Adrian Moore - Reason Foundation

Avoid folly when facing the mortgage "crisis"

2008-04-21T00:14:00Z

It is ironic that with the market doing a crackerjack job of punishing the excesses of the mortgage markets, cries for bailouts, handouts, and major new regulations. A recent USA Today article did a great job pointing out many of the ironies that abound.

In Vermont lender tend to be more cautious and mortgage delinquency rates are below 3%, in contrast to Nevada, where 30% of Las Vegas homebuyers used subprime loans, and now the state has a mortgage delinquency rate above 7%.
Home prices have only fallen in 77 of 150 cities tracked by the National Association of Realtors, but prices were up in 73 markets.
California and Florida alone accounted for 30% of recent U.S. foreclosure starts, according to the Mortgage Bankers Association.

Think about what those stats mean. First, Nevada’s 7% delinquency rate is the poster child for the problem, but that means 93% of mortgages are OK. A 7% problem is not the crisis that is portrayed. Moreover, even a small percentage of sub-prime borrowers are in trouble. This is a fairly small scale, geographically concentrated phenomenon, not a sweeping nationwide problem. Does it makes sense for the people in Vermont, who avoided trouble, to bail out all the housing gamblers in Las Vegas?

Yet, there seems little chance of calm at the national policy level. Election year politics will pander—hell they don’t really need an election as an excuse. My favorite quote from the USA Today article—a woman who bought a house a few years ago with no money down and an adjustable-rate mortgage that started at 5.9% and now faces an 11% interest rate she can't afford says “I think (a bailout) is a good thing for working Americans who are trying to pay their bills and do the right thing. I'm not asking for a handout.” Excuse me? I think you just did as for a handout.

I know some people are in pain, but it hurts us all if we don’t allow people to bear the consequences of the choices they make. You buy a too expensive home with a high-risk mortgage in order to squeeze down the payments, and things go wrong, it really is your fault, not America’s.

Eliot Spitzer and the Seduction of Crusader Politics

2008-03-25T20:05:00Z

My colleague Sam Staley wrote this interesting commentary on Eliot Spitzer's fall. It is stunning how hypocritical politicians manipulate system to serve their own agendas.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Few politicians will have fallen as hard and fast from the summit of political ambition as New York Gov. Eliot Spitzer, allegedly caught meeting with a prostitute. Indeed, Spitzer's fall may reveal some important lessons about the limits of crusader politics as officials like Spitzer practice it.

Critics and political opponents of the governor called for - and got - his resignation based on the traditional justifications of ethical weakness and criminal actions. But let's not overlook Spitzer's political hypocrisy. He purposefully and willfully ruined reputations and careers based on allegations of the same behavior he now reluctantly admits to participating in.

As a crusader, Spitzer manipulated the legal system in ways that served his own agenda. He bullied, threatened, and strong-armed his opponents, frequently relying on specious legal arguments and the threat of litigation to remove those he believed were corrupt and unworthy of the positions they held.

Eliot Spitzer's story is not a random or even unique one. It applies to a culture of politics that accepts a no-holds-barred approach to pursing political goals and allowing individual politicians to define for themselves the "public interest."

Spitzer's reign as attorney general was the stuff of superhero comic books and novels. The superhero rushed into a corrupt world, ridding it of evil so embedded in society and governance that regular law enforcement could not exorcise it. The superhero skirts the law to bring evil doers to justice. But, it's okay, because the end result is a better society-in the superhero's eyes.

In order to root out evil, the superhero has to be above and beyond the law-the rules that common men and women live buy. The superhero uses his guile and ability to raise above pedestrian social customs and rules to put down those he believes corrupt society.

But Spitzer lives in the real world and the Founding Fathers developed a government based accountability, checks and balances. In Spitzer's case, separation of powers-that crafty principle of federalism that gave state and federal governments different responsibilities-is also playing an important role.

The particular crime bringing Mr. Spitzer down is also noteworthy. The most powerful man in New York politics is being subdued by a victimless crime-prostitution. He has admitted to participating in an expensive prostitution ring using the fittingly named Emperor's Club VIP. Stockholders and investors were not defrauded. Corporate titans were not abusing their power. No one was robbed. No one's property was threatened.

Mr. Spitzer will likely be prosecuted under the rarely invoked Mann Act, an early 20th century legal relic put in place to stop interstate prostitution. It is exactly the kind of shell of a law that Mr. Spitzer pursued with gusto to bring down those he personally targeted as corrupt and unworthy of their positions in corporate America. As New York's Attorney General, Spitzer indicted, prosecuted, and jailed dozens of people for running "escort services" and "sex tourism."

Mr. Spitzer's family will suffer terribly from this mess. But these transgressions are Spitzer's. They are not the fault of the entrepreneurs operating the Emperor's Club or its other clients. They are the transgressions of a crusader who couldn't see the hypocrisy of failing to follow the same standards he expected of everyone else, who acted above the law, and, in the end, is being held accountable.

Create jobs and help the poor--open up taxi markets

2008-02-25T17:45:00Z

Taxis are an important element of mobility in the overall transportation network of any city. They should be considered part of a city’s array of mass transit services, an alternative to single-occupant auto trips. Nationwide, taxis carry at least 40 percent more passengers that all other mass transit combined. Since taxis are more expensive than other transit services, they obviously offer something that other transit modes do not. In particular, taxi services are important to certain segments of the population - seniors, housewives, the disabled, and the poor each account for a much higher share of taxi trips than their share of the population. Most other riders are business of tourist visitors.

