Topic: Regulatory Studies

A Condom Conundrum: Private Parts in the Public Sphere

While they were turning out to the polls to help reelect President Obama on Tuesday, residents of Los Angeles County also approved a ballot initiative known as “Measure B,” requiring the producers of “adult films”—meaning porn, not Criterion Collection fare—to acquire a public health permit and adhere to a number of regulations, most controversially a mandate that performers wear condoms on the set. Prominent industry figures such as James Deen have opposed the measure on the grounds that it is unnecessary in light of the existing rigorous testing regime, counterproductive in the context of shoots that require performers to have intercourse for “nonstandard amounts of time,” and will ultimately be ineffective as filming will simply move outside Los Angeles County.

These are all compelling points, but the measure also raises some interesting theoretical questions in an industry where, as in journalism before it, new technology has blurred the once-sharp lines between amateur and professional content production.

While I will refrain from linking to any examples on this family-friendly blog, “traditional” professionally produced adult video now competes with an array of sites specializing in amateur or quasi-amateur sexual content. Some entrepreneurial couples and individuals launch their own personal sites, making home videos and live webcam streams available to subscribers. Other sites act as middlemen, purchasing home videos shot by amateur couples for online distribution. Still others serve as platforms on which individuals and couples can stream live sexual content from their home web cameras, earning revenue based on the number of viewers. While it seems clear that Measure B is not intended to target these amateur producers, they do seem to fall within the scope of the law’s definitions, strictly construed.

Here’s a thought experiment: Imagine a couple who sometimes tape their sexual activity for—at least initially—their own private enjoyment. In the past, when money was tight, they periodically sold these videos to a subscription-based website that specializes in homemade fare, and they expect that they may do so again in the future as the need arises. At what point are they required to  register with the state and pay a permit fee if they wish to continue taping in their own bedrooms? If they fail to do so, are they later liable should they attempt to sell or self-distribute those recordings, either for a subscription fee or on an ad-supported website?

Now, realistically, I find it almost inconceivable that Los Angeles would seek to enforce the law against the imaginary couple I’ve described. I find it slightly more plausible that an L.A.–based couple who maintain their own site could be affected, and one can also imagine an aggregation and distribution site or platform being targeted—perhaps at the urging of traditional studios looking to eliminate the competition—though it is hard to see how such sites could feasibly comply with some of the law’s requirements. If a similar law were adopted nationally, or by many states—making it harder for professional studios to resume business by moving elsewhere—some of these scenarios become a good deal less far-fetched.

Again, given that the intent of the law is fairly clearly to regulate traditional professional porn studios, I expect that in practice they are likely to be the exclusive targets of enforcement for the foreseeable future, and those who wish to continue shooting scenes sans-latex will find plenty of nearby jurisdictions happy to welcome their business. Still, I think it’s an interesting class of hypotheticals to contemplate, because it problematizes the widespread view that there’s some sharp and clear distinction between the realm of private intimacy shielded from state interference and the realm of commerce subject to broad regulation. Here, it becomes especially clear that the commercial regulation inevitably implicates rights of personal sexual choice and bodily autonomy. But commerce has never really been some hermetically sealed domain, where rules that conflict with the values or preferences of workers and entrepreneurs somehow don’t count as impinging on personal autonomy, in contrast with the sacrosanct domain of the home where such intervention would be anathema. In a digital economy that makes “home” and “workplace” the same place for a growing number of people—where the boundary between personal projects and production for profit becomes increasingly blurred—that distinction seems likely to become increasingly untenable in more and more areas.

Why a Good Year for Peanut Farming Is Bad News for Taxpayers

The NY Times reports on how well peanut growing has gone this year:

In Georgia, where nearly half of the nation’s peanuts are grown, the annual fall harvest has yielded a record amount of big, shell-filling kernels that farmers say taste better than average.

“I’ll just say that the farmers of Georgia have been blessed with weather conditions,” said Armond Morris, who planted about 1,000 acres near Tifton, Ga., and serves as the chairman of the Georgia Peanut Commission.

“We had rain at the right time and didn’t have but three or four days that were 95 degrees,” he said.

Although the harvest is just winding down, the national peanut crop report from October showed that more than 6.1 billion pounds will be harvested this year, compared with about 3.6 billion last year. The yields are especially good in Alabama, Florida, Mississippi and Georgia, where the main crop is a variety called runner peanuts.

So that’s good news for taxpayers right?  No need to bail out struggling farmers whose crops have been ruined by drought?  A good time to end farm subsidies? Unfortunately, it’s quite the opposite:

… there is still a record supply of peanuts on the market, which means farmers will not see high prices to match their yields.

