Coyote Blog

The whole point of a pollution control regime driven by a carbon tax or cap-and-trade is to acknowledge that 300 million people making trade-off and investment decisions can do a better job reducing pollution than 300 people in Washington commanding solutions.   Give individuals an emissions cap (or raise the price of emissions) and people will make their own decisions how best to handle the response.  One household in Arizona might put in solar, while the Seattle household would see solar as a waste and might get the same reductions via conservation.

So why does the current cap-and-trade bill have so much command and control embedded in it?

In fact, the bill also contains regulations on everything from light bulb standards to the specs on hot tubs, and it will reshape America's economy in dozens of ways that many don't realize.

Here is just one: The bill would give the federal government power over local building codes. It requires that by 2012 codes must require that new buildings be 30 percent more efficient than they would have been under current regulations. By 2016, that figure rises to 50 percent, with increases scheduled for years after that. With those targets in mind, the bill expects organizations that develop model codes for states and localities to fill in the details, creating a national code. If they don't, the bill commands the Energy Department to draft a national code itself.

States, meanwhile, would have to adopt the national code or one that achieves the same efficiency targets. Those that refuse will see their codes overwritten automatically, and they will be docked federal funds and carbon "allowances" -- valuable securities created elsewhere in the bill that give the holder the right to pollute and can be sold. The Energy Department also could enforce its code itself. Among other things, the policy would demonstrate the new leverage of allocation of allowances as a sort of carbon currency -- leverage this bill would be giving to Congress to direct state behavior.

The reason, of course, is that Congress may nominally support cap-and-trade (mainly because it is hip and trendy, not because they really understand it) but they most certainly do not buy into the philosophy behind it -- that millions of individuals can make better decisions collectively than a few planners in Washington.  Because Congress most certainly thinks they are smarter than everyone else and can make better decisions.

Of course, this is absurd.  Has anyone tested these mandates above and seen if they are a less costly way to reduce emissions than other steps?  Of course not, just as they did not for the new CAFE standards.  In fact, I can prove it -- Do making massive investments in insulation and air conditioning efficiency make any sense in San Diego?  Of course not -- in that mild climate, these are near useless investments.  Does making me buy a more fuel efficient car to drive my 1.5 mile commute make sense?  Of course not.  But this is exactly what is happening, because Congress can only regulate to the mean, and the result is that in many cases its commands make no sense.  Which is exactly why cap-and-trade was invented, ironically.

I have written a zillion times that government licensing programs tend to be incumbent protection from competition for the licensees, rather than any real benefit to consumers.  This is particularly true in health care.

Why does a person need to go to school and residency for a decade to put three stitches in a kid's cut?  Why do I have to go to a full dentist's office to get my teeth cleaned?  Why does someone have to go to school for years to tell me my contact lens strength needs to be incremented by another 0.5, when I already knew that and could have just ordered them myself?  The reason is licensing, and it both increases prices by limiting the number of providers and by forcing me to see someone who is often wildly overqualified to handle my problem.

My sense is that this over-licensing for routine functions in medicine is the second largest contributor to costs (the first is the elimination of price-shopping by  making the payor for the services different from the person who receives the services).  But don't expect the government, long in thrall to the AMA, to do anything about this in any health care "reform":

bills and amendments died during the Texas legislative session that would have allowed advanced practice nurses to diagnose and to prescribe for common, minor illness and injures without doctor supervision.

You can blame Texas doctors.

Despite better protections from malpractice lawsuits and lower malpractice premiums, Texas has a doctor shortage. Nevertheless, the Texas Medical Association took every step to ensure physicians will have a tight rein on the activities of well-trained nurses.

The barrier against nurses will continue to keep low-fee retail health clinics, such as those operated by Walgreen and CVS drug store chains, from expanding in Texas. The state law requiring doctor supervision adds too much cost to the clinics.

Texas has only about 85 of the 1,200 retail health clinics in the nation. San Antonio does not have a single one. The clinics are popular wherever they exist because nurse practitioners can treat common ailments and minor injuries with little waiting time and fees that average about $60, much less than emergency rooms. The clinics operate evenings and weekends and accept insurance plans.

The clinics would represent real health care reform, especially in Texas. Most of the state, 179 counties out of 254, is classified as medically underserved. Among them are 45 metropolitan counties, including Bexar.  (hat tip:  Carpe Diem)

Postscript: But Coyote, how can you possibly be against licensing of doctors?  You wouldn't want just anyone doing open heart surgery on you, would you?

No, I wouldn't, but while AMA licensing is overkill for putting in stitches, it falls short of what I would want for heart surgery, or oncology, or major plastic surgery.  I would not just accept any licensed doctor to do these things - I would do research and get referrals.  I would enforce a higher standard.  And this is why broad licensing is so un-helpful.  It is overkill for certain procedures, but falls short for others.  I guess their may be a Goldilocks application for current licensing (maybe for my GP?) but that is almost an accident.

I don't oppose third party certifications per se.  I think that in a free society, many groups, such as the AMA (or consumers reports, or the UL, or whoever) could act as certification or review bodies for different medical practices.  And I would very likely as a consumer find such an organization I trust and insist the providers I used for certain procedures be minimally approved by this group.

In India, Tata corp.  has a plan to build condos that would sell for as little as $8000 a unit.  Which got me thinking about the cost of regulation in the US.  Take California, a state that has an explicit government goal to promote affordable housing.  My bet is that the permitting alone would cost more than $8000 a unit, and building code mandates would certainly make such a figure impossible.

I have always thought it funny that residents of the San Diego coast, with perhaps the mildest climate in the country, have the most onerous requirements in the country for insulation and air conditioning efficiency.  Its like requiring residents of Seattle to put on sun screen every day.

One of the seldom discussed problems with government regulation is that typical regulation is aimed at the "mean"  -- the mean worker, the mean industry participant, the mean driver, whatever.  The problem is that there are 300 million of us with vastly different lives and different preferences.  One-size-fits-all regulations are often a poor fit for many of those regulated.

Take the Fair Labor Standards Act (which includes minimum wages, maximum work weeks, record-keeping requirements, etc).  The Fair Labor Standards Act is written for factory workers who come in the door at 9AM, punch a time clock, work under the direct supervision of management, and punch out at 5PM.

Many of my workers are running isolated campgrounds.  They work out of their home (their RV).  While they have scheduled tasks, like cleaning the bathrooms, many of their hours come in spurts (e.g. someone comes to their RV and asks them a question).  The nearest manager from the company might be hundreds of miles away, and there may not even be electricity to power a timeclock.  All of this adds up to a hugely awkward compliance problem for many of the details of the FLSA.  But comply we must.

Yesterday's new proposed CAFE regulations on car fuel economy is another example.   It appears that the average MPG requirement for new cars will increase from 27.5 today to 42MPG in 2016.  The obvious question is -- of all the actions we could take to reduce CO2 emissions, is this the least costly and/or most efficient?

