COMPETITIVE ENTERPRISE INSTITUTE

VOL. 33, NO. 1 | WINTER 2020

FEATURED ARTICLES

A Republican Proposal to Feed

the Country to the Swamp
5 BY WAYNE CREWS
BY TREY KOVACS
The Cost of Ending
Independent Work P rogressives dream of making the District
of Columbia into a state, but now a pair
of Republican senators have the same vision
reflected through a funhouse mirror. The
Helping Infrastructure Restore the Economy
(HIRE) Act (S. 2672) would effectively trans-
form10 states into D.C. by moving at least 90
percent of jobs from 10 executive depart-

6
ments out of Washington and into “economi-
cally distressed regions” across the country.
The bill’s sponsors, Sens. Josh Hawley
BY MARIO LOYOLA of Missouri and Marsha Blackburn of
Stop the Ethanol Madness Tennessee, would send the Agriculture and
Education departments to their own home
states. Eight other federal departments and
most nondepartment agencies would also
be dispersed throughout the land, often to
places intended to suit their functions—for
example, the Transportation Department

8 would be sent to Michigan to be near the

auto industry.
Imagine the clamoring this would ignite
Consider the department Hawley wants
to bring home. The American Farm Bureau
Federation reports that nearly 40 percent
BY MATTHEW ADAMS among the states for the dozens of agencies of U.S. farm income in 2019 will come from
Congress Can Fix Legal Marijuana on the move. Within each state, every hamlet “trade aid, disaster assistance, the farm bill
Business Banking Problem will vie to host at least a branch, like the post and insurance indemnities”—much of which is
offices that linger on in the Internet age. largess from the Agriculture Department that
Sen. Hawley is right that “Americans’ hard- keeps farmers dependent and uncompetitive.
ALSO IN THIS ISSUE
earned tax dollars fund federal agencies that One might expect such a plan from
are mainly located in the D.C. bubble,” and Democrats, who are quick to name federal
Is “New Conservatism” Really that most people “lack equal access to those
Progressivism?. . . . . . . . . . . . . . . . . . . . . . . . . . 4
spending as the solution to every problem.
jobs.” But since when did Republicans accept Republicans are supposed to understand
Critics Can’t Decide if Facebook Does Too
Much or Too Little. . . . . . . . . . . . . . . . . . . . . . . 9
the idea that the federal government ought the unseen mechanics of redistribution,
to be a job creator? The GOP insisted for aware that taxpayer money paid to govern-
CEI Events and Public Appearances. . . . . . 10
decades that many New Deal agencies and ment employees in their states is taken from
CEI Summit 2020. . . . . . . . . . . . . . . . . . . . . . 12
subsequent government bodies should never taxpayers nationwide, a drag on the entire
Losing the Ex-Im Bank Battle Could Lead to have been created in the first place, and that
a Victory in the War Against It. . . . . . . . . . . . 13 country’s economy.
their red tape and interference is a dominant
The Good, the Bad, and the Ugly. . . . . . . . . 14 (continued on page 3)
cause of economic inefficiency.
Media Mentions. . . . . . . . . . . . . . . . . . . . . . . 15
End Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
 Insights from the Road
by Kent Lassman

I n the past few years, I’ve traveled all over the

United States to advocate for the rule of law and
free markets. At times it can be grueling. Because
a deputy minister on the relationship with China
and an extended meeting with a legislator from the
majority DPP party.
I have so much to draw me back home—an active Key insight of day two: While not every aspect
family life at the top of the list—my trips are always of life in Taiwan is dominated by the relationship
condensed with as little time on the road as pos- with the People’s Republic of China, every policy
sible, even if that means very early or overnight conversation will come around to the topic quickly.
FROM THE PRESIDENT

travel. International travel adds an entire layer of There is a shared history, common culture (at least
complexity. until Mao pursued historical destruction through the
Recently, I was in Taiwan as a part of a delega- Cultural Revolution), proximity, and overwhelm-
tion of free-market trade experts. Key insight of day ing political tension. The defining feature of the
one: An American delegation of free trade advo- dominant political parties is their relative postures
cates is distressingly small in the current political toward Beijing.
environment—a reminder of why CEI’s work is more A related and unsurprising observation from the
valuable than ever. day is how closely the Taiwanese are monitoring
My colleagues Iain Murray and Ryan Young the volatile situation in Hong Kong. It led the local
recently wrote a fantastic paper, “Traders of the news, was on the front page of the newspaper, and
Lost Ark,” making a moral and economic case for was brought up in our meetings. Some made the
free trade. I highly recommend it. assertion that the Hong Kong protests are putting
After 25 consecutive hours of travel, I found much more pressure on the political leadership in
my way to a hotel in downtown Taipei without any Beijing than anyone in the West can see.
appointments for almost five hours. Of course, I That is encouraging. People standing up to
had left Dulles airport on Saturday evening and it defend their freedoms, even at great personal cost,
was now early Monday morning, but I was free to is always inspiring, and a strong reminder of the
get settled before rejoining the group for lunch. I freedoms we enjoy in America. It is also a reminder
decided to take a run to a nearby park that features of how much we have to lose, and the importance
a red clay path around the perimeter and various of constant vigilance and advocacy for freedom.
sidewalks throughout. In addition to being the clos- At CEI, it is a duty we take seriously. And as the
est to the hotel, Daan Park was featured in a “Best example of the brave protesters in Hong Kong
Places to Run in Taiwan” article I had found before shows, the freedom to pursue it is something we
leaving home. should never take for granted.
After 4.6 extremely humid miles, I had all the
exercise I could handle. Despite the urban setting,
I crossed paths with at least a half a dozen egrets
(small white herons). The remainder of the morning
was focused on light reading before a briefing from

The CEI Planet is produced by the Competitive Enterprise

Publisher Institute, a pro-market public interest group dedicated to
Kent Lassman free enterprise and limited government.
Editor
CEI is a non-partisan, non-profit organization incorporated in
Ivan Osorio
the District of Columbia and is classified by the IRS as a 501
Associate Editor (c)(3) charity. CEI relies upon contributions from foundations,
Richard Morrison corporations, and individuals for its support. Articles may be
reprinted provided they are attributed to CEI.

