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No, Oklahoma’s school spending didn’t fall ‘nearly 30 percent’ - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 04/19/2018 - 13:12

Late last week, Oklahoma’s teachers returned to school after a nine-day walkout — one that began after the teachers had already claimed a preemptive a 16 percent raise of $6,100 per teacher.

It was hard to argue against that raise. Oklahoma ranked 49th nationally in terms of median teacher pay, according to the National Education Association (at $45,276 in 2015–16). The inflation-adjusted pay of the state’s teachers fell by more than 7 percent between 2008–09 and 2015–16. This makes it easy to understand the goodwill and glowing press that Oklahoma’s teachers have garnered.

Except for the part where sympathetic reporters routinely misrepresented the state of Oklahoma’s school spending.

During the walkout, the standard press narrative relied heavily on a report by the Center on Budget and Policy Priorities (CBPP) to suggest that the culprit was a 28.2 percent reduction in state school spending over the past decade. This claim showed up time and again in influential mainstream outlets. The Washington Post explained that, “adjusted for inflation, Oklahoma schools have lost about 30 percent of their funding over the past decade.” The New York Times reported that “since 2008, Oklahoma has cut its per-pupil instructional funding by 28 percent — the largest cut in the nation.” And The Atlantic related that “the legislature had been cutting education spending for years, with the amount of per-student funding dropping nearly 30 percent (when adjusted for inflation) over the past decade.”

The problem is that the CBPP’s figure was consistently used in a misleading fashion. It refers to Oklahoma’s general “formula” funding — not the amount schools actually spend on students. In Oklahoma, state aid of all kinds makes up only a bit less than half of total K–12 education spending (the rest comes from localities and from Washington). When all spending is accounted for, the Oklahoma State Department of Education reports that per-pupil outlays were flat between 2008 and 2017 — or down about 11 percent after adjusting for inflation.

Indeed, while it went largely unremarked in the coverage, Oklahoma’s salary issues have as much to do with staffing decisions and ballooning pension obligations as they do with funding cuts. Between 1992 and 2014, Oklahoma had a 17 percent increase in student enrollment but added non-teaching staff at more than twice that rate. And benefits now consume about 24 percent of Oklahoma teachers’ compensation — much of which goes to retirees rather than current teachers.

To be sure, Oklahoma has not invested in its schools — and that’s true whether spending is flat, down 11 percent, or down 30 percent. And we think the state, its students, and its citizens would be better off if the state upped its investment. But facts are stubborn things. There’s a huge difference between an 11 percent decrease and a 30 percent decrease, and reporters have an obligation to make sure their readers are getting the whole picture.

It may be less exciting to pen a story that says “Staffing decisions, benefit obligations, and stagnant spending frustrate teachers” than one that excitedly claims, “Fed up with school spending cuts, Oklahoma teachers walk out.” Yet in an era when the press is tired of being attacked for “fake news,” media outlets are well-served by taking care to use the right figures in the right way.

The paid prioritization ban in historical context: More regulated than the Bell Empire? - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 04/19/2018 - 10:00

On Tuesday, the House Energy and Commerce Committee’s Subcommittee on Communications and Technology held a hearing on paid prioritization. My AEI colleague Roslyn Layton summarized some of the testimony here. Given my own interest in this issue, I was glad that Congress was interested in learning more about paid prioritization, which is one of the primary points of contention in the net neutrality debate.

Via Twenty20

During the hearing, proponents described the paid prioritization ban as simply applying to broadband providers the nondiscrimination obligations that the law traditionally places on common carriers. But this description is false. Admittedly, when the Federal Communications Commission (FCC) classified broadband providers as common carriers it waived many of the most onerous requirements of the Title II regime, such as tariffing and comprehensive price regulation. But when it came to unreasonable discrimination, the paid prioritization ban was more restrictive than the obligations that Section 202 placed on the old Bell telephone monopoly.

Unreasonable discrimination defined

Section 202 prohibits “unreasonable discrimination” by telecommunications providers. Courts and the commission have applied a three-part test to such claims. To bring a complaint, a plaintiff must show that he or she received a service that was “like” a service provided to another customer and that the two customers were treated differently when receiving that service. If the plaintiff meets these two hurdles, the burden then shifts to the telecommunications provider to show that the difference in service was reasonable.

The DC Circuit has explained that Section 202 encompasses a wide range of conduct: “[the statute] bristles with ‘any’. It is made unlawful for ‘any’ carrier to make ‘any’ unjust discrimination by ‘any’ means, or to make ‘any’ undue preference to ‘any’ particular person, or to subject ‘any’ person to ‘any’ undue prejudice . . . Equal prices for like services is in itself a matter of public interest.”

But even this broad language highlights an important limitation on Section 202: It prohibits only differential treatment in the provision of “like” services. The court has defined “like services” as services that the customer would view as “functionally equivalent.” Section 202 does not prohibit the offering of different tiers of service. As the DC Circuit noted in 1993, “[b]y its nature, Section 202(a) is not concerned with the price differentials between qualitatively different services or service packages. In other words, as far as ‘unreasonable discrimination’ is concerned, an apple does not have to be priced the same as an orange.”

Several court cases illustrate how this “like” services test traditionally applies. For example, the Commission permitted AT&T to offer “private line” service as an alternative to traditional public telephone service. Private line service allowed a customer to use a portion of the phone company’s network capacity to keep a dedicated connection open at all times between two points to minimize the risk of delay or interruption if the telephone network became congested. Similarly, the Commission allowed AT&T and other carriers to negotiate individual deals with customers for services at below-tariff rates, as long as they then offered the same deal to any other customer interested in receiving the same service at the same price.

