Reason Magazine - Contributors

The Ownership Society and Its Discontents

info@reason.com (Ryan H. Sager) — Wed, 01 Nov 2006 12:15:00 EST

CHOICE IS APPEALING. That’s why it’s at the heart of the loose amalgam of programs, theories, and buzzwords that President George W. Bush calls the Ownership Society. It’s Bush and his political advisor Karl Rove’s way of trying to bring everyone inside the Republican tent. People who are happy with the government just the size it is shouldn’t be spooked, they say: The Republicans aren’t trying to take anything away, they just want to give people more choices. Libertarian types shouldn’t be spooked either, and maybe they should even be excited: Republicans are finally dismantling the New Deal and replacing it with the free market, or at least a Rube Goldberg approximation thereof. And if policies to expand home and small business ownership can be tied in (because, hey, the word ownership is in there), all the better; that could appeal to African Americans and Hispanics. A Republican Party pushing an Ownership Society can be all things to all people.

This leaves those of us who care about limited government with a dilemma. Do we take the idea of an Ownership Society seriously, despite the fact that it comes from a group of people who have proven beyond a shadow of a doubt that they are comfortable not just increasing but ballooning the size of the federal government? Or do we cast it aside, despite the fact that as a political formulation the Ownership Society offers perhaps the most promising path in a generation to expanding individual freedom?

At the risk of giving the Bush administration the benefit of the doubt, libertarians, small-government conservatives, and all other natural skeptics of the president and his policy shop should take a step back, take a deep breath, and take the Ownership Society seriously. The big-government conservatives are right about one thing: Republicans are never going to roll back the New Deal. But they can shape what takes its place as America moves past the framework of its old industrial-era economy, to which the New Deal is inextricably tied.

At the same time, the Ownership Society can’t be judged in a vacuum. The Republicans have held the presidency, the House, and (except for two years) the Senate since 2001. The president has had more than five years to advance a bold new approach to conservatism under some of the most favorable political conditions imaginable, and at first glance it doesn’t look like he has much to show for it. What’s more, the small steps he has taken toward realizing that vision have come at great expense in sheer dollars and cents, as well as in greatly expanding the role of the federal government.

If the Ownership Society is supposed to be the best political means to achieve small-government ends—if it’s supposed to be the realistic alternative to the paint-fume-huffing delusions of committed libertarians—then it only makes sense to judge its performance in the real world, without pulling punches or granting points for effort.

The Evolution of Ownership

Though Bush had used the phrase on occasion before, it wasn’t until the 2004 Republican National Convention that he brought under the umbrella of the Ownership Society several policies and goals that turned out (more by happenstance than by design) to tie together thematically. “Another priority for a new term is to build an Ownership Society, because ownership brings security, and dignity, and independence,” he told the crowd at New York City’s Madison Square Garden. “In an Ownership Society, more people will own their health care plans, and have the confidence of owning a piece of their retirement.” Bush extolled the fact that homeownership was at an all-time high in America, and he promised that more Americans would own their own homes. He said that his administration was transforming schools by raising standards, and he promised that it would keep insisting on accountability and empowering parents and teachers. “In all these proposals,” he said, “we seek to provide not just a government program, but a path—a path to greater opportunity, more freedom, and more control over your own life.”

A fine vision, that. But Bush’s words didn’t flesh out exactly what an Ownership Society is at the end of the day, or how far along his administration might be in creating one after a full term in office. In fact, Bush didn’t make a single speech during the 2004 campaign or in the year after his reelection giving the idea significant depth or detail.

Still, upon examination, it’s possible to map out a constellation of programs and proposals that, taken together, form something of a coherent picture. Bush’s stalled proposal for private Social Security accounts? Definitely part of the Ownership Society. The tiny health savings accounts tacked onto the humungous Medicare prescription-drug bill? Also part of the Ownership Society. Setting targets for increased minority homeownership? Sure, why not. Proposed job-training accounts? What the hell. A prospective overhaul of the federal tax code? Somewhat inexplicably, Bush aides also consider this idea part of the package. The No Child Left Behind law? Passed in 2001, it predates the newfangled slogan, but administration officials say it gives parents more control over their kids’ education, an idea central to the Ownership Society concept.

What’s remarkable, then, is just how short a distance Bush has traveled with this idea in five-plus years. Even the president’s greatest defenders are left praising achievements his administration hasn’t…well, achieved. “Imagine if the president had won the fight for private accounts in Social Security,” the conservative pundit Fred Barnes wrote in his 2006 book Rebel in Chief. “And imagine if he had expanded consumer-driven health care.…Achieving it would have been an epic feat. And Bush, having succeeded in creating an ownership society, would be the most important and consequential domestic policy president since FDR.”

Too bad it didn’t work out that way.

Barnes still says he thinks the Ownership Society has a shot at going down in history next to the New Deal and the Great Society (some company). Bush’s conservatism, Barnes and others argue, breaks daring new ground because it is not aimed at reducing the supply of government, as in the Gingrich years. Instead, it aims to reduce the demand for government, by making people more self-sufficient and less dependent on handouts. Even if many of Bush’s bolder proposals haven’t yet been enacted into law, they argue, his pilot programs and half-measures will whet Americans’ appetites for choice, and his reorientation of the political debate will set the course for future Republican presidents and congresses.

Libertarian critics counter that the Ownership Society is merely big government by another name, providing only the faintest illusion of choice. The government would still be taking people’s money and forcing them to spend it on schooling or health care, or to save it for retirement; adding insult to injury, it would then allow (force?) citizens to choose from a menu of pre-approved, government-sanctioned options as to how precisely they would like to receive the required services. Meanwhile, government’s growth would continue unabated.

Each of these views of the Ownership Society has an element of truth. But the only way to judge Bush’s success is by looking at the results so far.

Owning Education

In January 2003, a little over a year after President Bush signed the No Child Left Behind Act (NCLB) with a beaming Sen. Ted Kennedy (D.-Mass.) by his side, Harlem mother Eunice Staton filed suit against the New York City public school system. Staton and a group of parents from New York City and Albany were looking to sue for their right, under the new federal law, to transfer their children from the failing public schools they were in to more successful ones. The school district had neglected to notify them that their children’s schools were failing and that they had the right to transfer, but once they found out, they wanted to take control of their kids’ destinies. Staton, who had three boys in two of the city’s 300 failing public schools, told the press she felt “like a prisoner.”

The suit was thrown out, making Staton and her fellow plaintiffs just a few of the millions of parents let down by the promise of a bold, new approach to federal education reform. Barnes calls NCLB “a perfect example” of the president’s redefinition of conservatism “to fit the times and to come to grips with political reality.” If that’s true, Bush’s conservatism is in worse shape than almost anybody could have imagined.

In the 2000 campaign, Bush and his team did away with the old conservative answer to education reform: closing down the federal Department of Education. It’s still not such a bad idea (the money would be better spent at the state level), but it could hardly make for worse politics. As Republican pollster David Winston put it, “Getting rid of the Department of Education doesn’t explain anything to me about how my child’s going to be better educated.” What Bush came up with instead, however, wasn’t a way to devolve power to the states in a more politically acceptable way, nor a way to give parents more control. Rather, the Bush administration came in and said, We can tame the federal behemoth better than the last guys. We can be the ones to finally make it accountable.

The administration’s initial plan was ambitious. Bush’s “blueprint,” released not long after he took office, included two fairly radical proposals. First, kids in failing schools could take their share of federal funds to a more successful school, public or private. (In other words, they could use those funds as a voucher.) Second, states that agreed to strict accountability timetables could get all their federal money as essentially a block grant, instead of being bound by strict federal allocation formulas that tend to steer funds to special interests.

How quickly did Bush abandon real reform in favor of getting a bill, any bill, through Congress? On March 22, 2001, Rep. John Boehner (R-Ohio) introduced the No Child Left Behind Act, which essentially followed the president’s blueprint: vouchers of up to about $1,500 and flexibility for the states. By May 2, the House Education and the Workforce Committee had stripped the voucher provisions from the bill (on a 27-20 committee vote where five Republicans sided with all of the panel’s Democrats) and significantly watered down the flexibility provisions. It was a nice month while it lasted.

Conservatives were crestfallen, but the White House couldn’t care less. National Review recounted a White House education aide explaining that supporters of school choice should have done more to lobby lawmakers instead of expecting the White House to do it. The aide said the issue was “never central to the president.”

What was central to the president was changing the politics of the education issue from favoring the Democrats overwhelmingly to favoring the Republicans at least narrowly. Internal GOP polling in May 1999 showed the Republicans trailing Democrats by a full 21 percentage points on education. When Bush entered the race, however, he changed how Republicans talked about the subject. He talked about closing the “achievement gap.” He talked about ending “the soft bigotry of low expectations.” And, of course, he talked about leaving no child behind. By August 2000, the Republicans had closed their education gap to 10 points. By March 2001, when NCLB was introduced in Congress, Republicans were leading the Democrats by 5 points on the issue.

