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COMPETITIVE ENTERPRISE INSTITUTE

VOL. 28, NO. 1 | WINTER 2015

FEATURED ARTICLES

The IRS, Obamacare, and the


English Language
4
MARC SCRIBNER
Don’t Outlaw
Vapes on a Plane

11
JESSICA MELUGIN
A New Idea for
Tax Fairness Online

12
IAIN MURRAY
the rule will frustrate Congress’s alleged
Greece Jumps from BY SAM KAZMAN purpose of making health care available to
Scylla to Charybdis everyone.

ALSO IN THIS ISSUE


F or weeks, we’ve been hearing claims
about the disasters that will result if the
Supreme Court upholds the challenge to
This is where the disaster stories come
in—about how, without nationwide
subsidies, millions of people will be left
Obamacare it heard on March 4. At issue uninsured. But the Obamacare insurance
in the case, King v. Burwell, is an IRS rule subsidies aren’t some long-established fix-
Why the FCC’s Vote to Regulate the Internet ture of medical care; they only took effect
that gives health insurance subsidies to
Is a Mistake,
every state. The question for the Court is in 2014. And for several years before then
by Ryan Radia. . . . . . . . . . . . . . . . . . . . . . . 5
whether that rule is legal, since the under- Obamacare was delayed by purely politi-
In Memoriam: Robert Weekley. . . . . . . . . 6 cal decisions made by the White House.
lying statute authorizes subsidies only in
The Clean Power Plan’s Dirty Secret, those states that have set up their own Where were the cries of disaster back then?
by William Yeatman. . . . . . . . . . . . . . . . . 10 Obamacare exchanges. Only about 14 There weren’t any, in large part because
The Good, the Bad, and the Ugly. . . . . . 14 states have done so. The challengers argue we had a sizable array of medical entitle-
that the IRS rule is contrary to the clear lan- ments aimed at preventing such disasters.
Media Mentions. . . . . . . . . . . . . . . . . . . . 15
guage of the law that Congress enacted. We still have them. To the extent that state
End Notes . . . . . . . . . . . . . . . . . . . . . . . . . 16 (continued on page 3)
The government argues that invalidating
A New Year for CEI and Economic Liberty
by Lawson Bader

C EI works in the shadows. That does not mean we


work out of the public spotlight. Rather, we focus
do this with a combination of analysis and action. We
formulate and articulate the intellectual case for free
FROM THE PRESIDENT

on that dark, dry, but challenging place where gov- enterprise and capitalism. But our work doesn’t end
ernment policy and private markets clash: the regula- there. We also engage these ideas directly through
tory state. CEI is unique in that we not only analyze proactive advocacy and communications. It’s this
the impact of economic regulation on our economy, combination that makes us unique.
we directly challenge government overreach into this We produce studies that fill the intellectual gaps in
system of capitalism that has made America the most debates over economic regulation. For example, we
prosperous nation on Earth. We’ve been doing it for recently published a paper examining the deleterious
over 30 years, quietly bearing fruit—and sometimes effect of Securities and Exchange Commission rules
not so quietly, as our Supreme Court challenge to on crowdfunding—an important and growing venue
Obamacare shows. for expanding opportunities for investors and promot-
We’ve been in the news a lot during the past month. ing new business growth. It’s innovative, but hardly
On March 4, the Supreme Court heard oral argu- a new concept. It’s how Henry Ford first generated
ments in King v. Burwell, our legal challenge to an IRS funding for mass producing automobiles.
regulation imposed under Obamacare. The regulation We do not operate in a vacuum. We also need
illegally provides subsidies on both state and federally to work with others, including those with whom we
established health insurance exchanges—contrary to might not always agree in some areas, to successfully
the Obamacare statute’s plain language—after 36 advance policy change. We lead coalitions with both
states chose to opt out of the program. We are hopeful old allies and strange bedfellows—from center-right
a majority of Justices will correctly interpret the law and coalitions focused on environment and energy issues
agree with our challenge. to center-left ones focused on privacy, chemical
We have other cases in the works—from filing a policy, or cybersecurity.
significant constitutional challenge to the Dodd-Frank We also take our message directly to lawmak-
financial services law to holding the White House ers, the media, and the public. From radio and TV
Office of Science and Technology Policy account- appearances to animated videos about the spontane-
able for promoting questionable claims about the ous order of the marketplace. In short, we eagerly
“Polar Vortex” weather phenomenon that chilled take our message wherever it may be heard.
much of the eastern U.S. last year. We recently sued And when persuasion, thoughtful analysis, or
the Environmental Protection Agency for its failure political alliances aren’t enough, we challenge
to honor Freedom of Information Act requests. And government policy directly in court. Our Obamacare
believe me, there’ll be more legal action to come. challenge in King v. Burwell is but the latest, most
That’s because we see our legal work as part of visible example. This lawsuit and CEI’s other work
our integrated strategy toward public policy. CEI on exposing the regulatory state—from hard-hitting
seeks to remove government-created barriers to eco- analysis to strategic litigation—could not happen
nomic liberty, entrepreneurship, and innovation. We without your continued support.

