Tag: House Energy and Commerce Committee

Congressional Republicans May Be Understating the Cost of ObamaCare

Yesterday, the Senate Finance and House Energy & Commerce committees released a joint report on the costs that ObamaCare’s Medicaid mandate will impose on states.  That report, which is based on other reports, likely understates the cost of that unfunded mandate.

In a new Cato Working Paper, “Estimating ObamaCare’s Effect on State Medicaid Expenditure Growth,” senior fellow Jagadeesh Gokhale constructed cost projections for the five largest states – California, Florida, Illinois, New York, and Texas – which account for 40 percent of the nation’s population.  Gokhale carefully decomposed and organized micro-data and state-specific administrative data on Medicaid eligibility, enrollments, benefit recipiency, and average benefits per recipient.  Gokhale found much larger cost burdens than the committees’ projections.  

For example, Gokhale projects that ObamaCare will force Florida to spend an additional $20.4 billion between 2014 and 2023. That is almost double the committees’ estimate of an additional $12.9 billion in spending by Florida between 2013 to 2023.

The Fall of the House of Waxman

While others wish the new Congress well today on its swearing-in, I plan to light a 100-watt incandescent bulb and hoist a caffeinated alcoholic beverage in honor of a different milestone: starting today, the powerful House Energy and Commerce Committee will no longer be under the control of Henry Waxman (D-Calif.).

Some lawmakers can talk a decent game about lean ‘n’ smart regulation, but no one ever accused Waxman of having a light touch. (The 900-page Waxman-Markey environmental bill, mercifully killed by the Senate, included provisions letting Washington rewrite local building codes.) He’s known for aggressive micromanagement even of agencies run by putative allies: his staff has repeatedly twisted the ears of Obamanaut appointees to complain that their approach to regulation is too moderate and gradual. More than any other lawmaker on the Hill, he’s stood in the way of any meaningful reform of the 2008 CPSIA law, which piles impractical burdens on small makers of children’s products, thrift stores, bicycles and others.

Like his predecessor, Rep. John Dingell (D-Mich.), Waxman and his subcommittee chairs have famously used hearings as a club to discipline interest groups that don’t cooperate. Last spring he menaced large employers with hearings after several of them announced (contrary to some predictions) that ObamaCare was going to hurt their bottom lines. In September, subcommittee chair Rep. Anthony Weiner (D-N.Y.) announced hearings on regulating precious-metal companies, in a remarkable press release that devoted much attention to the firms’ role in sponsoring “several conservative pundits … including Glenn Beck, Mike Huckabee, Laura Ingraham, and Fred Thompson. By drumming up public fears during financially uncertain times, conservative pundits are able to drive a false narrative,” the release said. In other words, the committee was investigating private firms in part because it disapproved of their advertising on, and reinforcing the economic message of, conservative talk shows. Didn’t anyone on Weiner’s staff have a sudden overhead flash about the whole “First Amendment” idea? Or had that particular light bulb been banned too?

The committee was an unending source of ghastly new legislative proposals for regulatory manacles to be fastened on one or another sector of the economy , ideas that with any luck we may now be spared for the next two years. Thus it appears unlikely that the Republican-led committee will give its blessing to something called the Safe Cosmetics Act of 2010 (H.R. 5786), introduced by Reps. Ed Markey (D-Mass.), Jan Schakowsky (D-Ill.), and Tammy Baldwin (D-Wisc.), which – by mandating that all compounds found in personal-care items at any detectable level be expensively tested for and disclosed on labels – could have added tens of thousands of dollars of cost overhead to that little herbal-soap business your sister is trying to start in her garage. (Fragrance expert Robert Tisserand explains why most small personal-care product makers would not survive if the bill passed). Nor is it likely that the new leadership of chairman Fred Upton (R-Mich.) will be in a hurry to adopt Rep. Schakowsky’s H.R. 1408, the Inclusive Home Design Act, which would mandate handicap accessibility features in most new private homes.

I look forward to learning more about the plans of Rep. Upton and his new majority colleagues. For today, however, it’s enough just to know that they are Not Henry Waxman.

The CPSC’s Defective New Complaints Database

We are told constantly that government can play a beneficial role in the marketplace by taking steps to make sure consumers are more fully informed about the risks of the goods and services they use. But what happens when the government itself helps spread health and safety information that is false or misleading? That question came up recently in the controversy over New York City’s misleading nutrition-scare ad campaign, and it now comes up again in a controversy over a new database of complaints about consumer products sponsored by the federal Consumer Product Safety Commission (CPSC).

As part of the Consumer Product Safety Improvement Act of 2008 (CPSIA), Congress mandated that the CPSC create a “publicly available consumer product safety information database” compiling consumer complaints about the safety of products. Last week, by a 3-2 majority, the commission voted to adopt regulations that have dismayed many in the business community by ensuring that the database will needlessly include a wide range of secondhand, false, unfounded or tactical reports. The Washington Times editorializes:

…[Under the regulations as adopted last week] anybody who wants to trash a product, for whatever reason, can do so. The commission can leave a complaint on the database indefinitely without investigating its merits “even if a manufacturer has already provided evidence the claim is inaccurate,” as noted by Carter Wood of the National Association of Manufacturers’ “Shopfloor” blog….