Given the importance of taxi services to its residents, city governments should take every effort to ensure that nothing impairs local taxi markets. On April 1^st residents of Anchorage will vote on whether or not to open up their taxi market. And in Denver, the state legislature is facing the same question. There is a great deal of evidence that more open and competitive taxi markets are more valuable to the community. The last 15 years has seen a broad literature documenting the outcome of regulatory and other changes that increase competition in municipal taxi markets. In fact, a review I wrote of all the studies done by economists on taxi deregulation found that of the 28 articles, nineteen concluded that deregulation is beneficial (on net), two conclude that the results are mixed, seven conclude deregulation is net harmful

There is much to be learned from studying the success stories rather than reacting with fear because of some failures. In general, more open and competitive taxi services tend to mean higher service levels (in terms of total taxi hours in service), less waiting time for a taxi, a greater variety of services, lower operating costs in the industry, and higher quality service, than is found with monopoly taxi service. The net result is increased usage - more people use taxis for more trips - which means greater mobility for local residents. The city will also benefit from having a larger and more vital taxi industry, with greater employment and income opportunities. In many case, the city may also benefit from greater tax revenues from a larger and growing taxi industry.

Looking at all of the evidence on opening up taxi markets, I reach a number of conclusions.

1. Taxi deregulation has worked in many cities.

v Many cities have deregulated in the last two decades, and a complete survey of the literature shows that in some cases it worked well, and in others there were problems that led to some re-regulation.

v Arguments based on the results of one, two, or three studies do not tell the whole story—and even studies critical of deregulation concede that sometimes it works.

v The lesson is that we should be learning from the deregulation successes .

2. The Lynchpin Study Critical of Deregulation, by Price Waterhouse, is Flawed.

v The study did not condemn deregulation, as is commonly claimed, but concluded that “the effects of taxicab deregulation have ranged from benign to adverse, depending on local conditions and markets.”

v The study did not precisely define “re-regulation.” Many of the cities it studied re-imposed restrictions on entry, limiting the number of taxis allowed to operate, while others simply imposed a maximum fare. After ‘re-regulation” many of the cities studies were still more market-oriented than before they deregulated. And re-regulation was not without its faults—a 1996 review of taxi policies Seattle found that re-regulation to restrict the number of taxis had already begun to create a new set of problems.

v The study did not compare what happened to fares in the two sets of cities. Fares did not go down in either re-regulated or deregulated cities—between 1985 and 1992 average fares increased 17.4% in deregulated cities and 17.3% in re-regulated cities.

v Other studies of the same cities reach different conclusions. For example, another study of deregulation in San Diego concluded that the overall effect of deregulation was better for customers.

3. Fast-Growing, Spread-Out Cities are the Most Likely to Benefit from Deregulation.

v Many of the cities that have remained deregulated are growing cities, while those that re-regulated were mostly slow-growth or declining cities. Cities that stayed deregulated grew by an average of 22.7% while cities that re-regulated grew by only 2.1%.

v In growing cities, arranged rides are usually 75 percent or more of the market, and it is arranged rides where deregulation is most often successful—the problems that lead to re-regulation have most often occurred in the taxi stand markets and at airports.

v It is the tragedy of regulation’s one-size fits-all approach that problems in on part of the market lead to restrictions on all. A more sensible approach is to deal directly with the problems with the taxi stand and airport markets and leave the rest of the market minimally regulated for safety and perhaps maximum fares.

4. The Politics of Taxi Regulation Makes Decisions Difficult

v Who comes to testify on behalf of regulation—the industry. Little wonder, as they have the most to gain from restrictions on prices and especially entry—no one wants more competition if they can avoid it.

v Who loses from price and entry restrictions? Taxi riders—estimates of the cost to passengers of taxi regulations range as high as $800 million nationwide. Especially the poor without cars, the elderly, the disabled, and others who now and then need affordable door-to-door transportation services and would benefit from a competitive market. That is why ministers for black and hispanic community churches, who’s congregation cannot get a ride home after late night services, and organization’s such as the Urban League, plead for an open and competitive taxi market. Also, there are the taxi drivers, current and would-be. No matter how good the job market, there are those who would drive a taxi part-time or as a second job were it not for the restrictions on their options. One certain fact of all past deregulation has been more taxi drivers with the opportunity to make a go of it.

5. There are Positive Case Studies to Learn From.

v In 1994 Indianapolis undertook a more sweeping deregulation—removing limits on licenses, setting only a maximum fare and new stringent safety requirements. Today the city could not be more pleased with the outcome. Since deregulation: 1) The number of licenses taxi companies tripled from 26 to 75; 2) Of the 49 new companies, 40 are minority or women owned; 3) Average fares have dropped 7%; 4) The number of customer complaints has declined; 5) Waiting times have dropped; and 6) Before deregulation there were 392 licensed cabs, but only about 200 operated on a given day. Now roughly 500 cabs operate each day.

What if school funding followed the kid?

2008-01-25T02:46:00Z

In the varied universe of education reforms, one of the more recent and interesting is "weighted student formula." My colleague Lisa Snell put together a very interesting FAQ on this issue, using Indiana as an example.

1. In a nutshell, what is "weighted student formula"?

The broad concept of weighted student funding (WSF) goes by several names including results-based budgeting, student-based budgeting, "backpacking" or fair-student funding.

It proposes a system of school funding based on five key principles:

Funding should follow the child, on a per-student basis, to the public school that he or she attends.
Per-student funding should vary according to the child's need and other relevant circumstances.
Funding should arrive at the school as real dollars—not as teaching positions, ratios, or staffing norms—that can be spent flexibly, with accountability systems focused more on results and less on inputs, programs, or activities.
Principles for allocating money to schools should apply to all levels of funding, including federal, state, and local dollars.
Funding systems should be as simple as possible and made transparent to administrators, teachers, parents, and citizens.

2. How is this different from funding schools based on enrollment in the current system?

In the current system in Indiana school corporations receive funds based on the number of children enrolled in a corporation and their individual characteristics which are weighted through either categorical programs for education programs or additional funding for student characteristics such as poverty or English learner status.

However, at the district level these resources are not allocated to schools based on individual student characteristics. Schools in Indianapolis, for example, are allocated resources for staffing positions based on the number of full-time equivalent (FTE) salaries the district has calculated that an individual school is entitled to. So when you examine individual school budgets in Indiana you see money flowing to school positions and not children.

Salary averaging across schools means individual schools with similar student populations may receive vastly different real dollar amounts at the school level within a corporation.