But having come so far during the 2000 campaign, Bush chose not to spend any of that political capital on a worthwhile bill. “The president wanted a bill,” says Krista Kafer, a former House education committee staffer who also did a stint as an education analyst for the conservative Heritage Foundation. “It didn’t bother him that it was a significantly flawed bill.” The price of getting a bill that could pass 340-81 in the House and 87-10 in the Senate (with Kennedy part of that 87) was high: no vouchers, almost no new flexibility for states, a large across-the-board spending increase, a program combating hate crimes, a program promoting “gender equity,” and a “cultural exchange” for “Alaska Natives, Native Hawaiians, and Their Historical Whaling and Trading Partners in Massachusetts.” All that NCLB amounted to, really, was strengthening certain federal accountability requirements that were already in place, plus the president’s Reading First initiative, which helps states and schools adopt research-based reading programs. The bill’s “choice” provisions were utterly meaningless.

Under NCLB, school districts have done everything they can to avoid granting kids transfers out of failing schools. They don’t inform parents of their rights. They give them extremely small windows of time to act. They even send letters home meant to confuse or mislead parents. A researcher in Colorado found that a district there had sent parents home a letter with the good news that their school had been selected for “School Improvement” under federal law. “We are excited by this opportunity to focus on increasing student achievement,” the letter said, making it sound as if the school had won a grant, not gotten a slap on the wrist. No wonder that in the 2004–05 school year, just 1 percent of students eligible for choice under NCLB actually transferred schools.

The public school choice provisions are the only thing approximating “ownership” in the No Child Left Behind law, and yet they have been an utter failure because of resistance from local bureaucrats—resistance that NCLB does nothing to uproot.

Owning Health Care

If the Ownership Society has been an unmitigated disaster when it comes to education, its record when it comes to health care might be termed a mitigated disaster. Specifically, the disaster of the $1.2 trillion Medicare prescription-drug entitlement is mitigated by the significant expansion of health savings accounts (HSAs) that was included in the same bill, the first major free-market health care reform in a generation.

The question is: Is the trade-off worth it? Is it worth significantly (and permanently) expanding the size and scope of the welfare state so long as the expansion is tied to measures that will give Americans a degree of ownership over benefits previously controlled by the government?

There was a logic to adding a prescription-drug benefit to Medicare—it made little sense to say the government would pay for open-heart surgery, but not for the drugs that might make such surgery unnecessary. But most seniors already had some form of drug coverage. In 2002, the year before the benefit was passed, some 70 percent of seniors spent less than $500 out-of-pocket for prescriptions. A relatively small, targeted drug benefit, aimed at the 22 percent of seniors who didn’t have drug coverage, could have caught those who were falling through the cracks at much less expense.

But why be efficient when you can be popular for only a few hundred billion dollars more? Republican leaders, with their eyes on the 2004 election, were set on creating a universal benefit for more than 40 million elderly and disabled Americans. So they created Medicare Part D, the Medicare prescription-drug benefit.

The expense of all this is tremendous. Not only is the government crowding out private insurance that individuals were paying for themselves, but it has to write checks to corporations to discourage them from dropping retirees’ drug coverage and leaving the federal government to pick up the tab. In 2003, the Congressional Budget Office said the drug benefit would cost $400 billion over 10 years, and the White House accepted that number. The president’s first budget after the bill was signed bumped that number up to $511 billion. But neither of those numbers was a real 10-year figure; both counted two years, 2004 and 2005, when the new benefit wouldn’t be on line yet. The real 10-year cost, from 2006 to 2015, is closer to $1.2 trillion.

Administration officials estimate that various forms of savings will bring that closer to $720 billion. With Medicare, however, it has never been a good idea to accept the more modest cost estimates. While there’s been some early evidence of cost savings from drug plans competing against one another, it’s unlikely to make a serious dent in the program’s cost. And even going with the most modest of estimates, the prescription-drug benefit will increase the financial burden of Medicare by roughly a third, bringing its expenditures up from 2.6 percent of gross domestic product in 2003 to 3.4 percent in 2006. As 78 million baby boomers head toward retirement and Medicare eligibility, things will only get much, much worse.

All of this seemed like a high price to pay for HSAs. But it would be a mistake to underestimate just how radical a reform HSAs represent. “They were the first market-based health care reform really in over 60 years,” says Michael Cannon, director of health policy studies at the libertarian Cato Institute.

An HSA is essentially a 401(k), but for medical expenses instead of retirement savings. Individuals and their employers can make tax-free contributions. But unlike a 401(k), funds withdrawn to pay for medical expenses before age 65 are never taxed. HSAs can be set up only in conjunction with qualifying high-deductible health insurance (so that catastrophic expenses will be covered). They allow younger and healthier workers to save money on premiums while building up assets they can tap when they’re older and need more health care; this encourages HSA owners to be more price-conscious when tending to their everyday health-care needs.

HSAs became available under the new law at the beginning of 2004. Interest in them gained momentum quickly. In the first 15 months they were available, 1 million people had purchased the high-deductible health insurance to qualify for opening the accounts; in the next 10 months, another 2 million people signed up. What’s more, HSAs seem to be fulfilling their purpose of making health care affordable to the uninsured and containing costs. According to separate estimates from the health company Assurant and the trade group America’s Health Insurance Plans, which represents some 1,300 insurance providers, as many as 40 percent of HSA applicants were previously uninsured. A survey from Deloitte Consulting shows that the cost of consumer-driven health plans, such as HSAs and less flexible health reimbursement arrangements, increased by only 2.8 percent from 2004 to 2005, as opposed to an average of 7.3 percent for all other types of plans.

Building on this success, Bush in his 2006 State of the Union Address proposed expanding the amount of money individuals can put in HSAs and making them more accessible to individuals and employees of small businesses. His prescription-drug plan, one of the signature “accomplishments” of his first term and a key campaign issue in 2002 and 2004? He didn’t even mention it.

On the political side of things, there can be little doubt that the prescription-drug bill has been a disaster. A Gallup poll taken the month the bill was passed found that 73 percent of seniors thought the benefit wouldn’t go far enough. Once the benefit’s implementation got underway in January 2006, anger over the bill heated up even more as seniors came into contact with its complex machinery and hostile news stories flooded the media. As the midterm campaign season got underway, it was clear that the Democrats would use the prescription-drug plan as a weapon going into November, harping on its alleged stinginess, its complexity, and the Bush administration’s refusal to allow Americans to buy price-controlled prescription drugs from Canada and Europe.

With the bill giving Republicans so little political benefit, all that’s left is the question of whether it was a wise policy tradeoff. Grace-Marie Turner, president of the Galen Institute, a pro-market health care think tank, says she is absolutely certain HSAs could never have been passed any other way. “I cannot believe the naiveté of those who ask why couldn’t we have just passed HSAs on their own,” she says.

One such naive soul is Cato’s Michael Cannon—though he has a bit more than wide-eyed innocence behind his assertion that HSAs could have been won another way. He thinks HSAs could easily have been added to a tax or budget bill. In particular, he points to a Senate roll call vote in 2001 that showed that support for lifting the restrictions on Medical Savings Accounts (the forerunners of HSAs) was only a few votes short of a majority—and the 2002 elections resulted in the net gain of one new HSA supporter. “You had two stinking votes to get, you could have bought that for less than $400 billion,” says Cannon. But since HSAs were more of an afterthought designed to keep free-marketeers in line than a central part of the president’s agenda, there never was a push to pass them on their own.

Whatever your view of such hypotheticals, one of the corroding effects of the Ownership Society was clearly on display in the process that brought about the Medicare bill: its underlying assumption that the growth of government can never be stopped, or even slowed. In the third year of Bush’s presidency, with the Republicans having just reestablished control of the Senate and increased their margin in the House, those underlying assumptions expanded to include not just that government will stay the same size, not just that it will get bigger, but that it will explode catastrophically no matter who’s in power—and there’s nothing anyone can do about it, so it might as well be Republicans doing the exploding.

Owning Retirement

If the 2003 Medicare bill was wildly cynical and crassly political, it needs to be said that Bush’s advocacy of Social Security privatization over the years has been consistent, principled, and, yes, even bold—if not always well-articulated.

While Bush, Rove, and other Republican strategists see Social Security reform as part of a larger plan to—how to put this gently?—destroy the Democratic Party, the president has also long understood that the federal retirement system is unsustainable in its current form, short of massive tax hikes or benefit cuts. Rebel in Chief author Barnes traces Bush’s advocacy of private accounts back to his first, unsuccessful campaign for Congress in 1978. During that race in West Texas, Bush told a group of realtors at the Midland Country Club that “the ideal option would be for Social Security to be made sound and people be given the chance to invest the money the way they feel.” The issue wasn’t a big one in the campaign, but the idea would remain the same 22 years later.

Bush hit Social Security privatization hard during the 2000 campaign, and Al Gore and his allies hit back even harder. In the presidential debates, Gore labeled Bush’s plan “Social Security minus” and said that Bush would cut benefits and leave seniors eating cat food. The AARP and the labor unions spent millions on phone banks, mailings, and ads. There were even recorded calls by Ed Asner made to scare old folks out of their homes and into the voting booth. But ultimately, Bush had the politics of the issue right. In exit polls, 57 percent of voters said they supported Bush’s vision of private accounts—including one-third of those who’d voted for Al “Lock Box” Gore. In Florida, seniors split fairly evenly between Bush and Gore. Social Security was no longer the third rail of American politics. The new president might not have mustered the momentum for reform, but he demonstrated that it was no longer suicidal to try.

