COMPETITIVE ENTERPRISE INSTITUTE

VOL. 31, NO. 3 | SUMMER 2018

FEATURED ARTICLES

Washington Relearns to
Deregulate
5 BY MICK MULVANEY
Supreme Court’s Janus Decision

I
Is a Win for Government thought I’d start by talking about my friend,
Workers (and All Americans) Barney Frank. … Barney and I, we had
BY TREY KOVACS a good working relationship. And right
before he left, we went out to dinner, and
he was talking about what it’s really like in
Washington. And what he said was, “You
have to—just be aware of what the greatest
lie is in politics.” And Barney said the great-
est lie in politics is, “I hate to say ‘I told you

10 so.’” He said, “That’s a lie. Everybody loves

saying ‘I told you so.’”
And this is when I get to say “I told you
Supreme Court Wayfair Decision so.” Ben Bernanke got asked in a magazine
Will Hurt Online Shopping one time, “Can you really get growth over 3
BY JESSICA MELUGIN percent in this country?” He said, “probably
not, I would take the under on that.” Larry
Summers said, “I do not see how any exami-
nation of U.S. history could possibly support
the Trump forecast as a reasonable expecta-
Photo: Scott Henrichsen
tion.” Lastly, Jared Bernstein: “Still you’ve got
Trump advisers and Cabinet designees going
11 on about how their agenda will double the
growth rate from 2 percent to 4 percent.
And I think everyone sort of paid attention
to the Atlanta Fed that is still saying here, as
we’re getting to the close of the quarter, that
Ingenuity: Mankind’s I don’t see how they get there, especially
if they’re banking on trickle-down growth we could be as high as 4.5 percent growth
Number One Resource this quarter. Those are great numbers. How
effects from their big regressive tax cuts.” So,
BY HERNANDO DE SOTO it’s always fun when I have a bad day at the did we get here?
office, I like to pull this out the drawer and Everybody focuses on the low rates, and
just read this. it’s great, I know it’s important, but beyond
ALSO IN THIS ISSUE So, how did we get where we are? the rates, we have fundamentally changed
You’ve got unemployment at 3.8 percent. The the structure of the way that we tax wealth
last time it was lower than that was 1968. in this country. I choose to look at things like
The EU Attempts to Become the World’s
Antitrust Regulator. . . . . . . . . . . . . . . . . . . . . . . 4 Business fixed investment is up 10.4 percent the deduction for capital expenses. We come
2018 CEI Dinner and Reception. . . . . . . . . . . 6 on an annual basis so far this year. There’s up with this idea of not taxing people who
been more than 3 million jobs created since left money in their business. We only tax you
CEI Events Update . . . . . . . . . . . . . . . . . . . . . 12
the election. The April revenues that we took when you take it out. We didn’t get all the
The Good, the Bad, and the Ugly. . . . . . . . . 14
in at the Treasury were over half a trillion dol- way there with the corporate tax reform bill
Media Mentions. . . . . . . . . . . . . . . . . . . . . . . 15
lars in one month; it was the largest take ever. that we passed this year, but we got close.
End Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(continued on page 3)
 Taming the Washington Circus
by Kent Lassman
W ashington often gets derided as a circus these
days. But if Washington is truly a circus, then
freedom really is the greatest show on Earth—the free-
dom to laugh, cry, cheer, and embrace the wonder of
a life on your own terms.
That’s because most people, most of the time, are
going to make good decisions about their own lives.
We don’t need an instruction manual from the Code
FROM THE PRESIDENT
of Federal Regulations—for the few of us who even
know how to find it. We also don’t need hundreds of
regulatory agencies micromanaging the way we do
just about everything in this country.
We do need a little more confidence from just
about everyone that our experiment in democratic
capitalism can thrive without government intervention
at every turn.
This is what we believe at CEI. Whether it’s
lawmakers, executive branch officials, judges in the
courtroom, or simply our friends and family—we
argue, persuade, poke, and jab, but ultimately, we
bring others along to join us to support the miracle of
free people pursuing their own lives in harmony with
others.
I’d like to highlight some of my colleagues’ work
from the past year.
• For the first time in decades, the onslaught of
new federal regulations is slowing down. This
doesn’t mean that our massive regulatory state
isn’t still a problem, but progress has been
made. The administration has even gone so
far as to address what Wayne Crews calls
“regulatory dark matter”—all those murky
guidance documents, memoranda, and other
items that regulators like to use to go around
Congress.
• The EPA initiated at least 22 deregulatory
measures in its first year. Where was CEI?
Providing the analysis to roll back rule after
rule, which has threatened Americans’ access
to affordable and reliable energy. I call 22 a