New York City public schools are implementing weighted student formula district wide, encompassing 1.1 million students in 1,400 schools. New York City schools begin the transition to Fair Student Funding during their 2007-08 fiscal year. Here is an actual example of how funding would change for the Walter Crowley Intermediate School in Queens, New York, between the 2006-2007 and 2007-2008 budget years.

Under the old approach, Walter Crowley would have received $4 million for instructional programs, $1.2 million for special needs students, and another $1.9 million for "consolidate programs," for a total budget of $7.1 million. Under the weighted, Fair Student Formula approach, Walter Crowley will receive $8.8 million. In short, funding students based on their individual characteristics and not based on a staffing model increases the school's budget by more than $1.6 million.

Since New York City public schools are phasing in the new funding approach, Walter Crowley will only receive a portion of the new formula. However, the new weighted student budgeting also creates transparency by showing what resources each of the 1,400 schools in New York City are entitled to based on the characteristics of their students, not based on a bureaucratic staffing model unrelated to the actual students in the classroom. These numbers simplify the budget process in a way that is transparent to parents and all education stakeholders.

Read the rest of the FAQ here.

Stuck at the airport for the holidays

2007-12-26T21:10:00Z

Ahh, the joy of spending precious holiday time stuck in some crummy airport. I know it well. We frequent travelers are used to it, but for holiday travelers the delays in the system can be
especially frustrating.

One big part of the problem is too many flights trying to go in and out of the airport at the same time. The airlines all want to provide flights at the same optimal hours even if there is not enough room to move them all in and out in that period. Consider one random day in New York this year. The airlines scheduled 59 departures between 8:00 a.m. and 9:30 a.m. at JFK even though the Federal Aviation Administration can only safely handle 42 to 50 take-offs, depending on weather conditions. Passengers were guaranteed to be delayed before the day even started.

The solution to this part of the delay problem is to put congestion pricing at the airports. But the airlines and other resist this idea. Recently the federal government backed down on congestion pricing as a fix for NYC airports. As my colleague Bob Poole put it, "It is disappointing that the federal plan to reduce delays was unable to incorporate congestion pricing or produce a real auction that puts every runway spot up for bid. The new plan is a band-aid that won't cure delays. Airlines schedule more flights than can be safely handled by today's existing runways and air traffic technology, but they don't bear the costs of the delays they create.”

It is past time to get serious about airport congestion pricing. Reason recently published some helpful reports:

» Study: Congestion Pricing for New York Airports: Reducing Delays While Promoting Growth and Competition (.pdf)
» Frequently Asked Questions About Airport Congestion Pricing (.pdf)
» Using the Revenues from Airport Pricing (.pdf)
» Evidence That Airport Pricing Works (.pdf)

Raising gas taxes won't fix our bridges

2007-11-26T01:30:00Z

The I-35 bridge collapse in Minneapolis has revealed the ugly truth about our tendency to put off the maintenance of infrastructure. Indeed, the American Society of Civil Engineers estimates that our basic infrastructure needs an infusion of at least $1.5 trillion just to bring it into “good” condition.

Not surprisingly, many are calling for more funding to maintain our public infrastructure, including many proposals to infuse immediate cash into repairing bridges. Raising the federal and state gas taxes is one of the leading proposals. Unfortunately, our infrastructure needs more than stop-gap financing. We need to ask the following questions first:

1. How did we get here?

2. Will a temporary boost in funding fix the problem?

3. What is the right way to deal with a funding crisis?

How the problem arose.

We don’t invest enough in our core infrastructure. In a nutshell, that’s why bridges like the one in Minneapolis are falling down. Building new infrastructure is expensive, complicated, takes a long time, and is often controversial.

Compounding this problem is the political nature of infrastructure funding. The ebb and flow of politics determines who and what gets funding and when. Without a lobbyist in Congress, infrastructure like roads and bridges often take a back seat. It’s all too easy to put off maintenance until next year so that you can spend the money elsewhere this year.

Now the deferred maintenance bill is a $300 million annual deficit for roads, bridges, tunnels, and other infrastructure.

A temporary boost in funding won’t fix the problem.

Bridges are just the tip of the iceberg. The transportation funding system has a bias toward underfunding infrastructure and letting maintenance lag. A temporary infusion of cash into bridges is just a feel-good measure. The average household in the United States pays about $214 in federal gas taxes and between $99 and $374 in state gas taxes (depending on their state) each year. Adding to that burden to throw more money into a bad funding system won’t help.

If we want to avoid future disasters and the other risks associated with poor infrastructure we need to change the incentives in the system. Our system of funding infrastructure rewards deferred maintenance, not proactive management. States and localities that underinvest in maintenance still get their appropriation of gas tax revenues the each year, regardless of their decision to allow the system to deteriorate.

Proposals for a temporary federal gas tax hike to fund bridge repairs would be a worst case scenario of rewarding bad behavior. Residents of states that have done a good job maintaining bridges would pay the higher gas tax, but their state would get little, if any, of the funds. Instead, the funds would go to those states that have poor bridges, i.e. those states that have shown they do a lousy job with their maintenance budgets. We would be rewarding failure and punishing success. Until Congress and state legislators base funding on results and refuse to throw good money after bad, this problem will continue.

What is the right way to deal with a funding crisis?

A sensible approach to America’s transportation funding crisis, just like when dealing with the family budget, is to first look at managing your spending, then see what you can do about income. This is a three step process.

First, what are you doing with the money now? In the last transportation bill, individual Congressmen and Senators carved out special funding for 6,373 pet projects amounting to over $24,215,018,641. These “earmarks” are not subject to cost-benefit analysis or any form of prioritization other than the political strength of politicians on Capitol Hill. In Minneapolis, state legislators spent a great deal of the past two years working on a special tax to pay for a new stadium for the Minnesota Twins. They did not spend that much time debating how to pay to fix deficient bridges.

Clearly, in the wake of the I-35 bridge collapse Congress and state legislators need to re-examine transportation priorities and base funding on objective needs, not politics.

