Category Archives: Regulation

Federal rules serve as ‘worms’ buried in promises of ‘free money’

An often unappreciated mechanism throughout the Kansas budget severely limits the ability of legislators and governors to adapt to changing state priorities. A new paper from Kansas Policy Institute explains.

Federal Rules Serve as “Worms” Buried in Promises of “Free Money”

Mandates remove state control of budgets, exemplify increasing federal overreach

July 30, 2015 — Wichita — An often unappreciated mechanism throughout the Kansas budget severely limits the ability of legislators and governors to adapt to changing state priorities. These Maintenance of Effort (MOE) requirements are highlighted in a new paper by Kansas Policy Institute and is authored by former state budget director Steve Anderson. MOE stipulations force state and local governments to maintain a constant level of funding for several federal grant programs, most notably Medicaid and the Elementary and Secondary Education Act, two major components of Lyndon Johnson’s “Great Society;” in FY 2014 these two programs accounted for over two-thirds of Kansas general fund expenditures.

Maintenance of Effort cover Kansas Policy InstituteDave Trabert, president of Kansas Policy Institute, offered the following in conjunction with the release of the paper, “Maintenance of Effort requirements are an end-run on the U.S. Constitution, which prohibits the federal government from dictating how states operate.  The feds use MOE to create contractual obligations that effectively control large chunks of states’ budgets and limit legislators’ ability to make appropriate decisions for their constituents.”

Unfortunately, policy makers are bound by MOEs regardless of the state’s budget situation, changing priorities, or new-found efficiencies. A previous legislature can effectively tie the hands of future elected officials. Sometimes it is even agency bureaucrats who sign up for “free federal dollars” apart from the normal appropriations process with little legislative input.

Steve Anderson, author of the “Maintenance of Effort: The Federal Takeover of State Budgets” and current Senior Fiscal Policy Fellow with KPI, said, “The constitutional right of a state to control the appropriation of their citizens’ tax dollars is too often being abrogated by the federal government’s MOE requirements. This takeover of the state budgets is like an addictive drug from which withdrawal is painful. Unlike a drug, this addiction can be created by prior legislatures, governors or even bureaucrats.  The pervasiveness of MOE goes to almost every function of state government.”

The report outlines several strategies that can be utilized by state governments to mitigate the negative effects of MOEs. One proposal may prove difficult with existing programs but brings some common sense to policy making moving forward — avoid federal funds as much as possible. Conversely, a similar recommendation would be that all new grant programs be approved by the state legislature.

In conclusion KPI President Trabert said, “MOE requirements are not about improving outcomes, but dictating how states operate. Until Congress puts a stop to this practice state legislators must say no to the promise of ‘free money’ from the feds and avoid the problems brought by MOEs.”

Westar: First, control blatant waste

As our electric utility asks for a rate increase, let’s first ask that it stop blatant waste.

Westar, our state-regulated electric utility, is asking for a rate increase. As part of any increase, we ought to insist that the utility do a better job of controlling blatant waste.

Downtown Wichita, July 17, 2015, 11:18 am.
Downtown Wichita, July 17, 2015, 11:18 am.
Streetlights burning unnecessarily in the middle day in downtown Wichita is an ongoing problem. See In Wichita, wasting electricity a chronic problem and Waste in Wichita, the seen and probably unseen for examples.

The problem may not be solved soon. No one has much motivation to solve the problem. The city pays Westar a fixed fee for each streetlight. The use of electricity is not metered, at least as far as the city’s bill is concerned. So if the city notices the lights wasting electricity during the middle of the day, well, it’s of no cost to the city. The city is concerned that working with Westar to turn off street lights during the day may not be cost-effective, according to Ken Evans, the city’s director of strategic communications. That’s the attitude he expressed in a recent City of Wichita Facebook dialog with citizens. But the city has run a campaign asking people to turn off appliances like microwave ovens and alarm clocks when not in use. This saves a vanishingly small amount of electricity, and at a large cost in convenience.

Downtown Wichita, July 17, 2015, 11:18 am. At least five burning street lights can be seen.
Downtown Wichita, July 17, 2015, 11:18 am. At least five burning street lights can be seen.
Westar, on the other hand, is a highly-regulated utility that operates much like a governmental agency. How strong is the profit motive to Westar? Not strong, it seems. Most individuals or private business firms would seek to reduce the waste that Westar seems unconcerned about.

But before granting Westar a rate increase, its regulators ought to insist that the utility work to control blatant waste. This may be the only way to get attention to this problem.

Rebuilding liberty without permission

A forthcoming book by Charles Murray holds an intriguing idea as to how Americans can reassert liberty: Civil disobedience. Make the federal government an “insurable hazard.”

I think it’s a great idea. For an easy introduction to this concept, listen to the Cato Institute’s seven-minute podcast of Murray speaking about these ideas.

From the publisher:

American freedom is being gutted. Whether we are trying to run a business, practice a vocation, raise our families, cooperate with our neighbors, or follow our religious beliefs, we run afoul of the government—not because we are doing anything wrong but because the government has decided it knows better. When we object, that government can and does tell us, “Try to fight this, and we’ll ruin you.”

In this provocative book, acclaimed social scientist and bestselling author Charles Murray shows us why we can no longer hope to roll back the power of the federal government through the normal political process. The Constitution is broken in ways that cannot be fixed even by a sympathetic Supreme Court. Our legal system is increasingly lawless, unmoored from traditional ideas of “the rule of law.” The legislative process has become systemically corrupt no matter which party is in control.

But there’s good news beyond the Beltway. Technology is siphoning power from sclerotic government agencies and putting it in the hands of individuals and communities. The rediversification of American culture is making local freedom attractive to liberals as well as conservatives. People across the political spectrum are increasingly alienated from a regulatory state that nakedly serves its own interests rather than those of ordinary Americans.

The even better news is that federal government has a fatal weakness: It can get away with its thousands of laws and regulations only if the overwhelming majority of Americans voluntarily comply with them. Murray describes how civil disobedience backstopped by legal defense funds can make large portions of the 180,000-page Federal Code of Regulations unenforceable, through a targeted program that identifies regulations that arbitrarily and capriciously tell us what to do. Americans have it within their power to make the federal government an insurable hazard like hurricanes and floods, leaving us once again free to live our lives as we see fit.