good start.
Publisher
Kent Lassman
Editor
Ivan Osorio
Ph (202) 331-1010
Fax (202) 331-0640 Associate Editor
info@cei.org Richard Morrison
ISSN#: 1086-3036
2 CEI.ORG
• Over at the Federal Communications
Commission, with the longstanding support of
CEI scholars, Chairman Ajit Pai has introduced
transparency and stronger economic analysis.
He also put a stake in the ground for Internet
freedom and innovation and replaced the
Obama administration’s net neutrality rules.
• In our legal system, too often class action
settlements provide little or no relief while
lawyers walk away with a windfall. CEI is
changing the class action system. In the fall,
the Supreme Court will hear Frank v. Gaos,
one of more than two dozen cases in the CEI
portfolio that are the result of patient, pains-
taking work to identify, bring, and win the key
cases that change the law of the land.
When the lights go down and our days under
the big top end, a history of a regulatory revolution
will be written. And CEI helped carry the story. We
argue for meaningful changes that will constrain the
regulatory state and promote individual liberty now
and for future generations.
We can create a world where the focus of our
lives becomes bigger than the politics of the day. It is
a world where law and regulation no longer get in
the way of how your life unfolds.
So please remember, it is okay to have fun at
work, to expect to win, and to celebrate what was
previously unthinkable. So please step right up, get
your tickets for the show. Join CEI in the great noble
challenge of our generation.
This article is adapted from remarks delivered at CEI’s
2018 Annual Dinner and Reception.
The CEI Planet is produced by the Competitive Enterprise
Institute, a pro-market public interest group dedicated to
free enterprise and limited government.
CEI is a non-partisan, non-profit organization incorporated in
the District of Columbia and is classified by the IRS as a 501
(c)(3) charity. CEI relies upon contributions from foundations,
corporations, and individuals for its support. Articles may be
reprinted provided they are attributed to CEI.
COMPETITIVE ENTERPRISE INSTITUTE
 Deregulation, continued
What else are we doing? Well,
outside of taxes, energy. We got
ANWR open again. I think we finally
got the XL pipeline permitted—the
DOE just approved a new permit for a
new LNG plant down in Texas. We’ve
ended the prohibition of coal leasing
on federal lands.
Reorg. I talked a little bit about this
at the Cabinet meeting. When you
don’t reform a business, when you
don’t reform an organization, when
you don’t reform a government for
100 years, you end up with the stuff
I talked about at the Cabinet meet-
ing, which is this: We regulate cheese
pizza at the FDA. If you put a single
piece of pepperoni on it, it is regulated
by the USDA. It makes no sense at
all. This is what we’re trying to fix and
reorganize.
I want to talk a little about deregu-
lation. Some of the challenges we
faced early on in hindsight make per-
fect sense, which is that we had forgot-
ten how to do it. So we get there and
the first day we’re like, “Look, we’d like
you to please start deregulating.” And
a lot of the agencies look around and
they go, “Well, how do we do that?”
A lot of them had not been there since
the last time the government tried to
deregulate. The last big real deregula-
tion was during Reagan. So we had
to figure out a way to use muscles that
we had forgotten to use for a long
period of time.
We also have the regulatory
budget. You can’t add a dollar of new
reg until you get rid of a dollar of old
reg. It has to be revenue neutral. And
once again there, we’ve exceeded
that. I think we’re at negative, it’s
almost half a billion dollars a year.
What does all this mean? If you’re
in this room and you’re under 30
COMPETITIVE ENTERPRISE INSTITUTE
The last big real
deregulation was
during Reagan. So
we had to figure
out a way to use
muscles that we
had forgotten to
use for a long
period of time.
years old, this is the first time you’ve
had a chance to work in a healthy
American economy. You’ve been told
since you got out of college or out of
high school that 1.9 percent growth,
that stagnant sort of growth, that slow
growth, is the new normal. And for
that reason, it’s been hard to find jobs,
hard to find a good job, hard to find
opportunities, hard to match up your
degree with your job. And it’s differ-
ent now. You have a chance to be in
a growing American economy, and
that is a special and magical and truly
unique thing.
Mick Mulvaney is the Director of the
Office of Management and Budget.
This article is excerpted from his Keynote
Speech at the 2018 CEI Dinner.
C E I . O R G 3
Help the Competitive
Enterprise Institute carry
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 The EU Attempts to Become the World’s
Antitrust Regulator
apps because of the placement of the
BY IAIN MURRAY default apps, rather than their actually
preferring the latter. As Matt Kilcoyne