Publisher The CEI Planet is produced by the Competitive Enterprise


Lawson Bader Institute, a pro-market public interest group dedicated to
Editor free enterprise and limited government.
Marc Scribner
CEI is a non-partisan, non-profit organization incorporated in the
Editorial Director District of Columbia and is classified by the IRS as a 501 (c)(3)
Ph (202) 331-1010
Ivan G. Osorio charity. CEI relies upon contributions from foundations, corporations
Fax (202) 331-0640
info@cei.org Contributing Editor and individuals for its support. Articles may be reprinted provided
Keara Vickers they are attributed to CEI.
ISSN#: 1086-3036

2 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE


Obamacare, continued
or federal fixes are necessary to ease transition problems that
might be caused by a court ruling, nothing would stand in their
way. States that chose not to set up exchanges could change
their mind, for example.
One thing the disaster stories leave out is the fact that for mil-
lions of Americans Obamacare itself has been a disaster. These
victims of Obamacare—yes, victims—include people who can
no longer buy low-priced catastrophic insurance, or who find
the cost of their current policies have skyrocketed, or they can’t
keep their doctors. They include people pushed into part-time
status by companies trying to avoid Obamacare’s dictates, and

R.M.
companies that shelve their expansion plans due to its regulatory
burdens. They include the taxpayers who foot the bill.
And there’s one last victim here—the rule of law. Under the
Constitution’s separation of powers, Congress enacts laws and
the Executive Branch implements them. But what the IRS has
FREEDMAN
done in creating its subsidy rule isn’t implementation; it’s rewrit-
ing the law, plain and simple.
SOCI ET Y
To defend that rewriting, the government has resorted to a
set of arguments that twist the plain language of the Obamacare
statute into what the government’s lawyers claim is a “term of Help the Competitive
art”—a phrase whose meaning is known only by some inner
circle of experts. For example, consider the phrase “exchange
Enterprise Institute
established by the state.” Those are the words Congress used carry on its work for
to designate the insurance exchanges that qualify for subsi- generations by joining the
dies—those set up by the states. It clearly excludes the federal
exchanges—those the U.S. Department of Health and Human
R.M. Freedman society.
Services is directed to set up in states that don’t create their own
exchanges. In 2013, CEI established the R.M. Freedman
According to the government’s counsel, this phrase has noth- Society in honor of Robert M. Freedman,
ing to do with specifying a type of exchange. Rather, to quote a business owner from West Bloomfield,
directly from the government’s brief to the Court, the phrase Michigan, who placed CEI in his estate
is just a matter of “style and grammar.” Under the administra- and, in 2009, sadly passed on and gave
tion’s approach, the word “establish” is no longer a verb; it’s an CEI its first legacy gift. We named the
ornament. society in appreciation of his generosity.
Perhaps you think that’s an insignificant technicality. But con- Many of CEI’s extended family choose to
sider the opening phrase of the Constitution: “We the People of include CEI in their estate plans through:
the United States, in Order to form a more perfect Union, estab-
lish Justice …” Try applying the government’s semantic approach • Bequests,
to that sentence, and what do you get? Gibberish. • Charitable Remainder Trusts,
If defending the IRS takes us down the path toward consti- • Charitable Lead Trusts, or as a
tutional gibberish, that’s a pretty good hint that its rule should
never have seen the light of day in the first place. • Life insurance beneficiary.

If you make the decision to include CEI in


Sam Kazman (sam.kazman@cei.org) is General Counsel at CEI. your estate plans, please reach out and let
us know.
CEI is funding and coordinating the King v. Burwell challenge
before the Supreme Court.
While these sorts of decisions should be
undertaken with the help of an estate
planner, Lauren Avey and Al Canata of
CEI can be a resource to you. You can
reach them anytime at 202-331-1010.

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 3


Don’t Outlaw Vapes on a Plane
As Dr. Joel Nitzkin, a former co-chair of
BY MARC SCRIBNER the Tobacco Control Task Force of the
American Association of Public Health Anti-tobacco activists
T hese are good times for anti-smok-
ing campaigners. But you wouldn’t
know it from listening to their rhetoric.
Physicians, recently said, “[T]here is no
public health justification for banning
e-cigarette use in no-smoking areas.”
who disingenuously
equate vapor and
At the urging of anti-tobacco activists, Anti-tobacco activists who disin-
the U.S. Department of Transportation genuously equate vapor and tobacco tobacco smoke may
(DOT) is proposing to ban electronic smoke may perversely convince
cigarette use aboard aircraft. This smokers to reject far safer e-cigarette perversely convince
impending regulation not only defies
medical evidence but makes a mock-
alternatives. Consumers should not be
misled to believe e-cigarettes, which smokers to reject
ery of the law in the process. do not produce tobacco smoke and
its many concentrated toxins, pose the
far safer e-cigarette
The use of e-cigarettes among
adults in the U.S. more than doubled same risks as smoked tobacco. alternatives.
between 2010 and 2013, according To be sure, airlines should be free to
to the Centers for Disease Control and ban e-cigarettes aboard their aircraft
Prevention. The tobacco industry pre- if they so choose. But just like the use So, by DOT’s logic, when Congress
dicts e-cigarette sales will surpass sales of cell phones on planes (or a pas- referred to “smoke” and “smoking,”
of traditional cigarettes in the coming senger’s odoriferous perfume, for that it meant anything that might vaguely
decades. This signals great progress matter), the risks posed by e-cigarettes resemble smoke and smoking, rather
from a harm-reduction standpoint, do not justify federal regulation. than smoke itself and its resulting
since the best available scientific evi- In 2011, the Department of harms—even though Congress enacted
dence suggests that while e-cigarettes Transportation initiated a regulatory a clear law in which the terms “smoke”
may bring health risks, they are far proceeding to reinterpret “smoke” and and “smoking” are not ambiguous.
smaller than those associated with “smoking” in order to extend the exist- The Department of Transportation
tobacco smoking. ing federal ban on in-flight smoking has no authority to regulate vaping.
Yet, anti-tobacco campaigners are to e-cigarettes. Now years delayed, It may claim that it is simply interpret-
increasingly agitating for strict rules the department quietly indicated last ing “smoking” to cover the use of
against e-cigarette use, perversely January that it plans to issue a rule by e-cigarettes, but as the Supreme Court
threatening advances in public health. the end of April to prohibit e-cigarette has made clear, “an agency may not
The risks associated with e-cig- use aboard aircraft. Such an action bootstrap itself into an area in which
arettes are borne exclusively by the runs counter to congressional intent it has no jurisdiction” by stretching the
users, not the people around them. and constitutes an illegal expansion of language of a statute.
Unlike tobacco cigarettes, vaporizers regulatory power. Regardless of one’s views on
do not produce harmful “sidestream” The DOT states that Congress’ intent whether airlines should permit e-cig-
emissions—the smoke released directly in prohibiting smoking in the skies was arette use on their flights or not, the
into the air from the end of lit ciga- to “improve air quality within the air- Department of Transportation’s attempt
rettes, which produces 85 percent of craft, reduce the risk of adverse health to rewrite a law passed by Congress is
secondhand smoke and virtually all of effects on passengers and crewmem- an unlawful abuse of power. The loom-
its associated risks. bers, and enhance aviation safety ing in-flight e-cigarette ban has far
As for the “mainstream” smoke and passenger comfort.” The law more to do with pushing a nanny-state
inhaled by smokers, many of its harm- was intended to address secondhand agenda than promoting illusory public
ful compounds are partially retained smoke, and the department concedes health benefits.
within the smoker’s body, which acts “a vapor, rather than smoke, is pro-
as a filter before it is exhaled into the duced.” So how does the Department
surrounding air. of Transportation justify its proposal? Marc Scribner (marc.scribner@cei.org)
There is simply no evidence that By noting, that e-cigarettes “require is a Fellow at CEI. A version of this article
secondhand aerosols exhaled by an inhalation and exhalation similar to originally appeared on CNN.com.
e-cigarette users endanger non-users. smoking cigarettes.”