Well, nobody knows, and I don't think that anyone in the "science-based" Obama administration has even tried to put pen to paper on this question.  And, even if they did, their answer would be largely irrelevant because they would likely, again, be regulating to the mean.

I am sure the folks passing this kind of stuff picture a mean commuter driving 25-30 miles each day each way to work.  But what about me?  I drive 2 (actually 1.9, but we will round up).  That makes a 4 mile daily roundtrip commute.  Assuming I drive a car at the CAFE standard, this new regulation will save me 0.05 gallons of gas per day, or ten cents per day at $2.00 gas prices.

Obviously, it makes zero economic sense for me to be regulated in this way.  The fuel economy of my car for my daily commute is virtually irrelevant, because I chose to locate my house and my business within a few miles of each other.  It is a terrible investment for me to pay, both in higher costs and lost features, for a car with higher MPG.  Though my decision-making was not driven by gas consumption (it was driven by my time, which is way more valuable to me than a gallon of gas**) one could argue that I have already made a huge gas-use-reduction investment in terms of the location of my home, and thus a further investment in gas-use-reduction via my car is not necessary.

On Hidden Taxes

We can tease one other lesson from this regulation.  In regulating CO2 in transportation, the Obama administration had another choice -- a carbon tax.   A carbon tax on fuel would easily cause CO2 emissions to be reduced over time from cars  (in fact, it probably would do a better job, as history has shown that higher MPG standards actually lead to increased driving and thus have equivocal impacts on CO2 emissions).

Further, a carbon tax would have the advantage of putting 300 million people to work figuring out the most productive ways to reduce emissions.  Those who drive most, or have the greatest ability to cut back on driving and shift transportation modes, are going to be the ones to preferentially reduce emissions.

So why not a carbon tax?  Well, the politicians have all explained this pretty directly -- because they do not want to pay the political cost of raising taxes, particularly on something like gas whose price gets so much media attention.  Having demagogued oil companies as evil for so many years for raising gas prices, politicians were not able to bear the irony of themselves being responsible for higher gas prices.

So instead, they will force cars to be built more fuel efficiently, which will almost certainly raise the price of cars (as well as reduce choice and certain features).  These higher costs and reductions in choice are most certainly a tax on consumers, but they are an indirect tax.  They show up as rising prices and perhaps falling attractiveness of auto makers' product lines, which consumers will blame on auto makers, not the Congress or Obama.

So Obama will continue to say he has never raised taxes on the middle class, when in fact he has just made their cars $1500 more expensive.  Some day, we may live in a world where politicians are called to task for this kind of bait and switch, but my guess is that Obama gets away with it.

** Postscript: The one constant of all leftish regulation is that it puts about zero value on my personal time.  Every regulation seems to be about my spending more of my time in exchange for conserving some other supposedly scarce resource.  But I have never panicked that we are going to run out of oil or tungsten or iridium or whatever.  But I do know that I am going to run out of time, just like everyone else.   It is the only commodity I am positive is zero sum.

Via Overlawyered:

Sponsored by Congress' most senior member, Rep. John Dingell (D-Mich.), HR 759 amends the Federal Food, Drug and Cosmetic Act to include provisions governing food safety. The bill provides for an accreditation system for food facilities, and would require written food safety plans and hazard analyses for any facilities that manufacture, process, pack, transport or hold food in the United States.

It also calls for country of origin labeling and science-based minimum standards for harvesting fruits and vegetables, as well as establishing a risk-based inspection schedule for food facilities. "¦

The [Cornucopia] institute claims the preventative measures [on handling of food on farms] are designed with large-scale producers and processors in mind and "would likely put smaller and organic producers at an economic and competitive disadvantage."

You hear this all the time from proponents of certain regulations -- "even _____ corporation supports it."  GE supports global warming regulation.  Large health care companies support heath care regulation.  The list goes on forever.  That is because regulation always aids the large established companies over smaller companies and future upstart competitors.  Larger companies have the scale to spread compliance investments over larger sales volumes, and the political muscle to lobby Congress to tilt regulation in their favor (e.g. current cap-and-trade lobbying in Congress).  Regulation creates a barrier to entry for potential new competitors as well.

I hate to admit it, but regulation in my own business (which I neither sought nor supported) has killed off many of my smaller competitors and vastly improved our company's competitive position.  It is no accident that the list of the largest companies in heavily-regulated Europe nearly never change, decade after decade, whereas the American list has always seen substantial turnover.

Bottom line:  Never assume the states reasons of "safety" or "consumer protection" are the actual reasons for a regulation.  Regulation is much more likely to be protection of powerful political interests:

Flashback to 1959. The airline industry is on the cusp of its fifth decade, but there is a problem facing younger pilots who want to enter it. The old-timers just won't retire, and this frustrates potential entrants with much flying experience and training, thanks to military service in World War II, Korea, and elsewhere. The result is a sort of malinvestment in human capital, with many men trained to be pilots without private-sector jobs to justify the training.

What is a young, aspiring pilot to do? Well, he and his peers could make their presence and skills known to the airlines, signaling that the labor market had changed and that it would be possible to hire new pilots at lower wages. Not only would some airlines opt for the lower-priced laborers, thus lowering the airlines' reservation price required to provide flights to consumers, some owners of capital might invest in new airlines, thus increasing consumer choice, industry output, and create a downward pressure on prices.

Such would be the market solution, coordinated by changes in relative prices, and it would be peaceful, characterized by voluntary interaction and compromise by the parties involved. Unfortunately, there was another option, requiring the pilot to join a pilots union to lobby the federal government to enact rules forcing existing pilots to retire at age 60. All the union needed was a lobbying presence and some sympathetic regulators at the FAA.

Guess which option was chosen? It seems that in 1959, the aspiring pilots found a sympathetic ear in C.R. Smith, the then-president of American Airlines who also wanted to ground his older pilots. The industry was switching to jet engines, and Smith wanted to freeload off of the tax-supported training with those engines many of the younger pilots received in the military. So Smith instructed his lobbyists in Washington to rewrite FAA rules to force retirement at 60, and in December of 1959, an FAA administrator named Elwood R. Quesada simply authorized them. In January of 1961, Quesada retired from the FAA and immediately joined the board of directors of American Airlines. The retirement age rule has been in effect for almost 50 years.

Kevin Drum and Joe Romm offer a helpful primer on the politics of a carbon tax.  Unfortunately, they are a little shy in coming out with exactly what they mean, so I will add in a few helpful explanations.

1. A carbon tax, particularly one capable of deep emissions reductions quickly, is a political dead end....

What they are referring to is that though both are approximately equally costly, the government imposed costs of a cap and trade are better hidden from the consumer than those of a carbon tax, thus making it a more palatable plan for politicians.  By raising costs to producers, and then having the producers inevitably raise prices to the consumer, wily politicians can blame the producers,  not themselves, for the price increases.