T he European Union (EU) recently

announced it would fine Google
$5 billion for alleged anti-competitive
practices in the licensing of its Android
smartphone operating system. There
is so much wrong with this decision
it is difficult to know where to start to
critique it, but the first thing to note is
that it will very likely harm consumer
welfare, and is at odds with American
antitrust doctrine. Worse, given the
EU’s outsized influence on the world
economy, it represents an attempt by
the EU to become the world’s antitrust
regulator—a move that the United
States should oppose with every tool it
can muster.
At the heart of the decision was
Google’s business model for Android.
The company licenses the software
to makers of mobile phones free of
charge. However, there are develop-
ment costs for improving the Android
platform, and Google needs to recoup
these. So it asked mobile-phone
makers to install certain Google apps,
including Google Search, and the
Google Play app store. Customers
using those apps provide a revenue
stream to Google via advertising on the
apps. This has allowed those manu-
facturers to keep their smartphones
affordable.
The European Union calls this prac-
tice “tying,” which it defines as using
a dominant position in one market—
smartphone software—to disadvantage
competitors in another market—Internet
search. This is an unusual interpretation
of “tying,” as it refers to a party using
a dominant position in one market
to achieve dominance in a market
where it is not dominant. But Google is
already dominant in Internet search.
The EU also presupposes that
people do not use certain competitors’
of the London-based Adam Smith
Institute tweeted, “The EU commis-
sioner saying ‘we have to fine Google
£3.5bn because although people can
freely access another search engine
they don’t choose to’ is utterly insane.”
Indeed.
Furthermore, the EU defined the
market very narrowly, as licensable
smartphone operating systems. This
definition excludes Apple’s iOS, which
the company does not license. Apple
enjoys a large market share in west-
ern EU countries, including the U.K.,
France, Ireland, and in Scandinavia.
That means that the EU has ignored
a major source of competition in its
competition analysis (just as when it
ignored Amazon when going after
Google over online shopping).
So if the EU hinders Google’s ability
to get revenue from its apps, how will
Google pay to develop its platform
and accompanying software? It may
have to charge for the privilege of
using its software. That means goodbye
to the $50 smartphone. That may not
mean much to French or British consum-
ers who can afford iPhones, but it will
mean a lot to less well-off consumers in
Greece, Bulgaria, and Romania.
And if Google decides to roll out
that model to the rest of the world—
which is presumably what the EU
wants, since the EU fines are on the
basis of global revenue—then smart-
phone makers and users in the devel-
oping world will be even more hard
hit. Smartphones are a major engine of
growth and innovation in Africa, where
the loss of access to affordable mobile
phones means loss of opportunity for
millions of the world’s poorer people.
Ultimately, the EU’s action against
Google may help entrench Apple’s
business model around the world. If
that were the case, expect Google
to start limiting the ability of its com-
petitors to use Google Play the way
Apple limits access to its App Store.
That means less choice for consumers
and less opportunity for entrepreneurs.
We’ll all be worse off.
For years, the EU has tended to go
hard after big American tech firms—
remember its incessant complaints
against Microsoft? Notably, the EU
has no big innovative tech firms of
its own to speak of. The last were the
Scandinavian mobile phone giants,
who were caught napping by ... iOS
and Android. The EU’s harsh antitrust
laws surely didn’t help, either.
For these reasons, the United States
needs to seek allies to stand up to the
EU’s regulatory imperialism, including
Great Britain, when it leaves the EU.
Pushing back the regulatory onslaught
from Brussels will be good for innova-
tors, good for consumers, and good for
choice.
Iain Murray (iain.murray@cei.org) is Vice
President for Strategy at CEI. A version
of this article was originally published in
National Review.

4 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE

 Supreme Court’s Janus Decision Is a Win for
Government Workers (and All Americans)
BY TREY KOVACS
I n its 5-4 ruling in Janus vs. AFSCME
(American Federation of State,
County and Municipal Employees), the
Supreme Court overturned decades-old
precedent that allowed government
unions to require public employees to
pay union fees or risk being fired.
Now millions of teachers, police
officers, firefighters, and other govern-
ment employees across the country gain
the freedom to decide if paying a union
is a worthwhile proposition. This is how
it should have always been—no one
should be forced to finance an organi-
zation he or she disagrees with.
The Supreme Court found that forc-
ing public employees to pay union fees
as a condition of employment violates
the First Amendment of the Constitution.
This is because government unions are
inherently political.
Collective bargaining in the public
sector is no different from lobbying
by any other special interest group.
Subjects of bargaining in the public
sector—like pay, tenure, and pension
funding—are political choices that no
worker should be forced to finance.
But the favorable outcome for work-
ers in the Janus case is just a start to
fixing the problem.
According to a survey conducted
by Educators for Excellence, as of April,
“78 percent of teachers had heard not
much or nothing” about Janus and “47
percent of union members said they had
heard nothing about the case.”
It is reasonable to assume other
public employees may not hear about
their newfound freedom to opt out of
paying fees to a union without penalty.
People should know their rights and
prepare for a new fight. Union interests
are actively trying to pass state legisla-
tion to once again tip the scales in favor
of labor unions over worker freedom.
COMPETITIVE ENTERPRISE INSTITUTE
Subjects of
bargaining in the
public sector ... are
political choices that
no worker should be
forced to finance.
A pair of bills in Maryland, for
example, seeks to undermine public
employees’ privacy and require
captive-audience meetings where the
union can lobby new hires to join. It’s
been documented that unions use intimi-
dation tactics to coerce workers at these
meetings.
If those bills become law, public
schools and universities will be forced to
hand over teachers’ personal telephone
numbers, email addresses, and home
addresses, without giving them an
opportunity to opt out of the informa-
tion sharing. Unions could even share
workers’ private data with third-party
contractors.
In Hawaii, legislators came up with a
plan to evade the Janus ruling entirely. A
2016 bill would have created a “public
employees’ collective bargaining fund.”
Instead of forcing public employees to
pay fees against their will, taxpayers
would pick up the tab.
At the beginning of each fiscal
year, the state would deposit into the
fund a certain percentage of the “total
compensation provided by the State to
every public employee.” These funds
would then be distributed to unions that
represent state employees.
There is a better legislative solution.
A policy known as Workers Choice
C E I . O R G 5
strikes a balance that provides total
worker freedom and addresses unions’
primary concern with eliminating forced
union dues.
Unions argue that forced union dues
are necessary because without them
public employees “free ride” on union
services. They further argue that since
unions must represent members and
non-members fairly and equally, non-
members should pay for services unions
provide, like contract negotiation and
representation in grievances.
The conundrum is that workers who
are not union members should not be
forced to work under a union contract
and should be able to represent them-
selves or seek other counsel in griev-
ances procedures. Current state law
does not allow these freedoms.
The obvious solution is to free unions
and non-members from this forced
relationship. Workers Choice essentially
creates members-only unions. Only full-
fledged union members work under a
union-negotiated collective bargaining
agreement and receive union services.
Workers that choose not to become
members are free to negotiate their own
work conditions with the state employer.
This resolves the “free rider” problem
and gives workers total freedom over
how they are represented.
With forced union dues off the table,
hopefully unions can join with free-
market advocates to implement Workers
Choice across the country. It’s a win-win
system where both workers and unions
are better off.
Unions only represent workers
who voluntarily pay for their services.
Workers gain absolute freedom of asso-
ciation at the workplace.
Trey Kovacs (trey.kovacs@cei.org) is
a policy analyst at CEI. A version of
this article was originally published at
FoxNews.com.
 2018 CEI Annual Dinner and Reception