Second, are we getting the most bang for the bucks we already spend? Some states do a better job than others at providing infrastructure. For example, a comparison of state road conditions shows that some states do a much better job with road maintenance money than do others. Missouri is working on a landmark public-private partnership to have all 800 bridges in the state brought up to snuff in the next five years. Several other states have used public-private partnerships to get more maintenance out of the same budget. Too often we say the problem is a lack of funding and the way we do things is fine, when we should be constantly seeking to change and improve how we maintain our transportation systems.

Third, and only third, address additional revenue. At the federal level, Congress has created two commissions to create recommendations for how to fund transportation in the future. We should invest now in the first and second steps, and wait for those recommendations before hastily increasing the gas tax.

Myths of Hurricane Katrina

2007-10-22T21:48:00Z

Writing in Reason magazine, Daniel Rothschild observed:

Much reporting on the Gulf Coast has been inadequate at best, applying a cookie-cutter template to a scenario that's far too unique and important for trite narratives. Unfortunately, these stories are likely to continue. With [the] second anniversary of Katrina, reporters and editors have again turned their attention to the Gulf Coast. And as expected, they're resurrecting the old saws that have ill-informed the public the last two years.

This prompted Rothschild to write a 3 part series on the myths of Hurricane Katrina.

Myth Number One: The main impediment to rebuilding the Gulf Coast is a lack of federal money.

Talk with people on the Gulf Coast area and you'll soon learn the primary problem they face is not a lack of funding, but the mass confusion created by federal, state, and local governments about the rules of the game when it comes to rebuilding. Confusing and contradictory regulations, showboating by politicians, and stunningly complex bureaucracy have only exacerbated the problems of people who've already been through hell and have kept people from making the decisions they need to make to get on with their lives. (read the rest here)

Myth Number Two: "New Orleans" and "the Gulf Coast" are synonymous.

Rather than deal with the nuances affecting communities in Louisiana, Mississippi, and Alabama, the media like to cover New Orleans as if it is synonymous with the entire area affected by Hurricane Katrina. This is similar to the way the media often treats "Africa" as if it were one extremely large, monolithic country.

Many well-researched stories by dedicated reporters have come out of New Orleans in the past two years. But what's largely missing is any coverage of the Louisianan parishes near New Orleans, or of the many counties in Mississippi also hit by Katrina. In the aftermath of Katrina, the Red Cross provided assistance to some 4 million people, although only 450,000 people lived in New Orleans. President Bush's disaster declaration covered 90,000 square miles. New Orleans encompasses only 350 square miles, almost half of it water. Many parts of New Orleans did not flood, but over 99 percent of buildings in neighboring St. Bernard Parish did.

Why, then, does New Orleans receive the majority of the media coverage? Reporters disproportionately focus on New Orleans because it's more interesting, it fits more preconceived narratives, and it is, paradoxically, both a simpler and more complex story than other areas damaged by Katrina. (read the rest here)

Myth Number Three: The Gulf Coast is suffering from a lack of leadership

In his opening column to the recent issue of Time devoted to New Orleans, managing editor Richard Stengel reports that his impressions of the city's recovery efforts are based on "conversations with everyone from Mayor Ray Nagin to jazz great Terence Blanchard."

That sounds impressive, but truth be told, "everyone from the mayor to a famous jazz musician" isn't a terribly wide range, and misses a good deal of the city. The tendency of journalists to look first to political leaders-who, to say the least, usually have other motives for pushing a narrative-and big names explains why so much of the media has gotten post-Katrina New Orleans so wrong. Turning first to the great and the good to get the story is an easy mistake to make in a society where everything from the foods we eat to the way we garden is subject to the whims of the ruling class.

But leadership isn't something you are elected into. There have been plenty of leaders on the Gulf Coast over the last two years. It's just that their names don't roll off the tongues of magazine editors, or appear in newspapers or campaign ads. (read the rest here)

Drew Carey hosting documentary series on policy issues

2007-10-22T21:35:00Z

Hosting multiple game shows (The Price Is Right and Power of 10), making stand-up comedy appearances, and being Cleveland's biggest sports fan isn't all Drew Carey is up to these days. The popular comedian is now entering the world of journalism, hosting documentaries that examine hot-button issues like immigration, eminent domain, drug laws and traffic congestion.

He has teamed up with Reason.tv to produce this series. The first, on urban gridlock was released last week. The second, on medical marijuana will be released on Nov.1.

Employers and Workers Are Victims of New Immigration Policy

2007-09-25T16:04:00Z

A lot has been said and written about Bush's latest immigration policies. But it is clear that they will have an enormous impact and immigration will remain a hot topic through the election.

Alas, Bush's crackdown is all politics and no principle. My colleague Shikha Dalmia sliced and diced it in the LA Business Journal recently:

President Bush came into office promising to fix the country's broken immigration laws that, he said, were preventing willing American employers from hiring willing foreign workers. Nothing could be further from this vision than the employer crackdown that his Department of Homeland Security recently announced.

Why has the administration so totally reversed course?

It is not like it does not understand that the "problem" of illegal immigration is purely a function of existing immigration laws, not "evil doers." These laws don't exactly roll out the welcome mat for high-skilled immigrants that California's Silicon Valley badly needs. But they are downright hostile toward "unskilled" workers who form the backbone of the agricultural, landscaping and hotel industry in the Golden State and elsewhere.

On paper, there are two types of visas available for unskilled workers: H-2A for campesinos, or farm workers, and H-2B for other seasonal jobs. But thanks to copious red tape, these visas rarely ever arrive on time for the job. Even worse, they are usually good for less than a year and can only be renewed a few times. Once they expire, workers have to return home because neither they, nor their employers, can apply for a green card or permanent residency. Such a dead-end process leaves workers no choice but to work illegally.

The White House tried to get Congress to pass comprehensive immigration reform with a guest worker component to create a way for future foreign workers to legally live and work in this country – and also regularize the status of undocumented aliens already in the country. But GOP nativists – aided by conservative talk radio and some Democrats – killed the bill as "amnesty," insisting instead on a tough, enforcement-only approach.