2 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE

 The Swamp, continued
It will be impossible to prune the
bureaucracy once its seeds are spread
to every state. And the new federal
Republicans are
jobs in each state wouldn’t likely go supposed to
to locals. One main criterion for a
relocation site is “a low rate of educa- understand the
tion,” so expect a stream of college-
educated professionals to move to unseen mechanics Help the Competitive
the South and Midwest to claim the Enterprise Institute carry
positions. of redistribution,
on its work for generations
The HIRE Act pays lip service
to the ideal of cutting government
aware that
by joining the Legacy
by directing the General Services
Administration and Office of
taxpayer money of Liberty Society
Management and Budget (OMB) to paid to government
ascertain whether each agency slated
for relocation “should be abolished employees in their Thanks to the generous support of our friends,
or merged with another Executive
agency, rather than being relocated.” states is taken the Competitive Enterprise Institute has
remained a successful advocate for liberty
But conservatives have been led up
this road before. President Trump from taxpayers for 35 years. The Legacy of Liberty Society
recognizes the faithful support of any donor
kicked off his presidency with an
“executive branch restructuring” proj-
nationwide. who desires to advance the principles of free
enterprise and limited government through
ect to be overseen by the OMB. How his or her will, trust, life income gift, retirement
many agencies did that eliminate? the software companies he disparages plan, life insurance dedication, or another
Republicans used to seethe when and targets through legislation. planned giving instrument.
Democrats tried to move federal Would legislators from the “lucky”
Contributions to CEI are tax deductible. We
offices. In the early 1990s, House chosen states ever have the gumption
accept gifts via check, credit card, cash, or
Minority Whip Newt Gingrich fumed to slash funding from agencies that
Bitcoin—as well as stock or other securities
that Sen. Robert Byrd’s campaign to employ thousands of their constituents? and assets. CEI also accepts contributions in a
transfer certain national intelligence The HIRE Act would remake large will or trust. Including CEI in your estate plans
facilities to West Virginia was a “pure swaths of America in Washington’s is easy, and can be altered as needed.
abuse of power.” image. The bill’s supposed decentral-
ization would be anything but. Consult your tax professional about the limits
Now Sen. Blackburn cheerily says
A better bill to restructure the and conditions regarding charitable deduc-
in a statement: “Federal jobs provide
tions and your tax situation. For contributions
economic stability and encourage government would freeze hiring for
in a will or trust, consult a tax or estate profes-
regional growth. When the FBI moved federal jobs. Such an effort would cut
sional for language that is appropriate for
the Criminal Justice Information agencies’ spending and streamline
your estate and financial situation.
Services Center to Clarksburg, WV, their functions. In contrast, the HIRE
the stable stream of revenue from Act would create “Swamp 2.0”: just
those jobs boosted the local economy as deep and many times as wide.
and helped it grow.” If you would like to join the Legacy
Sen. Hawley’s role in this cam- of Liberty Society or learn more
paign is particularly vexing. He has Wayne Crews (wayne.crews@cei. about the impact you can make
become a famous critic of Big Tech, org) is Vice Presient for Policy at CEI.
through one of CEI’s giving societies,
but the federal bureaucracy is already A version of this article was originally
published in The Wall Street Journal. please contact CEI’s Philanthropy
vastly larger and more intrusive than
team at (202) 331-1010 for more
information.
Andy Yuan
Philanthropy Department
[email protected] | (202) 331-1010

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 3

 Is “New Conservatism” Really
Progressivism?
Doctrine—government mandates for “administrative constitutionalism”
BY KENT LASSMAN AND ideologically “balanced” political con- that regulate virtually every aspect
IAIN MURRAY tent in broadcast media—but for social of our lives, without regard for the
media platforms this time. Constitution’s constraints. In a way, we

F or much of the past century, con-

servatives in America largely fused
the ideas, means, and political factions
Today, critics of the free market say
capitalism has subverted democracy
by favoring billionaires and elites who
are already halfway to the goalposts
that progressives and national conser-
vatives say they want to reach.
of two distinct worldviews: traditional “game the system” and create poverty, Markets are as much cooperative
social arrangements informed by insecurity, pollution, and collapsing as competitive. They link each of us
religious faith and free-market capital- public services for everyone else. daily in a complex web of suppliers,
ism. But in the Trump era, an old idea While these tropes fit nicely on vendors, employers, coworkers, inves-
has new currency under the banner of bumper stickers, implementing them tors and other self-organized elements
“national conservatism.” would turn American democracy on its of society that allow each individual
Contrasted with more traditional head and shift more control over every- multiple chances to give voice to their
American conservative ideology day life to unelected, unaccountable preferences—what to buy, when to sell,
from thinkers like William F. Buckley government bureaucrats. what type of work to do.
and Barry Goldwater, some national Voices on both the left and Even billionaires have to be respon-
conservatives seem more willing, even right contend we must hand over sive to it. Bureaucrats, whom critics of
eager, to use the federal government large swaths of the economy to the capitalism want to empower, are not.
to implement their vision of America government, to ensure high-minded Respect for market processes, for
through far-reaching policy changes. but subjective ideals like “fairness” and capitalism in all its dynamic and unpre-
This approach has a poor record of “equality.” dictable ways, keeps government out
success and is often antithetical to fun- But our democratic system is con- of inherently private decisions.
damental liberties, the rule of law, and strained by design for this very reason— By contrast, “national conserva-
protection of minority rights. to prevent what philosopher John Stuart tism” lacks any real limits on govern-
We are living in a strange time. Mill called the “tyranny of the majority.” ment intrusion into our lives and would
Progressives and national conservatives It is why we have a Bill of Rights: to limit undermine our free and prosperous
are advocating similar economic con- the power of government actors even society by giving more power to unac-
trols and limits on markets in the name when urged on by a majority. countable bureaucrats. A more accu-
of bolstering democracy. Consider the In contrast to “more democracy,” rate name for it is “not as far-reaching
heightened discussion about the use of the American heritage of free markets progressivism.”
antitrust laws to break up successful and is among the truest expressions of Where it is healthy, capitalism
innovative companies like Facebook, our democracy the way our founders prevents government from entering
Google, and Amazon. intended. Free people, empowered into areas where it doesn’t belong and
It is not surprising to see left-leaning with property rights and protections encourages the development of values,
politicians like Sen. Elizabeth Warren against fraud, are able to make their like trust, that bind us together. It is why
(D-MA) argue that tech companies own economic decisions. That has led market capitalism has been a pillar
are too powerful and profitable and to the greatest outpouring of peace of conservatism for decades, and it is
should be broken up. But her efforts are and prosperity the world has known. why CEI works to ensure that capital-
bolstered by state attorneys general, Calls for economic controls and ism remains healthy, pruning back the
led by Texas Republican Ken Paxton, charges against “unfettered capitalism” regulations that stunt its growth.
pursuing their own antitrust investiga- also ring hollow. These critics point to
tions into Google. economically depressed areas of the
And this is just one example. Self- country as evidence of capitalism’s Kent Lassman is President of CEI. Iain
described conservatives have turned inherent inequality, but fail to see how Murray ([email protected]) is Vice
to tariffs and other trade barriers as the market is far from “unfettered.” President for Strategy at CEI. A version
leverage in negotiations and advo- Today, we are governed by of this article was originally published
cated reviving the long-dead Fairness a system of “super-statutes” and at Fox News.