FREEDOM
THE GREATEST SHOW ON EARTH
June 28, 2018

Left to right: Johanna Chase, Chase Investment Counsel

Corporation Founder and Chairman Emeritus Derwood S.
Chase, Jr., Zyvex Labs CEO and Founder James R. Von Ehr
II, and Gayla Von Ehr (photo: Scott Henrichsen)

National Review Senior Editor Jonah Goldberg, CEI President Kent Lassman presents the 2018
who served as Master of Ceremonies at the CEI Julian L. Simon Memorial Award to Peruvian
2018 Annual Dinner, welcomes guests (photo: economist Hernando de Soto (photo: Scott
Scott Henrichsen) Henrichsen)

6 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE

 Left to right: Deputy Assistant Attorney General
Barry A. Nigro, Jr., American Opportunity President
and CEO and former Virginia Governor Jim
Gilmore, Bruce Garrison, and DonorsTrust President
and CEO Lawson R. Bader (photo: Joe Shymanski)

Left to right: Galileo Global Securities Managing

Director and CEI Board Member Jean-Claude Gruffat, Left to right: Reason contributor Andrew
Chandler Residential Vice President and CEI Board Heaton, Donna Jackson of Project 21, and
Member Laura Holmes Jost, and Chandler Residential Reason.com Associate Editor Robby Soave
President Paul Jost (photo: Joe Shymanski) (photo: Scott Henrichsen)

Left to right: Coast to Coast Strategies

Principal Saul Anuzis, Eli Pisarski, and
Alan Pisarski (photo: Scott Henrichsen)

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 7

 Left to right: National Taxpayers Union
Executive Vice President Brandon Arnold,
Facebook Public Policy Manager Brooke Karen and David Parker, owners
Oberwetter, and Speech First President of Old Boston Restorations
Nicole Neily (photo: Scott Henrichsen) (photo: Joe Shymanski)

CEI President Kent Lassman (left) and

Federal Communications Commission
Chairman Ajit Pai (photo: Joe Shymanski)

BakerHostetler Partner Left to right: Bruce Garrison, HEYCO Energy Group

Andrew M. Grossman President and CEO George Yates, and National
and Jennifer Grossman Review Senior Editor and CEI 2018 Dinner Master of
(photo: Joe Shymanski) Ceremonies Jonah Goldberg (photo: Joe Shymanski)

8 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE

Robert Tracinski,
Senior Writer for The
Federalist, and R Street Left to right: CEI Vice President of Communications Annie Dwyer; Amber
Institute Digital Media Porter, Confidential Assistant to Securities and Exchange Commission (SEC)
Specialist Shoshana Commissioner Hester Peirce; SEC Commissioner Hester Peirce; Charles
Weissmann (photo: Koch Institute Director of Policy Strategy Robert Raffety; and Charles Koch
Scott Henrichsen) Institute Program Officer Taylor Barkley (photo: Joe Shymanski)

Left to right: State Policy Network Manager of Donor

Relations Britt Parker, America’s Future Foundation Executive
Director Cindy Cerquitella, Pacific Legal Foundation Cato Institute Senior Fellow Walter
Chief Operating Officer Chad Wilcox, and Pacific Legal Olson (left) and Mark Janus,
Foundation Attorney Erin Wilcox (photo: Scott Henrichsen) plaintiff in the landmark Supreme
Court case, Janus v. AFSCME
Council 31 (photo: Joe Shymanski)

Left to right: Camille Santry; Jessica Melugin, Associate Director

of CEI’s Center for Technology and Innovation; Brian Lusher; Ike
Sugg, presenter of the 2018 Julian L. Simon Memorial Award;
and Newfield Exploration Company Government Affairs
Manager Brook Simmons (photo: Joe Shymanski)

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 9

 Supreme Court Wayfair Decision Will Hurt
Online Shopping
Think of it like this: When you pull into a unpopular among voters. Bills like the
BY JESSICA MELUGIN gas station to fill up, the attendant does not Marketplace Fairness Act and the Remote
check your license plate or driver’s license Transactions Parity Act, both introduced