Unreasonable discrimination and paid prioritization

Thus, even if broadband providers were bound by traditional common carriage law, they would not be prohibited from offering paid prioritization. Like private line service compared to traditional phone service, paid prioritization is qualitatively different from best-efforts internet delivery. Prioritization allows the provider to offer a minimum quality of service and insulation from congestion, which might prove useful to providers of congestion-sensitive content and applications. Because this service is not functionally equivalent to best efforts delivery, Section 202 would not prohibit a broadband provider from offering both side-by-side. As I have argued at (perhaps too much) length elsewhere, nondiscrimination obligations might require a broadband provider to make paid prioritization available on similar terms to any interested party. But it does not prohibit the offering of a priority tier for those interested in purchasing it.

This conclusion makes sense when placed in the context of other traditional common carriers, such as the postal service. Any post office customer can mail a first-class letter. But shippers who need their packages delivered more quickly can purchase priority mail or next-day delivery for an additional fee. As long as those additional tiers are available to the public at the same rate, the existence of a priority tier does not violate nondiscrimination norms.

To clarify, I do not think broadband providers should be saddled with common carriage obligations. I support the FCC’s repeal of the Title II order and the restoration of broadband service to its traditional position as a Title I information service. But even inside the common carriage paradigm, regulators recognized that a heterogeneous customer base is not always best served by a one-size-fits-all service. This is especially true among internet applications, which have different susceptibilities to congestion. Apps that do not do well with best-efforts delivery should be permitted to purchase quality-of-service guarantees to improve the experience for their customers. The law requires common carriers to be fair. But as parents and elementary school teachers often teach children, fair does not always mean the same.

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Democrats can take the House, if they just pick Conor Lamb over Hillary Clinton - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/18/2018 - 21:00

What if they held a special election and nobody won? That’s more or less what happened in southwest Pennsylvania, in the special election to fill the vacancy in the 18th Congressional District of Pennsylvania.

As I write, Democrat Conor Lamb leads Republican Rick Saccone by 627 votes out of 228,378 counted, in a district held by Republican Tim Murphy since 2002. More to the point, the district was carried by a 20-point margin by Donald Trump in 2016, and 58 to 41 percent by Mitt Romney in 2012.

Lamb’s margin seems likely to hold up under a possible recount but, even if it doesn’t, this result is a sign that the 241-194 majority House Republicans won in 2016 is likely to be overturned this fall.

The pattern of Lamb’s narrow victory was similar to results in other special congressional and state legislative elections over the past year. Democratic turnout was robust, particularly in relatively upscale Pittsburgh suburbs. Republican turnout lagged, and some non-college whites who voted for Trump and Romney voted Democratic this time.

Evidently, downscale whites, whose trend toward Republicans started in the 1990s and was augmented with the Trump candidacy, are less firmly attached to one party than Trump-haters are to the other. This is in line with the skeptical response to any new policy change by either party, as evidenced by the negative responses to Obamacare when Barack Obama was in office and the negative response to Republicans’ “repeal and replace” once Trump became president.

Some observers argued that Saccone, like other Republican nominees in special elections, was a weak candidate. A better observation is that Lamb was a strong one. Nominated by party leaders, not in a primary, he has a family political pedigree (his uncle is Pittsburgh city controller) in a long-settled metro area where such ties are important.

And he took moderate positions on multiple issues. A former Marine, he ran an ad showing him shooting an AR-15 and said, “new gun laws aren’t the answer to preventing more mass shootings like the one at a Florida high school.” Early on, he pledged not to vote for Nancy Pelosi for speaker (an issue which won’t come up until at least January 2019). While many Democrats are baying for impeachment, Lamb said, “We need the office of the presidency to succeed if we’re going to make any progress on these issues.”

Special elections are often good indicators for general elections, but they are also inherently low-stakes contests. You can vote for the opposition party without giving it immediate control. But in November, control of the House will be at stake.

Lamb’s approach was similar to that of many candidates recruited by Rahm Emanuel in 2006, the last time Democrats overturned a Republican House majority. Their local roots and moderate positions were adapted to local terrain. That’s something the out-party can do, while the in-party is usually stuck with the president’s profile.

But it’s not clear that Democrats have been as canny this year as Emanuel was a dozen years ago. They have some 1,200 candidates running for the 435 House seats, a great many of them full-throated Trump haters. And Democratic primary voters may resist party leaders’ efforts to bolster moderate candidates. When the Democratic Congressional Campaign Committee urged voters in Texas’s 7th congressional district — a target seat with many upscale voters — not to vote for leftist Laura Moser, they responded by voting for her. Moser ran better on election day than in early voting and has a good chance to be nominated in the May 22 runoff.

The danger for Democrats is that they’ll be seen as campaigning for impeachment, contrary to Pelosi’s warnings, and as echoing the sentiments expressed by Hillary Clinton this week on her book promotion tour in India.

She characterized the areas voting for her as “optimistic, diverse, dynamic, moving forward,” in contrast to the ones that had voted for Obama but spurned her: “looking backwards. You know, you didn’t like black people getting rights, you don’t like women, you know, getting jobs, you don’t want it, you know, see that Indian-Americans succeeding more than you are.” White female Trump voters, she went on, acted under “ongoing pressure to vote the way that your husband, your boss, your son, whoever, believes you should.”

Such virtue-signaling appeals to those who still haven’t accepted the outcome of the 2016 election. But it risks repelling voters in districts like Pennsylvania 18, who will determine which party controls the House next year.

Teachers strike nationwide - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/18/2018 - 18:30

The recent wave of teacher strikes that originated in West Virginia have spread across the country to states such as Kentucky and Oklahoma, causing tens of thousands of teachers in multiple states to walk out of their classrooms and march to their state capitol buildings in protest.

AEI Resident Scholar Frederick M. Hess has written extensively on the subject, discussing the teacher’s demands as well as the broader implications the strikes may have on education reform. As he points out, foremost, the teachers are asking for higher pay for themselves and better funding for their schools. These demands seem to be met with varying degrees of concession, sparking debate on whether the relative success of the strikes will cause teachers in other states to make similar demands.

