The Boy Who Cried “Regulation”

Recently Facebook’s billionaire CEO, Mark Zuckerberg, published an op-ed piece in the Washington Post that called for “a more active role for governments and regulators” to establish “new rules” for the internet.  The op-ed has provoked lots of comment.

facebook-ceo-mark-zuckerberg-testifies-before-us-congress-highlightsZuckerberg’s op-ed piece begins:  “Technology is a major part of our lives, and companies such as Facebook have immense responsibilities. Every day, we make decisions about what speech is harmful, what constitutes political advertising, and how to prevent sophisticated cyberattacks. These are important for keeping our community safe. But if we were starting from scratch, we wouldn’t ask companies to make these judgments alone.”  He says he agrees with people who say Facebook has “too much power over speech” and argues that government regulation is needed in four area — harmful content, election integrity, privacy and data portability.  Zuckerberg adds:  “By updating the rules for the Internet, we can preserve what’s best about it — the freedom for people to express themselves and for entrepreneurs to build new things — while also protecting society from broader harms.”

Zuckerberg’s article, while couched as a call for regulation, reads like a PR piece for Facebook; it argues, among other things, that Facebook has developed “advanced systems for finding harmful content, stopping election interference and making ads more transparent” and has taken other steps in the four areas.

It’s safe to say that Zuckerberg’s clarion call has been viewed with significant skepticism in the United States and abroad.  An article in The Hill says that “[r]egulators, lawmakers and activists who have grown wary of Facebook saw Zuckerberg’s move less as a mea culpa and more as an effort to shape future regulations in his favor,” and quotes, for example, a UK regulator who says that if Zuckerberg really believes what he has written he can start by dropping an appeal of a $560,000 fine the UK imposed for Facebook’s activities in connection with the Cambridge Analytica scandal.  Others are leery of inviting the government to regulate on-line speech, and believe that Facebook — having thrived and made millions in a regulation-free environment — now wants to see regulations imposed in order to complicate and thwart efforts by new competitors to grab some of Facebook’s social media market share.

The reaction to Zuckerberg’s op-ed piece illustrates what happens when you have frittered away your credibility.  Facebook’s history doesn’t exactly fill people with confidence that the company has users’ privacy and best interests at heart; too often, the company appears to have placed generating revenue above user concerns and data protection.  I’m inherently dubious of any governmental action that touches free speech, and large-scale regulatory efforts often impose staggering costs without providing much benefit — but even if you think such efforts are a good idea, Zuckerberg is exactly the wrong person to float such proposals.  He’s like the boy who cried wolf.

Advertisements

Old-School Joe

Joe Biden is an “old school” politician.  First elected to the U.S. Senate from Delaware in 1972 — that’s almost 50 years ago, folks — he traces his roots to a different political era.  Joe Biden has been involved in politics at the national level for longer than just about anyone you can think of, and certainly longer than anyone else who might be a serious candidate for President in 2020.

screen_shot_2019-04-02_at_10.23.19_pm_0It’s pretty clear that Joe Biden is what you might call a “hands-on” politician, the kind who likes the handshakes and arm around the shoulder photos and ropeline grappling with admirers.  That’s why you can find countless photos of Joe Biden in physical contact with somebody — some of whom look happy about it, and some of whom look very uncomfortable — and why some of the people who are attempting to explain his current predicament say things like “he hugs everybody.”  It’s a political style that was commonplace in decades past, when some politicians believed that the personal touch and laying of hands was a way to establish a memorable connection with voters and establish power relationships with other politicians.  The backslaps and shoulder grabs were also a way to allow the politician to remain the center of attention, even when someone else was getting an award or making a speech.  Such politicians embodied the old comment about the politician who so craved attention that he wanted to be the bride at every wedding and the corpse at every funeral.