4 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE

 The Cost of Ending Independent Work
Such a test is nearly impossible for
BY TREY KOVACS contractors to satisfy and would make
“employee status” the default classifica-

T he California legislature recently

passed legislation that effectively bans
independent work in a misguided bid to
tion of workers in the state of California.
Consider truckers, which are com-
monly classified as “owner-operators”
“protect workers” by redefining the critical or independent contractors. They gener-
legal distinction between an employee ally satisfy part A. Many truckers own
and an independent contractor. Worse, their truck and determine when and
the law is retroactive and will subject busi- where they work. A significant portion
nesses to damages they could not pos- of truckers opposed the legislation and
sibly have anticipated or, likely, afford. said they value the flexible hours and
Progressives claim some employ- freedom they have as independent
ees are “currently exploited by being contractors. They will be ensnared by
misclassified as independent contractors the new law because it would be very
instead of employees.” Even if that were difficult for many truckers to pass part B,
so, forcing almost all independent con- since transportation is the usual course
tractors into employee status is hardly of business of many of the companies
the solution. In fact, it may cost many that hire them.
jobs and spawn endless litigation. Part C would harm countless entrepre-
Anecdotally, many individuals have neurs who perform contract work to earn unemployment insurance funds will
said they feel far from exploited by supplemental income. These individuals run out with so many new employees
working as an independent contrac- may operate with complete autonomy becoming eligible?
tor. Pasadena physical therapist Dawn but would fail the ABC test because they Further, during the last recession
James told the Los Angeles Times, only have one client and do not market unemployment skyrocketed, and many
“As a professional with two doctorate their services to other companies. individuals avoided financial ruin by
degrees, I really don’t believe it was Cutting off an avenue to earn a living taking refuge as independent contrac-
meant to include me.” is bad enough, but perhaps the most tors when they lost their job and could
Los Angeleno spoke with several pernicious aspect of AB 5 is that the ABC not find traditional employment.
Uber drivers who said they do not want test is retroactive and exposes businesses According to a report by the
to become employees. Drivers value the to four years of damages for failure to American Action Forum and the Aspen
flexibility driving for Uber offers, which pay overtime and provide meal and rest Institute, “Between 2010 and 2014,
allows them to meet family obligations. periods among other items. A company independent contractors grew by
California legislators disregarded that complied with the law at the time will 11.1 percent (2.1 million workers) and
these concerns. On September 18, be on the hook for damages because represented 29.2 percent of all jobs
2019, California Governor Gavin a completely new standard is being added during that time period.” In the
Newsom signed Assembly Bill 5 into applied to past conduct. next downturn, workers in California will
law. It imposes a new test to determine Before implementation, the state have fewer options to make a living.
whether a worker is an employee or needs to determine the anticipated costs Even if AB 5 is well-meaning, many
independent contractor. In summary, a of these damages and the impact it will individuals who work as independent
worker must satisfy all parts of the so- have on business—never mind the obvi- contractors think it may strip them of their
called ABC test to qualify as an inde- ous unfairness of holding a company livelihood. Legislators in California need
pendent contractor. The worker must: liable for damages when they were in to consider their views and have a plan
(A) be free from the hirer’s control compliance at the time. to deal with the costs of the law before
and direction; Another issue that legislators must not imposing this unrealistic standard on the
have thought much about: who will pay world’s fifth largest economy.
(B) perform work that is outside the for unemployment benefits and workers’
usual course of the hiring entity’s compensation for independent contrac-
business; and tors that become employees based on Trey Kovacs is a former policy analyst
(C) be established in a trade that the new ABC test? Funds have not been at CEI. A version of this article was
is the same nature as the work collected to pay out these benefits. originally published in The Orange
performed for the hiring entity. Has California projected how quickly County Register.

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 5

 Stop the Ethanol Madness
address climate change, the program RFS unpredictable and arbitrary. And,
BY MARIO LOYOLA never made any sense. Corn ethanol because cellulosic ethanol has never
may well be worse for the climate been able to overcome the techno-

