Mercatus Site Feed en OIRA Quality Control Is Missing for Most Regulations <h5> Publication </h5> <p>Over the last decade, federal regulatory agencies finalized more than 37,000 regulations, yet 92 percent of rules escaped review by the Office of Information and Regulatory Affairs (OIRA), a small office tasked with reviewing significant regulatory actions promulgated by such agencies. Of the roughly 3,000 rules OIRA did review, only 116 have estimates of both benefits and costs appearing in OIRA’s annual report. Relative to the cost of many of these regulations, expecting agencies to analyze benefits and costs before issuing a rule is a fairly low bar to set.</p><p><a href=""> <img src="" /></a></p> <p>The numbers suggest that the analysis of rules reviewed by OIRA is severely lacking in most cases. Of roughly 3,600 rules finalized last fiscal year, only seven had estimates of both benefits and costs appearing in OIRA’s report.</p> <p>By confirming that agency actions are consistent with <a href="">executive orders</a> that set standards for regulatory analysis, OIRA is charged with ensuring that analysis meets minimal levels of quality and that agency rules are informed by those analyses. Each year OIRA puts out a <a href="">report</a> with details on the costs and benefits of the US regulatory system, but the report provides little insight because so many regulations escape review by OIRA. These missing rules also lack OIRA’s critical quality control check.</p> <p>Most rules that avoid OIRA review are not deemed “significant,” meaning they aren’t expected to have large economic impacts, raise novel legal issues, or meet certain other criteria signifying the importance of a regulation. Yet, even if any of these rules by themselves might be small, cumulatively their effects can be large. Even worse, the rules that have estimates of both benefits and costs in OIRA’s report are not necessarily the ones that are most important to the American public. Of fiscal year 2013 rules, OIRA reports benefits and costs for <a href="">a rule</a> that defined “gluten-free” for the purposes of labeling foods that are gluten-free, but four major regulations emanating from the Affordable Care Act do not have any benefit or cost information, and none of the regulations implementing the Dodd-Frank Act have estimates of both benefits and costs. This last point is not surprising, as independent agencies (including most financial regulators) do not have to comply with executive orders setting regulatory analysis standards. Still, these examples suggest the true costs to the public are simply not captured in OIRA’s report.</p> <p>OIRA performs an important role, but its staff is too small (38 at the end of 2013) relative to the hundreds of thousands of employees working in regulatory agencies to provide effective oversight. This means that there is no effective check on the vast majority of regulations, where there is often a total absence of analysis, analysis is ignored in the decision-making, or analysis is made to conform with a predetermined decision.&nbsp;</p> Wed, 01 Oct 2014 14:11:52 -0400 Hazardous Materials: Enhanced Tank Car Standards and Operational Controls for High-Hazard Flammable Trains <h5> Publication </h5> <p class="p1">The proposed rule is promulgated by the Pipeline and Hazardous Materials Safety Administration (PHMSA) of&nbsp;<span style="font-size: 12px;">the Department of Transportation (DOT) and recommends new requirements for trains transporting a large volume&nbsp;</span><span style="font-size: 12px;">of Class 3 flammable liquids (mostly ethanol and Bakken crude).<sup>1</sup>&nbsp;The purpose of this rule is to lessen both&nbsp;</span><span style="font-size: 12px;">the number of train accidents and the consequences that follow when trains carrying flammable liquids spill&nbsp;</span><span style="font-size: 12px;">their contents. The regulation focuses on six areas. The agency’s Regulatory Impact Analysis (RIA) calculates the&nbsp;</span><span style="font-size: 12px;">20-year costs and benefits of the individual provisions of the proposed rule<sup>2</sup>&nbsp;and costs and benefits of combined&nbsp;</span><span style="font-size: 12px;">provisions of the proposed rule.<sup>3</sup>&nbsp; The six areas are:</span></p> <p class="p1">1. Rail routing restrictions</p> <p class="p1">2. Tank car integrity</p> <p class="p1">3. Speed restrictions</p> <p class="p1">4. Braking systems</p> <p class="p1">5. Proper classification and characterization of mined liquid and gas</p> <p class="p1">6. Notification to State Emergency Response commissions (SERCs)<sup>4</sup></p> <p class="p1">The PHMSA has failed to make a case for regulation for the following four reasons. First, the PHMSA fails to show&nbsp;<span style="font-size: 12px;">that there is actually a problem with increased accidents and hence the need for regulation. Second, the PHMSA&nbsp;</span><span style="font-size: 12px;">is working with incomplete data and highly questionable assumptions to provide an economic justification for&nbsp;</span><span style="font-size: 12px;">their regulation. Third, the PHMSA states that the regulation is needed due to market failure, but its own analysis&nbsp;</span><span style="font-size: 12px;">shows that current government policy is likely the cause of the problem. Fourth, the PHMSA fails to consider&nbsp;</span><span style="font-size: 12px;">alternatives such as pipelines or legal liability, which might be safer and more cost-efficient than the proposed rule.</span><span style="font-size: 12px;">&nbsp;</span></p> <p class="p4">ANALYSIS</p> <p class="p4">Issue 1. Failure to show reason for regulation.&nbsp;<span style="font-size: 12px;">The PHMSA claims that the number of accidents occurring with rail cars is increasing and that regulation is&nbsp;</span><span style="font-size: 12px;">needed to reduce them. The draft Notice of Proposed Rulemaking (NPRM) notes that crude oil transported by&nbsp;</span><span style="font-size: 12px;">rail increased 423 percent in one year (2011 to 2012).<sup>5</sup>&nbsp; In 2009, 10,800 rail cars of crude were transported. In 2013,&nbsp;</span><span style="font-size: 12px;">400,000 rail cars of crude were transported. There have also been large increases in ethanol shipment.<sup>6</sup></span></p> <p class="p1">The PHMSA notes that in general, rail accidents involving hazardous materials have declined by 16 percent since&nbsp;<span style="font-size: 12px;">2003. The PHMSA then notes that there were zero mainline train accidents in 2010, but this number increased to&nbsp;</span><span style="font-size: 12px;">five in 2013; hence, the need for regulation. It appears, however, that the inconsistent use of starting dates (2009&nbsp;</span><span style="font-size: 12px;">for oil transport and 2010 for accidents) is driving some of the PHMSA’s conclusions.</span></p> <p class="p3"><a href="">Continue reading</a></p> Wed, 01 Oct 2014 13:06:20 -0400 Banking Regulators Could Use a Lesson in Humility from Hayek <h5> Expert Commentary </h5> <p class="p1">Forty years ago, <a href="">Friedrich August von Hayek received the Nobel Prize in economic sciences</a> for his "pioneering work in the theory of money and economic fluctuations" and for "penetrating analysis of the interdependence of economic, social and institutional phenomena."<a href="">Officially</a> known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, it was first awarded only five years earlier.</p> <p class="p1">In his <a href="">banquet speech</a>, Hayek mused that perhaps such an award never should have been created, lest its recipients think too much of themselves. He told the Nobel Committee that he was "almost inclined to suggest that you require from your laureates an oath of humility, a sort of <a href="">Hippocratic Oath</a>, never to exceed in public pronouncements the limits of their competence." Our regulators should take a similar oath, and I nominate the financial regulators to be the first to take it.</p> <p class="p1">Reshaped by the Dodd-Frank Act, financial regulation has taken a decidedly anti-Hayekian turn. The legislative response to the financial crisis consisted primarily of handing more powers to expert regulators in the hopes that they would prevent the next crisis. A group of these regulators, for example, are part of a new regulatory body, the Financial Stability Oversight Council. The FSOC — informed by the Office of Financial Research, a new governmental data aggregator — must "identify gaps in regulation that could pose risks to the financial stability of the United States."