By the People’s hopeful message is that rebuilding our traditional freedoms does not require electing a right-thinking Congress or president, nor does it require five right-thinking justices on the Supreme Court. It can be done by we the people, using America’s unique civil society to put government back in its proper box.

Study on state and local regulation released

This week Kansas Policy Institute released a study of regulation and its impact at the state and local level. This is different from most investigations of regulation, as most focus on federal regulations.

Business Perceptions of the Economic Impact of State and Local Government Regulation coverThe study is titled “Business Perceptions of the Economic Impact of State and Local Government Regulation.” It was conducted by the Hugo Wall School of Public Affairs at Wichita State University. Click here to view the entire document.

Following is an excerpt from the introduction by James Franko, Vice President and Policy Director at Kansas Policy Institute.

Surprising to some, the businesses interviewed did not have as much of a problem with the regulations themselves, or the need for regulations, but with their application and enforcement. Across industries and focus group sessions the key themes were clear — give businesses transparency in what regulations are being applied, how they are employed, provide flexibility in meeting those goals, and allow an opportunity for compliance.

Sometimes things can be said so often as to lose their punch and become little more than the platitudes referenced above. The findings from Hugo Wall are clear that businesses will adapt and comply with regulations if they are transparent and accountable. Many in the public can be forgiven for thinking this was already the case. Thankfully, local and state governments can ensure this happens with minimal additional expense.

A transparent and accountable regulatory regime should be considered the “low hanging fruit” of government. Individuals and communities will always land on different places along the continuum of appropriate regulation. And, a give and take will always exist between regulators and the regulated. Those two truisms, however, should do nothing to undermine the need for regulations to be applied equally, based on clear rules and interpretations, and to give each business an opportunity to comply.

Food labeling act to be heard

A bill sponsored by U.S. Representative Mike Pompeo of Wichita will be heard in committee this week. On his Facebook page, Pompeo wrote:

On December 10 there will be a hearing in the Energy and Commerce Committee to review the Safe and Accurate Food Labeling Act. We will hear testimony from expert scientists and those with a wide variety of experiences. We will also hear from those who produce the safest food in the world here in America.

This legislation will make the following reforms:

  • Ensure that new innovations in food are — and always remain — safe by creating a mandatory process for all genetically engineered crops that requires an FDA safety review prior to their introduction into the food supply;
  • Empower the FDA to specify special labeling if these foods are found to be unsafe in any way, and;
  • Preserve the FDA’s 100-year management of food labeling and prevent a disruptive regulatory patchwork that will significantly increase the cost of food for families.

Following from Voice for Liberty in July, why this legislation should be passed.

For GMOs, a patchwork of state regulations would be a nightmare

A complicated regulatory landscape for genetically modified foods would shift power to large food producers at the expense of small companies and innovative startups.

Have you ever seen a product that displayed a label that states: “This product contains a chemical known to the State of California to cause cancer and birth defects or other reproductive harm.” And notifying you that you should wash your hands after handling it?

In my case, it was a cable attached to a computer peripheral.

How is that that the State of California “knows” this product is harmful, but none of the other states or the federal government have such knowledge? And why should I — here in Kansas — be discouraged by buying a product and then be scared to use it, just because California believes it is harmful?

The answer is that California has a list of about 900 chemicals that it believes are harmful. If you want to sell a product in California, and if your product contains one of these, you must provide a warning label on your product.

Now, can you imagine the confusion that would result if other states had their own list of chemicals that they believe are harmful. It’s quite likely that each state would have a different list. Complying with the multitude of different harmful lists and labeling requirements would be a burden. It might be impossible — or very costly — to comply.

Today, we have similar potential for regulatory complexity cropping up in the form of state-based label requirements for foods that contain GMOs (Genetically Modified Organisms). Dozens of states are considering their own labeling requirements for food sold within their borders. It’s quite likely that each state would have a different set of labeling requirements. The complexity of complying with such disjointed regulations is costly and forbidding.

To help in this situation, United States Representative Mike Pompeo has introduced legislation that would eliminate the ability of states to require labeling. The bill is H.R. 4432: Safe and Accurate Food Labeling Act of 2014.

The proposed law does not prohibit voluntarily labeling.

What’s interesting is that opponents say this bill will create a new federal bureaucracy to enforce GMO regulations. I suppose that’s true. But it’s either that, or 50 states with 50 sets of regulations, all different. Cities could add regulations, too, further complicating the regulatory landscape.

Another observation: Critics of this bill say its supporters have “sold out” to the large food producer companies, Monsanto being mentioned most prominently. But it is large companies like Monsanto that are best able to cope with complicated regulations. Large companies have fleets of lawyers and compliance officers that can deal with burdensome regulation. And being large, these companies can spread the cost of regulation over a large sales volume.

But small companies, start up companies, and innovators don’t have lots of lawyers and compliance officers. Being small, they can’t spread the cost of regulation over a large sales volume. These are the companies that are most harmed by regulations like those that H.R. 4432 is designed to squelch.

It’s in the interest of large companies to have regulations that create barriers to entry to markets by new competitors. We often see companies lobbying to create such regulations. But H.R. 4432 will create a uniform playing field that is easier and simpler to navigate and obey.

Finally, markets have a remarkable ability to provide the products and information that consumers want. If a food producer senses that consumers want information about the ingredients in a product, they’ll provide it. Their competitors — if they see themselves disadvantaged — will also provide the information that consumers demand. The alternative is relying on 50 sets of government bureaucrats operating in 50 state capitals, plus ambitious city bureaucrats.

Cato Institute: A discussion of net neutrality

From Cato Institute, a discussion of net neutrality.

The debate continues over whether “net neutrality” is the equivalent of old-school utility regulation of telecommunication firms. The President and others are now asking the FCC to treat telecom firms in the same ways telephone companies were treated decades ago. Berin Szoka, president of TechFreedom, comments.

View below, or click here to view at YouTube.

For GMOs, a patchwork of state regulations would be a nightmare

A complicated regulatory landscape for genetically modified foods would shift power to large food producers at the expense of small companies and innovative startups.

Have you ever seen a product that displayed a label that states: “This product contains a chemical known to the State of California to cause cancer and birth defects or other reproductive harm.” And notifying you that you should wash your hands after handling it?

In my case, it was a cable attached to a computer peripheral.