A June 2018 Supreme Court deci-
sion has changed how states can
tax online shopping. In South Dakota
v. Wayfair Inc., the court upheld a state
law that allows South Dakota officials to
collect sales taxes from other states’ busi-
nesses that sell to South Dakota residents.
The court’s decision is a loss for consumers,
small online businesses, and the future of
e-commerce.
The justices overruled the 1992
Supreme Court decision Quill Corporation
v. North Dakota, which set the standard
for how states tax online purchases. Until
now, states could tax only businesses that
have a physical presence—like stores or
warehouses—in their state. This decision
is a huge departure from legal precedent
and threatens a devastating increase in tax
compliance costs for online entrepreneurs,
like sellers on Etsy and eBay.
This ruling subjects small Internet-
based businesses to “taxation without
representation.” The seller must now
calculate, collect, and remit sales taxes to
whichever state a buyer lives in, including
those in which the seller has no stores or
employees and no voting power or politi-
cal voice. Online businesses will now be
responsible for adhering to this compli-
ance burden and could be audited as a
result.
in order to charge you the tax rate of your
home address and send off payment to
your state’s tax authorities. The owner of
the gas station calculates the tax based on
the station’s location, collects it from you,
and sends the taxes to his local authority.
This approach preserves healthy tax
competition among the states. New York
can only hike gas taxes so high before
everyone starts to drive across the border
to New Jersey. Unfortunately, the Supreme
Court’s decision does away with this
competitive system for people who buy
and sell online.
Now that states can export their tax
policies and reach outside their borders to
tax businesses in other states, that ben-
eficial rivalry among states is diminished.
That puts both the online buyer and the
entrepreneur at a disadvantage. It is the
online equivalent of the gas station atten-
dant calculating your tax based on where
you live, not where you are pumping gas.
This means consumers can no longer vote
with their wallets by taking their online
purchases elsewhere.
With fewer political consequences,
there is less incentive to keep tax rates
reasonable.
States have spent years trying to
reverse the Quill ruling and persuade
Congress to pass supportive legisla-
tion. The problem is that online taxes are
last year, were doomed by high compli-
ance costs for small businesses and by
general opposition to more sales taxes
online, but they may find a second wind
after the new ruling.
With this decision, the Supreme Court
underestimates the importance of prevent-
ing states from regulating and taxing the
business owners of other states. Congress
must now step in to consider plans for
reforming online sales taxes to reduce the
damage of the ruling. Legislators should
act to clarify and reinforce the principles
of physical presence and state tax
competition.
The Internet has presented enormous
opportunities to people who dreamed of
starting their own business, and American
consumers have reaped the reward. There
is no doubt that online shopping has made
it much easier and more convenient for
busy parents and rural Americans to get
items they need for their families more
quickly. Congress should get to work
protecting this progress for the sake of all
consumers and online entrepreneurs.
Jessica Melugin (jessica.melugin@cei.org)
is Associate Director of CEI’s Center for
Technology and Innovation. A version of
this article was originally published in The
New York Times.

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10 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE

 Ingenuity: Mankind’s Number One Resource
BY HERNANDO DE SOTO
At this year’s CEI Dinner, the Julian L.
Simon Memorial Award was presented
to renowned Peruvian economist
Hernando de Soto. He was introduced
by CEI alum Ike Sugg, who remarked
that de Soto “has shown that you can
be a free market economist and a pri-
vate property rights advocate, but also
be a humanitarian and focus on pov-
erty throughout the developing world.”
Further, he noted, “Mr. de Soto’s work
shows that property is prosperity, and
it’s the way to get out of poverty.” An
excerpt of Hernando de Soto’s remarks
follows.
T hank you. Muchas gracias. I came
only with one little slide. What you
see there are the titles being handed out
by the Islamic State, Al Qaeda, FARC,
the Shining Path. Essentially what they’ve
realized is the following.
Think of the world as an egg. Think
of energy. And where you have the
energy is in the center of the egg, which
is a golden yolk. Now, in the States you
don’t think about it too much, because
… once you get the egg, you get the
egg, but in the rest of the world, the egg
is a different reality from the eggshell.
Because the way you’re going to get at
the depth of the water, the way you’re
going to get the oil, the coal, the petro-
leum, the gas that fuels and helps things
run is, you’ve got to pierce the eggshell.
In other words, in the rest of the world
aside from the United States, and
only in some places as far as I know,
owning the eggshell is very different
from owning the yolk.
So if wherever you go now, in the
former Soviet Union, and develop-
ing countries, all those issues that you
see where you’re fighting a bunch of
small tribes in different countries are
essentially people that are taking over
the eggshell. Because if they are able
to get the eggshell, once they do that,
COMPETITIVE ENTERPRISE INSTITUTE
the majority of those people, the 80
percent that we’ve talked about, are
there. And all they have to say is once
you own the eggshell and I’m going to
title you, you are then going to be able
to get at the yolk, and we’re in power.
All over the world, people have got
ledgers. Since 1989 when communism
was defeated, they’ve got ledgers in
which it is quite clear who owns what.
What they don’t have is ledgers that
give them rights at a global level, that is
to say, rights that can travel.
And so the question, in this coun-
try when you’re starting to talk about
tokens: Is Bitcoin a Ponzi scheme or is
there value behind it? You know that
value—that’s what Julian Simon knew—
is not something that you can see. He
was a metaphysician. He saw beyond
physics. Value is, as Marx said, some-
thing that can only be captured in your
brain. That’s why he said capital, comes
from the word capita, which comes
from the word head.
And what you have done in the Photo: Joe Shymanski
United States that is astounding, is
that you have been able to put all the
have Facebook accounts. I can now
resources of the Earth in securities,
get to all of them.
in titles. Everything that gets you in
So you’ve got the technology. What
someplace in the United States comes
you have to remember is Julian Simon,
from a tag.
who said that the ingenuity of mankind
I just got into this country and
is its number one resource and that the
when somebody asked me, “You look
reason that you can get to it is because
familiar.” And I said, “Yes, my name is
people are entitled to property. And
Hernando de Soto. I come from Peru
that’s one of mankind’s greatest
and that’s, you know, south of the Rio
achievements.
Grande.” He said, “Just show me your
The bad news is that we’re losing.
passport.” Everything you do is in a
The good news is that if we become
token. In a symbol. Everything you
aware, thanks to people like you,
fight about is done on papers because
we can win this new war, which isn’t
ideas only travel in tokens. And well,
against Communism; it’s a war against
all I wanted to say was, these guys are
underdevelopment.
ahead of us.
Blockchain is important. Because
Blockchain is a way of rapidly, mas-
Hernando de Soto is President of the
sively handling paper.
Institute for Liberty and Democracy in
Facebook is important. I used to be
Lima, Peru, and winner of the 2018 Julian
able to reach in Peru maximum 10,000
L. Simon Memorial Award. This article is
people at a time in a square. The first
excerpted from his remarks at the 2018
time I tried Facebook—there are 30
CEI Dinner.
million Peruvians, of which 18 million
C E I . O R G 11
 C E I E V E N T S A ND P UBL IC A P P E A R A NCE S