2. A carbon tax that could pass Congress would not be simple. Advocates of a tax argue that simplicity is one of its biggest benefits.  Again, those advocates seem bizarrely unfamiliar with the tax code in spite of the fact that they pay taxes every year....

Basically, they are arguing that Congress is incapable of producing a simple, clean law.  Politicians used to be able to do this (the US Constitution will fit on the back of a cereal box -- the new EU proposed constitution barely fits in a large 3-ring binder) but have obviously lost the knack.  Or, more likely, as public choice theory tells us, as the dollar stakes have been raised, politicians are incapable of resisting the pressure of huge sums of money at stake for targeted tweaks and overrides for politically favored groups.

By the way, the comparison he is making to the US income tax code is a false one.  The carbon tax is much more like a sales tax, and many state governments in the US (though not all) maintain very simple and easy to administer sales tax systems with single rates and little complexity.  Our sales tax return in New Mexico, for example, consists of three numbers and a signature on a form about the size of a 3x5 card.

3. A carbon tax is woefully inadequate and incomplete as a climate strategy. Why?  Well, for one, it doesn't have mandatory targets and timetables.  Thus it doesn't guarantee specific emissions results and thus doesn't guarantee specific climate benefits.  Perhaps more important, it doesn't allow us to join the other nations of the world in setting science-based targets and timetables.  Also, a tax lacks all of the key complementary measures "” many of which are in Waxman-Markey "” that are essential to any rational climate policy, but which inherently complicate any comprehensive energy and climate bill.

Basically, their argument here is that they don't like the fact that the success of a carbon tax relies on the unmanaged, bottom up responses to higher prices by 300 million Americans acting in their own best interests and finding their own individual solutions to carbon reduction.  The authors instead prefer a few people in Washington, heavily influenced by a number of special interest lobbyists, setting policy and picking winners.  "Complementary measures" is shorthand for government picking of winners and subsidizing of ... whatever the hell Congress chooses to subsidize.  It is a great way to wrap pork in a nifty new green wrapper.

I think most folks who are not naive understand that what the authors are advocating for here is doomed to be hopelessly politicized -- this is, after all, how we got massive ethanol subsidies that do zero for carbon emissions.  But even if one believes the politicians in charge are monks of public service making purely science-based decisions, these guys still are advocating for at most a few hundred people making the major carbon reduction priority decisions from the top rather than 300 million making them from the bottom up.

Besides, isn't this argument deeply contradictory.  In points 1 and 2, they basically argued that the legislative process is deeply politicized and it is naive to think otherwise.   But then, in point 3, they make an argument for top down planning over bottom up response to planning that can only be even marginally valid if the process is not politicized and science, and not political pull, rule decisions.

Postscript: A couple of related stories, first from the Washington Times:

House Speaker Nancy Pelosi and House Energy and Commerce Committee Chairman Henry A. Waxman, both of California, were among the Democrats -- then in the minority -- who slammed Vice President Dick Cheney for holding closed-door meetings to draft energy policy early in the Bush administration.

Republicans "invited energy lobbyists to write the energy bill that gouges consumers with big payoffs to Big Gas and Big Oil," Mrs. Pelosi said in 2005. "They have turned Washington, D.C., into an oil and gas town when it is supposed to be the city of innovation, of new, of fresh ideas about our energy policy."

But the sweeping climate bill Mr. Waxman and Rep. Edward J. Markey, Massachusetts Democrat and chairman of the panel's key environmental subcommittee, introduced at the end of March includes a provision that benefits Duke Energy Corp., a founding member of the U.S. Climate Action Partnership (USCAP), whose climate plan released in January the lawmakers have frequently called a "blueprint" for their climate legislation.

The exemption would save Duke Energy -- along with other firms now building new coal power plants -- from having to spend millions of dollars outfitting its Cliffside, N.C., power plant currently under construction with "clean coal" technology.

"The USCAP companies must be delirious over the freebies that they've received after writing the blueprint for [the House draft bill]," said Larry Neal, deputy Republican staff director for the House Energy and Commerce Committee.

The second is from the Washington Examiner via Watts Up With That

In exchange for votes to pass a controversial global warming package, Democratic leaders are offering some lawmakers generous emission "allowances" to protect their districts from the economic pain of pollution restrictions.

Rep. Gene Green, D-Texas, represents a district with several oil refineries, a huge source of greenhouse gas emissions. He also serves on the House Energy and Commerce Committee, which must approve the global warming plan backed by President Barack Obama.

Green says Rep. Henry Waxman, D-Calif., who heads the panel, is trying to entice him into voting for the bill by giving some refineries favorable treatment in the administration's "cap and trade" system, which is expected to generate hundreds of billions of dollars over the coming years. Under the plan, companies would pay for the right to emit carbon dioxide, but Green and other lawmakers are angling to get a free pass for refineries in their districts.

"We've been talking," Green said, referring to a meeting he had with Waxman on Tuesday night. "To put together a bill that passes, they have to get our votes, and I'm not going to vote for a bill without refinery allowances."

I am totally confused - under what reading of the constitution can this possibly be within Federal powers?  Is there an off-chance that a pool might pick up and move across state lines?

A new federal pool-safety law has cash-strapped Valley homeowners' associations and apartment managers scrambling to finish costly drain modifications so they won't have to close pools this summer.

Some have already locked gates and posted signs; a few are mulling permanent closure to avoid renovation costs or stiff penalties and legal liabilities if they fail to comply.

The Virginia Graeme Baker Pool and Spa Safety Act went into effect in December and requires that all outlet fittings and drain systems in public and semi-public pools meet new safety standards that prevent drain suction from holding swimmers under water. Backyard pools at single-family residences are exempt.

Certainly the old design can be dangerous -- we updated our drains when we re-did our pool.   But a federal law?

One might expect that the underlying problem was so grave that it necessitated the shortcut of federal regulation over state and local regulation (which normally covers things like pool construction standards).  But in fact the article says that, according to the law's promoters, less than 2 people per year have been killed by this problem, and presumably most of these have been in private pools not covered by the law (since their numbers statistically dwarf those of public pools).

So why has expensive extra-Constitutional federal legislation been passed to save less than one person per year?  Well, because that one person was once related to a famous politician:

The law was named after the 7-year-old granddaughter of former Secretary of State James A. Baker III who died in 2002 in a spa after the powerful suction of a drain held her underwater.

I have written before how politicians' personal experiences often lead to bad regulation.