4 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE


Why the FCC’s Vote to Regulate the
Internet Is a Mistake
rocking the boat with something new like broadband. If a provider touts its
BY RYAN RADIA and disruptive. service as access to the full Internet but
To be sure, we’ve all had a bad then blocks access to legal sites, it’s

O n February 26, the Federal


Communications Commission
(FCC) voted to regulate Internet pro-
experience—or several—with the cable
or phone company, along with air-
lines, insurance companies, and banks.
arguably in violation of federal law.
Net neutrality supporters tout it as
a solution to the alleged problem of
viders as public utilities under a 1934 But compare your Internet bill from 10 “paid prioritization”—an Internet pro-
law. President Obama celebrated this years ago to this month’s. Odds are vider giving preferential treatment to
ruling, which the FCC based on his your connection speeds have grown certain traffic in exchange for money.
plan to enforce net neutrality—the idea significantly, even as your bill has But paid prioritization is a feature, not
that Internet providers shouldn’t be probably changed little in real dollars a bug. What exactly is the problem
allowed to prioritize, throttle, degrade, (excluding television, which is driven with an online gaming or telemedicine
or block lawful content. But the FCC’s by content costs). If broadband were service that wants to pay Comcast for
sweeping rules will have unintended a monopoly, or even a cozy duopoly, faster access to its subscribers?
consequences for the Internet’s future, big providers wouldn’t invest billions Not every startup will have an
potentially hurting the very users net annually to one-up each other. Yet this equal chance to make these deals,
neutrality is supposed to protect. is precisely what they’re doing. according to critics of so-called “fast
Consider other markets where All sides agree that broadband lanes,” but since when do we ban
bureaucrats have the final say over competition can only benefit consum- something because only some com-
prices and services. Taxicabs, for ers. But how can government best panies can afford it? If firms believe
instance, are strictly governed by local foster entry into the Internet market? they can offer better service through
boards or commissions that dictate Reducing burdens on Internet provid- paid prioritization, users shouldn’t be
rates and policies. In theory, these ers is the better approach. Making it denied this potential benefit. Besides,
rules are supposed to guarantee good cheaper and easier for companies to Silicon Valley giants have come
service and affordable prices. In real- wire neighborhoods with fiber-optic and gone even though they’ve long
ity, riders routinely endure cabs that lines—or build new wireless towers— enjoyed better equipment and more
are expensive, unreliable, or both. should be a no-brainer for Congress engineers than their smaller rivals.
Recently, some entrepreneurs have and the FCC. Conversely, more regula- Regulating Internet providers as
upended this status quo through ride- tion means more barriers to entry, as utilities might stop a few instances
sharing services like Uber and Lyft that evinced by Google’s decision not to of genuinely harmful conduct, but
most consumers find vastly superior to offer voice to Google Fiber subscribers public outcry over such practices will
taxis. because of “special rules” that would likely also curb abuses. Regulation,
Ridesharing faces far fewer rules apply to the service. however, will deter providers from
than taxis, even in states with laws spe- What about fears of providers devising better ways to serve consum-
cifically addressing Uber and similar blocking or throttling lawful traffic? ers through trial and error—a process
services. And that’s as it should be. Again, FCC intervention is unneces- epitomized by Uber’s ongoing efforts
Competition works best for consum- sary—this time thanks to another to perfect its surge pricing model. If
ers when rival firms can experiment federal agency, the Federal Trade courts uphold the FCC’s decision,
with business models without worrying Commission (FTC). Tasked with pursu- Congress should step in and reverse it.
about what prices and levels of service ing companies that employ “unfair Consumers will be better off if they do.
government regulators will deem “just or deceptive” business practices, the
and reasonable.” Yet that uncertainty FTC has gone after Internet provid-
is precisely what the FCC’s decision ers before. Unlike the FCC—best Ryan Radia (ryan.radia@cei.org) is
will impose on Internet providers going known for censoring the airwaves Associate Director of Technology Studies
forward. That will breed complacency and safeguarding the Ma Bell tele- at CEI. A version of this article originally
and make providers think twice before phone monopoly—the FTC special- appeared on MSNBC.com.
izes in policing competitive markets,

