November-December 1996

"THIS JUST IN"

December 19, 1996

Taxpayer support of Amtrak unjustified, Cato study finds

"After 25 years of federal ownership and $13 billion of federal subsidies, Amtrak appears no closer to financial independence than the day taxpayer assistance began," says Stephen Moore, director of fiscal policy studies at the Cato Institute. In a new Cato study, "Amtrak at Twenty-Five: End of the Line for Taxpayer Subsidies," Moore and economic consultants Wendell Cox and Jean Love argue against two alleged justifications for taxpayer subsidies: market failure and social equity. Amtrak, they conclude, fails on both counts.

• Amtrak’s market share is so small that it hardly adds to transportation system capacity. Train service supplies less than 0.007 percent of the daily work trips Americans make every year. As a result, Amtrak does not divert a significant portion of traffic from busy highways or airports. The authors note that the smallest of the nation’s ten major airlines has double the intercity market share of Amtrak. Taxpayer subsidies to Amtrak provide no benefit that is not more effectively provided by the competitive market.

• Amtrak’s riders are not low-income Americans. Three-fourths of Amtrak passengers have household incomes that surpass the national average, and only 13 percent have incomes below $20,000.

According to the study, Amtrak is the most highly subsidized form of intercity transportation. The average taxpayer subsidy per Amtrak passenger is $100 per trip, and on some long-distance routes, the taxpayer subsidy per passenger exceeds $1,000. At this rate, the authors note, "it would be cheaper for taxpayers to close down expensive lines and purchase discount round-trip airfare for all the Amtrak riders."

Moore, Cox and Love recommend freeing Amtrak from excessive federal regulation and political control and moving immediately toward privatization. "For 20 years, Amtrak supporters have promised that self-sufficiency is ‘just around the corner.’ Now is the time for Amtrak to turn that corner."

Policy Analysis no. 266 (http://www.cato.org/pubs/pas/pa-266es.html)

December 12, 1996

Intelligence agencies have misplaced priorities, Cato study says
Economic espionage distracts from missions promoting national security

"American’s intelligence agencies should devote their resources to the most serious security threats, principally international terrorism," says Cato adjunct scholar Stanley Kober. "Instead, their resources are being diverted into economic espionage."

In "Why Spy? The Uses and Misuses of Intelligence," a study released today by the Cato Institute, Kober argues that economic espionage—the gathering of economic intelligence to "protect" American companies—is based on faulty assumptions and damages relations with governments whose cooperation we may need in dealing with security threats.

According to Kober, "The Clinton administration clings to the outdated notion that trade is a form of warfare among nations, and consequently that thinking is alive and well in the U.S. intelligence agencies." He notes that the Central Intelligence Agency’s economic espionage missions have already led to confrontations with France and Japan.

"There are more than enough bona fide security problems in the world to command the full attention of the intelligence community," Kober writes. He cites countering international terrorism and monitoring geostrategic trends, such as the political turbulence in Russia, as appropriate intelligence activities.

"The secrets of corporate America should be protected by the appropriate agencies of the U.S. government," Kober writes, "but the intelligence agencies should focus on their main mission: safeguarding the security of the American people."

Policy Analysis no. 265 (http://www.cato.org/pubs/pas/pa-265es.html)

November 27, 1996

 Proposed FCC rules on telephone costs flawed
FCC plan will discourage investment in new technologies, Cato study says

The Federal Communications Commission has proposed flawed cost-allocation rules for new telephone networks, according to a study released today by the Cato Institute. The FCC has proposed that investors in new telecommunications networks share the revenues or cost savings reaped from those networks with telephone ratepayers.

In "How to Treat the Costs of Shared Voice and Video Networks in a Post-Regulatory Age," Alfred Kahn, former chairman of the Civil Aeronautics Board and special consultant to the National Economic Research Association, writes that, because they deny investors the ability to reap the full benefits of their investment, the proposed rules will discourage investment in the new networks.

Competition between cable television companies and new video services distributed by telephone companies will be slow to emerge if investors are not permitted to receive the full profits from investment in the new networks. Thus, Kahn writes, the FCC’s proposal would not result in real net benefits for consumers.

According to the study, the FCC’s proposed rules would hinder the achievement of a central goal of the Telecommunications Act of 1996: the rapid deployment of new telecommunications facilities by the private sector.

Policy Analysis no. 264 (http://www.cato.org/pubs/pas/pa-264es.html)

November 21, 1996

This Thanksgiving, much to be thankful for
Book renews and expands challenge to doomsayers

In a sequel to his blockbuster 1981 book The Ultimate Resource, Cato Institute senior fellow and economist Julian Simon demonstrates that we have much to be thankful for next Thursday.

The Ultimate Resource 2, published by Princeton University Press and Cato, shows that we continue to live longer, healthier and richer lives than ever. "The doomsayers predicted world-wide famine due to population increase, increased environmental pollution and shrinking supplies of natural resources and energy. They were wrong before, and they are wrong now," says Simon.