Although some early contracts assured growers of close to $700 a ton, those kinds of deals are long gone, said Patrick Archer, the president of the American Peanut Council, adding that growers will be lucky to get $400.

As a result, many farmers are likely to turn to the federal government to keep the bottom from falling out of the peanut market. Instead of selling their crops right away, they will store shelled nuts in refrigerated warehouses and take government loans, betting that prices will rise within nine months and that their peanuts will bring enough to repay the loans.

If prices stay low on the open market, the government will buy the peanuts for less than it cost to produce them but at a rate that will allow farmers to recoup some of their expenses.

Sigh.  Is there any market situation that doesn’t result in subsidies to agriculture?

If Oklahoma Wins Lawsuit, ‘The Whole Structure’ of ObamaCare ‘Starts to Fall Apart’

Oklahoma Attorney General Scott Pruitt has filed a lawsuit challenging the Internal Revenue Service’s unlawful attempt to impose ObamaCare’s taxes on exempt employers and individuals. (Jonathan Adler and I plumb this issue in our forthcoming Health Matrix article, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.”)

An article in the current issue of Business Insurance cites a couple of experts on the potential impact of the lawsuit:

While the ramifications of the suit pending in the U.S. District Court in Muskogee, Okla., are huge, the challenge brought last month has gotten little attention…

What is clear is that the outcome of the lawsuit could be crucial for the future of the health care reform law, observers said.

If premium subsidies are not available in federally established exchanges, “No one would go to those exchanges. The whole structure created by the health care reform law starts to fall apart,” said Gretchen Young, senior vice president-health policy at the ERISA Industry Committee in Washington.

“The health care reform law would become a meaningless law,” added Chantel Sheaks, a principal with Buck Consultants L.L.C. in Washington.

For more, read here, hereherehereherehere, here, and here.

Shades of Nixon

Reason magazine has a characteristically excellent video about the gas shortages in New York and New Jersey. Which is to say, the video is really about the insane responses of officials in those states to the scarcity of gas. Reason’s Jim Epstein writes: “Govs. Chris Christie and Andrew Cuomo…threatened to prosecute any station owners caught raising prices, thus removing any incentive to truck more gas in from other parts of the country.” Here’s the video:

The Washington Post reports Christie responded with an age-old government-rationing scheme:

New Jersey Gov. Chris Christie ordered…drivers with even-numbered license plates being allowed to fill up on even-numbered dates and odd-numbered cars on the other days. But several motorists said they hadn’t heard the news because they had no power at home, and gas station managers said they didn’t bother to look at the plates.

“I don’t have any time to check plates,” David Singh said as he pumped gas into a car at the Delta station he manages on McCarter Highway in Newark.

So not everyone heard about the government’s rationing scheme, and even fewer people cared. You know what conveys information a lot better than tired government edicts? Market prices.

Fortunately, market prices are still breaking through:

Shauron Sears, 37, a waitress, said she spent 12 hours vainly waiting for gas on Friday and another hour waiting Saturday at a Sunoco station on McCarter Highway. Just as she got to the front of the line, a manager started waving his arms and shouting, “No more gas!”

Sears said…since her house flooded she and her family have been camping at her sister’s house in Orange, N.J. Nine people are in the house, including a baby, and Sears is eager to return to her own home. But her first priority is to get gas.

“There are people who are buying gas and selling it for $8 a gallon,” she said. “Maybe I can buy some from them.”

The entrepreneurs selling gas at illegal mark-ups might affect Sears in a manner the government’s price controls won’t. By helping her.

Economic Lessons from Obituaries

Where is the best place in the newspaper to learn about how the economy works?

In today’s Washington Post the business section has the usual stories about Ben Bernanke’s manipulations, government debt, and regulatory issues. But there is little on the innovation and dynamism that is at the heart of long-run economic growth.

It is entrepreneurs who create growth, and they are often best covered in the obituary section of the paper. Today the WaPo has a Bloomberg story about the passing of Albert Ueltschi, “who founded aviation-training company FlightSafety in 1951 [and] expanded it into an international powerhouse.”

Here are a few highlights:

As pilot of Pan American’s first corporate plane … Ueltschi hit upon the idea of opening a testing and training center for the booming aviation industry in the 1950s.

That company today is FlightSafety International Inc., which bills itself as the world’s leading aviation-training company, teaching pilots, aviation mechanics, flight attendants, dispatchers and others each year.