How is that that the State of California “knows” this product is harmful, but none of the other states or the federal government have such knowledge? And why should I — here in Kansas — be discouraged by buying a product and then be scared to use it, just because California believes it is harmful?

The answer is that California has a list of about 900 chemicals that it believes are harmful. If you want to sell a product in California, and if your product contains one of these, you must provide a warning label on your product.

Now, can you imagine the confusion that would result if other states had their own list of chemicals that they believe are harmful. It’s quite likely that each state would have a different list. Complying with the multitude of different harmful lists and labeling requirements would be a burden. It might be impossible — or very costly — to comply.

Today, we have similar potential for regulatory complexity cropping up in the form of state-based label requirements for foods that contain GMOs (Genetically Modified Organisms). Dozens of states are considering their own labeling requirements for food sold within their borders. It’s quite likely that each state would have a different set of labeling requirements. The complexity of complying with such disjointed regulations is costly and forbidding.

To help in this situation, United States Representative Mike Pompeo has introduced legislation that would eliminate the ability of states to require labeling. The bill is H.R. 4432: Safe and Accurate Food Labeling Act of 2014.

The proposed law does not prohibit voluntarily labeling.

What’s interesting is that opponents say this bill will create a new federal bureaucracy to enforce GMO regulations. I suppose that’s true. But it’s either that, or 50 states with 50 sets of regulations, all different. Cities could add regulations, too, further complicating the regulatory landscape.

Another observation: Critics of this bill say its supporters have “sold out” to the large food producer companies, Monsanto being mentioned most prominently. But it is large companies like Monsanto that are best able to cope with complicated regulations. Large companies have fleets of lawyers and compliance officers that can deal with burdensome regulation. And being large, these companies can spread the cost of regulation over a large sales volume.

But small companies, start up companies, and innovators don’t have lots of lawyers and compliance officers. Being small, they can’t spread the cost of regulation over a large sales volume. These are the companies that are most harmed by regulations like those that H.R. 4432 is designed to squelch.

It’s in the interest of large companies to have regulations that create barriers to entry to markets by new competitors. We often see companies lobbying to create such regulations. But H.R. 4432 will create a uniform playing field that is easier and simpler to navigate and obey.

Finally, markets have a remarkable ability to provide the products and information that consumers want. If a food producer senses that consumers want information about the ingredients in a product, they’ll provide it. Their competitors — if they see themselves disadvantaged — will also provide the information that consumers demand. The alternative is relying on 50 sets of government bureaucrats operating in 50 state capitals, plus ambitious city bureaucrats.

‘Ten Thousand Commandments’ for 2014 released

Ten Thousand Commandments 2014

By Clyde Wayne Crews

Full Report Available Here

Ten Thousand Commandments is the Competitive Enterprise Institute’s annual survey of the federal regulatory state. Authored by CEI Vice President for Policy Clyde Wayne Crews, it shines a light on the large, growing, and hidden costs of America’s regulatory state.

The scope of federal government spending and deficits is sobering, but federal regulations cost hundreds of billions – perhaps trillions – of dollars annually. Unfortunately, they get little attention in policy debates. Regulatory costs are difficult to quantify because, unlike taxes, they are unbudgeted and often indirect. Ten Thousand Commandments compiles scattered government and private data on the numbers and costs of regulations and about the agencies that issue them, in an attempt to make the regulatory state more comprehensible.

Highlights of the 2014 Edition Include:

  • Combined with $3.454 trillion in federal spending, Washington’s share of the economy now reaches 31 percent.
  • Costs for Americans to comply with federal regulations reached $1.863 trillion in 2013. That is more than the GDPs of Canada or Australia.
  • This is the 21st edition of Ten Thousand Commandments. In that time, 87,282 final rules have been issued. That’s more than 3,500 per year or about nine per day.
  • The “Unconstitutionality Index” is the ratio of regulations issued by agencies compared to legislation passed by Congress and signed into law by the president. The ratio stood at 51 for 2013. That means there were 72 new laws and 3,659 new rules – 51 rules for every law, or a new rule every 2 ½ hours.
  • Regulatory costs amount to an average of $14,974 per household – 23 percent of the average household income of $65,596 and 29 percent of the expenditure budget of $51,442. This exceeds every item in the household budget except housing – more than health care, food, transportation, entertainment, apparel, services, and savings. Some 63 departments, agencies and commissions have regulations in the pipeline.
  • The 2013 Federal Register contains 79,311 pages, the fourth highest ever. The top two all-time totals are 81,405 pages in 2010 and 81,247 in 2011, both under Obama.
  • The top six federal rulemaking agencies account for 49.3 percent of all federal rules. In 2013, these were the Departments of the Treasury, Commerce, Interior, Health and Human Services, and Transportation and the Environmental Protection Agency.
  • Small businesses pay more in per-employee regulatory costs. Firms with fewer than 20 employees pay an average of $10,585 per employee, compared to $7,755 for those with 500 or more employees.

Wayne Crews – Ten Thousand Commandments 2014.pdf

Ten Thousand Commandments 2014 on Scribd

Kansas advanced biofuels plant subject of New York Times story

The New York Times has provided a story on the future of advanced biofuels, using a plant under construction in Kansas as the centerpiece. The plant, near the western Kansas town of Hugoton, produces cellulosic ethanol. Instead of using kernels of corn as input, the plant uses material like corn stalks and wheat straw. When the Hugoton plant starts operations in May, it will be twice as large as the largest plant currently in operation.

A few notes:

The lede of the story: “There is an old joke in the energy business that advanced biofuels are the fuel of the future, and always will be.”

The legislation requiring the use of advanced biofuels (Energy Independence and Security Act of 2007) was the product of a Republican administration.

The executive vice president of Abengoa complains that the government is changing the rules.

Experts are not convinced of the potential of cellulosic ethanol plants to be economically viable.

A Canadian biofuel company wants the EPA to create regulations requiring the use of its product, and to provide incentives.

The Kansas cellulosic plant has received a $134 million loan guarantee from the Energy Department, the same type of benefit the notorious Solyndra company received.

Gosnell movie smashes through crowdfunding record

gosnell-movieFollowing is a message from Ann & Phelim Media on the continuing success of the crowdfunding campaign for the Gosnell Movie. I’ve made a contribution, and I hope you do too, as the goal is not yet met.