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 5


In Memoriam: Robert Weekley
Lawson Bader Fred Smith
I was in Los Angeles recently, and Bob Weekley was enthusiastic
happened to drive by a certain coffee about economic liberty and curious
shop near Santa Monica. It marked our about why so few others seemed to
meeting for many of my visits with Bob be. I met with him several times when
Weekley. I hadn’t planned on driving by. visiting California. Our meetings were
It just happened. But I managed to pull often punctuated by some interesting
over and give Bob a nod of thanks. I’m cuisine and some even more interest-
glad I did. ing conversation. He knew CEI’s goals,
I knew Bob before I came to but consistently pressed me on how
CEI.  He was quick to champion my we hoped to advance liberty. On one
arrival and equally quick to challenge occasion, he said he found my direct
me to push CEI and build on what remarks were evocative and convincing.
Fred had started. His often low-key So why wasn’t I doing more to commu-
demeanor belied a fierce commitment nicate them more widely? Good point,
to classical liberal ideas. He was never I responded, and experimented with a
afraid to ask pointed questions and few short videos. He liked them, and sent
always eager to listen and learn. This a contribution enabling us to do more,
liberty movement of ours is replete with leading to a “Fred Weekly” series. 

W e are saddened to note the


passing of Robert Weekley, a
longtime supporter of CEI, who was
intellectual champions. Bob was that
and more—a practical defender of the
businessman as hero and an equally
Bob represented the type of busi-
nessman we need more of if capitalism
is to survive. Bob cared about economic
passionately committed to advancing fierce defender of the businessman as liberalization and understood the chal-
economic liberty on every front. In rec- communicator. Messengers matter. We lenges we face in making it a reality.
ognition of his substantial contribution to have lost a good one.   Importantly, he brought his insights as a
the free market movement, CEI President businessman to that struggle. We need
Lawson Bader and Founder Fred Smith more engaged activist business support-
offer the following thoughts. ers. Bob will be missed.

Coming soon to Indiegogo


I, Whiskey: The Spirit of the Market  reveals  how every product
and service we enjoy is made possible by the free market and
human ingenuity. It’s the story of entrepreneurs, scientists, and
bootleggers and the whiskey they produce—a spirit renowned for
its individual expression and rich history.
When people share a glass of whiskey they are playing a part in
this ever-evolving narrative. 
CEI is dedicated not only to protecting the human spirit but also
celebrating it.

6 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE


SAVE
COMPETITIVE ENTERPRISE INSTITUTE

THE
DATE SAVE THE DATE
JUNE 11, 2015
CEI’s Bourbon and BBQ Bash:
Liberty served smooth and smokin’
JW Marriott Washington
1331 Pennsylvania Avenue, NW
Washington, DC 20004

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 7


CEI Joins Ridesharing
Regulation Debate
On February 10, CEI Fellow Marc Scribner
appeared on the Cato Institute panel, “How
Should Ridesharing Be Regulated?” Scribner
was joined by Cato’s Matthew Feeney and
Dean Baker of the left-leaning Center for
Economic and Policy Research. Scribner
discussed the origin of taxi regulations, which
began not with early taxis but with streetcars
in the years before World War I. He strongly
criticized government attempts to apply
anti-competitive taxi regulations to Uber
and other ridesharing companies, argu-
ing that the current rules limiting entry and
imposing minimum fare requirements serve
CEI Fellow in Transportation Studies Marc Scribner explains the history no legitimate public purpose and should be
of anti-consumer transportation service regulations. Photo courtesy of repealed.
Brendan O’Hara.

CEI Hosts
Reception for
Staffers on
Capitol Hill
To highlight the publication of the latest
edition of CEI’s most recent Agenda
for Congress, CEI held a reception for
congressional staffers in the Rayburn
House Office Building on February
12. CEI Executive Director Gregory
Conko delivered remarks on the King
v. Burwell case against Obamacare’s
illegal IRS rule, which CEI is funding
and coordinating. Dozens of Hill staff-
ers attended to enjoy light refreshments
and mingle with CEI policy scholars.

(Top) CEI Executive Director Gregory


Conko welcomes congressional staff
and provides an update on King v.
Burwell.
(Bottom) Congressional staffers social-
ize with CEI analysts.

8 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE


CEI at CPAC
In late February, the American
Conservative Union hosted its
annual Conservative Political Action
Conference (CPAC) in National
Harbor, Maryland. CEI President
Lawson Bader moderated a panel on
crony capitalism featuring Rep.Jeb
Hensarling (R-Texas), chairman of the
House Financial Services Committee;
Washington Examiner columnist Tim
Carney; and others. Myron Ebell,
director of CEI’s Center for Energy and
Environment, appeared on the panel,
“Setting the Record Straight on Climate
Change,” along with Rep. Bill Flores
(R-Texas) and others. In addition, CEI
held its own panel and reception at
CPAC on the King v. Burwell case.
The panel discussion was led by CEI
General Counsel Sam Kazman and
featured several health care policy
analysts.

(Top) Panelists at CEI’s event on the King


v. Burwell challenge to Obamacare.
Left to right: CEI General Counsel Sam
CEI President Lawson Bader addresses Myron Ebell, director of CEI’s Center Kazman, American Enterprise Institute
the CPAC audience. for Energy and Environment, debunks Resident Fellow Thomas P. Miller, Galen
left-wing myths on climate change risks Institute President Grace-Marie Turner,
before a CPAC audience. and American Commitment President
Phil Kerpen.