When you’ve been playing the political games for as long as Joe Biden has, perhaps you lose touch with prevailing views, and perhaps you lose a good sense of the line between an appropriate contact and creepy, personal-space-invading behavior.  No one, male or female, is going to object to handshakes, or a backslap or tap on the shoulder.  But grabbing the upper arms or shoulders of a woman to pull her close, smelling and kissing the hair of a woman, and leaning in so that your face is inches away clearly cross the line into more intimate contact and should be reserved for close friends and colleagues.  The fact that Joe Biden was routinely engaging in such conduct with complete strangers, from biker women in diners to political candidates at rallies to the wives of people appointed to federal jobs, shows that he simply didn’t — and perhaps still doesn’t — understand what are long-standing, and commonly accepted, social boundaries.

Joe Biden’s old-school roots may help to explain his behavior toward women, but they don’t excuse them.  Part of being an effective politician is having sensitivity to what is going on, and how society — and standards and boundaries — are changing.  Joe Biden apparently lacks that quality.  His clutching and space-invading behavior with women is creepy and a real problem, but in my view the fact that he apparently didn’t understand that until now raises deeper concerns about him.

Congestion Taxes

It sounds like an April Fool’s Day joke, but it isn’t:  New York lawmakers have approved a budget that will impose a tax on drivers who venture into Manhattan — one of the most congested driving areas in the world.  Drivers in New York City not only will be cursing the gridlock, now they’ll be paying extra for the privilege, too.

maxresdefaultThe budget deal will create a six-member commission that will set the fee to be paid by drivers who cross into Manhattan below 61st Street.  Because the idea is to use the tax to reduce congestion, pricing is expected to be variable, with higher rates during the peak periods and lower rates at night and on weekends.  Electronic readers will assess the tolls, which are expected to be between $11 and $12 for cars during daylight periods and about $25 for trucks.  The tax is forecast to generate about $1 billion in revenues, which New York lawmakers promise to use to address desperate repair needs in New York City’s subway and commuter rail systems.

Congestion taxes are used in other congested cities of the world, like London, but New York City will be the first U.S. city to adopt them.  And if the taxes work as planned in the Big Apple, it isn’t hard to foresee other congested areas of the country, like southern California, adopting them, too.  After all, local governments are always looking for new revenue sources, and this particular approach can be pitched as a method of using taxes to achieve a virtuous result — reduced road congestion and, if the tax revenues are earmarked, improved mass transit.

I’ve driven through New York City exactly once, in a rental car on a Saturday morning when the roads weren’t bad.  I can’t imagine what how nerve-wracking it would be to drive there on a daily basis — and now to pay special taxes for that added stress.

And here’s what’s interesting, too:  if congestion taxes are, in fact, designed to reduce congestion, that reflects an acknowledgement that taxes influence behavior.  That is, such taxes presuppose that some drivers will forgo taking their cars into the congested zone in order to avoid the tax — otherwise, the tax would have no effect on congestion.  But if taxes do in fact affect behavior, and people take action to avoid taxes, what does that mean for New York and New York City generally, which have some of the highest income taxes and other taxes in the U.S.?

Highway Hilarity

One of the local news stations carried an article today that set me over the edge, so brace yourself for an unwanted Codger Rant.

The article, headlined “Ohio transportation officials use highway sign humor for safety,” was all about how the Ohio Department of Transportation (“ODOT”) is using those intrusive, programmable, ever looming electronic highways signs “to encourage drivers to stay safe and to smile.”  How?  Through messages like these dismal chestnuts — “Turkey says buckle buckle,” or “Drive egg-cellent some bunny needs you,” or “Santa sees you when you’re speeding.”  And if those knee-slappers aren’t leaving you in stitches, how about that favorite subject of stand-up hacks from the ’60s — namely, a little in-law humor?  Like:  “Visiting in-laws? Slow down, get there late.”

2551307_stillIt’s a laugh riot, for sure.  An ODOT official quoted in the article says:  “We are a government agency, but we are a government agency with a sense of humor.”

Hey, ODOT?  Uh, we’ll be the judge of that.

Here’s what’s interesting.  Those signs obviously cost a lot of money.  They were initially presented to taxpayers as something that could be used in emergencies, like “amber alerts” when an adult supposedly goes missing.  Of course, the amber alert rationale made no sense, unless drivers navigating the highways are somehow supposed to act on identified license plate numbers and car makes and models.  But how are drivers supposed to take down the information?  Keep a pen and notepad handy and scribble down the information while they’re manning the steering wheel?  Use forbidden cell phones to take photos of the sign?  And even if drivers could assimilate that information, are we really supposed to pay attention to the makes and models and license plates of other cars on the road, rather than our driving?