Frederick M. Hess offers the following analysis in his piece What’s behind the teacher strikes?:

[T]eachers deserve to be paid more — especially in places like West Virginia, Kentucky, and Oklahoma. Schools need to figure out how to pay terrific and invaluable teachers more appropriately. Teacher benefits need to be reconfigured so that more school funds are showing up in the paychecks of working teachers, but also in a way that takes care to treat retirees and veteran teachers fairly. There’s a natural bargain lurking here — one in which big pay boosts are linked to rethinking the job description, rewarding excellence, and modernizing benefits systems. Such an approach has a big upside for teachers, taxpayers, and students.

In his piece, Kentucky’s teachers embrace a broken pension system, Hess adds:

Teachers in places like West Virginia, Oklahoma, and Arizona are making a good case for higher pay and finding popular support along the way. But digging in for a dogged defense of a deeply indebted, outmoded pension system is the wrong way to tackle teacher compensation. Indeed, such demands will only leave parents, taxpayers, and civic leaders skeptical about whether new dollars are being used to finance debt payments rather than fund teacher salaries or student needs.

To arrange an interview, please contact AEI Media Services at or 202.862.5829.

From the archives | Tariffs and trade wars - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/18/2018 - 17:30

In recent weeks, AEI colleagues including Michael Strain, Claude Barfield, Robert Barro, Mark Perry, James Pethokoukis, and others have voiced a variety of objections to President Trump’s trade policy. While they have criticized his decision to impose tariffs on steel and aluminum, they do agree that China takes unfair advantage of us and the rest of the world. These scholars’ powerful arguments about the dangers posed by tariffs and trade wars build on the work of past AEI economic experts.

In 1971, AEI hired its first two resident fellows, both of whom were economists. Gottfried Haberler was emeritus at Harvard, and William Fellner emeritus at Yale. Many people believe that bringing these two highly-regarded individuals to AEI was a signal that AEI would be joining the first rank of think tanks.

Haberler was born in 1900 and educated in Austria. He moved to the United States in 1936 and was hired by Joseph Schumpeter to join the economics faculty at Harvard. Haberler became president of the International Economic Association and the American Economic Association. He published his first trade paper in 1929, and his 1936 book, “The Theory of International Trade,” is considered a classic. His “Prosperity and Depression,” a theoretical analysis of economic cycles, was published by the League of Nations in 1937.

Journalist Jude Wanniski, an AEI journalist in residence, published his book “The Way the World Works” in 1978. In it, he credits Haberler with the insight that the decisions made in October 1929, when the Senate was preparing to pass the Smoot-Hawley tariff, triggered the stock market crash and the Depression that followed.

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AEI event: Making the 2020 census succeed - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/18/2018 - 16:15

The 2020 decennial census is critically important. Businesses rely on official statistics to make key decisions, and those statistics must be accurate. Policymakers rely on official statistics as well for decisions as important as setting interest rates throughout the economy. And the research community needs accurate data to evaluate the effects of public policies.

Many are concerned about the 2020 census’ funding, the controversial decision to include a question on US citizenship, and response rates. How will these affect the accuracy of the 2020 census? And in turn, how will that ripple through the economy?

Please join us at AEI this coming Monday, April 23, at noon, for a panel discussion on the importance of the 2020 census and what can be done to ensure its success.

I’m delighted that John H. Thompson, the immediate past director of the Census Bureau, will be speaking on the panel. Diane Schanzenbach, former director of The Hamilton Project and professor at Northwestern University, will also be a panelist. Dr. Schanzenbach and I are coauthors of a recent report on the importance of official statistics. Hans von Spakovsky of the Heritage Foundation will be speaking. Mr. von Spakovsky is in favor of the Trump administration’s decision to include a citizenship question on the 2020 census, while I am opposed to this decision. My AEI colleague Karlyn Bowman, a noted expert on public opinion, will moderate the discussion.

Plus, AEI is offering free lunch!

I hope to see you at AEI on Monday, April 23, at noon. Please click here to RSVP.

Work requirements help the poor | In 60 seconds - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/18/2018 - 15:23


While some have argued that work requirements for safety net programs are “cruel,” AEI’s Angela Rachidi argues that work requirements can help those at risk of poverty to stay connected to the labor force and lead better lives.

Sino-American trade: We know where this is headed - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/18/2018 - 15:04
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It’s hard to be sure how Sino-American economic tensions will evolve this year. Will tariffs be implemented? Probably yes, but in reduced fashion. Will other barriers be raised? Yes, on investment. Who will come out ahead? Possibly China, but not for long.

It’s easier to be confident about the next decade. Sino-American economic cooperation jump-started when Deng Xiaoping resumed reform in 1992, climaxed with China’s entry into the World Trade Organization, and survived the 2008 global crisis. It is now starting to wind down. Both countries have changed such that yesterday and today’s relationship can’t go on forever. So, it will stop.

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Twenty years ago, China was economically small compared to the United States. Its disposable income in 1998 was 1/50th (no, that’s not a typo) of America’s. Its GDP had just breached $1 trillion, which was barely 1/9th of America’s. US consent to China’s WTO accession was driven by farmers and a relatively small number of multinationals. The economic stakes seemed low.

The Short-Run Employment Effects of Recent Minimum Wage Changes: Evidence from the American Community Survey - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/18/2018 - 14:52


This paper presents early evidence on the employment effects of state minimum wage increases enacted between January 2013 and January 2015. As of 2015, we estimate that relatively large minimum wage increases (defined as those exceeding $1) reduced employment among low-skilled population groups by just over 1 percentage point. Smaller minimum wage increases, as well as increases linked to inflation indexation provisions, appear to have had much smaller (and possibly positive) effects on employment over our sample period. The estimates thus raise the potential importance of non-linearities in the minimum wage’s effects, which are consistent with standard models of the labor market.

Click here to access the published version of the paper.

Click here to read the full paper.