T he idea of requiring the nation’s

gasoline supply to contain a certain
amount of renewable biofuel was born
than fossil fuels, and the program
does significant damage to both the
economy and the environment. Its sole
logical hurdles it needs to clear to be
viable, the EPA has had to waive the
overall target every year since 2013.
in a short-lived doomsday fad of the beneficiaries are large agricultural Each year the EPA dictates the
1970s. With experts warning that the corporations—and the politicians who required overall volumes of various
world was quickly running out of oil, the serve them. biofuels for the following year or two.
shocks of 1973 and 1979 led President Corn ethanol is the mainstay of It then combines those numbers with
Jimmy Carter to call for rationing of fuel the nation’s Renewable Fuel Standard federal projections of overall fuel
and other draconian measures to avoid (RFS), which was created in 2005 consumption to arrive at a percentage
a “national catastrophe.” His proposals, when gasoline prices finally rose amount of ethanol that each gallon
fortunately, didn’t get much further than again, though that price shock, too, of gasoline produced by a refin-
a small subsidy for corn ethanol. proved fleeting. The RFS program cre- ery must contain. Responding to the
Just a few years later, with its ated both a gradually rising biofuel government-created demand, ethanol
market share under assault from new mandate, and within that mandate, producers swing into action. To create
non-OPEC oil producers, Saudi Arabia a gradually rising proportion of a credit-trading scheme, each new
suddenly doubled production. Oil advanced biofuels (particularly cellu- gallon of pure renewable biofuel is
prices crashed around the world, and losic ethanol) relative to corn ethanol, assigned a unique renewable identifi-
a decades-long oil glut ensued. So such that advanced biofuels are sup- cation number (RIN), which becomes
much for that doomsday fad. posed to make up the majority of the a tradable credit when that gallon of
As a way to replace dwindling mandated volume by 2022. biofuel is blended with enough regular
reserves of oil, ethanol subsidies had But the U.S. Environmental gasoline to meet the RFS.
a certain brutal logic, especially if Protection Agency (EPA) has substan- The scheme creates a major con-
oil prices were going to keep rising tial authority to waive the statutory tar- flict between two of America’s most
with no end in sight. But as a way to gets. In practice, that has rendered the powerful special-interest groups: oil

6 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE

 producers and refineries on the one almost perfectly continuous since the
hand and corn-ethanol producers on
the other. With hundreds of billions of
Obama administration first exercised
the refinery exemptions in 2013. The government
dollars at stake, the result is tectonic
political pressures on the government.
A major 2011 study by the National
Academy of Sciences found that biofu-
oscillates between
The fault line, as it were, is the
“blend wall”: how much ethanol can
els can be cost-competitive with fossil
fuels only in an economic environ-
helping refineries
be blended into the nation’s fuel supply
without corroding automobile engines
ment of high oil prices. It assessed that
biofuels would only be competitive
and helping
or violating the EPA’s own emissions
standards for ozone and particu-
with fossil fuels by 2022 (when the corn producers,
statutory RFS targets expire) if gasoline
late matter. With the nation’s current was about $5 a gallon (or $191 per in a pattern that
automobile fleet, that number turns out barrel of crude oil). That represented
to be about 10 percent, which is why the Department of Energy’s worst-case has been almost
virtually all the gasoline you put in your scenario projection for 2022. Then
car is at least E10. came the shale revolution, and now perfectly continuous
But because the EPA’s percentage- the Department’s projected worst-
volume obligations are set above the case scenario for 2022 is significantly since the Obama
effective blend wall for many refiners,
many still “owe” the EPA lots of RINs
lower, about $4 a gallon ($140 per
barrel of crude oil), and more likely administration first
even after blending all the ethanol they
reasonably can into their gasoline. So
$2.50, or even $2.
Cheap gasoline is nice in the short
exercised the refinery
refineries have little choice but to buy
RINs from those who have already
term, but in exchange for that, the RFS
gives us more expensive food. The
exemptions.
blended fuel for themselves. That diversion of arable land for ethanol
leaves a lot of refiners chasing a small production constricts the supply of both ethanol and regular gasoline. As a
number of excess RINs. The resulting crops and cropland that are available National Academies report puts it, the
scarcity drives up prices, and produces for food, with a particularly pro- RFS “may be an ineffective policy for
volatility in both the ethanol and bio- nounced impact on livestock feed, and
reducing global greenhouse-gas emis-
diesel markets. hence on meat. Price signals cause
sions because the extent of emissions
The compliance burden falls most farmers to switch from other crops
heavily on large refiners, but it most to corn production, seeking higher reductions depends to a great degree
immediately threatens the small ones, returns. As a result, the price of all on how the biofuels are produced and
for whom the law has created a foods—not just those directly related to what land-use or land-cover changes
case-by-case hardship exemption. corn—increases, and because the U.S. occur in the process.”
As a result, small refiners put enor- is the world’s largest exporter of food, Renewable biofuels are not neces-
mous pressure on the White House food prices increase all over the world. sarily doomed. If advanced biofuels
and the EPA to exempt them from the The RFS program mandates that can be economically competitive and
RFS. And because the EPA tends to corn ethanol have at least 20 per- avoid the impacts of corn ethanol on
grant the small-refinery exemptions cent lower carbon emissions than poor people and on the environment,
in batches (in August 2019 it granted petroleum-based gasoline. But in the they will be a welcome addition to our
31 of them), the exemptions drive RIN decade since the program’s full imple- future energy portfolio. But today’s
prices down. mentation, many studies have shown corn-ethanol program is a glaring
Angry corn producers then besiege that the greenhouse-gas impacts failure, and it is unconscionable that
the White House with hired lobbyists collaterally associated with ethanol
politicians of both parties are conspir-
and members of Congress, demand- production—the full “carbon-cycle”
ing to keep it alive despite knowing full
ing that the EPA allow the sale of effect—negate that 20 percent reduc-
higher-percentage ethanol blends and tion and may even make corn ethanol well what its problems are.
promulgate a higher overall target- worse for the climate than fossil fuels.
volume RFS. A large amount of fossil fuel is
As a result of these opposing forces, required to produce, grow, harvest, Mario Loyola ([email protected]) is
the government oscillates between transport, and process a gallon of a Senior Fellow at CEI. A longer version
helping refineries and helping corn ethanol, eating up much of the differ- of this article was originally published in
producers, in a pattern that has been ence in carbon emissions between The Atlantic.