Trial lawyers pushing class-action suits could gin up hundreds of anonymous complaints, then point the jurors to those complaints at the “official” CPSC website as [support for] their theories that a product in question caused vast harm. “The agency does not appear to be concerned about fairness and does not care that unfounded complaints could damage the reputation of a company,” said [Commissioner Nancy] Nord.

Commissioners Nord and Anne Northup introduced an alternative proposal (PDF) aimed at making the contents of the database more reliable and accurate but were outvoted by the Democratic commission majority led by Chairman Inez Tenenbaum. Nord: “under the majority’s approach, the database will not differentiate between complaints entered by lawyers, competitors, labor unions and advocacy groups who may have their own reasons to ‘salt’ the database, from those of actual consumers with firsthand experience with a product.” Commissioner Northup has published posts criticizing the regulations for their definitions of who can submit a report, who counts as a consumer, and who counts as a public safety entity.

For those interested in reading further, Rick Woldenberg, a leading private critic of the law who blogs at AmendTheCPSIA.com, has critically commented on the politics of the proposal here, here, here, here, and here. More coverage: ShopFloor with followups here and here, New York Times, Sean Wajert/Mass Tort Defense. I’ve been blogging for the past two years at my website Overlawyered about the wider problems with the CPSIA law, including its effects on books published before 1985, thrift stores, natural wooden toys, ballpoint pens, bicycles, plush animals, Irish dance costumes, rocks used in science class and many more. Most of these problems remain unresolved thanks to the inflexible wording of the law as well as, sometimes, the unsympathetic attitude of the commission majority. I’ve heard that bringing overdue investigative oversight to the ongoing CPSIA disaster is shaping up as a priority for many incoming lawmakers on the (newly Republican-led) House Energy and Commerce Committee, whose outgoing chair, California Democrat Henry Waxman, is closely identified with the law and its consumer-group backers.

Time to End the “Gore Tax”

When the Telecommunications Act of 1996 passed, section 254 was dubbed the “Gore Tax” by detractors of the policy and the then-Vice President whose project it was.

A system of cross-subsidy that was implicit in the old AT&T was made explicit as a tax on interstate telecom services—euphemistically referred to as a “contribution”—and expanded to reach to a small universe of sympathetic interests—more accurately, the telecommunications providers serving those interests.

The amount of the “contribution” would be set by the Federal Communications Commission. That is, the agency would set the level of taxes on telecommunications, then hand out the money it produced by taxing. (I wrote previously about the Taxpayers Defense Act (House -105th Congress, House - 106th, Senate - 106th), introduced in recognition that this is taxation without representation.)

Under the program, subsidies go in four directions: to high-cost telecom users, such as those in remote locations; to low-income telecom users; to schools and libraries; and to rural health care efforts. Surprise, surprise! The program has grown over the years, and it has been plagued by allegations of corruption and misuse.

To its credit, the House Energy and Commerce Committee has been doing some oversight, and it recently sent a letter asking the FCC to provide some data on the program. The FCC has responded, and the results are striking.

The FCC’s list of the top ten recipients and the subsidies they received in 2007, 2008, and 2009 show hundreds of millions of dollars going to large telecom firms, more than a billion each to AT&T and Verizon.

A state by state list of subsidies under each of the four universal service programs also shows each state’s “contribution” and whether it was a net winner or loser. The total “dollar flow” is negative by some $187 million in 2009. That’s the money that went to administrative expenses—essentially Washington, D.C.’s take.

Then there’s the shocking list of the largest per line subsidies. Westgate Communications in Washington state received $301,966 in 2009 to support 17 subscribers to their services—a subsidy of $17,763 per line. Adak Eagle Enterprises in Hawaii received $23,945,376 for 2,192 customers, a subsidy of $10,926 per customer. Subscription news service TechLawJournal notes that the top five per line subsidies are all in states with representation on the Senate Commerce Committee.

Folks with the biggest heart-to-brain ratio might interpret this as good news: People who otherwise might not have telecommunications services are getting it! But even a big-heart might recognize the brainiac/green-eyeshade perspective. These subsidies do at enormous cost what might be done better and cheaper with competition and innovation. Utterly top-class communications can be delivered anywhere in the United States—pretty much anywhere in the world—for far less than $10,000 per customer per year.

Equally importantly, people who live in remote areas have no just claim that others should pay for their communications, just as people in areas with expensive housing have no just claim that rural folk should pay their rent.

Section 254 was a bad policy at the outset, and these data manifest that. Expensive government “universal service” programs should be eliminated so that unhampered competition in the private telecommunications market can deliver cost-effective telecom services everywhere they are supposed to be. That would satisfy both the hearts and the brains among us, and it would do so justly.