Once in office, Bush appointed a commission, chaired by the late Sen. Daniel Patrick Moynihan (D-N.Y.) and AOL/Time Warner COO Richard Parsons, to consider how to “modernize” Social Security. The panel was heavily tilted toward privatization proponents, but it had the unique disadvantage of releasing its final report on December 11, 2001, when the nation was in no mood to worry about an issue that fell well short of life or death. The prospects for private accounts just got worse in the spring and summer of 2002, as the names Enron, Ken Lay, and WorldCom became late-night punchlines and the stock market sank to five-year lows. Reform was off the table for the rest of Bush’s first term.

Social Security was far from the biggest issue in the 2004 campaign, but when Bush won reelection, he decided it was time to take his big gamble. He dedicated a 1,200-word section of his 2005 State of the Union Address to a call for reforming Social Security with personal accounts, then embarked on a barnstorming tour of America, including 60 stops in 60 days in March and April.

But the push fell flat. Despite all the talk about an Ownership Society, Bush put little effort into pushing the ownership aspects of Social Security reform, preferring to stress the system’s solvency problems. And even then, while he succeeded in convincing many Americans that the system needed reform, he didn’t convince many that it needed to be reformed right then. By late spring 2005, it was clear that reform was going nowhere. As early as March, Bush’s personal approval rating began to dip. Support for his Social Security proposal also dropped. A report from the Pew Research Center for the People and the Press found that support for private accounts fell among those considered most likely to support them, younger Americans, between February and March, from 66 percent to 49 percent. Opposition among older Americans was much higher. The Pew poll also found that among all Americans, the more they heard about the plan, the less likely they were to support it. And when the public’s support wavered, Republicans in Congress got squirrelly and ran for cover.

Creating a consensus that Social Security needs to be changed and creating broad familiarity with the concept of private accounts among the public were two non-trivial accomplishments. And it’s hard to see how anything short of political miracle-working would have brought a nervous public charging head-first into the most radical reform of the New Deal ever undertaken.

But it’s also worth recognizing that while the ownership pushed by Bush is in some ways more politically palatable than the austerity pushed during the Gingrich years, it is also no political palliative. Tough choices are still tough choices, and the public isn’t likely to believe that it can get something for nothing. Social Security may be the key to creating an Ownership Society, but no one’s found a way to make it click.

Failing, But Not Irredeemable

By accepting the premises behind so much of the federal edifice, Republicans have left themselves with precious little room to maneuver. If a conservative president comes into office set on education reform, but accepts off the bat that the Department of Education’s role should increase, not decrease, and that vouchers are off the table, he’s going to end up with a meaningless clump of sod like NCLB. The same goes for health care, where a lack of confidence and imagination—not to mention a routine triumph of politics over principle—prevented Republicans from even attempting to win free-market innovations like HSAs on their own before tying them to a massive expansion of the welfare state.

Still, Bush’s version of the Ownership Society is not the only version imaginable. Time and again Bush has decided that getting any bill is more important than getting a good bill. A more principled president or Congress might yet do some real good with the ideas Bush has clumsily and carelessly groped toward.

For now, however, all Bush’s Ownership Society has done is prove a timeless law of politics: Once you’ve written yourself a permission slip to bend on principle in the service of a higher good, you end up looking like a pretzel.

What Are They Smoking?

info@reason.com (Ryan H. Sager) — Sat, 01 Jul 2000 00:00:00 EDT

The War on Drugs may soon become a war on words. No longer content simply to abuse the rights of drug users and dealers, Congress has set its sights on anyone offering information that might lead to drug use.

The Methamphetamine Anti-Proliferation Act passed the Senate with unanimous support in November. Along with provisions for new narcocops and stiffer sentences for meth cooks and distributors, the bill would make it illegal "to teach or demonstrate the manufacture of a controlled substance, or to distribute by any means information pertaining to, in whole or in part, the manufacture or use of a controlled substance."

This provision would only apply to information that a prosecutor could prove figured in a crime. Even so, the potential effects are chilling --who knows how a reader might use one's wares? --and a number of Web and book publishers have expressed deep concern over the bill's potential effects on free speech. As Mike Hoy, head of the radical publishing house Loompanics Unlimited, told The Village Voice, "If it passes, we would probably pull all of our drug books, since I am unwilling to spend several hundred thousand dollars that I don't have."

Rep. Chris Cannon (R-Utah), sponsor of the House bill, is optimistic about its chances of passing this year. The ACLU, however, plans to mount a challenge the first time anyone is prosecuted for disseminating drug-related information.

Penal Code

info@reason.com (Ryan H. Sager) — Mon, 01 May 2000 00:00:00 EDT

Easily aroused men and boys had best steer clear of Mississippi--at least if State Sen. Tom King has his way. Concerned with the behavior of strip-club patrons, Sen. King has proposed a public nudity law that defines nakedness to include "the showing of covered male genitals in a discernibly turgid state."

"It will set some boundaries on what [strip club patrons] can or cannot do in a community," Forrest County Supervisor Johnny DuPree told Reuters earlier this year. DuPree, who has opposed the opening of a strip club at a local National Guard base, asked for a discussion of the law in the state legislature.

If a man has a hard time following the law, he could face up to $2,000 in fines and a year in jail. The bill, which was modeled on a similar statute in Indiana, has been sent to the Mississippi Senate Judiciary Committee for review.

Bewitched

info@reason.com (Ryan H. Sager) — Sat, 01 Apr 2000 00:00:00 EST

A North Carolina high school teacher is fighting to regain her job after being suspended for practicing the pagan faith Wicca. Shari Eicher, an 11th-grade English teacher at Scotland High School in Laurinburg, North Carolina, told Reuters news service that she had been escorted off campus by school officials and suspended indefinitely after administrators learned of her religious beliefs. She intends to appeal her suspension, and has contacted the North Carolina Education Association, the state's largest teachers union, for legal help.

Currently, neither Eicher nor the school board will comment on the issue. "I do my job the way it is supposed to be done," Eicher told Reuters in January. "My students learn what they're supposed to learn. What I do in my private time and how I worship my concept of deity are none of their business."

Coffin Fit

info@reason.com (Ryan H. Sager) — Tue, 01 Feb 2000 00:00:00 EST

When Tommy Wilson and the Rev. Nathaniel Craigmiles started selling caskets at discount prices, they thought they were providing a service. To regulators, though, they were criminals.

Craigmiles/Wilson Casket Supply in Chattanooga never handles bodies; nor does it perform burials. Nonetheless, Tennessee law says it can't sell caskets from a retail location unless one of the proprietors becomes a licensed funeral director, a process that costs at least $8,000 and requires two years of training in running funerals and embalming.

The state has ordered the pair to stop selling caskets or risk criminal prosecution. Craigmiles, Wilson, and the owners of another casket store in Knoxville have responded by filing a suit in federal court. Represented by the D.C.-based Institute for Justice, the plaintiffs claim the law exists solely to protect a funeral home cartel that routinely sells caskets for more than twice the price these retail stores charge.

"Requiring us to go through this training," argues an incensed Craigmiles, "makes as much sense as requiring the [same from the] hearse driver or the person who sells the tombstone."

Cybersquat Thrusts

info@reason.com (Ryan H. Sager) — Sat, 01 Jan 2000 00:00:00 EST

Both the U.S. House of Representatives and the Senate have passed separate versions of bills outlawing "cybersquatting." According to Congress, cybersquatting occurs when a person registers as an Internet domain name a trademark or famous name to which he does not hold rights, with the intent of turning a buck.

For Sen. Orrin Hatch (R-Utah), the sponsor of the Senate version of the bill, the motivation appears to be partly personal. When Hatch looked into setting up a Web site to publicize his bid for the Republican presidential nomination, someone offered him the domain name www.senatororrinhatch.com for $45,000 (Hatch declined the offer). While the House and Senate bills cover the use of famous names, Hatch is working with the author of the House bill, Rep. James Rogan (R-Calif.), to craft a provision that would outlaw squatting on any name if it could be proved that the motive was profit.

While such legislation seeks to simplify the matter, it raises a number of questions of its own. For instance, it's not clear whether or how coincidental or accidental interference with trademarks would be punished. What, if anything, should be done with potentially--and, one assumes, pointedly--confusing domain names such as whitehouse.com, which takes surfers not to the president's Web site (that's whitehouse.gov) but to a porno site?

Then there's the issue of parody Web pages. On the Web, a site's address can be speech as much as its content. Sites such as www.aolsucks.com use company names to lambaste corporations and famous individuals. That's one of the reasons more and more political candidates are preemptively buying up obvious variations on a theme before they launch their campaigns. GOP presidential front-runner George W. Bush's campaign, for instance, is reportedly the owner of such domain names as www. georgebushsucks. com.

As the In-ternet becomes more central to our lives, the issue of who owns the rights to a given domain name can only continue to heat up, especially when it comes to commercial trademarks. Despite the flurry of legislative activity in Washington, however, it's not clear that new laws are needed. The non-profit International Corporation for Assigned Names and Numbers (ICANN), which assigns and administers Internet domain names, favors resolving conflicts by having registrants undergo an arbitration-like procedure.