New York Luncheon Discussion on Derivatives

with Dr. Christopher Culp
On April 5, CEI hosted a private luncheon at New York City’s Union League Club with
Dr. Christopher Culp on how regulations pursuant to the Dodd-Frank Act have impacted
derivatives activity in the U.S. Culp focused on issues related to the Commodity Futures
Trading Commission’s mandatory clearing regulations. Among the questions pondered:
Have such regulations have made central counterparties into new “too big to fail” institu-
tions? Dr. Culp is a Research Fellow at the Johns Hopkins Institute for Applied Econom-
ics, an Adjunct Professor at the Swiss Finance Institute, a senior affiliate with Compass
Lexecon, and managing director of Financial Economics Consulting, Inc.

CEI and Cooler Heads Coalition Host Briefing

by Climate Expert Ross McKitrick
On May 18, CEI and the Cooler Heads Coalition hosted a private briefing by
Ross McKitrick, professor of economics at the University of Guelph in Ontario.
McKitrick reviewed several recent research papers that find that increasing
atmospheric concentrations of carbon dioxide and other greenhouse gases
is leading to much less global warming than predicted by the global climate
models used by the United Nations Intergovernmental Panel on Climate
Change. McKitrick was also the co-recipient of CEI’s Julian Simon Memorial
Award in 2010 along with Steve McIntyre.

CEI Dinner Host Committee Reception

with Sen. James Lankford
On June 6, the CEI Dinner Host Committee held a private
reception for special guests and friends of CEI with Sen.
James Lankford (R-Okla.). Sen. Lankford delivered brief
remarks about ongoing efforts to roll back the reach of the
federal administrative state. As Chairman of the Subcom-
mittee on Regulatory Affairs and Federal Management,
Sen. Lankford is an outspoken advocate fighting burden-
some regulation and encouraging greater transparency
and congressional oversight on important issues such as
Dodd-Frank and Chevron deference.

CEI President Kent Lassman (left) and Sen. James Lankford

12 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE

 Adam Schulman Discusses CEI’s Supreme
Court Case Frank v. Gaos on Capitol Hill
On June 8, Adam Schulman, an attorney with CEI’s
Center for Class Action Fairness, spoke at the Capitol
Hill briefing, “Class Action Fairness? Zero-Dollar Set-
tlements and Cy Pres Awards Go to the U.S. Supreme
Court,” hosted by the George Mason University Law
and Economics Center (LEC). Also participating on
the panel were Center for Constitutional Litigation
Founder and President Robert S. Peck and LEC Interim
Executive Director (and CEI alum) Gregory Conko.
The panelists discussed how the case Frank v. Gaos,
which will be argued before the Supreme Court this
fall, could impact class-action settlements in which
plaintiffs’ attorneys collect hefty legal fees while the
class members receive puny, if any awards.
Left to right: Adam Schulman, Gregory Conko, and Robert S. Peck

Myron Ebell Testifies on Offshore Oil and Gas Leasing and

Endangered Species Act Reform
On June 14, Myron Ebell, Director of CEI’s Center for Energy and Environment, tes-
tified at hearing of the Energy and Mineral Resources Subcommittee of the House
Natural Resources Committee, on federal offshore and onshore oil and gas leasing.
He urged the subcommittee to enact revenue sharing with coastal states that have
production in federal offshore waters. Then on July 12, Ebell spoke at a roundtable
discussion on the Endangered Species Act (ESA) reform hosted by the House
Western Caucus. The forum was part of the introduction of nine incremental bills
to “modernize and reform” the ESA. Ebell argued that these incremental reforms
should lead to fundamental reform, including takings compensation legislation for
landowners who for whom ESA regulation destroys the value of their property. On
May 4, Ebell spoke at a private luncheon discussion on the Trump administration’s
deregulatory efforts on energy and hosted by HEYCO Energy Group President and
CEO George Yates.

CEI Luncheon with Bad Blood Author John

Carreyrou
On June 19, CEI hosted a private lunch discussion with
John Carreyrou, two-time Pulitzer Prize-winning investiga-
tive reporter for The Wall Street Journal and author of Bad
Blood: Secrets and Lies in a Silicon Valley Startup. Car-
reyrou first broke the story on how the controversial startup
Theranos defrauded investors in October 2015. In Bad
Blood, he charts the downfall of the once-hyped company.
CEI alum Caleb Johnson interviewed Carreyrou about his
new book and how he uncovered one of the most brazen
fraud cases in corporate history.