But, as inevitably seems to be the case, the use of the signs has now gone beyond their initial stated purpose.  Now would-be comedians in state government are using the signs to try out lame jokes that even a self-respecting Dad wouldn’t touch.  Is this really part of somebody’s job description?  And as for those of us who wonder whether the signs aren’t an unnecessary distraction, the article reports that the ODOT points out that “there’s no indication the signs have been blamed for any crashes.”  Gee, that doesn’t seem like a very high standard to meet, does it?

I’m sick to death of spending money on stuff that seems affirmatively counterproductive and unhelpful.  When it comes to electronic highway signs, I’m not laughing.

 

California Warning

The Mamas and the Papas sang about California Dreaming.  Things have changed in the Golden State since the ’60s, however.  Now, whenever I enter the California-plated rental car for our little trip through southern Arizona and New Mexico, I get a weird  California Warning.

It’s a big, intrusive notice plastered right there on the driver’s side door that tells me that operating a motor vehicle can be hazardous to my health.  You see, the State of California apparently knows — hey, that’s the word the notice uses — that engine exhaust, carbon monoxide, phthalates (how is that pronounced, anyway?), and lead cause cancer and birth defects.  So what’s a driver to do?  Well, the notice says you should avoid breathing exhaust fumes and idling your engine, you should service your vehicle — I think that means gas it up when the tank runs dry — in a well-ventilated area, and you should wear gloves or wash your hands frequently when servicing your vehicle.

From the look of the notice, it appears that California voters enacted one of their voter propositions — in this case, Proposition 65 — that requires the notice.  In fact, Proposition 65 was passed in 1986 and, among other things, requires the State of California to assemble and publish a list of chemicals that cause cancer or birth defects — which now includes about 800 chemicals — and obligates businesses to notify consumers about chemicals in products. Hence, the Big Brother-type notice on our rental car.

I have to say that the notice gives me a laugh every time I get into the car.  Why?  Because, based on what I’ve seen of California, it’s got to be one of the most ignored — even flouted — notices in the history of governmental notices.  Californians don’t exactly seem to be avoiding their cars; California traffic congestion is easily one of the worst in any state.  And because of that, Californians are routinely breathing in those bad exhaust fumes as they wait in a colossal traffic jam on “the Santa Monica Freeway” or “the 405” or any of the countless other highways that are always subject to a traffic snarl at any time of the day or night.  And I haven’t noticed Californians donning gloves at the filling station as they fuel their cars or rushing to wash their hands after gassing up, either.  Apparently they’ve made the rational judgment that washing your hands in one of those gross, soiled sinks in a gas station bathroom is more hazardous that those phthalates.

By the way, phthalates are pronounced ftha-lates.

Reining In Excessive Fines

Yesterday the Supreme Court ruled that the Eighth Amendment to the U.S. Constitution — which states that “[e]xcessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted” — imposes limits on the abilities of state and local governments to seize assets and property and impose financial penalties.  And the Court’s ruling applying the “excessive fines” clause of the amendment to state and local governments was a unanimous one, which is a welcome development in our era of increasingly divided politics.

gettyimages-1066751830The case involved an Indiana man who was arrested for selling several hundred dollars’ worth of heroin, had his $42,000 Range Rover seized as part of the process — even though the maximum fine for his crime was $10,000 — and sued to get his car back.  The Indiana Supreme Court ruled that the “excessive fines” clause of the Eighth Amendment did not apply to the states, even though the “excessive bail” and “cruel and unusual punishment” clauses have long been applied to the states.  The Supreme Court, in an opinion written by Justice Ruth Bader Ginsburg, disagreed.