Discussing the late Barbara Bush and North Korea: Thiessen on Fox News’ ‘America’s Newsroom’ - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/18/2018 - 14:04
Resident Fellow Marc Thiessen discusses North Korea and Barbara Bush's passing on Fox News's 'America's Newsroom'.

Episode 33: The nacho situation - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/18/2018 - 13:59

Trade lawyer and Cato Institute scholar Scott Lincicome returns to the Remnant as we await the US-China trade war that may or may not happen to tell us what we should or should not do.

You can subscribe to The Remnant with Jonah Goldberg on iTunesGoogle PlayStitcher, and TuneIn. You can also download this episode here.

This podcast was originally published by National Review.


Want government permission to work? Get ready to go back to school - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/18/2018 - 13:13

A significant barrier to opportunity for low- and middle-income workers is occupational licensing: the requirement to obtain government permission to work in a certain occupation. Licensing requirements have expanded over the past several decades, and estimates suggest that nearly a third of workers need an occupational license to do their jobs. People who do not already have a license often find themselves shut out of work opportunities, since the barriers to obtaining a license are often steep.

@cobalt via Twenty20

License-seekers may need to pay hundreds or thousands of dollars in fees, pass multiple exams, and/or gain months to years of experience before receiving a license. The Institute for Justice (IJ), a nonprofit law firm, has exhaustively catalogued licensing requirements for over a hundred low- and middle-income occupations across the fifty states plus the District of Columbia.

One particularly common requirement for occupational licenses is education. These requirements range from daylong courses to certificates or degrees that may take many years to attain. Longer education requirements are particularly burdensome because they carry multiple costs: aspiring workers must not only find a way to finance their education, but may also forego the opportunity to earn income while they are in school. Taking on student debt becomes necessary for many license-seekers.

The following chart shows the number of licensed occupations with some sort of education requirement, out of 102 low- and middle-income occupations analyzed by IJ. Virginia requires education for 56 different occupations, followed by Oregon and Utah (47 occupations each). While many of these education requirements are light (a week or less of training), eight occupations in Virginia require a year or more of education.

Source: Institute for Justice, “License to Work: A National Study of Burdens from Occupational Licensing” and author’s calculations. Education requirements denoted in credit-hours, clock-hours, or degree requirements have been converted to weeks for the sake of comparability. For the source data, see

The disparities in educational requirements across states suggest that many of these requirements do not justify their costs. Less than half a year of education is required to become a licensed massage therapist in most states, but Maryland requires over a year of training for this occupation. Fire alarm installers need no education in most states, but need two years in Tennessee.

Just three states have education requirements for interior designers (Florida, Louisiana, and Nevada, plus D.C.) but these states require over four years of training for would-be decorators. (As someone who lives in Maryland and works in D.C., I can’t say that there’s a perceivable difference in the quality of the drapery between the two jurisdictions, despite their different licensing requirements.)

Other oddities abound. In every single state, education requirements for cosmetologists are higher than those for emergency medical technicians. For instance, Iowa requires 70 weeks of education to style hair but less than four weeks to provide emergency medical care. Such lengthy requirements may force would-be coiffeurs to borrow student loans in order to pay tuition and living costs, contributing to high debt burdens among graduates of cosmetology schools.

Comparing education requirements across states suggests there’s plenty of room to reduce them. After all, it makes little sense that landscape contractors in Mississippi need two years of education, while their colleagues in neighboring Louisiana need none. But an analysis by the Mercatus Center shows that the burden of licensure is growing, not shrinking, in most states.

Education is unique among occupational licensing requirements in that it requires substantial amounts of both time and money to attain—scarce resources for many aspiring workers. By trimming education requirements for occupational licenses, state policymakers could tackle the burden of student debt and create working-class job opportunities all in one go.

Hot Java? Google is potentially on the hook for billions after recent Oracle copyright infringement ruling - Hot Java? Google potentially on hook for billions after recent Oracle copyright infringement ruling

Wed, 04/18/2018 - 10:00

Java may be a beverage best served hot, but was Google’s use of Java, the software, hot, as in stolen, i.e., from Oracle, which developed the language? In a key ruling last month in a landmark copyright case pitting the two software heavyweights against each other, the Federal Circuit Court of Appeals held that it was.

A sign marks a building housing Oracle offices in Burlington, Massachusetts, REUTERS.

Oracle originally sued Google in federal court in San Francisco in 2010, seeking nearly $9 billion in damages for Google’s use in its Android operating system of certain Java application programming interfaces (API). The database giant —  which in 2010 had purchased Sun Microsystems, the developer of Java in the 1990s —  claimed copyright protection over Java APIs, which function as building blocks for mobile applications and other software.

Google didn’t deny using the software but contended that the code was not sufficiently creative to be copyrightable and, even if it was, Google’s use was “fair” —  a term of art in copyright law involving a four-part inquiry:

  • Is the use commercial or transformative?
  • How creative is the copyrighted work?
  • How much of the work did the infringer use?
  • How much harm did the infringing use cause?

After a deadlocked first trial, the case went up on appeal to the Federal Circuit (the exclusive appellate venue for patent cases, which the case originated as), which held that the “structure, sequence, and organization” of Java APIs were indeed copyrightable and instructed the trial court to consider whether Google’s use was fair.

A second jury then excused Google’s use of the Java APIs as fair, thereby clearing Google of any wrongdoing. But late last month, the Federal Circuit reversed their verdict. (To make things more complicated, the Federal Circuit had to apply the fair-use standards of the Ninth Circuit —  the regional appellate court covering California.)

First, the appeals court found that Google’s use was “highly commercial,” even though Android itself is provided for free, and that it was not “transformative.” That is, it did not “alter the original with new expression, meaning, or message or serve a new purpose distinct from that of the original work” because “the purpose of the API packages in Android is the same as the purpose of the packages in the Java platform. . . . Google made no alteration to the expressive content or message of the copyrighted material, and . . . smartphones were not a new context.”