The movie on Philadelphia abortion doctor Kermit Gosnell has just become the most successful film ever on the Indiegogo crowdfunding website.

Gosnell, a made for TV project on the doctor who is America’s most prolific serial killer, has just smashed through the $900,000 mark — overtaking the previous record holder which had raised $898,000.

Gosnell was convicted of the murder of several live and viable babies at his clinic. It is thought that over a 40 year killing spree he murdered thousands of infants. Gosnell is currently serving several life sentences.

His case became controversial after the trial received almost no media coverage — and sparked allegations of a media coverup.

Gosnell Producer Ann McElhinney said the record breaking success of the Gosnell Movie was a testament to the thousands of small donors who wanted the truth to be covered.

“Dr Kermit Gosnell is America’s biggest serial killer — but there was almost no media coverage of his trial — and then Hollywood — which loves to make movies and TV programmes about serial killers — also decided to ignore the story.

That’s why we decided to crowdfund and it’s also why we have been the most successful project ever. This was the biggest crime in US history, which led to one of the biggest media cover ups. It makes sense that the American public has responded with the biggest ever crowdfunding campaign.”

Co-Producer Phelim McAleer said they were “ecstatic” to have achieved a record breaking amount but warned that they would not be relaxing until they had raised the $2.1m needed.

“We have a fixed funding campaign — which means that if we don’t reach our target, all the money goes back to the contributors.”

Producer Magdalena Segieda said the record breaking amount raised for the project is proof that people are fed up with censorship.

“This sends a message to the media and Hollywood that they need to stop ignoring stories that don’t match their political beliefs. By helping Gosnell smash these records the public are making a very strong statement about their dissatisfaction with media bias.”

More information on the Gosnell Movie crowdfunding campaign can be found at www.gosnellmovie.com.

Regulation failure leads to tragedy in Wichita

wichita-taxi regulationsWhen the Wichita City Council passed new taxicab regulations in 2012, the focus was on dirty cabs and slovenly drivers who were not acting as goodwill ambassadors for the city. Mayor Carl Brewer said he was “tired” of hearing complaints about drivers.

So the council passed new regulations regarding taxicabs, including the requirement that drivers attend customer service training provided by Go Wichita Convention and Visitors Bureau. Other regulations determine taxicab office staffing levels and level of supervision.

Bryon Scott Spohn, a taxi driver accused of raping a passenger.

But something very important slipped through the cracks. The Wichita Eagle has reported the city didn’t competently enforce regulations designed to protect passenger safety:

A Wichita taxicab driver now in prison for raping a passenger last year shouldn’t have been allowed to operate a taxi in the first place.

That’s because at the time Bryon Scott Spohn applied for a taxi driver’s license in late 2012, he was on a state sex offender registry for possession of child pornography. A city ordinance that went into effect in July 2012 says a taxi driver’s license shall not be issued to anyone who “is now or has ever been registered as a sexual offender with any state, county or local government.”

Spohn shouldn’t have received a taxi license but did because the new change banning registered sex offenders wasn’t communicated to staff members doing background checks on taxi driver applicants, city officials told The Eagle on Friday. The city has fixed the problem that led to the oversight in Spohn’s case, they said. Taxi driver in prison for raping passenger was on sex offender registry, March 3, 2014

The regulations regarding customer service training were implemented. But the really important regulations? Lack of oversight, says the city.

I wonder: Who is regulating the regulators?

Exchange data security breaches don’t require notification

The breach of consumer data at Target has brought the issue of data security in focus. Yesterday a senator called for more protection and accountability for consumers and retailers. The following story from Watchdog.org tells us that government does not want to hold itself to the standards it wants the private sector to observe. There has been legislation proposed. Rep. Diane Black [R-TN6] has introduced H.R. 3731: Federal Exchange Data Breach Notification Act of 2013, whose title is “To require an Exchange established under the Patient Protection and Affordable Care Act to notify individuals in the case that personal information of such individuals is known to have been acquired or accessed as a result of a breach of the security of any system maintained by the Exchange.”

Feds not required to report security breaches of Obamacare exchange website

By 

HACKED OFF: Hackers or careless bureaucrats could cause private information to be spilled across the Internet. But the federal government, unlike most states, don't have to tell users when they have been compromised.

HACKED OFF: Hackers or careless bureaucrats could cause private information to be spilled across the Internet. But the federal government, unlike most states, don’t have to tell users when they have been compromised.

By Eric Boehm | Watchdog.org

Americans who buy health insurance through the federal Obamacare exchange website could have their personal information stolen by hackers and never even know it.

Most of the state-run health exchange websites will be covered by state laws that require notification when government databases are breached by hackers. But there is no law requiring notification when databases run by the federal government are breached, and even though the Department of Health and Human Services was asked to include a notification provision in the rules being drawn up for the new federal exchange, it declined to do so.

Other protections for individuals’ privacy, like the Health Insurance Portability and Accountability Act, or HIPAA, do not apply to the government-run exchange, only to health providers and insurance companies operating within the exchange.

Privacy advocates and cyber-security experts have had concerns about the lack of a federal notification law for years and hope the scrutiny of the Obamacare exchange will finally bringchange.

“The notification requirement is a very important part of overall security,” saidDeven McGraw, director of the Health Privacy Project at the Center for Democracy and Technology. “People should be told when their information is at-risk.”

The lack of a notification requirement is particularly bad for the health insurance exchange website because of all the questions surrounding the site’s security. Poor security, coupled with the website’s high-profile problems, could make it a target for hackers either seeking to steal identities or embarrass the government.

Unfortunately, security is often an afterthought for the government, said David Kennedy, CEO of TrustedSEC, an Ohio-based cyber-security firm. Kennedy has testified before Congress about security threats in the Obamacare exchange and the need for notification laws.

“All we need is something that says if the federal government is breached, all we have to do is alert the public,” he told Watchdog.org. “Healthcare.gov is just one website of hundreds that have had these issues going back through the years.”

Together it creates a possible nightmare scenario. Without strong security on the front end, the hastily built and not fully operational website could become a treasure trove for hackers looking to steal identities. But without any laws requiring that those victims be notified by the federal government users of the Federal health exchange will be in the dark about any potential security breaches of their private data.