Per Overlawyered:

Mothers Against Drunk Driving is anything but an uncontroversial organization, as the Washington Times, Radley Balko, and our own archives make clear. Among the bad, sometimes awful ideas with which it has been identified are a reduction of the blood alcohol limit to 0.4 (meaning that for some adults a single drink could result in arrest), blanket police roadblocks and pullovers, the 55 mph speed limit, traffic-cams, and the imprisonment of parents who knowingly permit teen party drinking, to name but a few. Of particular interest when it comes to the policies of the National Highway Traffic Safety Administration (NHTSA), it has backed proposed legislation demanding that costly breathalyzer-ignition interlock systems be foisted on all new cars, whether or not their drivers have ever committed a DUI offense; it's also lined up with the plaintiff's bar on various dubious efforts to expand liability.

Now President Obama has named MADD CEO Chuck Hurley to head NHTSA. Drivers, car buyers, and the American public had better brace themselves for a season of neo-Prohibitionist rhetoric, nannyist initiatives, and efforts to criminalize now-lawful conduct. It won't be pretty.

Olson has tons of history linked on his site.

Jeff Skilling of Enron essentially sits in jail for being too publicly optimistic about his company's prospects in the face of a liquidity crisis  (despite popular perceptions, he was not convicted for accounting issues associated with off balance sheet entities).

I didn't follow the trial that closely, but my sense is that Skilling denied this charge.  But even if he had admitted it, it strikes me that he would have had an interesting case in his favor.  US securities law takes as an absolute core principle that relevant information must always be disclosed quickly and completely to both shareholders and potential shareholders alike.  It presumes that total openness is the best way to serve shareholders.

But in a short-term liquidity crisis, openness is the kiss of death.  As we have seen over the last 6 months, the merest hint that a liquidity crisis may exist at a company creates a real crisis, even if one did not exist before.  Liquidity crises are crises of confidence among short-term lenders, and the only way to fight such a crisis is to build confidence.  So what happens if the best way to serve shareholders is to keep silent about problems?  What if the best way to fulfill one's fiduciary responsibility to maintaining shareholder value is to be overly rosy in one's pronouncements during difficult times?

Fast forward to the Bear Stearn failure last year, from the Economist:

As recently as March 12th, Alan Schwartz, the chief executive of Bear Stearns, issued a statement responding to rumours that it was in trouble, saying that "we don't see any pressure on our liquidity, let alone a liquidity crisis." Two days later, only an emergency credit line arranged by the Federal Reserve was keeping the investment bank alive. (Meanwhile, as its share price tumbled on rumours of trouble on March 17th, Lehman Brothers issued a statement confirming that its "liquidity is very strong.")

And now, we hear that the Federal Government urged Bank of America's Kenneth Lewis to do exactly what Lay and Skilling were convicted of.

Federal Reserve Chairman Ben Bernanke and then-Treasury Department chief Henry Paulson pressured Bank of America Corp. to not discuss its increasingly troubled plan to buy Merrill Lynch & Co. -- a deal that later triggered a government bailout of BofA -- according to testimony by Kenneth Lewis, the bank's chief executive.

Mr. Lewis, testifying under oath before New York's attorney general in February, told prosecutors that he believed Messrs. Paulson and Bernanke were instructing him to keep silent about deepening financial difficulties at Merrill, the struggling brokerage giant. As part of his testimony, a transcript of which was reviewed by The Wall Street Journal, Mr. Lewis said the government wanted him to keep quiet while the two sides negotiated government funding to help BofA absorb Merrill and its huge losses.

Federal Reserve Chairman Ben Bernanke and then-Treasury Department chief Henry Paulson pressured Bank of America Corp. to not discuss its increasingly troubled plan to buy Merrill Lynch & Co. -- a deal that later triggered a government bailout of BofA -- according to testimony by Kenneth Lewis, the bank's chief executive.

Mr. Lewis, testifying under oath before New York's attorney general in February, told prosecutors that he believed Messrs. Paulson and Bernanke were instructing him to keep silent about deepening financial difficulties at Merrill, the struggling brokerage giant. As part of his testimony, a transcript of which was reviewed by The Wall Street Journal, Mr. Lewis said the government wanted him to keep quiet while the two sides negotiated government funding to help BofA absorb Merrill and its huge losses.

Many observers found it odd when Skilling was convicted of giving false information to shareholders but not for insider trading.  The implication, then, was that Skilling was guilty of lying to shareholders but not for personal gain.  Why then, people asked, did he do it?  It is becoming increasingly clear that putting on a happy face during an impending liquidity crisis is the only responsible approach for a leader to take.  Whether he goes to jail for it or gets rewarded by the Feds for it comes down to, what?  PR?

Update: In fact, one can argue that the Enron situation is more honorable than the BofA situation.  Enron management was trying to protect the value of Enron shareholders.  In the case of BofA, the feds demanded that BofA management hide information in order to complete a transaction that BofA shareholders might rightly oppose.

To get a liquor license for my corporation in California, I must tell the state where I was married and on what date(!)  This is about the weirdest thing I have been asked on a form for my corporation.  Of course this is on top of the usual over-the-top list of requirements to get a liquor license which include providing the state with:

• Fingerprints of owners and officers
• Name of bank and checking account numbers
• Name and address of accountant
• Name and address of attorney
• For every owner and officer:
  • Spouse's name
  • Home address
  • Home phone number
  • Drivers license number
  • Social Security number
  • Height, weight, eye and hair color
  • Value of home
  • Value of investments
  • Debts and mortgages
  • Net worth and Personal income history (again for each as individuals, not for the corporation).

The entire application, including forms and drawings, requires hours and hours to complete.  As is usually for government forms packages, the same information is requested on multiple forms.  To apply for two licenses requires two entire sets of forms filled out, signed, and notarize separately, despite the fact that 99.9% of the information is the same.  My wife and I have to fill out extensive, totally identical personal affidavits multiple times, despite the fact that the exact same forms with all this information are already on file with the State of California for other liquor licenses the company holds in the state.

The purpose, of course, is twofold:

• To make sure we are not fronting for Al Capone, a problem that went out of date about 5 minutes after the repeal of prohibition, but still drives licensing requirements 75 years later.
• To make the process arcane and onerous enough to discourage us from entering the business in California, or, as a minimum, to force us to hire a consultant to help us with the process, the profession of which is 99.9% dominated by ex-California ABC employees.  The harder the process is, the better the prospects for their post-retirement consulting gig.

Regulation in California has generally been good for the relocation-related businesses in Nevada in Arizona.  Now, California is looking to prop up the home electronics retailers in neighboring states:

"To reduce the electrical draw from TVs, the commission has proposed the nation's first mandatory energy limits on televisions -- limits that many large LCD and plasma TVs on the market do not meet.

"'We want to get rid of energy-guzzling televisions,' said Adam Gottlieb, spokesman for the state energy commission.

"The proposed rules would take effect from 2011 to 2013, eventually cutting the use of power by 50 percent.