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 7

 Congress Can Fix Legal Marijuana
Business Banking Problem
BY MATTHEW ADAMS

V iolent and property crime rates

have decreased over the past 25
years, so it’s telling that instances of
robbery or burglary against one sort of
business seem to be on the rise—legal
marijuana businesses. Just last October
there was a robbery at a marijuana
dispensary in Ann Arbor, Michigan,
that almost turned deadly after three
assailants robbed the store at gunpoint
and then fired at an employee when he
pursued.
Unfortunately, instances like these
are far too common. The Wharton
School of Business Public Policy
Initiative found that one in every two
marijuana dispensaries have been overwhelmingly bipartisan vote of Community Bankers of America and
robbed—with thieves making away 321-103, the House passed the Secure the Credit Union National Association.
with $20,000 to $50,000 of cash or and Fair Enforcement (SAFE) Banking Public policy organizations have
merchandise, on average. Act (H.R. 1595) to provide safe harbor banded together to urge the Senate to
Businesses in the legal marijuana protections for banks and credit unions take up the legislation, too.
industry are prime targets for rob- doing business with the legal mari- But even with such board sup-
bery because they often operate on a juana industry. port, 33 Senate cosponsors and a
cash-only basis. Although a majority These protections would apply to hearing in March, the SAFE Banking
of states have legalized marijuana, the any licensed marijuana business that’s Act has yet to even make it out of the
federal government still has anti-can- engaged in manufacturing, growing Senate Banking Committee. While on
nabis laws on the books. So banks and or producing, as well as those that the record, Chairman Mike Crapo,
credit unions can run afoul of criminal handle, sell, transport, display, or Idaho Republican, bluntly warned,
statutes such as aiding, abetting, or distribute such products. The legislation “The impact on the ability of small and
acting as an accessory to a crime if extends the protections to ancillary large businesses to operate justifies our
they offer services to these businesses. businesses, such as real estate owners, attention.” It’s high time to schedule a
That is a shocking limitation con- accountants, plumbers, and electri- committee vote on the bill, while reject-
sidering marijuana is now a major cians who provide non-bank services ing amendments to water down the bill
industry that’s been legalized in mul- but face similar challenges. or further regulate the vaping industry.
tiple states. In 2018, the legal mari- Earlier this year, 38 state attorneys It’s time for the federal government
juana industry grew to $10.4 billion general signed a letter backing the bill, to step aside to let states, consumers,
and now employs more than 210,000 and at the federal level both Attorney businesses, and lending institutions
Americans. Yet recent research shows General William Barr and Treasury make the decisions that best meet their
only 30 percent of marijuana busi- Secretary Steven Mnuchin have needs.
nesses reported having a bank, and expressed support for reforming the
less than 500 banks or credit unions laws around marijuana banking.
have active operating accounts for Moreover, the bill has wide sup- Matthew Adams (matthew.adams@cei.
such businesses. port from financial industry trade org) is a policy analyst at CEI. A version
Congress has made a start toward associations, including the American of this article was originally published in
fixing the problem. In October, in an Bankers Association, the Independent The Washington Times.

8 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE

 Critics Can’t Decide if Facebook Does
Too Much or Too Little
appease all critics, including many of making publications beholden to
BY PATRICK HEDGER members of Congress, academics, and subscribers, not advertisers.
journalists. Thriving subscription businesses

D uring a recent appearance at

Georgetown University, Facebook
CEO Mark Zuckerberg summed up the
Following news of the no-fact-check
policy, John Stanton, co-founder of
the Save Journalism Project, promptly
elsewhere in media, such as video
streaming, show that there is strong
consumer demand for commercial-free
company's predicament: “Right now, accused Facebook of putting “count- content.
we’re doing a very good job at getting less journalists out of work” while Journalists are also using their work
everyone mad at us.” “providing a platform for Zuckerberg to generate book deals and become
Taking responsibility for the com- propaganda.” He believes tech giants contributors to major TV news networks.
pany's public perception problem like Facebook are sucking up all the The reach of a good journalist is now
is admirable and a good sign for reader attention and ad revenue that effectively unlimited. Online services
consumer power at a time when the would otherwise flow to establishment now provide journalists with treasure
company is facing government antitrust news sources, all the while offering a troves of information at their fingertips.
scrutiny. And the company is making platform megaphone to the CEO's own In addition, the field of journalism is
some consumer-friendly changes. viewpoints. benefiting from new competition from
Specifically, Facebook says it is What Stanton and other critics fail nonprofits and others who previously
adopting a policy of not fact-checking to realize is that Facebook’s hands-off lacked the ability to reach readers and
or otherwise limiting most political approach to fact-checking is actually viewers. Countless hours of informa-
advertisements, in response to charges a boon to journalists. Put another way, tive podcasts and other media are
of censorship of both far-right and having Facebook fact-check political uploaded to platforms daily, most
far-left political content, which, indeed, ads and other primary-source state- without any semblance or expectation
made a lot of people mad. ments from politicians would only of advertiser support.
The problem is, no matter what it exacerbate displacement of journalists. Without a doubt, there is a major
does, Facebook will not be able to After all, isn’t fact-checking politicians shift going on in the news media land-
what journalists are supposed to do? scape being driven by online plat-
Also, no one should want Facebook forms. There will continue to be winners
to fact-check or limit content. The and losers. Journalists and others who
platform is valuable to users precisely value the flow of information in a free
because it offers primarily user- and open marketplace should focus on
directed content. The company has a adapting and offering new and better
big incentive for users to see both what value products and services to readers.
a politician is saying as well as all the Those are the businesses and individu-
subsequent analysis from as many jour- als who will succeed.
nalists and fellow citizens as possible. The losers will be those who want to
The real source of criticism has use government to prop up politically
much more to do with the complaint favored news sources. If that scenario
about ad revenue. Facebook has, comes to pass, the real losers will be
evidently, created a better, more useful consumers who will lose an open,
platform for advertisers compared to unregulated marketplace for news
news websites or print outlets. about public policies that impact their
Yet even there, media companies lives and livelihoods.
and journalists are already looking
beyond ad dollars and instead finding
new ways to bring in revenue. Plenty Patrick Hedger (patrick.hedger@cei.
of news sites offer online subscrip- org) is a research fellow at CEI. A
tions for valuable content, a funding version of this article was originally
source that brings an added benefit published in The Chicago Tribune.

