Trends

NUCLEAR SUBSIDY OVERTURNED

The special interest legislation by which the Federal government subsidizes the insurance of nuclear power plants has been overturned by a U.S. District Court in North Carolina. Judge James B. McMillan ruled that the Price-Anderson Act is an "unconstitutional deprivation of property without due process of law." The Act, first passed in 1957 at the behest of insurance companies and the power industry, limits the liability for any nuclear accident to $625 million, regardless of the actual extent of the damages. It further provides that the Federal government (i.e., the taxpayers) pays the majority of these damages, with the insurance companies paying only a fraction (currently $125 million).

The irresponsibility of the law was clearly identified by Judge McMillan: "The act violates the equal protection provisions…of the Fifth Amendment because it provides for what Congress deemed to be a benefit to the whole society (the encouragement of the generation of nuclear power) but places the cost of that benefit on an arbitrarily chosen segment of society, those injured by nuclear catastrophe." Further, he said, the act "irrationally and unreasonably places a greater burden upon people damaged by nuclear accident than upon people damaged by other types of accidents, such as motor vehicle or electrical accidents, involving power companies."

Nuclear power advocates have long maintained that even though the odds of a nuclear catastrophe are extremely small, insurance companies could not afford to take the chance and would refuse to insure the plants in the absence of the act. Nonsense, said Judge McMillan. He suggested that the power companies establish a liability pool to spread the cost of any disaster among all operators of nuclear power plants—a solution that strikes us as quite reasonable. There is simply no justification for forcing the taxpayers to subsidize power plant insurance, or for short-changing the victims of a disaster—no matter how remote its likelihood.

SOURCE:
• "Nuclear Mishap Liability Limit Struck Down," Los Angeles Times, April 1, 1977.

MARIJUANA PROHIBITION ON THE WAY OUT

During his campaign for the presidency Jimmy Carter pledged an end to the Federal prohibition on use of marijuana. Present Federal law calls for a $5000 fine and up to a year in jail for first-time simple possession, with the penalties doubled for a second offense. These penalties remain on the books, despite a 1972 presidential commission recommendation to decriminalize the substance, subsequent decriminalization in eight states, and a de-facto end to Federal enforcement efforts, other than those against dealers.

But the end of the prohibition appears to be in sight. In its annual report to Congress on marijuana and health, HEW announced that marijuana use has joined that of other common drugs such as alcohol, tobacco, and caffeine as "part of the national lifestyle." The HEW report went on to say that marijuana use "is more than a fad and may well prove to be an enduring cultural pattern in the United States." HEW also noted that most of the widely publicized fears about possible adverse medical effects of the drug remain unproved. The recognized physical effects are limited to temporarily reduced psychomotor coordination (as with alcohol) and possible long-term lung damage (as with tobacco).

About the same time as HEW's report was released, the results of another study became public. This one, conducted by the Law Enforcement Assistance Administration for the National Governors Conference, analyzed the extent of marijuana use in the states that have so far decriminalized it. In Oregon, the first state, there was no increase in use during the first two years, and only a small increase the third year. Hard data from the other seven states were not available, but the "judgment of knowledgeable officials" indicated no substantial increase in usage in those states, either. In addition, there was no evidence of an influx of users from other states into the eight decriminalized states.

A week later, the Carter Administration formally asked Congress to repeal the Federal penalties. The Administration's position was advanced by Dr. Peter Bourne, head of the Office of Drug Abuse. Bourne played a key role in drafting the National Governors Conference report on marijuana. (He also stated that the Administration is "carefully reexamining the Federal prohibition on cocaine.) Bourne's testimony to the House Select Committee on Narcotics Abuse and Control was strongly endorsed by Gary, Indiana Mayor Richard G. Hatcher, speaking for the 15,000-member National League of Cities. The League had previously gone on record supporting decriminalization of marijuana. Others testifying in support of repeal were Reps. Jacob Javits and Edward Koch (who have introduced bills to that effect), Rep. Yvonne Burke, the Playboy Foundation, and the National Organization for Reform of Marijuana Laws.