When the federal Obamacare exchange was being developed by HHS prior to its troubled launch on Oct. 1, experts told the department that it should include a data-breach provision in its policies for the website even though one was not required under federal law.

The department flatly declined to do so.

The final rules for the exchanges were approved on March 27, 2012, meeting of HHS officials, according to the Federal Register.

At that meeting, two commenters asked HHS to ensure the exchanges would promptly notify affected enrollees in the event of a data breach or unauthorized access to the exchange’s databases. One suggested that a full investigation be launched each time such a breach occurred, with the goal of holding hackers legally and financially accountable for breaking into the website.

The department’s response: “We do not plan to include the specific notification procedures in the final rule. Consistent with this approach, we do not include specific policies for investigation of data breaches in this final rule.”

Since there is no federal notification requirement, breaches of any and all federal databases can occur without the public ever being informed.

The only way to find out a hack has occurred is when the government decides to disclose it — as several federal law enforcement agencies did last month in response to attacks from Anonymous, a group of super-hackers who threatened to take down the FBI website and others.

But hacks that happen behind the scenes —potentially stealing everything from Social Security numbers to Department of Homeland Security watch lists — never have to be reported.

“That’s alarming because there could be a number of federal databases that are compromised already and we don’t know about it,” Kennedy said. “The exchange is part of a bigger problem.”

Federal privacy protections contained in HIPAA also do not apply to the databases created by the federal exchange website, McGraw said, even though health insurers doing business through the exchange must be HIPAA compliant.

In other words, the health plan itself is covered by HIPAA and any breaches of security that affect a consumer who has purchased a specific plan would have to be reported. But the process of choosing and purchasing a plan through the federal exchange — along with any information entered into the federal exchange as part of that process — is not subject to HIPAA protections.

“The problem with the exchanges is that they are such new entities, and they are so unique that existing laws don’t really cover them,” McGraw said.

But 48 states have laws on the books requiring that they give notification to individuals who may have had personal information stolen or leaked from a government database. Many states require that government agencies and departments alert the state attorney general so investigations can be launched.

In states that opted to run their own health insurance exchanges, those laws generally cover security breaches of the exchanges, McGraw said, though it depends on the specific wording of each state law.

Those state laws are how data breaches of several state-level health insurance exchange websites have come to light.

In September, Watchdog.org reported on a data breech of the Minnesota health exchange — known as “MNsure” — that potentially affected as many as 2,400 people.

In Florida, concerns about data breaches of the state-run exchange website prompted Gov. Rick Scott to send a letter to Congress saying Floridians would not exchange privacy for insurance.

On the federal exchange, such breaches are possible, maybe even likely, since the site was launched without comprehensive testing of the security controls for the system.

A Sept. 27 memo to Medicare chief Marylin Tavernner said insufficient testing of the website before the Oct. 1 launch “exposed a level of uncertainty that can be deemed a high risk,” the Associated Press reported in October.

Even though the federal government does not have to report any breaches of security, at least a few already have occurred.

The most high-profile case so far is that of Thomas Dougall, a South Carolina lawyer who had his personal information accidentally leaked to another person after using the Obamacare exchange last month.

We logged on and compared some prices,” Dougall later told Fox News’ Greta Van Susteren. “We came home last Friday night to have a young man from a completely different state calling to tell me that when he logged on … he got all my personal information in exchange.

Dougall only found out about that breach of security because the recipient was kind enough to give him a call.  Without a requirement that the exchanges report such problems — whether the result of nefarious hackers or glitches in the programming — it is impossible to tell how many other Americans have had their private information released by the federal exchange.

Kennedy said he would not recommend that anyone use the federal exchange until it is more secure and until breaches of security are reported.

“I would say think twice about it, at least until we get more details,” he said.

Kennedy says he supports universal health care and his criticisms of the website are not rooted in political motivations. But the former U.S. Marine whose firm provides computer security to several Fortune 100 companies says there have been “zero changes” to the security of the health insurance exchange website in the run-up to the much-touted Dec. 1 re-launch.

Congress has debated a federal notification law in each of the past three years, but one has never been passed.

In July, during a hearing of the House Committee on Energy and Commerce, lawmakers heard testimony from a variety of experts who explained the need for a federal breach notification requirement.

David Thaw, a law professor at the University of Connecticut who specializes in cyber-security and the legal framework around it, said data breach notification laws, combined with comprehensive data security, are an essential part of protecting consumers and businesses.

I analogize the effects of breach notification alone to locking the bank or vault door while leaving a back window wide open,” he said.

With the federal health insurance exchange, there are questions about whether the vault door has been adequately locked.

But there is no doubt that the back window is still wide open.

Boehm is a reporter for Watchdog.org and can be reached at EBoehm@Watchdog.org. Follow him on Twitter @EricBoehm87

USA versus You: The problem of overcriminalization

Events in recent months have justifiably caused Americans to ask whether a powerful, activist, and interventionist government and bureaucracy is good to have. Those who have been looking at overcriminalization, however, have known that government and regulatory agencies have been targeting and oppressing Americans for a long time. And it’s getting worse.

USA vs. You cover

The new website USAvsYOU.com holds useful information for Americans to know about how law has changed in recent years, compared to how it operated for centuries before. The booklet available for reading is titled USA vs. You: The flood of criminal laws threatening your liberty.

As an example, here is a troubling trend:

In many criminal laws, the “guilty mind” requirement has been removed or weakened. This means people can go to prison regardless of whether they intended to break the law or knew their actions were in violation of the law.

Traditionally, crimes had two components: (l) mens reu (guilty mind), and (2) actus reus (bad act).

Today, many criminal laws and regulations have insufficient or no mens rea (guilty mind) requirement — meaning, a person need not know that his or her conduct is illegal in order to be guilty of the crime.

An example story is the following:

THE CRIME: Rescuing a baby deer

Jeff Counceller, a police officer, and his wife Jennifer spotted an injured baby deer on their neighbor’s porch. Instead of turning a blind eye to the dying fawn, the Councellers took the deer in and nursed it back to health.

An Indiana Conservation Officer spotted the fawn (named Dani) in the Councellers’ yard — and promptly charged the couple with unlawful possession of a deer, a misdemeanor offense. Fortunately for her, the day that “Little Orphan Dani” was to be euthanized by the state, the deer escaped into the wild. Due to public outrage, the government dropped the charges.