So far most disputes have been handled either through selling domain names or by extending traditional trademark law, which protects against fraud and "dilution" of brand names, into cyberspace. Last summer, for instance, Avery Dennison Corp., well-known makers of mailing labels and other office-related products, lost on appeal a case against a Los Angeles businessman who had registered the domains avery.net and dennison.net, apparently with the intent of selling them to people with those last names. The U.S. Court of Appeals for the 9th Circuit ruled that the corporation's trademark was not famous enough to warrant exclusive use and that Avery and Dennison are common enough last names that trademark protection does not apply. In other cases, one assumes, the results would be different.

Republican members of Congress, however, seem to place little faith in the courts. "Traditional trademark law is very cumbersome and expensive," says Grayson Wolfe, an aide to Rep. Rogan. Wolfe acknowledges that the legislation may restrict speech in ways that raise constitutional issues. "It's hard with the First Amendment," he says, "but we're working on it."

There's another potential problem with whatever legislation ultimately makes it to the White House (the chief executive's residence, not the porno site). The Clinton administration favors relying on current trademark law to resolve disputes, so any bill submitted to the president may face a veto.

Permission Slip

info@reason.com (Ryan H. Sager) — Sat, 01 Jan 2000 00:00:00 EST

In October, the Federal Trade Commission voted unanimously to approve final regulations requiring Web sites to obtain parental consent before collecting personal information, such as names, ages, or e-mail addresses, from children under the age of 13. The rule was drafted hastily after privacy advocates began complaining about Internet marketing to children.

Given all the scare stories it's easy to forget that the issue is much ado about next to nothing. Once you get past the apocalyptic rhetoric that still clings to many Internet-related stories, the privacy advocates were simply shocked that companies were pitching products to kids--something that happens during every half-hour of TV and every time a school bus passes a billboard.

Though the new regulations will undoubtedly reduce the flow of information between children and businesses, they will also hurt smaller Web site operators and shut many kids out of parts of cyberspace. The FTC requires that a site get parental consent via e-mail or telephone before it can collect any personal data from
a child. In cases where the information might be transmitted to a third-party, sites have to either provide a consent form that can be sent in via postal mail or obtain a valid credit card number from an adult.

Large companies such as Disney and the Discovery Channel have the resources to run a regulatory maze every time they collect an e-mail address from a child. But many smaller outfits do not, putting them at a competitive disadvantage. Opponents of the legislation have pointed out that children whose parents do not speak English, use computers, or have credit cards will have difficulty obtaining consent, effectively redlining them out of the Web's commercial zones.

Broadband and the Beast

info@reason.com (Ryan H. Sager) — Sat, 01 Jan 2000 00:00:00 EST

In the last few years AT&T has spent more than $100 billion building a broadband cable network capable of providing high-speed Internet access and local telephone services along with TV programming. Given such a bundle of services and the Internet's stunningly steep adoption curve, AT&T is hoping that consumers will sign up in droves. It figures that by getting out in the field first, it should be able to snag the lion's share of the nation's cable modem users.

The trade publication Cable Datacom News estimates that there are currently about 1.5 million such customers in the U.S. and Canada, a figure it estimates will be 15.9 million by 2003. It's hard to overstate the growing frenzy over broadband, since the technology allows users to access the Internet at speeds unimaginable with even the best 56K modem connection and is seen as crucial to the future of Web-based business.

But even if broadband is the next big thing, it's not clear yet if and when AT&T's bet will pay off in full. The company's Excite@Home service, which offers a cable modem and full Internet access for about $45 a month, has about 600,000 subscribers. But The Wall Street Journal and others have cast a cold eye on AT&T's cable and Internet operations, accusing them of underperforming and blaming them for the telecom giant's recent earnings woes.

If the vagaries of the marketplace aren't enough to deal with, AT&T has also picked up a few hitchhikers on its own information superhighway. Internet service providers (ISPs) such as America Online, Mindspring, and Erols are trying to catch a ride on AT&T's "fat pipe." These ISPs, which present themselves as "open access" advocates, are lobbying the Federal Communications Commission to force AT&T and other cable companies to lease them space on their super fast systems at cut-rate, regulated prices.

Pricing, not access per se, is the critical issue. Currently, most cable-based broadband providers have exclusive contracts with their own ISPs, such as Excite@Home and Time Warner's RoadRunner. When those deals expire--AT&T's runs out in 2002, for example--it's generally accepted that broadband providers will start leasing space at market rates to competing ISPs. The only question is how much it's going to cost.

Abetting the ISPs in the battle for open access are self-styled consumer advocates. The advocates claim that AT&T and other cable companies offering similar services possess an illegal monopoly and should be forced to open their systems to competitors at below-market rates. This is not a stupid argument on its face. After all, the cable companies are themselves creatures of government, built on municipally granted exclusive franchises. But the investment in broadband, like the development of the technology itself, has been market-driven, and any policy that substantially reduces the potential return is likely to slow implementation and stifle innovation. After all, why take the risks if you can't get the rewards?

Most people would agree that the preferred regulatory regime is the one most likely to provide customers with the broadest range of services and options--a criterion that undercuts the open-access position. Nothing, however, is settled, and how this battle plays out over the next few years will have a serious impact on how quickly the average American can expect to get high-speed access to the Internet. It's also an object lesson in how consumer advocates are often a consumer's worst friends.

So far, the open access crowd has found little sympathy in the nation's capital. The FCC has prudently refused to step in and regulate an industry that has barely taken shape. But a series of orchestrated local battles has already yielded some results for AOL and its allies, as they have been able to convince a handful of municipalities to implement a policy that the feds have rejected.

In early June, Portland, Oregon, became the first city to require AT&T to open its cable network to competing ISPs. AT&T promptly filed suit, but the city's decision was upheld by a federal court, and an appeal to the U.S. Court of Appeals for the 9th Circuit is pending. Other localities have ordered AT&T's pipe opened up, including Broward County in Florida, and Cambridge and Weymouth in Massachusetts. St. Louis has taken preliminary steps toward open access. In October, the city of Fairfax, Virginia, required its cable provider, Atlanta-based Cox Communications, to open up its network. Cox has so far threatened to sue the city and to refuse to provide Internet service there. (Additionally, as of press time in mid-November, a group of lawyers in Los Angeles were seeking certification of a federal class-action lawsuit against several cable companies, claiming some 500,000 consumers were being overcharged for or denied broadband access.)

The strategy of fighting local battles in the absence of federal support for open access was the brainchild of George Vradenburg III, AOL's senior vice president for global and strategic policy. A Hollywood lawyer brought in by an AOL desperate to find its home in the broadband market, Vradenburg is a shrewd tactician and a friend of such Washington notables as David Boies, the lead attorney in the Department of Justice's antitrust case against Microsoft. In November 1998, Vradenburg created the openNet Coalition, a lobbying group made up of ISPs threatened by AT&T's burgeoning high-speed capabilities. Reporting on a meeting put together by Vradenburg at Washington's Willard Hotel, Regardie's Power, a D.C. business magazine, outlined the group's basic strategy: to attack AT&T in the name of consumer choice.

But the open access lobby's initial bid to curry regulatory favor with the FCC failed miserably. Essentially, commissioners didn't buy AOL's claim of being shut out of the broadband market, especially since the world's biggest ISP was simultaneously cutting deals with local phone companies and satellite carriers to provide broadband access via non-cable means. Faced with a Republican Congress not likely to be sympathetic to its cause, AOL instead has taken its case to local city councils--a strategy that has AT&T hopping mad.

"It isn't the role of government to step in and force cable companies to open up their pipes to other ISPs," says Jim McGann of AT&T's government affairs office in Washington, D.C. "We are perfectly willing to sit down with AOL or other ISPs and negotiate access on business terms." That is, of course, after AT&T's exclusive deal with Excite@Home expires. Until then, AT&T's clear message is that it will not be giving anyone access at any price, as per its contract with Excite@Home.

With the FCC solidly on its side, AT&T has little reason to negotiate. At every step so far, the FCC has supported AT&T's entry into the cable and broadband markets, even relaxing federal cable ownership restrictions in October to clear the way for AT&T's acquisition of cable operator MediaOne. FCC Chairman William Kennard has looked favorably on AT&T's expansion, at least in part because of the competition that he sees AT&T as able to bring to the local telephone market. He also does not see the broadband market as in any way monopolized, citing satellite services such as Hughes Network Systems' DirecPC and phone-line-based technologies such as Digital Subscriber Line (DSL), both of which provide competition to cable.

"We don't...have a monopoly in broadband," Kennard told a group of communications lawyers in San Francisco in July. "We have a `no-opoly.'" Kennard sees it as simply too early to regulate, stressing that "the bottom line is that most Americans don't even have [access to] broadband."

That is expected to change in the near future, of course, which is precisely why there is such a large battle brewing now. By investing so heavily now, AT&T has managed to capture a good portion of early adopters. But whether it will be able to hold on to--much less expand--its customer base remains to be seen.

Steve Cohen, a spokesman for the openNet Coalition, emphatically denies that there's choice available in broadband access, saying, "I think the consumer should have the same freedom of choice and opportunity that they have right now with dial-up" Internet access. While such rhetoric pushes the right consumer buttons, it ignores Kennard's trenchant observation: While most Americans don't have broadband access, there is a growing range of options in the marketplace.

