Checking His Premises

Former civil rights activist (now Harvard law professor) Derrick Bell has changed his mind on the issue of legally mandated desegregation. In the 1960s, Bell was a lawyer for the NAACP working on cases based on the US Supreme Court's 1954 Brown ruling that segregated schools are unconstitutional. Several weeks ago, though, he paid his own expenses to travel to San Bernardino, California, there to testify in court against mandatory busing. Bell now believes that desegregation often creates more problems than it solves.

Bell's main criticism is that the Brown decision has been misinterpreted. "For so long we've assumed that unless we have a majority white school, it wasn't an effective school, and I don't believe that is necessarily true," he says. Rather, Bell would like emphasis to be transferred from racial "balance" to the improvement of basic educational opportunities for blacks and minorities. Bell notes that, speaking pragmatically, forced desegregation means that school systems have to concentrate on keeping white children in desegregated schools (because of white flight) rather than on the needs of black students.

"We shouldn't give up on desegregation," Bell stresses, "but we should define desegregation as not simply the elimination of separation but also the elimination of all the other aspects of the stigmatization of black children" (such as unequal curricula and lack of minority parent participation in schools).

Brown's former colleagues at the NAACP Legal Defense Fund are not exactly happy with his reassessment. One lawyer chides Bell for wanting to return to a "separate but equal" doctrine and described Bell as "a nice bright guy who has gone off the deep end." Another black lawyer castigates him for giving up on the "court process of achieving change." Perhaps Bell has just realized that might is not always right.

Breaking the Barriers

If elected, Republican presidential front runner Ronald Reagan declares that he will seek repeal of the federal minimum wage law, the federal inheritance tax (without regard to economic circumstances), and federal income tax on the interest from savings; he will also create a task force "from outside government" to study Social Security.

It is reassuring to hear such libertarian sentiments from a major party contender and even better to find them backed by economist Walter Williams, whose special interest is minorities and jobs. Williams, in an interview with Time (Jan. 21, 1980), estimated that the January 1 increase in the minimum wage from $2.90 to $3.10 an hour guarantees at least a five percent increase in unemployment—particularly for low-skilled black teenagers and minorities. "How else do you explain the massive change from waiter service to self-service in restaurants? How else do you explain the absence of ushers in movies and youngsters at supermarkets to take your bags to the car?" Williams points out. "We have cut the bottom rungs off the economic ladder, and the consequence is that for the first time in US history, we have developed a permanent welfare class."

Williams also advocates a reassessment of child labor laws. "If a 14-year-old is not benefitting from school, perhaps he should be allowed to leave and get work in a car wash. Perhaps then he will discover he cannot get ahead without an education, and that lesson in life will motivate him to return to school." Another option ruled out by minimum wage laws is an apprentice system, where unskilled workers could learn crafts at low wages as assistants. Williams further criticizes state licensing laws, pointing out that "roughly 600 occupations are licensed in the United States," keeping those occupations closed to minorities.

Echoing the mood of much of the country, Williams ends with a plea for less special treatment. "Black people do not need any special programs. All they need is for government to get off their backs."

Private Boycotts

Three of America's most prestigious scientific/technical organizations have cancelled exchanges with their Soviet counterparts to protest the internal exile of Soviet physicist and dissident Andrei D. Sakharov.

In the first action of this kind in its 117-year history, the National Academy of Sciences voted 10 to 3 to boycott meetings with Soviet scientists for the next six months. Spokeswoman Barbara Jorgenson said, "No one was against some sort of action. There was some discussion over whether six months was a long-enough suspension."

The world's largest engineering society, the Institute of Electrical and Electronic Engineers (IEEE), also decided to suspend its annual program of technical exchange with the Popov Society, the leading Soviet electrical engineering society. The IEEE's program with the Popov Society at its May conference in Boston was called off, as was an IEEE plan to send a delegation to a Popov congress in Moscow that same month.