The website and booklet is a product of Heritage Foundation and it partners such as the American Civil Liberties Union. Heritage has been covering the issue of overcriminalization here. It describes the problem as this: “Overcriminalization describes the trend to use the criminal law rather than the civil law to solve every problem, to punish every mistake, and to compel compliance with regulatory objectives. Criminal law should be used only if a person intentionally flouts the law or engages in conduct that is morally blameworthy or dangerous.”

We have problems like this in Wichita, believe it or not. An ordinance passed by the Wichita City Council in 2010 might ensnare anyone visiting city hall, if they happen to have a broad-tip marker in their purse or briefcase:

Animated marker

“Possession of Graffiti Implements Prohibited in Public Places. It is unlawful for any person to have in his/her possession any graffiti implement while in, upon or within one hundred (100) feet of any public facility, park, playground, swimming pool, skate park, recreational facility, or other public building owned or operated by the city, county, state, or federal government, or while in, under or within one hundred (100) feet of an underpass, bridge, abutment, storm drain, spillway or similar types of infrastructure unless otherwise authorized.”

“Graffiti implements” are defined broadly earlier in the ordinance.

If you’re thinking about a career in taxicab driving, be advised that the city has ordinances punishing you if you’re found to have violated these standards: “Fail to maintain their personal appearance by being neat and clean in dress and person” and “Fail to keep clothing in good repair, free of rips, tears and stains.”

We could use the shutdown as a teachable moment

The United States government is in the third day of a partial shutdown. It’s quite a coincidence that Chapter 9 of Henry Hazlitt’s book “Economics in One Lesson” talks about government employees right at the time we’re in a government shutdown.

Here, Amanda BillyRock illustrates this chapter of “Economics in One Lesson.” (Click here to view at YouTube.)

You know how on a day when it has snowed or there’s been an ice storm, you hear on the news that “only essential government employees should report to work today.” When I hear that, I’ve wondered “Why do we have non-essential government employees?”

EPA logo

Here’s something that’s a little shocking. I didn’t believe it when I first heard it. The news agency Reuters is reporting that the Environmental Protection Agency — the EPA — has decided that only seven percent of its employees are essential. The others are non-essential. So why do we have them, if they are not essential?

At the Department of Education, only five percent of the employees are considered to be essential and will work during the shutdown. How, I wonder, are we going to educate children during this time?

Do private sector companies have non-essential employees? Of course. But market competition provides a balancing force, a motivation to avoid waste. That’s not present as strongly in government, if at all.

I understand that we depend on government for so many things that during a shutdown — be it partial or whatever — people’s lives will be disrupted. We’re seeing news stories of people showing up at our great national parks, for example, and being turned away because the park is closed. The solution to these problems is to take these products and services away from government and let the private sector operate them.

That’s something that seems very foreign to a lot of people. Take the inspection of airplanes, for example. Right now people are saying that if government inspectors are not available to inspect airplanes, they’re going to crash. Well ask yourself this question. Does an airline strive to operate its airplanes safely only to satisfy government inspectors, or does it wish to protect the lives of its customers and employees, and safeguard its physical assets like the expensive airplanes?

Or consider a meatpacking plant. Does it endeavor to produce safe beef only because inspectors are watching, or because it is concerned for its customers and wants to avoid the terrible publicity and economic harm of a recall?

I’m not saying that beef and airplanes should not be inspected. But they shouldn’t be inspected by government. It’s very difficult to hold government accountable. When we see episodes where government breaks down, such as perhaps government inspectors who might not be doing a good job inspecting beef, the proposed solution is always more money for government. More money for more inspectors and bureaucrats. But, what if we had a private market for inspection services? If there was a failure of inspection, in other words, if a private inspection company was not being thorough, that would become known. The reputation of that company, which is its primary asset, would be harmed. No longer would we trust that company when it says the beef is safe. The company would likely fail, and someone else would provide these services. We can’t really do this with government.

Markets can provide a very strong form of regulation, if we let them work.

To some extent, this happened during the financial crises of 2008. The credit rating services were not owned by government, but they had a government-granted monopoly on providing credit rating services, and many say that their failure to produce accurate assessments of the risks of securities was pivotal in contributing to the collapse. Might it have been different if there was a free market for credit rating services? We don’t really know.

This government shutdown is an opportunity to realize what we really need government to do, what can be better done by the private sector, and maybe even what doesn’t need to be done at all.

Robosquirrel

It’s a tough battle, though. Last week Nancy Pelosi said there was nowhere to cut. How about this: $325,000 was spent on a robotic squirrel named “RoboSquirrel.” This National Science Foundation grant was used to create a realistic-looking robotic squirrel for the purpose of studying how a rattlesnake would react to it. Can’t we cut that? I’m sure Pelosi would say “what would the scientific researchers do if we didn’t fund this program?” As Hazlitt tells us, they’d do something else. Hopefully something else that the market — that is, you and I — value enough to buy it because we want it, not because government taxed us to pay for it. But we can’t see that right now, while we do see robosquirrel. The seen and unseen, again.

I don’t know. Maybe I shouldn’t be so harsh in my criticism. We did learn that a successful rattlesnake attack on a squirrel involves three steps. First, striking and hitting a prey animal, and that’s usually from only about 10 inches away. Then envenomating the prey animal, and the animal may attempt to escape. Then the rattlesnake must relocate the envenomated prey animal after it succumbs to the venom.

Envenomating. I’d never heard that word before. Maybe we really need to get government back to work after all.

Regulations, even well-intentioned, may be dangerous

A regulation intended to save children resulted in many more deaths. The reason is the lulling effect.

Do well-intentioned regulations ever produce the opposite effect? In 1972 the Food and Drug Administration introduced regulations requiring child-resistant bottlecaps for aspirin and some other medications. The goal was to reduce aspirin poisonings among children. Surely this is a laudable goal. If government has the capability to reduce these tragedies, why wouldn’t we implement laws or regulations?

When W. Kip Viscusi looked at data, he found something striking and very sad: After the implementation of the regulations, there was no significant impact on the rate of aspirin poisonings. The intended goal of the regulation was not met.

