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All articles with the "Regulation" tag.

Published: Thu, 23 Feb 2017 00:00:00 -0500

Last Build Date: Thu, 23 Feb 2017 11:19:34 -0500


Scott Pruitt Emails Reveal He Consulted with Industry About Regulations

Wed, 22 Feb 2017 17:15:00 -0500

Scott Pruitt, the former attorney general of Oklahoma, was confirmed last week as the head of the U.S. Environmental Protection Agency. Activist groups and Congressional Democrats urged that the vote on his confirmation be delayed until emails detailing his communications with folks in industry were released under court order this week. The evident hope was that combing through the emails would reveal some kind of "smoking gun" that would forestall his becoming EPA adminstrator. Well, some 7,000 pages of emails have now been released and posted by the liberal watchdog group the Center for Media and Democracy (CMD). It turns out that an elected Republican politician was in frequent contact with constituent companies who wanted to make known their concerns about the impact of federal regulations on their businesses. I confess that I have not read through all of the emails, but the reports in The New York Times and The Washington Post have evidently turned up nothing that is particularly surprising or corrupt in this batch (more emails are expected to be released later this month). As the Times reports: The emails do not appear to include any request for his intervention explicitly in exchange for campaign contributions, although Mr. Pruitt was separately working as a member of the Republican Attorneys General Association to raise money from many of the same companies. Despite the large volume of correspondence between Mr. Pruitt's office and the industry players, the emails are unlikely to cause Mr. Pruitt significant new problems. They do expand on email exchanges or topics that previously had been disclosed. To a large extent, this episode is another tiresome example of selective political outrage: Special interest, like beauty, is in the eye of beholder. For example, in its 2015 report Obama's Carbon Mandate: An Account of Collusion, Cutting Corners, and Costing Americans Billions, the Senate Environment and Public Works Committee found: EPA and environmental activists had cozy relationships and egregiously used personal emails and held meetings away from EPA headquarters, including a local park and coffee shops. Of specific interest was the role that the Natural Resources Defense Council played in helping the EPA devise the Obama Administration's rules for reducing the emissions of carbon dioxide. The report details how NRDC staff was able to get their ideas for imposing greenhouse gas limits on power plants before EPA officials, how EPA policy makers and attorneys worked closely with NRDC's experts on developing these regulations, and how EPA relied on groups like NRDC as partners to communicate messages to the public about the pro posed rules. Bemusingly, the Post reports today: Rhea Suh, president of the Natural Resources Defense Council, said in a statement. "These [Pruitt] emails tell us that he's in league with the very industries we've now entrusted him to police." If an agency or government office is empowered to punish and reward, then it's not a surprise that special interests - activists and industry - seek to persuade government functionaries to reward their friends and punish their enemies. In any case, the public should expect maximum transparency from government officials. In that spirit, the Attorneys General United for Clean Power will doubtlessly soon release their Common Interest Agreements pertaining to consultations with activist groups formulating demands that ExxonMobil turn over documents concerning its contacts with think tanks, scholars, and others who have been skeptical of catastrophic man-made warming.[...]

Brickbat: I Can't Believe It's Not Legal

Tue, 21 Feb 2017 04:00:00 -0500

(image) Ornua North America sells Kerrygold Irish butter in all 50 states. Whoops, make that 49. Wisconsin state officials recently reminded distributors that no butter can be sold in the state unless it has been certified by an official panel of experts. Kerrygold, which is imported, hasn't been certified, so anyone selling it faces a fine of up to $1,000 or six months in jail.