After graduating from high school in 1934, he opened a hamburger stand and used the proceeds to take flying lessons. A year later he borrowed $3,500 to buy an open-cockpit bi-wing airplane, the Waco 10, and made it his next business venture. “I took people up for a dollar a hop, gave lessons, and even put on air shows.”

[I]n 1951, Ueltschi borrowed $15,000 by mortgaging his house and opened FlightSafety at LaGuardia’s Marine Air Terminal.

In subsequent years, Mr. Ueltschi worked his tail off juggling two jobs and building what would become a multibillion part of the U.S. economy. The government did not build FlightSafety. Nor did the government build the thousands of other firms and industries that comprise the bulk of the U.S. economy, such as the electric guitar industry, as I discuss here.

To revive the economy, we need fewer central planners like Ben Bernanke and more decentralized business-builders like Albert Ueltschi. We need more firms like FlightSafety and less like Solyndra. Both candidates for president are promising to create jobs, but what we really need is for the government to get out of way of the people who create companies and industries.

A Few Notes:

Here’s a brief history of FlightSafety and pilot training. As in some other tech industries, it appears that the government helped to boost the demand for this industry’s services. But the basic innovations and advancements were made by gutsy individuals taking risks in the marketplace.

A final note is that the Washington Post does run some articles on live entrepreneurs, not just deceased ones. For example, Thomas Heath’s column is often very interesting and inspiring.

Minnesota: Beware of Free Education

Imagine that it’s the 21st century, and that at least a handful of people in the education business have realized this. Putting their insight to good use, a few of them create an online service called “Coursera” that offers free lectures from some of the top universities in the nation (Stanford, Johns Hopkins, etc.). Then imagine that the state of Minnesota has decided that it is illegal for Coursera to offer these free lectures to its citizens.

I know, it’s hard to imagine. Unfortunately, you don’t have to, you can just read about how it’s actually happening.

One of the classes you can take at Coursera is “Principles of Macroeconomics.” Maybe the folks who lobbied for and enacted the state’s education regulations are afraid that free learning and economic literacy would threaten their phony-baloney jobs.

Exactly What Is Max Baucus Saying Here?

At a packed Cato Institute briefing on Capitol Hill yesterday, Jonathan Adler and I debated ObamaCare expert Timothy Jost over an admittedly wonky issue that nevertheless could determine the fate of ObamaCare: whether Congress authorized the IRS to subsidize health insurers, and to tax employers and certain individuals, in states that refuse to establish one of ObamaCare’s health insurance “exchanges.”

I want you, dear Cato@Liberty readers, to help us get to the bottom of it.

Adler and I claim that Congress specifically, repeatedly, and unambiguously precluded the IRS from imposing those taxes or issuing those subsidies through federal “fallback” Exchanges. We maintain the below video shows ObamaCare’s chief sponsor and lead author–Senate Finance Committee chairman Max Baucus (D-MT)–admitting it. Jost says Baucus’s comments have “absolutely nothing” to do with the matter. You be the judge, and tell us what you think.

A bit of background will help to frame what’s happening in the video: Both sides agree this issue hinges on whether the statute authorizes “premium assistance tax credits” through both state-created and federal Exchanges, or only state-created Exchanges. The video is from a September 23, 2009, Finance Committee markup of ObamaCare. In it, Baucus rules out of order a Republican amendment on the grounds that medical malpractice lies outside the committee’s jurisdiction. Sensing a double-standard, Sen. John Ensign (R-NV) notes that Baucus’s underlying bill directs states to change their health insurance laws and to establish Exchanges, matters which also lie outside the Finance Committee’s jurisdiction, and asks why aren’t those provisions also out of order. Okay, go.

I might note that these are the only comments anyone has unearthed from ObamaCare’s legislative history that bear directly on the question of whether Congress intended to authorize tax credits in federal Exchanges.

Baucus’s response is hardly a model of clarity. But I can see no possible interpretation other than Baucus is admitting that (A) the statute makes tax credits conditional on states establishing an Exchange, and therefore does not authorize tax credits through federal Exchanges, and (B) that this feature was essential for the Senate’s tax-writing committee to have jurisdiction to legislate in the area of health insurance.

But maybe I’m wrong. What do you think Baucus is saying? Since we don’t enable comments on Cato@Liberty, post your interpretation here on the Anti-Universal Coverage Club’s Facebook page. Or post it on your own blog and send me a link.

For more on this issue, see what Adler and I have written for the law journal Health Matrix, the Wall Street JournalUSA Today, the Health Affairs blog, and National Review Online.