But here’s the real problem, writes Viscusi: “… there has been an alarming, upward shift in the trend of analgesic ingestion rates since 1972. The source of this pattern appears to be attributable to a general reduction in parental caution with respect to such medicines, which has had an adverse spillover effect on unregulated products. The economic mechanisms involved can be best understood by considering the nature of individuals’ response to regulatory protection.”

Because of the response of people to the regulations, Viscusi estimates an additional 3,500 children died each year. This is a regulation intended to protect children.

The research is presented in The Lulling Effect: The Impact of Child-Resistant Packaging on Aspirin and Analgesic Ingestions. I’ve excerpted from the conclusion:

Analgesic poisoning rates for children under age 5 escalated from 1.1 per 1,000 in 1971 to 1.5 per 1,000 in 1980. Even after taking into account increases in analgesic sales, 47 percent of this increase is attributable to an unexplained upward shift in the analgesic poisoning rate beginning in 1972. The coupling of the absence of any shift in the trend of aspirin poisoning rates with an upsurge in analgesic poisoning rates is consistent with the hypothesis that there is a significant indivisibility in safety precautions. Moreover, absence of a significant effect of safety caps on aspirin poisonings and the 47 percent unexplained shift in analgesic poisonings suggests that the impact of the regulation on balance was counterproductive, leading to 3,500 additional poisonings of children under age 5 annually from analgesics.

It is possible but unlikely that such a strong impact could emerge from fully rational consumer decisions. Moreover, this effect is not only large but reasonably widespread, as I have identified a similar pattern for prescription drugs, and for cleaning and polishing agents. A more likely explanation for these dramatic effects is that consumers have been lulled into a less-safety-conscious mode of behavior by the existence of safety caps. The presumed effectiveness of the technological solution may have induced increased parental irresponsibility.

A variety of regulatory efforts have sought to reduce individual risks through mandated technological changes. These measures will be effective if individual actions remain unchanged. In practice, these regulations will produce a lulling effect on consumer behavior because the perceived need for precautions will decline, potentially producing adverse spillover effects on the safety of other products. The strength of these impacts should highlight the importance of taking individual behavior into account when designing regulations intended to promote safety.

So we see regulations lulling people into assuming safety, assuming that all is well, but danger is actually increased.

Do you remember Bernie Madoff? He operated in the highly-regulated securities investment industry, yet he was able to steal billions from his clients over a long period of time. Did his clients assume that regulations would keep their money safe? I’m sure that many did.

Recently John Stossel has an episode of his television show devoted to the subject of regulations. He said: “America drowns in law. There are 175,000 pages of federal regulations that you must obey, or some lawyer can wreck your life. For every pound of good the regulations do, they do a ton of harm. 175,000 pages alone strangles life.”

Stossesl also recently wrote: “EBay’s business model is also threatened by fraud. How can a buyer trust that, say, a seller will actually deliver a $25 pack of baseball cards and that the cards will be what he claims they are? In theory, you could sue; but in practice, our legal system is too slow and costly for that. So eBay came up with self-regulation: The buyers rate the sellers.”

When we look to government to solve problems, we can end up with systems that actually make the problem worse. When trading baseball cards, that’s not good. When investing for retirement, regulatory failure is very harmful. But when trying to protect children from poisoning, and then actually causing more deaths — that’s a man-made disaster of the highest order.

USA vs. You: The problem of overcriminalization

Events in recent months have justifiably caused Americans to ask whether a powerful, activist, and interventionist government and bureaucracy is good to have. Those who have been looking at overcriminalization, however, have known that government and regulatory agencies have been targeting and oppressing Americans for a long time. And it’s getting worse.

USA vs. You cover

The new website USAvsYOU.com holds useful information for Americans to know about how law has changed in recent years, compared to how it operated for centuries before. The booklet available for reading is titled USA vs. You: The flood of criminal laws threatening your liberty.

As an example, here is a troubling trend:

In many criminal laws, the “guilty mind” requirement has been removed or weakened. This means people can go to prison regardless of whether they intended to break the law or knew their actions were in violation of the law.

Traditionally, crimes had two components: (l) mens reu (guilty mind), and (2) actus reus (bad act).

Today, many criminal laws and regulations have insufficient or no mens rea (guilty mind) requirement — meaning, a person need not know that his or her conduct is illegal in order to be guilty of the crime.

An example story is the following:

THE CRIME: Rescuing a baby deer

Jeff Counceller, a police officer, and his wife Jennifer spotted an injured baby deer on their neighbor’s porch. Instead of turning a blind eye to the dying fawn, the Councellers took the deer in and nursed it back to health.

An Indiana Conservation Officer spotted the fawn (named Dani) in the Councellers’ yard — and promptly charged the couple with unlawful possession of a deer, a misdemeanor offense. Fortunately for her, the day that “Little Orphan Dani” was to be euthanized by the state, the deer escaped into the wild. Due to public outrage, the government dropped the charges.

The website and booklet is a product of Heritage Foundation and it partners such as the American Civil Liberties Union. Heritage has been covering the issue of overcriminalization here. It describes the problem as this: “Overcriminalization describes the trend to use the criminal law rather than the civil law to solve every problem, to punish every mistake, and to compel compliance with regulatory objectives. Criminal law should be used only if a person intentionally flouts the law or engages in conduct that is morally blameworthy or dangerous.”

We have problems like this in Wichita, believe it or not. An ordinance passed by the Wichita City Council in 2010 might ensnare anyone visiting city hall, if they happen to have a broad-tip marker in their purse or briefcase:

Animated marker

“Possession of Graffiti Implements Prohibited in Public Places. It is unlawful for any person to have in his/her possession any graffiti implement while in, upon or within one hundred (100) feet of any public facility, park, playground, swimming pool, skate park, recreational facility, or other public building owned or operated by the city, county, state, or federal government, or while in, under or within one hundred (100) feet of an underpass, bridge, abutment, storm drain, spillway or similar types of infrastructure unless otherwise authorized.”

“Graffiti implements” are defined broadly earlier in the ordinance.

If you’re thinking about a career in taxicab driving, be advised that the city has ordinances punishing you if you’re found to have violated these standards: “Fail to maintain their personal appearance by being neat and clean in dress and person” and “Fail to keep clothing in good repair, free of rips, tears and stains.”

REAP: We’ll plan for you, like it or not

Democracy is the theory that the common people know what they want, and deserve to get it good and hard.
— H.L. Mencken

We’ve learned that the government planners will plan for you, whether or not you want it. Despite having voted against participation, two Kansas counties are still included in a regional planning consortium.