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 9

 CEI EVENTS AND PUBLIC APPEARANCES

Kent Lassman and Patrick Hedger Highlight Dangers of Drug Price Controls
On November 5, CEI hosted the luncheon discussion, “The
Impact of Prescription Drug Price Controls,” featuring CEI
President Kent Lassman and Research Fellow Patrick Hedger
at the National Press Club in Washington, D.C. Panelists
discussed bipartisan proposals to set certain drug prices in
America based on price controls in other countries. As the
panelists noted, this policy would not bring down costs, but
would slow innovation and restrict patients’ access to treat-
ments. Also on the panel were John Adams, chairman of the
Best Medicines Coalition and CEO of Canadian PKU and Allied
Disorders; Tim Andrews, Executive Director of the Taxpayers
Protection Alliance and Founder of the Australian Taxpayers
Alliance; Jolanta Bilinska, Founder of World Patients Alli-
ance and Director of Development at the Dr. K. Jonscher City
Medical Centre; Austrian Economics Center Director and
Founder Barbara Kolm; Institute for Free Enterprise Executive
Director Wolfgang Müller; and Global Colon Cancer Associa-
tion Founder and Executive Director Andrew Spiegel. Patrick Hedger Kent Lassman

Jessica Melugin Discusses Antitrust’s Implications for Tech at NASDAQ

On November 12, Jessica Melugin, Associate Director of
CEI’s Center for Technology and Innovation, spoke on the
panel, “Targeting Tech: Is Antitrust the Answer?” at the
NASDAQ stock exchange building in Times Square. The
event kicked off Recount Media’s Shift event series, held
in partnership with Mozilla. The discussion focused on
the role of technology companies in shaping our society
and whether antitrust is an appropriate policy for tech
regulation. Joining Melugin on the panel were Brad
Burnham, Managing Partner at Union Square Ventures,
and Jeffrey Blattner, Attorney and President of Legal
Policy Solutions, PLLC. The panel was moderated by Left to right: Jessica Melugin, Brad Burnham,
Recount Media co-founder John Battelle. Jeffrey Blattner, and John Battelle

Myron Ebell Discusses Fuel Economy Mandates’

Effect on Consumers
On November 19, Sheldon Rose and the Friends of Liberty hosted a private
dinner, “Car Wars—A New Hopelessness or the Consumer Strikes Back?”
featuring Myron Ebell, Director of CEI’s Center for Energy and Environment,
at the Bloomfield Hills Country Club in Michigan. Ebell discussed the policy
fight, pitting consumers against environmentalists, over stricter fuel econ-
omy mandates and its effect on the auto industry.

10 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE

 CEI EVENTS AND PUBLIC APPEARANCES

Luncheon Discussion with Patrick Hedger on the

Future of the Internet
On December 3, CEI hosted a private luncheon
discussion on the future of tech policy with Patrick
Hedger, at the 21 Club in New York City. Hedger
discussed the state of the Internet, from the wires
to the edge, and what major policy issues will
shape the World Wide Web going forward. As
the 2020 campaign heats up, politicians on both
sides of the aisle are making “tech monopolies”
a central issue. In his remarks, Hedger issued a
strong response to this narrative. He argues the
accused—Facebook, Apple, Alphabet, Amazon—are
all fierce competitors and we must preserve their
pro-consumer dynamic.

Wayne Crews Joins House Government Reform Task Force

On February 6, CEI Vice President for Policy Wayne Crews spoke at
a Capitol Hill briefing of the Government Efficiency, Accountability,
and Reform (GEAR) Task Force, formed by the Republican Study
Committee to seek ways “to reform, streamline and modernize federal
government.” Joining Crews on the panel were Heritage Foundation
Research Fellow Rachel Greszler and Citizens Against Government
Waste President Thomas A. Schatz. The panel was moderated by GEAR
Chairman Rep. Greg Gianforte (R-MT).

SAVE THE DATE

CEI Annual Dinner and Reception

Wednesday, June 17, 2020

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 11

 CEI Summit 2020
New Orleans

Chris Rose, Times-Picayune columnist and author of 1 Dead in Ariel Corporation CEO Karen Consumer Financial Protection
Attic: After Katrina, leads the Magical Musical Mystery History Wright and CEI President Kent Bureau Director Kathy
Tour of New Orleans. Seated, left to right: Jack France, CEI Lassman Kraninger
Vice President for Strategy Iain Murray, Lois Ann Beaver, Reason
Foundation Director of Donor Engagement Brittney Paul, State
Policy Network Manager of Donor Relations Christina Pajak, and
CEI President Kent Lassman. Standing, left to right: George Mason
University Law Professor and CEI Board Member Michael Greve,
Christiane Gruffat, and CEI Board Chairman Jean-Claude Gruffat.

Closing brunch at Three Keys, Ace Hotel, featuring Frenchy live event
painting and Knockaz Brass Band.

Left to right: CEI Research Fellow Richard Morrison and Senior

Fellows Gregory Conko and Angela Logomasini.

Left to right: Richard Morrison; Mario Loyola; and Myron Ebell,

Director of CEI’s Center for Energy and Environment.

CEI Board Chairman Jean-Claude Gruffat welcomes attendees

to the CEI Summit in New Orleans. Left to right: CEI Senior
Fellow Mario Loyola; Sally Lapeyre; Jessica Melugin, Associate
Director of CEI’s Center for Technology and Innovation; Christine
Williamson; CEI Research Fellow Patrick Hedger; and National
Review columnist Kevin Williamson. Left to right: Patrick Hedger, Jessica Melugin, and Richard Morrison.