Why Customers Like Check Cashers and Payday Lenders

Sat, 18 Feb 2017 06:00:00 -0500

The Unbanking of America: How the New Middle Class Survives, by Lisa Servon, Houghton Mifflin Harcourt, 272 pages, $27 My parents opened my first savings account for me when I was seven," Lisa Servon writes at the beginning of The Unbanking of America: How the New Middle Class Survives. "The teller gave me a green Pulaski [Savings and Loan] passbook with gold lettering. It made me feel important, like I'd crossed some threshold and joined a club that bigger kids and grownups got to be a part of." Clearly nostalgic for her rite of passage, Servon, a professor of city and regional planning at the University of Pennsylvania, sets out to discover why that experience has become alien to so many modern Americans, and what practices and services they've adopted to replace banks in meeting their financial needs. She speaks with experts, entrepreneurs, and people trying to make ends meet, and she even takes jobs at a check-cashing store and a payday loan business. She concludes that banks as currently constituted aren't a good choice for everybody, and that many alternatives—including some options widely reviled by pundits and politicians—do a better job of serving many people's needs. The numbers of Americans who either don't have bank accounts (the "unbanked") or use them sparingly alongside alternative financial services (the "underbanked") can be startling if you were raised on bank robber Willie Sutton's apparently apocryphal wisdom that "that's where the money is." "As of 2013, the year of the [Federal Deposit Insurance Corporation's] most recent survey, approximately 8 percent of Americans were unbanked and another 20 percent were underbanked," notes Servon. The 2015 survey, released after her book was written, finds nearly identical numbers, but alienation from the banking system is even more remarkable in some major communities. In 2015, the Albuquerque Journal found that 11 percent of area households had no bank accounts, while 24.4 percent kept one account while also using alternative services. Likewise, in 2015 The Kansas City Star reported that 12 percent of local households—and 45 percent of local African-American families—completely avoided banks. Why do so many Americans shun the institutions traditionally devoted to saving and loaning money? The answer, many people tell Servon, is that banks don't seem to want their business and make it too difficult and expensive to get anything done. "Banks want one customer with a million dollars," the owner of one check-cashing chain tells her. "Check cashers like us want a million customers with one dollar." The check-cashing magnate has a clear interest in portraying his business in a populist way, especially given the criticism his industry faces from such politicians as Sen. Elizabeth Warren (D–Mass.) and such activist organizations as the Public Interest Research Group. But as Servon learns, people who use such services seem to agree with that description. Check cashers and payday lenders may charge seemingly high fees, but they're knowable fees. "Customers can find it difficult to predict when banks will charge them a fee (they sometimes change the timing) and what the amount of the fee will be; this lack of clarity can be costly," Servon writes. "Now imagine the interior of a check casher—or visit one. It resembles a fast food restaurant more than a bank. Posters tell you what products are sold, and large signs above the teller windows list every product, along with its price." Alternative services come with clear costs—and they move fast. Somebody facing bills needs a paycheck cashed now, not after an arbitrary delay while the check clears. Unpaid rent or unpurchased groceries are bigger concerns than a few dollars in fees. Also, those fees aren't necessarily so high when you consider the available options. When concerned Oregon lawmakers restricted "expensive" payday loans in 2007, borrowers shifted to comparable products offered by banks. "It's called an overdraft," Servon reports, "and if it had a[...]

The Consumer Financial Protection Bureau Wants to Weaken Attorney-Client Privilege

Wed, 15 Feb 2017 15:00:00 -0500

The Consumer Financial Protection Bureau (CFPB) has been in the spotlight lately, with courts and congressional Republicans zeroing in on the agency's unconstitutional structure that leaves its head—currently Richard Cordray a likely future Democratic candidate for Ohio governor—in possession of vast powers, accountable to no one. Sen. Ben Sasse has dubbed Cordray "King Richard," and President Donald Trump has been threatening to fire him. It's just the latest scandal for the CFPB, which a few years back got itself in hot water for collecting reams of consumer data, undercutting privacy rights while putting lots of potentially sensitive personal information at risk in the event of a hack, and has been in the firing line nearly continuously since its inception for spending lots of taxpayer cash on everything from high salaries to luxurious overhauls of its headquarters. Now the CFPB may be headed back into big doo-doo, thanks to a rule it is pursuing that would allow it to share communication between an entity it regulates and that entity's lawyer with a slew of other government regulators—potentially even with foreign governments. The rule would also relieve the CFPB from any requirement that it inform an entity it regulates that it's sharing such information with Congress, and bar entities it regulates from sharing any correspondence related to CFPB enforcement without the agency giving a proverbial thumbs up. It's obviously a big boon to a big government regulator, written by and for big government regulators. Unsurprisingly, it's also being decried as a straight-up erosion of attorney-client privilege, and something that jeopardizes a core, constitutionally protected civil liberty. In comments on the proposed rule, the American Bar Association—an entity that more often than not seems to side on policy with Democrats like the ones who authored Dodd-Frank and act as protectors of the CFPB—writes that, "each such disclosure of privileged information by the CFPB to a non-federal agency or Congress could endanger the privileged status of the information." In other words, every time the CFPB discloses privileged information, they're making sure that legally, it's no longer confidential. Or, you have the right to a lawyer, but what you and your lawyer say to each other is not really private and can totally be used against you. This is so because under federal case law, if privileged communication is shared with any third party, even a federal agency, its confidentiality evaporates; the only instances in which this is not so are when it's shared with a relatively narrow set of third parties, explicitly listed in actual legislation. The ABA argues that CFPB's attempted erosion of attorney-client privilege matters because preservation of it underpins "fundamental rights to effective counsel." So, in this rule, we have another example of itty-bitty, little-discussed, not-very-interesting regulation that, if put on the books, will put more civil liberties on the chopping block—in this case, one protected by the Sixth Amendment. Clearly, the civil liberties immediately at risk here are those of financial service providers themselves—not you or me (unless, say, you own an entity the CFPB regulates or is trying to regulate). The problem, though—as ever—is when you start eroding a right for one arguably undesirable person, you tend to end up eroding it for all people. Once you set a legal precedent, it has a tendency to stick around, and be invoked in instances in which the people who conjured it up in the first place never predicted. Don't believe that? Just ask President Obama, whose expansion of executive authority is now being used to undo his signature health-care law. For this reason, the ABA is asking the CFPB to rewrite its rule and narrow it. House Republicans, meanwhile, are objecting to pursuit of the rule full-stop, demanding in a letter that CFPB Director Cordray "provide the Committee with the statutory authority on which[...]