Decriminalization is also contained in the latest version of the proposed revision of the Federal criminal code, Senate Bill 1. The new bill, cosponsored by Sen. Ted Kennedy, drops all penalties for possession of up to 10 grams of marijuana.

SOURCES,
• "HEW Report Says Marijuana Now Part of National Lifestyle," UPI (Washington), March 10, 1977.
• "Marijuana Use Doesn't Rise with Passage of Decriminalization, Study Finds," Los Angeles Times, March 9, 1977.
• "Carter Aide Asks Congress to Decriminalize Marijuana," Ibid., March 15, 1977.
• "Three Lawmakers Back Carter Marijuana Plan," Ibid., March 16, 1977.
• "The Remaking of S-1," Time, April 4, 1977.

ISLAND SECESSIONISTS

Massachusetts, birthplace of American secession from Great Britain, has given birth to another secession movement. Officials of the island resorts of Nantucket and Martha's Vineyard have signed a joint declaration of independence from Massachusetts and filed a secession bill in the state legislature. State Rep. Terrence McCarthy said the islands intend to form their own country or state, or join another state. Offers of annexation have already been made by officials of Connecticut, Rhode Island, Vermont, and New Hampshire.

The secession movement has arisen out of the state's new legislative redistricting plan. In reducing the legislature from 240 to 160 members and complying with one-person, one-vote rules, the plan requires each district to have about 33,000 residents. The combined population of the two islands, each of which now has its own representative, is only 11,000. Thus, the redistricting would force both islands into a single, much larger district with a single representative. "The only effective advocate for the islands is an islander," says Rep. McCarthy. "If the commonwealth persists in its plan to thrust arbitrary government upon us…we are prepared to withdraw our consent of its continued authority over us, and dissolve all connection with it."

On April 4 residents of Nantucket voted four to one in favor of secession. On Martha's Vineyard, the first two towns to hold town meetings on the issue also supported secession. The latter island's other towns will hold individual town meetings through mid-May, but the outcome appears to be overwhelming support for the breakaway.

SOURCES:
• "Massachusetts Islands Secede," UPI (Boston), March 23, 1977.
• "Islanders Peeved Enough to Secede," UPI (Chilmark), April 4, 1977.
• "Massachusetts Islanders Back Secession," Los Angeles Times, April 5, 1977.

COSTLY REGULATIONS

The economic impact of Federal regulations has long been a matter of concern to those being regulated—which today means nearly every business in the country. But until very recently almost no one in Washington gave much thought to whether their regulations might do more harm than good. That situation seems to be slowly changing.

Last year the Council on Wage and Price Stability (COWPS) began requiring "inflation impact statements" on new regulations issued by executive agencies (e.g. OSHA, NHTSA, FDA, but not independent agencies like the FTC, EPA, or CAB) that could entail costs of more than $100 million. But the requirement has had little effect because the impact statements are published after the regulations have appeared in the Federal Register and COWPS has no authority to block them if they do appear to cost more than their benefits.

The Carter Administration is now considering a substantially stronger version of this idea. Under this plan, each executive agency would have to prepare a detailed economic impact statement and submit it to the White House Economic Policy Group two months before publication of the proposed regulation in the Federal Register. The EPG, whose membership includes the Secretaries of Treasury, Commerce, Labor, and State as well as the director of the Office of Management and Budget and the Chairman of the Council of Economic Advisors, would have substantial clout to recommend against adoption of regulations with adverse cost-benefit ratios.

Not to be outdone, the independent FTC is beginning to conduct impact evaluations on some of its regulations already in effect. The first such study will evaluate what has actually taken place in response to its 1971 rule requiring retailers to stock large quantities of sale-advertised items. There are indications that the rule has raised stores' administrative and inventory costs, reduced both the size of price markdowns and the number of bargain sales, and benefitted suburbanites at the expense of inner city dwellers. FTC commissioner David Clanton predicts that such impact analyses will become an increasingly important element in the agency's rule-making procedures.