12 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE

 Losing the Ex-Im Bank Battle Could Lead
to a Victory in the War Against It
shareholders it had no problem finding
BY RYAN YOUNG private financing that normally would
have been provided by Ex-Im. Ex-Im has no visible
A s flashpoint issues go, the Export-
Import Bank is an unlikely candi-
date. And yet, here we are.
Ex-Im has no visible effect on the
economy but has resulted in dozens
of corruption allegations, while mostly
effect on the economy
Called Ex-Im for short, the agency benefiting large companies that do not but has resulted in
provides financial assistance to United need the help, such as Caterpillar and
States exporters and their customers John Deere. It should be shut down. dozens of corruption
abroad, though critics argue Ex-Im is According to the Mercatus Center’s
prone to corruption and cronyism. Veronique de Rugy, China was the allegations, while
Unlike most other agencies, largest foreign destination for Ex-Im
Congress has to periodically renew financing in 2014, Ex-Im’s most recent mostly benefiting
Ex-Im’s charter or it will shut down. The year at full capacity. The single largest
House recently voted on a bill from state-owned beneficiary was China large companies that
Rep. Maxine Waters (D-CA) to reau- Air. Ex-Im clearly cuts against President
thorize Ex-Im for 10 years. Trump’s China policy goals, but he still do not need the help.
The Waters bill contains no reforms favors reauthorization.
and would actively make the agency With Ex-Im reauthorized, the
worse and less accountable. A Senate relevant battleground is now over
bill sponsored by Sens. Kyrsten Sinema second-best reforms. The Waters and a significant victory for reformers. The
(D-AZ) and Kevin Cramer (R-ND) suf- Sinema-Cramer bills would reauthorize Nobel-winning economist Ronald
fers similar problems. Meanwhile, the Ex-Im for a decade, more than double Coase once wrote, “An econo-
Trump administration is pushing for a the usual interval. Two years would be mist who, by his efforts, is able to
“clean” 10-year reauthorization that, better, so each session of Congress postpone by a week a government
while it doesn’t add new problems like would have a chance to weigh in on program which wastes $100 million
the Waters and Sinema-Cramer bills Ex-Im’s performance. a year (which I would call a modest
do, doesn’t solve any of Ex-Im’s crony- The bills would also raise Ex-Im’s success) has, by his action, earned
ism problems, either. portfolio limit to $175 billion, up from his salary for the whole of his life.”
Last time around, in 2014, Ex-Im’s $140 billion. It should instead be set at Over the period from 2014 to 2018,
authorization lapsed for the better part most to $60 billion, roughly in line with Ex-Im’s reduced activity spared tax-
of a year after Congress declined to Ex-Im’s current portfolio size. payers from nearly $48 billion of risk
renew it. Even after reauthorization Most importantly, the bills would exposure, or nearly $12 billion per
eventually passed in 2015, the agency essentially remove Ex-Im’s quorum year. Ex-Im’s total portfolio decreased
was unable to perform transactions requirement for approving transac- by $52 billion, or an average of $13
larger than $10 million, normally tions over $10 million. Ex-Im’s board is billion per year. This is more than a
roughly five-sixths of its business. Senate-appointed, making it one of the modest success.
Expired board member terms during few available democratic checks on Due to Ex-Im’s reauthorization
the lapse left Ex-Im shy of the needed the agency. Taking away this account- requirement, reformers will have
three-member quorum to approve such ability would give more power to an another opportunity in a few years—a
transactions. The Senate refused to executive branch that already has too lesson in institutional design that should
confirm replacements until May 2019. much, something Democrats should be applied to other agencies.
During this period of reduced consider in the age of Trump and
Ex-Im activity, annual U.S. exports something Republicans should consider
increased by $128 billion. Boeing, for when power eventually changes Ryan Young ([email protected]) is a
which alone often accounts for half of hands. Senior Fellow at CEI. A version of this
Ex-Im’s business in most years, enjoyed Despite Ex-Im’s reauthorization, article was originally published in The
record profits. Its CEO publicly told the last five years have already been Washington Examiner.

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 13

 THE THE THE
GOOD BAD UGLY

FCC Proposes Freeing Drugs Price Feds Ban Vapes to

Spectrum for Emerging Controls Bill Passes Curb Non-Existent Teen
Technologies the House Vaping “Epidemic”

On November 20, 2019, Federal On December 12, 2019, the House On January 2, the Trump
Communications Commission Chairman of Representatives passed a bill that administration announced a ban on
Ajit Pai announced a proposed aims to rein in rising medicine prices flavored vaping products, with the
reallocation of the 5.9 GHz band of through the bluntest, least effective exception of menthol or tobacco
spectrum. For the last two decades, this means of all—price controls. The flavors, with the aim of reining in
band has been specifically allocated for Lower Drug Costs Now Act (H.R. 3) a supposed “epidemic” of vaping
Dedicated Short Range Communications would achieve its supposed savings by among teenagers. However, the
(DSRC) automobile safety technology, capping prices using other countries’ youth vaping is just so much hype.
which has yet to be widely adopted, price controls and having the federal “With the aid of sloppy reporting
but served as the basis for a costly and government negotiate downward and biased announcements from
flawed regulatory proposal to mandate from there. Drug manufacturers that federal officials, anti-tobacco
“talking car” technology.” The proposed don’t agree could face a 75 percent advocates have successfully
reallocation would provide expanded tax on gross sales. Imposing such deceived the public into thinking that
spectrum for Wi-Fi technology while draconian price controls would result vaping is to blame for an outbreak
retaining other spectrum for automotive in less investment in research for of lung ailments last summer actually
safety technology. CEI Senior Fellow new, lifesaving medicines. “The bill’s caused by black market marijuana
Marc Scribner commented: “We hope supporters are making an offer the products,” said CEI Senior Fellow
Chairman Pai’s announcement will prompt pharmaceutical industry can’t refuse: Michelle Minton. “A flavor ban
the Department of Transportation to accept the obscenely low prices we ignores the data that show only
withdraw its proposed DSRC mandate, demand or we’ll take most of your one out of five teens who vape cite
which would reduce regulatory uncertainty money,” said CEI Senior Fellow flavors as a reason. Teen curiosity is
and allow the debate over emerging auto Gregory Conko. “Companies not the number one reason for underage
safety technologies to evolve to a higher only need to recover the cost of their vaping. Ironically, that curiosity
level.” CEI Research Fellow Patrick Hedger blockbuster drugs, but also that of the was ignited by anti-vaping news
added: “Chairman Pai deserves credit for hundreds of drugs that don’t make a headlines and campaigns.”
acknowledging the failed policy that has profit and the thousands that never
let useful spectrum sit fallow and for his even make it into pharmacies. With
efforts to do what government rarely does: price controls, drug companies would
improve efficiency.” be foolish to invest in future research
and development.”