You’re Not Really a ‘Sanctuary City’ If You Keep Sending the Police to Harass the Poor

Wed, 15 Feb 2017 12:40:00 -0500

After years and years of harassment, arrests, and private property destruction, the City of Los Angeles has finally decriminalized street vending. Jesse Walker took note of the decision a few weeks ago. There are tens of thousands of street vendors within the Los Angeles area who now have a legal avenue to make a living (money-grubbing city permitting and inspection schemes notwithstanding). The Los Angeles City Council didn't make this abrupt change because they suddenly realized their oppressive municipal regulations were harming its poorest citizens. It happened because Los Angeles has declared itself to be a "sanctuary city," where police decline to check to immigration status of those they interact with or those who end up in their custody. President Donald Trump promised a crackdown on illegal immigration, particularly down near the border to Mexico. By arresting street vendors, they could potentially be introducing them into a legal system where federal immigration agents would step in and deport them if it turned out they were in the country illegally. But that's just one tiny chunk of the massive iceberg of municipal laws and codes that can trip up immigrants and city residents and force encounters with police. Why stop with just street vending? Shakeer Rahman and Robin Steinberg of Bronx Defenders, a criminal defense advocacy organization for the poor in that New York community, took to The New York Times op-ed pages to point out that there are all sorts of ways that cities use law enforcement and oppressive regulations that harm poor immigrants. These have always been bad policies that made life miserable and even harsher for urban citizens. Now they have an even greater potential to sweep immigrants up in a system that could separate them from their families and deport them: Many of these unnecessary arrests stem from the discredited idea that a draconian crackdown on the most minor offenses — littering, selling loose cigarettes, biking on the sidewalk — will prevent more serious crimes. This model of policing, known as broken windows or zero tolerance, helped to drive mass incarceration. Its next cost could be mass deportation. While the federal government runs immigration courts and prisons, local police departments are its eyes and ears. Across the country, whenever they arrest someone, city departments send fingerprints and other identifying information to federal officials. Whether the offense is as trivial as selling mango slices on the street without a license or taking a shortcut through a park after dark, federal agents are notified of an immigrant's name and how to find him or her. President Trump has announced his plans for all those names. Each week, the White House will publish a list of crimes that immigrants have been accused of, and the government will prioritize the deportation of anyone "charged with any criminal offense," even if it never leads to a conviction. They conclude: "Until cities reject the failed thinking that led to mass incarceration, local police and prosecutors will be doing the legwork for mass deportation." Granted, the Bronx Defenders are using the circumstances to advance an argument they've been pushing for some time, and so is Reason. We've done a lot of reporting and blogging about how overcriminalization of "quality of life" issues in cities overwhelmingly ends up with law enforcement officials cracking down on poor people. And yet, when these encounters go bad and lead to police violence, the emphasis is almost entirely on police abuse and never the underlying crime enforcement issues that brought the city to this point. It was wrong for New York police to strangle Eric Garner to death for selling black market cigarettes, but urban progressives flat out do not want to discuss the oppressive taxation and regulatory atmosphere that forced that interaction. Apparently it would have been fine for police to arrest Garner or fine him and otherwise ruin his li[...]

Brickbat: Without a Paddle

Mon, 13 Feb 2017 04:00:00 -0500

(image) In Florida, a panel appointed by the Fish and Wildlife Conservation Commission is considering whether to recommend that canoes, kayaks, and other water craft that don't require a motor to be licensed.