</p> <p class="p1">The FSOC also picks out financial institutions that "could pose a threat to the financial stability of the United States" so that the Federal Reserve can watch over these companies, guide their every move, and try to ensure that they never fail. If the Fed slips up, the Federal Deposit Insurance Corp. stands by to design a special rescue plan under Dodd-Frank's so-called orderly liquidation authority to protect the institution and its favored creditors.</p> <p class="p1">Viewed through the lens of Hayek's <a href="">Prize Lecture</a>, entitled "The Pretence of Knowledge," this financial regulatory regime is troubling. In his lecture, Hayek observed that:</p> <p class="p2">The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men's fatal striving to control society — a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.</p> <p class="p1">Dodd-Frank's financial stability regime, however, is built on the belief that a group of regulators can gather and comprehend enough knowledge to manage our complex financial system. These regulators are charged with using their allegedly superior knowledge to override decisions made by countless individuals and firms in the marketplace. Dodd-Frank is by no means the first statute to displace market-based decision-making. The pre-crisis financial markets were shaped by a messy tangle of market and regulatory forces. But Dodd-Frank allows regulators an even freer hand to substitute their own thinking for the "free efforts of millions of individuals."</p> <p class="p1">The FSOC, the OFR, the Fed, and the FDIC employ very well-educated lawyers and economists, but all that education still leaves them decidedly less knowledgeable than the markets they regulate. Hayek, in his Nobel lecture, remarked that "[w]e are only beginning to understand on how subtle a communication system the functioning of an advanced industrial society is based — a communications system which we call the market and which turns out to be a more efficient mechanism for digesting dispersed information than any that man has deliberately designed." Even after all these years, we still cannot fully appreciate the market's ability to collect and process information. Consequently, we must assess any proposed interference in the market with skepticism.</p> <p class="p1">Defenders of the new regime speak of bringing financial activities out of the shadows and into the regulatory light. Allowing regulators a better view of what is transpiring in the financial markets is fine, but it is more important for regulators not to stand in the way of market participants' access to the information, because they are able to act on it. Regulators are often inclined to keep information from market participants for fear they will act on it. (Think bank to crisis-era regulatory commands that healthy banks take TARP money so that the banks that actually needed it would look as if they were healthy too.)</p> <p class="p1">Especially after a deep financial crisis, it is tempting to believe that we can avoid another by giving regulators additional controls over the financial markets. A more radical — and more effective — approach would have been to acknowledge regulators' limits and embrace the markets' superior ability to make the tough live-or-die, expand-or-contract decisions for financial firms. Doing so would have required eliminating government <a href="">guarantees</a>, <a href="">subsidies</a>, and <a href="">barriers</a> <a href="">to</a> <a href="">entry</a> that interfere with the market's ability to collect, communicate, and act on information.</p> <p class="p1">Four decades after Hayek received the Nobel Prize, there are many corners of the world that have yet to absorb his message of <a href="">humility</a>. To change that, financial regulators and their legislative benefactors should commemorate this two-score anniversary milestone by revisiting Hayek's pioneering work.</p> Tue, 30 Sep 2014 14:48:42 -0400 Regulatory Statistics for the Railroad Sector from RegData 2.0 <h5> Publication </h5> <p class="p1">RegData 2.0, an objective text-based database, offers three simple and replicable measures of regulation, each created with custom-made text analysis software run on the annual <i>Code of Federal Regulations</i>. Each measure can be examined on an agency-by-agency basis. These measures are:</p><p class="p1">1. Search term count</p><p class="p1">2. Restriction count</p><p class="p1">3. Total word count</p> <p class="p1">These metrics of regulation convey information about the agencies creating regulation as well as the industries or sectors mentioned in regulation. RegData 2.0 can produce statistics for hundreds of different regulatory departments, agencies, offices, and commissions. This permits a more complete characterization and measurement of regulatory accumulation for a specific sector.<sup>1</sup> For example, RegData 2.0 tracks how often a sector is mentioned in federal regulation over time, which agencies are mentioning the sector, and what the long-term regulatory trends are in these agencies and for this sector.&nbsp;</p> <p class="p1">The second section of this report explains these metrics in detail and gives some statistics and figures for five agencies. Three of the agencies are housed in the Department of Transportation and were selected because at least some of their regulations directly address railroads or railroad safety. Two agencies were selected from the Department of Labor as a way of examining the relevance and possible overlap of workplace safety regulations to railroad and railroad safety regulations. The third section offers brief concluding remarks. This brief includes a data appendix.</p> <p class="p8"><b>REGDATA METRICS IN DETAIL FOR A SAMPLE OF RAILROAD-RELEVANT AGENCIES</b></p> <p class="p1">For this report, we have limited our analysis to a sample of five agencies that were determined as likely to be important to the railroad industry. Three of the agencies were selected from the Department of Transportation as agencies likely to promulgate regulations that directly address railroads or railroad safety. The other two agencies were selected from the Department of Labor as agencies whose regulations may be directly or indirectly affecting the railroad sector. However, RegData 2.0 could be used to produce statistics similar to those presented here for other agencies within or external to these departments. The RegData metrics of regulation for these agencies and the railroad transportation sector are explained in detail below.</p> <p class="p9"><b>Search Term Count&nbsp;<br /></b><span style="font-size: 12px;">Agency-specific search term counts are available for most industries or sectors in the United States economy. This measure of regulation is created by searching the regulatory text published in the </span><i style="font-family: inherit; font-weight: inherit;">Code of Federal Regulations </i><span style="font-size: 12px;">by each agency for certain terms that are related to specific industries. These search terms are created following an algorithm that generates permutations of the original sector description given by the North American Industry Classification System (NAICS). This algorithm is explained in detail in appendix A of the RegData working paper.<sup>2</sup> For this report, the search terms are limited to those that are related to rail transportation (NAICS code 482). This is a limited set of search terms consisting of: “rail transportation,” “rail transporter,” “rail transporters,” “transportation,” and “rail.” The final result—the variable “search term count”—contains the total number of times these terms were found in the relevant text.<sup>3</sup></span></p> <p class="p6">When applied to specific agencies, search term count measures how often an agency uses these sector or industry-specific search terms each year. The user can compare the relevance of different agencies to an industry by comparing search term counts. In general, the more search terms for a specific industry or sector are found in an agency’s text, the more relevant that agency’s text to that industry or sector.&nbsp;</p> <p class="p1">Furthermore, changes in search term counts over time likely indicate changes in the relevance of the agency’s text to the industry or sector. Thus, if an agency’s search term count for the rail transportation sector is increasing over time, then it is likely that an increasing amount of that agency’s text is relevant to the rail transportation sector. Note that simply finding a search term may not indicate that the industry was restricted in some cases because search terms could be used in exemption clauses or as information only.