Though open access proponents discount non-cable-based broadband methods, many of these technologies are making significant inroads. DSL--a broadband technology that can run over upgraded traditional copper wires--used to be an expensive alternative but has come down significantly in price. U.S. West, a regional Bell operating in 14 Western states, now offers DSL Internet access for as low as $20 a month. The highest speeds cost more (about $40 a month), but even the slowest DSL is three times faster than a conventional 56K dial-up modem. In July, there were about 92,000 DSL subscribers in the U.S. That number is expected to rise dramatically over the next three years. Spurred by the threat of cable modems, all the Baby Bells have announced plans to start selling DSL, and industry analysts predict that there will be roughly 94 million DSL lines available by 2002.

There are also wholly wireless ways to get broadband access. "Terrestrial wireless," similar to cellular phone networks, is an idea that is actively being pursued by companies such as Sprint and Motorola. Sprint has already started offering a terrestrial wireless "Integrated On-Demand Network," which provides voice, broadband Internet, and video. Motorola and Sun Microsystems are teaming up to invest $1 billion in infrastructure for wireless digital networks with similar capabilities. Both of these ventures will at first be aimed at small and medium businesses but are expected to be available to residential customers within five years.

Aside from terrestrial wireless, there is also satellite. Comparable in price to DSL and similar to TV services such as DISH Network and DirecTV, satellite services offer residential consumers who have room for a mini-satellite dish access to the Internet at eight times the speed of a traditional modem. At this point, the dishes cost around $250, though prices are dropping regularly. Monthly service fees start around $20 and increase based on usage.

Not only are these wireless technologies viable, but for rural markets they are often the only choice. Cable tends to have weak or nonexistent market share in rural areas, and even DSL is unavailable to customers more than 18,000 feet away from a telephone company central office. Indeed, wireless technologies are so attractive that AOL has invested heavily in both, making a $1.5 billion deal with satellite provider Hughes Electronics Corp. and entering into partnerships with Bell Atlantic and SBC Communications.

So, contrary to the claims of open access advocates, the broadband market is in fact robust with prices falling and services improving. In fact, about the only thing that could go wrong at this point would be for excessive new regulations to stunt the growth of this promising new sector of the economy.

Lawrence Gasman, president of Communications Industry Researchers, a consulting firm that assesses the commercial impact of new information technologies, sees regulation as a potential disaster that would discourage investment in new and competing technologies. He points out that there are a number of unresolved issues on the technological side. No one, he says, is quite certain if the technology exists to allow more than one ISP to share the same network, and there are large questions regarding network administration. While Gasman stresses that these questions will be answered, he suggests that ham-handed regulations of access and pricing will slow down development of broadband.

"If you tell a cable or a Bell company that on top of all the problems they're having implementing a new system, they're going to have to deal with opening it to anyone else--that might be a real discouragement to creating a network in the first place," says Gasman. "The concern that there won't be enough competition is misplaced. If there's no network, there's no competition."

If the argument sounds far-fetched, it isn't. AT&T has already made it clear that those cities which impose burdensome open access requirements will be the last to see broadband. The company is not simply being vindictive, but recognizing that it will not make as much money in cities where other ISPs have a claim to the networks it is building.

As the FCC has argued in an amicus brief on behalf of AT&T in the case before the 9th Circuit, the most sensible policy in this area is to leave the market to progress on its own. Local control could only wreak havoc on an important framework that is just now developing. Maximum investment in broadband only will come when companies interested in investing in this technology can be assured that they will retain the rights to the networks they are creating.

That's especially true since, at this point, no broadband technology is truly dominant. Cable seems to have the lead for now, but billions of dollars are being poured into competing formats precisely because what will dominate is far from clear. AOL and the other ISPs in the openNet Coalition, then, haven't been shut out of the broadband market. They just dislike how much it's currently costing them to enter it. But in lobbying local governments to grab a share of the broadband pipe rather than getting on with the actual building of it, open access advocates may be slowing down the one thing they profess to care about most.

What Does Gore Really Think About Medical Pot?

info@reason.com (Ryan H. Sager) — Mon, 20 Dec 1999 00:00:00 EST

Last week found Vice President Albert Gore trying to walk a fine line between Drug War dogma and common sense on the increasingly incendiary issue of medical marijuana. At a televised forum in New Hampshire on Tuesday, Gore put himself on equal footing with Democratic rival Bill Bradley by saying that he is open to the idea of allowing marijuana to be used for medical purposes. Emphasizing that he did not favor wholesale legalization of the drug, Gore said that if research proved the effectiveness of the drug, "doctors ought to have that option."

The Vice President was quick to backtrack after the forum, however, and come back in line with the Clinton-Gore administration's longstanding policy of opposing all state initiatives allowing patients access to pot. Gore claimed that the initiatives went too far and amounted to de facto legalization, even though no state initiative has gone farther than what he endorsed himself - allowing patients to use marijuana with the recommendation of a physician. Furthermore, Gore's assertion that research has not yet bared out the medical value of marijuana flies in the face of a March report by the Institute of Medicine that vindicated marijuana and called for legal patient access to the drug until a safer, non-smoked alternative can be developed.

Though the Drug War still rages on, pressure at the state level may finally push the issue of medical marijuana onto the national political stage. Alaska, Arizona, California, Colorado, Maine, Nevada, Oregon and Washington have all passed initiatives protecting patients from prosecution if they obtain a doctor's recommendation. Likely Republican presidential nominee George W. Bush has had little to say on the issue, but even he said in October that despite personal opposition to the medical use of marijuana he feels the decision should be made at the state level.

While politicians are still unable to unabashedly support the use of an effective drug because of the stigma attached to it, it is refreshing to see that perhaps the hard work of activists at the state level has helped facilitate a more reasonable and open debate at the national level.

Sued Shut

info@reason.com (Ryan H. Sager) — Wed, 01 Dec 1999 00:00:00 EST

Though they've barely started, local-government lawsuits against gun manufacturers can already claim their first uncontested victories. Two small California gun makers have decided to close shop or seek bankruptcy protection rather than face the oncoming barrage of municipal lawsuits.

Davis Industries Inc. and Sundance Industries make so-called Saturday night specials, cheap guns that critics often associate with crime. Along with larger companies, they have been targeted by local governments under the theory that gun manufacturers should be held liable for crimes that may or may not have been committed with their products.

In September, a lawyer for Valencia-based Sundance Industries told The Wall Street Journal that the company filed for Chapter 7 bankruptcy because it "didn't have even the beginning of the resources to pay the legal fees" associated with the lawsuits. Chino-based Davis Industries specifically cited the costs of litigation in its filing for Chapter 11 bankruptcy--a move that has enraged some municipalities looking to squeeze money out of the gun industry. (A third California gun maker, Lorcin Engineering, has also filed for bankruptcy, citing liability worries as "secondary" to internal management disputes.)

According to Randy Michelson, an attorney for the city and county of San Francisco, plaintiffs plan to argue that the legal protections bankruptcy traditionally guarantees are void in this case. Gun makers, says Michelson, should not be able to shield themselves from government lawsuits brought to protect the public welfare.

High Count

info@reason.com (Ryan H. Sager) — Wed, 01 Dec 1999 00:00:00 EST

Almost a year after the fact, a federal judge ruled this fall that Congress cannot suppress the results of Washington, D.C.'s Proposition 59, a 1998 ballot initiative to legalize medical marijuana in the District. Last November, exit polls showed the initiative winning with two-thirds of the vote. That potential outcome irked Congress and the president so much that they passed legislation preventing the vote from being counted and certified. But now the vote has been properly tallied. The polls were right: Prop. 59 passed with a whopping 69 percent of the vote.

That's not to say Congress and the president will be bowing to the electorate's wishes any time soon. Because of the District's charter, the federal government retains the ability to overturn ballot initiatives and is expected to do so in this case. In fact, as of press time, the House of Representatives had already passed a bill to that effect.

Such an action would highlight the national government's indifference to voters' wishes and its conflict with state governments. California, Arizona, Washington, Oregon, and Alaska have already passed initiatives allowing marijuana or other controlled substances to be used in certain medical situations. This November, Maine will become the first state on the East Coast to vote on such an initiative; support for Question 2 there was hovering around 59 percent in early polls, and most observers assume it will pass easily. In 2000, Coloradans will vote on a medical marijuana initiative that has been held up by a court challenge. Also next year, Nevada will decide on a constitutional amendment legalizing medical marijuana (voters have already approved the measure once; under Nevada's constitution, amendments must be ratified twice).

On with the Show

info@reason.com (Ryan H. Sager) — Wed, 01 Dec 1999 00:00:00 EST

When budget constraints forced Citrus High School in Citrus County, Florida, to let an instructor go before this school year began, the principal decided to eliminate a drama teacher. So parents and students alike were extremely happy when Judy Poplawski volunteered to teach drama classes at the school for free. Not only was the price right, but Poplawski had directed the local Playhouse 19 Community Theater for years. She also ran popular summer acting camps and had created several internship and scholarship programs. Several of her students have even gone on to Broadway.