Lawmakers and Regulators Act Like They Hate Farmers Markets

Sat, 11 Feb 2017 08:00:00 -0500

Last weekend I shopped for the first time at a farmers market in Seattle's University District, near my new home in the city's Wallingford neighborhood. I visited vendors there who sold everything from hazelnuts to salmon, beef, lamb, cheeses, root vegetables, kimchi, sauerkraut, kefir, hard cider, and quesadillas. This was a different sort of farmers market visit for me—and not just because the U District market has a far better and more interesting selection of foods than did the Washington, D.C.-area markets I used to frequent. What made this trip really different is that I typically find it doesn't take much for farmers and other market vendors to open up about how some combination of federal, state, and local regulations is making their lives—and livelihoods—increasingly difficult. Over the years, I've visited a rich diversity of farmers markets in at least two-dozen states—including in Louisiana, Massachusetts, Hawaii, North Carolina, Iowa, Texas, Illinois, and California—and have heard farmers and other vendors rightly groan in nearly every case about overly burdensome regulations. But at the U District market, the only vendor complaints I heard were about the rain and snow that day, or about the seasonally affected shortage of vendors and their offerings. My unscientific sampling of a handful of vendors at one farmers market (along with earlier visits to the nearby Ballard and Fremont markets, which yielded similar results) doesn't mean that farmers in Seattle or Washington State face few regulatory challenges. A simple Google search reveals such hurdles do exist, including in the farmers market held during warmer months in the parking lot right outside my apartment. But for every city or state where farmers might not be compelled by awful regulations to lament during every market about how they're drowning in red tape, their peers in dozens of other states must do so, because awful rules mean they face existential threats. The past month alone has provided ample evidence of this unfortunate truth. For example, in St. Augustine, Fla., a recent city council meeting to discuss a local farmers market was punctuated by what the St. Augustine Record characterizes as "bickering," "shouts[,] and grumbling." The issue? Whether to renew a lease that would let the city's Wednesday night market survive. The survival of a farmers market is also at issue across the country in Sonoma, Calif., where the city council recently inserted itself into a debate between what the Sonoma Index-Tribune calls a dispute between farmers market "purists" who want markets to feature mainly farmed foods like meat and produce and "moderns" who prefer such foods with a side of music and food trucks. Is the purist or the modern vision of a farmers market the proper one? I wouldn't want to see farmers squeezed out of a farmers market. But I'm certain local consumers—rather than me, or you, or local lawmakers—know best what they want to see at their farmers market. Locals "fear that the Council majority is out to ruin the market," Sonoma farmers market customer Gina Cuclis told the Index-Tribune. "It's not the City Council's job to micromanage the market." While the fight in California and Florida is over whether and how to allow a farmers market to continue its existence, in Chesapeake, Va., the question is whether to legalize farmers markets at all. Current rules make it nearly impossible for private farmers markets to operate in the city. "There is currently no definition of farmers markets in the city code," reports the Virginian-Pilot. "They're considered flea markets and subject to a laborious—and potentially expensive—approval process." Other farmers market controversies have popped up in recent years in such widespread locales as Nashville, Ann Arbor, Collier County (Fla.), Turlock, Calif., and Long Island. My recent book Biting the Hands that Feed Us is also cho[...]

Why We Don't Need a Department of Technology Policy

Tue, 07 Feb 2017 08:30:00 -0500

There seem to be embarrassing new "Internet of Things" failures every week now. Sometimes, they are on the humorous side, like when a "smart toilet" was hacked to randomly flush at startled bathroom-goers. Other times, they can be disturbing, as in case of critical vulnerabilities in St. Jude's implantable cardiac devices that could put users' lives in the hands of hackers. But in all cases, these failures tend to grab headlines and inflame calls for government regulation. It's not hard to see why. When faced with some kind of public dilemma, many people immediately assume that the government alone can solve the problem. And when you throw in futuristic fears about losing control of everyday things around us, the prospect of a savior from above seems all the more necessary. But we must take care that such "solutions" don't create more problems than they supposedly solve. Such would almost certainly be the case with one recent proposal: a "Department of Technology Policy." A 'World-Size Robot' Recently, Bruce Schneier, a veteran in information-security studies and leading voice in technology policy, penned a long article for the New Yorker in which he argues for the creation of a new federal agency—the "Department of Technology Policy"—that would consolidate control of technological regulations into a single body. Schneier explains how the incredible rate of "smart"-device adoption has created some new and unprecedented security challenges. Few people realize just how quickly IOT devices have saturated the world around them. This will only accelerate—Schneier likens the rise of IOT technologies to building a "world-size robot," with all of the sensors, commands, and computations to match. And with an expanded connected reality comes an expanded digital threat set. Computer bugs and software vulnerabilities no longer merely endanger personal data and hardware, they can potentially shut down connected home devices or hijack moving cars and even cause us physical harm. Indeed, there have been considerable security problems with connected devices. Often, the issues are theoretical: Security researchers warn the public at conferences and in journals of major vulnerabilities they discover in popular consumer routers or printers or security cameras—vulnerabilities which may or may not end up getting patched. But sometimes these vulnerabilities are actually exploited. Last October, some of the Internet's most popular websites—Twitter, Amazon, GitHub, Reddit—were knocked offline thanks to insecure IOT devices. Some malicious actor was able to infect an army of DVRs, cameras, baby monitors, and printers with a malware called Mirai, directing these devices to launch a distributed-denial-of-service (DDOS) attack on those websites' hosting provider, Dyn. While the attack was short, and the fallout was mostly limited to inconvenience and loss of sales, it was a major warning signal for security researchers who envisioned how such an attack could have been much more devastating. The main problem, as Schneier sees it, is that many companies developing and selling connected devices do not have the right security chops to make sure that they are safe before people buy them. Technology companies like Google and Apple have large dedicated teams to locate and patch software vulnerabilities as soon as possible—and even this process is imperfect. Now, companies who have no such software experience may put IOT products out to market without the necessary testing, which could create major unexpected problems down the road. And the home consumers who buy such devices are seldom equipped to evaluate the security settings on their own. Whose Failure? While Schneier's essay does an excellent job of describing the new security challenges that smart devices create, it falls short on solutions. "The market can't fix this," Schneier suggests, "because [...]