</p> <p class="p1">Figure 1 below shows the total number of times railroad search terms were found in each year from 1997 to 2012 in the regulatory text of the five agencies studied in this report (Federal Motor Carriers Safety Administration [FMCSA], Federal Railroad Administration [FRA], Mine Safety and Health Administration [MSHA], Occupational Safety and Health Administration [OSHA], and Pipelines and Hazardous Material Safety Administration [PHMSA]4). The data plotted in figure 1 is the aggregate search term count for all five of these agencies.</p> <p class="p10">As figure 1 shows, railroad search terms were found 3,644 times in these five agencies’ regulations in 1997. In 2012, the same search terms were found 5,319 times—a 46 percent increase. By way of comparison, all other agencies (that is, all federal agencies except the five shown in figure 1) mentioned railroad search terms 18,128 times in 1997 and 20,586 times in 2012—an increase of 14 percent.</p><p class="p10"><a href=""><img height="438" width="585" src="" /></a></p><p class="p10"><a href="">Continue reading</a></p> Tue, 30 Sep 2014 14:34:07 -0400 Public Data Suggest Ex-Im Bank Is Not for Everyone <h5> Publication </h5> <p class="p1">Defenders of the Export-Import Bank sometimes counter criticisms of cronyism by arguing that anyone can apply for its subsidies. This claim is not only technically incorrect—Ex-Im Bank’s <a href="">charter</a> clearly prohibits certain industries, projects, and countries from receiving assistance—it is also not very meaningful. To determine whether Ex-Im assistance is truly “for everyone,” we must look at the distribution of assistance.</p><p class="p1"><a href=""><img src="" width="585" height="424" /></a></p> <p class="p1">This week’s charts use data from the <a href="">Export-Import Bank</a> and the <a href="">Census Bureau</a> to display assistance dispersion among minority- and women-owned exporting firms as a proportion of those in the general economy, along with the top 10 firms that receive assistance and the proportion of their benefits to the whole. The charts show that despite the rhetoric, Ex-Im assistance primarily benefits a handful of large corporations while barely penetrating the demographics that are <a href="">used to justify the Ex-Im Bank’s existence</a>.</p> <p class="p1">The first chart compares Ex-Im data on the number of minority-owned exporting firms and export value supported by Ex-Im Bank to the total number of minority-owned firms and export value in the US economy as reported by the <a href="">Census</a>. The data are from 2007, which is the most recent year for which the Census report is currently available. The circle to the left compares the portion of Ex-Im-backed minority-owned exporting firms (in purple) to the total number of minority-owned exporting firms in the entire economy (in blue). Less than one percent of the 28,531 minority-owned exporting firms in the United States receive any Ex-Im assistance. The circle to the right compares the portion of Ex-Im-backed minority-owned export value (in yellow) to the total amount of minority-owned export value in the entire economy (in pink). A little over two percent of the $30.6 billion in total minority-owned export value received Ex-Im assistance that year. The chart shows that Ex-Im Bank is hardly responsible for the successes of minority-owned exports.</p><p class="p1"><a href=""><img height="398" width="585" src="" /></a></p> <p class="p4">The second chart uses the same datasets to display Ex-Im Bank’s influence on women-owned exporting firms. The circle to the left compares the portion of Ex-Im-backed women-owned exporting firms (in purple) to the total number of women-owned exporting firms in the economy (in blue). Again, less than one percent of the 19,739 women-owned exporting firms in the United States receive any Ex-Im assistance. The circle to the right compares the portion of Ex-Im-backed women-owned export value (in yellow) to the total amount of women-owned export value in the economy (in pink). Almost three percent of the $15.1 billion in total women-owned export value received Ex-Im assistance that year. The chart shows that Ex-Im Bank does not significantly influence the overall number and exports of women-owned exporting firms, either.</p><p class="p4"><a href=""><img src="" width="585" height="398" /></a></p> <p class="p4">The final charts above display the top 10 corporations that received Ex-Im assistance in 2007 and 2013, using public <a href="">Ex-Im data</a>. The top beneficiaries are displayed by descending order of benefits on the left, along with the total assistance received for that year, while each beneficiary’s percentage share of total Ex-Im benefits for the year is displayed on the right. The charts show that the vast majority of Ex-Im assistance goes to large corporations rather than small businesses, minority-owned exporters, or woman-owned exporters. In 2007, a little over $7 billion, or 57 percent, of the total $12.4 billion in assistance went to 10 companies. In 2013, $17.4 billion, or 64 percent, of the total $27.4 billion in assistance accrued to the top 10 beneficiaries. In both cases, Boeing leads the pack, pulling in 36 percent of all funds in 2007 and 30 percent of all funds in 2013.</p> <p class="p4">These charts suggest that while a wide variety of exporters might be eligible to apply for Ex-Im assistance in theory, in practice its subsidies tend to benefit many of the same large corporations year after year. Ex-Im Bank’s negligible penetration into minority- and woman-owned exporting markets suggests that its priorities lay elsewhere. Supporters who claim that Ex-Im Bank primarily benefits the average person and is fairly distributed to all do not have the data on their side.</p> Tue, 30 Sep 2014 15:59:20 -0400 Blackout Repeal Heads in the Right Direction <h5> Expert Commentary </h5> <p class="p1">Today’s announcement that the Federal Communication Commission is ending its sports blackout rule after nearly 40 years is a step in the right direction, according to <a href="">Brent Skorup</a>, a research fellow at the Mercatus Center at George Mason University.&nbsp; Skorup says that overturning these rules will &nbsp;make media companies freer to respond to consumer demands and changing viewing technologies.</p> <p class="p1"><b>“After today’s rule repeal goes into effect, sports blackouts will occur only when the leagues and networks believe a blackout makes business sense—not because the government says certain games must be withheld from consumers,”</b> said Skorup.&nbsp;</p> <p class="p1"><b>“Hopefully the FCC won’t stop with the repeal of sports blackout rules. Many more TV regulations are designed for the rabbit-ears antenna era and harm consumers who live in an entertainment world of hundreds of TV channels, online video from sources like Netflix and YouTube, and access to television nearly anywhere from smartphones and tablets. The thriving marketplace for media content and distribution—not government mandates like the sports blackout rule—should determine when and how Americans watch television.”</b></p> Tue, 30 Sep 2014 12:00:40 -0400 Bad Arguments for Good Policy <h5> Expert Commentary </h5> <p class="p1">History and sound analysis supply many reasons for those of us who celebrate mass prosperity to support free markets. Yet champions of free markets sometimes offer bad arguments to support their positions. These bad arguments only damage the case for free markets.</p> <p class="p2">One bad argument is that high tariffs and other forms of protectionism decrease the number of jobs in the home market.</p> <p class="p2">In fact, protectionism does <i>not </i>decrease employment. Nor, however, does protectionism increase employment. What protectionism does is <i>shift </i>workers from jobs that are more productive into jobs that are less productive.</p> <p class="p2">The number of jobs in an economy is determined by the size of that economy's labor force and by conditions in the domestic labor market. For example, government policies, such as ObamaCare, that artificially raise firms' costs of employing workers will result in fewer domestic jobs.