One group affiliated with the school, however, was disturbed by the seemingly perfect arrangement: the local teachers union. The union argued that Poplawski should not be allowed to teach the classes. She's not state-certified, said the union, and those summer camps create a conflict of interest (exactly why that's so went unexplored).

Despite the union's opposition, Poplawski has been allowed to teach the classes and is apparently doing a fine job. But the incident suggests that student education is a low priority for the union. It also created a little morality play with the union filling the role of villain, and provided journalists with easy metaphors. "The union's concerns do not seem to me to be those of well-meaning people working for the benefit of students," wrote a columnist for the St. Petersburg Times. "It's time to fetch the hook and yank this thinly plotted sham from the stage."

Out of Its Domain

info@reason.com (Ryan H. Sager) — Wed, 01 Dec 1999 00:00:00 EST

While most Americans would be content with the U.S. Postal Service if it simply delivered "snail mail" reliably, the agency has boldly set its sights on cyberspace. The USPS wants to control the "top-level" domain .us. A top-level domain is the final Internet suffix that can identify an e-mail account's or World Wide Web site's country of origin, as in www.city.palo-alto.ca. us. Although not very common in the United States, top-level domains are used in many European countries, and in 1997 the Clinton administration decided the idea of encouraging such usage was worth exploring. The White House asked the USPS to draft a proposal to run the operation and put forward a plan "to commit substantial resources to accelerate the development of .us as an enabling framework for electronic commerce." The USPS said it would do this by providing "universal" access to geographically based electronic addresses (such as name@city.palo-alto.ca.us) for all U.S. residents.

As might be expected, the thought of bringing the USPS' particular brand of efficiency to cyberspace has not exactly been well-received. Critics of the plan, such as Mikki Barry of the Domain Name Rights Coalition, a nonprofit that lobbies for fair and open domain name practices, point out that the USPS has no relevant expertise in the area of top-level domain administration and argue that it would likely bungle the job.

If an amendment to the National Telecommunications and Information Administration Reauthorization Act proposed by Rep. Chris Cox (R-Calif.) passes, the USPS will have no role to play in delivering e-mail. Cox doesn't just worry about USPS incompetence; he fears that the postal service would try to undercut competitors in a new area that threatens traditional mail. "We're concerned [the USPS] would leverage their existing monopoly and the advantages they have--not paying taxes, not being regulated the same way--to disadvantage their competitors," an aide to Cox told Wired News in August. "They've shown a willingness to play that game."

Public Drinking

info@reason.com (Ryan H. Sager) — Wed, 01 Dec 1999 00:00:00 EST

In September, the Federal Trade Commission reported to Congress that beer, wine, and liquor makers have dangerously loose standards regarding the marketing of booze to minors. While stopping short of recommending that the government regulate alcohol advertising, the report rattled the government's saber and has been taken by companies as a warning that they had better get onto this federal wagon.

The study, commissioned last August at the height of the national debate on tobacco, required eight companies to show they have complied with self-enforced industry advertising standards. The firms reporting included industry heavyweights Anheuser-Busch, Miller Brewing, Coors Brewing, and Seagram & Sons. Among other complaints, the report faults companies for placing alcohol in PG and PG-13 movies and running ads during TV shows with large underage audiences. Noting that 30 percent of the U.S. population is under the age of 21, the report implies that any program with a youth audience exceeding 30 percent should not portray drinking or have beer and wine ads.

The report recommends that the industry "voluntarily" adopt stricter standards and submit to third-party reviews by vaguely defined "independent external review boards." "We're optimistic they can adhere to these practices," said the report's main author, who added that "there has been no determination of what we would do next" should the industry fail to fall in line.

The FTC might start thinking about that. Despite federal optimism, industry execs are showing some rare, 90-proof courage in the face of the regulatory threat. "Underage drinking has gone down, not up," explains Francine Katz, vice president of consumer affairs for Anheuser-Busch. Indeed, according to Department of Health and Human Services data, teenage drinking has declined by 45 percent over the past 15 years. "We have always taken our responsibility seriously," says Katz. "Third-party review would be nothing but redundant at this point."

Sue the Bastards!

info@reason.com (Ryan H. Sager) — Wed, 01 Dec 1999 00:00:00 EST

Perhaps British computer users can help take down Microsoft. That seems to be the view of the U.S. Justice Department.

In an interview printed in the London Observer in August, DOJ lead attorney David Boies encouraged British citizens to sue the U.S.-based software giant, making use of a little-known statute regarding compensation for foreigners harmed by a "U.S.-based pricing conspiracy." The statute, though seldom used, entitles anyone outside the U.S. to the same compensation U.S. citizens would receive under antitrust law. So if the courts do find Microsoft guilty of anticompetitive practices, the DOJ wants the Brits to pile on. Furthermore, explained Boies, not every individual British purchaser of Windows would have to file suit--only enough to substantiate a class action. Using the estimate of a [sterling]10 overcharge ($16 U.S.), the Observer calculated that the windfall to British citizens would total about $482 million, making it lucrative for U.S. lawyers to represent them.

Boies' interview lends credence to a Senate Judiciary Committee suspicion that the Justice Department is encouraging foreign governments with weaker standards for antitrust violations to take legal action against Microsoft. In July 1998, three members of the committee asked Attorney General Janet Reno for a detailed account of Antitrust Division officials' contacts with foreign governments. Reno refused to answer on the grounds that Justice could not "divulge non-public information on pending law enforcement matters." A curious--and perhaps telling--response, since no such information should be contained in the materials the senators requested.

Field of Nightmares

info@reason.com (Ryan H. Sager) — Mon, 01 Nov 1999 00:00:00 EST

California's Lawrence Berkeley Laboratory was home to a prominent piece of federally funded junk science. As a result, the lab may be forced to repay more than $800,000 in grant money. The incident involves researcher Robert P. Liburdy, who allegedly falsified some of the earliest findings that electromagnetic fields may cause cancer.

The data, published in two medical journals in 1992, purported to show the first plausible biological mechanism linking electromagnetic field exposure to cancer and other diseases; the reports helped fuel the widespread though unsubstantiated belief that power lines cause health problems (see "Shock Journalism," January 1995). Acting on a tip from a postdoctoral student working with him in 1994, lab administrators alerted the federal Office of Research Integrity (ORI), a branch of the U.S. Department of Health and Human Services, in 1995. In June 1999, after a two-year investigation, the ORI reported that Liburdy had committed "scientific misconduct" by "intentionally falsifying and fabricating" data. The data were used to secure more federal funding.

The 51-year-old Liburdy, who resigned from the lab in March after 15 years there, agreed in May to retract three data graphs and to accept a three-year ban on receiving federal research money. He claims that he has taken these steps only to avoid an expensive legal fight. But subsequent investigation into the effects of electromagnetic fields has yielded little evidence to support Liburdy's research.

Student Bodies

info@reason.com (Ryan H. Sager) — Mon, 01 Nov 1999 00:00:00 EST

For a half-dozen ersatz college coeds--known only as Alex, Amber, Milla, Robyn, Tamara, and Trixie--the fall semester got off to a very rocky start. These six "students" inhabit a pornographic "Voyeur Dorm" in Tampa, Florida, equipped with 40 cameras that transmit round-the-clock coverage of their every intimate action to subscribers on the World Wide Web. Although no customers actually enter the studio, Tampa's city council is upholding a finding by the zoning board that the site violates local ordinances regarding "adult" businesses and has threatened to lock the doors to Voyeur Dorm. Although the operation has not yet been shut down, the threat hangs in the air.

Over the past few years, Tampa has stepped up its attacks on traditional adult businesses. "We've gone after them vigorously," city council member Bob Buckhorn has told the press. "I don't think they reflect our community values." The Voyeur Dorm, he says, "is not conducive to wholesome living."

Maybe not. But according to Washington, D.C.-based Internet and First Amendment law specialist Robert Corn-Revere, Tampa may just have to get used to the student bodies. Corn-Revere notes that localities have sometimes been given great latitude in regulating what might otherwise be considered protected speech. But that is usually the case only when there are "secondary effects" involved, such as noise or traffic. No such secondary effects exist here, he points out. "The Commerce Clause [banning state interference with interstate trade] has turned out to be a really powerful argument in the Internet context," says Corn-Revere, who believes this to be the first case of its type.

That theory may soon be put to a test. Voyeur Dorm is going to court to challenge the zoning board's ruling.

Air War

info@reason.com (Ryan H. Sager) — Tue, 01 Jun 1999 00:00:00 EDT

Rep. Bud Shuster (R-Pa.) is mad as hell at the airline industry--and he's set to teach them a lesson as only the chairman of the House Transportation and Infrastructure Committee can. In February, when nasty contract negotiations between American Airlines and its pilots temporarily shut the carrier down and left thousands of passengers stranded, Shuster loudly declared "a pox on both their houses" and then unveiled the legislative equivalent of a plague blanket: an "Airline Passenger Bill of Rights." Divining that airlines "don't give a damn about the traveling public," he observed, "I think that you need to do whatever it takes to get their attention."