Los Angeles Moves to Decriminalize Sidewalk Vending

Wed, 01 Feb 2017 11:05:00 -0500

(image) I'll say one thing for Donald Trump's executive orders on immigration: They've spurred some welcome reactions at the more local levels of government. Los Angeles has a history of hitting unlicensed sidewalk vendors with criminal charges. But yesterday, not wanting the proprietors of tamale carts or T-shirt stands to be deported for their misdemeanors, the city council voted to draft an ordinance to decriminalize such enterprises.

Emily Alpert Reyes explains in the Los Angeles Times:

City attorneys will now draw up new rules that would strip those criminal penalties and authorize the city to eventually issue vending permits, a first step toward legalization....In the meantime, vendors who ply their trade on city sidewalks could still be cited and fined for violating the municipal code, but they would not face criminal convictions.

Lawyers are also supposed to report back on whether the city can offer amnesty to vendors already facing criminal charges. Though lesser citations are much more common, city prosecutors filed misdemeanor charges for sidewalk vending in more than two dozen cases between October 2015 and October 2016, according to the city attorney's office.

Obviously, that's good news if you're facing such charges, especially if you're running the risk of deportation. But it's also good news for any Angelenos who want to launch one of these micro-businesses, regardless of their immigration status. And it's good news for consumers, who will have more and cheaper choices. It may not be the taco truck on every corner that we were promised, but I'll take it.

Bonus video: The Battle of the Bacon Dogs.

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Which Is Worse for Poor Americans: Energy Efficiency Mandates or Energy Taxes?: New at Reason

Fri, 27 Jan 2017 13:30:00 -0500

(image) U.S. automakers are asking the Trump administration to relax the vehicle efficiency standards imposed on them by the Obama Administrtion. Ratcheting up the mandatory energy efficiency standards for vehicles and appliances was a major part of Obama's effort to reduce greenhouse gas emissions. The Department of Energy calculated that the Obama administration's energy efficiency standards would save consumers more than $520 billion on electricity costs by 2030.

But not all consumers are alike. In a new study contrasting the effects on consumers of energy efficiency standards versus energy taxes, the Georgetown economist Arik Levinson notes that both energy efficiency standards and energy taxes function as a regressive tax, taking a larger percentage of a lower income and a smaller percentage of a higher income. His analysis aims to find out which is more regressive—in other words, which is worse for poor Americans.

Georgia Legislators Want to Force Tattoo Artists to Spread Misleading Information