"But only one-fourth of TVs now sold in the state meet the standard

From the San Francisco Chronicle via Al Tompkins via Overlawyered.

Apparently, the Obama administration may soon put limits on short-selling.  If so, this is cargo-cult thinking at its worst.  Prices fell really fast, so it must be the sellers' fault!  If we could just stop all this selling, then prices would never go down!

Here is my previous explanation of why short selling is in fact a critical tool to moderate bubbles, adding to the irony that we should be considering limits on this tool while suffering a bubble-induced recession.

At the start of the bubble, a particular asset (be it an equity or a commodity like oil) is owned by a mix of people who have different expectations about future price movements.  For whatever reasons, in a bubble, a subset of the market develops rapidly rising expectations about the value of the asset.  They start buying the asset, and the price starts rising.  As the price rises, and these bulls buy in, folks who owned the asset previously and are less bullish about the future will sell to the new buyers.  The very fact of the rising price of the asset from this buying reinforces the bulls' feeling that the sky is the limit for prices, and bulls buy in even more.

Let's fast forward to a point where the price has risen to some stratospheric levels vs. the previous pricing as well as historical norms or ratios.  The ownership base for the asset is now disproportionately made up of those sky-is-the-limit bulls, while everyone who thought these guys were overly optimistic and a bit wonky have sold out. 99.9% of the world now thinks the asset is grossly overvalued.  But how does it come to earth?  After all, the only way the price can drop is if some owners sell, and all the owners are super-bulls who are unlikely to do so.  As a result, the bubble might continue and grow long after most of the world has seen the insanity of it.

Thus, we have short-selling.  Short-selling allows the other 99.9% who are not owners to sell part of the asset anyway, casting their financial vote for the value of the company.  Short-selling shortens bubbles, hastens the reckoning, and in the process generally reduces the wreckage on the back end.

Megan McArdle hilariously commented:

I don't understand why the Commission doesn't focus on something more effective, like installing lavish statues of Mammon on trading floors so that traders can better propitiate him.

Update: By the way, this could be argued to be just another piece of corporate welfare.  CEO's hate short sales of their stocks, and would love Congress to ban the practice altogether.  The fact that the practice enforces accountability on them, I am sure, has nothing to do with it.  The reality is that if buying and selling are thought of as voting for or against a company's or asset's value and prospects, then banning short selling is a way of disenfranchising most of the world from this process.

By the way, not that I think it should matter from a policy perspective, but have you noticed that the shorts seem to be right an awful lot?  In retrospect, more shorting of bank and insurance stocks 3 years ago would have been a good thing.

This is a great example of a point I often make about regulation aiding incumbents and large companies against smaller companies and upstarts.  From the DC Examiner, via Radley Balko

Philip Morris, openly and without qualification, backs Kennedy's and Waxman's bills to heighten regulation of tobacco.

Philip Morris stands to benefit from this regulation in many ways. First, all regulation adds to overhead, and thus falls more heavily on smaller firms. Second, restrictions on advertising help Philip Morris' Marlboro, a brand everyone already knows, by keeping lesser-known brands in the shadows. (Existing restrictions on advertising have already helped Philip Morris in this regard, with an added benefit spelled out in Altria's annual report: "Marketing and selling expenses were lower, reflecting regulatory restrictions on advertising and promotion activities. "¦ ")

Finally, if the bill passes and the FDA gets added control over the industry, Philip Morris, more than any of its competitors, will have access to those bureaucrats and agency heads making the decisions. For all these reasons, RJ Reynolds and other tobacco companies oppose the bills Kennedy and Waxman are pushing.

Via Radley Balko, here is a great article on 5 great public safety measures that failed, and why.  Here is one brief excerpt, on why speed limits fail:

Because, and this surprised the hell out of us, people aren't completely retarded. As it turns out, people tend to drive at speeds they feel comfortable driving. Yes, there are reckless madmen out there, but they're not going to obey a couple of digits on a sign anyway. It just becomes a make-work project for traffic cops.

I could drive a Caterpillar D6 to work and still use less fuel than most folks do in their commute.  That is because I choose to work less than 2 miles from my office, out here in the northern suburbs of Phoenix (and, when it is not 110 degrees out, there is a bike path that takes a more direct route that is even shorter).  There is no place I would choose to live anywhere near the central business district of Phoenix;  if my job was downtown, rather than in my suburban neighborhood, my commute would increase to sixty minutes per day rather than six.

So, I wonder why the movement of jobs from city centers to suburbs has the Brookings folks so upset.  If your remember, urban planning types lamented the move of homes to the suburbs, saying this increased commuting time and energy use.  Now that the jobs are moving out to the suburbs as well, close to where people actually live (rather than where the planners want them to live), this increases gas use and commute times as well?

Since 1998, almost every major American metro area has seen a drop in the share of employment located downtown as jobs have increasingly moved into farther-out suburbs, exacerbating "job sprawl" "“ a phenomenon that threatens to undermine the long-term prosperity of the nation's vital economic engines, according to a report released today by the Brookings Institution.
...
""˜People sprawl' has long been known for its effect on the environment, infrastructure, tax base, quality of life, and more. Now, we must recognize what "˜job sprawl' means for the economic health of the nation," stated Elizabeth Kneebone, author of the report and senior research analyst at the Metropolitan Policy Program.

"The location of jobs is also important to the larger discussion about growing the number of jobs," said Robert Puentes, a Brookings senior fellow. "Allowing jobs to shift away from city
centers hurts economic productivity, creates unsustainable and energy inefficient development, and limits access to underemployed workers."

The economic productivity argument has me totally flummoxed.  Are they really arguing that companies purposely reduce their own productivity and access to labor?  Why?  This makes no sense, and as the Anti-Planner points out, goes totally unproven in their study.

The only possible argument I can see is a government one, that somehow suburb infrastructure by being more spread out is more costly per person than urban infrastructure.  But this is a point that has never been well proven, and is a classic case of looking at just one variable in an multi-variate system.  Sure, I would guess the total miles of sewer pipe and roads per person is greater in the suburbs than the city.  But the cost of land acquisition, infrastructure construction, and maintenance are all lower.  It is not at all clear how these balance, and the authors do not even try to figure it out.  I would be surprised if the government infrastructure costs per person in, say, Scottsdale is really higher than in Manhattan.

In fact, if there is an issue here, it strikes me it is more a government pricing issue than a demographic issue.  If government is somehow taking a loss on suburban vs. urban infrastructure, then it needs to rethink its tax structure to appropriately set property taxes and fees to match actual costs.  But I think we all know that this is NOT the problem.  Where suburbs are separate cities from the inner cities, those cities tend to have lower taxes and healthier budgets than their inner city cousins, giving the lie to the statement that suburban infrastructure is somehow more expensive (or, as a minimum, that any increase in costs are more than offset by other cost advantages to government of the suburbs).