Sens. John McCain (R-Ariz.) and Ron Wyden (D-Ore.) similarly want to get the industry's attention. Like Shuster, they have sponsored legislation--and held highly publicized hearings in March--aimed at "improving" airlines' customer service. The McCain-Wyden bill would require airlines to warn passengers if a flight is oversold and give them 48 hours after buying a ticket to ask for a refund. Shuster's Passenger Bill of Rights would go further, requiring airlines to compensate passengers for twice the value of their ticket if they are kept waiting on the runway for more than two hours, with compensation increasing proportionately for each extra hour. Shuster's bill would also prohibit airlines from using a single flight number if they know passengers will have to change aircraft and require the Department of Transportation to track flight cancellations to determine whether they are being made for economic rather than mechanical reasons.

While the proposed rules are mostly petty on their face, they signal an important, worrisome shift in Washington with regard to regulation. If the airlines--which have delivered demonstrably safer, cheaper, and more plentiful flights since deregulation--can come under such an attack, what industry is safe? It's also more than a little ironic that Republicans are leading the charge on the issue: Since airfares were deregulated by a Democratic Congress and president two decades ago, there have been consistent calls for re-regulation, typically from left-of-center pols who simply dislike anything smacking of free enterprise. Republicans have traditionally been the major supporters of leaving airlines to their own devices. Now, still reeling from the Clinton impeachment proceedings and the negative poll numbers they generated, the GOP sees "passenger protection" as a feel-good, populist way of showing they're in touch with what "really matters" to voters.

There's little doubt that the Shuster and McCain-Wyden bills are extremely photogenic: The March Senate hearings, for instance, were a parade of teary-eyed passengers recounting bad experiences and incensed travel agents and industry analysts lambasting supposedly unresponsive airlines. There's also little doubt that increased governmental involvement will do little to remedy the airlines' reputedly rotten customer service or increase the industry's overall performance record (after all, enforcing good customer relations and workplace efficiency are hardly public-sector strong suits). Indeed, it's unlikely that the pending legislation will accomplish much more than opening the door to greater regulation down the road.

But the bills are misdirected in another, more insidious way: They fail to even address those parts of air travel that are still under federal control--including the air traffic control system and the assignment of airport landing rights--and how those aspects contribute to consumer dissatisfaction by limiting the competition that generates new and better ways of doing things. Instead of passing legislation aimed at punishing airlines for things that are largely out of their control (such as snow-related delays), Congress should instead be taking a serious look at finishing its deregulation of the industry.

In 1978, President Jimmy Carter signed the Airline Deregulation Act, relieving the government of its role in deciding everything from airfares to the sizes of sandwiches served during flights. Since then, by virtually all accountings (including the government's own), things in the airline industry have gotten progressively better. Safety, which skeptics predicted would immediately take a backseat to profits once airlines were no longer under the government's thumb, has improved dramatically. 1998 marked the first year on record without a single life lost on a scheduled U.S. airliner. As stunningly, air travel, once out of reach of the average American, has gone mainstream. According to Northeastern University economist Steven Morrison, between 1978 and 1997, airfares dropped by 40 percent in real terms, leading to a doubling of passengers. In 1995, reports the General Accounting Office, departures were up by 50 percent for small airports, 57 percent for mid-sized ones, and 68 percent for large ones.

The major hook for the Shuster and McCain-Wyden bills is last year's reported 28 percent rise in passenger complaints. But that increase is not necessarily a bad sign, says Brookings Institution economist Clifford Winston. "The increase in complaints actually speaks to the success of deregulation," argues Winston. As many more people have started flying, he says, planes have gotten more crowded and people have gotten testier. Winston believes that if the airlines are guilty of anything, it is being too timid in expanding capacity--buying more planes and adding more flights. The carriers are still adjusting to deregulation, he says, and they are worried about the possibility of a recession that would leave them with empty seats.

If increasing capacity is the key to improving the flying experience, then it's unclear what the government can do in terms of customer service mandates, Winston contends, adding that airlines already compete on the basis of meals, frequent-flyer promotions, friendly service, and the like. The easiest way to boost capacity, he points out, is to throw out restrictions on foreign investment in U.S. airlines--restrictions that date back to the days before deregulation.

Currently, foreign investors cannot own more than 25 percent of the voting stock of a U.S.-based carrier, and foreign-owned airlines cannot fly passengers between U.S. cities. This effectively shields domestic carriers from a major source of competition and has thus prevented innovation in the domestic airline industry. Last year, for instance, Richard Branson, the British owner of Virgin Atlantic Airways, wanted to invest $200 million in a low-fare airline based in New York. Since he is not a U.S. citizen, however, he was blocked from entering the market. That result may have helped domestic airlines, but it clearly did nothing for U.S. passengers.

There are two other major ways in which the government continues to regulate air travel. The first involves terminal and gate assignments at airports. Airports are operated mostly by municipal governments and are run on a break-even basis, required by federal law. Prior to deregulation, cities locked in tenants with long-term leases to guarantee a source of revenue to pay off airport bonds. Airlines agreed to 30- or 40-year leases in exchange for things like veto power over terminal expansion, which gave them the ability to keep potential competitors out or, at least, limit the number of gates they could use. Despite deregulation, airports still operate in basically the same way. The result is that airlines that are already ensconced in a given airport have effective control both over expansion plans and over who gets to use what gates at what times. Under such a system new airlines, when granted space at all, are typically leased gate space at off times and high prices.

An obvious way around such problems is to privatize airports. Turning airports into for-profit enterprises would foster far greater competition and efficiency in local markets. Airports might allocate gates based on day-by-day, if not hour-by-hour, demand. In 1987, Britain privatized two major airports, Heathrow and Gatwick, with great success: Those airports' landing fees and gate charges are lower today in real terms than they were 12 years ago; passenger and cargo volumes are up, as is commercial revenue. At the same time, operating costs for the private operators are significantly lower. For similar reforms to happen in the United States, Congress needs to ease federal restrictions on municipalities trying to sell or lease their airports.

The air traffic control system, which is run by the Federal Aviation Administration, is similarly stifled by government oversight. John E. Robson, chairman of the Civil Aeronautics Board from 1975 to 1977, dismisses the Shuster and McCain-Wyden bills as wastes of time. "If they're going to fix every service-level imperfection," suggests Robson, who helped conceptualize and implement airline deregulation, "they might as well get into car rentals...drug stores, dry cleaners, and everything else." Robson thinks Congress needs to overhaul the air traffic control system. Problems in the air, he says, lead to many, if not most, of the delays that have passengers so riled up.

While the number of passengers has more than doubled, from 275 million to 600 million, since deregulation, the numbers of computers and air traffic controllers have not increased proportionately. In 1998, roughly one-quarter of all flights by major carriers were delayed, mostly because of the sluggish air traffic control system. In its current condition--relying on obsolete computers and radar systems--the system simply cannot move passengers any faster while maintaining safety. New, proven technologies that would allow planes to safely take off and land closer to each other--and, hence, allow more flights--have gone begging for takers.

Canada, New Zealand, and Germany all provide models of how modernization can cut costs and increase efficiency. In each country, government air traffic control systems were transformed into corporations that are operated and funded directly by the airlines that use them. Germany corporatized its system in 1993 and reduced air traffic delays by 25 percent by 1997. New Zealand corporatized in 1987 and reduced user fees by 30 percent during the next 10 years.

Switching to such a system would eliminate the major air traffic control bottleneck: landing slots assignments. At crowded airports, the FAA arbitrarily allocates a certain fraction of landing slots to large, national airlines, another fraction to smaller, regional airlines, and the rest to private planes. The FAA also determines the fees planes pay to land based on the weight of the aircraft. For instance, a four-person private plane landing at the busiest hour of the day will pay only a fraction of what a 375-passenger Boeing 747 would. That creates delays as scarce landing resources are used inefficiently. Recalculating fees--and allowing for-profit airports wider latitude to assign gate slots based on peak-pricing principles--would both make better use of scarce resources and allow carriers to crack new markets.

However much such reforms might help make air travel safer, cheaper, and more pleasant for consumers, they are not even on Congress's radar screen. In their place are feel-good proposals such as the McCain-Wyden bill and Bud Shuster's Passenger Bill of Rights (which, given its provision penalizing carriers for delays, actually gives airlines an incentive to put planes in the air even when there are safety concerns). Indeed, Vice President Al Gore, whose interest in transportation issues led to his recent call for a national traffic hotline, is already on board as a way of furthering his own chances for the White House in 2000. Given all that, it seems likely that some version of a "passengers' bill of rights" will be one of the few laws passed by Congress in the period before the presidential race gets fully under way.

More's the pity. Such legislative activity does not simply obscure the larger, overwhelming success of airline deregulation and direct attention away from where deregulation is still needed. By cracking open the door to more expansive regulation of an industry that has boomed without old-style government oversight, it suggests that few battles for limited government ever stay won for very long.

Damned Revenuers

info@reason.com (Ryan H. Sager) — Thu, 01 Apr 1999 00:00:00 EST

Why do people hate the IRS? With the delivery of the annual report of the Internal Revenue Service's own national taxpayer advocate to Congress, let us count the ways.

For the third year running, the report cites the mind-numbing complexity of federal tax laws as the biggest cause of bad feelings. Even the most basic aspects of the law, such as filing status and exemptions, "contain exceptions and special rules that many taxpayers do not understand," the report's principal author told The Wall Street Journal. Other major gripes include the length of the tax process, the IRS's lack of responsiveness, an incomprehensible phone answering system, and employees' generally rotten attitudes toward taxpayers.