Fri, 27 Jan 2017 08:45:00 -0500

Tattoo artists in Georgia may have to include an additional warning on their consent forms if state legislators get their way. According to the Atlanta-Journal Constitution, lawmakers have introduced a bill, H.B. 123, that would make it mandatory for tattoo parlors to provide written notice that getting certain tattoos could make a person ineligible for military service. The language would read, "Warning: You will likely be disqualified from joining the military if you have a tattoo on your face, neck, forearm, hand, wrist, or lower leg." Rep. Sandra Scott (D–Rex) is the main sponsor, having previously introduced a similar bill that was passed by the House but later tabled by the Senate. It's unclear whether she realizes that the military has updated its tattoo policies to be more lenient in recent years. The Army no longer limits the size or number of tattoos that soldiers can have on their arms or legs, though it does maintain a prohibition on face, neck, and hand tattoos (with the exception of one ring tattoo per hand). The Air Force similarly prohibits tattoos on the head, neck, and face, but allows for authorized tattoos on the chest, back, arms, and legs (contra the proposed warning) with no size or area limitations. The Navy has the most lenient policy: Sailors are permitted to have multiple tattoos of any size as long as they're below the elbow or knee, including on the wrist and hand. They may also have one neck tattoo, though it can't exceed an inch in length. The Marines have a stricter policy, but even they allow for an unlimited number of tattoos on any area of the body that can be covered by a properly fitted standard physical training uniform. Cultural attitudes about tattoos in the U.S. have been changing over time. A 2014 Fox News poll found that 20 percent of voters have at least one, while 14 percent have two or more. Not surprisingly, the poll also found that younger Americans are more likely to have a tattoo and view them more favorably than older generations. Even more telling is that 73 percent of voters say they'd hire someone even if he or she had a visible tattoo. Why, then, do Georgia legislators feel the need to warn people—all people, regardless of their interest in or qualifications for military service—that their ability to sign up is in jeopardy if they get ink? Of course, regulatory interference is no stranger to the tattoo industry. As Damon Root noted in Reason's June 2016 cover story, "Tattoos vs. the State": "Over the past half-century, tattoo artists have been subjected to all manner of overreaching, ill-fitting, and just plain nonsensical government controls. They've been hassled by clueless health departments, shut down by moralizing zoning boards, and outlawed entirely by busybody city councils and state legislatures." Rep. Scott did not respond to a request for comment on this story.[...]

Scientifically Absurd Proposed FDA Regulations on Genetically Improved Livestock Should Be Withdrawn Immediately

Wed, 25 Jan 2017 12:45:00 -0500

The Food and Drug Administration issued, just two days before the end of the Obama administration, draft guidance on how the agency proposes to regulate genomically altered food animals. The FDA claims authority to regulate livestock and their products developed using the fantastically precise and versatile new genome editing techniques like CRISPR. Ultimately, the FDA's guidance document is rife with scientific nonsense. First, the overreaching agency claims it has the authority to regulate genetically improved livestock as a "new animal drug." As the agency points out all new animal drugs are "deemed unsafe" unless it has approved a new animal drug application. Treating each version of new improved livestock as a drug is really bad news for developers and consumers, since it takes years for a new drug to get through the FDA process at an average cost of more than $1 billion. Consider that it took the agency 20 years to approve the Aquabounty salmon that was genetically engineered simply to grow faster. The new FDA proposal is also ridiculously bad science. In fact, the regulation of modern biotech crops has been based on bad science for nearly three decades. Researchers have pleaded for years that regulation, if needed, be based on whether the end product poses novel risks, not on the method by which it is created. Under the new idiotic FDA guidance, any intentional change to a single-nucleotide base pair would make the entire animal a regulated drug. Let's put this into perspective. DNA, the chemicals that make up genes, are safe to eat. Unless you are eating only things like processed pure sugars and some minerals (in which case you'd be dead by now), nearly everything you eat contains DNA. In fact, by one estimate you eat more than 100 trillion genes that are in your food every day. Eating the DNA that specifies the production of snake venom is no more dangerous than eating any other DNA (even eating snake venom isn't necessarily dangerous, but I personally wouldn't advise it). Genetically improved livestock like hornless Holstein dairy cows are now in the FDA regulators' crosshairs. Researchers at the University of California, Davis used precise genomic editing to change the horn gene in Holstein dairy cattle to match the hornless gene found in Angus beef cattle. Most dairy cattle are dehorned as a way to keep them from harming farmers. As someone who has dehorned both calves and cattle, I can tell you that the animals don't enjoy the experience. This gene editing actually advances animal welfare. Since it is safe to eat hornless Angus cows, it is also safe to eat and consume dairy products from now hornless Holstein cows. Yet, the proposed FDA guidance wants the developers to go through its whole new drug regulatory rigamarole before products from these genetically improved animals can be offered to the public. This is on top the the FDA regulations that have stymied biotech advances in crop agriculture for decades. As Alison van Eenennaam, one of the researchers who developed the hornless Holsteins tells Gizmodo: "If DNA is a drug, then all life on Earth is high." She adds, "We have equivalent products with the same risks. Human intention isn't where risk lies. Who would say a Holstein is a drug? It's a bull without horns. There's no normal person that would think that's a drug." The FDA guidance blandly observes: In general, FDA's guidance documents do not establish legally enforceable responsibilities. Instead, guidances describe the Agency's current thinking on a topic and should be viewed only as recommendations, unless specific regulatory or statutory requirements are cited. The use of the word "should" in Agency guidances means that something is suggested or recommended, but not required. As the former head o[...]