And all this ignores the individual rights issue of why government should be influencing the shape of people's living and commuting choices at all.  Note the very suggestive words in the Brookings press release -- "Allowing jobs to shift away from city centers hurts economic productivity," as if the location of my employees requires government approval.   It's amazing to me that the children of the sixties grew up to be such control freaks.

Timothy Carney has a really interesting deconstruction of the US Chamber of Commerce agenda, and it is a good reminder of the forces at work pushing this country towards a corporate state (similar to France and Germany).  When large corporations lobby via the Chamber of Commerce, it is apparently not for low taxes and free markets, but rather targeted interventions and subsidies.  The article does not have a money quote I could find, but this should give you an idea of what the author discovered in the Chamber of Commerce rankings of Congressmen:

On the House side, it's a similar picture. The Republican with the lowest Chamber score was [Ron] Paul.   Even Rep. Barney Frank, D-MA, who wants to regulate everything except Fannie Mae, scored 14 points higher than Paul on the Chamber's scorecard.

Suffice it to say a ranking system that has folks like Ron Paul last is not based on free markets and small government.  Apparently, the Chamber marks down Congressmen who did not vote for all the bailout and stimulus packages, did not vote for various alternative energy subsidies, and did not vote to expand college loan subsidies.

The victor of almost any new regulation or licensing program is typically incumbents, and particularly large incumbents.  In my own business, there have been a series of new government regulations added over the years, with the effect that an industry formerly dominated by hundreds of ma and pa operators has consolidated to barely four or five players.  No one else can afford the compliance costs.  Licensing is almost always incumbent protection, and the government even frequently turns over the approval process for new entrants to the current incumbents (e.g. medicine and law).  And subsidies are almost by definition support incumbents over potential new entrants.

Postscript: In terms of incumbent protection, keep an eye on carbon permits.  There will be a ton of pressure to give free or discounted permits to current incumbents, as was done in Europe.  This would be a huge structural barrier to competition, as incumbents can service their current market share for free but new entrants (or expansions of existing entrants) will require expensive new permits.

This story in the Nation was a pretty classic example of intended consequences at work:  (via the Anti-Planner)

Thanks to an obscure tax provision, the United States government stands to pay out as much as $8 billion this year to the ten largest paper companies. And get this: even though the money comes from a transportation bill whose manifest intent was to reduce dependence on fossil fuel, paper mills are adding diesel fuel to a process that requires none in order to qualify for the tax credit. In other words, we are paying the industry--handsomely--to use more fossil fuel. "Which is," as a Goldman Sachs report archly noted, the "opposite of what lawmakers likely had in mind when the tax credit was established."

As I understand it, the paper companies had a process that has for decades been 100% biofuel powered, but if they now mix in some diesel fuel, they can get a tax credit under a provision that gives such credits for using a 50/50 diesel/biofuel mix.   Obviously, the indended consequence were to get 100% diesel fuel users to mix in some biofuel, but the law was not written in a way to preclude the opposite.

I found nothing particularly new or unique about this example, but I did find the author's reaction depressing.  Apparently, for Christopher Hayes, this is a failure of private enterprise, not of government:

I've come to expect that even nobly conceived laws will be manipulated and distorted for private ends. But once in a while I hear a story that gives me the queasy feeling that I'm nowhere near cynical enough...

the episode is a useful reminder of the persistently ingenious ways the private sector can exploit even well-intentioned legislation

First, the notion that the whole bio-diesel law was "nobly conceived" is a total hoot.  Basically this law was originally a politically-motivated subsidy of a powerful political lobby (farmers and agribusiness) that most science has demonstrated to have zero impact on its nominal target (CO2 production).  So all that is happening here is that one narrow business interest has hijacked the subsidy intended for a different narrow business interest.   Seriously, I probably should know who this author is, but can anyone who has covered Washington for, say, a week or more really attach  "noble" and "well-intentioned" as modifiers to "legislation" with a straight face?

Second, as a back-check on all the "well-intentioned" stuff, note that there has been no movement to change the original law now that this exploit is understood.  Why?  Because, Mr. Hayes says, the paper industry has a powerful political lobby.  I am having a hard time reconciling the picture of a group of folks in Congress failing to fix an expensive exploit in a law due to political pressure from 8-10 corporations with the view that these same guys passed the original law nobly and with the best of intentions.

Finally, there seems to be a general reaction, particularly on the left, that if Congress were just smarter then this would never happen.  But it HAS to happen.  It is a mathematic certainty.  No one, no matter how smart, can make changes to a single variable in a nearly infinitely large, chaotic, and multi-variate system like the economy and understand fully what the consequences will be.  It's absurd hubris to think otherwise.

Via Hit and Run:

The Obama administration recently filed a somewhat encouraging amicus curiae brief in the Supreme Court case involving Savana Redding, the girl who was strip-searched when she was in eighth grade by Arizona public school officials looking for contraband ibuprofen. The brief (PDF) argues that the U.S. Court of Appeals for the 9th Circuit was right to conclude that the search violated Redding's Fourth Amendment rights but wrong to allow a lawsuit that seeks to hold the school officials personally liable. "The school officials are entitled to qualified immunity because the law was unclear at the time they acted," says the brief, which was signed by Acting Solicitor General Edwin Kneedler, joined by lawyers for the Education Department, the Defense Department, and the Office of National Drug Control Policy.

I won't comment on the case per se, except to say that we have to be insane to be placing adults in positions of responsibility who think it makes sense to strip search young girls looking for Advil.

But I will observe that the Obama administration's position in the last sentence is NOT the one it takes with my business any time or any place.  Qualified immunity because the law was unclear?  Hell, most of the regulations we deal with are wildly unclear -- everything from anti-trust law, which is anything a jury says it is, to how many sinks I need in my store.  No one has ever suggested that I have qualified immunity because the law is unclear.  In fact, the government makes very clear that I am absolutely liable for whatever they think the law says, even if this opinion changes from day to day.

A reader sent me this, and I was just floored.  The California Air Resources Board (CARB) is asking for legislation to ban black cars in California

The California legislature is considering regulating the color of cars and reflectivity of paint to reduce the energy requirements to cool them. A presentation on the proposed legislation by the California Air Resources Board is below.

The problem isn't the color per se, but the reflectivity of the paint overall. And dark colors just don't reflect well, so they are likely out. "Jet black remains an issue," says the report.

Anyone who's ever entered a very hot car knows that it can be cooled down immediately by driving a few feet with the windows open, effectively neutralizing any color-caused heat issues before engaging the air conditioner. But whatever, black is evil.