In The Ultimate Resource 2, Simon takes on new doomsday scares, for example, waste disposal. "Coercive recycling is a tremendous waste of resources, money and effort," he says. "If each state had its own landfill, the average state would require only about 1.5 square miles to handle the next century’s waste."

Simon gained national attention in 1990 for a public wager with doomsayer Paul Ehrlich, author of The Population Bomb. In 1980 Simon bet $1,000 that the price of any natural resources of Ehrlich’s choosing would decrease during the 1980s. In 1990 Ehrlich wrote Simon a check when the prices of copper, chrome, nickel, tin and tungsten had indeed all fallen.

With the publication of The Ultimate Resource 2, Simon offers another wager. He offers to bet with prominent doomsayers on any explicit or implicit prediction made in the book. "I’ll bet a week’s or a month’s pay that just about any trend pertaining to material human welfare will improve rather than get worse. You pick the trend—perhaps the death rate, the price of a natural resource, air or water pollution, or the number of telephones per person—and you choose the area of the world and the future year in which the comparison is to be made—at least 10 years hence. If I win, my winnings go to nonprofit research."

Simon has repeatedly challenged the principal doomsayers to debate, on television or in print, the overwhelming reasons for optimism about the human condition. His challenges have gone unanswered.

To order copies of the book ($35.00 hardcover), please call: 800-767-1241

November 12, 1996

 EPA cancer risk guidelines flawed, Cato study says
Proposed changes, based on bad science, are a risk to public health

 "The Environmental Protection Agency’s proposed revisions to its cancer risk assessment guidelines represent a setback for public health, science and the EPA cancer risk assessment process," says Michael Gough, director of science and risk studies at the Cato Institute, in a new Cato study, "EPA’s Cancer Risk Guidelines: Guidance to Nowhere."

 Gough and co-author Steven Milloy, president of the Environmental Policy Analysis Network, identify three primary flaws in the proposed EPA guidelines. First, the guidelines do not require tests for statistical significance in interpreting epidemiologic studies, thereby opening the door to the drawing of spurious conclusions. Second, the interpretation of animal tests depends on default assumptions that have no scientific justification and dictate inflated risk estimates. Third, no clear guidance is provided about what kind of data can overcome reliance on the default assumptions.

The authors conclude that the EPA’s cancer guidelines may have adverse health consequences.

"The National Cancer Institute urges that everyone eat five fresh fruits and vegetables daily to reduce the risk of cancer," the authors note, "and the use of pesticides has contributed to the availability of fresh fruits and vegetables at affordable prices. Flawed risk assessments can lead to regulations or bad publicity about pesticides that reduce pesticide use or require the use of more expensive pesticides, driving up the cost of fruits and vegetables and increasing cancer risk."

"The EPA needs to analyze what public health benefits should be produced through regulatory programs that cost billions of public and private dollars each year," says Gough. "Instead, it seems focused on how many rats get cancer from massive doses of chemicals."

Gough and Milloy call on Congress to hold hearing on the costs and benefits of EPA regulation. Until they do, "arguments about regulatory changes will deal with minutiae while gigantic regulatory costs pile up with no expectation of improvements in public health."

Policy Analysis no. 263 (http://www.cato.org/pubs/pas/pa-263es.html)

November 4, 1996

Internet cannot be constitutionally regulated, Cato study says
Private options undercut government interest in censoring cyberspace

"No regulation of computer network indecency should pass constitutional scrutiny," says Solveig Bernstein, assistant director of telecommunications and technology studies at the Cato Institute. Bernstein is the author of a new Cato study, "Beyond the Communications Decency Act: Constitutional Lessons of the Internet."

The study looks beyond the recently-enacted CDA and is the first to examine and reject many proposals for government censorship of the Internet. Legislation banning speech deemed "harmful to minors" would still ban much amateur speech because of the difficulties of restricting access. The use of "site rating labels"—forcing content providers to label and rate their sites for content—would unconstitutionally compel speech and place extraordinary burdens on entities with large collections of works, such as libraries.

According to Bernstein, mandatory labeling is invasive and oppressive when applied to casual speech in chat rooms, newsgroups or private e-mail. "For spontaneous computer speech," she writes, mandatory labeling is "the equivalent of requiring the labeling of conversations around a backyard barbecue."

The study analyzes private solutions to combat indecency on the Internet. Private-sector alternatives to government censorship include software filters and services from Internet providers who offer access to child-safe materials. "In America, we do not need the government to tell us what is and is not indecent," Bernstein says. "Civil society has solved this perceived problem on its own, so the government cannot legitimately claim that it has any interest in content control."

"Any court prepared to recognize the reality of what computer networks offer will realize an amazing opportunity to restore the First Amendment. We can only hope that the courts will recognize this opportunity and take it."

Policy Analysis no. 262 (http://www.cato.org/pubs/pas/pa-262es.html).