How the IRS Could Cripple Cryptocurrency

Tue, 24 Jan 2017 08:00:00 -0500

Should the Internal Revenue Service (IRS) have authority to make financial-services companies turn over millions of customer records when they suspect a handful of customers could be evading taxes? Most people would respond with an emphatic no, yet this is exactly what the IRS is attempting to do with Coinbase, one of the most popular cryptocurrency service providers. And if the IRS prevails in this privacy-violating crusade against cryptocurrency users, it could have big implications for the future of everyone's digital privacy. In November, the IRS initiated a "John Doe" summons against Coinbase to secure information on suspected tax cheats that use the service. But rather than tailor a subpoena to a narrow group of likely tax-evaders, the IRS instead requested all transaction records between 2013 and 2015—an alarmingly broad net that casts Coinbase customers as possibly guilty until proven innocent. In early December, a federal judge in San Francisco approved federal tax collector's request, which Coinbase is now fighting in court as too broad and unnecessarily punitive. Coinbase is noteworthy both as one of the earliest and most successful cryptocurrency startups, as well as a Bitcoin business that is scrupulously compliant with government regulations (sometimes to the chagrin of the more anarchist-minded Bitcoin community). In a blog post on the matter, Coinbase Chief Executive Officer Brian Armstrong writes that the company was proactive in helping its user base comply with IRS rules by building special tools and monitoring all new tax developments. This apparently was not enough to the IRS, who decided to bring out the big guns and try to scrutinize all Coinbase users as suspected criminals. This action has alarmed people in the cryptocurrency space, many of whom applauded Coinbase's expensive stand against IRS overreach. But the tax agency's mega data-grab is in many ways an inevitable outcome of the IRS's own less-than-ideal tax rules for cryptocurrency. Taxing the Blockchain The IRS was actually one of the earliest agencies to consider cryptocurrency policy, perhaps for obvious reasons. In March of 2014, the agency issued an "IRS Virtual Currency Guidance" detailing the tax requirements for cryptocurrencies. The IRS decided to treat cryptocurrencies as a kind of property, which meant that they enjoyed a lower capital gains tax rate than if they were taxed as a currency. But it also meant that cryptocurrency users would need to keep track of any price movements in between transactions for tax purposes. And what's worse, there would be no "de minimis" tax exemption for very small transactions. So the woman buying her daily cup of coffee with cryptocurrency would have to track price fluctuations as meticulously as the professional financial trader. This created a major reporting burden for casual cryptocurrency users and institutional traders alike. To remain fully compliant with IRS rules, users would need to carefully record price differentials each time that they used cryptocurrency in a transaction. And cryptocurrencies are notoriously volatile, thus adding to the complexity of the tax burden. Service providers like Coinbase and BitPay did their best to provide tools for users that would streamline their tax reporting, and standalone tax tools were developed as well. But cryptocurrency users who did not use such services would need to keep track of this web of information themselves, and even those who did use such tools might inadvertently misreport or forget tiny transactions. Ironically, this cryptocurrency tax arrangement ended up imposing significant costs on the IRS itself (as I pointed out with Coin Center executive director Jerry Brito in our Bitcoin Primer). The agency failed t[...]