</p> <p class="p2">But preventing consumers from buying foreign-made products neither causes workers to leave the workforce nor raises firms' costs of hiring workers. Such protectionist policies merely increase demand for workers in the protected industries. But these workers are drawn to these protected industries from other domestic industries.</p> <p class="p2">The bottom line is that the case for free trade is harmed, not helped, whenever champions of free trade assert that protectionist policies mean fewer jobs.</p> <p class="p2">Another bad argument often made by some advocates of free markets is that raising the minimum wage causes inflation. Minimum-wage legislation is responsible for a bevy of awful outcomes, but higher inflation is not among them.</p> <p class="p2">Inflation is a fall in money's purchasing power. It's caused by an increase in the supply of money. Because raising the minimum wage does not cause the money supply to increase, raising the minimum wage does not cause inflation.</p> <p class="p2">It's true that raising the minimum wage causes <i>some </i>prices to rise. Specifically, the higher the minimum wage, the higher are the prices charged by firms that employ large numbers of low-skilled workers, such as supermarkets and fast-food restaurants. Raising the minimum wage raises these firms' operating costs. The result is higher prices charged by these firms.</p> <p class="p2">But to pay these higher prices, consumers must spend less money buying other products. The prices of these other products, therefore, wind up being lower than they would be otherwise. Overall, the price level remains unchanged. There is no inflation.</p> <p class="p2">Yet another mistaken argument often made by free-market types is that America was saved from the Great Depression by World War II. This argument is offered to refute the claim that the Depression was ended by New Deal policies.</p> <p class="p2">It's true that New Deal policies did not end the Depression; in fact, such policies made the Depression worse. But entry into World War II also did not end the Depression.</p> <p class="p2">Entry into the war did reduce unemployment, of course, because many men were drawn into the military. Yet there's no evidence that the private economy improved during the war years. Quite the contrary.</p> <p class="p2">As economist Robert Higgs has shown, the U.S. economy emerged from the Depression starting in 1946, only after the increasingly socialist FDR was replaced by the more middle-of-the-road Truman and the GOP won both houses of Congress.</p> Tue, 30 Sep 2014 10:53:32 -0400 A December to Remember? <h5> Expert Commentary </h5> <p class="p1">In what has become a recent tradition in Washington, Congress will again be using a lame-duck session to finish the business it was unable to complete before members left town to hit the campaign trail. And this year’s agenda will include a host of important issues – from funding the government to extending numerous tax breaks – that Congress didn't get to in the regular session.</p> <p class="p1">This will give outgoing members – those who have retired and those who have been voted out – an opportunity to return to Washington to vote one last time. These members will be unencumbered by the typical pressures of office, and we will have an opportunity to see where these legislators’ priorities really lie.</p> <p class="p1">In a typical congressional session, a legislator faces a number of pressures. And not all of them are good.</p><p class="p1"><a href="">Continue reading</a></p> Mon, 29 Sep 2014 14:53:18 -0400 Curbing the Surge in Year-End Federal Government Spending: Reforming ‘Use It or Lose It’ Rules <h5> Publication </h5> <p class="p1">The “use it or lose it” phenomenon refers to the propensity of US government agencies to spend unused financial resources toward the end of the fiscal year out of fear that leftover resources will be returned to the Department of the Treasury and will prompt future congressional budget cuts for the agency. While anecdotes and media stories of year-end spending surges are widespread, empirical evidence for year-end spending surges and use-it-or-lose-it spending or the motivation behind it is significantly less available. As we discuss in the next section, while the budget and spending literature has examined the efficacy of various policy solutions designed to curb year-end spending surges, these studies often lack empirical evidence. In this paper, we examine existing literature on the prevalence, consequences, wastefulness, and causes of year-end spending surges. We then report executive departments’ year-end obligated federal contract expenditure patterns, using data obtained from We review literature on purported solutions to curb year-end spending and conclude with a policy recommendation.<b style="font-family: inherit; font-style: inherit;">&nbsp;</b></p> <p class="p1"><b>Literature Survey on Year-End Spending Surges and Whether Use It or Lose It Is to Blame</b></p> <p class="p1">Research suggests that year-end spending surges may facilitate wasteful spending. In a 2007 survey of Department of Defense financial management and contracting careerists, 95 percent of the respondents believe there is a problem with year-end agency spending. In their 2013 paper, economists Jeffrey Liebman and Neale Mahoney analyze data from the Federal Procurement Data System and the White House’s IT Dashboard to show not only that is there a surge in federal spending at the end of the year, but also that this spending is of lower quality. According to Liebman and Mahoney, at the end of a fiscal year, “the prospect of expiring funds” causes agencies to spend all their remaining resources, “even if the marginal value is below the social costs of funds (our definition of wasteful spending).”</p> <p class="p3">In 1998, the US General Accounting Office (GAO) reported that the number of year-end spending surges had declined since 1980, when Congress and the GAO first looked at the issue. Among more than 3,200 Inspectors General reports, the GAO found only one that linked poor contracting practices with a high rate of year-end spending. However, the GAO cautions that its analysis is limited because of “agencies’ widespread reporting noncompliance” and “the absence of complete and accurate reporting” of agencies’ spending. A 2007 study partially confirmed the existence of year-end spending surges on the federal level by analyzing the spending patterns of military hospitals that are completely reliant on congressional appropriations for funding.</p> <p class="p3">However, some observers point out that little empirical evidence exists to prove that there is a link between year-end spending surges and the US federal budget process. A panel of budget experts at the International Public Management Network Symposium largely concluded that while year-end spending surges exist, little empirical evidence supports the use-it-or-lose-it phenomenon. Panel member Fred Thompson of Willamette University calls the use-it-or-lose-it phenomenon’s key premise—that fears of future budget cuts drive exhaustive spending—an “urban legend.” He points to the timing of the budget process, explaining that budget proposals are “formulated during the prior fiscal year and enacted into law well before the books [close] on the current year.” He also argues that because year-end spending surges exist at agencies in state governments and in Canada, US federal budgeting patterns cannot be a unique source. Panel member Robert D. Behn of Harvard University argues that year-end spending surges may in fact be “socially optimal” and doubts the assumption that they are inherently wasteful.</p><p class="p3"><a href=""><img src="" width="585" height="469" /></a></p> <p class="p4"><a href="">Continue reading</a></p> Tue, 30 Sep 2014 10:19:37 -0400 Net Neutrality and Maintaining a Free and Open Internet <h5> Video </h5> <iframe width="480" height="360" src="//" frameborder="0" allowfullscreen></iframe> <p>Net neutrality regulations would mandate that essentially all data on the Internet be treated the same by Internet service providers (ISPs), with many supporters calling on the FCC to prohibit “Internet fast lanes.” But are there situations in which different treatment of broadband traffic is good? What role should the government play in ever-changing broadband markets?