Topic: Regulatory Studies

Is Free Trade in Energy Finally on the Horizon?

Over the last few months, the media and the policy world have discovered that America’s archaic crude oil export restrictions are really bad policy. Two new and important developments give this welcome and growing movement even more momentum:

  • In a much-publicized speech yesterday, Sen. Lisa Murkowski (R-AK), ranking member of the Senate Energy Committee, advocated modernizing U.S. export restrictions on energy products, particularly natural gas and crude oil. Accompanying her speech was a new white paper on the same topic, which (i) highlights the serious economic problems caused by the current crude oil export licensing system (which is effectively a ban on exports to all countries except Canada); (ii) confirms the widely held view that oil exports won’t cause higher gas prices; and (iii) recommends that the president, the Commerce Department, or–if they continue to do nothing–Congress relax the export ban. Just as importantly, Murkowski’s views were recently echoed by Sen. Mary Landrieu, (D-LA) who stands to take over the Senate Energy Committee this year. Thus, there could be bi-partisan support for easing the U.S. crude oil ban on the Senate committee arguably most integral to any such reforms.
  • Also, today, the American Petroleum Institute’s president and CEO Jack Gerard reiterated his organization’s support for lifting the crude oil export ban:

Gerards’s formal announcement echoes a few previous statements from folks at API (which is the largest U.S. energy trade association and a big player on Capitol Hill) and is a good sign that they’re going to push harder on this issue in the future. (API’s related blog post, which calls the crude export ban “obsolete,” certainly indicates as much.)

These two developments should be welcome news for anyone concerned with free markets, economic growth, and well-functioning energy markets. As I argued in a February 2013 Cato paper (and subsequent podcast), the crude oil export restrictions–and the similar, more well-known restrictions on U.S. natural gas exports–raise a host of economic, legal, and policy concerns. These restrictions should be replaced with a simple, transparent, and automatic licensing system for all exports of U.S. energy goods (not just fossil fuels).

“We have to pass the bill to find out what’s in it”

The Affordable Care Act is like a big box of Christmas presents: you keep rummaging around in the peanuts and find hidden treasures. Or hidden costs, as it were. Here’s one I hadn’t heard of until today:

Office workers in search of snacks will be counting calories along with their change under new labeling regulations for vending machines included in President Barack Obama’s health care overhaul law.

Requiring calorie information to be displayed on roughly 5 million vending machines nationwide will help consumers make healthier choices, says the Food and Drug Administration, which is expected to release final rules early next year. It estimates the cost to the vending machine industry at $25.8 million initially and $24 million per year after that, but says if just .02 percent of obese adults ate 100 fewer calories a week, the savings to the health care system would be at least that great.

The rules will apply to about 10,800 companies that operate 20 or more machines. Nearly three quarters of those companies have three or fewer employees, and their profit margin is extremely low, according to the National Automatic Merchandising Association. An initial investment of $2,400 plus $2,200 in annual costs is a lot of money for a small company that only clears a few thousand dollars a year, said Eric Dell, the group’s vice president for government affairs.

“The money that would be spent to comply with this - there’s no return on the investment,” he said.

In my experience, vending machines shuffle their offerings fairly frequently. If the machine operators have to change the calorie information displayed every time they swap potato chips for corn chips, then $2,200 seems like a conservative estimate of costs. But then, as Hillary Clinton said when it was suggested that her own health care plan would bankrupt small businesses, “I can’t be responsible for every undercapitalized small business in America.”

Connecticut, Drunk on Power, Uses Bottle Bill to Steal Money

For nearly 30 years, Connecticut beverage distributors received the unclaimed refund value of recycled bottles as part of the state’s Bottle Bill, which set up a refund system for used bottles as an attempt to encourage recycling. As in other states, the law requires beverage dealers to pay refunds for every bottle turned in.

Fiscal troubles in 2008 prompted Connecticut to amend the law, however, to require a “deposit account” from which distributors were to pay the refunds. This requirement was intended to aid the state environmental agency to study the rates of deposit payments and returns. The following year, the fiscal situation worsened, and the Bottle Bill was again amended, this time to require the remaining funds in the deposit accounts (after returns were paid out) to be paid to the state—retroactively including any unpaid remainder funds since the accounts went into effect in 2008.

A. Gallo & Co. and other beverage distributors in Connecticut saw this as an uncompensated taking of their property and sued the state. They took their case through the state court system, but even the Connecticut Supreme Court turned a blind eye, holding that beverage distributors never had a property right in the remainder funds in the first place. The distributors have now asked the U.S. Supreme Court to hear their case, and Cato joined the New England Legal Foundation, the Southeastern Legal Foundation, and the National Federation of Independent Business on a brief supporting their petition.

We argue that Connecticut’s budgetary troubles are no excuse for violating a longstanding property right without compensation. Moreover, by twisting its statutory interpretation to satisfy political pressures, the Connecticut Supreme Court has made itself complicit in the uncompensated taking. It’s bad enough when strapped-for-cash legislatures unfairly force public burdens onto the shoulders of private parties to feed their spending addictions, but when all three government branches – including the one entrusted with soberly interpreting the law, especially in times of fiscal emergency – get drunk on power and deny even the existence of a property right, it’s time for a Supreme Court intervention.

The Supreme Court will decide by winter’s end whether to take the case of A. Gallo & Co. v. Esty.

Denmark Without the Danish? A Crisis of EU Regulation

Two of my lifelong interests — government over-regulation and scrumptious Scandinavian baked goods — have finally intersected:

…scientists have now discovered that too much of the most commonly used type of cinnamon, cassia, can cause liver damage thanks to high levels of coumarin, a natural ingredient found in the spice.