14 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE

MediaMENTIONS
The New York Times cites CEI’s General Counsel Sam Kazman Jessica Melugin,
opposition to the USMCA trade explains CEI’s petition for new Associate
deal for its counterproductive rules allowing faster dishwashers. Director of
provisions unrelated to trade. “The current dishwasher rules are CEI’s Center
Not everyone was pleased a royal pain for huge numbers of for Technology
by the final agreement. The Pass consumers,” said Sam Kazman, General and Innovation,
USMCA coalition, which represented Counsel for CEI. explains why
a range of industries including “That’s demonstrated by the the proposed
pharmaceuticals, withdrew its support overwhelming support that our petition merger
for the measure after months of received in both rounds of rulemaking, between Sprint
lobbying for its passage. by the consumer survey that we and T-Mobile
Free traders have also panned submitted, and by the many detailed will likely benefit consumers.
the deal, which aims to encourage comments that consumers sent in Attorneys general from 14 states and
North American manufacturing by describing how the poor performance of the District of Columbia have objected
raising barriers to products made today’s models are a royal pain when it to the proposed $26 billion merger,
outside the continent. The Competitive comes to running a household.” citing fears about limited choice in the
Enterprise Institute, a nonprofit public —November 20 telecom market. The merger would
policy organization that advocates The Hill “cause irreparable harm to mobile
limited government, announced that subscribers nationwide by cutting
the new agreement’s “trade-unrelated access to affordable, reliable wireless
CEI Julian Simon award winner
provisions and political giveaways service,” they warned in a letter asking
Matt Ridley cites Senior Fellow
set precedents that could harm future the Justice Department to block the deal.
Michelle Minton in a Wall
trade agreements for decades to But without a T-Mobile/Sprint
Street Journal essay on why an
come.” merger, wireless customers might have
e-cigarette flavor ban will backfire.
—December 19 been left with fewer choices, not more.
The U.S. Food and Drug Administration
The New York Times If neither company was positioned to
has recently proposed rules for regulating
compete with the bigger providers,
e-cigarettes that would echo the British
the result would be a 5G network
Politico’s Morning Money quotes approach by “reviewing a tobacco
dominated by two companies instead
Senior Fellow Ryan Young product’s components, ingredients,
of three, says Jessica Melugin, associate
regarding CEI’s opposition additives, constituents, toxicological profile
director for technology and innovation
to steel and aluminum trade and health impact, as well as how the
at the Competitive Enterprise Institute.
tariffs imposed by the Trump product is manufactured, packaged and
“With the government out of the
administration. labeled.”
way, consumers will get the wireless
“Trump wrongly believes these new Some fear that this is too late and that
innovations they deserve and that the
steel and aluminum tariffs will help politicians will react to the moral panic
unfettered marketplace can deliver,”
American farmers. Trump should instead over vaping by preferring prohibition
says Melugin. “It’s a shame this
remove the tariffs that sparked the trade instead. Michelle Minton of the
approval had to come with government
war and shrank farmers’ export markets Competitive Enterprise Institute says: “A
divestiture conditions that are likely
in the first place. ban on flavors, devices or nicotine levels
arbitrary and unfairly penalizing.”
“Today’s new tariffs will have little will have the same effect as every other
—October 21
effect on agriculture but will harm prohibition. People will turn to illicit dealers
Reason
other industries and consumers. More or try to do it themselves. And, as we saw
than three-quarters of steel goes to with the outbreak of tainted THC, this will
construction and automobiles, for result in overdoses, injury and death.”
example.” —October 24
—December 3 The Wall Street Journal
Politico

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 15

 Nonprofit Org.
U.S. Postage
PAID
1310 L Street NW, 7th Floor Permit 425
Washington, DC 20005 Southern MD

...END NOTES
Where Are the Tariffs on Vibranium? But Can He Bend Brussels to His Will?
In December, the Department of Agriculture removed Wakanda Dominic Cummings, senior advisor to British Prime Minister
from a database of countries that have trade agreements with Boris Johnson, recently cast a wide net for recruiting talent
the United States. Wakanda is the fictional kingdom in the to work for the UK government, and got a response from
Marvel superhero blockbuster film, “Black Panther.” It was someone with … unusual talents. In a blog post, Cummings
listed during a test of the system, and was inadvertently left said that the government is hiring “data scientists, project
in. Software engineer Francis Tseng noticed the listing when managers, policy experts, assorted weirdos…” Cue celebrity
looking up data on U.S. agricultural tariffs and mentioned psychic Uri Geller, who gained fame in the 1970s by doing
it on Twitter. “I was very confused at first and thought I public stunts like bending spoons on television. In a letter to
misremembered the country from the movie and got it confused Cummings, Geller said his entertainment career would be
with something else,” he told Reuters. Tseng downloaded a a “perfect mask” for espionage work. “In my intelligence
tariff schedule for goods traded between Wakanda and the work I assisted with Operation Desert Storm, helped to
U.S., including live animals, dairy products, tobacco, and locate secret tunnels in North Korea, and used my skills to
alcohol (but not the fictional metal Vibranium). After the list was erase crucial diplomatic discs on their way to Moscow,” said
corrected, Tseng tweeted: “Well, the USDA took Wakanda off Geller. Referring to the EU’s chief Brexit negotiator, he noted,
the list. Guess we’re in a trade war with them too.” “Perhaps you could have used my abilities in your dealings
with Michel Barnier.”
One Man’s Dictator Is another Man’s President
Dictator or president? Depends on whom you ask—and in And Now for Some Good News
what language. Late last year, allegations of election fraud in A proposed law in Virginia could allow bar and restaurant
Bolivia led to a political crisis that culminated in the ouster of patrons to combine their favorite tipple with a stroll. The
longtime president Evo Morales, a leftist firebrand who had legislation would expand the issuing of open container
seen his support erode as he sought to extend his mandate— licenses that allow customers to purchase alcohol in a
and even Siri, Apple’s voice-activated search function, restaurant and take it outside while walking around. As of
seemed to notice. When asked, “Who is the president of this writing, only four such licenses have been issued. Known
Bolivia?” Siri offered different answers depending on whether as “commercial lifestyle center licenses,” they have only
it was asked in English or Spanish. While the English response been available to developments sited on at least 25 acres
simply referred to Morales as “president,” the Spanish version and come with a long list of requirements.
stated, “The dictator of Bolivia is Evo Morales.”

16 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE