The age-old question has finally been answered: No, Snuggies are not clothing.
Earlier this month, a federal court ruled that Snuggies, the As Seen on TV 'blanket with sleeves', should be classified as blankets, and live as a separate entity from robes or priestly vestments.
The ruling followed the Justice Department's argument that Snuggies are apparel and not blankets, so they should be 'subjected to higher duties than blankets', reports Bloomberg.
Judge Mark Barnett of the Court of International Trade said during the trial that the Customs and Border Protection was in the wrong to classify Snuggies as apparel. Barnett cited the Snuggies' use of marketing as a blanket, specifically referencing its packaging with the phrase, "The Blanket With Sleeves!".
The judge added that those who purchase Snuggies may likely be "in the types of situations one might use a blanket; for example, while seated or reclining on a couch or bed, or outside cheering a sports team."
In Barnett's opinion, the addition of sleeves 'was not enough' to have the Snuggie be considered a piece of clothing. He added the use of sleeves allowed the Snuggie "to remain in place and keep the user warm while allowing the user to engage in certain activities requiring the use of their hands."
More so, Judge Barnett rejected the idea a Snuggie may also be similar in fashion to priestly vestments or scholastic robes which also use wide sleeves and a loose fit around the body. In his ruling, the judge argued that robes open from the front, and priestly vestments and scholastic robes have no opening on either side, so the role of a Snuggie as a garment is invalid.
Posts tagged ‘Regulation’
One of my favorite correspondents, also the proprietor of the Finem Respice blog, sent me a note today about my article the other day about cheating on diesel emissions regulations. The note covers a lot of ground but is well worth reading to understand the crony-regulatory state. They begin by quoting me (yes, as I repeat so often, I understand that "they" is not grammatically correct here but we don't have a gender-neutral third person pronoun and so I use "they" and "their" as substitutes, until the SJW's start making me use ze or whatever.)
"My thinking was that the Cat, Cummins, and VW cheating incidents all demonstrated that automakers had hit a wall on diesel emissions compliance -- the regulations had gone beyond what automakers could comply with and still provide consumers with an acceptable level of performance."
Exactly. More importantly, the regulators KNEW it. I was researching energy shorts and had a ton of discussions with former regulatory types in the U.S. I was stunned to discover that there was widespread acknowledgement on the regulatory side that many regulations were impossible to comply with and so "compliance trump cards" were built into the system.
For instance, in Illinois you get favorable treatment as a potential government contractor if you "comply" with all sorts of insane progressive policy strictures. "Woman or minority owned business" or "small business owner", as an example. Even a small advantage in the contracting process for (for example) the State of Illinois puts you over the edge. Competitors without (for instance) the Woman or Minority Owned Business certification would have to underbid a certified applicant by 10-15% (it's all a complex points system) to just break even. It got so bad so quickly that the regs were revised to permit a de minimis ownership (1%). Of course, several regulatory lawyers quickly made a business out of offering minority or women equity "owners" who would take 1% for a fee (just absorb how backwards it is to be paying a fee to have a 1% equity partner) with very restrictive shareholder agreements. Then it became obvious that you'd get points for the "women" and "minority" categories BOTH if you had a black woman as a proxy 1% "owner." There was one woman who was a 1% owner of 320 firms.
Some of my favorites include environmental building requirements tied to government contract approval. The LEED certification is such a joke. There are a ton of "real" categories, like motion detecting lights, solar / thermal filtering windows, CO2 neutral engineering. But if you can't get enough of that, you can also squeeze in with points for "environmental education". For instance, a display in the lobby discussing the three solar panels on the roof, or with a pretty diagram of the building's heat pump system. You can end up getting a platinum LEED certification and still have the highest energy consumption density in the city of Chicago, as it turns out.
U.S. automakers have been just as bad. There's been a fuel computer "test mode" for emissions testing in every GM car since... whenever. Also, often the makers have gotten away with "fleet standards" where the MPG / emissions criteria are spread across the "fleet." Guess how powerful / "efficient" the cars that get sent to Hertz or Avis are.
Like so many other things in the crony capitalist / crudely protectionist United States, (e.g. banking prosecutions) foreign firms will get crucified for industry-wide practices.
Gee, I wonder if state-ownership of GM has been a factor in sudden acceleration / emissions prosecutions?
BTW, I wrote about the silliness of LEED certification here, among other places, after my local Bank of America branch got LEED certified, scoring many of their points by putting EV-only spaces (without a charger) in the fron of the building. In a different post, I made this comparison:
I am not religious but am fascinated by the comparisons at times between religion and environmentalism. Here is the LEED process applied to religion:
- 1 point: Buy indulgence for $25
- 1 point: Say 10 Our Fathers
- 1 point: Light candle in church
- 3 points: Behave well all the time, act charitably, never lie, etc.
It takes 3 points to get to heaven. Which path do you chose?
I would be all for reductions in tax levels, but I don't think that current Federal tax rates are particularly a barrier to growth and prosperity. A much bigger, and ever-growing barrier to growth is regulation.
5-10 years ago, in my small business, I spent my free time, and most of our organization's training time, on new business initiatives (e.g. growth into new businesses, new out-warding-facing technologies for customers, etc). Over the last five years, all of my time and the organization's free bandwidth has been spent on regulatory compliance. Obamacare alone has sucked up endless hours and hassles -- and continues to do so as we work through arcane reporting requirements. But changing Federal and state OSHA requirements, changing minimum wage and other labor regulations, and numerous changes to state and local legislation have also consumed an inordinate amount of our time. We spent over a year in trial and error just trying to work out how to comply with California meal break law, with each successive approach we took challenged in some court case, forcing us to start over. For next year, we are working to figure out how to comply with the 2015 Obama mandate that all of our salaried managers now have to punch a time clock and get paid hourly.
Greg Mankiw points to a nice talk on this topic by Steven Davis. For years I have been saying that one effect of all this regulation is to essentially increase the minimum viable size of any business, because of the fixed compliance costs. A corollary to this rising minimum size hypothesis is that the rate of new business formation is likely dropping, since more and more capital is needed just to overcome the compliance costs before one reaches this rising minimum viable size. The author has a nice chart on this point, which is actually pretty scary. This is probably the best single chart I have seen to illustrate the rise of the corporate state:
Postscript: I had thought that all the difficult years converting all of our employees from full to part time to avoid Obamacare sanctions would be the end of our compliance hassles (no company will write health insurance for us, so our only defense against the mandates and penalties is to make everyone part-time). But the hassles have not ended. For every employee, next year we must provide a statement that has a series of codes, by month, for that employee's health care status. It is so complicated that knowledgeable people are still arguing about what codes we should be using. Here is a mere taste of the rules:
A code must be entered for each calendar month January through December, even if the employee was not a full-time employee for one or more of the calendar months. Enter the code identifying the type of health coverage actually offered by the employer (or on behalf of the employer) to the employee, if any. Do not enter a code for any other type of health coverage the employer is treated as having offered (but the employee was not actually offered coverage). For example, do not enter a code for health coverage the employer is treated as having offered (but did not actually offer) under the dependent coverage transition relief, or non-calendar year transition relief, even if the employee is included in the count of full-time employees offered minimum essential coverage for purposes of Form 1094-C, Part III, column (a). If the employee was not actually offered coverage, enter Code 1H (no offer of coverage) on line 14. For reporting offers of coverage for 2015, an employer relying on the multiemployer arrangement interim guidance should enter code 1H on line 14 for any month for which the employer enters code 2E on line 16 (indicating that the employer was required to contribute to a multiemployer plan on behalf of the employee for that month and therefore is eligible for multiemployer interim rule relief). For a description of the multiemployer arrangement interim guidance, see Offer of health coverage in the Definitions section. For reporting for 2015, Code 1H may be entered without regard to whether the employee was eligible to enroll or enrolled in coverage under the multiemployer plan. For reporting for 2016 and future years, ALE Members relying on the multiemployer arrangement interim guidance may be required to report offers of coverage made through a multiemployer plan in a different manner.
Here are some of the codes:
- 1A. Qualifying Offer: Minimum essential coverage providing minimum value offered to full-time employee with employee contribution for self-only coverage equal to or less than 9.5% mainland single federal poverty line and at least minimum essential coverage offered to spouse and dependent(s).
This code may be used to report for specific months for which a Qualifying Offer was made, even if the employee did not receive a Qualifying Offer for all 12 months of the calendar year. However, an employer may not use the Alternative Furnishing Method for an employee who did not receive a Qualifying Offer for all 12 calendar months (except in cases in which the employer is eligible for and reports using the Alternative Furnishing Method for 2015 Qualifying Offer Method Transition Relief as described in these instructions).
- 1B. Minimum essential coverage providing minimum value offered to employee only.
- 1C. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) (not spouse).
- 1D. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to spouse (not dependent(s)).
- 1E. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse.
- 1F. Minimum essential coverage NOT providing minimum value offered to employee; employee and spouse or dependent(s); or employee, spouse and dependents.
- 1G. Offer of coverage to employee who was not a full-time employee for any month of the calendar year (which may include one or more months in which the individual was not an employee) and who enrolled in self-insured coverage for one or more months of the calendar year.
- 1H. No offer of coverage (employee not offered any health coverage or employee offered coverage that is not minimum essential coverage, which may include one or more months in which the individual was not an employee).
- 1I. Qualifying Offer Transition Relief 2015: Employee (and spouse or dependents) received no offer of coverage; received an offer that is not a qualifying offer; or received a qualifying offer for less than 12 months.
Engadget is celebrating the fact that the Internet just got turned into Ma Bell. Here was my response in the comments:
This is utter madness. Since when has "free" ever meant "tightly controlled by the government"? Regulation like this always locks in current competitors and business models. Hate Comcast? You just guaranteed them their infinite existence and profitability. They will be the Ma Bell of your generation.
New competitive models and technologies will now have to be vetted by government bureaucrats who will soon be captured by the industry itself. It literally always happens this way. How much innovation did you ever see in the landline phone business? My telephone at my birth in 1962 was identical to the one in my dorm room in 1984. Power companies? Water companies? Cell voice service? What innovation have you ever seen? What new competitors have you seen pop up to challenge the old guys? Only in cellular data has there been any innovation, and that is to date the one place in phone communications the FCC has not regulated with this model.
I am exhausted with people justifying these heavy-handed government regulations based on the good intentions of their supporters rather than the actual facts of how these regulations always play out historically. We will look back on this day as the beginning of the end of the wild, open Internet we loved.
I will say that folks can really be rubes. Playing on the fear of one narrow issue that would have been easy to legislate (that broadband companies might block or limit access to certain sites), the government used this niche concern to drive through a total takeover of the Internet. Way to go sheeple.
Update: Some additional comments I made:
This problem of blocking web sites is almost entirely hypothetical, and to the extent it has been used at all it merely has been a negotiating tactic between big boys like Netflix and Comcast who can take care of themselves. It could have easily been fixed with a narrow bit of rulemaking but in stead we get this major regulatory takeover.
Doesn't it bother you that this is a problem that could have been solved with a fly-swatter but instead the regulators demanded they be given a 16-inch naval gun. Don't you worry why they need all that regulatory power to swat a fly? Aren't you at all suspicious there is more going on here?
Greg Patterson brings us this example from the AZ legislature, but this sort of thing is ubiquitous:
Just before I got to the Legislature, there was a big move to regulate day care facilities. Naturally, the government has a role in establishing basic health and safety standards for facilities that take care of young children, so I thought it was a good move.
Then a funny thing happened. The Legislature established one set of standards for private day care facilities and a different (lower) set of standards for public or non-profit day care facilities. Some Legislators dared to ask why the health and safety rules would be different depending on what type of entity owned the facility. After all, if a rule is really in place to keep a child healthy and safe, why should a publicly owned facility be exempt or have a lower standard?
The answer, of course, is that there's no reason for publicly owned facilities to have a different regulatory regime than private facilities and that these bills were really just disguised attempts to ensure that private day cares couldn't compete with public ones
We are facing something similar in my world. As you may know, my company operates government parks and campgrounds on a concession basis (which means we get no government money, we are paid by the user fees of visitors). This makes sense because we can do it less expensively and usually better than the government agency.
Recently, the Obama Administration has imposed an executive order that we concessionaires on Federal lands have to pay a $10.10 minimum wage. Since most of our costs are labor, this is causing us to have a to raise fees to customers substantially to offset the higher costs.
In response to these fee increases, the US Forest Service in California is in the process of taking back traditionally concession-run campgrounds to run themselves, in-house. Their justification is that they can do it cheaper. Part of this is just poor government accounting -- because many costs (risk management/insurance, capital assets, interest on investments) don't hit their budgets but show up on other parts of the government's books, what appears to be lower costs is actually just costs that are hidden. But their main cost savings is that since the Federal government is exempt from labor law and this new executive order, the Forest Service can staff the park with volunteers. They are allowed to pay a minimum wage of ... zero!
This is just incredibly hypocritical, to say with one statement that private companies need to pay campground workers more and with the very next action take over the campground and staff it with people making nothing.
We generally use startup activity as a proxy for positive innovation and future increases in productivity and consumer value. But it is only a proxy - based on the theory that in a free economy new startups generally add new value or die. Startups per se are not inherently positive, especially when all they are doing is fixing the inefficiencies and mandates imposed by government regulation
I wrote about a new study suggesting that new federal regulation doesn't inhibit the creation of new startup companies in an industry. In fact, it might actually stimulate the creation of startups. This seems counterintuitive, but a reader with some experience in the education and health care sectors—which were influenced by NCLB and Obamacare, respectively—proposes an explanation for this:
Healthcare startups have absolutely exploded post-ACA....This was pretty well anticipated by venture capital; a bunch of Sand Hill firms started putting together ad-hoc health IT teams shortly after the ACA was passed, on the basic logic that anything that changed an industry as much as the ACA did would necessarily create a lot of startup opportunities.
Drum says, well this may be good or may be bad. Look, it HAS to be bad. All this investment and activity is going into trying to get back to even from productivity losses imposed by the government, or is being spent addressing government mandates for new services that the market did not want or value. This is a diversion of resources from new value-creation to fixing things, and as such is just the broken windows fallacy re-written in a new form.
The language he is using, of shaking things up, is a bit like that of chemistry. He seems to imagine that markets can reach and get stuck in local maxima, so that government action that shakes the system out of these maxima (like annealing in a metal) is positive in that it allows the system to progress to a better state over time even if the government's action initially makes things worse. I know of absolutely no evidence for this being true, and my strong suspicion given how many industries the government has trashed is that this is rare or non-existent. And impossible to spot, even if it did exist. Not to mention the fact it is a total joke to talk of health care as if it was some pristine untouched-by-government industry before Obamacare.
I have mentioned a number of times my chicken or the egg arguments with Progressives on the solution to cronyism. Is the problem that government power exists to influence markets, and as long as it exists people will bid to control it? Or is it possible to wield massive make-or-break government power over industry rationally, and only the rank immorality and corrupt speech of corporations stands in the way. The former argues for a reduction in government power, the latter for more regulation of corporations and their ability to participate in the political process.
I believe this is an example in favor of the "power is inherently corrupting" argument. No corporation lobbied for NOx rules on diesel engines. They all fought it tooth and nail. But once these regulations existed, engine makers are all trying to use the laws to gut their competition:
In 1991, the EPA ignored complaints from several makers of non-road engines that rivals were cheating, in order to save fuel, on emissions rules for oxides of nitrous (NOx). Then environmental groups took up the same complaint, whereupon the agency demanded face-saving consent decrees with numerous engine makers, including two Volvo affiliates.
In essence, the engine makers apologized by agreeing in 1999 to accelerate by a single year compliance with a new emissions standard scheduled to take effect in 2006.
Meanwhile, with another NOx standard looming in 2010, Navistar sued the EPA claiming rival engine-makers were seeking to meet the rule with a defective technology. In turn, Navistar’s competitors sued claiming the EPA was unfairly favoring a defective technology pursued by Navistar (these are only the barest highlights of what became a truck-makers’ legal holy war).
While all this was going on, a Navistar joint-venture partner, Caterpillar, complained that 7,262 Volvo stationary engines made in Sweden before 2006 had violated the 1999 consent decree. Now let’s credit Caterpillar with a certain paperwork ingenuity: The Volvo engines were not imported to the U.S. and were made by a Volvo affiliate that wasn’t a party to the consent decree. EPA itself happily certified the engines under its then-current NOx standard, only changing its mind four years later, prodded by a competitor with a clear interest in damaging Volvo’s business.
To complete the parody, a federal district court would later agree that the 1999 consent terms “do not clearly apply” to the engines in question, but upheld an EPA penalty anyway because Volvo otherwise might enjoy a “competitive advantage” against engines to which the consent decree applied.
As a side note, this is from the "oops, nevermind" Emily Litella School of Regulation:
Let it be said that the EPA’s NOx regulation must have done some good for the American people, though how much good is hard to know. The EPA relies on dubious extrapolations to estimate the benefits to public health. What’s more, the agency appears to have stopped publishing estimates of NOx pollution after 2005. Maybe that’s because the EPA’s focus has shifted to climate change, and its NOx regulations actually increase greenhouse emissions by increasing fuel burn.
Kevin Drum simply does not understand why Wall Street might be piling into broadband stocks despite proposed "tough new regulations." He posits a number of hypotheses -- that Wall Street expected the rules to be worse than they turned out to be. But this can't be it because the hundreds of pages of rules are still a secret. He also hypothesizes there might be some nefarious secret loophole buried in the rules Wall Street knows about but we don't.
This is crazy! How can a reasonably bright person like Drum who writes about the political economy not understand the issue of regulatory capture? Seriously, I have always figured that the Left, which has a seemingly infinite appetite for regulation, must favor regulation because they find the benefits to out-weight the crony-ist downsides. Is it really possible Drum is unfamiliar with the downsides altogether, or is he just being coy?
Here is what regulation, particularly utility-style regulation, tends to do -- it locks in current business models and competitors. It makes it really hard for new entrants to challenge incumbents with innovative new business models or approaches, because regulations have been written based on the old business model and did not take the new one in account. So a new entrant must begin business by getting regulators to allow their new model, which never happens because by this time incumbents have buildings full of lobbyists aimed at the regulatory process. Go ask Tesla and Uber and Lyft about how easy it is to enter a heavily regulated business even with a superior new business model.
This is particularly true in the technology world. The biggest threat to incumbency is someone with a new technology or approach to the technology. Don't believe me? I suggest you go to the offices of Netscape or AOL or Lycos or Borders or Circuit City or Radio Shack and interview them about the security of their multi-billion dollar businesses in the face of new online technologies. At best, regulators put a huge speed bump in the way of competitors, costing them time and money to get their alternative business model approved. At worst, regulators block new competitors altogether.
I will give you a thought experiment. Let's say these exact same rules were adopted in the year 2000, when AOL and Earthlink dial-up ruled the internet access world. Would cable and satellite and DSL have grown as quickly? I can see the regulators now -- "hey, all the rules specify phone dial up. There's nothing here about cable TV. Sorry [Cox, Comcast, whoever] you are going to have to wait until we can write new rules.
The other thing that happens with utility-style regulation is that companies in the business tend to get their returns guaranteed. Made a bad investment in a competitive market? Well good luck getting customers to pay extra to bail you out from your bad decision when they have other options. But what happens when your local power company wastes $10 billion on a nuclear plant that never opens -- it gets built into your rate base!
In the cast of broadband, they are locked in what business school students would see as a classic supply chain battle. Upstream companies like Netflix supply content via downstream broadband companies. Consumers are only willing to pay a certain amount for this content, so the upstream and downstream fight a lot over who gets what share of that consumer $. This happens everywhere in the business world, from Cable TV to oil refining to selling TV's at Wal-Mart. There is a real danger that broadband will lose this fight in the future -- but not now. Regulated industries never die, they appeal to their regulators for help.
As of yesterday, Wall Street is looking at broadband companies and realizing that they are now largely immune from competition and some level of minimum returns are likely now gauranteed forever. Consumers should hate this, but what's not to love for Wall Street?
Postscript: Kevin Drum describes the new regulation this way: "Basically, under Wheeler's proposal, cable companies would no longer be able to sign special deals to provide certain companies with faster service in return for higher payments." This is a bit like describing the Patriot Act as a law to force people to take their shoes off at the airport. Yes, it does that narrow thing, but it does a LOT else. The proposal is hundreds of freaking pages long. It does not take hundreds of pages to do the narrow little niche thing Drum (like most neutrality supporters) wants.
This Administration has cleverly taken this one tiny concern people have and have used it as an excuse to do a major regulatory takeover of the Internet. This is a huge Trojan Horse. But I have already ranted about the details of that and you can read that here.
One of the factors in the financial crisis of 2007-2009 that is mentioned too infrequently is the role of banking capital sufficiency standards and exactly how they were written. Folks have said that capital requirements were somehow deregulated or reduced. But in fact the intention had been to tighten them with the Basil II standards and US equivalents. The problem was not some notional deregulation, but in exactly how the regulation was written.
In effect, capital sufficiency standards declared that mortgage-backed securities and government bonds were "risk-free" in the sense that they were counted 100% of their book value in assessing capital sufficiency. Most other sorts of financial instruments and assets had to be discounted in making these calculations. This created a land rush by banks for mortgage-backed securities, since they tended to have better returns than government bonds and still counted as 100% safe.
Without the regulation, one might imagine banks to have a risk-reward tradeoff in a portfolio of more and less risky assets. But the capital standards created a new decision rule: find the highest returning assets that could still count for 100%. They also helped create what in biology we might call a mono-culture. One might expect banks to have varied investment choices and favorites, such that a problem in one class of asset would affect some but not all banks. Regulations helped create a mono-culture where all banks had essentially the same portfolio stuffed with the same one or two types of assets. When just one class of asset sank, the whole industry went into the tank,
Well, we found out that mortgage-backed securities were not in fact risk-free, and many banks and other financial institutions found they had a huge hole blown in their capital. So, not surprisingly, banks then rushed into government bonds as the last "risk-free" investment that counted 100% towards their capital sufficiency. But again the standard was flawed, since every government bond, whether from Crete or the US, were considered risk-free. So banks rushed into bonds of some of the more marginal countries, again since these paid a higher return than the bigger country bonds. And yet again we got a disaster, as Greek bonds imploded and the value of many other countries' bonds (Spain, Portugal, Italy) were questioned.
So now banking regulators may finally be coming to the conclusion that a) there is no such thing as a risk free asset and b) it is impossible to give a blanket risk grade to an entire class of assets. Regulators are pushing to discount at least some government securities in capital calculations.
This will be a most interesting discussion, and I doubt that these rules will ever pass. Why? Because the governments involved have a conflict of interest here. No government is going to quietly accept a designation that its bonds are risky while its neighbor's are healthy. In addition, many governments (Spain is a good example) absolutely rely on their country's banks as the main buyer of their bonds. Without Spanish bank buying, the Spanish government would be in a world of hurt placing its debt. There is no way it can countenance rules that might in any way shift bank asset purchases away from its government bonds.
Yesterday, I came home exhausted. I have been working late nearly every night for weeks, at a time of year when most of my business is not even open yet (the business is seasonal). I realized to my immense depression that I have been spending all my time on regulatory compliance. I have not been pitching new clients or bidding on new prospects or making investments or improving our customer service processes -- though I have ideas for all of these. I have been 100% dedicated through 14 hour days to just trying to keep up with and adapt to changing government rules.
Break rules, changing minimum wages, heat stress plans, mandatory sexual harassment training, OSHA reporting, EEO reporting, Census reporting, and most recently changing rules on salaried workers that Obama just waived his wand and imposed -- this is what has been consuming me. I have been trying to roll out a new safety program to the field and can't do it because I keep having to train for one of these new requirements (one learns there is only a limited number of things one can simultaneously roll out to front-line staff).
At some point regulation will accrete so fast that it will be impossible to keep up. I am going to call that the Regulation Singularity, and for businesses my size, we are fast approaching it.
Prominent libertarian think tanks often rank state business climate by their tax regimes. I am all for low, sensibly-structured taxes. But for most of my time, taxes are irrelevant. We are shutting down businesses left and right in California and it has zero to do with taxes.
Many on the Left often deride the notion that government regulation really affects business behavior and reduces business activity. But it turns out that even the Feds themselves throw up their hands and give up in the face of trying to deal with their own regulations
Government estimates suggest there may be 77,000 empty or underutilized buildings across the country. Taxpayers own them, and even vacant, they’re expensive. The Office of Management and Budget believes these buildings could be costing taxpayers $1.7 billion a year.
…But doing something with these buildings is a complicated job. It turns out that the federal government does not know what it owns.
…even when an agency knows it has a building it would like to sell, bureaucratic hurdles limit it from doing so. No federal agency can sell anything unless it’s uncontaminated, asbestos-free and environmentally safe. Those are expensive fixes.
Then the agency has to make sure another one doesn’t want it. Then state and local governments get a crack at it, then nonprofits — and finally, a 25-year-old law requires the government to see if it could be used as a homeless shelter.
Many agencies just lock the doors and say forget it.
Scratch "consumer" protection laws and you will almost always find the laws are really aimed a protecting incumbent businesses and traditional business models. This time from France:
To the surprise of virtually everyone in France, the government has just passed a law requiring car services like Uber to wait 15 minutes before picking up passengers. The bill is designed to help regular taxi drivers, who feel threatened by recently-introduced companies like Uber, SnapCar and LeCab. Cabbies in the Gallic nation require formidable time and expense to get their permits and see the new services -- which lack such onerous requirements -- as direct competitors.
This is the interesting political ground where the Occupy Wall Street movement and the Tea Party have a lot of overlap. That is why the Chamber of Commerce, which represents all these incumbent businesses, is working with both parties to keep the cozy corporatists in power against challenges from the Left and Right. If you are a business owner, eschew the Chamber and join the NFIB and support the IJ.
Beginning in November 2016, all new motorcoaches and some other large buses must be equipped by manufacturers with three-point lap-shoulder belts, the National Highway Traffic Safety Administration said.
Ahh, but there is an exemption
The rule doesn’t apply to school buses or city transit buses.
What do these two exempted categories have in common: They mostly belong to governments (public schools or public transit agencies). So the government comes up with an expensive new regulation, but exempts itself from it, applying it to only private operators (who own a minority of buses in the country).
So, what is the next danger to the Republic that requires coercive government control to protect us all from disaster? Pedicabs:
Operating a pedicab used to be cheap and easy. A person could make a buck with little or no overhead and without restrictive, burdensome regulations.
That’s no longer true in some Valley cities that have approved ordinances limiting who can operate pedicabs on their streets. Scottsdale is the latest to tighten its rules, joining Phoenix and Glendale. No other Valley municipality regulates pedicabs.
To continue doing business in Scottsdale, pedicab operators must have a valid Arizona driver’s license, maintain insurance and adhere to regulations pertaining to the safety and visibility of the pedicab. The ordinance, which became law on May 9, includes penalties for non-compliance but does not specify any inspections.
Phoenix’s ordinance, which went into effect in August 2008, was in response to concerns and complaints from downtown stakeholders and patrons regarding pedicab activity, city spokeswoman Sina Matthes said. The ordinance is stricter than Scottsdale’s, requiring Police Department inspections and inspection tags.
Glendale’s ordinance, which became law in late 2007, requires a city-issued license and limits the hours of operation and what roads can be used by operators, said Sgt. Jay O’Neill of the Glendale Police Department.
Why the regulation. What safety disaster led to this? Well, apparently some poor pedicab operator allowed himself to be hit by a drunk driver.
Scottsdale’s ordinance was prompted by a Jan. 4 crash involving a suspected drunken driver and a pedicab trailer on Scottsdale Road near Rose Lane. The two pedicab passengers suffered serious head and spine injuries.
Scottsdale police determined that there were no mechanical or safety violations.
Here is some government cluelessness: it is OK if we rape you as long as we ask for your feedback first
In Scottsdale, operators must maintain at all times a commercial general-liability insurance policy of at least $1 million per occurrence and $2 million annual aggregate.
Jay Ewing Jr., owner and operator of Big Papa Human Powered Transportation, said four people have asked him if he wanted to purchase their equipment because they are going out of business in connection with the Scottsdale regulations. He says a pedicab operator can expect to pay at least $250 a month for insurance....
Scottsdale police Cmdr. Jeff Walther said the transition has gone smoothly because all operators were made aware of the proposed changes and were given the opportunity to provide input before the regulations were approved by the council.
“I was surprised, my folks were surprised, that almost immediately there seemed to be a pretty dramatic decline in operators,” Walther said.
Google has a pilot to offer TV and high-speed Internet service in Kansas City. Adding phone service would have cost them practically nothing, and presumably would have provided great value to its customers. But it gave up because even for a company as large as Google, the regulatory start-up burdens were too large. Many innovative new industries or new approaches to old industries have been started literally in someone's garage. But no one with a better idea for local telephone service is ever going to make progress against these kinds of regulatory barriers. Which is exactly what the large incumbents want, and why they secretly support these massive regulatory infrastructures (while publicly whining about them).
I don't have time to comment or peruse the study in depth, but this looks interesting. From Randal O'Toole:
Harvard economists have proven one of the major theses of American Nightmare, which is that land-use regulation is a major cause of growing income inequality in the United States. By restricting labor mobility, the economists say, such regulation has played a “central role” in income disparities.
When measured on a state-by-state basis, American income inequality declined at a steady rate of 1.8 percent per year from 1880 to 1980. The slowing and reversal of this long-term trend after 1980 is startling. Not by coincidence, the states with the strongest land-use regulations–those on the Pacific Coast and in New England–began such regulation in the 1970s and 1980s.
Forty to 75 percent of the decline in inequality before 1880, the Harvard economists say, was due to migration of workers from low-income states to high-income states. The freedom to easily move faded after 1980 as many of the highest-income states used land-use regulation to make housing unaffordable to low-income workers. Average incomes in those states grew, leading them to congratulate themselves for attracting high-paid workers when what they were really doing is driving out low- and (in California, at least) middle-income workers.
As Virginia Postrel puts it, “the best-educated, most-affluent, most politically influential Americans like th[e] result” of economic segregation, because it “keeps out fat people with bad taste.” Postrel refers to these well-educated people as “elites,” but I simply call them “middle class.”
I have not read the study, but I think the word "proven" in the first sentence likely goes to far. Economic systems are way too complex to absolutely show one variable among millions causes another. I am convinced that the way we have regulated the housing market and promoted home ownership has reduced labor mobility.
Don't say I have not been warning you. For years. Philip Klein via Peter Suderman:
...Bloomberg highlighted a comment from a supporter of the [soda] ban, who wrote, "Anyone who pays taxes and thus bears the health care costs of obesity should support this."
In a free society, individuals are able to take risks and make decisions detrimental to their own well-being -- be it smoking, drinking, excessive eating or anything else -- because they'll bear the ultimate costs of their decisions. But when government assumes a greater role in the health care system, suddenly there's a societal cost to individual risks. This provides an opening for those who believe in a paternalistic role for government to make their regulations seem pragmatic. Bloomberg used the "health care costs to taxpayers" argument during his previous drives to ban smoking in bars and restaurants and to outlaw the use of trans fats.
Can we please make sure no one is able to put an AI into this thing. We definitely don't want it to become self-aware.
My Forbes article is up this week and uses my company's vendors to compare the power of markets vs. government regulation. A small excerpt:
I am assuming that many readers will have already spotted what these three vendors have in common: all are either highly-regulated government-enforced monopolies (in the case of liquor wholesaling and electric power) or government agencies themselves. As a consumer, I get the worst deal from my vendors in direct proportion to how heavily regulated they are.
Best Buy is apparently increasing its customer return window from 14 days to 30 days.
Why? This certainly costs them money, not just from lost revenue but from the cost of restocking and returning to the manufacture (not to mention fraud).
Are they doing this because they are good guys? Hah. Do you really expect goodwill out of an electronic retailer?
They did it because they felt they had to. As the top dog in dedicated electronics stores, they are constantly under competitive assault. They are the reference point competitors start from. Wal-mart attacks them on price. Amazon.com attacks them on price and convenience. Smaller retailers attack them on knowledge and integration services. Everyone attacks them on the niche details like return policies.
Best Buy did this not because they wanted to, but because they felt they had to under competitive pressure. The accountability enforced by the market works faster, on more relevant variables, and far more powerfully than government regulation.
When the government does regulate variables such as this, such regulation often actually blunts the full accountability of the market. Retail laws in many European countries set maximum hours and discount levels, protecting large retailers like Best Buy from upstarts trying to provide a better of different service.
Frequently, so-called consumer regulation is coopted by large corporations to limit the ways competitors can try to unseat them. For example, limo services will get laws passed that all limos have to have certain features. Ostensibly, this is so consumers will be protected from having a limo without a wet bar, or whatever, but in fact its to prevent upstart competitors from taking them on with a different kind of business model potentially using different kinds of vehicles.
I find that this is frequently the case with regulated utilities. Utilities are able to get all kinds of crazy laws passed to protect business practices that would never survive the marketplace. Just today I was trying to open a business account with Duck River Electric in Tennessee. We are attempting to reopen a TVA campground that has been closed for several years. The campground is tiny, so I was flabberghasted when the utility told me that we had to put down a permanent deposit of $4100. I found this to be shockingly high. Apparently, it is based on the highest two months demand in the highest year (several years ago) in history. Since the campground is only open for five months, it means that we have to give the utility an indefinite interest free loan equal to half the annual business we do with them.
This is simply insane. Name one reasonably competitive business where one has to put down anywhere near this kind of advanced deposit to become a regular customer. If there was any sort of competition in this business, the sales people for the other company would have a field day with this. Sure, vendors often do a credit check on us, and a very few times (mostly early in our history) we had to pay COD for orders. But this is absurd.
PS- The only vendors we work with that are even close to this for abusiveness are the state authorities from whom we buy fishing licenses for resale. Many of these agencies require expensive payment bonds not required by any of our other (private) vendors. Arizona Game and Fish even forces us in January to accept an inventory of many products we do not sell (e.g. hunting stamps) and cannot sell by the terms of our lease. We have to keep these in the safe for a year and if we lose any and are unable to return them at the end of the year, we have to pay for them. Imagine Amazon.com sent you a bunch of crap you did not want and required you to hold them for a year, and then pay the expenses of returning them, and then pay for any item you might have lost. Anyone like myself who was dumb enough to fall into the Columbia House records thing will know the danger of this.
After over three years of effort, and many, many checks written to numerous departments, Ventura County has granted us the right to operate a fuel tank at a particular location near Lake Piru, CA. This is actually a huge improvement, and will be much safer and less liable to create a spill than the current methods of schlepping around zillions of 5-gallon cans in a pickup truck.
However, we still have not, after 3 years of trying, obtained a permit from self-same Ventura County to install said tank. So it is currently legal for us to own, posses, and operate a fuel tank at the permitted location but still illegal for us to install one there.
The tank we purchased 3-years ago in the naive hope all this permitting could be done in a month or two will probably be rusted out by the time we can actually install it.
This article by Mark Perry seems right to me -- the lightest touch (and probably the most effective) approach to bank regulation is to return to a regime that puts its major emphasis on capital requirements.
We can talk all day about causes of the recent financial crisis, but in my mind the root cause was taking real property with a volatile underlying value (e.g. homes) and leveraging the absolute crap out of it. In the initial transaction, home buyers were allowed to come to the table with less and less equity, until deals were being cut with more than 100% debt. This stupidity was a true public-private partnership, as the government kicked off the party and encouraged its growth via various community development policies as well as policies atFannie and Freddie, but private originators as well as home buyers eagerly jumped into the fray.
This debt backed by property that was already too highly leveraged was thrown into portfolios that were themselves highly leveraged, and then further leveraged again through CDS's and other derivatives. And then the CDS's were put into leveraged portfolios. I would love to figure out the effective leverage in the AIG portfolio. For ever $1 million in real property that secured the mortgages they insured, how much equity did they have? A thousand bucks? Less?
These investors felt protected by diversification that didn't really exist. The felt safe with AAA ratings from agencies who really didn't understand the risks any better than anyone else did. They relaxed assuming everything was watched by government regulators who were in way over their heads. But more than anything, they felt protected by history. The system of putting mortgage risks into tranches, such that the top tranches could only be affected by default rates consider then to be wildly improbable, had never to that point failed to deliver its promise. Default rates had always stayed withing expected norms.
And this is the most dangerous risk -- the risk that something will happen that has never happened before. Default rates that seemed impossible suddenly became reality. Tranches that were untouchable suddenly were losing large chunks of their value. Sure, there were warning signs, but at the end of the day what happened was that events occurred that were worse than people had thought was the worst case scenario (there is a whole body of interesting behavioral study on how humans tend to overestimate their understanding and underestimate the width of a probability distribution).
As new financial products are created and the economy evolves and the government pursues new forms of interventions in commerce, new failures can occur that have never happened before. And never has there been invented a micro-regulatory approach that guards against new-type failures (they don't even do a very good job against old-style failures). Capital requirements are the one approach that guard against catastrophic failures even for unanticipated risks.
It can be argued that this will raise the cost of capital, at it is true interest rates at any one point of time would have to go up. But one can argue that the low interest rates of the 2000's greatly understated the true cost of capital, and that those additional costs were paid in a sort of balloon payment at the end of the decade.
I am still thinking this through -- I don't think any regular reader would be mistake me for someone who favors regulation in general, but I am coming around to some extent on the notion that banks are different. I would ideally like to see a self-policing market where companies that choose to cut equity too fine just go bankrupt. But the reality of the political-financial complex today is that this never happens -- costs of large failures are socialized, and executives who made bad choices get fat gold parachutes and Treasury jobs.
Postscript: I have arguments all the time about whether the financial melt down was mainly caused by government or private action. Was it a public or private failure.? My answer is yes.
One thing that those of us who promote private action over public can never repeat enough is this: Our support for private action does not mean that private actors don't screw up, that there are not bad outcomes, that people don't make bad decisions, etc. They do. Lots of them. When these constitute outright fraud, there should be prosecution. For the rest of the cases, though, libertarians believe that in a free society there are automatic corrections and sources of accountability.
Make a bad product - people stop buying it. Sign a union contract with wages that are too high - you go bankrupt. Treat your workers shabbily - and the best of them go work for someone else. Take on too much risk - you will fail and lose all your capital.
The problem with our financial sector is not that it is not regulated -- it is the most regulated sector of the economy. The problem is that, as always happens, there has been substantial regulatory capture. There has been an implicit deal cut by large financial institutions - regulate me, but in return protect me. In a sense, as is typical in a corporate state, large corporations and government have become partners.
As a result, many of the typical checks and balances on private action in a free economy have been disrupted. In effect, certain institutions became too big to fail, and costs of failure and risk taking were socialized.
That is why the answer is not one or the other. Certainly the massive failures were driven by the actions of private actors. But they were driven in part by incentives put in place by the government, and their stupid behavior was not checked because traditional private avenues of accountability had been neutered by the government. This is why the recent financial crisis will always remain a sort of political Rorschach test, where folks of wildly different political philosophies can all find justification for their position.
Ford Motor Co.'s financing arm pulled plans to issue new debt, the first casualty of a bond market thrown into turmoil by the financial overhaul signed into law Wednesday.
Market participants said the auto maker pulled a recent deal, backed by packages of auto loans, because it was unable to use credit ratings in its offering documents, a legal requirement for such sales. The company declined to comment.
The nation's dominant ratings firms have in recent days refused to allow their ratings to be used in bond registration statements. The firms, including Moody's Investors Service, Standard & Poor's and Fitch Ratings, fear they will be exposed to new liability created by the Dodd-Frank law.
The law says that the ratings firms can be held legally liable for the quality of their ratings. In response, the firms yanked their consent to use the ratings, hoping for a reprieve from the Securities and Exchange Commission or Congress. The trouble is that asset-backed bonds are required by law to include ratings in official documents.
The result has been a shutdown of the market for asset-backed securities, a $1.4 trillion market that only recently clawed its way back to health after being nearly shuttered by the financial crisis.
John Stossel has this chart to clearly define the power that is OSHA regulation:
Wow, that sure makes a big difference. Which confirms my experience as a business owner. Financial incentives like workers comp rates are a FAR more powerful force, at least in my business, to root our safety issues than the arcane and bureaucratic mandates that flow out of OSHA.