Second, the Federal Circuit held that the Java APIs “involved some level of creativity,” (emphasis mine), but that “reasonable jurors could have concluded that functional considerations were both substantial and important” —  a finding weighing in favor of fair use, although not generally a hugely important one.

Third, the court ruled that Google made extensive use of the copyrighted material: “Google copied 11,500 lines of code — 11,330 more lines than necessary to write in Java.”

Finally, the Federal Circuit found that because Android competed against —  and largely displaced — earlier smartphone operating systems using Java SE, its infringing use of Java APIs caused significant marketplace harm to Oracle.

Having dispensed with Google’s fair use defense, the Federal Circuit sent the case back to the trial court for a third time for a damages determination.

The battle has been closely watched by industry insiders, who collectively submitted no fewer than 20 friend-of-the-court briefs. One practitioner called the ruling “momentous” and “very, very important,” predicting the Supreme Court would take it up.

“The Federal Circuit’s opinion upholds fundamental principles of copyright law and makes clear that Google violated the law,” Oracle Executive Vice President Dorian Daley said in a prepared statement. “This decision protects creators and consumers from the unlawful abuse of their rights.”

Meanwhile, Google and others sounded a different note. “We are disappointed the court reversed the jury finding that Java is open and free for everyone,” said Google spokesperson Patrick Lenihan in a company statement. “This type of ruling will make apps and online services more expensive for users. We are considering our options.”

Similarly, Corynne McSherry, legal director of the Electronic Frontier Foundation, contended in a blog post that “this case has already cast a long legal shadow over the entire world of software development. . . . How many developers will abandon ideas for competitive software because the legal risks are too great? How many investors will fear to support them?”

Google will likely seek Supreme Court review of the decision before it returns to the trial court. And the trend in recent years among mobile operating system providers and app developers has been toward the use of open-source APIs, which are available to all for free. But at least as of now, Google is staring down the barrel of a $9 billion weapon that the Federal Circuit’s fair use warning has unleashed upon the software world.

Learn more:

How republicans can ward off demographic doom - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/17/2018 - 21:02

In the run-up to the 2016 campaign, Republicans were told that they had to adjust to demographic change if they were to have a future. They even said it to themselves.

The Republican National Committee produced an “autopsy” after Mitt Romney’s 2012 defeat urging the party, among other things, “to embrace and champion comprehensive immigration reform” or be written off by the country’s growing Hispanic population.

Demography was destiny — until it wasn’t. House Republicans declined to pass a big immigration bill, and Donald Trump ran a campaign that sometimes seemed designed to alienate rather than court Hispanics. Yet Trump not only won the election. He even slightly improved on Romney’s share of Hispanic voters who chose a major-party candidate. (Asian-Americans were the only racial group that moved toward the Democrats in 2016.)

My sense is that since then, the folk wisdom of Democrats on this subject is that the previous consensus was right but premature. History is still on their side; it is just taking a while to prove it. Among Republicans there is still concern about adverse demographic trends. But the example of 2016 has also increased the number of Republicans who discount or ignore such trends.

Four think tanks have an ongoing project, called “States of Change,” that brings data to bear on these questions. Its researchers are serious data crunchers (although they let this history major serve on their advisory board). In a new report, Democratic strategist Anna Greenberg and conservative-leaning election commentator Sean Trende offer separate analyses based on the best available data.

The project allows the researchers to run different simulations of future presidential elections based on assumptions about turnout and voting behavior for different groups. For example: If whites with college degrees, whites without college degrees, Hispanics, African-Americans and Asian-Americans vote at the same rates and for the same parties they did in 2016, the change in their share of the population would lead to a Democratic victory in 2020.

All else equal, whites’ falling share of the population will help Democrats and hurt Republicans. But Republicans can counteract that effect if, for example, they continually win somewhat higher shares of the many white voters without college degrees.

Several of the scenarios in which Republicans win the presidency resemble 2000 and 2016: They’re electoral victories earned with fewer popular votes than the Democrats are projected to get. That might erode the legitimacy of the electoral system. It might also reduce Democratic turnout, as liberal-leaning voters decide their votes do not matter.

The analyses by Greenberg and Trende raise at least three issues worth tracking.

First: What percentage of people of Hispanic descent are going to define themselves, in the future, as Hispanic? Trende raises the possibility that “intermarriage and the shedding of ethnic identity” will affect Hispanics as it previously affected Italian-Americans and other groups, especially as “Hispanic immigration rates level off.”

Second: Will Democrats find a way to replicate President Barack Obama’s performance among African-Americans? Between 2012 and 2016, black turnout dropped a little and their Democratic vote share dropped a lot, from 93.7 to 88.2 percent. The decreased vote share was especially devastating for Democrats, as Greenberg notes: If Hillary Clinton had gotten 93.7 percent too, even with the lower turnout, she would have tied Trump in the Electoral College. Black votes matter. Trende suggests that black voting patterns are returning to their pre-Obama norm, and Democrats will be hard-pressed to regenerate the excitement that greeted the first black president.

Third: How long will the leftward inclinations of young voters last? The generation gap in voting has widened in the elections of the 21st century, although in the last election young voters moved right in some states and left in others. Will age, and the marriages and mortgages that accompany them, pull these voters toward the Republicans?

In his analysis, Trende returns to a theme of his (very good) book “The Lost Majority”: Seemingly inexorable trends can suddenly reverse. In 1925, it would have been natural to assume that the South would stay Democratic, blacks would stay Republican, and the working class was moving toward the GOP. All of those assumptions were upended, some of them within a few years.

There’s probably something that even the smartest political minds take for granted that will soon turn out to be untrue.

Improving our anti-money laundering operations will help prevent Great Power war - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/17/2018 - 20:06

Interest is growing in illicit finance because Great Power competition is playing out in boardrooms, stock markets, trade wars, and compliance departments. The US anti-money laundering (AML) regime needs an update that enhances national security and sets an example for the rest of the world.