The decision yesterday addresses a significant real world issue — namely, how far can states and local governments go in imposing monetary penalties and seizing property from people who violate the law . . . or, in some cases, are only accused of violating the law.  Because raising taxes isn’t popular with voters, state and local governments have increasingly looked to aggressive forfeiture practices to fund part of their operations.  Briefs filed in the Supreme Court noted that more than half of municipal and county agencies who participated in a survey said reliance on forfeiture profits was a “necessary” part of their budgets, and that, in 2017, 10 million people owed more than $50 billion in criminal fines, fees and forfeitures. And the aggressive penalties aren’t limited to drug offenses.  One brief in the Supreme Court, for example, described how a $100 ticket for a red-light violation in California results in another $390 in fees.

In holding that the excessive fines clause applies to the states and local governments, Justice Ginsberg noted that “[e]xorbitant tolls undermine other constitutional liberties,” and added:  “Excessive fines can be used, for example, to retaliate against or chill the speech of political enemies. . . . Even absent a political motive, fines may be employed in a measure out of accord with the penal goals of retribution and deterrence.”

Now that the states know that they can’t impose excessive fines, it will be up to the courts to determine whether the aggressive property forfeiture and fining practices, like the seizure of the Range Rover, are “excessive” or not.  We’ll have to see how that works out, but for now it’s nice to know that Americans have another constitutional protection against potentially overreaching governmental actions.

40 Years Of 401(k)

Last year, 401(k) employee retirement savings plans hit a venerable milestone — the 40th anniversary of their creation.  401(k) plans were born during the Carter presidency, with the passage of the Revenue Act of 1978, which established Section 401 of the Internal Revenue Code.

stk27434sigThe language of the statute is the dense, definition-filled content that tax lawyers love, but the concept of the 401(k) is simple:  workers can salt pre-tax money away in protected funds and invest it, thereby enjoying some tax savings and having a vehicle to save for retirement.  Many employers offer 401(k) plans as a part of their benefit package and facilitate the program through payroll deductions.  According to the Investment Company Institute, in 2016 there were almost 555,000 401(k) plans in the U.S. and more than 55 million Americans were active participants.  The ICI also reports that, as of the end of the third quarter of 2018, 401(k) plans held $5.6 trillion in assets — up from $2.2 trillion in 2008 — and represented 19 percent of the total amount of U.S. retirement assets.

Some people raise questions about the 401(k) option, arguing that its availability has helped to produce the virtual disappearance of employer-funded pension plans, in which the employer totally funded the plan and, in many instance, provided the employee with a guaranteed retirement benefit.  I think that’s wishful thinking.  Even at the time the 1978 legislation was passed, many American companies were looking to cut costs, and guaranteed pension plans were disappearing into the mists of history.  Most of us have never worked for an employer that offered a true pension plan.  To be sure, 401(k) plans are based primarily on employee contributions, not employer largesse — although in many cases employers offer some kind of match to employee contributions.

Unless you’re an investment advisor who pines for the long-lost days of funded pension plans, though, you’re probably grateful that Congress was far-sighted enough to create the 401(k) option 40 years ago.  And it’s not hard to argue that 401(k) plans are, in some respects, superior to pension plans.  The 401(k) option gets the worker directly involved in her own retirement planning; employees have to elect to participate in the plan, after all, determine how their contributions will be invested, and then have their contribution withheld from their paychecks.  The 401(k) mechanism makes that as painless, relatively speaking, as withholding for federal and state taxes and Social Security contributions — because it comes out automatically, most people don’t notice it.  And then, after a few years, workers realize that they’ve actually made progress in starting to save for retirement, and for many people that realization opens the door to additional efforts to save, invest, and get ready for the retirement years.  The 401(k) option has made many Americans take personal responsibility for their own financial affairs, rather than relying on a company pension plan to do the trick.

And you can argue that 401(k)s have had a broader benefit, too.  So much automatic saving has to be invested somewhere — principally in the U.S. stock market.  In 1978 the Dow was well below 1,000; now it stands above 25,000.  No one would argue that 401(k) plans have been solely responsible for that run up, but there is no doubt that they have contributed to buy-side pressure that has helped to move the stock market averages upward, which has the incidental benefit of helping all of those 401(k) participants who’ve put their retirement savings into the market in the first place.

Happy anniversary, 401(k)!  Beneath that Tax Code jargon lurks an idea that has been helpful to millions of Americans.  I’d say we need to give credit where credit is due:  the 401(k) is one time when Congress did the job right.