The Homeland Security Department's employer crackdown effectively embraces their approach. In 30 days, the Social Security Administration (SSA) will start sending letters to employers alerting them to any discrepancy in the Social Security numbers their employees are using and government records. Employers who discover that employees have given them false numbers – something that undocumented workers often do -- will be required to fire them within 90 days – or face up to $10,000 in fines per employee. Repeat violations could bring jail time.

Michael Chertoff, the Secretary of Homeland Security and the architect of the crackdown, noted that the SSA expects to send 140,000 of these "no-match" letters covering more than 8 million people. But how precisely any of this will enhance national security, the core reason why his department exists, he has yet to explain. Does he really believe that Al Qaeda operatives are holding jobs illegally and will drop their plans to scurry for the border once these letters start rolling in?

This crusade won't improve national security, but it will disrupt the economy. To the extent that it succeeds in slowing the tide of foreign immigrants, it will cause labor shortages and raise prices of produce -- and other goods and services in immigrant-dependent industries. California employers, especially farmers, will be among the worst hit given that they employ 2.5 million illegal immigrants – the highest of any state. Even before the crackdown, California's farmers were projecting 30 percent crop losses because intensified border patrolling had already shrunk the labor pool this year. Dianne Feinstein, California's Democratic Senator, expects the situation now to be nothing short of "catastrophic."

Curiously, Commerce Secretary Carlos Gutierrez, who joined Chertoff in announcing the crackdown, doesn't deny any of this. "We do not have the workers our economy needs to keep growing," he readily admits.

So why drive out the workers we have? Employer sanctions have been on the books for years. Why enforce them if there are no upsides for national security – only downsides for the economy?

One explanation is that the administration is hoping that this campaign will prove to Congress how much the economy depends on undocumented workers and force it to once again tackle comprehensive immigration reform. However, it is highly doubtful that the administration can genuinely believe that driving California farmers out of business will convince a determined immigration foe like Republican Rep. Tom Tancredo of Colorado to see the light.

The only plausible reason is that the administration has not just abandoned rational immigration reform, which would be understandable under the circumstances. It has actually made a conscious decision to embrace its opposite to win back its lost base before next year's elections. In short, its immigration policy now is driven neither by conviction, nor the needs of the economy - but naked political calculation, even if that involves targeting "willing employers" and "willing foreign workers," the very victims of that policy.

That is a new low.

Open the Doors for Entrepreneurs

2007-08-27T19:26:00Z

Do you want to be a fortune teller in Maryland? Your future better include a license from the state. How about being a hair braider in Mississippi? You'll need 300 to 1,500 hours of training and government permission. Want to sell flowers in Louisiana? Only licensed florists can do that. And almost every state requires certification if you want to move furniture and hang art while calling yourself an interior designer.

We all know some jobs require a license from the state, but most people don't realize how many jobs require them and how sometimes the requirements to get a license are onerous and ridiculous. We'd like to think such licenses exist to protect consumers, but too often, they have slipped into limiting competition. That licensing requirements don’t always exist to protect consumers is most obvious when you consider how arbitrary requirements are from state to state. Doesn’t it make sense that consumer would require similar protections in neighboring states? But California has 177 job categories licensed, while if you take one step across the state line into Arizona just 72 careers are licensed. In North Carolina you need a license to do 107 jobs. Next door in South Carolina, only 60 jobs require certification.

Indeed, states like California, Connecticut, Maine and New Hampshire all require job seekers to obtain a license before performing two or three times as many jobs as in states like Missouri, Washington, and Kansas. Does anyone think, therefore, that consumers are victimized twice as often in Connecticut as Washington?

No, the broad difference in licensing requirements has more to do with successful lobbying by existing business to keep out competition, which winds up restricting consumer choice, destroying entrepreneurship, driving up prices, and reducing job opportunities. And since many of these jobs--hair stylist, florist, interior decorator, for example--require talent and passion but not formal training, they are great opportunities for those without the benefit of wealth or higher education to start their own business. Occupational licensing requirements for formal training or high fees raise a formidable barrier to this important channel of upward mobility.

My colleague Adam Summers has done a full analysis of what occupations the 50 states license (see the table below) and discusses the unfortunate effects that often occur. Read it all here.

Ranking the States on Occupational Licensing
States (Number of jobs requiring a license)

1. California (177)	26. Virginia (89)
2. Connecticut (155)	27. Louisiana (88)
3. Maine (134)	28. Ohio (88)
4. New Hampshire (130)	29. Georgia (85)
5. Arkansas (128)	30. Indiana (85)
6. Michigan (116)	31. Iowa (85)
7. Rhode Island (116)	32. Utah (84)
8. New Jersey (114)	33. Delaware (83)
9. Wisconsin (111)	34. Montana (79)
10. Tennessee (110)	35. Texas (78)
11. Alaska (109)	36. New York (77)
12. Massachusetts (107)	37. West Virginia (77)
13. North Carolina (107)	38. Wyoming (74)
14. Oregon (107)	39. Arizona (72)
15. Vermont (107)	40. Alabama (70)
16. Florida (104)	41. Colorado (69)
17. New Mexico (104)	42. North Dakota (69)
18. Maryland (98)	43. Mississippi (68)
19. Nebraska (96)	44. Hawaii (64)
20. Minnesota (95)	45. Pennsylvania (62)
21. Nevada (95)	46. Idaho (61)
22. Illinois (93)	47. South Carolina (60)
23. Kentucky (91)	48. Kansas (56)
24. Oklahoma (91)	49. Washington (53)
25. South Dakota (90)	50. Missouri (41)

Let the Bald Eagle Soar

2007-07-26T14:05:00Z

On June 29^th the federal government removed the bald eagle from the endangered species list. It is great news that bald eagle populations in the contiguous 48 states have done so well, where now there are more than 11,000 breeding pairs.

Unfortunately some serious problems remain. First, the story is not being told of how many different factors led to the recovery of the bald eagle. Second, the Endangered Species Act's role has been significantly overstated. Third, the Act may well have caused more harm than good to the eagle. Fourth, the bald eagle will be removed from the endangered list in name only because despite the species' much hailed recovery, recent implementation rules of the Bald and Golden Eagle Protection Act (Eagle Act) essentially cut-and-pasted the Endangered Species Act (ESA) land-use regulations-the "teeth" that make the law so broadly powerful.

The recovery of the bald eagle is a more complex story than you might think. Contrary to claims by a number of prominent ESA boosters, the bald eagle was never in danger of extinction because the vast majority of the species' population (around 75%) has lived in Alaska and British Columbia, Canada where the combination of superb habitat and lack of DDT has kept them safe. Alaskan eagles have never been listed under the ESA.

In fact banning DDT in 1972, not the passage of the ESA a year later, is widely acknowledged as the paramount reason for the bald eagle's resurgence. Seventy percent of the bald eagle population in the 48 contiguous states were not even listed under the ESA, and therefore not afforded the purported benefits of its protection, until 1978, several years after DDT was banned.

Habitat conservation and creation is far more nuanced than portrayed by the ESA's boosters. The ESA may well have done more harm than good on private land, where most of the listed eagles exist. In addition, the tolerance of some eagles to human activity and habitat creation by humans undermine the portrayal of the eagle as a wilderness denizen.

At the same time, releasing young eagles in areas where the species had been extirpated proved to be very effective in the recovery effort, but these captive breeding programs were carried out primarily by states and private organizations, not federal agencies. The main contribution of the federal ESA was to provide funding for these efforts, though given the eagle's charisma, state and private entities proved able to raise substantial funds for these projects.

Public attitudes about eagles have changed and people are much more inclined to respect and admire eagles and avoid bothering them. The ESA's land-use regulations were not necessary to curtail shooting, and penalties for shooting got their biggest boost from the 1987 Criminal Fines Improvement Act, not the ESA. The ESA played little role in people's increasing environmental consciences and attitude towards eagles.

Given all of this, it is outrageous that the Bald and Golden Eagle Protection Act continues so many of the ESA's draconian land use restrictions and even expands them to the habitat of bald eagles in Alaska and golden eagles nationwide, which are also not endangered and have not before been subject to such provisions.

Under the ESA and the Eagle Act, land use restrictions are the centerpiece of the strategy to protect bald eagles. These land use restrictions did more harm than good, leading many landowners to make their land inhospitable to eagles.

History shows that the Fish and Wildlife Service (FWS) does not confine itself to measures that ensure the eagle's recover. In the mid-1990s the bald eagle population in the 48 contiguous states reached over 3,000 breeding pairs which met the goal for recovery of the species under the ESA. But the FWS was in no hurry to remove the eagle from the endangered list until 2005 when Minnesota landowner Edmund Contoski sued the FWS for failing to delist the eagle in a timely manner. He won his case, and the court ordered the FWS to remove the bald eagle from the endangered list. As of now there are at least 11,137 pairs, which exceeds the recovery goal by 371%.

The land use restrictions in the Eagle Act can be used to encumber huge amounts of habitat. Applying FWS nest protection guidelines under the Eagle Act means that the 11,137 pairs in the 48 contiguous states occupy 5.6 million acres (roughly the size of New Hampshire or New Jersey)-524,834 acres of which will be the most stringently regulated because it is closest to nest sites. Keep in mind, these figures don't account for regulations protecting nesting birds in the outer extent of their ranges, non-nesting eagles, wintering eagles that migrate across the Canadian border, the Alaskan population of bald eagles, or golden eagles-all also potentially subject to the revised Eagle Act.

If the bald eagle were removed from the endangered list without increasing the land use restrictions of the Eagle Act, the population of bald eagles would certainly continue to increase. The combination of the bald eagle's symbolic importance and state and private conservation efforts will ensure the eagle prospers into the future. The time is long overdue for the bald eagle to fly free of the Endangered Species Act's land use controls, and that means Congress needs to change the Eagle Act.

Second Anniversary of Kelo and the State of Property Rights in America

2007-06-26T13:35:00Z

This week marks the second anniversary of the U.S. Supreme Court's Kelo vs. New London decision. I asked my colleague Len Gilroy, a certified planner, to provide an update on what the Kelo decison has wrought for property rights and justice. Here is what he says.

Kelo lit a fire under the private property rights movement and set into motion a wave of policy reform that is still ongoing. Even though the decision to condemn the middle-class homes of Susette Kelo and her neighbors to make way for a private developers was an utter affront to freedom, it actually ended up being one of the best things that could have ever happened to the property rights movement. Today it's worth stepping back and taking a look at how far things have come in these two short years.

Almost every state--with the notable exceptions of New York, New Jersey, Massachusetts, and Rhode Island--has adopted some form of eminent domain reform (see the Castle Coalition's handy map here , and their 50-state report card here). Some of these reforms are clearly better than others. For example, the five bills signed last fall by Gov. Schwarzenegger in California added very little if any protection to property owners, while states like Florida, South Dakota, and Georgia passed very strong reforms.
Kelo added momentum to the regulatory takings reform movement, which had been reignited just seven months before with the passage of Measure 37 in Oregon. Last fall, property rights activists in four states placed measures with regulatory takings protections on the ballot. Measure supporters in Idaho and Washington faced decisive defeats after being outspent by opponents (often coalitions of environmental groups, planners, city & county associations, and others) by significant margins, yet Prop 90 was only narrowly defeated in California, and Arizona's Prop 207 passed by a healthy margin.
Arizona's Prop 207 proved that a "Kelo-Plus" strategy of targeting eminent domain and regulatory takings in one reform package--although risky--can be an effective vehicle to enact comprehensive property rights protections. See my recent blog post on Prop 207 for more info.

However, this issue won't be going away anytime soon. The erosion of property rights that began in the early 20th century with the rise of the Progressive era and modern urban planning has been pervasive and far-reaching. It will take a long time and a lot of effort to undo the damage. Kelo provided a vehicle by which a lot of the low-hanging fruit could be plucked, but there's a lot more work needed, and property owners need to be constantly vigilant against new threats to their rights.

Just to give a sense of what's challenges still remain on the property rights landscape:

Meaningful eminent domain reform has eluded three key states--California, New York, and New Jersey--which, not coincidentally, are among the biggest abusers of eminent domain.
"Blight" definitions--often used as a justification for eminent domain--remain vague and amorphous in many states, leaving property owners vulnersable to abuse
As some of the reform efforts have shown, it's easy to pass eminent domain legislation full of exemptions, loopholes, and window dressing. Right now in California, the League of California Cities is pushing sham legislation and a backup ballot measure that purports to restrict eminent domain but comes nowhere close to actually doing so. Luckily, the California Alliance to Protect Private Property Rights is countering with its own strong ballot measure, but citizens will undoubtedly be confused by the cynical attempts of big government supporters to pull the wool over their eyes.
The poor, minorities, and the less affluent segments of society are disproportionately impacted by eminent domain abuse, according to a new study from the Institute for Justice. The study found that 58 percent of those targeted with the threat of eminent domain were minorities, and those targeted had an annual median income under $19,000 (compared to $23,000 in surrounding neighborhoods).
Regulatory takings reform still has a long and difficult road to travel before it moves beyond Oregon and Arizona (and the handful of states like Florida and Texas with weaker statutory protections). Regulatory takings are the holy grail of the environmental movement, because modern environmentalism is predicated upon using regulation to restrict property use. A similar story could be told for urban planners, whose grandiose planning schemes often rely on uncompensated takings. Myopic planners and environmentalists that cling to the blunt hammer of regulation--as opposed to market-oriented, property rights based policy solutions--will fight like cats backed into a corner to stop regulatory takings reform, as we saw in California and Washington last fall when the Sierra Club, Defenders of Wildlife, American Planning Association, and others launched their well-funded attacks on the RT ballot measures.

So for those of us interested in restoring the tradition of strong private property rights that served this nation so well in its first century, Kelo was a pivotal moment and turning point from which some great outcomes have already been derived. But the more time that goes on, the more important it is to stay vigilant and advance the fight forward. Without vigilance, memories of the Kelo decision may fade, complacency may too easily set in, and rights may too quickly erode again.

Alternative Fuel Zombie Policies

2007-06-15T20:29:00Z

Talking to a reporter about ethanol today reminded me how many classic elements of bad policy are wrapped up in the ethanol issue.

Ethanol started as a bust. Originally pushed as an additive to gasoline to help reduce emissions, it did not work. From a 2003 study on ethanol by colleagues of mine at Reason:

The Environmental Protection Agency formed a Blue Ribbon Panel in 1999 to study the health
benefits of fuel oxygenates. The Blue Ribbon Panel report highlighted the fact that the air quality
benefits of oxygenated fuel are unclear. The Blue Ribbon Panel recommendation was to eliminate the oxygenate requirement altogether.

In other words, the EPA repudiated ethanol as a clean air additive (see the whole deal here). New research from Marc Jacobsen at Stanford [Effects of Ethanol (E85) versus Gasoline Vehicles on Cancer and Mortality in the United States, warning it is technical] confirms the EPA's conclusion:

Due to its ozone effects, future E85 may be a greater overall public health risk than gasoline. However, because of the uncertainty in future emission regulations, it can be concluded with confidence only that E85 is unlikely to improve air quality over future gasoline vehicles. Unburned ethanol emissions fromE85may result in a global-scale source of acetaldehyde larger than that of direct emissions.

But advocates and corn state Congressmen quickly shifted to "Ethanol will reduce our use of oil, especially that evil mid eastern oil. yeah, yeah, thats the ticket."

But there is plenty of reason to believe that ethanol will do litle to reduce oil use--beacuse with ehtanol you have to use more gasoline to go a mile in your car, plus it takes lots of fuel to produce the crops and turn them into ethanol and get the ethanol into your tank. That same Reason study did a benefit-cost analysis of the ethanol mandate and showed the total energy balance from using ethanol is probably at best a tiny bit positive. Even Consumer Reports magazine did a nice accessible article "The ethanol myth."

A long string of government policies on alternative fuel vehicles have not worked. Ethanol was one of them. But like a zombie from Shaun of the Dead it is back and making me laugh in a sickened way. We'll have alternative fuel vehicles someday, when the market gets us there. And they have a tough row to hoe to beat out hybrids, which are doing quite well.

Parent Power

2007-05-24T23:15:00Z

It seems almost trite to pipe up in the latest hot debate over TV violence and children and say "What about the off button in the parent's hands?". But fro crying out loud, what about the off button in the parent's hands?? What exactly is the evil force afoot that makes parents unable to manage this problem and thus the government need to step in and save the children?

The latest discussion is spurred by the FCC's report in April on TV violence. My colleague Kerry Howley did not think much of the report and points out some silly stuff, including rampant ignoring of the role of parents. But she really kicks it pointing out the weakness of the implied problems, concluding

Perhaps we should trust parents to prioritize the risks to their otherwise well-padded offspring. Supposedly awash in media violence, kids are growing up in an America less violent than the one their parents knew. “Since 1990 there has been a tremendous drop in the rate of violent crime,” says Freedman. “If the effects of violence are so great, you’d think the violent crime rate would go up. You’d think there would be an epidemic of crime, but it’s dropped like a stone—and it’s now down to where it was before television was invented.”

Another colleague, Jacob Sullum, delves deeper into the role of the parents in a May 20 column he wrote for for the NY Post.

In 2004, a few dozen members of Congress asked the Federal Communications Commission whether the government could define and regulate "excessively violent programming that is harmful to children" without violating the First Amendment. Last month, after thinking about it for three years, the FCC had an answer: Sure. Go ahead.

Emboldened by the FCC report, Sen. Jay Rockefeller (D-W.Va.) plans to introduce legislation aimed at regulating TV violence any day now. If he takes the same approach he did in a 2005 bill he sponsored, he will knock the ball back to the FCC, asking it to define excessively violent programming and adopt measures to protect children from it.

There's a reason no one is keen to define excessively violent programming: Anyone who tries will face insoluble practical and constitutional problems.