In addition, the Federation of American Scientists was richly rewarded when it issued an appeal to scientists to sign a declaration stating their intention to refuse participation in any scientific exchange with the Soviet government or its representatives until such time as Sakharov is released from internal exile. Nine Nobel prize winners have already signed the declaration, and the FAS has sent it out to other scientific societies for more signatures. The FAS will keep track of all pledges received and will report the results to the Soviets.

These societies may yet prove that the scientific community's disapproval is a more painful weapon than government guns or diplomacy.

Where the IRS Clamps Down

A study based on the IRS's own statistics and done by Freedom, the newspaper of the Church of Scientology, shows that there are gross inconsistencies in the use of levies and seizures to settle taxpayer delinquent accounts. Levying a delinquent taxpayer's bank account or insurance policy or seizing property occurs on over 40 percent of the delinquent accounts in Alaska (the highest) as compared to just under 13 percent in Wyoming (the lowest).

The national rate is 268 seizures per 1,000 taxpayer delinquent accounts, with the Western region having the highest ratio at 306 per 1,000 followed by the Mid-Atlantic region (295), the Central (289), Midwest (287), North-Atlantic (279), Southeast (221), and the Southwest (217). The five worst cities for a tardy taxpayer to live in are Anchorage, Reno, Cleveland, Helena, and Burlington.

Freedom researcher Michael O'Brien attributes the discrepancies to the lack of strict guidelines governing an IRS agent's use of such measures to collect overdue taxes.

Expensive Warning

In their never-ending efforts to protect people from their own actions, government bureaucrats have long called for mandatory patient package inserts (PPIs) with all prescription drugs and refills. PPIs are explanatory leaflets, written in nontechnical terms, indicating the proper use and potential side effects of the drug.

The Food and Drug Administration (FDA) has been a prime promoter of this idea but found itself having to defend its views against the White House's Regulatory Analysis Review Group (RARG) in November. The RARG urged the FDA to come up with cheaper ways to get the drug information to the consumer, noting that such information strategies could then be passed on to other areas such as product safety, nutrition, food additives, and workplace safety. While the FDA pegs the five-year phase-in cost of implementing its mandatory program at $270 million, the American Pharmaceutical Association insists the cost would be closer to $1.7 billion.

The RARG suggested such less-costly options as a reference book with all drug information available at pharmacies (costing $5 million annually); PPIs only with new prescriptions, not refills ($50 million annually); PPIs only for the 75 most prescribed drugs ($61 million); or a requirement that all labelling now written in technical language be redistributed in simpler language ($87 million). What didn't seem to occur to the RARG is to study whether it would be more efficient to find out how many people actually bother to read the little depressing notes now included with a large number of drugs and whether it should not, instead, be up to the consumer to make sure his or her doctor adequately explains such drugs before accepting prescriptions for them.

Laetrile Freedom

About 1,000 Americans a month attempt to acquire Laetrile legally, following the route prescribed in the 1975 Bohanon decision. The decision states that cancer patients are allowed to import Laetrile, a drug derived from apricot pits that is alleged to help cancer victims recover, if they can produce an affidavit signed by their doctor that their disease is terminal. The decision was the result of a suit brought by cancer victim Glen Rutherford in an Oklahoma court, but Rutherford hasn't ended his battle yet. At the end of February this year, the 10th Circuit Court of Appeals in Denver ruled that the constitutional right to privacy does not guarantee access to Laetrile and upheld the FDA ban on interstate commerce in the substance—putting the Bohanon decision on shaky grounds. Rutherford's lawyer, Kenneth Coe, says they will bring the case to the Denver appeals court for a new hearing and if they lose that will appeal the latest decision back to the US Supreme Court.

On a different front, the National Cancer Institute will now be allowed to conduct federally financed Laetrile tests on cancer victims who have not benefited from conventional forms of therapy. This will be the first time tests of the FDA-banned substance have been allowed on humans.

The FDA decision to approve Laetrile testing on humans is a victory for the Committee for Freedom of Choice in Cancer Therapy, a pro-Laetrile group formed in 1972. The CFCCT's Robert Bradford has managed—by winning popular support—to put the FDA on the defensive, challenging it to prove that Laetrile is not effective. Other pro-Laetrile groups, such as the 25-year-old National Health Federation, argue on the basis of "freedom of choice in personal health where such choices do not infringe upon the liberties of others."

Pro-Laetrile groups are skeptical of the FDA testing, saying that since testing will be allowed only on terminally ill patients, it will be a case of too little, too late. A new animal test of Laetrile is being done prior to the actual tests on humans.

In addition, California governor Jerry Brown has indicated that he will support a measure to legalize Laetrile in California as a treatment for seriously ill cancer patients. This is significant because the FDA ban has made it illegal to involve interstate commerce in Laetrile's production or distribution, and none of the 21 states where it is already legal has any significant crop of apricots (a prime source of Laetrile is apricot pits), whereas California is a leading apricot producer.

A San Diego, California physician was recently sentenced to six months' imprisonment for using Laetrile as a cancer treatment. Though Brown has refused to grant the physician a pardon, he did offer sanctuary to the parents of Chad Green of Massachusetts, who had defied a Massachusetts court order not to put their three-year-old son on Laetrile therapy (their son later died). Brown called it "an instance of the monopoly of the healing practice that I intend to change" and argued that the State should be reluctant to intervene in a family decision on such a controversial matter.

Medical Myths Debunked

Increasing frustration over the swelling costs of health care is leading to some innovative proposals with one common denominator: competition.

Several members of Congress, led by Stanford economics professor Alain Enthoven, suggest that free-market competition may be more effective at containing health costs than regulation. They can point to the example of West Germany, which attempted to hold down health care cost increases with a Health Cost Containment law, passed in July 1977. It succeeded—sort of—for nine months, whereupon another surge in costs, more rapid than the increase in 1977, set in. "The lesson we have learned," says health expert Peter Rosenberg of the Ministry of Labor and Social Affairs, "is that we cannot restrain the increase in health costs by legislation."

What are the alternatives, then? Enthoven suggests that the time is ripe for governmental measures that would encourage competition. One such bill would have employers contribute a fixed amount toward the cost of one of several alternative health plans offered to employees. The various plans would range in coverage, and if the employee chose a plan costing more than the fixed amount, the employee would pay the difference. On the other hand, if the employee chose a cheaper, less-comprehensive plan, he or she would receive a rebate for the difference.

Aside from providing alternative health plans, employers need to study cost-reimbursement trends. A recent study shows that employers and physicians tend to carelessly approve small medical bills because they are promptly reimbursed by insurance companies. Physicians are actively encouraged to use technology rather than old-fashioned personal examination because they earn more that way. Contrary to popular mythology, though, the increased costs are not due to large-scale technology such as CAT scanners but rather to more frequent use of minor tests such as ordinary X-rays and blood tests. The study was done at the Robert Wood Johnson Foundation and was published in medicine's leading publication, the New England Journal of Medicine.

One of the key alternatives encouraged by Enthoven and other free-market proponents is prepaid group practice via Health Maintenance Organizations (HMOs; see Trends, Nov. 1979) and Independent Practice Associations (IPAs). Much like the cheaper legal clinics, these prepaid health care plans offer comprehensive coverage for less money—a trend begun by Kaiser-Permanente some years ago. Studies show that HMOs do manage to hold down costs; patients who belong to them are hospitalized half as often as patients belonging to fee-for-service plans, and surgery on HMO patients is performed half as often as by private practitioners. Some argue that this is because HMOs specialize in younger, healthier populations. But a 1972 study by Dr. Milton Roemer of UCLA showed that group practices in fact cover patients with a greater average age and cover a much higher percentage of families with chronic illnesses than do fee-for-service insurance plans.

According to another medical myth, the poor have vastly less access to medical care than do the rich. Government statistics cited by medical writer Harry Schwartz show that in fact the poor and aged receive equal, if not more, medical treatment (Wall Street Journal, Feb. 15, 1980). In 1977, for example, families earning less than $5,000 annually accounted for 158.3 hospital discharges per thousand persons that year; the figure steadily goes down as income increases, until for families earning $25,000 or more, the number is 93.4, some 40 percent less. Poorer families also had more physician contacts a year (5.8 compared to 4.7 for the same extreme incomes), and more hospital care (1,541 days of hospital care as compared with 678.8 days). The study pointed out that proponents of increased government intervention in health care often confuse the issue of the amount of health care and the environment in which people receive health care.

How Not to Help the Unemployed

No matter what route the government takes to "protect" American workers, it seems to fail miserably every time. Two recent reports have exposed bureaucratic boondoggles in (1) cash aid to laid-off workers and (2) government training programs.

The Trade Act of 1974 was passed to ensure layoff benefits and job relocation services to US workers who lose their jobs due to import competition, such as those in the auto, steel, and clothing industries. Eligible workers can receive, for a period of a year, weekly cash allowances that, when added to state unemployment compensation, come to 70 percent of their average weekly gross wage. But the General Accounting Office, in interviewing 868 workers eligible for the program, made several interesting discoveries. In the first place, nearly three out of four workers were employed again by the time they received the cash aid—not surprising, since the workers waited an average of 16 months before receiving the cash. Second, most workers received the cash in a lump sum, rather than weekly, averaging $824 but ranging from as little as $2 to as much as $6,010. Since the Trade Act went into effect, about 403,000 workers have received about $617 million in cash benefits. Workers shunned the employment and job relocation services offered. Only a little over two percent of eligible workers entered government-sponsored training programs. (The Trade Act is due to expire in September 1982 but may be renewed.)

Those laid-off workers were smart to opt out of government-sponsored training, it turns out. An Industry Weekly report says that, despite a shortage of about 500,000 full-time skilled workers each month, technical firms adamantly refuse to hire graduates from government training programs. "We have had 'graduates' who couldn't find the 'start' button on a machine," a Cleveland plant manager says. And David Coverdale of the Cross & Trecker Co. agrees: "We don't apply for or accept government funding," he explains. "We could get it from the government, the chamber of commerce, or our industry association. But we have had bad luck with government programs." The company is instead reviving apprenticeship programs and pursuing more contact with technical schools.

Boycotting L.A.

Rent-control opponents tired of pointing to New York as an example of the destructiveness of that charade now have new proof of a city in the throes of a worsening housing shortage aggravated by rent control: Los Angeles. Only one in a series of western cities that have adopted rent control, the Big Enchilada is proving that even so-called moderate controls lead to problems now familiar in the east's New York. Builders, lenders, and investors are boycotting L.A., and the program has led to rapid discrimination between renters covered by the regulation and those not.

Because landlords can only increase rents on units that have been voluntarily vacated or from which tenants have been evicted, rent increases of as high as 60 percent have been levied on newly vacated apartment units. Luxury apartments (one-bedroom units renting for more than $420 a month) are exempted from controls. A predictable result is that the market for low-cost units is tightening up drastically and that new units will be renting for more than the free-market price to compensate for those held below the market price by controls. Since landlords will be faced with more people wanting to rent the same unit, they will of course tend to choose people with "favored characteristics," as one study puts it (i.e., middle-class whites, preferably single).

Landlords are also raising income by cutting down on maintenance costs, thus leaving tenants in shabbier buildings. As one landlord put it, "We're doing nothing for renters now. We're better off if a good tenant gets disgusted and moves," because then, of course, they can raise their rents. Los Angeles suppliers of carpets, furniture, and other items say their business is off 30 to 70 percent since 1978 (when rent control was enacted).

The fallacy that rent control allows lower-income people to live comfortably in low-cost housing is debunked by Eric Hemel in an article in Taxes and Spending (Fall 1979). Hemel points out that, "since lower-income people move more than other people, many of them will actually experience rent increases under rent control." He cites a 1970 Rand Corporation Report stating that since less desirable apartments had a higher turnover of tenants, and since the landlord could increase rents only on those vacated apartments, high-mobility tenants "had higher rents than they would have had in a housing market free of controls."

Other studies of southern California cities that have recently adopted rent control point to the same conclusion: it just hurts renters. University of Southern California researchers John Kirlin (a professor) and Steven Frates (a graduate student) cite figures showing that:

• In Santa Monica, after a strong rent control movement managed to get a rent control ordinance on the June 1978 ballot, applications to convert to condominiums jumped from 46 in the six months preceding to 122 in the following six months. (The June 1978 measure failed, but rent control was approved in April 1979.)

• In Berkeley, 81 units have been approved for condominium conversion since rent control was approved last November—compared to an average of five a year in the six years preceding that.

• In El Monte, apartment construction has slowed markedly and condominium conversion has increased since rent control was passed.

If the facts are so patently against rent control, why has it continued to be so popular? Eric Hemel says that "much of the problem lies with a blind infatuation by rent control opponents…with an abstract notion of economic efficiency, and an apparent indifference to the plight of the poor and elderly. So long as rent control advocates remain alone in stressing the need to protect society's downtrodden," he adds, "they will be perceived as having a monopoly of virtue."

Denationalization Update

With the US government taking another turn at socialized industry via the Chrysler bailout, the examples of Portugal and Italy merit our attention, for they are desperately trying to desocialize major nationalized industries.

Portugal's new antisocialist center-right Democratic Alliance government (see Trends, Mar. 1980) paved the way, for example, for the return of Carlos Duarte Ferreira to his company, taken over by workers at the height of the revolution in 1974. Metalurgica Duarte Ferreira, Portugal's foremost light industry complex, very nearly went bankrupt in the five years it has been under government management (via a workers committee). Now, Ferreira has been restored as chairman of the board and has been given six months to pull the complex out from under. MDF is only one of the industrial firms that the government has been returning to private industry in the hopes of recouping—or at least putting a hold on—the huge losses the firms have been suffering.

And talking about huge losses, Chrysler would do well to note that Italy's Alfa Romeo loses about $1,000 on every car produced at its new factory—a loss billed to the taxpayers (see Trends, Jan. 1980). And it has plenty of company. Italy's Institute for the Reconstruction of Industry, the largest and most diversified State holding company, began in 1933 and flourished, more or less, until the 1970s. But bureaucratic inefficiencies crept in, too-free borrowing with government backing fostered debt, and State firms were ordered to solve social problems. Whereas private firms could dismiss workers, State firms had to ignore absenteeism and low productivity. Now the government is acknowledging these facts and proposing that, as a first step, IRI's holdings be reduced at least 40 percent. The least efficient firms should be closed, some politicians say, and the profitable ones should be turned over to private industry. Also, managers of State firms may be granted more autonomy and freedom from political interference—such as in the appointment of personnel.

School Initiative On Again

The National Taxpayers Union's voter initiative to introduce tax credits for educational expenses in California, which failed to get on the ballot last November, is back again. The revised initiative was submitted to the secretary of state on January 26 and has an April 30 deadline for collecting 553,790 signatures to get on this November's ballot (see Trends, Nov. 1979). The measure would make every taxpayer entitled to an educational tax credit of up to $1,200 per full-time student, to be deducted from state income tax due. Political consultant Butcher-Forde has agreed to do a test mailing to 300,000 names, soliciting signatures and funds, and will work for the rest of the required signatures if the test mailing is successful. Butcher-Forde is the group that qualified Jarvis II (see Trends, Mar. 1980) for the ballot (and raised $200,000 above expenses), mailing to contributors to Jarvis-Gann's Prop. 13.

Both the Libertarian Party and Republican Party of California have endorsed the tax-credit initiative, and NTU predicts a 75 percent chance of victory if it gets on the ballot. NTU is not forgetful of its opponents, though; Los Angeles county voted to spend $55,000 to oppose a school voucher initiative in 1979, so apparently they can use taxpayers' money to oppose what they disapprove of. To help finance advertising, NTU is counting on private schools as well as individual teachers who may want to go into business for themselves if the initiative passes and creates a market for more alternative schooling. The Coons-Sugarman voucher plan, which also failed to get on the ballot last year, will probably not be tried again this year. But the NTU initiative may face competition from another school initiative proposal that could make it onto the November 1981 ballot. Jack Hickey's Committee to Redistribute Educational Dollars Objectively is pushing a Performance Voucher Plan—which the San Francisco Chronicle has called the "Public School Death Ray." It would abolish compulsory education and all public schools and give school tax money to parents whose children pass achievement tests given by a new "department of educational accountability."

Genetic Engineering Vindicated

Just a few years ago, scientists regarded it with extreme caution, hysterical city councils passed ordinances restricting it, and the People's Business Commission lobbied the federal government to ban it. Yet today, gene-splicing, or genetic engineering, stands vindicated as a relatively safe procedure, and it's starting to produce dramatic results.

Much of the attention thus far has focused on the production of interferon, a substance produced in tiny amounts by the body itself to defend against viruses and cancer cells. Scientists at two firms—Biogen and Hoffman-LaRoche—have announced the synthesis of interferon by common E. coli bacteria. Since the bacteria can be cloned, the potential exists for large-scale production of this valuable substance.

Just two weeks after the firms' January announcements, the federal government dropped most of its restrictions on gene-splicing work. Previously, all federally funded researchers using such techniques had to comply with extremely meticulous and costly containment requirements. Within the past year the consensus within the scientific community has changed, with the realization that the risks are much less than once was feared. As a result, last fall a special National Institutes of Health committee recommended only minimal safety precautions; its recommendations were officially adopted by NIH by publication in the Federal Register on January 29.

The new consensus hasn't convinced everyone, however. Sen. Adlai Stevenson has introduced a bill that would require companies to notify the federal government of their gene-splicing work—even if they don't receive a penny of federal funds. At present most companies doing such research are voluntarily submitting data to NIH and following its containment guidelines. Stevenson wants to make this mandatory, despite some researchers' fears about proprietary data being compromised in this hotly competitive area.

Going All the Way

One of the leading opponents of airline deregulation before it was enacted has done a complete about-face. TWA president C.E. Meyer, Jr., now thinks deregulation is not going fast enough; he wants the Civil Aeronautics Board terminated this year instead of in 1983, as planned.

Speaking to an Aviation Week conference on the effects of deregulation, Meyer endorsed a completely free market as the best way of enabling air carriers to cope with soaring fuel prices. "Genuine deregulation—not the selective, halfway, piecemeal version we've seen so far—could have gone a long way toward enabling the airlines to stem the crippling erosion of their profitability last year," he said. And he pointed out that the airlines were hurt even worse in the international market, where the CAB retains full regulatory powers.

All in all, it's an amazing turnaround for one who (like many airline officials) was as recently as two years ago predicting disaster due to competitive freedom.

Truck Battle Heats Up

Would you believe General Motors in bed with the Teamsters to oppose Jimmy Carter and Ted Kennedy? That's how the trucking deregulation battle is shaping up in Washington.

Economists long ago demonstrated that regulation of trucking by the Interstate Commerce Commission benefits mostly those truck firms that manage to obtain ICC certificates. Shippers in general pay 20 to 50 percent more than they would in a free market, and various arbitrary regulations result in thousands of trucks making return trips (backhauls) empty, wasting a billion dollars or more just in fuel each year.

Over the past two years the ICC has taken a cue from the success of airline deregulation and begun loosening up. Entry requirements have been reduced, the hauling of government freight deregulated, and some restrictions on backhauls eased. But the law still tightly controls pricing and service, allowing truckers to set rates collusively under antitrust immunity. It is breaking up this cartelization that most economists favor—and which the Carter administration's bill, essentially the same as Kennedy's, is designed to do.

Congress, however, hasn't been quite so eager. In the Senate, Commerce Committee chairman Howard Cannon is presiding over a more modest bill that would reduce but not eliminate the antitrust immunity—and would also restrict the ICC's taking major deregulatory steps on its own. In the House an even weaker bill is wending its way through committees. These bills have come under fire for their timidity from, among others, Transportation Secretary Neil Goldschmidt, Associate Attorney General John Shenefield, the National Federation of Independent Business, and the ICC's new chairman, economist Darius Gaskins.

But just when it looked as if only the Teamsters and the American Trucking Associations would be opposing deregulation, who should come along but a group of truck industry suppliers: GM, Firestone, B.F. Goodrich, Bethlehem Steel, Republic Steel, and Corning Glass. These worthies have now organized the Committee of Truck Shippers [shippers?] to lobby for retaining "the key elements that promote stability in the industry"—namely, the status quo that leads to above-market profits for those who purchase trucks and tires.

The outcome remains in doubt. But one thing seems clear: at least in this case, what's good for General Motors is certainly not what's good for the country.

FTC Slammed Again

The antiregulation steamroller moves on, with the Federal Trade Commission still among the leading targets. Latest to act was the Senate, which voted 77-13 in February to impose significant restrictions on FTC powers.

Included in the Senate bill were bans on the FTC's attempt to regulate "unfair" commercials aimed at children and on its efforts to control the activities of private standard-setting organizations like Underwriters' Laboratory. But the effort to include a one-house veto of new trade regulations, as passed by the House (see Trends, Feb.) was defeated on the Senate floor. Passed instead was a much weaker provision calling for a 20-day review period during which the commerce committees of both houses would consider proposed trade regulations. If either disapproved, both houses would have to vote to overturn the rules within 60 days, subject to the president's approval.

Anti-FTC forces also lost a close vote on barring the agency from taking any action with respect to state-licensed professions. And the effort to stop the FTC from paying the expenses of lobby groups that testify before it was watered down to provide only a limit of $50,000 per rule-making.

How the House and Senate will resolve their differences was unclear at press time, and President Carter has threatened to veto the final bill. But the wide margin by which both houses voted makes the likelihood of an override of any veto quite high.

Proprietor's Liability

In March we reported a victory for airport neighbors in Los Angeles, wherein the California Supreme Court upheld their right to sue for damages caused by increased noise due to airport expansion. Now another southern California court has clarified another key issue: the airport operator's authority to control the noise.

For years the argument has raged over this issue. Those in favor of more noise (mostly the airlines) have argued that because the federal government (via the Federal Aviation Administration) operates the airways and sets noise requirements for planes, it has therefore preempted the field of noise control. Airport operators (usually city governments or port authorities) have countered that, as the owners of the facilities and as parties increasingly being found liable for noise damages, they must be able to specify rules of operation for those who use their facilities.

The airport operators' eminently reasonable position has now been upheld by Superior Court judge Thomas C. Murphy. In a case filed by Hughes Airwest against the Burbank-Glendale-Pasadena Airport, Judge Murphy rejected the federal preemption argument and held that the airport's noise rules are "reasonable and nondiscriminatory." Thus, the airport authority is being treated just like a private firm, with both the rights and responsibilities of an owner.

Needless to say, the airline plans an appeal, and the issue is expected eventually to wind up before the US Supreme Court.


Constitutional Sex. A New York statute prohibiting "deviate" sexual conduct (including sodomy and oral sex) between persons not married to each other has finally been struck down by the New York Supreme Court, appellate division. The court ruled that "personal sexual conduct is a fundamental right" stemming from the right to privacy in a relationship.

Allocation Anomalies. Statistics show that there is more gasoline available today than there was a year ago and that gasoline demand is down, yet car drivers have found themselves in lines once again. The culprit, says the Lundberg Letter (a widely regarded weekly gasoline-sales publication) "is an allocation system that requires uniform treatment in broad geographical areas a month at a time." One gasoline station owner, Jules Krasner of Florida, adds that "the oil companies will give us more gasoline, but the Department of Energy office in Atlanta won't approve my requests for additional amounts." Sure sounds like the DOE doesn't know how to run a business.

The Shadow Knows. The Shadow Open Market Committee, a 10-member panel organized by monetarists to influence the Federal Reserve System's policymaking Federal Open Market Committee, announced that it believes it has finally succeeded in converting the Federal Reserve System after seven years of work. Fed chairman Paul Volcker virtually concurred with the group in advocating progressively lower growth rates for the money supply as a way to ease inflation. The shadow committee's next efforts will be directed at reducing the ratio between government outlays and the gross national product to 20 percent by 1985 (it is projected at 22.3 percent in 1981).

IRS Memos Now Open. District Judge Charles Richey in Washington ordered the Internal Revenue Service to release all General Counsel memoranda, Actions on Decisions, and Technical Memoranda written since the Freedom of Information Act in 1976. These explain the legal reasoning behind IRS rulings and policies. The IRS has asked for a rehearing, saying the notes contain tax-return data. The Taxation Without Representation Fund, which publishes a magazine called Tax Notes and which sought the information, says it would agree to delete such tax-return information from public release of the documents.

Adults-Only Rental Bans. Pollster Mervin Field announced that 75 percent of the respondents in a survey on adults-only rentals in California oppose prohibiting such complexes, and 85 percent support the right of adults to live in such complexes. A state bill that would have banned adults-only complexes (SB 440) died in the legislature. Referring to the 505 adults interviewed by telephone in the survey, Field noted that "property rights is where they draw the line" and said that "there's a growing feeling of anti-legislation."

SEC Rule Opposed. A new Securities and Exchange Commission rule that requires a tender offer to proceed within five days of a takeover announcement has been challenged in federal court by the Ohio Attorney General. Ohio law requires a 20-day waiting period as a protection to investors; some 36 other states have takeover statutes with similar waiting periods, and they are likely to challenge the rule also if the Ohio effort is successful. Ohio Attorney General William Brown complained that the SEC is making "simultaneous compliance with state and federal laws an impossibility."

Utah Joins Rebellion. The so-called "sagebrush rebellion" (see Trends, Dec. 1979, and "Trouble on the Range," Dec. 1977) has a new ally—Utah. A recent state law claims 22 million acres (42 percent of the state) now held by the federal Bureau of Land Management. The Utah version sets up a state board to plan uses for the land, and its governor Scott Matheson says Utah will wait until the courts decide whether their claim is legal.

Greyhound Monopoly Slimmed Down. California's Public Utilities Commission, in a landmark decision, approved a Trailways bus lines application to serve routes between San Diego and Yuma and between Calexico and Los Angeles along with Greyhound. The application was actively opposed by Greyhound, but the PUC noted that competition would encourage "innovative fare schedules, cleaner and better maintained depots, and courteous, accommodating personnel."

Charity Restrictions Lifted. The Supreme Court, in an 8-1 decision, struck down a law limiting administrative and fundraising spending by a charity to 25 percent. The ordinance was passed by a Chicago suburb, Schaumburg, allegedly to protect residents from fraud and (somehow) to protect the physical safety and privacy of residents. Average fundraising costs in Illinois run to 26 percent. There are various regulations in 35 other states restricting a charity's freedom to operate.

S.S. Head Comes Clean. Outgoing Social Security Commissioner Stanford Ross has admitted that Social Security is a tax on workers, a pay-as-you-go system weighted to favor low-income workers in which workers pay much more than they would have to for the same benefits to a private insurance company. He categorized as a "myth" the idea that Social Security is a contributory pension plan.

How to Stop Progress. A report by the Committee for Economic Development blames government for retarding technological progress. The report asserts that excessive regulatory activity and uncertain economic policies have increased the risks for would-be investors while current tax policies have reduced the real potential return on investment and have channeled investment funds away from innovative opportunities toward hedging activities.