Abraham Lincoln also weighed in from beyond the grave, reprising his threat “to attack with the North” if the commission doesn’t free the internet.

These dead Sons of Liberty likely are pleased that the FCC’s proposed rules take steps to protect innovation and free the internet from excessive regulation. But it shouldn’t surprise us that politicians have strong opinions. What about some figures with a broader perspective?

Jesus weighed in with forceful, if sometimes incomprehensible, views that take both sides on the commission’s Notice of Proposed Rulemaking, which seeks comment on scaling back the FCC’s 2015 decision to subject internet service to the heavy hand of Title II of the Communications Act of 1934. Satan, on the other hand, was characteristically harsher, entreating the commissioners to “rot in Florida.”

Our magical friends across the pond also chimed with some thoughts. Harry Potter, no doubt frustrated with the slow Wi-Fi at Hogwarts, seems strongly in favor of keeping Title II. His compatriot Hermione Granger, however, is more supportive of the current FCC’s efforts to move away from laws designed to regulate a now defunct telephone monopoly, perhaps because she realizes the 2015 rules won’t do much to improve internet service. Dumbledore used his comments to give a favorable evaluation of both Title II and the casting of Jude Law to portray his younger self in an upcoming film.

A few superheroes also deigned to join the discourse. Wonder Woman, Batman and Superman joined a coalition letter which made up with brevity what it lacked in substance. The same can’t be said for the FCC’s notice itself, which contains dozens of pages of analysis and seeks comments on many substantive suggestions designed to reduce regulatory burdens on infrastructure investment and the next generation of real time, internet-based services. Another, more diverse, coalition letter was joined by Morgan Freeman, Pepe the Frog, a “Mr. Dank Memes” and the Marvel villain (and Norse trickster god) Loki. It contained a transcript of Jerry Seinfeld’s Bee Movie.

Speaking of villains, Josef Stalin made known his preference that no rules be changed. But Adolf Hitler attacked Stalin’s position like it was 1941.

Then there are those with advanced degrees. Doctor Bigfoot and Doctor Who filed separate comments in support of net neutrality.

In a debate too often characterized by shrill and misleading rhetoric, it’s heartening to see the FCC’s comment process is engaging such lofty figures to substantively inform the policymaking process. I mean, it sure would be a shame if taxpayer money supporting the mandatory review of the 1,500,000+ comments in this proceeding was wasted on fake responses.


Image by Bonezboyz

Coppage talks urbanism on the Matt Lewis Show

R Street Visiting Senior Fellow Jonathan Coppage was a recent guest on the Matt Lewis Show, where he made the case for the Federal Housing Administration to re-legalize Main Street. Full audio is embedded below.

How Scott Gottlieb’s ‘boring’ approach could transform the FDA

IQ2

Dr. Scott Gottlieb, confirmed earlier this week by the U.S. Senate to become the new commissioner of the Food and Drug Administration, has a pragmatic—some might even say boring—approach to public health that could revolutionize how FDA regulations can fight the consequences of addiction.

With his vision of the future of tobacco, Gottlieb takes all the fun out of the heated arguments that anti-tobacco and pro-vaping individuals engage in on a regular basis – offering a reasonable solution to the disease burden of cigarettes. In a 2013 Forbes essay, he stated:

Whatever one thinks of cigarette makers, if the industry was earnest about transitioning away from the manufacture of smoked cigarettes, and getting into the development of new products that would still satisfy peoples’ taste for nicotine (with hopefully much lower risks) there could be public health virtue. The overall incidence of smoking related disease could be sharply diminished.

He acknowledges the enormous power the FDA has in the future of public health, particularly as it relates to tobacco consumption. He even has the guts to imply that “big tobacco” could actually be an ally in solving a problem many think they created, by encouraging cigarette manufacturers to focus on safer products and the e-cigarette market.

He recognizes the emergence of e-cigarettes present a viable alternative to other smoking-cessation products and that they have the potential to contribute to a future without combustible cigarettes. During his confirmation hearings, Gottlieb stated that reduced-harm products should be available to consumers to transition off combustible cigarettes, and he has taken note of the burdensome regulations that will be put on small businesses who want to enter the e-cigarette market, under currently scheduled FDA vaping rules.

These comments suggest that he would be open to regulations that make it easier for safer products to enter the market, rather than the currently planned deeming regulations, which would require nearly all existing e-cigarette products to go through a pre-market tobacco application (PMTA) process that would cost approximately $300,000 for each combination of flavor, strength, mixture and device. In a harm-reduction model, this is important, because increased competition from small businesses in the e-cigarette market will increase innovation and production of even safer products, while decreasing the price point of products that are at least 95 percent safer than combustible cigarettes.

Furthermore, this harm-reduction approach also could be applied to the opioid epidemic, which Gottlieb has stated is the FDA’s top priority. Medication-assisted treatments—such as methadone and Suboxone—help nearly 40 percent of people with opioid-use disorders to abstain from heroin and other commonly abused opioids. Opioid antagonists—such as Narcan and Vivitrol—can be used to reverse overdoses and cut cravings. Pharmaceutical companies, both big and small, have an opportunity to improve upon medications that can be used to treat opioid addiction and its consequences. Gottlieb’s willingness to embrace a harm-reduction philosophy and his recognition that it is important to have a practical approach to expensive and time-consuming FDA regulations could further encourage small pharmaceutical companies to enter the pipeline of life-saving opioid addiction treatments.

During the confirmation process, Gottlieb received criticism for his ties to the pharmaceutical industry. But frankly, his recognition that the tobacco and pharmaceutical industries can help solve an addiction crisis that kills nearly half a million people a year is to be applauded. That level-headed vision is exactly what the FDA needs to reduce the economic and health burden of addiction in the United States.

Top