RealClear Radio
Hour Now Live in
San Francisco
On February 11, CEI hosted a launch
party to celebrate RealClear Radio
Hour’s debut on Bloomberg Radio
San Francisco. Host Bill Frezza and
CEI President Lawson Bader were
delighted with the turnout and the
enthusiasm of local friends and media
at Donato Enoteca in Redwood
City. A special project of CEI,
RealClear Radio Hour airs Saturdays
at 10 am and 4 pm PT on San
Francisco’s KNEW 960AM and KOSF CEI Fellow and RealClear Radio Hour Host Bill Frezza (right) with CEI President
103.7FM-HD2. Lawson Bader at Donata Ecoteca in Redwood City, California.

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 9


The Clean Power Plan’s Dirty Secret
including revelations that a high-ranking
BY WILLIAM YEATMAN agency official had defrauded the
agency of more than a million dollars Federal Energy
T he U.S. Environmental Protection
Agency (EPA) recently announced it
over a decade by impersonating a CIA
agent, that an employee was caught Regulatory Commission
would finalize three major rules regulating watching porn for six hours a day on the
taxpayer dime (and received a perfor-
member Philip Moeller
carbon emissions this summer, as a part of
the Obama administration’s plan to imple- mance bonus!), and widespread reports warned that the Clean
ment an ideological, environmentalist that employees at the EPA’s Denver
agenda. One rule in particular, the Clean office had repeatedly used a hallway as Power Plan could lead
a bathroom.
Power Plan, would have a devastating
effect on America’s electricity industry and Plainly, this agency can barely to “widespread rotating
economy. manage itself, yet the Obama adminis-
tration would like to hand the EPA power
blackouts” in parts of
The generation and retail provision of
electricity has been regulated by the states over the entire electricity industry, the the country.
since the passage of the 1935 Federal backbone of the U.S. economy.
Power Act. The law was premised on the Consumers stand to lose the
notion that an electric utility is a “local most. According to a study by NERA in transmission reliability issues due to
institution” and should be “locally con- Economic Consulting, the Clean Power the loss of generation resources in and
trolled,” as articulated by former U.S. Sen. Plan would be the most expensive regula- around major urban centers.”
Burton Wheeler of Montana, one of the tion ever imposed on the power sector, And for what? The EPA’s climate rule
statute’s sponsors. It established a bright costing between $41 billion and $73 would fail to impact the climate in any
line between state and federal jurisdiction, billion per year. meaningful fashion, since the vast major-
whereby Washington regulates interstate It will hit Americans’ gas bills, too. An ity of global emissions originate outside
wholesale power sales and the states analysis by Energy Ventures Analysis esti- the United States. According to the Cato
oversee retail electricity markets within mates that the EPA’s suite of energy regula- Institute’s Patrick Michaels and Chip
their borders. tions, including the Clean Power Plan, Knappenberger, who modeled the climate
While not perfect, that longstanding cumulatively would increase the cost of impact of the rule, the Clean Power Plan
model has served the nation pretty well. electricity and natural gas by nearly $300 would only reduce temperatures by 0.018
So it came as a surprise last summer when billion in 2020 compared with 2012. degrees Celsius by 2100.
the Obama administration proposed the The rule also poses a threat to electric In sum, the EPA’s Clean Power Plan
Clean Power Plan, an unprecedented reliability. By the EPA’s own estimates, it is a costly regulation that serves no valid
power grab that would usurp oversight of would shutter 68,000 megawatts of fossil environmental or public health purpose.
the electric industry from the 50 states and fuel electric generating capacity. Yet, that is to be expected when such a
hand it over to the EPA. Federal, regional, and state experts bungling agency is put in charge of the
Historically, states have overseen their have warned that the Clean Power Plan nation’s vital electricity industry.
electricity industry to incentivize afford- threatens to turn out the lights in much of Utilities need to plan years in advance.
ability, reliability, and use of local fuel the country. Federal Energy Regulatory That means they have to reckon with EPA’s
sources. The Clean Power Plan would Commission member Philip Moeller Clean Power Plan now, even though
jettison these sensible state-determined warned that the Clean Power Plan could the rule isn’t set to be finalized until this
goals and instead impose a federally lead to “widespread rotating blackouts” in summer. The upshot is that the regulation
determined goal for resource planning: parts of the country. is already causing economic distortions.
carbon reduction. The result will be more Southern Company CEO Thomas Congress should rein in the agency’s
expensive and less reliable power for Fanning, whose company serves several attempt to overlord the provision of elec-
American industry and consumers. Southeastern states, told Bloomberg in tricity, before the costs begin to mount.
Then there is the issue of the agency November, “I don’t think we have the
itself. Considering recent events at the ability to maintain a reliable system”
EPA, it is deeply worrying for it to be and comply with the new EPA rule. And William Yeatman (william.yeatman@cei.org)
entrusted with such a major responsibility. a reliability analysis performed by the is a Senior Fellow at CEI. A version of this
Over the past year, the EPA has independent operator that maintains article originally appeared in U.S. News &
been rocked by embarrassing scandals, Texas’s grid warned the rule “could result World Report.

10 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE


A New Idea for Tax Fairness Online
example, if an online
BY JESSICA MELUGIN bookseller in Virginia sells
to a customer in Texas,
The misleadingly named Marketplace sales tax is only applied
Fairness Act (MFA) died a quiet death to the transaction if the
during the House of Representatives’ seller has some physical
lame-duck session, but is it really the presence in the Lone Star
end? What does the new year and State. Far from a tax loop-
the new Congress have in store for the hole, this is the principle
Internet sales tax debate? If recent expe- of “no taxation without
rience is any guide, MFA supporters will representation” in prac-
be back to try again. tice, because it is the seller
Many MFA supporters correctly who remits and is subject
point out that the current system creates to compliance audits. In
inequities in the way brick-and-mortar effect, the business is the
and remote sellers are treated. But their taxpayer.
proposed cure would be worse than the This system confines
disease. To understand why, let’s con- states’ taxing power to
lower tax-rate jurisdictions when shop-
sider what the nation just avoided. their borders, preserving tax competition
ping online or by mail.
The MFA passed the Senate with the among the states, which puts downward
The accounting burden would be
support of lobbyists for big-box retail- pressure on taxes. It keeps taxing authori-
minimal. Retailers would only have to
ers and revenue-hungry states. It would ties politically accountable to those they
calculate and remit taxes applicable to
have empowered states to reach across tax and limits the jurisdictions for which
their primary place of business. Their rate
geographic boundaries and collect sales businesses must calculate and remit sales
would stay constant whether they sell
taxes from businesses outside their bor- taxes to the states where they choose to
an item in the store or mail it across the
ders—meaning that Virginia companies locate.
country. This efficiency would benefit the
would have become subject to New York But what about the different treatment
larger economy (with the possible excep-
state taxes and audits, for example. of online and brick-and-mortar retailers?
tion of sales tax software makers).
This would have weakened healthy Instead of empowering states to tax
An origin-based regime preserves
tax competition among states and led to outside their borders, Congress should
consumer privacy. The tax calculations
higher taxes. It also would have proved consider some solutions proposed by
are based on the seller’s location only, so
burdensome to implement, as it would Rep. Goodlatte in his 2013 report, “Basic
there is no need to collect, store, or share
have required single-location Internet Principles on Remote Sales,” which he
the buyer’s location. An origin-based
sellers (think Etsy and eBay) to calculate is likely to reintroduce. One such idea is
approach requires no databases to main-
sales tax in accordance with almost an origin-based system, under which the
tain, no third parties to calculate rates,
10,000 jurisdictions across the nation, tax is assessed at the point of sale, not
and no audits to verify accuracy.
each with its own rates, taxing catego- the destination of the good, as under the
Perhaps most important, an origin-
ries, exemptions, and tax holidays. The MFA. This would address the “fairness”
based sales tax keeps political authorities
compliance costs would have proved issue by treating all retailers the same.
accountable to those they tax. This is an
lethal for many small Internet sellers. For walk-in stores, sales tax is
especially important consideration for the
Cooler heads prevailed in the House, calculated at the point of sale, not by
maintenance of democratic governance;
where the bill stalled in committee. the residency of the customer—who
it’s simply too easy to tax those who lack
Judiciary Committee Chairman Bob may be crossing state lines or city limits.
a political voice.
Goodlatte (R-Va.) expressed concern Expanding this origin-based principle
So in the New Year and the new
about the MFA’s approach to address to all retailers will ensure that online,
Congress, here’s to new ideas for
the inequities in how sales are taxed both catalog, phone, and yet-to-be-invented
e-fairness online.
online and at brick-and-mortar retailers. sales platforms will be treated the same
Currently, a tax is only applied to as purchases on Main Street.
online purchases when the seller has a An origin-based system puts down-
Jessica Melugin is an Adjunct Analyst at
physical presence like a store, ware- ward pressure on taxes. It allows custom-
CEI. A version of this article originally ap-
house, or office in the buyer’s state. For ers to vote with their wallets by choosing
peared in The Roanoke Times.

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 11


Greece Jumps from Scylla to Charybdis
Panhellenic Socialist Movement,
BY IAIN MURRAY better known by its Greek acro-
nym, PASOK. It was the last PASOK
Greek voters came to
regard PASOK as the
E very Greek child reads Homer
in school. So Greek children are
familiar with the legend of Scylla and
government, headed by George
Papandreou (from a family that pro-
duced three Socialist prime ministers), party of nepotism and
that steered Greece into these straits
Charybdis, from Homer’s Odyssey. The
sailor Odysseus, returning home after the in the first place. corruption, and shifted
Trojan War, is faced with a desperate Papandreou was presented with
the boon of cheap money following
their support to the
choice in the straits separating Italy and
Sicily. To one side is the monster Scylla, Greece’s entry into the euro zone Coalition of the Radical
who will tear his ship and eat his crew. in January of 2001. At the time,
On the other is the whirlpool Charybdis, the European Central Bank (ECB) Left, known as Syriza.
which will suck his entire ship down to the pursued policies aimed at shoring up
depths. He chooses to sail past Scylla, Germany’s then-flagging economy
and loses a few of his crew, but the rest by borrowing heavily to finance public anti-bank, and (at least implicitly) anti-
and the ship make it through. Greece, in spending. The result was the debt crisis euro, and for increased levels of public
its recent parliamentary election, faced that began in 2010. spending and welfare.
a similar choice. But unlike Odysseus, Greek voters came to regard Syriza narrowly lost to the center-
Greek voters chose Charybdis. PASOK as the party of nepotism and right New Democracy party in the 2012
The whirlpool was represented by corruption, and shifted their support to election, but was able to capitalize on
Syriza, a radical leftist party that sprang the Coalition of the Radical Left, known increasing public discontent with that
out of nowhere to fill the void created as Syriza for its Greek acronym. Syriza party’s policies afterward. A majority
by the collapse of the long-established positioned itself as anti-corruption, of Greeks perceived New Democracy

12 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE


and increasing spending strongly in favor of the European
As long as Greece to stimulate demand, while project. They would likely blame Grexit
providing “free” electricity. on Germany, leading to even greater
remains beset by a How would it pay for this? political tensions. The fact that Syriza’s
By more heavily taxing “the coalition partner, the right-wing
bureaucracy that rich”—of course!—and by populist Independent Greek party, is
promotes corruption as diverting money from bond
repayments to public spend-
militantly pro-Russian would exacer-
bate this further.
the best way around ing following a negotiated Not all the blame for this terrible
debt restructuring. It also situation should fall on Greek voters.
it, its economy will expects the ECB to steer its While the austerity program of New
new quantitative easing pro- Democracy and the troika looks
remain in the doldrums, gram toward buying Greek impressively Thatcherite at first sight, it
regardless of how debt.
This set of policies—
includes very high taxes and misses out
on one vital element: institutional and
austere or profligate any spending financed by the regulatory reform. New Democracy’s
rest of Europe—is precisely attempts at reform were half-hearted at
one government may be. what got Greece into best. Greece’s financial and labor mar-
trouble under PASOK. But kets are still hopelessly bureaucratic.
this time the rest of Europe is As long as Greece remains beset
to be governing at the behest of the unlikely to stand for paying by a bureaucracy that promotes cor-
“troika”—the European Commission, Greece’s bills. German finance minister ruption as the best way around it, its
the ECB, and the International Wolfgang Schaeuble has already economy will remain in the doldrums,
Monetary Fund—that set conditions for signaled that he expects Greece’s new regardless of how austere or profligate
the Greek bailout. government to abide by its interna- any one government may be.
The troika’s conditions were charac- tional agreements. Greece does not have to choose
terized as an austerity program intended All this sets Greece on a straight between Scylla and Charybdis. It is
to lower the country’s debt burden. It course for another whirlpool: default possible to steer between the rocks
consisted of a combination of increased and a possible “Grexit” from the euro. of anti-establishment populism (in
taxes and lower public spending by The new prime minister, Alexis Tsipras, Greece’s case, Syriza) and the whirl-
means of privatization, staff layoffs, has said he wants to avoid both even- pool of an arbitrary executive (the
and welfare cuts. But it did not include tualities, but it is hard to see how he can troika). It can do so if its sets a straight
major structural reforms, so the Greek achieve this without forcing the troika course for the safe harbor of liberty.
economy has yet to recover, with unem- and Germany into a humiliating U-turn.
ployment at 25 percent overall and 60 There is a strong argument that
percent among young people. Grexit would actually be good for Iain Murray (iain.murray@cei.org) is Vice
Syriza’s platform rejected austerity. Greece, which probably should never President for Strategy at CEI. A version
Instead, it offered a return to prosperity have entered the euro zone in the first of this article originally appeared in The
by lowering taxes on the working class place. But the Greek people remain Freeman.

Realclear Radio offers listeners a


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Learn more at RealClearRadio.org.

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 13


THE THE THE
GOOD BAD UGLY

Adelson Continues Court Rules NSA


CEI Releases Agenda Push for Internet Spying Not Broad
for Congress Gambling Ban Enough for FOIA

In late January, CEI released Free to A handful of GOP lawmakers have The United States District Court
Prosper: A Pro-Growth Agenda for the revived an effort to effectively ban for the District of Columbia ruled
114th Congress, which identifies eight internet gambling, reintroducing the in January that based on national
economic areas in dire need of free so-called Restoration of America’s security concerns, the National
market reforms. CEI’s agenda recom- Wire Act. The bill, written by a lob- Security Agency (NSA) does not
mends policy ideas that would release byist for casino mogul and GOP have to disclose even the existence of
innovators, entrepreneurs, and other mega-donor Sheldon Adelson and documents related to the phone calls,
hardworking Americans from bureau- introduced by Rep. Jason Chaffetz emails, and text messages of certain
crats’ regulatory squeeze, and advance (R-Utah), would amend a 1961 law Environmental Protection Agency
health, safety, efficiency, and long-term by expanding a ban on interstate officials, in response to a Freedom of
economic growth. “CEI has more than sports betting to a de facto ban on Information Act (FOIA) lawsuit from
30 years of institutional knowledge all online gambling transactions. CEI. Judge James E. Boasberg stated
about the effects of well-intentioned but “This attack on consumer freedom is in his ruling that the government
poorly planned economic regulations,” not about protecting consumers or had not officially acknowledged its
said CEI President Lawson Bader. “The restoring any law,” said CEI Fellow collection of such materials. “At first
hidden and growing regulatory state Michelle Minton. “It is about doing glance, there’s a silver lining in this
deserves more attention and CEI’s the bidding of a powerful donor and decision—namely, it suggests that the
Agenda puts Congress back in the imposing top-down federal control NSA isn’t spying on all of us,” said
driver’s seat to create real regulatory over state choice. Anyone who cares CEI General Counsel Sam Kazman.
reform, stemming the executive branch’s about consumer choice and abuse “This is because Judge Boasberg
ever-increasing overreach.” of power by the federal government found no public acknowledgement
should oppose this bill.” by the NSA that its monitoring is that
broad. On the other hand, the ruling
leaves open the possibility that the
NSA simply hasn’t admitted that it’s
snooping on everyone.”