The EU has accordingly decreed that coumarin levels must be kept below 50 mg per kg in “traditional” or “seasonal” foodstuffs eaten only occasionally, and 15 mg per kg in everyday “fine baked goods.” This is triggering a crisis in Denmark:

Last month, the Danish food authority ruled that the nation’s famous cinnamon swirls were neither traditional nor seasonal, thus limiting the quantity of cinnamon that bakers are allowed to use, placing the pastry at risk – and sparking a national outcry that could be dubbed the great Danish bake strop.

The president of the Danish Bakers’ Association, Hardy Christensen, said: “We’ve been making bread and cakes with cinnamon for 200 years. Then suddenly the government says these pastries are not traditional? I have been a baker for 43 years and never come across anything like this – it’s crazy. Using lower amounts of the spice will change the distinctive flavour and produce less tasty pastries. Normally, we do as we’re told by the government and say OK, but now it’s time to take a stand. Enough is enough.”

The one thing cinnamon buns have been missing all these years is a sense of outlaw defiance of authority. Now they are perfect. [adapted from Overlawyered]

It’s a Very Merry Christmas for Washington Insiders

Last year, while writing about the corrupt and self-serving behavior at the IRS, I came up with a theorem that explains day-to-day behavior in Washington.

Simply stated, government is a racket that benefits the D.C. political elite by taking money from average people in America

I realize this is an unhappy topic to be discussing during the Christmas season, but the American people need to realize that they are being pillaged by the insiders that control Washington and live fat and easy lives at our expense.

If you don’t believe me, check out this map showing that 10 of the 15 richest counties in America are the ones surrounding our nation’s imperial capital.

Who would have guessed that the wages of sin are so high?

D.C., itself, isn’t on the list. But that doesn’t mean there aren’t a lot of people living large inside the District.

Low Job Satisfaction in the Federal Bureaucracy

Other than providing generous pay and fat pensions, many federal agencies are not great places to work, according to federal employees themselves on a new survey.

A Washington Post story summarized the OPM results:

 “The average government worker comes in 13 points below the average private-sector employee in terms of job satisfaction, according to the ‘Best Places to Work in the Federal Government’ report.

‘This is an ongoing train crash,’ said Max Stier, president of the Partnership for Public Service.

Hay Group, which collaborated on the data, found that job satisfaction in the private sector was not only higher than in the public sector, it even climbed since last year — from 70.0 to 70.7 points out of 100 — all while the government numbers fell.

Of the 10 questions that both public and private employees answered, government scored higher on only question: Do you like the kind of work you do?

On every other question, including how well colleagues cooperate and how well management keeps employees informed, private-sector workers gave their organizations higher marks.”

During the Bush years, government failures were explained away by liberal pundits as being the result of a Republican administration that (supposedly) did not believe in government. But the government-loving Obama administration has now been in office five years and federal employees are more dissatisfied than they have been in at least a decade.

Many liberal experts—such as these folks—will admit that the government bungles a lot of its activities. They usually call for reforms like more coordination, reduced overlap, and better leadership to solve the government’s mismanagement problems.

However, the government will never operate as effectively as private enterprise for many reasons. One is that government workplaces will always be buried under piles of rules and regulations that frustrate workers and stifle initiative. Another is that the government has rigid pay structures that don’t differentiate between the slackers and the hard workers. Ludwig von Mises discussed some of the fundamental differences between private enterprises and government bureaus in his book Bureaucracy seven decades ago. Little has changed since then, despite repeated efforts to “reinvent government.”

One reason why our federal government is a particularly poor performer is that it has become so large, complex, and immune to oversight. If Americans want Washington to work better, they should insist that it be downsized as much as possible. Some agencies should be abolished, such as the lowest scoring agency on the new survey, the Economic Development Administration, which is an unneeded pork barrel machine. Other agencies should be privatized, such as the low-scoring Transportation Security Administration.

Less would be more when it comes to government and its performance.

Obama Playing Politics with Regulation? That’s Old News

In the newspaper business, the most precious space is on the front page, above the fold, of the Sunday edition. In that space yesterday, the Washington Post trumpeted that the Obama White House had ”systematically delayed enacting a series of rules on the environment, worker safety and health care to prevent them from becoming points of contention before the 2012 election.

WaPo reports:

The Obama administration has repeatedly said that any delays until after the election were coincidental and that such decisions were made without regard to politics. But seven current and former administration officials told The Washington Post that the motives behind many of the delays were clearly political, as Obama’s top aides focused on avoiding controversy before his reelection.

The number and scope of delays under Obama went well beyond those of his predecessors, who helped shape rules but did not have the same formalized controls, said current and former officials who spoke on the condition of anonymity because of the sensitivity of the topic.

For many WaPo readers, this revelation may be shocking. For readers of the Cato Institute’s journal Regulation, it’s old news.

Last spring, the American Action Forum’s Sam Batkins and the Bush Institute’s Ike Brannon reported that federal data show the Obama administration’s regulatory activity had slowed in 2012. Their explanation for the “pause”: “presidents up for reelection typically delay controversial regulations that could anger various constituencies.” Because the administration felt confident of President Obama’s reelection, they saw little reason to push through rules in a mad dash of “midnight regulation” and instead kept their activities out of the voters’ sight.

Batkins and Brannon go on to say that now that the 2012 election has safely passed, we should not expect a mad dash of regulation. That’s not good news, however. As they explain, “a reelected president has little compunction to issue regulations quickly—not with four more years of governing in the offing. As a result, no one should interpret the regulatory pause in 2012 as evidence of a new ‘go slow’ approach by the Obama administration.”