The US leads in crafting and enforcing global standards of financial integrity and accountability. However, like most US economic regulations, the current AML regime is a haphazard, ad hoc patchwork riddled with loopholes and inefficiencies. An illicit finance bill should encourage communication between and within compliance and law enforcement, safeguard individual privacy rights, and help smaller businesses and financial institutions. It has been 17 years since the last AML overhaul. It is time to address the clear and present danger — dirty money.

National security concerns

For the past thirty years Western democracies have actively and passively sought out economic integration with authoritarian states. Westerners hoped (and many still do) that modernization would create middle classes that demand rights. Investors and businesses simply saw new markets as opportunities to turn a profit.

Profits came to fruition, but economic integration morphed into a sort of messy imbroglio, or a rules-based liberal order entangled with opaque, violent, and kleptocratic authoritarians eager to bend the rules in their favor.

Currently, kleptocrats and their ilk can store and move wealth in the US anonymously. Some profit from breaking drug laws, others evade taxes, and many set up simplistic fraud schemes. Dastardly agitators use anonymous capital to support political and economic espionage, nationalistic violence, and religious zealotry.

The absence of clear and transparent rules in non-democracies (and among thieves) breeds instability, uncertainty, and violence. A simple first step toward protecting the US from these negative externalities is to require legal entities to register and verify their beneficial ownership (BO) at the time of incorporation.

Two examples

The General Services Administration apparently cannot identify the ultimate beneficial owners of up to a third of high security leases. This means that unidentified Russians can, and might, own the buildings that the FBI leases to investigate Russian activities.

An investigative report recently uncovered thousands of planes in the US registered to companies known to use secrecy tactics to provide services to non-US citizens. Planes transport drugs — and, post 9/11, well.

New reporting and securing individual privacy rights

Thresholds for currency transaction reports (CTRs) and suspicious activity reports (SARs) are not adjusted for inflation. The estimated 55,000 SARs that the Financial Crimes Enforcement Network (FinCEN) receives every day are not being efficiently communicated or leveraged with simple, cheap, and powerful data science tools.

Legislation should ensure that reporting data (BO, SARs, and CTRs) will never be made public. But data sharing within and between financial institutions and law enforcement needs to be increased and modernized.

The problem is that privacy is now protected by effectively deputizing the financial sector. In the current threat environment this puts a massive amorphous burden on compliance departments. That cost is ultimately passed on to the consumer and hamstrings the effectiveness of law enforcement.

One solution is for FinCEN to host a basic BO dataset (such as name, address, ID) that compliance departments can access and search, verifying their own due diligence findings. This allows FinCEN to leverage big data analytical tools to easily find trends in CTRs and SARs. Also, more sensitive information remains in private hands.

How legislation can help smaller competitors 

A small American shipping company has to turn a profit in order to pay its employees and stay open. A drug cartel-owned shipping company in the same town has no need to turn a profit. All it has to do is not get caught. It can and does swallow up fair competitors by seeking out legit accounts to cover its illegitimate activity.

Second, large government contracts have “set asides” for small businesses. Shell companies defraud the government by underbidding fairly competing small businesses for these set asides and then providing shoddy product or engaging in other schemes. Congress could also make it cheaper and easier for businesses to become a publicly-traded company.

Bottom Line: Updating the AML regime for the explicit purposes of creating a better business environment strikes a pragmatic balance between the duty of government to provide the public good of national security and the privacy necessary for free enterprise. Doing it before Great Power competition turns into Great Power war might just be what prevents that calamity and ushers in a brighter future.

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Cutting China’s cash flow to North Korea: US strategy won’t get the job done - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/17/2018 - 18:09

American policymakers focused on denying resources to North Korea should have noted Kim Jong Un’s recent visit to Chinese president Xi Jinping and what it might mean for the US-led strategy. One of the major challenges identified by the administration in curtailing the North’s nuclear program is preventing the flow of money coming from China illicitly (as defined by US sanctions). The Chinese Communist Party (CCP) exerts a high degree of control on Chinese firms, and companies that illegally conduct business with North Korea are far more likely to exist with the tacit approval of the state than due to poor oversight. US policy that aims to stop illicit financial flows will ultimately mean holding the Chinese state accountable.

US policy that aims to stop illicit financial flows into North Korea will ultimately mean holding the Chinese state accountable. KCNA/via Reuters

Currently, US Treasury sanctions buy into the Chinese company shell game by targeting smaller firms. In 2017, the US Treasury took action against individuals, entities, and vessels involved in illegal business with North Korea. The Chinese companies cited in this list are relatively small in scope, with some exclusively set up for the purposes of conducting business with North Korea and located on the border between the two countries in Dandong, home to a bilateral trade zone. Targeting these companies for sanctions is made easier by open source information that allows researchers to identify companies directly involved in illegal business with North Korea. However, because these companies often enjoy the effective support of the Chinese state, they can easily reappear in a different guise than the one sanctioned.

If the US aim is to stop significant financial flows into North Korea from China, then it will need to up the ante and target the large state-owned enterprises (SOE) under the control of the CCP.  Some small companies involved in illegal activity with North Korea are subsidiaries of the huge SOEs. Take Limac Corp, partner in a joint venture with North Korea’s Ryonbong General Corp to mine minerals used to make computers, missiles, and nuclear reactors. Limac is a subsidiary of China National Machinery Import and Export, whose parent company in turn is China General Technology (Genertec). Genertec has over 38,000 employees, a worldwide business scope with overseas investment and construction projects, and access to international finance — all ready targets for US sanctions.

Of course, pursuing sanctions against large SOEs in the context of the current trade standoff between China and the US would spark concerns about escalating tensions and potentially diminishes the prospect of future Chinese cooperation. Also open for question is whether or not we fully understand the sources of revenue for North Korea’s nuclear program, which remain unmapped.  However, what is already clear is that if the goal of the US is to stop illegal finance, it will require putting pressure on the Chinese state itself.