Because opinions about what is appropriate for children vary widely, any definition of excessively violent programming would be attacked as too narrow, too broad or both. Some critics say TV violence encourages imitation; others worry that it causes anxiety by making the world seem dangerous.

The most troubling violence, some say, is the "explicit" and "graphic" kind, because it's both disturbing and desensitizing. Others worry about the "sanitized" and "glamorized" kind, which separates violence from its real-world consequences.

I'd say "CSI," "Schindler's List" and History Channel war documentaries are not appropriate for small children. Does that mean such programming should be banished to late-night hours, one solution the FCC proposes? If not, what use is "time channeling"? If so, it's hard to see why news shows covering crime and war, or sports such as football and boxing, should be exempt.

For those who worry about imitation of sanitized violence, even children's cartoons are not appropriate for children. Should "Teenage Mutant Ninja Turtles" be shown only between 10 p.m. and 6 a.m.?

Another FCC suggestion, forcing cable and satellite companies to offer channels "a la carte," is even less promising. Blocking entire channels is a clumsy way to shield kids from inappropriate material. In any case, cable and satellite subscribers already have this ability; the FCC is just saying they shouldn't have to pay for the channels they decide to block.

The effectiveness of these rules will be an important question when courts address their constitutionality, since content-based speech regulation generally can be justified only if it's the least restrictive means of serving a compelling government interest. No restriction on violent entertainment has ever met this test.

As the First Amendment lawyer Robert Corn-Revere notes, regulations that take the context of violence into account would be scrutinized especially closely, because the government would be targeting speech based on viewpoint as well as subject. "Any attempt to regulate televised violence would face insurmountable First Amendment barriers," he concludes.

Although the FCC report obfuscates the issue, extending content regulation from broadcasting to cable and satellite TV is also constitutionally problematic. Advocates of broader regulation say it's silly to treat programming that travels through a wire differently from programming that travels over the air, especially when the two are indistinguishable to viewers.

I agree. Given the tools parents have to filter what their children see - including the V-chip, ratings from producers and independent groups, and cable and satellite system controls - the excuse for regulating content on any channel is weaker than ever.

The FCC's quaint talk of "time channeling" betrays an old-fashioned bureaucratic mindset. It seems regulators have not come to terms with an entertainment world in which a wide variety of programming is increasingly available, via DVDs, DVRs, downloads and video on demand, whenever viewers want to watch it.

The route taken by that programming, whether over the air or over the Internet, through TV cable or through phone lines, by mail or by satellite, into computers or cell phones or iPods, should be legally irrelevant. Logically, the government has to choose between a lot more censorship and a little more respect for parents

Here Comes the Exaflood

2007-05-24T21:04:00Z

My colleague Steven Titch recently pointed out this video on YouTube and offered some interesting comments I thought I'd share. The rest here are his words.

The video talks about how more than 100 million YouTube videos are being downloaded every day and that, as they say, is not the half of it. Video has become standard feature on most news sites, from CNN to the news page for your local network affiliate. Even small blogs carry video.

This video explosion has touched off discussion on how the nation’s collective network infrastructure will handle the “exaflood”—the near exponential growth of Internet traffic from year to year.

We are almost there. The term exaflood derives from exabyte, which equals 1 quintillion bytes, or 1 followed by 18 zeros. As of December 2006, the Internet was handling 700 million gigabytes of traffic a month, according to the University of Minnesota’s Digital Technology Center. A gigabyte is 1 billion bytes and 700 million billion bytes equals 700 quadrillion bytes, or 0.7 exabytes.

In and of itself, the exaflood does not necessarily present a crisis. Right now the global Internet has the capacity to handle the traffic. The question is, when the amount of Internet data truly begins to reach the capacity of the network, as it inevitably will, how will the industry be able to respond.

One obvious answer is to build more infrastructure. Optical transmission technology continues to improve and faster processors make for faster Internet switches and routers. Carriers have been doing as much all along. However, a second, complementary solution could be applied to the transmission layer--the internal software of the network that handles Internet data as it flows through. While indeed Internet transmission is all bits and bytes, intelligence in the transmission layer already can discern video from voice and text from image and prioritize them differently. Just as with physical infrastructure, scores of U.S. manufacturers are working to improve the performance of the transmission layer.

Yet proposed network neutrality legislation, if allowed to pass, stands to short-circuit these efforts. Network neutrality would prohibit carriers from enhancing the quality, reliability or performance of Internet applications as it moves through the transmission layer. The law would require carriers to treat every bit of data the same, even if the overarching applications are vastly different. Conversely, applications providers who want to create a better experience for their customers could not ask carriers to assure quality or reliability—whether they wanted to pay for the service or not.

Trouble is, costs of the exaflood can not be avoided. As reported in Telephonyin March 2006, Henry Kafka, Chief Architect at BellSouth (now AT&T) told attendees at the National Fiber Optic Engineers Conference that average residential broadband user was consuming about 2 gigabytes of data per month, which Kafka estimated costs the service provider about $1. As downloading feature films becomes more popular, users might consume an average of 9 gigabytes per month, costing carriers $4.50.

The average IPTV user will likely consume about 224 gigabytes per month, he added, at a monthly cost to carriers of $112, a giant leap from the less than $5 attributed to Internet use. If that content were high-definition video, the average user would be consuming more than 1 terabyte per month at a cost to carriers of $560 per month.
“Clearly that’s not what the average user is going to pay per month for their video service,” Kafka said. “That’s why we need help.”

Network neutrality would close off an important revenue stream for carriers—quality, reliability and partitioning services that very large applications providers will need for their services to work properly. This will chill investment and slow deployment. The overall utility of the Internet declines as it become clogged. Prices would remain for consumers because cost of managing congestion could not be transferred to the largest users of bandwidth. Although attacked as a “toll lane” on the Web, such paid partitioning will keep the standard transmission lanes—still extremely fast—cleared for less commercial and less bandwidth-intensive applications, resulting in a better functioning Internet for all. This will do more to ensure the Internet remains equally useful for all than regulating or banning Internet quality control.