John Carreyrou (left) and Caleb Johnson

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 13

 THE
GOOD
The Good: Supreme
Court Strengthens
Digital Privacy
On June 22, the United States Supreme
Court ruled that the government needs
a warrant to access a person’s cell
phone location history. The court, in a
5-4 decision, found that obtaining such
information constitutes a search under
the Fourth Amendment and therefore
requires a warrant from a judge based
on probable cause. The plaintiff, Timothy
Carpenter, was convicted of committing
several robberies after police obtained
more than 100 days of his smartphone
location data records. However, the
court declined to decide on whether
law enforcement seeking a smaller time
window of records requires a warrant
and allowed for exceptions for emer-
gency situations like “bomb threats,
active shootings, and child abductions.”
“Today’s Supreme Court decision
is a victory for Americans’ privacy, as
the court recognized that the govern-
ment conducts a search when it tracks
our cell phone location history,” said
CEI Research Fellow and Regulatory
Counsel Ryan Radia. “Although the
court’s opinion was narrowly crafted to
address the particular facts in this case,
its decision underscores the court’s
willingness to apply rigorous scrutiny
to governmental surveillance involving
new technologies.”
14 CEI.ORG
THE
BAD
The Bad: 13 Republican
Senators Talked into
Supporting Costly Obama-
Era Climate Deal
In 2016, the Obama administration
signed the Kigali Amendment to the
Montreal Protocol, an international
agreement that would restrict the refrig-
erants currently used in most air condi-
tioning and refrigeration equipment. A
relative few companies stand to make
a windfall by selling substitute refriger-
ants that cost considerably more than
the ones targeted under this measure.
They have been lobbying aggressively
for the Kigali Amendment and have
managed to convince 13 Republican
Senators that higher costs to stay cool
are what their constituents need.
“The Kigali Amendment would
raise the cost of air conditioning and
refrigeration, and a number of cor-
porations that stand to benefit have
joined forces with environmentalists in
lobbying for Kigali ratification,” said
CEI Senior Fellow Ben Lieberman. “In
particular, two major chemical compa-
nies, Honeywell and Chemours, have
patented costly substitutes and hope
to attain a captive market for them via
Kigali. However, among the millions of
businesses that use refrigeration and
air conditioning, such as restaurants,
supermarkets, and convenience stores,
Kigali will drive up the cost of doing
business and hurt employment.”
COMPETITIVE ENTERPRISE INSTITUTE
THE
UGLY
The Ugly: Federal
Employee Unions
Take Fight to Preserve
Official Time to Court
On July 25, U.S. District Judge Ketanji
Brown heard oral arguments in a
lawsuit brought by several federal
employee unions challenging the
Trump administration’s rollback of a
practice that lets government workers
conduct union business while being
paid by taxpayers. This practice,
known as “official time,” constitutes
a taxpayer subsidy to government
unions, which are supposed to be
funded by member dues. In some
cases, government employees spend
100 percent of their work hours on
official time. The unions are chal-
lenging a May executive order by
President Trump that limits the use
of official time to 25 percent of an
employee’s work hours.
“Official time is a massive sub-
sidy to federal employee unions that
takes public employees away from
the serving the public,” said CEI
Policy Analyst Trey Kovacs. “Union-
negotiated grievance processes are
too time consuming and allow poor
performing federal employees and
those who are convicted of miscon-
duct to keep their job.”
 MediaMENTIONS
General Counsel Sam Kazman led
an effort to lift government energy
restrictions enough for consumers to
get some decent dishwashers.
The digital revolution relentlessly
enables consumer products to become
better, faster, and cheaper. But
environmental regulation has for decades
been making household tasks more
difficult, time-consuming, and expensive.
A new effort to rewrite some old rules
suggests a consumer backlash may be
brewing.
“Make dishwashers great again.
It should not take 2-3 hours to clean a
dishwasher full of dirty dishes,” writes
consumer Laurelle Hess in one of more
than 2,000 public comments collected by
the Department of Energy in response to a
rule-making petition from the Competitive
Enterprise Institute. The free-market think
tank is asking the feds to reconsider their
long-term campaign to degrade the
kitchen appliance.
–June 27,
The Wall Street Journal
Vice President for Policy Clyde
Wayne Crews assesses the Trump
administration’s regulatory reform
efforts.
[A]fter a promising start in 2017, it
appears that Donald Trump’s effort to
eliminate government red tape is not only
still active but may even be accelerating.
That’s the news today from
Washington’s unofficial scorekeeper of the
federal regulatory burden, Wayne Crews
of the Competitive Enterprise Institute.
Over the years, candidates too numerous
to count have promised to streamline and
reduce Washington’s myriad rules and
regulations. By Mr. Crews’s tabulation, the
current occupant of the White House is
one politician who is actually exceeding
his signature promise in this area.
–May 22,
The Wall Street Journal
COMPETITIVE ENTERPRISE INSTITUTE
CEI Presisent Kent Lassman
comments on the administration’s
changes to managing the federal
workforce.
According to data collected by the
American Federation of Government
Employees, more than 1,600 workers
have been removed under the provisions
of the law passed last year, called
the Department of Veterans Affairs
Accountability and Whistleblower
Protection Act. […]
Conservatives were quick to voice
support for the measures. “Today’s
announcement shows a move toward
accountability for poor performers and
unions while increasing workplace equity
for all the dedicated and hard-working
government employees who have had
to pick up the slack for far too long,”
said Kent Lassman, president and chief
executive of the Competitive Enterprise
Institute, a free-market advocacy group.
–May 26,
The New York Times
CEI Center for Class Action Fairness
Director Ted Frank explains the
abuses that led to the Supreme
Court deciding to hear Frank v.
Gaos.
Frank, director of the Center for Class
Action Fairness, says he intervenes in
cases where he believes the lawyers “are
operating in their own self-interest.” In the
Google case, he said the lawyers could
have established a settlement fund and
waited to see how many people would
file a claim.
Increasingly, he said, lawyers opt for
a cy pres award because it allows them
to settle the case with a minimal effort
and a healthy fee. His appeal contends
these settlements are quite common. They
are “typical in the current wave of data-
breach class-action settlements,” he said.
–April 30,
Los Angeles Times
C E I . O R G 15
Adjunct Fellow
Jessica Melugin
urges Congress to
stop Internet sales
taxes in the wake of
the Supreme Court’s
ruling in South
Dakota v. Wayfair.
“Stopping state regulatory and tax
power at each state’s border should be
the default rule for online commerce,”
said Jessica Melugin, of the Competitive
Enterprise Institute, which supported online
retailers who did not want to collect taxes
for each state.
“It is essential that Congress now
clarify and reinforce the principles
of physical presence and state tax
competition to protect online commerce,
smaller online businesses, and consumers.
Hopefully, this unfortunate decision is the
call to action that members of Congress
need to provide these critical parameters
for economic freedom.”
–June 21,
The Washington Post
Fellow Ryan Young warns trade
tariffs will mean big losses for
many industries and bring on
international retaliation.
So, a trade war now seems likely.
And it might get even larger. In two
weeks, the White House releases a tariff
hit-list of 1,300 Chinese goods valued
at $50 billion. China has vowed to
respond in kind.
Get the picture?
Nor will they be without cost to the
domestic U.S. economy.
As Competitive Enterprise Institute
fellow Ryan Young notes, “While the
tariffs could potentially save 33,000
steel jobs, the harms to downstream
industries from automobiles to construction
to food production could result in a net
loss of 146,000 American jobs. It also
encourages America’s biggest trading
partners to raise their trade barriers,
harming their economies as well as ours.”
—May 31,
IBD Weekly