</p><div class="field field-type-text field-field-embed-code"> <div class="field-label">Embed Code:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> &lt;iframe width=&quot;480&quot; height=&quot;360&quot; src=&quot;//; frameborder=&quot;0&quot; allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> Fri, 26 Sep 2014 11:41:25 -0400 Adam Thierer Discusses Ridesharing on Stossel <h5> Video </h5> <iframe width="580" height="360" src="//" frameborder="0" allowfullscreen></iframe> <p>Adam Thierer Discusses Ridesharing on Stossel</p><div class="field field-type-text field-field-embed-code"> <div class="field-label">Embed Code:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> &lt;iframe width=&quot;580&quot; height=&quot;360&quot; src=&quot;//; frameborder=&quot;0&quot; allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> Tue, 30 Sep 2014 14:14:57 -0400 How Lame Are Lame Ducks? <h5> Publication </h5> <p>A lame duck session of Congress occurs when legislators meet after an election has been held but before the next Congress has taken office.<sup>1</sup> Lame duck sessions are often criticized by the victorious party in the election, and a common critique is that the lame duck members—undisciplined by electoral constraints—vote irresponsibly. There are subtle but statistically significant differences between voting patterns in regular and lame duck sessions, as revealed by analysis of over 50,000 House and Senate roll call votes.</p> <p class="p1">During a lame duck session, members are slightly less likely to side with their own parties and less likely to vote at all. These patterns persist in <i>very</i><i> </i>lame duck sessions—those that take place following the loss of majority status within a single house. In these sessions, however, a new pattern emerges: House members become more likely to cast bipartisan votes and Senators become less likely to do so. Beyond these voting patterns, it is difficult to say whether members vote more or less “responsibly” during lame duck sessions of Congress. Our analysis supports the primary findings of the existing literature on lame ducks. Past studies have found lame duck legislators to be less likely to indulge most special interests, but others suggest they may be more likely to indulge one particular special interest: their next employers. In this study, we explain how incentives change for lame duck legislators, briefly review past research on lame ducks, and present our statistical findings that support and add to the existing literature.<span style="font-size: 12px;">&nbsp;</span></p> <p class="p3">WHAT MAKES A LAME DUCK SESSION SPECIAL?</p> <p class="p4">Lame duck sessions differ from regular legislative sessions in that some members will have lost their reelection bids and others will be on the brink of retirement.</p> <p class="p5">For many, the mere presence of members who will not be returning is prima facie evidence that lame duck sessions are undesirable. As Yale Law professor Bruce Ackerman says, “It is utterly undemocratic for repudiated representatives to legislate in the name of the American people.”<sup>2</sup> Indeed, John Nagle of Notre Dame has demonstrated that these sorts of concerns animated the push for the 20th Amendment, which, after 1933, eliminated the long and mandatory lame duck session that had followed each election since the founding of the Republic.<sup>3</sup></p> <p class="p6">The force of this critique is blunted by the fact that the vast majority of members win their reelections: Since 1962, just 6 percent of congressmen and 13 percent of senators have lost reelection.<sup>4</sup> And in the average session, only about 5 percent of members retire.<sup>5</sup> So most legislators who sit during a lame duck session will have just passed an electoral test. A large body of literature examines the reasons that incumbents are unlikely to lose their seats. These factors include name-recognition, a fundraising advantage, and uncompetitive, gerrymandered districts.<sup>6</sup> Current estimates suggest the incumbent advantage is between eight and ten percentage points.<sup>7</sup></p> <p class="p7">Among those members who do retire or lose their reelection bids, lame duck sessions might be expected to alter incentives for a number of reasons:</p><p class="p7">1. Nonreturning members may feel less of an obligation to serve the interests of their constituents since they no longer need their approval for reelection. Depending on your point of view, this may result in more “ideological” votes or more “principled” votes. It’s also likely to result in diminished work effort.</p><p class="p7">2. Nonreturning legislators are also free to ignore whatever political bargains (commonly called “logrolls”) they have struck with their fellow members, especially party leaders. This has an ambiguous effect on public welfare because, on the one hand, logrolls tend to facilitate policies that favor parochial interests, but on the other hand, logrolls can also help minority interests register intense preferences.<sup>8</sup></p><p class="p7">3. These members may feel less pressure to cater to special interests whose financial and organizational support is often needed for political success. This may make lame ducks more likely to serve the general population.</p><p class="p7">4. There is an important caveat to the previous factor: nonreturning members may be <i>more</i><i> </i>likely to cater to the interests of one particular special interest—their next employers. And for many ex-members, this next employer is a lobbyist or a client of a lobbyist.<sup>9</sup></p> <p class="p15">On balance, it is not clear whether these altered incentives are likely to produce better or worse public policy.</p> <p class="p16">Empirical evaluation of lame duck sessions is complicated by the fact these sessions occur at the end of the year, when more complex and controversial bills are likely to come up for a vote. This is because large, complex pieces of legislation take longer to assemble and controversial legislation takes longer to whip. It is possible, therefore, that votes cast near the end of the year will tend to be more momentous and more controversial, whether they take place during an election year or not. For this reason we believe it important to control for any confounding “time of year” effect when assessing the influence of lame duck sessions on voting patterns.</p><p class="p1">WHAT DO WE KNOW ABOUT LAME DUCK VOTING PATTERNS?</p> <p class="p2">In recent years, a number of researchers have documented differences in voting patterns between regular and lame duck sessions of the House of Representatives.<sup>10 </sup>These authors have found House members less likely to participate in roll call votes and more likely to cast votes that are inconsistent with the ideological wishes of their party leaders. There is also some evidence that members who do not face electoral constraints are more likely to ignore the ideological wishes of their constituents.<sup>11&nbsp;</sup></p> <p class="p2">We build on this research, extending it to the Senate and introducing controls to account for different voting patterns that might emerge at the end of the year, whether members are voting in a lame duck session or not. We also assess the effect of a “very lame duck” session, i.e., one that takes place following the loss of majority status in the chamber.&nbsp;</p> <p class="p2">Our analysis is based on more than 28,000 House and 22,000 Senate roll call votes from 1939 through 2013.<sup>12</sup> A roll call vote is a recorded, chamber-wide vote on any measure. It could be a vote on the final passage of a bill, an amendment, or a procedural vote.&nbsp;</p><p class="p2"><a href=""><img height="400" width="585" src="" /></a></p> <p><a href="">Continue reading</a></p> Tue, 30 Sep 2014 16:27:39 -0400 Judge to CFTC: Heads You Win, Tails You Win Too <h5> Expert Commentary </h5> <p class="p1">Last week was a big week for the Commodity Futures Trading Commission. As Commissioner Sharon Bowen <a href=""><b>pointed out</b></a>, the CFTC held its first meeting at which "all of the Commissioners have arrived after passage of the Dodd Frank Act." Also this week, a judge largely upheld CFTC guidance regarding the extraterritorial application of CFTC rules governing swaps (a type of derivative). In doing so, the judge gave the freshly minted CFTC commissioners a green light to continue the bad practices of their predecessors.</p> <p class="p1">The lawsuit, which was brought by several industry organizations, came in response to an 80-page, 650-footnote CFTC guidance document that-along with some letters issued by the CFTC staff-defined the scope of the agency's extraterritorial jurisdiction. The industry argued that the CFTC essentially wrote a binding rule without calling it a rule and thus avoided requirements that govern binding rulemaking.