Freedom Line Blog

Join CFIF Corporate Counsel and Senior Vice President Renee Giachino today from 4:00 p.m. CST to 6:00 p.m. CST (that’s 5:00 p.m. to 7:00 p.m. EST) on Northwest Florida’s 1330 AM WEBY, as she hosts her radio show, “Your Turn: Meeting Nonsense with Commonsense.”  Today’s guest lineup includes:

4:00 (CST)/5:00 pm (EST): Marc Scribner, Research Fellow at the Competitive Enterprise Institute: Vehicle-to-Vehicle Communications;

4:30 (CST)/5:30 (EST): Leighton Steward, Chairman of Plants Need CO2: Global Warming and the Supreme Court;

5:00 (CST)/6:00 pm (EST): Slade O’Brien, Florida State Director of Americans for Prosperity: Why ObamaCare is Harming Florida; and

5:30 (CST)/6:30 pm (EST): Peter Roff, Contributing Editor at U.S. News & World Report: The IRS “Smidgeon” of Corruption Keeps Growing.

Listen live on the Internet here.   Call in to share your comments or ask questions of today’s guests at (850) 623-1330.

In his otherwise lackluster State of the Union address this week, President Obama stated to bipartisan applause that he’d like to lower America’s corporate tax rate and reduce the Byzantine array of loopholes in our code.  That policy is actually supported by leaders in both parties, including Speaker John Boehner, and the Republican and Democratic chairmen of the House and Senate tax-writing committees.

And as we recently noted, reform is necessary, given the complexity of America’s nearly three-decade old tax code.  The problem remains that Congress has been too timid to take the hard steps necessary to lower America’s corporate tax rate to 25% from 35% – which is the highest rate amongst all OECD nations.  Because of this anticompetitive rate, the United States is at a huge comparative disadvantage globally.

And CEOs have taken notice.

Several hundred corporations have unfortunately chosen to reincorporate abroad to dodge U.S. taxes in recent years.  While the practice is technically legal, the opportunity costs for the United States are huge.   Some 484 U.S. companies were bought by foreign companies in the first half of 2013, for a total of $43.6 billion, according to Thomson Reuters.  That provides a wake-up call that action on corporate tax reform is absolutely crucial.  President Obama called for a ‘year of action’ in this week’s address, and threatened to use his executive powers in a constitutionally dubious manner.

For tax reform, Congress needs to act swiftly to ride this rare bipartisan wave and introduce legislation that supports a fundamental overhaul of America’s tax code.  American-owned businesses lead globally in innovation and economic growth, and our tax reform should support their success, not drive it overseas.

There is no better example of Washington’s dysfunction than the U.S. tax code.  With President Obama’s annual State of the Union Address less than two weeks away, discussion about how to fix our broken tax code is growing.  In particular, the House Ways & Means Committee released a video this week highlighting its problems, and some proposals about how to fix it.

WATCH THE VIDEO: https://www.youtube.com/watch?v=BGizlBE-u10&feature=youtu.be

The last time America’s tax code was overhauled was in 1986, under President Ronald Reagan.  Obviously, very much has changed since then, from the dot-com boom-and-bust, the rise of China as an economic powerhouse and the sub-prime mortgage crisis, just to name a few.  What’s more, the tax code continues to grow more complicated with each passing day.   According to House Ways & Means Committee research, more than 4,400 changes to the tax code have occurred in the last 10 years, amounting to about one change per day.  While other countries have been simplifying their codes and reducing rates, America’s tax burden continues to grow in scope and complexity.

While the fleeting political will do something still exists – even President Obama himself proclaimed, “Our corporate tax rate is too high” – action is urgently required.  The best solution is one that makes America more competitive globally and leads to economic growth.  America’s corporate tax rate currently stands at 35% – the highest in the world.  Accordingly, a proposal to lower that corporate rate, while broadening the base, will result in a simpler, fairer tax code that both sides of Congress can get behind.

In today’s Wall Street Journal, former Japanese Diet member Mieko Nakabayashi and former U.S. Deputy Assistant Secretary of the Treasury James Carter spell out in stark terms the need for reform and reduction of U.S. corporate taxes, now the highest in the industrialized world.  In particular, they highlight the alarming exodus of large corporations from America to more hospitable tax regimes with this statistic:

When the U.S. last cut its corporate tax rate in 1986, 218 of the world’s 500 largest corporations measured by revenue were in the U.S.  Today, that number is 137.  Similarly, the number of Japanese corporations in the Fortune Global 500 fell to 68 last year from 81 in 2005.  While there is no single explanation for the drop, Tax Foundation chief economist William McBride tells us:  ‘The common thread behind all of this is the U.S. corporate tax, which is the most punitive in the developed world.’”

We live in a period of unprecedented political polarization.  The need to reduce our corporate rate, however, has actually achieved bipartisan agreement, with Barack Obama himself proclaiming the rate too high.  Accordingly, the time is now to enact reduction and reform, lest America’s legacy of economic leadership deteriorate further.

In our Liberty Update this week, we highlight the new 2014 Index of Economic Freedom, which itself highlights the critical importance of property rights and free trade in generating prosperity.  The facts, and that correlation, are simply beyond dispute.

On that note, current Trans Pacific Partnership (TPP) free-trade agreement negotiations provide a critical opportunity to upgrade intellectual property (IP) protections that have gradually become outdated since the landmark North American Free Trade Agreement (NAFTA) was signed two decades ago.  That was the expert conclusion of Mark T. Elliot, Executive Vice President of the U.S. Chamber of Commerce’s Global Intellectual Property Center, in testimony this week before the House of Representatives at a hearing entitled “NAFTA at Twenty:  Accomplishments, Challenges, and the Way Forward.”

At the time of signing, NAFTA intended to create the best levels of IP protection and enforcement…  It was a testament to how important IP was viewed by Mexico, Canada, and the United States.  However, as this was signed twenty years ago, this level of IP protection is now a very low bar in 2014.  In 2012, the Chamber released an International IP Index, a comprehensive review of the intellectual property environment in 11 key markets based on existing international standards and best practices.  The United States, the United Kingdom, and Australia all perform well in the Index…  Mexico and Canada, however, rank closer to the likes of Russia, Malaysia, and China.

In Mexico, however, we continue to see progress… and the business community has been working productively with the Mexican government.  In contrast, Canada’s relative low score is a result of wide-ranging IP problems including:  enforcement, weak on membership and poor ratification of international treaties, and significant problems with patent and copyright laws.  Canada is the largest trading partner for the United States… [making] it all the more bewildering to the business community at how substandard Canada’s IP system is.”

When NAFTA was signed, it was an idea ahead of its time.  And as former Clinton Administration Chief of Staff Thomas “Mack” McLarty noted a recent Wall Street Journal commentary, the results have been spectacular:

U.S. trade with Mexico and Canada has tripled to more than $1 trillion a year, supporting millions of American jobs.  The U.S. exported more last year to Mexico than to Brazil, Russia, India and China combined; and more to Canada, with 35 million people, than to the European Union, with 500 million…  NAFTA also opened the door for free trade agreements across Latin America, a catalyst for economic and political reforms.  Mexico was transformed from one of the most closed economies in the world to one of the most open, and it subsequently threw off decades of one-party rule.   Today, U.S. products make up 40% of the contents of goods imported here from Mexico (compared with 4% in goods imported from China).  An integrated market boosts exports and imports, and helps keep good jobs at home.”

Today, we face a perfect opportunity to improve upon NAFTA’s good thing.   As Mr. Elliot testified:

2014 will present many opportunities for the United States, Canada, and Mexico to further improve their IP environments…  In particular, all three countries are participants in the Trans Pacific Partnership (TPP) Agreement negotiations.  The TPP is being negotiated between 12 different countries, and it is essential that it include robust standards for IP protection, using the Korea-U.S. free trade agreement as a model and providing 12 years of regulatory data protection for biologic products.  We encourage the U.S., Canadian, Mexican, and all TPP negotiators to uphold their positions and protect IP from the efforts to weaken existing laws and norms.  The TPP provides the U.S., Canada, and Mexico the opportunity to stand shoulder-to-shoulder in support of strong IP protections, innovation, and access to the creations and inventions of the 21st century.  A TPP agreement that includes a high-standard IP chapter is good for jobs and good for international trade.  The TPP will also allow Canada to raise its IP standards, promote innovation, and bolster its growing economy.  2014 should be the year when the North American neighbors work together to improve each other’s IP environments and the IP environments of countries around the world.”

Free trade and strong IP rights are critical components of economic freedom, which the latest Index of Economic Freedom shows is causally related to a nation’s prosperity.  America, Canada, Mexico and the other negotiating nations face an important opportunity in 2014 to improve upon both, which will boost our prosperity at a time when we desperately need it.

Nearly half a decade has passed since the last recession ended in June 2009.  Unfortunately, this morning’s monthly jobs report from the Labor Department sent another alarming signal that the worst recovery in recorded U.S. history continues.  That is directly attributable to the destructive economic policies of the Obama Administration, and changes must be made, lest we stall into an entirely new recession.

According to the Labor Department, the economy added a shockingly low 74,000 jobs in December.  That is the lowest total in three years, and it fell 126,000 jobs short of the consensus expectation of 200,000 or more (which was economists’ highest predicted number in several months).  Nobody foresaw that tiny job creation number.  Even more alarming, the labor participation rate (meaning the percentage of all Americans actually choosing to participate in the workforce) fell again to 62.8%, the lowest number since 1978.  That is significant because that was before women had more fully entered the workforce.

The Obama Administration and its apologists may attempt to cite the decline in the overall unemployment rate to 6.7%, but that is not the result of an improving economy or labor market, but rather because some 374,000 additional Americans simply dropped out of the workforce and stopped searching for jobs.  Moreover, the Administration assured us back in January 2009 that the rate would be down to its pre-recession level of 5% by now under its wasteful trillion-dollar “stimulus.”

This sharp slowdown is simply the latest evidence that we haven’t “turned the corner” as Obama has been telling us since as far back as 2010.  Rather, we’re going in circles.  Until we return to the policies of lower taxes, less regulation and smaller government that create jobs and economic growth, that will continue.  The numbers prove that beyond any rational doubt at this point.  The answer isn’t more unemployment checks, but putting America back to work.

Join CFIF Corporate Counsel and Senior Vice President Renee Giachino today from 4:00 p.m. CST to 6:00 p.m. CST (that’s 5:00 p.m. to 7:00 p.m. EST) on Northwest Florida’s 1330 AM WEBY, as she hosts her radio show, “Your Turn:  Meeting Nonsense with Common Sense.”  Today’s guest lineup includes:

4:00 (CST)/5:00 pm (EST):  Bradley A. Smith, Chairman and Founder of the Center for Competitive Politics – Proposed IRS Rules on 501(c)(4) Social Welfare Groups;

4:30 (CST)/5:30 (EST):  Romina Boccia, Grover M. Hermann Fellow in Budgetary Affairs at The Heritage Foundation – Congressional Budget Deal;

5:00 (CST)/6:00 pm (EST):  Carrie Severino, Chief Counsel and Policy Director of the Judicial Crisis Network – DC Circuit Court Appointments and Filibuster; and

5:30 (CST)/6:30 pm (EST):  Jim Lacy, attorney, political communications expert and author – “Taxifornia: Liberals’ Laboratory to Bankrupt America.”

Listen live on the Internet here.   Call in to share your comments or ask questions of today’s guests at (850) 623-1330.

This week’s CFIF TechNotes – happy Thanksgiving week, and enjoy!

(1)  At Wireless Week, Representative Greg Walden (R – Oregon) warns the Federal Communications Commission (FCC) against spectrum caps in upcoming auctions:

Walden and other Republicans are warning the FCC not to pick winners and losers in the auction and to allow as much participation as possible.  ‘I don’t think it’s fair to take perhaps some of the biggest bidders out of the process in the beginning,’ Walden said.  ‘Remember, part of the requirement here is to generate maximum revenues for the taxpayers.'”

(2) From Reuters, T-Mobile eyes an airwaves purchase from Verizon Wireless, according to sources:

T-Mobile US is looking to buy wireless airwaves from larger rival Verizon Wireless to bolster its mobile network capacity for data services, a source familiar with the matter said on Tuesday.  While T-Mobile has approached Verizon about buying the spectrum, the process is still in the early stages, according to the source, who asked not to be named. The source was not authorized to discuss the matter.  T-Mobile, the No. 4 U.S. mobile service provider, might have to pay as much as $3 billion for the airwaves, which are not being used by Verizon, according to one analyst estimate.  The airwaves would give T-Mobile additional network capacity to help it catch up with its bigger rivals in delivering high-speed wireless services.”

(3) From The New York Times, FCC Chairman Tom Wheeler calls for transforming the technology used by phone systems:

Americans could soon be one step closer to getting that videophone they were promised in the 1960s.  The chairman of the Federal Communications Commission said on Tuesday that the agency would begin ‘a diverse set of experiments’ next year that would begin to move the nation’s telephone system from its century-old network of circuits, switches and copper wires to one that transmits phone calls in a manner similar to that used for Internet data.  The Internet-based systems allow more information to be transmitted at one time, making possible the addition of video to phone calls, as employed by services like Skype and Vonage.  While consumers can already use those services, most of the legacy telephone networks still use analog technology, employing an out-of-date system of physical switches that is expensive to keep operating.”

(4) From The Wall Street Journal, “FCC to Begin Acting on Phone-Network Upgrade”:

AT&T and other legacy phone providers have been looking to retire the old networks in favor of new, IP-based phone systems that are often delivered by broadband, both wired and wireless.  But it has been unclear how many of those old rules would be applied to the new networks, in part because the FCC previously decided against classifying broadband Internet as a telecom service, which would subject it to greater regulatory oversight.  ‘Our current infrastructure has served us well for almost a century but it no longer meets the needs of America’s consumers.  The transition to broadband and IP services that has already begun is driven by consumers who are moving to the Internet and choosing to connect in ways not imagined just a decade ago,’ AT&T’s Jim Cicconi said in a response published online.  The transition to IP technology has yielded many benefits, such as greater speed and capabilities.”

(5)  And from Broadcasting & Cable, even Senator Charles Schumer (D – New York) has urged the FCC to refrain from attempting to adopt incentive auction rules that would limit the participation of any wireless carriers:

‘It is the responsibility of the Commission to structure the auction so that broadcasters will realize substantial benefit for choosing to put spectrum up for auction, broadcasters who will have to move to new channel assignments can be adequately compensated, and so that the auctions can generate maximum revenue in order to adequately fund FirstNet,’ Schumer wrote in a letter to FCC Chairman Tom Wheeler.”

America’s century-old telephone networks using analog and physical switch technology served us well from the days of Alexander Graham Bell to the dawn of the Internet.  Twenty-first century technology, however, demands a smooth and rapid transition to Internet-Protocol (IP) services.

Fortunately, there’s actually good news coming out of the Federal Communications Commission (FCC) on that critical issue.  As noted by The New York Times, FCC Chairman Tom Wheeler announced this week that he’s directing staff to commence trials for the much-needed transmission:

The chairman of the Federal Communications Commission said on Tuesday that the agency would begin “a diverse set of experiments” next year that would begin to move the nation’s telephone system from its century-old network of circuits, switches and copper wires to one that transmits phone calls in a manner similar to that used for Internet data.  The Internet-based systems allow more information to be transmitted at one time, making possible the addition of video to phone calls, as employed by services like Skype and Vonage.  While consumers can already use those services, most of the legacy telephone networks still use analog technology, employing an out-of-date system of physical switches that is expensive to keep operating.  Those old networks make possible what is known in the communications industry as Plain Old Telephone Service, or POTS, and they use types of switches that in many cases are no longer manufactured, telephone company executives say.  The outdated switches limit the ability of companies to expand the networks to carry more traffic and impede a company’s ability to refurbish equipment.”

Some of the usual anti-market activist suspects, such as Public Knowledge, fear that the FCC’s comparatively limited authority to overregulate the Internet in the same way that it did existing telephone networks will mean a reduced ability of federal regulators to meddle as communications technology advances.  The reality, however, is that the transition to broadband and IP services has already begun as consumers freely migrate to more advanced connection methods.

The FCC should focus on what works in the real world, rather than hobble technology’s advance on the basis of unfounded fears, so this week’s announcement marks a welcome and positive milestone.

Join CFIF Corporate Counsel and Senior Vice President Renee Giachino today from 4:00 p.m. CST to 6:00 p.m. CST (that’s 5:00 p.m. to 7:00 p.m. EST) on Northwest Florida’s 1330 AM WEBY, as she hosts her radio show, “Your Turn: Meeting Nonsense with Common Sense.”  Today’s guest lineup includes:

4:00 CST/5:00 pm EST:  Peter Ferrara, Carleson Center for Public Policy Senior Fellow – Global Warming and Obamacare are Costing Americans Jobs and Liberties;

4:30 CST/5:30 EST:  Jennifer Gratz, Co-Founder of the XIV Foundation and Equal Protection Advocates – Race Preferences in College Admissions;

5:00 CST/6:00 pm EST:  Aloysius Hogan, Senior Fellow at Competitive Enterprise Institute – Right to Work Amendment; and

5:30 CST/6:30 pm EST:  Timothy Lee, CFIF Senior Vice President – America’s Copyright Protections.

Listen live on the Internet here.   Call in to share your comments or ask questions of today’s guests at (850) 623-1330.

(1)  In a Daily Caller commentary entitled “Conservatives and Libertarians Should Support America’s Copyright Protections, Not Malign Them” I highlight the causal connection between U.S. intellectual property (IP) protections and our unmatched artistic and technological dominance:

America’s system of copyright and intellectual property (IP) protections, which incentivize creators and reward their efforts, has resulted in the most innovative, influential, artistic, and prosperous nation in human history.  No country or alternative system even rivals our record of creative preeminence in music, movies, television shows, news, and literature.”

On that basis, I also address some myths regarding proposed Congressional legislation entitled the Free Market Royalty Act (FMRA):

That bill would finally end terrestrial radio’s special government privilege against paying performance rights that artists are allowed to negotiate with all other forms of use.  Simply put, the proposed legislation doesn’t “regulate the market” as Khanna claims.  More accurately, the FMRA seeks to create a more level playing field for all forms of broadcast.  Currently, artists aren’t compensated when their works are played on terrestrial radio, except through a cumbersome licensing process.  This bill would change that and allow them to negotiate.”

(2)  Over at AEI’s TechPolicyDaily.com, Jeffrey Eisenach and James Glassman wrote that “It’s Time to Move Ahead at the FCC”:

The DISCLOSE Act was proposed in 2010 by Sen. Charles Schumer (D-NY) and Rep. Chris Van Hollen (D-Md) in the wake of the Citizens United decision by the U.S. Supreme Court.  The act, in our view, was genuinely pernicious and in all likelihood unconstitutional.  For example, it would prohibit political contributions by recipients of TARP (Troubled Asset Relief Program) money and by any firm that received government contracts of more than $10 million.”

The authors agree with Senator Ted Cruz (R – Texas) that it is “understandable and appropriate” to raise questions, but that now the FCC can hopefully move on and act in ways that spawn innovation, incentivize investment and reduce costs for consumers.

On that note, as reported in USA Today, “The U.S. Senate on Tuesday confirmed venture capitalist Thomas Wheeler to head the FCC and, as a commissioner, Mike O’Rielly, who had been an advisor to Senate Minority Whip John Cornyn, R-Tex.”   With these confirmations, the FCC now has a full roster.

(3)  At HighTechForum.org, Richard Bennett writes in a piece entitled “IP Transition:  The One Percent Problem” that “the way forward is to incentivize the formation of private firms operating with diminishing levels of public subsidy”:

The hardest thing to do in Washington is to unwind a body of regulation with a long history, and the telephone has been around forever in technology terms.  In 1876, Alexander Graham Bell picked up a telephone and said:  “Mr. Watson–come here–I want to see you.”  In 1913, The Justice Department made an out-of-court settlement with AT&T that allowed it to operate as a government-sanctioned monopoly as long as it provided universal service within a defined territory and allowed other telephone systems to interconnect with its network to serve others.  By 1984, technology changes made this arrangement untenable and the Justice Department’s anti-monopoly suit against AT&T broke the company up into a number of parts.  After 12 years in which the nation’s telecom business was run out of a judge’s chambers, Congress finally passed the Telecommunications Act of 1996, imposing new obligations meant to promote competition for local and long-distance telephone service.  By 2010, the Telecom Act was irrelevant as telephone users had began to end their Plain Old Telephone Service (POTS) subscriptions in favor of mobile telephony and broadband.  Today POTS is not economically viable.”

(4)  On The Hill’s technology blog, Kate Tummarello and Brendan Sasso update us on events affecting the FCC and FTC:

The government shutdown has forced the Federal Communications Commission to delay the planned auction of the “H block” of wireless spectrum.  The commission had set the auction for Jan. 14, but on Monday, the agency announced that date will be bumped back to Jan. 22.  House FTC hearing postponed: The House Commerce, Manufacturing and Trade subcommittee has postponed Thursday’s planned hearing on the future of the Federal Trade Commission.  The House canceled Thursday’s session so members can attend the funeral of Rep. Bill Young (R-Fla.).”

(5)  At Politico, Brooks Boliek writes an update piece entitled “FCC Forced to Play Catch-Up After Shutdown”:

The FCC is delaying high-profile actions, including a key spectrum auction, as it plays catch-up after the government shutdown.  Acting Chairwoman Mignon Clyburn had originally scheduled an auction for the so-called H-Block for Jan. 14.  The auction, which will be the first major airwaves sale since 2008, is now slated to start on Jan. 22, the FCC announced today.  That could push it into next year’s fiscal battles.  The bill that just passed Congress funds the government through Jan. 15 and raises the debt ceiling through Feb. 7.  The shutdown delays add new pressure to the FCC, which is in the midst of major policy initiatives and stuck at three commissioners with two nominees stalled in Congress.  The H-Block is the first of a string of planned auctions designed to get more airwaves into the marketplace to feed data-hungry smartphones and power high-speed communications systems.  The commission lost critical planning time with most of its nearly 2,000 staffers furloughed for 16 days.  ‘These schedule changes are necessary to give potential bidders and commission staff additional time for planning and preparation,’ the FCC said in a public notice issued Monday.”

(6)  At Mountain View Voice, Angela Hey details online education innovations in “Coursera Educates Five Million Students and Revenues Start Growing”:

Mountain View’s Coursera offers free online courses from the world’s leading universities.  Today, at the Global Mobile Internet Conference in San Francisco’s Moscone Center, Stanford professor Andrew Ng described why he co-founded Coursera, which launched in 2012.  The conference, which is also held in Beijing, features mobile apps, wearable devices and connected cars.  Ng is director of Stanford’s artificial intelligence laboratory.  At Stanford he can teach 400 students.  With Coursera he taught 100,000 students in his machine learning class.  The other co-founder is Daphne Koller, a Stanford professor of computer science.  Five million students have registered Coursera accounts to take MOOCs (massive open online courses).”

(7)  Over at Forbes, Steve Forbes himself laments how telecom sector regulations simply aren’t keeping appropriate pace with technological change in “Government Should Mandate that Car Makers Invest Billions in Horse-Drawn Carriages!”:

Should Ford Motor have to reintroduce the Model T instead of investing in new cars that meet the needs of today’s consumers?  Should Apple be made to bring back the Apple II instead of investing in new products?   Should dental device makers be forced to invest in drills powered not by electricity but by foot pedals?  Crazy?  Not in telecommunications.  Special interests want to require traditional landline telephone companies like Verizon and AT&T to increase investment in antiquated technologies like copper-based telephone services that most consumers are choosing not to use.  These phone companies are restricted by archaic regulations that were put in place back when the Bell system was a monopoly.  Consumers then had one option, the landline phone.”

(8)  Finally, over at Broadcasting & Cable, John Eggerton writes on points of left-right agreement and disagreement in “Public Knowledge, AT&T Weigh in with Hill on IP Trials”:

Public Knowledge and AT&T agree on five touchstones for the IP transition but disagree on AT&T’s suggested trials, according to testimony for an Oct. 23 House Communications Subcommittee hearing on the transition.  Harold Feld, senior VP of Public Knowledge, delineated those values in his testimony as follows:  service to all Americans, interconnection and competition, consumer protection, reliability, and public safety.  Feld adds that AT&T’s suggested IP transition trials should be rejected.  However, AT&T countered Feld’s statement, saying the FCC should expedite those ‘real world tests.’  Feld will tell the legislators that test trials are needed, but they must be guided by those values and they should not be the trials AT&T has offered up.  In his prepared testimony AT&T senior VP James Cicconi complimented Feld on ‘identifying the key consumer protections needed for a successful IP transition.  We may end up differing on details,” he said, “but their framework is sound.  Clearly the fundamental principles of universal connectivity, interconnection, consumer protection, reliability and public safety are hallmarks of our Nation’s commitment to communications and cannot be lost in this process.’  Cicconi says its trials offer ‘clear benefits’ with no costs and says AT&T is not looking for the IP world to be a regulation-free zone.  ‘We understand that there will be a set of core consumer protections that exist,’ he said.  ‘While I might disagree with the FCC on particular matters, I would concede readily the FCC can play a strong role in protecting consumers, and it has demonstrated that in recent years.  Public safety should fall within the FCC’s consumer protection mandate as well.'”

And those are your CFIF TechNotes for this week!

The United States keeps shooting itself in the proverbial foot with our foolishly high and complex corporate tax rate.  Fully 31 of the world’s 34 leading economies have lowered their corporate tax rates since 1997 alone, but the U.S. is not among them.  Consequently, as all other competitor countries lower their rates, corporations flee for better shores, never to return.  And with those corporations go critical American jobs.

Maintaining a federal corporate tax rate of 35% in addition to various state corporate taxes – the highest in the developed world – doesn’t just impede American businesses.  The code is also riddled with Byzantine loopholes that warp decisionmaking and dictate winners and losers.  And contrary to popular myth, most of those loopholes aren’t accessible to most companies.  To the contrary, new research by PricewaterhouseCoopers (PwC) reveals that the effective tax rate for corporations was 36.2% from 2004 – 2010.  Stripping out many of the false assumptions of the GAO report that claimed an effective U.S. rate of approximately 13%, the PwC report is a devastating indictment of our tax code that highlights its unfair and punitive nature.

Our economy continues to struggle, and with so much regulatory uncertainty and chaos in Washington it would be nice to focus on something on which everyone sees eye-to-eye.  Reforming the corporate tax rate is precisely that sort of bipartisan solution, something widely acknowledged by both sides as the correct move.  Even President Obama, whose policies have done so much to impede economic and job growth, has gone out of his way to emphasize that reality.  We simply must reduce corporate tax rates and reform our tax code so that our economy isn’t permanently crippled by it.  Although pronouncements of the downfall of the United States are greatly exaggerated, it would be wise for us to avoid heading down that path due to outdated corporate tax policies that nobody supports.

The time for reduction and reform is now, before it really is too late.

(1)  Writing in The Wall Street Journal, Representatives Fred Upton (R – Texas) and Greg Walden (R – Oregon) on how the Obama Administration continues to “put the brakes on business,” including FCC red tape and regulatory uncertainty:

On Sept. 26, the Federal Communications Commission adopted a Notice of Proposed Rulemaking outlining potential new media-ownership rules that eliminate the so-called UHF discount.  The change would affect how the FCC determines whether a station owner has approached a 39% cap on nationwide audience that can be reached by a single owner.  The proposed FCC rules aren’t just complicated.  They won’t even be final until next year at the earliest because the FCC can take however long it sees fit—sometimes more than a decade—to promulgate rules.  Even worse, the commission says whatever rules the FCC dreams up in the future will be applied retroactively.  So between now and when the new guidelines become final, no one knows the rules of the game.  And companies have to be prepared at all times to adhere to a new set of regulations that are still a glimmer in the FCC’s eye.  This leaves one of the economy’s only flourishing industries at the mercy of bureaucrats in Washington.”

(2) From The Washington Post, encouraging analysis entitled “How the FCC Plans to Clear the Air for More Mobile Data”:

To fix the coming crunch, federal regulators think they’ve come up with the right solution: Give companies like Verizon and AT&T a lot more frequencies on the wireless spectrum to play with. But where will all those extra channels come from? That’s where the television industry comes in. If all goes according to plan, next year hundreds of TV stations will get a big check to shut down operations and give up their spectrum. Then the agency will turn around and sell that invisible treasure to the wireless companies so that when you fire up your data connection, you won’t get caught in an online traffic jam. All told, the FCC hopes to take about 20 channels worth of spectrum that are currently licensed to various TV stations across the country and auction them off to the wireless companies in various local markets.”

(3) From Jim Kohlenberger writing at GigaOM, a clarion call to free much-needed spectrum for commercial wireless use:

To advance the emerging connected device revolution, we need to continue to free up spectrum for commercial wireless use, and accelerate the transition to IP networks.  At GigaOM’s Mobilize conference on October 16, I’ll be talking about some of the ways we can do this.  President Obama has already taken important steps to make more spectrum available and accelerate the transition to faster and more capable next-generation IP-based wireless LTE networks.  It is absolutely essential that we continue to invest and upgrade our next-generation networks today in order to keep pace with innovation and meet the wireless demands of consumers and businesses tomorrow.”

(4) From Bloomberg, a report on FCC observers’ recommendations for quick action if and when its new commissioners are confirmed:

Once confirmed, the new chairman of the FCC should spell out the agency’s perspective on the issues facing the modern telecommunications sector, industry analysts said Oct. 15 at a panel hosted by the Technology Policy Institute.  The FCC should ‘take a look at where the industry is today, [ask] what are the challenges ahead, is there a role for regulation in that, what is it and how should we, in fact, plan for that?’  Jim Cicconi, AT&T’s senior vice president of external and legislative affairs, said Oct. 15.  This requires the FCC to ‘modernize its approach and its outlook and, frankly, modernize some of its regulations,’ he said. Cicconi said he believes the FCC has an oversight role as telecommunications companies and customers migrate from wired copper telephone networks to IP-based networks.  AT&T has a pending proposal with the commission to coordinate tests at wireline facilities which would replace their time-division multiplexed facilities with IP-based alternatives.

Cicconi urged the FCC to avoid setting spectrum caps that would prevent larger carriers from bidding on certain bands in the upcoming incentive auction. ‘The notion of setting artificial limits seem purely designed to advantage one set of companies and disadvantage another,’ he said. AT&T isn’t against ‘something that is set up to be even-handed,’ Cicconi said.  ‘I think it is possible to do that with the current spectrum screen.'”

(5) From the State Telephone Regulation Report, a story on calls for fewer obstructive regulation from the FCC as we move forward in the IP transition:

Fewer regulations are needed by states and the FCC to promote competition and to move the IP transition forward, said speakers at the Telecommunications Summit at Murray State University in Kentucky Oct. 9.  The deregulation of telecom services by the Indiana Utility Regulatory Commission helped to spread investment and innovation in the state by AT&T and Comcast, said Commissioner Larry Landis.  State commissions have the opportunity to work with the FCC to change policies in the states, said Landis:  ‘States have a unique perspective to bring to the process, and they understand the need to share a vision as well as each having their own.’  The IP transition is a multi-year change that doesn’t need to be hampered by FCC regulation before the technologies are fully developed, said Hank Hultquist, AT&T vice president-federal regulatory.  ‘IP is a remarkably flexible protocol that allows you to operate different technologies on the same network.’  IP does provide some solutions to old technologies that will take time to adopt, said Hultquist.  Some customers were upset that Verizon deployed Voice Link as the sole service in Fire Island, N.Y., because it did not have faxing capability, he said.  ‘You can do faxing with scanning, but I’m skeptical that this should be handled in the transition or the network,’ because increasingly scanning can take the place of sending faxes, he said.  It will also take time to make sure IP interconnection works, said Hultquist.  ‘We don’t want to replicate problems.’  Rural providers are concerned about the IP transition because they base revenue on long-distance calls, which would cost them money on IP networks, said Hultquist.  ‘The revenue flow would go away and these providers want a way to resolve that.'”

(6) From The Hill, an update on confirmation hearings for FCC and FTC nominees ready to proceed:

The Senate could confirm President Obama’s nominees to the Federal Communications Commission and Federal Trade Commission as early as Wednesday night.  Tom Wheeler, President Obama’s pick for FCC chairman, and Michael O’Rielly, a nominee for a Republican commission seat, have been placed on a fast track for Senate approval, according to a document circulated on Capitol Hill Wednesday.  The confirmations would likely come after the Senate votes on a deal to lift the debt ceiling and end the government shutdown on Wednesday night.  The Senate Commerce, Science and Transportation Committee approved Wheeler’s nomination by a voice vote in July.  O’Rielly and McSweeny testified before the panel last month, but the committee hasn’t voted on either nomination.  Sen. Ted Cruz (R-Texas) has indicated he might block Wheeler’s nomination unless he promised not to require more disclosure about the groups paying for political advertisements.”

Join CFIF Corporate Counsel and Senior Vice President Renee Giachino today from 4:00 p.m. CDT to 6:00 p.m. CDT (that’s 5:00 p.m. to 7:00 p.m. EDT) on Northwest Florida’s 1330 AM WEBY, as she hosts her radio show, “Your Turn: Meeting Nonsense with Commonsense.”  Today’s guest lineup includes:

4:00 CDT/5:00 pm EDT:  Troy Senik, CFIF Fellow and Senior Editor at Ricochet – Infighting in the GOP in the wake of the shutdown and the disastrous ObamaCare rollout;

4:30 CDT/5:30 EDT:  Romina Boccia, Grover M. Hermann Fellow in Federal Budgetary Affairs at The Heritage Foundation – How Federal Spending and Government Waste Affect Economic Growth;

5:00 CDT/6:00 pm EDT:  Dr. Peter Vincent Pry, Executive Director of the Task Force on National and Homeland Security – Cybersecurity Vulnerabilties; and

5:30 CDT/6:30 pm EDT:  Sam Kazman, General Counsel of Competitive Enterprise Institute and Head of Death by Regulation Project – ObamaCare in Federal Court over Illegitimate IRS Penalties.

Listen live on the Internet here.   Call in to share your comments or ask questions of today’s guests at (850) 623-1330.

(1)  A new study from the Internet Innovation Alliance (IIA) shows how American consumers continue to abandon old-fashioned wireline telephone service, but Federal Communications Commission (FCC) bureaucratic inaction in the transition to all Internet Protocol networks (the “IP Transition”) threatens harm to consumers, our economy and market competition:

To ensure that ILECs can continue to provide innovative solutions for consumers and compete effectively against other platforms, they must be free to make the best use of their capital. That, in turn, means dedicating their capital to IP – and fiber – based broadband networks, rather than tying it up in obsolete copper-based circuit-switched networks.  At the end of 2012, the ILECs’ share of the consumer voice, broadband-access, and video markets was 34%, 14%, and 10% respectively.  It is time to stop treating the ILECs as monopolies that must be hobbled and start treating them as useful assets whose health is important to this nation’s economy and global competitiveness.”

(2)  Similarly, Raymond J. Keating of the Small Business & Entrepreneurship Council (SBE Council) summarizes how the FCC’s upcoming auction of low-frequency spectrum currently used by TV broadcasters over to wireless firms is fraught with bureaucratic overreach and market interference, citing a study by Duke University’s Leslie Marx:

This incentive auction would have the TV broadcasters getting a split of the proceeds from the auction.  But some, like the Justice Department’s Antitrust Division in a filing with the FCC, argue that the auction rules should be set to provide an advantage for smaller carriers – such as Sprint and T-Mobile – over the largest mobile service providers, i.e., AT&T and Verizon.  Unfortunately, some fail to understand the competitive market process and how businesses gain market share.  Others more cynically are attempting to use government to manipulate the rules of the game in their own favor.”

(3)  Bloomberg.com reports on more positive news for the FCC, however, courtesy of the U.S. Supreme Court:

The U.S. Supreme Court turned away a challenge by five power companies to new federal rules that lower the fees telecommunications companies must pay to attach lines to electric utility poles.”

(4)  Over at The Wall Street Journal, meanwhile, Holman Jenkins puts on his usual must-read clinic.  In his latest piece, Jenkins details successful Internet service providers’ efforts to “tunnel under the regulatory morass that inhibits physical broadband deployment”:

All this renders even more quaint the scrap over ‘net neutrality.’  Verizon is battling in a U.S. appeals court the FCC’s effort to impose this regulatory conceit on the broadband industry – with certain bloggers insisting that if Verizon wins, it will represent “the end of the Internet,” because, you know, there’s not enough competition to make sure broadband operators don’t “censor” the Internet in their own interest by blocking access to websites that compete with their own services.  Uh huh.  The truth is, competition has been more than adequate so far to police the Internet, and now competition is getting jacked up a serious notch as the video explosion stimulates a deluge of new investment. Now if the regulatory establishment would just take ‘yes’ for an answer.”

(5)  USA Today highlights how mobile communications advances have improved natural disaster relief:

Natural disasters are on the rise.  Reported incidents have more than doubled since 1980, and in 2010 alone, the combined impact of earthquakes, hurricanes, floods and other calamities forced 42 million people to flee their homes.  Thankfully, advances in mobile communications have spread to all corners of the globe, providing the victims of disasters much easier contact with relief workers, and each other.”

(6)  The Hill’s Technology Blog details House Energy and Commerce Committee Vice-Chairwoman Marsha Blackburn’s (R – Tennessee) comments on FCC interference with private telecom investment:

The Federal Communications Commission (FCC) has a ‘regulatory addiction and … penchant for picking winners and losers’ and the laws governing the agency need a ‘substantial overhaul,’ House Energy and Commerce Vice-Chairwoman Marsha Blackburn (R – Tenn.) said Wednesday.  The agency is hurting the telecommunications industry and crowding out private investment because it ‘is fixated on growing its jurisdictional footprint and expanding its influence in other areas,’ Blackburn said, speaking at a Telecommunications Industry Association event.”

(7)  Fiercetelecom.com reports on the TIA 2013 tradeshow, where keynote speakers from AT&T and Verizon lamented the federal regulatory murkiness that inhibits the TDM-to-IP transition:

AT&T and Verizon envision a blended wireless and wireline service world, but regulatory executives from both telecos said during a policy keynote session at the TIA 2013 tradeshow that a lack of regulatory clarity in transitioning their legacy TDM networks to IP is a key barrier.

‘In 2009, the FCC set some very ambitious objectives, one of which was a complete shutdown of the TDM architecture and merge to IP by 2017,’ said James W. Cicconi, Senior Executive Vice President of External and Legislative Affairs for AT&T.  ‘We’re here in 2013, and no single thing that I can discern has been done to advance that objective.’  Cicconi said that he has gotten little, if any guidance from the FCC on the next step.

And Craig Sillman, Senior Vice President of Public Policy for Verizon, said that while the telco has benefitted from a ‘light touch’ regulatory approach for advancing its wireless business, legacy voice service regulations have hindered its wireline moves.”

(8)  Finally, Mobile World Live reports on a wide range of CEOs repeating their call for lighter regulation:

The opening keynote session at Mobile World Congress brought together the chief executives of AT&T, China Mobile, Telecom Italia, Telefónica and Vodafone.  Under the theme of mobile operator strategies, talk of digital revolution and unprecedented industry transformation – spurred on by LTE and cloud-based technologies – was dominant…   But if the rapid development of networks and digital eco-systems is to continue, and help boost GDP in the process, much more investment will be required.”

The biggest takeaway from this week’s Technotes?  The FCC has its work cut out for it if it truly seeks to advance innovation and modernization.

Recently, CFIF highlighted the threat to markets and the U.S. economy posed by Dodd-Frank and overzealous Obama Administration regulators.  Specifically, the Securities and Exchange Commission (SEC) proposed a new regulation last month requiring public companies to tediously calculate their employees’ income ratios for exploitation by political activists.  Current laws already require public companies to post executive compensation levels, and the proposed rule would only encourage more overseas outsourcing, since foreign employees would likely be excluded.

Importantly, we noted that the SEC’s proposed regulation would also push even more companies to go private rather than public, thus depriving everyday investors the opportunity to participate in markets.  In other words, this little class warfare tactic would paradoxically end up hurting middle-class and poorer Americans while benefiting wealthier Americans who are able to participate in private company investment.  On that topic, in today’s Wall Street Journal Edward S. Knight illustrates the problem we face:

The number of publicly traded companies listed on U.S. exchanges has steadily declined to 5,000 this year from around 8,000 in 1995.  There are a number of reasons, but no one doubts that going and staying public has become increasingly more expensive, time-consuming and distracting for management.  As a result, businesses have sought other ways to organize and finance themselves.

This is not a healthy trend.  Private companies that need to grow can raise capital efficiently in U.S. public markets.  And robust public markets provide wide opportunities for individual and institutional investors to grow wealth.”

Clearly, federal overregulation comes at great cost, whether via Sarbanes-Oxley, Dodd-Frank or SEC executive compensation micromanagement.  Until we put an end to it, those costs will only increase for American markets and citizens alike.

Another day, another front-page headline announcing yet another ObamaCare dysfunction.  At CFIF we’ve detailed the ongoing litany, and today brought another in that inglorious procession.  Yet the Obama Administration and Congressional Democrats remain willing to force a government shutdown defending it?

Page A1 of today’s Wall Street Journal reads, “Late Snags On Eve Of Health Rollout” with the law’s debut set for tomorrow:

Obama Administration officials scrambling to get the health law’s insurance marketplaces ready to open on Tuesday keep hitting technical problems, while government-funded field workers across the country say they aren’t fully prepared to help Americans enroll in the program.”

Meanwhile, in a separate report on the looming government shutdown, the Journal examines which federal agencies would be affected.  It highlights that mail delivery would continue, Social Security checks would still be mailed, transportation functions such as air traffic control and Amtrak would continue and national security services would be exempt.  So who would be hit?  Well, the out-of-control Environmental Protection Agency (EPA) and National Labor Relations Board (NLRB), among others:

Which agencies would be most affected?

The Environmental Protection Agency would be among the most disrupted, furloughing all but 1,069 of its 16,200 workers, according to plans that agencies filed with the White House.  The National Labor Relations Board would send home all but 11 of its 1,611 employees, and the Commodity Futures Trading Commission would furlough 652 of its 680 employees.  Agencies devoted to national security and human safety would remain more fully staffed.”

Wait…  Remind me again why a shutdown is a bad thing for conservatives and libertarians?

Last week, we highlighted how Obama’s hyperkinetic expansion of federal government power has only served to drive Americans’ trust in it to a record low:

Presidents like Reagan and Clinton who publicly commit to moderating federal government expansion have increased Americans’ trust in government competence.  In contrast, President Obama seeks at every turn to enlarge the federal government, but has degraded trust in it to all-time lows.  We can thank Obama for few things, but reaffirming Reagan’s observation that government has become more of a problem than a solution is one of them.”

This week, a separate Gallup poll affirms Obama’s unintended causal relationship.  Specifically, the belief that the federal government is too powerful has reached a record level:

Six in 10 Americans (60%) believe the federal government has too much power, one percentage point above the previous high recorded in September 2010.  At least half of Americans since 2005 have said the government has too much power.  Thirty-two percent now say the government has the right amount of power.  Few say it has too little power.”

When Obama entered office, the disparity between those saying the federal government possessed too much power versus those saying it possessed the right amount or too little power was just 1 point, 50% to 49%.  Today, the disparity has ballooned to 21%, proving welcome confirmation that Americans still tend to believe that limited government is the best government.

Last week, we highlighted the latest in a long line of Dodd-Frank debacles.  Specifically, a federal court unceremoniously vacated a regulation forcing U.S. energy companies working abroad to disclose sensitive proprietary information to foreign competitors who aren’t subject to the same rule.  As we noted, federal bureaucrats were essentially trying to force domestic companies to surrender their playbooks to overseas rivals in the name of worldwide social engineering.

This week, we’re witnessing yet another Dodd-Frank infamy.

On Wednesday, a sharply divided Securities and Exchange Commission (SEC) proposed a controversial regulation that would require companies to tediously calculate compensation ratios between chief executives and employees for public scrutiny.  Keep in mind that public companies are already required to disclose compensation of top executives, so the proposed new rule won’t provide any useful information about a given company’s financial stability.  Rather, it is nothing more than a sop to activists who obsess over distribution of wealth and who seek to pressure businesses and executives.

To what end?  What business is it of the federal government how private companies choose to compensate every single one of their employees?  Why should companies’ time and resources be wastefully diverted to calculating ratios simply to please Washington, D.C. bureaucrats?  How will this help “protect” investors?  The simple answer is that it won’t.  Instead, it’s a provision sought by anti-corporate activists to foment discord and wage class warfare.

Moreover, the proposed rule may drive subject companies to shift even more workers overseas rather than here in the U.S., since foreign employees may be excluded from the burdensome calculations.  The proposed rule will also incentivize companies to remain or become private, rather than public, in order to escape these pointless burdens.  In turn, that would only serve to punish middle-class investors who don’t possess the wealth to participate in private investment.

While the SEC’s proposed pay ratio disclosure rule has yet to be implemented, the issue of executive compensation has also surfaced in the ongoing American Airlines bankruptcy.  This week, in U.S. Bankruptcy Court, Judge Sean Lane rejected the compensation package American Airlines’ creditors had approved for the airline’s CEO Tom Horton.  Largely due to the work of Horton and his management team, American’s performance in bankruptcy has exceeded all expectations — the company has experienced an almost total turnaround.  Furthermore, Horton’s compensation package is in line with industry standards.  Executives whose airlines fared far worse in bankruptcy than American received their compensation packages with little to no opposition.

An individual’s compensation at a corporation is a matter that should be decided by its leadership, board, and investors.  The government has no business intervening and micromanaging company pay, whether at American Airlines or all of the other U.S. public companies now moving within its sights.

It’s a particularly strange dynamic for an attorney and politician, given those professions’ reliance upon the art of persuasion.  But the more Barack Obama talks, the more he seems to dissuade rather than persuade.  Recall the signature act of his presidency to date, ObamaCare.  The more Obama has attempted to sell it both before and after its enactment, the less popular it has become.

Today, we’re witnessing that same lack of persuasive skill with regard to the question of military intervention in Syria.  According to an NBC News/Wall Street Journal survey released this morning, public opinion on intervention has reversed in the past two weeks, from 50% to 44% in favor to 51% to 44% opposed:

At the end of August, and NBC News poll found that half of Americans backed a limited set of airstrikes to destroy Syrian military units in response to an alleged government-directed gas attack that killed more than 1,400 civilians.  In less than two weeks since then, support for a limited attack dropped to 44%, the new poll found.  ‘As the public hears more information, they are coming down on the side of ‘don’t do it,” said Bill McInturff, a Republican pollster who conducted the survey with Democratic pollsters Fred Yang and Peter Hart.”

I was asked yesterday on Cam & Company on NRA News whether Obama can recover politically from his current debacle.  Given his performance to date in the art of persuasion, that prospect certainly doesn’t appear likely.

Join CFIF Corporate Counsel and Senior Vice President Renee Giachino today from 4:00 p.m. CDT to 6:00 p.m. CDT (that’s 5:00 p.m. to 7:00 p.m. EDT) on Northwest Florida’s 1330 AM WEBY, as she hosts her radio show, “Your Turn: Meeting Nonsense with Commonsense.”  Today’s guest lineup includes:

4:00 CDT/5:00 pm EDT:  Pete Sepp, Executive Vice President of National Taxpayers Union – NTU’s 3^rd Annual “No-Brainer List” of Congressional Bills;

4:30 CDT/5:30 EDT:  RJ Smith, Distinguished Fellow at the Competitive Enterprise Institute’s Center for Energy and Environment – Federal Control of Land and Environmentalist Deception;

5:00 CDT/6:00 pm EDT:  Sally Pipes, President and Chief Executive Officer of Pacific Research Institute – ObamaCare and Employer Health Care Cuts; and

5:30 CDT/6:30 pm EDT:  Captain Glenn Sulmasy, Center for National Policy’s Homeland and National Security Law Fellow – Syria.

Listen live on the Internet here.   Call in to share your comments or ask questions of today’s guests at (850) 623-1330.