So what kind of fix does the advocate advocate? Eschewing bold, sweeping moves, he opts instead for a slew of "simplification" proposals, such as a clearer definition of a qualifying child for the Earned Income Tax Credit. While such measures may mollify Congress--which regularly passes "paperwork reduction" acts and other simplification schemes --they seem unlikely to stop the hate.

French Twist

info@reason.com (Ryan H. Sager) — Mon, 01 Mar 1999 00:00:00 EST

If you thought the French were strange for liking Jerry Lewis, get a load of this: The French government is cracking down on people who work too much.Employees trying to work more than the legal limit of 39 hours a week can expect to be harassed by the government, reports The Washington Post. Labor inspectors have been found counting cars after hours in parking lots, checking office entry-and-departure records, and grilling people about their work schedules. Several companies have been fined for allowing employees, including managers, to work longer than is legally allowed. As a researcher at the Center for the Study of Labor in Paris told the Post, "Even a top manager does not have the right to work more than [they're legally allowed to]. It has to do with security and public order."

Of course, maintaining "security and public order" threatens to disrupt France's way of life in another way that's not entirely lost on Frenchmen. "We are in world-wide competition. If we lose one point of productivity, we lose orders," Henri Thierry, an executive at Thomson-CSF Communications, told the Post. Thomson-CSF was fined the equivalent of $2 million for 2,000 overtime law violations in three months. Thierry is even less pleased with a proposal favored by the Socialist government to shorten the legal work week to 35 hours. "If we're obligated to go to 35 hours, it would be like requiring French athletes to run the 100 meters wearing flippers," he said. They wouldn't have much chance of winning a medal."

Bone Sell

info@reason.com (Ryan H. Sager) — Mon, 01 Feb 1999 00:00:00 EST

Your milkman is free to exclaim that milk does a body good. But if he tells you that milk also helps prevent osteoporosis, he may soon be in trouble with the Food and Drug Administration. Under a proposed rule change, the agency could classify such a statement as a "disease claim," which can be made only about FDA-approved drugs.

Under a 1994 law, manufacturers of dietary supplements and food products are already prohibited from claiming to cure or treat a disease--defined by the FDA as "damage to an organ, part, structure, or system of the body such that it does not function properly (e.g. cardiovascular disease)."

This means that products cannot be represented as able to "cure cancer" or "treat arthritis." But manufacturers can make more general claims about health effects, as the milk example illustrates.

The FDA is now proposing to expand its "disease claim" definition to include "any deviation from the normal structure or function" of the body. The new definition is potentially limitless. As Dr. Stacey Zawel, a food safety expert with the Grocery Manufacturers of America, points out, any health claim for a product will have something to do with its effect on the body's "structure or function."

Desperate Measures

info@reason.com (Ryan H. Sager) — Mon, 01 Feb 1999 00:00:00 EST

Desperate times call for desperate measures. Last fall, New York State Attorney General Dennis Vacco was desperate as election day approached and he found himself in a neck-and-neck race with Democratic challenger Eliot Spitzer. The desperate measure he took: seizing the computer servers of two Internet service providers as part of a high-profile, international child-pornography bust called Operation Ripcord.

The action targeted "Pedo University," an online newsgroup of pornographers that trades electronic images of adolescents engaged in sex acts. Last October, law enforcement agents in 12 states and four countries arrested a total of 13 suspects for possession and transmission of child pornography.

Vacco's prey, however, was not suspected child pornographers. It was Syracuse's Dreamscape and Buffalo's BuffNET, two ISPs whose only crime may have been operating in areas where the attorney general needed votes. While it is illegal to distribute or possess child pornography, no state or federal law requires ISPs to moderate newsgroups. Although hundreds of New York-based ISPs carried the newsgroups on which members of Pedo University traded files, Dreamscape and BuffNET were the only two to have their servers seized, raising charges of politically motivated prosecution and investigatory overreach.

Noting that none of the individuals arrested in Operation Ripcord had accounts with Dreamscape or BuffNET and that no charges have been filed against either provider, BuffNET Vice President Mike Hassett asks, "Isn't it intriguing that [Vacco] chose only two ISPs, both in upstate New York? Is it coincidence that Vacco won his last election relying on upstate New York votes? Why weren't the other 1,000-plus ISPs in New York state a target of his investigation?"

Vacco's action also has troubling implications for all ISPs, says BuffNET's attorney, Steven Fox, who has likened seizing equipment that merely provided subscribers with access to Internet newsgroups to "seizing envelopes to combat mail fraud." Vacco's office refused comment on the matter.

While neither ISP faces criminal charges, both have incurred costs for legal fees, equipment replacement, service interruptions, and massive bad publicity. Vacco, too, has problems: He lost a tight race ultimately decided by absentee ballots.

Too Kool?

info@reason.com (Ryan H. Sager) — Mon, 01 Feb 1999 00:00:00 EST

Smoking has gone from a personal vice to a public health problem to a civil rights violation. In a lawsuit filed in U.S. District Court in Philadelphia, the National Association of African Americans for Positive Imagery, the Uptown Coalition (originally formed in 1990 to protest a cigarette brand aimed at urban blacks), and a group of current and former smokers claim that the marketing of menthol cigarettes to blacks violates their civil rights.

Based on the Civil Rights Acts of 1866 and 1870, which were enacted to protect former slaves during Reconstruction, this lawsuit marks the first attempt to sue tobacco companies under federal civil rights law rather than personal injury or product liability statutes. The suit alleges that blacks account for 60 percent to 70 percent of menthol puffers and argues that since the soothing effect of menthol enables deeper inhaling, menthol cigarettes have a disparate impact on black smokers' health.

The plaintiffs want tobacco companies and industry groups to make public all research about the impact of smoking on blacks. It also seeks a ban on menthol cigarettes.

In explaining the use of civil rights legislation, plaintiffs' attorney Stephen Sheller told CNN that the acts were "intended to prevent targeting black people in ways that take advantage of them."

Poll Vault

info@reason.com (Ryan H. Sager) — Fri, 01 Jan 1999 00:00:00 EST

If you thought the only problem with the last budget deal was a lack of tax and spending cuts, think again. Congress attached a rider to the omnibus spending bill to snuff out a medical marijuana ballot initiative in Washington, D.C.

The rider, introduced by Rep. Bob Barr (R-Ga.), prohibited the District from spending any funds in the fiscal 1999 budget on Initiative 59, which would allow the use of pot as medicine upon the oral or written recommendation of a licensed physician. Barr contends that the prohibition extends even to public money used to finance the printing and counting of ballots. Since ballots had already been printed by the time the spending bill was passed, D.C. residents were able to vote on the initiative, which passed with 69 percent support, according to exit polls. But Barr's rider has prevented the vote from being officially counted and certified, a process requiring a negligible amount of public funds.

"The American people don't want federal money used to hold a referendum on the use of mind-altering drugs," Barr snaps when asked why Congress should pre-empt democracy in D.C. "If [D.C. residents] want to hold this kind of initiative with their own money, they are free to do so."

Unfortunately for D.C. residents, they're not allowed to do that. Election results can be certified only by public workers. And since Congress operates the District of Columbia, even local tax money is considered federal money.

Supporters of the initiative, who worked for over a year to get it on the ballot, are mounting a legal challenge to Congress' intervention. The American Civil Liberties Union has gone to court asserting that the rider is "viewpoint discriminatory." Once an initiative process has been created, the ACLU argues, Congress cannot block measures it finds objectionable.

"This isn't Bosnia," says Wayne Turner, the head of ACT-UP, the gay rights advocacy group responsible for getting Initiative 59 on the ballot. "We played by the rules and gathered 32,000 signatures so the people could decide."

Instant Gratification

info@reason.com (Ryan H. Sager) — Tue, 01 Dec 1998 00:00:00 EST

The instant that Independent Counsel Kenneth Starr sent his impeachment report to Congress on September 11, the race was on to get the report before the public. Copies were distributed to legislators, the White House, and members of the press; it was also posted it on the Thomas Web site maintained by the Library of Congress (thomas.loc.gov). Soon after the initial release, however, the private sector took over.

Within hours, hundreds of Web sites--operated by sources as diverse as CNN, Yahoo, Netscape, and REASON--had posted the 453-page document. Hundreds of newspapers put the report on their Web sites and many made excerpts available on old-fashioned newsprint the next day. Some, including The New York Times, The Washington Post, the Los Angeles Times, and the Boston Globe, reprinted the report in its entirety.

The first bound version of the Starr report hit bookstores Monday the 14th, as Prima Publishing's Forum division released a copy of the report and sold it for $9.99. On Tuesday, two other bound versions hit stores. For $10, Public Affairs offered the report, the initial White House rebuttal, and analysis from the staff of The Washington Post. Pocket Books offered the cheapest version ($5.99), including the rebuttal and an outline of the history of the Starr investigation by reporter Phil Kuntz of The Wall Street Journal.

But if you weren't in a hurry and money was no object, you could get a copy of the Starr report from the Government Printing Office by paying $14 and waiting an unspecified time for delivery by the U.S. Postal Service--unless, of course, you lived within easy driving distance of a GPO bookstore.