</p> <p class="p1">The judge thought the CFTC's approach was just fine: The CFTC's guidance "looks, walks, and quacks like a policy statement," not like a binding rule. This conclusion rested in part on the agency's assurances to the judge that it did not consider <i>itself</i> to be bound by the policy statement. It could depart from it whenever it wanted. As the court sees it, companies also can choose not to be bound by the guidance. Sure, the CFTC's last chairman <i>told</i> companies that they should comply with it, but that "encouragement merely conveys the CFTC's understandable desire that market participants voluntarily comply with the otherwise nonbinding policies within the Cross Border Action."</p> <p class="p1">Since the guidance isn't binding, the industry can't challenge it in court. The CFTC also avoids the accountability that comes from statutory requirements to involve the public in the rulemaking process and analyze the costs and benefits of the guidance.</p> <p class="p1">The plaintiffs superficially prevailed in the part of the case that involved indisputably binding rules. Because they are binding, the CFTC did a cost-benefit analysis, but the court held that the CFTC failed to do an adequate job. Rather than voiding the rules, the judge sent the CFTC back for a second try at the cost-benefit analysis. The court made it clear, however, that all the CFTC needs to do is check a few boxes.</p> <p class="p1">To see why all this procedural stuff matters, let's go back to last week's CFTC meeting. One of the items on the agenda was reversing-in the <a href=""><b>words</b></a> of Commissioner Christopher Giancarlo-"a regulatory action inspired by the Dodd-Frank Act [that] would have increased utility rates for millions of Americans." That is the type of problem that could have been flagged through a rigorous cost-benefit analysis before the rule was adopted. Instead, the CFTC put its rule out only to discover that it would prevent utilities from protecting themselves from risks. The message from the judge, however, is that the CFTC need only do a superficial cost-benefit analysis to check the statutory box, rather than a meaningful analysis to productively inform rulemaking and identify market disruptions before they happen.</p> <p class="p1">The second matter on the meeting agenda was the re-proposal of a rule governing margin on uncleared swap transactions. That proposal has some positive elements, but it could partially depart from the course set in the cross-border guidance. Commissioner Wetjen <a href=""><b>cautioned</b></a> his colleagues not to forget "that many operational and compliance decisions have been made with significant costs incurred by firms ... pursuant to the cross-border guidance."</p> <p class="p1">Commissioner Wetjen recognizes something the court failed to: When the CFTC puts out a statement telling firms what they have to do, firms go to great lengths and expense to comply with it. The judge can call it nonbinding, but there is nothing voluntary about it for the industry. Of course, now with the court's blessing, the CFTC can change the guidance whenever it wants.</p> <p class="p1">The court's ruling just encourages the CFTC to continue using statements that don't bind itself to bind the industry. Likewise, the court encourages the agency to continue treating cost-benefit analysis as a fill-in-the-blank exercise rather than a rigorous examination. That is hardly a model of good government. In its policymaking endeavors, the newly reconstituted CFTC should voluntarily embrace strong rulemaking procedures, instead of the court's form-over-substance alternative.</p> Tue, 30 Sep 2014 09:29:03 -0400 No Free Lunch: Ex-Im Winners and Losers <h5> Publication </h5> <p class="BasicParagraph">Supporters of the Export-Import Bank (Ex-Im) are quick to tout the alleged benefits that its policies bring to the few firms that receive assistance, but they rarely consider who might be harmed by these export credit subsidies and by how much.</p> <p class="BasicParagraph"><a href=""><img height="426" width="585" src="" /></a></p><p class="BasicParagraph"><a href=""></a><span style="font-size: 12px;">This week’s chart uses data from a new </span><a style="font-size: 12px;" href="">Cato Institute study</a><span style="font-size: 12px;"> quantifying some of the industrial “winners” and “victims” of Ex-Im subsidy policies. The chart shows that Ex-Im policies benefit far fewer industries than they penalize. Out of 236 industries (defined at the six-digit level of the North American Industry Classification System [NAICS]), 189 are victims, incurring a combined annual net cost of almost $3 billion, while Ex-Im provides subsidies to its chosen firms to the tune of over $4 billion. This, however, measures only direct costs and ignores other costs that flow from distortions in investment and other choices as a consequence of&nbsp; Ex-Im’s actions.</span></p> <p class="BasicParagraph">Economist Daniel Ikenson estimates the relative cost disadvantage imposed on the US competitors of Ex-Im–subsidized foreign companies using seven years of Ex-Im transactions records and official input-output tables from the Bureau of Economic Analysis. As Ikenson explains:</p> <p class="BasicParagraph">When a foreign farm machinery producer purchases steel on credit at subsidized interest rates, it obtains an advantage over its competitors—including its U.S. competitors. So, when that subsidized rate comes courtesy of a U.S. government program committed to increasing U.S. exports, it only seems reasonable to consider the effects on firms in downstream U.S. industries before claiming success. Has the subsidy to the foreign farm machinery producer made John Deere, Caterpillar, New Holland, or other U.S. farm machinery producers less competitive? Has it hurt their bottom lines?</p> <p class="BasicParagraph">Ikenson calculated the “benefit” of Ex-Im subsidies to a given industry as the aggregate of Ex-Im subsidies for all companies in that industry. The downstream cost of the Ex-Im subsidy to each industry was calculated as the benefits accruing to all of its supplier industries, weighted by the relative importance of each input to the industry’s output, and then aggregated.</p> <p class="BasicParagraph">To discern which industries “win” and which industries “lose” under Ex-Im industrial policy, Ikenson calculates the net benefit for each, which is equal to the gross benefits (or the benefits that Ex-Im claims for each NAICS industry in its annual reports) minus the downstream industry costs. A positive net benefit indicates that an industry benefits more than it loses from Ex-Im subsidies and is therefore a “winner.” Industries with negative net benefits, on the other hand, are “victims” of Ex-Im subsidies. Ikenson notes that he simply takes the total benefits reported by Ex-Im as a given; it is likely that benefits are less or even greater than reported in some cases. However, Ikenson decided to accept their reported benefits in order to focus on what he sees as the greater error of ignoring downstream industry costs.</p> <p class="BasicParagraph">The chart displays the results of Ikenson’s analysis. His study yielded 189 industries that are net “victims” of Ex-Im policy, represented in green, and a mere 47 industries that are net “winners,” represented in red. The total amount of subsidies, costs and net benefits from 2007 to 2013, along with the annualized net benefits for each category, are displayed on the chart from left to right.</p> <p class="BasicParagraph">The chart shows that Ex-Im subsidies impose net downstream costs on far more industries than they benefit. Each year, the 189 victim industries of Ex-Im incur costs of roughly $2.8 billion because of distorting industry subsidies. The 47 winner industries, on the other hand, enjoy net benefits of roughly $4.2 billion each year.</p> <p class="BasicParagraph">The chart and study show that Ex-Im is far from a free lunch. Its subsidies impose billions in downstream costs on hundreds of industries each year. What’s more, Ikenson’s study only analyzed one kind of economic cost: the downstream costs. The study did not consider the costs imposed on domestic manufacturers who compete with Ex-Im–subsidized domestic exporters, nor does it consider what alternative opportunities might have been otherwise viable in the absence of subsidies. If these indirect costs are factored in, the total true costs of Ex-Im subsidies could be even greater.</p> <p class="BasicParagraph"><span style="font-size: 12px;">Proper debate on trade policy will consider the benefits and the costs of Ex-Im before attempting to claim that it is a good deal for all Americans. This chart shows that the costs of Ex-Im are substantial, a point that has not been fully acknowledged throughout the debate.</span></p> Thu, 25 Sep 2014 12:00:49 -0400 Federal Aviation Administration Interpretation of the Special Rule for Model Aircraft <h5> Publication </h5> <p class="p1"><span style="font-size: 12px;">As part of the FAA Modernization and Reform Act of 2012 (FMRA),<sup>1</sup> Congress ordered the Federal Aviation&nbsp;</span><span style="font-size: 12px;">Administration (FAA) to integrate unmanned aircraft systems (UASs)—sometimes referred to as drones—into the&nbsp;</span><span style="font-size: 12px;">National Airspace System by September 2015. As part of that effort, the FAA is currently accepting comments on&nbsp;</span><span style="font-size: 12px;">its “Interpretation of the Special Rule for Model Aircraft” (Section 336 of the FMRA) and the FAA’s enforcement&nbsp;</span><span style="font-size: 12px;">authority over model aircraft as affirmed by the statute.<sup>2</sup></span></p> <p class="p2">The Technology Policy Program of the Mercatus Center at George Mason University is dedicated to advancing&nbsp;<span style="font-size: 12px;">knowledge of the impact of regulation on society. As part of its mission, the program conducts careful and independent&nbsp;</span><span style="font-size: 12px;">analyses employing contemporary economic scholarship to assess rulemaking proposals from the perspective&nbsp;</span><span style="font-size: 12px;">of the public interest. Therefore, this comment on the FAA’s “Interpretation of the Special Rule for Model Aircraft”&nbsp;</span><span style="font-size: 12px;">does not represent the views of any particular affected party or special interest group but is designed to assist the&nbsp;</span><span style="font-size: 12px;">administration as it carries out Congress’s mandate to safely integrate UASs into the National Airspace System.</span></p> <p class="p4"><span style="font-size: 12px;">In this brief comment, we discuss the need for the agency to conduct a thorough review of the benefits and costs&nbsp;</span><span style="font-size: 12px;">associated with this rule. We argue this is essential because airspace is poised to become a major platform for&nbsp;</span><span style="font-size: 12px;">innovation if the agency strikes the right balance between safety and innovation. To achieve that goal, we stress&nbsp;</span><span style="font-size: 12px;">the need for flexibility and humility in interpreting older standards, such as “line of sight” restrictions, as well&nbsp;</span><span style="font-size: 12px;">as increasingly archaic “noncommercial” vs. “commercial” distinctions or “hobbyists” vs. “professional” designations.</span></p> <p class="p2">We also highlight the growing tension between the agency’s current regulatory approach and the First&nbsp;<span style="font-size: 12px;">Amendment rights of the public to engage in peaceful, information-gathering activities using these technologies.&nbsp;</span><span style="font-size: 12px;">Finally, we close by noting the important role that voluntary self-regulation and codes of conduct already play&nbsp;</span><span style="font-size: 12px;">in governing proper use of these technologies. We also argue that other “bottom-up” remedies are available and&nbsp;</span><span style="font-size: 12px;">should be used before the agency imposes additional restrictions on this dynamic, rapidly evolving space.</span></p> <p class="p1">BENEFIT-COST ANALYSIS NEEDED</p> <p class="p2">Before addressing the substance of the rule at issue here, we wish to remind the agency that it is required to&nbsp;<span style="font-size: 12px;">conduct a formal benefit-cost analysis (BCA) of any “significant regulatory action” it undertakes.<sup>3</sup> As defined by&nbsp;</span><span style="font-size: 12px;">Executive Order 12866, a “significant regulatory action” includes rules or guidelines that “have an annual effect&nbsp;</span><span style="font-size: 12px;">on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy,&nbsp;</span><span style="font-size: 12px;">productivity, competition, jobs, the environment, public health or safety, or state, local or tribal government&nbsp;</span><span style="font-size: 12px;">or communities.”<sup>4</sup> A “significant regulatory action” can also include regulatory actions that “raise novel legal or&nbsp;</span><span style="font-size: 12px;">policy issues.”<sup>5</sup></span></p> <p class="p2">Although the exact economic ramifications of integrating commercial drones into the national airspace is uncertain,&nbsp;<span style="font-size: 12px;">there have been numerous assessments of the potential impact this technology would have on the US economy.&nbsp;</span><span style="font-size: 12px;">The Association for Unmanned Vehicle Systems International (AUVSI), for example, estimates that between&nbsp;</span><span style="font-size: 12px;">2015 and 2025, the integration of unmanned aerial systems into the national airspace “is expected to contribute&nbsp;</span><span style="font-size: 12px;">$82.1 billion to the nation’s economy by agriculture, public safety, and other activities.” These benefits run the&nbsp;</span><span style="font-size: 12px;">gamut from over 100,000 new high-paying ($40,000 or more per year) jobs created in aerospace manufacturing&nbsp;</span><span style="font-size: 12px;">to almost 850,000 job years worked over that period.<sup>6</sup></span></p> <p class="p2">The FAA has not yet undertaken a comprehensive benefit-cost analysis of the rule in question. Such an analysis&nbsp;<span style="font-size: 12px;">would help determine how new regulations in this space could affect the market for this evolving class of technologies&nbsp;</span><span style="font-size: 12px;">as well as how these technologies might impact the broader economy or other important values. This&nbsp;</span><span style="font-size: 12px;">is particularly true as the distinction between model aircraft and other types of unmanned aircraft systems is&nbsp;</span><span style="font-size: 12px;">rapidly blurring.</span></p> <p class="p2">The agency may believe that the matter under review is merely an interpretative exercise requiring no formal BCA&nbsp;<span style="font-size: 12px;">review at this time. Nonetheless, as noted below, the agency’s “Interpretation” could indeed result in the sort of&nbsp;</span><span style="font-size: 12px;">significant economic impacts and novel legal issues contemplated by Executive Order 12866. Consequently, the&nbsp;</span><span style="font-size: 12px;">agency should not avoid formal BCA but instead take this opportunity to consider the ramifications of its actions&nbsp;</span><span style="font-size: 12px;">in this matter.<sup>7</sup></span></p><p><a href="">Continue reading</a></p> Tue, 23 Sep 2014 14:31:46 -0400 Transparency of Airline Ancillary Fees and Other Consumer Protection Issues <h5> Publication </h5> <p class="p1">The Department of Transportation (DOT) proposes, among other things, to expand the definition of ticket agent&nbsp;<span style="font-size: 12px;">to include entities that display airline schedules and fares on their websites and apply DOT consumer protection&nbsp;</span><span style="font-size: 12px;">rules to them, to require all such websites to disclose the fees associated with a specific set of services early in t</span><span style="font-size: 12px;">he flight search process, and to prohibit certain types of biasing in schedule and fare displays. The proposed rule&nbsp;</span><span style="font-size: 12px;">requires sellers of travel to offer information and disclosures in a uniform manner.</span></p> <p class="p1">We disagree with this approach for the following reasons:</p> <p class="p1">First, the DOT is proposing to intervene in a market without presenting credible evidence of a problem that needs&nbsp;<span style="font-size: 12px;">government intervention. The DOT has not successfully made the case that airline ticket buyers need the information&nbsp;</span><span style="font-size: 12px;">required by the proposed rule for every trip they consider.