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Ryan’s retirement won’t end the entitlement debate - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/17/2018 - 15:51

The announcement by House Speaker Paul Ryan (R-Wis.) that he will not seek re-election later this year means entitlement reform will lose its most important recent champion, but it doesn’t mean the idea of reform is now dead for good. Basic math and fiscal reality are what make changes to these programs all but inevitable.

The federal government’s finances are now in a disastrous state, and the situation will get much worse in the years ahead.

House Speaker Paul Ryan (R-WI) addresses a news conference where he announced he would not seek re-election in November, on Capitol Hill in Washington, April 11, 2018. Reuters

The Congressional Budget Office (CBO) projects the federal government will run a cumulative deficit of $12.4 trillion over the next decade, pushing total federal debt up to $28.7 trillion, or 96 percent of GDP, at the end of 2028. Federal debt was 39 percent of GDP at the end of 2008.

The primary cause of both current budgetary pressure and the deterioration that will occur over the coming decades is the rapid growth in entitlement spending. The federal budget is now dominated by expenditures on federal benefit programs.

In 1970, the federal government spent 5.8 percent of GDP on entitlements. By 2017, entitlement spending had grown to 13.1 percent of GDP. As the population ages and health-care costs continue to rise more rapidly than economic growth, entitlement spending will surge in coming years.

In 2040, federal spending on Social Security, Medicare, Medicaid and the subsidies provided in the Affordable Care Act will be 3.9 percentage points of GDP higher than it was in 2017. Left unchecked, entitlement spending will consume nearly all federal revenue by the middle of the century.

Further, both Social Security and Medicare are financed by federal trust funds that will not have sufficient resources to pay full benefits in the coming years. The Social Security trust funds are projected to be depleted of reserves in 2034, while the Medicare hospital insurance trust fund is expected to run out of funding in 2029.

Once the trust funds are depleted, incoming revenue will be insufficient to finance full benefits, which means there will need to be cuts in benefits paid to retirees. The prospect of across-the-board benefit cuts is certain to force some action in Congress eventually.

While changes in entitlement programs are inevitable, they may not occur soon or be pursued sensibly. At the moment, serious reform is a non-starter politically.

President Trump has no interest in pursuing anything controversial with respect to the big middle-class entitlements, Social Security and Medicare, and most Democrats seem to think the nation’s budgetary problems can be solved with tax increases alone. So, for the time being, nothing will be done — unless a crisis forces Congress to act.

Unfortunately, a crisis cannot be ruled out. As deficits and debt have piled up, the possibility of a federal debt crisis has risen too. Any number of different events, such as an international conflict or a trade war or the bursting of a global asset bubble, could make it more difficult for the federal government to borrow at preferential rates.

If interest rates were to jump precipitously, so too would the federal government’s payments to its creditors, which might force Congress to pass legislation to prevent deficits from spiraling out of control.

Under this kind of scenario, Congress would have little choice but to raise taxes sharply and to cut spending quickly too, probably including immediate cuts in entitlement spending.

That’s not the ideal way to implement reform. Imposing deep cuts without advance warning would leave no time for program beneficiaries to make adjustments in their financial plans.

It would be far better if Congress passed legislation before a crisis hit to phase-in adjustments in program spending over many years. Current Social Security and Medicare beneficiaries could be exempt from the changes, as could those nearing retirement. The goal should be to lower spending on these programs over 10, 20 and 30 years, not immediately.

Done right, entitlement reform could strengthen the safety net rather than weaken it. Social Security’s benefit structure leaves many millions of workers who had short careers and low wages with meager retirement benefits.

The program could be modified to improve protection for low-wage workers while providing less generous benefits for higher-income workers. Social Security’s benefit formula could also be calibrated to adjust automatically to compensate for longer lifespans.

In Medicare, the federal government should move to a system of fixed, defined contributions in support of insurance enrollment by program beneficiaries (often called “premium support”), as Ryan has long recommended.

This change would promote competition, and cut costs, according to CBO. The program should also provide higher subsidies to retirees with low lifetime earnings and reduced subsidies for retirees who earned higher-than-average wages when working.

With these changes, Social Security and Medicare would become more financially sustainable while also providing better protection for retirees with very low incomes.

Paul Ryan understands entitlement reform better than anyone else in Congress. He studied the issue for years, and, despite what his critics now say, he was effective at convincing his colleagues of the issue’s importance and thus making actual change a more likely prospect.

Changing Social Security and Medicare is never going to be a popular exercise, but Ryan made the case consistently anyway, and for that he deserves much credit. His voice will be missed, but even after he is gone, the case for entitlement reform will intensify.

Federal debt is set to soar in coming years, and it will not be possible to slow down government borrowing if the largest spending programs in the budget are off-limits for all sensible adjustments.

The other opioid problem - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/17/2018 - 15:49

While seemingly every part of the US government is worrying about opioid overdoses, some medical professionals are agonizing over another problem — patients with chronic pain who are finding it harder to access the medications they require.

Below are two brief stories posted to the People’s Pharmacy, an online blog and radio show about access to medicines and medical concerns.

D.M. in Baton Rouge, LA, shared a poignant story:

“It is really a shame how a physician who took an oath ‘To Do No Harm’ out of medical school can bow down to a government that has no business meddling in the practice of medicine.

I was injured twice in Vietnam, and in 1988 a backhoe drove over me. I’ve had four back surgeries as a result, but am left with chronic pain. I haven’t told the VA that this 65-year-old soldier who proudly served my country in time of need often thinks about taking my own life. It is truly sad that the very country I went to war for is the one that is going to be the death of me.

I will fight this pain with all I have because I care about my family. But since my dosage of Oxycontin was reduced, I have a hard time getting even two hours of sleep a night. I cannot find a position in which I am not in pain.”