Pricing Laws Violate Free Speech

Sat, 21 Jan 2017 10:00:00 -0500

The comedian Gallagher once joked that customers don't like to hear they're being charged more for using credit cards—they'd rather hear they're getting a "discount for cash." But in New York and some other states, it's not just what customers want to hear. Telling customers there's a surcharge to pay by credit card can actually land business owners in jail. Yet it's perfectly legal to tell them something costs less if they pay cash. That, at least, is how New York officials enforced the law, which—read literally—actually only prohibits shopkeepers from charging customers different prices depending on how they pay. Passed in the 1980s, the law is supposedly intended to protect consumers from hidden fees. But business owners must pay processing fees that don't apply to cash transactions. Charging customers to pay that fee makes perfect sense. That's why New York officials didn't punish businesses that said they were giving cash customers a discount. Yet that also means the state was violating the free speech rights of businesses who used the word "surcharge"—which, after all, is the truth. Business owners therefore sued on First Amendment grounds, and the U.S. Supreme Court heard the case last week. The Court has made clear that government can't punish people simply because they express themselves in one way or another. Laws must limit actions, not words. Yet the law's actual language makes no reference to speech. It just says, "No seller…may impose a surcharge on a [customer] who elects to use a credit card." As Justice Stephen Breyer pointed out at the January 10 hearing, that language doesn't seem like a limit on free speech—it's just a kind of price control. How, he asked, could the law violate the First Amendment if it only limits what store owners do, not what they say? Business lawyers answered that however the law may read, it's only enforced when shopkeepers call the price difference a "surcharge," rather than a "discount." But there's a deeper sense in which the New York law violates the Constitution: all price restrictions are limits on free speech. That's because prices are just a way of conveying information. For any product or service on the market, the price is simply a number that represents what the owner is willing to trade for. That number is based on many different factors—how much flour goes into a cake, how much labor goes into a car, how much research goes into a new medical treatment—but ultimately all a price does is convey information about the scarcity of the ingredients that go into that product, and how what other people are willing to give in exchange for that product. As economist Thomas Sowell has put it, "prices are like messengers conveying news." Laws that ban companies from charging what they want don't make products or services cheaper, any more than the government can simply declare that cakes can be baked without flour or cars made without labor. All that price controls do is ban companies from telling people what the products and services are actually worth. Such laws, writes Sowell, "[do] not change the underlying scarcity in the slightest." Price control laws are like painting over the numbers on your speedometer in order to comply with the speed limit. If companies are punished for charging what something is worth, they will just stop selling it. Justice Breyer hinted at this fact in a question to the business's lawyer. Recalling the Depression-era Office of Price Administration, he explained, "Ken Galbraith ran it for a while. And they would—what they would do, he said, is they'd go around and they'd smell what the price was," and "you couldn't charge a higher price. Would you have come in and said, Ken Galbraith[...]

White House Site Relaunches with Trump’s Populist Policy Proposals

Fri, 20 Jan 2017 13:55:00 -0500

The website for the White House has been updated and relaunched to fit the new President Donald Trump administration. It is obviously pretty bare bones for now (you can read his inauguration speech here), but the issues section puts his agenda on open display. For those less interested in speeches and more interested in actual upcoming policy hints, it's worth looking over to see where things are going. He has six sections—energy, foreign policy, jobs, military, law enforcement, and trade. Here's a few interesting things worth noting, both good and bad: The administration will embrace fracking. Sound energy policy begins with the recognition that we have vast untapped domestic energy reserves right here in America. The Trump Administration will embrace the shale oil and gas revolution to bring jobs and prosperity to millions of Americans. We must take advantage of the estimated $50 trillion in untapped shale, oil, and natural gas reserves, especially those on federal lands that the American people own. We will use the revenues from energy production to rebuild our roads, schools, bridges and public infrastructure. Less expensive energy will be a big boost to American agriculture, as well. Unfortunately, but not unsurprisingly, Trump is also "committed" to the white whale of "energy independence." Just as with trade, America benefits when we get energy cheaply no matter where it comes from. It's great that he recognizes that cheaper energy creates jobs (by reducing costs). It's a shame he doesn't realize it's another good that can free Americans up to do other things if we can get it more cheaply elsewhere. The administration will use military action to fight the Islamic State (and increase the size of the military) Defeating ISIS and other radical Islamic terror groups will be our highest priority. To defeat and destroy these groups, we will pursue aggressive joint and coalition military operations when necessary. In addition, the Trump Administration will work with international partners to cut off funding for terrorist groups, to expand intelligence sharing, and to engage in cyberwarfare to disrupt and disable propaganda and recruiting. The Trump administration is also calling to "rebuild" the military even though America still overwhelms every other country's forces, saying "our military dominance must be unquestioned." But he does also call for embracing diplomacy and his saber-rattling here is focused entirely on terrorist groups and has no suggestion of interference in other countries' governance. The administration is calling for a moratorium on new federal regulations. As a lifelong job-creator and businessman, the President also knows how important it is to get Washington out of the way of America's small businesses, entrepreneurs, and workers. In 2015 alone, federal regulations cost the American economy more than $2 trillion. That is why the President has proposed a moratorium on new federal regulations and is ordering the heads of federal agencies and departments to identify job-killing regulations that should be repealed. Tim Carney at the Washington Examiner noticed last night that right as Barack Obama's administration was packing up, the Department of Energy released a new rule that will likely kill off cheap incandescent three-way light bulbs. Libertarians and conservatives who love trade should be doing the best they can to push Trump into focusing on these kinds of issues. This is what is hurting both manufacturers and consumers. Foreign trade makes goods cheaper for Americans and should be supported. All these regulations make both the production and the consumption of goods more expensive. That's where the focus shoul[...]