Un-freaking-believable.  This is what happens when you satisfy an emissions reduction goal (in this case CO2) via complex command-and-control legislation rather than simpler price mechanisms.   Earlier, I told the story of how California adopted an increasingly sprawling CARB micro-management of their economy to reduce CO2 rather than implementing earlier proposals for a simple carbon tax.

I tell folks all the time -- there are very few bad people in government, just people with very bad incentives.   Government inspectors are no exception.  They look around them and see falling government tax revenues.  They know that state and local governments are looking to cut costs, and they know further that lawmakers are likely to look at falling construction starts and reduced business activity and say "I bet we could do with fewer inspectors."

So state inspectors, naturally, want to hold onto their jobs, so they have to go out and look busy.   One way to look busy (and to further look like one is being useful) is to be more picky about small, meaningless violations. Writing up more violations makes it look like one is needed (after all, if there are so many violations out there, surely we need inspectors to find them).  Also, violations demand return visits and follow-up inspections, which again create the illusion of activity.

Which leads to stuff like this:

Sherrie Nielson owns two Chandler bars, antique-filled Priceless Too at Alma School and Elliot roads, and Priceless Primetime at Dobson and Elliot.

An inspector with the county department of environmental services has told her she needs to install a sink at the bar so it's convenient for the bartenders to wash their hands

Nielson has one sink in the bar area, but that's for washing glasses. County regulations say employees can't wash their hands in the same sink that they wash dishes.

"I've owned 'Too' for 30 years," Nielson said. "The sink we use is probably 20 feet in a different direction. . . . I have a dishwashing sink; (the inspector) wants a hand sink next to it."

Nielson says counting the sinks in the kitchen and the restrooms, she has four sinks available for washing hands. But the key point is that it has to be convenient for the bartender.

"If I don't comply, they will start proceedings to shut me down," she said.

Johnny Dilone, a spokesman for the county environmental services department, verified that Nielson's license could be revoked if she doesn't install the new sink.

This story resonates with me, as we have had to fight the sink battle in a number of locations as well.  Take one small store we run in a state park in northern California.  Because we make coffee there, we must comply with food preparation rules (including 8 hours annually of training, lol.  I am not a coffee drinker, but for all that I sure hope we have good freaking coffee).  We eventually had to install:  A three sink dishwashing station, a sink in the employee bathroom, a separate sink for handwashing in the store a few feet from the sink in the bathroom, and a mop sink.

The problem is that the regulations are confusing, and no one in the local health department would look at our plans in advance.  Obviously, it is a lot easier to fix missing sinks and such at the planning stage, but the health department in this county would only inspect actual facilities, so would only tell us if our design met their requirements once it was built!

One of the images I remember form reading Atlas Shrugged was of darkened skyscrapers, as the government forced the closure of the upper stories of buildings to save energy.  Only building owners with political pull were excepted.  It seems San Francisco is following a similar plan:

Turn the lights out -- or pay.

That's the message of legislation being revived by Board of Supervisors President David Chiu, who will introduce a measure Tuesday mandating that skyscrapers turn off all nonemergency lights at night as a way to save energy. The introduction comes just days before Earth Hour Saturday, in which people are urged to turn off their lights for an hour at 8 p.m.

The legislation is essentially a new run at a law introduced a year ago by former board president Aaron Peskin that ultimately withered after strong opposition by the Building Owners and Managers Association of San Francisco. (We couldn't reach them by press time Monday). Peskin's proposal mandated building owners turn the lights out, or face administrative fines, but it was criticized as difficult to enforce. Chiu actually pushed Peskin to introduce that legislation, he said.

I would have assumed that if electricity consumption were really so high and so useless, that building owners would have had sufficient reason on their own to turn lights off.  After all, isn't it already turn the lights out or pay?  Unless of course electricity is free in SF.

One problem poorly understood by academics and government officials is that many folks outside of government actually work longer than a 9-4 work day.  As it happens, I am in my office tonight, likely until midnight, catching up on some things I could not with the phone ringing off the hook all day.  The only time I have ever occupied prime downtown real estate in an office tower was when I consulted with McKinsey & Co., and I can say for sure that there was seldom if ever a night when there weren't people in the office working well past midnight  (unfortunately, I was often one of them, which explains why my consulting career outlasted the birth of my first kid by only as long as it took me to find a new job).

Postscript: There is an incentive mis-match at work here in most leases.  Few commercial leases include individual metering for utilities, since most buildings are not set up for it  (it would actually be moderately hard, since office space is often reconfigured over time, shifting from one suite to another).  As a result, there is a kind of tragedy of the commons where renters pay their share of average use for all occupants, diluting the effect of their own usage on their own bills.  I am not sure how fining building owners when their tenants work late is going to help, though.

At the end of the day, this is all micro-managed bullsh*t.  If you want less electricity usage, raise rates, and let individuals figure out how to get the savings.  Just because a particular use (eg night lights in skyscrapers) is the most visible to policy makers does not make it the marginal use or the low hanging fruit for energy savings.

I don't have time right now to editorialize in depth, but I found many of the links in this Reason piece on newspaper bailout proposals to be really creepy.  Nothing could be worse for the First Amendment than making news organizations dependent on government largess.   This bit from the Nation is not only totally misguided, but it demonstrates an utter lack of understanding of history, to the point of demonstrating contempt for hist0rical accuracy:

Only government can implement policies and subsidies to provide an institutional framework for quality journalism. [...]

Fortunately, the rude calculus that says government intervention equals government control is inaccurate and does not reflect our past or present, or what enlightened policies and subsidies could entail.

Our founders never thought that freedom of the press would belong only to those who could afford a press. They would have been horrified at the notion that journalism should be regarded as the private preserve of the Rupert Murdochs and John Malones. The founders would not have entertained, let alone accepted, the current equation that seems to say that if rich people determine there is no good money to be made in the news, then society cannot have news.

I find the arguments that such intervention is needed because publishing is too expensive and effectively excludes all but the largest players to be hilarious in the Internet age.  The real problem of newspapers is in fact that it has become so cheap to publish, and competition is rampant.  The problem papers are struggling with is not monopoly, but just the opposite -- that their historic monopoly is gone.   (Take yours truly, for example.  With a $10 a month hosting fee and some of my free time, I have a circulation of almost 5,000 per day).

This appears to me to be yet another veiled attempt by current incumbents to use the government to give them a boost against competition.  Murdoch's empire is utterly assailable -- all you have to do is a better job.   The only thing that makes a business position unassailable is government protection or political advantage aimed at selected players.

Which reminds me of an interesting story.  Ben Franklin  (you know, one of those founders that the Nation refers to as horrified by domination of journalism by moneyed interests) is pretty famous for being among the country's first postmasters.  Before the Revolution, he was postmaster of Philadelphia and later one of the lead postmasters for all the colonies.  We all read in school how he did all kinds of innovative things, because Franklin was a freaking smart guy**.