Jan in Plano, IL, is also at the end of her rope:

“I had a crush injury to my feet and legs 17 years ago. All my nerves died. I have been on everything, but mostly just Fentanyl patches every other day.

A neurologist who knew nothing about pain stopped my Fentanyl when I tried to have a spinal stem implant. I felt like Joan of Arc burning at the stake. I couldn’t lift my head off the bed, and vomited till taken to the hospital.

The pain was excruciatingly unbearable!! If I couldn’t get my Fentanyl I would have to find a way to end it. So the deaths from drug addicts that the DEA is trying to prevent will just be made up in suicides from people in severe, unending pain! The government needs to stay out of our lives.”

Combating the illicit trade in opioids is important, as is trying to prevent overdoses, but the patients who require these medicines must not be lost in the cracks.

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Hungary’s opposition faces an uphill battle against authoritarianism - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/17/2018 - 14:09

Viktor Orbán’s victory in Hungary’s recent parliamentary election was not fair and he is not going to play nice in his third consecutive term. Those who are worried about the fate of democracy in Hungary have to get used to that reality and get to work quickly.

Protest marches in Budapest, like the one we saw on Saturday, might fulfil an important therapeutic role but they are no substitute for effective political action.

People attend a protest against the government of Prime Minister Viktor Orban in Budapest, Hungary, April 14, 2018. Reuters

Although Mr Orbán is a talented and ruthless politician, his takeover has been more than helped by the opposition’s divisions, incompetence and lack of leadership. Mass protests ring more than a bit hollow considering that a few days ago Mr Orban’s Fidesz party gained a two-thirds majority in a free and non-fraudulent (though unfair) parliamentary election, at a record-high turnout.

A quick note on fairness. Back in 2012, a new electoral law changed the rules of the game in Fidesz’s favour by re-districting the country and increasing the number of single-mandate constituencies in which the largest party enjoyed a natural advantage over its challengers.

As a result Fidesz now enjoys a supermajority despite receiving a little less than 50 per cent the popular vote. Mr Orbán also controls the vast majority of media outlets in the country, either directly or through a network of party-connected oligarchs. After the election, even the government’s leading critic, the former Fidesz-affiliated oligarch Lajos Simicska, has decided to cut his losses and close down the opposition outlets he had been bankrolling.

Still, the opposition parties could have worked around the skewed electoral rules by coordinating more closely and backing the strongest opposition candidates in each district. They chose not to, in part because that would involve working with the once neo-fascist Jobbik movement, which came second in the election with over a million votes.

Make no mistake, the risk of Hungary’s sliding towards fully-fledged authoritarianism is substantial. Besides gaming electoral rules and taking control of media and state apparatus including the judiciary, Fidesz also operates a vast network of patronage, in which party-connected businesses receive privileged access to public tenders, including those funded by the EU. Mr Orbán has made it no secret that he intends to tighten the screw – a few days after the election a pro-government outlet published a list of ‘Soros mercenaries’, printed in white on a black background with the thinly veiled purpose of intimidating the government’s critics, including NGO workers and academics at the Soros-funded Central European University.

What should be the response of Hungary’s opposition? For one, stop indulging in fantasies. Not so long ago, many put their faith the Momentum Movement, founded by a group of young Hungarian professionals who successfully derailed Mr Orbán’s bid to host the Olympic games in Budapest. The movement promised not only to build a political alternative to Fidesz but also to rebuild politics from the ground up, giving a new role to spontaneous grassroots engagement as opposed to rigid party structures. In this parliamentary election, Momentum received 3 per cent of the popular vote.

Instead of hubris, the centrist liberal opposition needs to invest in conventional party structures that reach outside of the capital and can recruit candidates with local bona fides. It also needs to accept that Jobbik is a political force to be reckoned with. Without building coalitions and always backing the most promising anti-Fidesz candidate in every election, local or national, it will be impossible to ever weaken Mr Orbán’s hold on power.

Fidesz’s defeat is not going to come from the outside and certainly not in the form of a ‘rule of law’ procedure of the kind initiated against Poland by the European Commission. That said, it is hard to see why the European People’s Party keeps indulging Fidesz’s excesses – and also why the blatant politicisation of EU funds and their use for domestic corruption and patronage in new EU member states has not led to a serious rethink.

One external force that can make a difference is the Hungarian diaspora in Western Europe. The departure of hundreds of thousands of Hungarians to Austria, Germany, and the United Kingdom, driven overwhelmingly by a lack of economic opportunities at home, has been a loss to Hungary but has served Mr Orbán well. The overwhelmingly young and educated demographic group could not only be a political force in its own right, but also a source of funding for independent media and for budding political movements at home, independent of the trappings of the heavily politicised Hungarian economy.

The next four years will decide whether Hungary becomes the Turkey, or Russia of Central Europe. And unless opposition, civil society and ordinary Hungarians who value liberal democracy step up their game significantly, it is going to be an uphill battle.

‘Suicide of the West’: The comic book - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/17/2018 - 13:30

Some longtime readers know that I was a comic book nerd (some would even quibble with “was”). When I was young, my plan was to write comic books. But I became a conservative pundit instead. Fortunately, the release of my new book, “Suicide of the West: How the Rebirth of Tribalism, Populism, Nationalism, and Identity Politics Is Destroying American Democracy,” has given me an unexpected opportunity to merge these two worlds.

With the help of AEI’s graphic design and digital teams, I have created a graphic novel adaptation of a portion of “Suicide of the West.” It covers the basic argument presented in the book’s introduction: that mankind was materially miserable for most of its history until not much before the present moment, and that widespread ingratitude for the Miracle of the modern world threatens to return us to that misery. It also hints at the greater depths explored in the book.

This graphic novel is no substitute for “Suicide of the West,” but this is a fun companion and, I hope, an inducement to buy the real thing. And there are pictures! So please give it a read. I hope you enjoy it. You can access the graphic novel by following this link.

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