South Central Kansas Prosperity

The new website thinktomorrowtoday.org promotes and supports the sustainable communities government planning process in South-Central Kansas. The planning effort has been rebranded as “South Central Kansas Prosperity.”

In the logo, on a map, and in narrative, Butler and Sumner counties are listed as participants. But these newspaper headlines say something else about what the elected officials in these counties thought about joining the plan:

Sumner County isn’t on board with fed’s sustainable communities planning grant

Sumner County isn’t on board with fed’s sustainable communities planning grant (Wichita Eagle, July 30, 2012): “One of the counties served by a sustainable communities planning grant recently declined to be a partner in the effort, expressing concerns about federal intrusion in local government.”

Butler County decides not to support REAP planning grant

Butler County decides not to support REAP planning grant (El Dorado Times, August 23, 2012): “The issue at the center of the Butler County Commission’s discussion about a sustainable communities planning grant was local control.”

I can understand why these counties decided to opt out of the planning process and why two Sedgwick County Commissioners voted against participation.

Cato Institute Senior Fellow Randal O’Toole, in his book The Best-Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future, explains the danger and harm of government plans. I remember two passages in particular:

Somewhere in the United States today, government officials are writing a plan that will profoundly affect other people’s lives, incomes, and property. Though it may be written with the best intentions, the plan will go horribly wrong. The costs will be far higher than anticipated, the benefits will prove far smaller, and various unintended consequences will turn out to be worse than even the plan’s critics predicted.

And this:

The worst thing about having a vision is that it confers upon the visionary a moral absolutism: only highly prescriptive regulation can ensure that the vision overcomes an uncaring populace responding to a free market that planners do not really trust. But the more prescriptive the plan, the more likely it is that the plan will be wrong, and such errors will prove extremely costly for the city or region that tries to implement the plan.

We see the vision of moral absolutism on display: Despite two counties voting against participation, their overseers will, nonetheless, create a plan for them.

It’s for their own good, after all.

Language makes a difference

No longer is it “Sustainable Communities.” Now it’s “South Central Kansas Prosperity Plan.” Either way, the program is still centralized government planning, with great potential to harm our economy and liberties.

South Central Kansas Prosperity Plan

The newly-renamed planning initiative has a new website set to launch in a few days — Let’s Talk Prosperity.

But no matter how politicians and bureaucrats dress it up, we need to remember the roots of this program. It took from 1987 to 2012, but Sedgwick County actually adopted the language of the United Nations regarding sustainability.

Those critical of sustainability planning are concerned that engaging in the practice has the potential to import harmful policies and practices originating from the United Nations. Critics of these critics say this is nonsense and overreacting. Tin-foil hat stuff, they say. Examples as reported in the Wichita Eagle come from Commissioner Dave Unruh and Commission Chair Tim Norton:

Unruh said he sees the grant simply as an “effort to make decisions about our future for us and our future generations that will save money, conserve resources and be the best solutions for all the folks in our region.” …

Norton said he sees the grant as a way to “look to the future, try to figure out best possible outcomes and make decisions today that will be good for tomorrow.”

“We’re all in this together. You may not like the federal government. You may not like the state government. You may not even like the local government. But I like being at the table and being involved in the future.”

He dismisses any connection to Agenda 21.

“It was a non-binding agreement passed during the first Bush era,” he said of former president George H.W. Bush. “I don’t rail on President Bush because it happened on his watch. I’m not twitchy about it. I’m not worried about it.”

It’s instructive to notice, however, that the language Sedgwick County uses when considering sustainability comes directly from the United Nations. General Assembly Resolution 42/187: Report of the World Commission on Environment and Development holds this language: “Believing that sustainable development, which implies meeting the needs of the present without compromising the ability of future generations to meet their own needs, should become a central guiding principle of the United Nations, Governments and private institutions, organizations and enterprises.” (emphasis added)

Sedgwick County’s Sustainability Page holds this: Definition of Sustainability for Sedgwick County … Meeting the needs of the present without compromising the ability of future generations to meet their needs … (emphasis added)

Sedgwick County left out the word “own,” but otherwise the language is identical. This definition was repeated on the county’s 2012 Employee Sustainability Survey.

The Sedgwick County page — and other county documents — mention economic development, environmental protection, institutional and financial viability, and social equity as “the four core factors that Sedgwick County considers when making community policy and program management decisions.” These goals are often mentioned in Agenda 21 documents, especially social equity.

The heavy hand of Kansas regulation

Martini glass, half full, with a single olive

Regulation run amok in Wichita, from Anne Meyer of KWCH 12 Eyewitness News:

(Wichita, KS)— “Two for one” drinks or “half price”. Customers may not know the difference between the two on their bill, but those words matter when it comes to Kansas liquor laws. One phrase is legal, the other is not.

One Wichita bar owner is trying to fight that.

Shooters on South Hydraulic is known for attracting pool players. Now Owner Paul Weigand is getting attention from the state for violating Kansas’ liquor law.

“I’m just not ready to pay that fine yet, I want a judge to tell me the difference between two for one and half price,” Weigand said.

Continue reading and view the video at Words matter when it comes to Kansas liquor law.

Kansas House votes for property rights

state-historic-preservation-environs

Today the Kansas House of Representatives passed a bill that will protect property owners from harm simply because their property is near a historic property.

The bill is HB 2118, as described by its supplemental note:

HB 2118 would delete provisions related to environs restrictions from historic property reviews.

Under current law, proposed projects within 500 feet of the boundaries of a historic property located in a city or within 1,000 feet of the boundaries of a historic property located in the unincorporated portion of a county are subject to historic design and appearance restrictions.

The bill would limit historic reviews conducted under the act to proposed projects that would directly involve, damage, or destroy a property included in the National Register of Historic Places or the State Register of Historic Places.

The bill passed today by a vote of 99 to 24. Those voting against this bill — those who wish to keep the current restrictions on private property rights — were Alcala, Ballard, Becker, Bridges, Burroughs, Carlin, Crum, Davis, Dillmore, Grant, Henderson, Henry, Hill, Kuether, Lane, Meier, Pauls, Ruiz, Sloop, Tietze, Weigel, Whipple, Wilson, and Winn.