What you may not know is why he sought out the postmaster job.  Ben Franklin was a printer, and a large source of income for him was running a periodical in Philadelphia  (the names changed over time but among them were the Philadelphia Gazette).  At the time, there were no wire services  (and no wires!)  News came via mail.  Franklin actively sought the postmaster job as a way to get special, privileged access to the mail, which he monitized via his publications.   He had fresher news, and he used the mails to deliver his own publication to customers for free  (a right competitors were not granted)  In a strategy that he did not invent (it was fairly common at the time, and in fact he took the Philadelphia job from his main journalistic competitor who had pursued the same strategy) the surest route to success in the newspaper business was to secure an advantaged position via the government, specifically in a postmaster role.

I am perfectly happy not to go back to this model.

** Postscript:  Franklin seldom gets credit in popular literature for the real areas he contributed to science.  Everyone knows the kite in the thunderstorm story, but I always thought this kind of made him look like a goof, rather than a real scientist.  But Franklin did some real theoretical science, for example by describing what was really going on in a Leyden jar, and substantially advancing how scientists thought about electrical charge and capacitance.

We have taken over a demolished campground near Guntersville, AL  (Honeycomb, if anyone is familiar with the area) and are currently in the process of rebuilding it and opening it to the public.  We have not previously done business in Alabama, so here is what we have had to do so far to be legal:

1.  Identified and retained an attorney in the state to act as our registered agent (required for in-state process service)

2.  Registered as a "foreign corporation"  (foreign meaning we are from another state) with the Secretary of State

3.  Registered with the state for a Corporate income tax number

4.  Registered with the state for a business privilege tax number  (Nothing sets me off faster than when I get the pious "doing business in our state is a privilege" spiel from a state.  What an awful theory of government and individual rights that statement represents!)  The privilege tax (which is in some sates, like AZ, a euphemism for sales tax)  seems to be a second income tax in AL, calculated on a slightly different basis. (Update: apparently the first year's taxes must be paid in advance, at the time one starts business in the state).

5.  Registered with the state (yes, with another ID number) to collect sales taxes

6.  Registered with the state to collect lodging taxes  (By the way, spent a couple of hours with the code trying to figure out what these taxes apply to and what they don't, as this varies by state.  Also, the tax rate tables are a complicated mess, and can vary for two locations located a few yards from each other).

7. Registered with the County (yes, with another ID number) to collect county sales tax.  Actually, they outsource this collection to a private company called "Revenue Discovery Systems" which is a nice Orwellian name for a private tax collector.  Is tax farming coming back in vogue?

8.  Registered with the County to collect county lodging tax.   (sigh, we are going to have to file multiple reports each month to report all of our transaction taxes - some states actually have unified reporting and payment).

9.  No city taxes, it turns out, because we are just outside of any incorporated areas.  Thank goodness for small favors

10.  Registered for state unemployment taxes  (yes, with another ID number).  This was one of those circularities that really drive you crazy.  I can't pay people until ADP has the state set up for us in the payroll system, but they need an unemployment number that the state refuses to provide until we have issued at least $1500 in state payroll checks.  Arrrgghhh.  Fortunately (?) ADP will go ahead and start issuing the checks without a number, but there is a $50 per month fee for doing so.

11.  Registered for state income tax withholding (yes, with another ID number).  Again, need this to pay people legally

12.  Don't know yet if there is County withholding.  There are county income taxes in some places.

Expect in these forms to fill out the exact same data over, and over, and over again.  The state will maintain corporate records in about 6-8 parallel data bases and corporations are responsible for keeping every one of these data bases correct.

What I have not done yet, but know from experience I will have to do

1.  Obtain county occupancy permits or licenses

2.  Obtain county and/or state health inspections

3.  Obtain Coast Guard inspections of the docks

4.  Register with the state and/or county to pay personal property taxes

5.  Get miscellaneous bizarre licenses that are absolutely unpredictable and impossible to discover until we are in violation, like the egg merchant license in KY and CO.

I thought for about 3 microseconds about selling beer and wine in our store, but I am sick and tired of the intrusive, picky, petty, and time-consuming liquor licensing processes in most states, and the income we make from alcohol sales simply doesn't measure up to the hassle.

Postscript: I try to remember that we should actually be thankful for this mess.  Though it represents almost 20 hours of my personal time to set up, and hours of time each month  filling out forms and reports, not to mention thousands of dollars a year to ADP to help manage, this mess is still orders of magnitude better than what an entrepeneur would face in France or Germany.

I have been negligent in covering some of the nuttiness that is resulting from the CPSIA, the law last year passed in response to the Chinese toy recalls that allows greatly increased regulatory authority (requiring extensive testing of every lot, aircraft-manufacturing-like supply chain documentation, etc) over the entire toy distribution chain for certain perceived health threats like lead and pthalates.  Worse, the law provides enormous openings for third party groups to sue for ridiculous amounts of money over unproven health risks.  It is not clear to me a group suing under this law even needs to prove injury, but just some mythical small percentage chance of potential injury.

What all the targets of this law have in common are absurd overreactions to trivial risks of ingesting microscopic quantities of certain substances like lead.  Recently, a whole bunch of mini-bikes were taken off the market because 12-year-olds might suddenly start gnawing on the engine parts and ingest some lead.  For reasons that are not really clear to me, this country finds it impossible to rationally assess risks -- we have schools shut down with hazmat teams called out to clean up the mercury when someone drops a thermometer in the lab, while day after day the school probably serves fish in the cafeteria with higher mercury content than any kid would get from being near a broken thermometer.

Overlawyered has been all over this story, for example here.  The most recent episode came the other day when an EPA spokesman suggested that all libraries needed to pull books from the shelves printed before 1985 because there might be a billionth of a gram of lead in the ink:

It's been a day of dramatic developments on the CPSIA-and-libraries front. An Associated Press article out yesterday quoted Scott Wolfson, a spokesman for the Consumer Product Safety Commission (CPSC) as officially urging the nation's libraries to remove from their shelves children's books printed before 1986 until more is known about their possible dangers from lead in their inks, dyes and pigments:

Until the testing is done, the nation's more than 116,000 public and school libraries "should take steps to ensure that the children aren't accessing those books," Wolfson said. "Steps can be taken to put them in an area on hold until the Consumer Product Safety Commission can give further guidance."

Within the day, however, commission chief of staff Joe Martyak said that Wolfson had "misspoke", and that the commission has neither concluded that the books might be dangerous nor recommended that libraries take any action. An early version of the AP story is here, with the Wolfson quote, and a later version here, for purposes of comparison.

It's not as if Wolfson was making things up here. As readers will recall, one of the two CPSC commissioners, Thomas Moore, called weeks ago for some undefinedly large share of old books to be "sequestered" from children for the time being. However, the full commission has left the issue up in the air rather than endorsing Moore's view.