</span></p> <p class="p2"><span style="font-size: 12px;">Second, there is ample evidence that airlines, travel agents, and information services companies are already acting&nbsp;</span><span style="font-size: 12px;">to help consumers in their travel choices. A growing number of websites make travel easier by providing relevant&nbsp;</span><span style="font-size: 12px;">information to potential travelers. The trend in the market—exemplified by websites such as—suggests&nbsp;</span><span style="font-size: 12px;">that, even without this rule, travelers increasingly receive the information they care about. We provide several&nbsp;</span><span style="font-size: 12px;">examples of this trend in this comment.</span></p> <p class="p1">Third, several elements of this proposed rule would lead to unintended consequences. By specifying what information&nbsp;<span style="font-size: 12px;">travelers must see whenever presented airline schedules, the proposed rule risks stifling innovation that’s&nbsp;</span><span style="font-size: 12px;">already underway and has the potential to do far more to improve consumer understanding. The proposal could&nbsp;</span><span style="font-size: 12px;">hinder websites’ ability to present a customized set of relevant information to consumers by requiring disclosure&nbsp;</span><span style="font-size: 12px;">of a uniform, specific set of fees to all consumers by all websites. Meanwhile, by requiring consumers to wade&nbsp;</span><span style="font-size: 12px;">through information that’s not customized or relevant to their specific situation, the rule carries the risk of reducing&nbsp;</span><span style="font-size: 12px;">rather than improving understanding.</span></p> <p class="p1">It is primarily because of these unintended consequences that we recommend that the DOT consider the following&nbsp;<span style="font-size: 12px;">changes to its proposal:</span></p> <p class="p1">1. The DOT should limit the websites subject to the proposed rule to only airline-owned and&nbsp;<span style="font-size: 12px;">-operated travel sites. This would help avoid the unintended consequence of limiting the ability of&nbsp;</span><span style="font-size: 12px;">third-party information aggregation and organization services—such as Google—to customize the&nbsp;</span><span style="font-size: 12px;">information display based upon user preferences.</span></p> <p class="p1">2. The proposal should not attempt to limit travel agencies’ ability to improve service for&nbsp;<span style="font-size: 12px;">consumers by requiring that information or search results be sorted in a predetermined&nbsp;</span><span style="font-size: 12px;">(“unbiased”) manner. Websites have incentives to compete to develop the “best” algorithm for&nbsp;</span><span style="font-size: 12px;">attracting customers to make purchases on their websites, and restricting that competition to only&nbsp;</span><span style="font-size: 12px;">certain predetermined algorithms will likely reduce an important element of competition between&nbsp;</span><span style="font-size: 12px;">travel websites.</span></p> <p class="p1">3. The DOT should consider leaving the disclosure requirements established in 14 CFR 399.85—&nbsp;<span style="font-size: 12px;">the section that requires a simple “baggage fees may apply” statement—unchanged. This approach&nbsp;</span><span style="font-size: 12px;">would impose a minimum amount of disruption on innovation in the airfare distribution market&nbsp;</span><span style="font-size: 12px;">while alerting travelers to be aware of possible baggage fees.</span></p><p class="p1"><span style="font-size: 12px;"><a href="">Continue reading</a></span></p> Tue, 23 Sep 2014 14:10:39 -0400 If You Like Your Plan, You Still Can't Keep It <h5> Expert Commentary </h5> <p class="p1">There’s a bizarre reason why millions of Americans saw their health insurance plans cancelled in 2013 – and as explained in a <a href="">new video</a> put out by the Mercatus Center at George Mason University, millions more will lose their plans in years to come.&nbsp;</p> <p class="p2"><span style="font-size: 12px;">Insurance coverage for Americans will remain in permanent turmoil because the Affordable Care Act requires all plans to fit within four cookie-cutter designs called "metallic tiers." (The tiers – bronze, silver, gold and platinum – refer to the percentage of medical expenses a particular plan pays.) The </span><a style="font-size: 12px;" href="">video</a><span style="font-size: 12px;"> also notes that families may have to change plans repeatedly because, as circumstances change, a plan that fits within a tier one year may not fit in any tier a later year.</span></p><p class="p2"><span style="font-size: 12px;"><a href="">Continue reading</a></span></p> Tue, 23 Sep 2014 12:12:25 -0400 Measuring the Dodd-Frank Act (and Other Major Acts) with RegData 2.0 <h5> Publication </h5> <p class="p1">RegData 2.0 can be used to examine how agencies’ regulatory stocks respond to major acts of Congress. This chart examines the regulatory stocks of agencies affected by the Dodd-Frank Act of 2010, which required several agencies to create new regulations or substantially modify existing regulations. The result is a notable surge in regulations produced by those agencies following the passage of the Dodd-Frank Act.</p><p class="p1"><a href=""><img height="398" width="585" src="" /></a></p> <p class="p1">This chart depicts two data series from RegData 2.0—word counts and restriction counts. Each series contains aggregated statistics for all federal regulatory agencies that were required to engage in rulemaking by the Dodd-Frank Act of 2010.&nbsp;</p> <p class="p1">The following agencies, which were affected by Dodd-Frank, are included: Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve Bank, Financial Stability Oversight Council, Office of Financial Research and some other offices at the Department of Treasury, Consumer Financial Protection Bureau, National Credit Union Administration, Department of Housing and Urban Development’s Office of Community Planning and Development, Federal Housing Finance Agency, Federal Housing Administration and some other offices at the Department of Housing and Urban Development, Office of Thrift Supervision (still in print in 2012), State Department, and Federal Trade Commission.&nbsp;</p> <p class="p1">Word counts from these agencies are measured on the left-hand axis in millions of words. This group of agencies published 4,022,233 words in 1997. These agencies’ total word count grew by 1,149,828—a 28.5 percent increase in total and a roughly 2.2 percent annual growth rate—between 1997 and 2010, when Dodd-Frank was signed into law. Between 2010 and 2012, the agencies’ word count grew from 5,172,061 to 6,176,953—a total increase of 19.4 percent and an average year-to-year growth rate of 9.7 percent.</p> <p class="p1">Restrictions exhibit a similar pattern. Restrictions published by these agencies—words that create binding legal obligations such as “shall,” “must,” and “prohibited”—grew from 55,613 in 1997 to 65,486 in 2010. This represents an increase of about 17.7 percent over that period and an average annual growth rate of 1.4 percent. After Dodd-Frank was signed in 2010, restrictions grew from 65,486 in 2010 to 78,270 in 2012—a total increase of 19.5 percent and annual growth rate of 9.8 percent, representing a seven-fold increase in the annual growth rate.</p> <p class="p1">The quantification of regulations creates an opportunity to observe and understand long-term regulatory trends, their causes, and their effects. Regulations tend to <a href="">accumulate</a> over time as policymakers react to the exigencies of the day. Regulatory accumulation increases the possibility of rules interacting with or duplicating each other and could have other <a href="">unintended consequences</a>. By showing regulatory trends for a single industry across a number of regulators, RegData 2.0 can focus regulators and policymakers on areas where such interactions or duplication may occur.&nbsp;</p> <p class="p1">Dodd-Frank primarily addressed the finance and insurance industries by requiring numerous agencies to significantly increase their rates of rulemaking. Such a significant surge in rulemaking across such a wide array of agencies—including several agencies that are independent and therefore not subject to centralized review by the Office of Management and Budget’s Office of Information and Regulatory Affairs—may have created more duplication and negative interaction effects. 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