1310 L Street NW, 7th Floor
Washington, DC 20005
...END NOTES
Anti-“Amazon Effect” Legislation Too Late for
Borders Bookstore
The San Francisco Board of Supervisors is reportedly
considering a measure to ban private companies from
providing their employees with a full-service office cafeteria.
The reason? To force them to eat lunch at area restaurants.
Unsurprisingly, the proposal has the strong support of the
city’s restaurant trade association, reports The San Francisco
Examiner. Supervisor Aaron Peskin, who cosponsored the
legislation, said it was intended to avoid the “Amazon effect
that impacts retail and restaurants across the county.” So his
solution: “People will have to go out and eat lunch with the
rest of us.” There was no comment on how the legislation
might affect brown bag lunches..
Lex Stulta de Piscibus (Stupid Fish Law)
Seafood merchants in southern France are reportedly
furious over being fined for not displaying the Latin-based
scientific names of the fish varieties they were selling.
Marseilles fishmongers were apparently violating European
Union regulations that require terms like “Sparus aurata”
and “Mullus barbatus” to be displayed alongside the more
commonly used names. Fines ranged from €400 ($466) to
€1,500 ($1,749). European regulators claim that the rule
is needed to better inform consumers of their food choices.
“They’re bureaucrats who have no idea about realities on
the ground. No customer ever asks for a fish using its Latin
name,” one fishmonger told BFMTV news channel. Another
quipped, “If the ghosts of Caesar or Nero turn up, they’ll be
pleased. If they somehow come back to life at least they will
know what the names mean.”
16 CEI.ORG
Nonprofit Org.
U.S. Postage
PAID
Permit 425
Southern MD
Actually, Passion Fruit Ale Sounds Delicious Too
California is home to many cutting-edge companies,
and not just in the computer and technology business. Some
are innovating with beer—and cannabis. Last spring, San
Francisco’s Black Hammer Brewing introduced Toke Back
Mountain, one of several beers that includes cannabidiol, a
non-psychoactive derivative also known as CBD. However,
the federal Alcohol and Tobacco Tax and Trade Bureau
(TTB) recently ordered the brewery to cease and desist from
brewing with cannabinoids. It’s not because of the federal
Title I classification of marijuana, but because the TTB allows
only certain ingredients to go into beer. That means that a
long list of safe and healthy foods and ingredients are for-
bidden in beer unless they are explicitly allowed. As the San
Francisco Chronicle reported, “Rose hips are fine; rosewater
is not. Guava is OK, but not passion fruit.”
UK Government Says You’re Healthy … Enough
You’re not the customer unless you’re paying the bills.
That simple truth applies to health care. However, the United
Kingdom’s National Health Service (NHS) seems to have
reinterpreted it to mean: You’re not really the patient unless
you’re paying the bills. In order to control exploding health
care costs, the NHS, famed provider of “free” medical treat-
ment for over 70 years, has decided that certain procedures
are no longer worth performing. We’re not just talking about
cosmetic surgery or other elective procedures. According to
the list of procedures being considered for elimination, British
taxpayers who need treatment for carpal tunnel or hemor-
rhoids may be out of luck.
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