They will have to, if Congressman William Moorhead has his way. Moorhead has introduced a bill to require economic impact statements on proposed regulations from all government agencies, both executive and independent. The bill would require COWPS to conduct the analysis while the proposed rule was being drafted, and require the analysis to be published in the Federal Register along with the proposed rule and the agency's own impact statement.

While not the solution to the problem of government regulation (which is to abolish the agencies), tough requirements for economic impact analyses could be a valuable weapon in curbing the agencies' heretofore unstoppable growth.

SOURCES:
• "A Cost Criterion for the Regulators," Business Week, March 14, 1977, p. 36.
• "The FTC Reviews Its Own Consumer Rules," ibid., March 28, 1977, p. 92.

NEW MEDIA FREEDOM

Federal courts in two separate cases have rejected FCC restrictions on radio and TV programs. In the first case, the U.S. Circuit Court in Washington, DC overturned an FCC order that had banned George Carlin's "Seven Words You Can't Say on TV" from being broadcast over the radio during hours when children might be listening. Two of the court's three judges voted to overturn the ban, one arguing flatly that it violated the First Amendment and the other merely stating that it was too broad and carried the FCC into the "forbidden realm of censorship." The latter noted that the FCC's rule could have been used to prohibit broadcasting of the Nixon White House tapes, Shakespeare's plays, and the Bible. He also pointed out that if communities don't like the use of such language on a particular station, they have ways of making their distaste known, through public protest.

The other ruling concerned pay cable TV. Some years ago, the FCC, reacting to pressure from broadcasters, prohibited pay cable operators from presenting a wide variety of programs: feature films more than three but less than 10 years old, the World Series and football bowl games, regular season sports, and all series programs. Unfair, ruled the U.S. Court of Appeals in Washington, DC. The FCC has "indulged in speculation and innuendo" about the supposed threat of "siphoning" by pay cable operators. By issuing its prohibition the agency "has not put itself into a position to know whether the alleged siphoning phenomenon is a real or merely a fanciful threat to those not served by cable," the court ruled. Although it leaves the door open to possible future regulation, the court's decision for the present clears the way for expansion of the promising pay cable industry.

SOURCES:
• "Panel Sets Aside FCC 'Censorship,'" Washington Post, March 17, 1977.
• "Court Rejects U.S. Curbs on Pay-by-the-Program TV," AP (Washington), March 26, 1977.

PADDED UNEMPLOYMENT RATES

Two University of Miami economists have discovered that millions of Americans became unemployment statistics for the sole reason that they applied for food stamps or other welfare benefits. The fact that qualifying for financial assistance under many government programs now requires registration for work has resulted in inflating the official unemployment figures, according to Drs. Kenneth W. Clarkson and Roger E. Meiners.

In a study published by the University's Law and Economics Center, they show that the inclusion of individuals who would not previously have been considered unemployed has had the effect of padding the unemployment rate over the past several years by approximately two and one-half percentage points. Their study shows that in 1976, when unemployment was officially measured at 7.7 percent, the actual unemployment rate under traditional standards was approximately 5.3 percent.

"The observation that reported unemployment has been at levels unprecedented in post-war history is the result of several factors," they say, "including the change in the magnitude and duration of payments of unemployment compensation, higher levels of transfer payments for welfare programs, higher values of in-kind transfers, changes in the composition of the labor force, changes in the value of spending time searching for jobs, modifications in manpower programs, and changes in the definition of unemployed persons. Although each of these factors contributes to the persisting high levels of measured unemployment, our preliminary findings indicate that the single most important factor is the change in certain welfare eligibility requirements. These requirements result in the inclusion of many individuals in the ranks of the unemployed who do not fit the traditional definition of unemployed persons."

Dr. Henry G. Manne, director of the Center, explained that the curiosity of the two economists had been piqued by the fact that reported rates of unemployment have recently been almost double the historical pattern during periods of high employment, and by their discovery that eligibility rules for food stamps, Aid to Families with Dependent Children and other programs of lesser significance had been changed in the 1970's to require registration for, work. Several months ago, he said, they began probing deeply into the wealth of employment data collected by the U.S. Census Bureau, traced changes in welfare program eligibility rules, and developed a computer program to aid in analyzing upsurges in official unemployment statistics resulting from the introduction of work registration requirements.

Drs. Clarkson and Meiners estimate that the food stamp program alone inflated the officially-counted number of unemployed by more than a million persons last year. "There is, in fact, a permanent increase in the number of individuals included in the unemployment statistics that represents a new class of individuals who are not seeking work. Prior to the introduction of work registration requirements…these individuals would not have entered into the measured unemployment statistics. Since the unemployment rate is often used as a basis for policy decisions, it is important to distinguish between the effects due to the new institutional requirements and those attributable to the more traditional reasons for identifying individuals as unemployed."

SOURCE:
• "Inflated Unemployment Statistics: The Effects of Work Registration Requirements," Kenneth W. Clarkson and Roger E. Meiners, Law and Economics Center, University of Miami, March 1977 (P.O. Box 248000, Coral Gables, FL 33124).

SHOE TARIFFS REJECTED

In an important victory for consumers and free trade, the Carter Administration has rejected pleas from shoe manufacturers for higher tariffs on imported shoes. The tariffs would have increased the costs of imported shoes—mostly from Taiwan, Korea, Brazil, Spain, and Italy—by $200-300 million per year, and had been recommended by the government's International Trade Commission. In announcing the decision Carter said he was "very reluctant to restrict international trade in any way."

Unfortunately, Carter's alternative to raising tariffs appears to be an alternate form of restricting international trade. He has ordered his special trade representative, Robert Strauss, to negotiate a "voluntary" limit on imports with each of the offending governments. Strauss has already begun talks with officials of Korea and Taiwan, publicly stating that "There has to be a rollback from 1976 levels." Whether the Strauss/Carter gambit will be just a symbolic gesture to the domestic shoe industry or a substantial new restriction on trade remains to be seen.

SOURCE:
• "Carter Rejects Higher Tariffs on Imported Shoes," Los Angeles Times, April 2, 1977.

SACCHARIN BACKLASH

The FDA's proposed ban on saccharin has stirred up the strongest antigovernment protest in recent years. HEW Secretary Califano reports receiving 600-800 letters per day on the issue, more than HEW "has ever gotten on any other issue." An FDA spokesman said he'd never seen anything like the deluge of phone calls the agency was receiving. The industry-sponsored Calorie Control Council, Inc. took out full-page ads in major newspapers attacking the ban as "just another example of the arbitrary nature of big government." Both the New York Times and the Los Angeles Times editorialized against the ban, calling for replacement of the Delaney Amendment under which the FDA was required to act.

Dr. Irving Kessler, professor of epidemiology at Johns Hopkins, called the Delaney law "illogical" and pointed to his own controlled studies of the bladders of over 1000 human users of artificial sweeteners. They showed "no evidence that saccharin or cyclamates cause bladder cancer in people." The president of the American Cancer Society, Dr. Lee Clark, stated that the harm caused to diabetics and the obese by the saccharin ban would be worse than 'the "possible carcinogenity of saccharin." The ban "may cause great harm to many citizens while protecting a theoretical few," he said.

As sales of saccharin products boomed, the president of the firm that makes Sweet n' Low announced that he had commissioned a laboratory to conduct tests on the carcinogenic potential of salt, pepper, and sugar. "In the case of pepper, I am told there's a fairly good prospect that used in sufficiently enormous amounts it will cause cancer in rats," he said. "If this turns out to be true, I will demand that the FDA ban pepper," which it must do under the Delaney law.

Legislative reaction was swift and strong. Sen. S.I. Hayakawa introduced a bill to legalize saccharin. So did Rep. Andrew Jacobs, whose bill provided for a cautionary label reading, "Warning: The Canadians have determined that saccharin is dangerous to your rat's health." Rep. James G. Martin introduced a bill to modify the Delaney law to authorize the HEW secretary to decide if the benefits of a product outweigh the risk of its causing cancer. Former FDA commissioner Herbert Ley (who lost his job seven years ago over the cyclamate controversy) predicted that Congress would revise the Delaney law in a matter of months.

When the dust settles, the FDA's power will likely remain intact, though its credibility has been seriously damaged. The Delaney Amendment will probably not be repealed, as it should be, but at least will be made less rigid. The great saccharin flap of 1977 illustrates once more the idiotic lengths to which the State will go to save us from ourselves.

SOURCES:
• "Ban on Saccharin Opposed by Public," AP (Washington), March 30, 1977.
• "Ex-FDA Chief Expects OK for Saccharin or Substitute," Los Angeles Times, March 17, 1977.
• "The Ban on Saccharin: How? Why?," Ibid., March 20, 1977.
• "U.S. Food Ban Law 'Illogical,' Expert Says," UPI (Baltimore), March 13, 1977.
• "Diet Soft Drinks May Gain Calories in Saccharin Ban," Los Angeles Times, March 11, 1977.

POSTAL MONOPOLY CHALLENGES

The government's monopoly on first class mail delivery is being challenged in New York and Kansas. In both states, private entrepreneurs are attacking the constitutionality of the private express statutes, which grant this monopoly. The Kansas case involves Robert Black, a businessman from Pittsburg, Kansas, whose Alternate Systems, Inc. has been delivering mail for over a year (see Spotlight, Sept. 1976). Black was hauled into court by the Postal Service last year, and the U.S. District Court ruled against his contention that the private express statutes exceed the proper power of Congress and deny rights retained by the people. Black's attorney has appealed and the case is now before the U.S. Court of Appeals for the 10th Circuit.

The second case involves the Brennan Hand Delivery Co. of Rochester, NY (see Trends, Dec. 1976). The Postal Service in February filed a civil complaint against the Brennans, charging violation of the private express statutes. Mrs. Brennan has responded, like Black, on constitutional grounds. "When the Founding Fathers drafted the Constitution, they had no intention of giving anybody a monopoly," she told the New York Times. Their case was filed in U.S. District Court in March. Meanwhile, the company is still delivering letters in Rochester.

SOURCES:
• "Brief of Appellants-Defendants, U.S.A. vs. Robert E. Black and Alternate Systems, Inc.," March 1977.
• "Postal Service Files Suit Against Upstate Couple that Runs Mail Service," New York Times. Feb. 27, 1977.

NLRB SUPERFLUOUS?

The premise that union representation elections can only be fair if closely supervised by the National Labor Relations Board has been an article of faith since the agency was established in 1935. That premise has now been seriously questioned in a pathbreaking study of how those elections actually work.

Three labor/management scholars interviewed 1300 workers who voted in 37 NLRB elections from 1968 to 1973. Their intent was to determine why workers voted for or against the union and how frequently they changed sides during the campaign. Their findings were surprising: only 13 percent of the workers switched sides during the 45-day (average) campaign period, despite vigorous persuasive efforts by both company and union. Yet NLRB regulation and supervision "rests on the assumption that the precampaign intent of most employees is tenuous and easily changed by the campaign," says Prof. Julius Getman, one of the researchers. Since this does not appear to be the case, the argument for NLRB participation is largely without foundation. Indeed, says Getman, "The only people who profit from the present system are labor lawyers."

Chalk up one more empirical case against a useless government agency.

SOURCES:
• "Do Representation Elections Need the NLRB?" Business Week, March 21, 1977, p. 54.
• Union Representation Elections: Law and Reality. Julius G. Getman, Stephen B. Goldberg, and Jeanne B. Herman, Russell Sage Foundation, 1977.

MILESTONES

• Software Tax Axed. The State of Florida's attempt to tax computer software as tangible personal property has been struck down by the state's Division of Administrative Hearings. The Division ruled that the consequential element in the sale of software is data, which is defined as intangible property and therefore not taxable. The case was brought by Nova Computing Services, Inc., from which the state had attempted to collect some $26,000 in back taxes. Many states have been taxing software as tangible personal property, even though Federal law considers such property intangible, as is now the case in Florida. (Source: "Florida Kills Tax on Software," Computerworld, Jan. 17, 1977.)