14 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE


MediaMENTIONS
The Washington Examiner asks CEI Vox.com cites CEI Associate The Financial
Fellow Michelle Minton to discuss Director of Technology Studies Times quotes
the potential changes in tax policy Ryan Radia on the net neutrality CEI General
facing big and small brewers: debate: Counsel Sam
Michelle Minton, consumer poli- Ryan Radia, a telecom policy expert Kazman on the
cies study fellow at the free-market at the libertarian Competitive Enterprise King v. Burwell
Competitive Enterprise Institute, says the Institute, expects the Republican- Obamacare
main beneficiaries would be medium- controlled Congress to become more challenge:
sized brewers. “The BREW Act would hostile toward the FCC as the result of “If the states
increase the number of barrels a brewer Wheeler’s latest move. didn’t set up the exchanges, they would
could produce and still qualify for the “If Tom Wheeler wanted to anger not get the subsidies,” says Sam Kazman
reduced excise tax rate. That will pull Congressional Republicans, he’s done it,” of the Competitive Enterprise Institute, a
in some of the larger craft brewers Radia says. “For the rest of this congress, free-market group that has spearheaded
like Boston Beer Company and Sierra Republicans will do what they can to the challenge. “But then the IRS comes
Nevada,” she said. ... make things unpleasant for the FCC.” along and basically says ‘subsidies for
Minton says either the BEER Act or Radia notes that Thune recently everyone’.”
the BREW Act would be an improvement proposed requiring Congress to regularly Should the premium subsidies be
over current policy. The major brewers’ reauthorize the FCC, effectively putting struck down, the average out-of-pocket
approach would be the better one, she the independent agency on a shorter expense for consumers would more than
said, since it would be broader and leash. As Congress works to overhaul triple from $105 to $374 per month,
more comprehensive. telecommunications law in the coming according to Department of Health and
A much better approach would be years, Republicans will be more leery of Human Services data.
to scrap the excise tax entirely, Minton giving the FCC broad authority, he says. “If people do lose badly needed
said. “Excise taxes should not be used And Radia predicts that if a health insurance, it really is the IRS that is
to penalize companies just because Republican captures the White House in the culprit here,” said Mr. Kazman.
they are large. They should be reduced 2016, he will appoint someone who will –MARCH 4,
across the board or just scrapped.” go to work reversing Wheeler’s network Financial Times
–JANUARY 11, neutrality rules.
The Washington Examiner –FEBRUARY 5,
Vox.com USA Today cites CEI’s Sam Kazman
George Will cites CEI Vice on the impact of the Affordable
President for Policy Wayne Crews’ The New York Times’ profile of Care Act:
regulatory calculations in his CEI features Senior Fellow William Sam Kazman, general counsel of the
column: Yeatman: Competitive Enterprise Institute, which
The lingering economic anemia is The Competitive Enterprise Institute coordinated the Obamacare challenge,
astonishing, given plummeting energy sees itself not as a think tank, but as a spoke after the oral arguments on behalf
prices. To a considerable extent, the “do tank,” committed to changing fed- of the “millions of people” hurt by the
anemia is an iatrogenic social ailment, eral policies rather than just analyzing health law. They’ve lost their health plans,
induced by government behavior. The them, said William Yeatman, a senior their doctors or jobs, and thanks to the
business burdens and uncertainties fellow at the group. Internal Revenue Service, have to pay
created by the Affordable Care Act are –MARCH 4, higher insurance premiums and taxes, he
just part of the Obama administration’s The New York Times said.
regulatory mania (3,659 new regu- –MARCH 4,
lations finalized in 2013 and 2,594 USA Today
others proposed, according to Wayne
Crews of the Competitive Enterprise
Institute).
–FEBRUARY 4,
The Washington Post

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 15


Nonprofit Org.
U.S. Postage
PAID
Permit 425
Southern MD

...END NOTES
Litigiousness Destroys Childhood Winter Fun Court Dismisses Man’s Claim of Fajita Burns
America is a very litigious nation. And Americans often Suffered During Prayer
go to absurd lengths to avoid being sued. Now several In March 2010, a New Jersey man ordered fajitas at
cities, fearing lawsuits, are outlawing sledding in their public an Applebee’s. According to the Associated Press, the man
parks, ruining a favorite winter pastime for children through- claimed he bowed his head in prayer and “then heard a
out America’s colder climates. In Dubuque, Iowa, the city loud sizzle followed by a grease pop. He then felt a burning
council voted to ban sledding in all but two public parks sensation in his left eye and on his face. The man said he
because the city, they said, “can’t manage the risk at all of panicked and knocked the food on his lap, causing more
those places.” To justify their decision, Dubuque officials burns.” In his lawsuit, Hiram Jimenez claimed that his injuries
cited a case of an adult Iowa man who successfully sued for were solely due to Applebee’s “negligence when he came
$2.75 million after he injured his spine running into a sign on in contact with a dangerous and hazardous condition.”
a sled. Hope may not be lost. In the nation’s capital, a group Affirming a lower court decision dismissing the case, a New
calling itself “Sled Free or Die” took to the slopes of Capitol Jersey appeals court held that the “self-evident” risks of the
Hill in early March to defy the prohibition there. No arrests hot fajita skillet did not require the restaurant to warn Jimenez
were made. “against a danger that is open and obvious.”

Garbage Man Gets Jail Time for Working Too Early Mayor Called “Jerk” for Expecting Spanish
Sandy Springs, Georgia, a wealthy suburb of Atlanta Inquisition
famous for outsourcing most of its municipal functions to As any forum moderator can tell you, audience members
private sector contractors, may be a great place to raise a frequently waste question and answer times to make long-
family. But it may be the worst place to pick up the trash. In winded comments, much to everyone’s annoyance. To tackle
March, a judge sentenced Kevin McGill to 30 days in jail this problem, one mayor in a Philadelphia suburb is proudly
for emptying garbage cans too early. Some residents have eschewing question marks for his Q&A sessions. During a
complained that early morning pickups disturb their sleep. tense Evesham, New Jersey, township council meeting in
McGill had only been driving his route since the beginning December 2014, Mayor Randy Brown spoke over a question
of 2015 and was apparently unaware of the ongoing spat on a tax abatement from a member of the public. That ques-
between his company and the city. McGill, an employee of tioner, 81-year-old Kenneth Mills, told Mayor Brown, “You’re
Waste Management, Inc., received jail time after prosecu- acting like a jerk.” In response, the council has only accepted
tors claimed previous efforts to fine Waste Management into public comments, not questions, at meetings. Brown, who is
ending early morning pickup failed. So, they argued that considering a run for governor in 2017, told the Philadelphia
jailing Waste Management employees was their only avail- Inquirer that most residents ask him questions outside of public
able solution. meetings. Those who ask questions in public, Brown said, “try
to turn it into the Spanish Inquisition.”

16 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE