issue: Regulatory Reform

Weinstein Jr. for Forbes: The Cost And Benefits Of Privatizing Amtrak

Posted on by Alex Terr

Elon Musk’s call to privatize Amtrak should surprise no one. He owns a car company, has recommended that tourists from abroad not ride passenger rail in the U.S., and according to his biographer “the idea (for the Hyperloop) originated out of his hatred for California’s proposed high-speed rail system,” which he viewed as too costly and too slow.

But supporters of passenger rail in the U.S. should not dismiss the notion of redefining Amtrak’s role in running our nation’s intercity rail network, including privatizing some of its operational responsibilities. Rather, they should use this moment as an opportunity to debate the best way to leverage private investment in passenger rail.

Born out of necessity, Amtrak was never intended to be the long-term solution to providing passenger rail in the U.S. The collapse of privately-owned and operated passenger rail in the 1960s led to the government corporation’s creation in 1971. Amtrak’s operations greatly expanded in the mid-1970s when it took over the Northeast Corridor (NEC), which accounts for over a third of its passengers and is operationally a money maker. Since then, Congress has been fairly divided about Amtrak’s vision. Many Democrats support more government funding of Amtrak while large swaths of Republicans have called for the public corporation’s dismantling and the sale of the NEC to private interests. Partly as a result of this partisan divide, Amtrak has been unable to access a stable source of funding to invest in its rail infrastructure, leaving it with billions in deferred maintenance and little money for investments in high-speed rail.

Read more in Forbes. 

Why the Sixth Circuit Was Right on Net Neutrality

Posted on by Max Sherrill

The Sixth Circuit Court of Appeals’ decision to block the Federal Communications Commission’s (FCC) attempt to revive net neutrality regulations is a significant affirmation of judicial restraint and regulatory clarity. This decision not only preserves the light-touch framework that has driven unprecedented internet growth since 2017 but also sends a clear message: federal agencies must respect the boundaries of their statutory authority, leaving sweeping policy changes to Congress where they belong.

Since the FCC’s 2017 repeal of Obama-era net neutrality rules, the internet has defied expectations of its demise. Investment in broadband infrastructure has surged, speeds have risen, and access has expanded, particularly in rural and underserved areas. Critics of deregulation once forecast a dystopia of throttled connections and blocked content. Yet the reality has been altogether more mundane: a market-driven system where broadband providers, spurred by consumer demand and competition, have kept the internet open and reliable. Far from descending into chaos, the internet has flourished under a framework that prioritizes innovation over heavy-handed oversight.

The Sixth Circuit’s ruling resonates beyond the FCC, reflecting a broader recalibration of regulatory authority in Washington. In rolling back Chevron deference — a doctrine that long gave agencies leeway to interpret ambiguous statutes — the Supreme Court signaled a new era of constraint. The Sixth Circuit’s insistence that the FCC stay within its statutory bounds is a pointed reminder that sweeping policy shifts belong to Congress, not unelected bureaucrats. By curbing the impulse to govern by fiat, the court has reinforced the foundational principle that regulation must rest on clear legislative intent.

Outgoing FCC Chairwoman Jessica Rosenworcel’s acknowledgment that the commission’s efforts had reached a dead end is a candid admission of the regulatory reality. While she called for Congress to enshrine net neutrality principles, this plea also highlights the inherent challenges of imposing sweeping rules through agency actions alone. Legislative clarity would resolve many uncertainties and contentious legal battles that have plagued this issue for over a decade.

Proponents of net neutrality argue that the principles of a “fast, open, and fair” internet are non-negotiable. However, those ideals can coexist with the flexible, innovation-friendly regulatory environment established in 2017. The internet’s evolution has consistently been driven by market forces, not prescriptive government mandates. Internet service providers have every incentive to maintain user satisfaction, as consumer trust and market competition remain key drivers of success in the digital age.

Moreover, the narrative that stricter regulations are necessary to protect consumers or enhance cybersecurity fails to hold up under scrutiny. Since the repeal of net neutrality rules, there has been no documented systemic abuse of power by broadband providers. The argument for reintroducing heavy-handed regulations often appears to be a solution in search of a problem.

Looking ahead, Congress has an opportunity to step in and provide a durable resolution to the net neutrality debate. Bipartisan legislation that balances the need for an open internet with the benefits of a market-driven approach could end the regulatory ping-pong that has defined this issue. Such a framework should prioritize transparency, competition, and consumer protections while avoiding the pitfalls of overregulation that stifle innovation.

The Sixth Circuit’s ruling is a win for consumers, businesses, and the broader internet ecosystem. By upholding the light-touch regulatory framework that has driven unprecedented growth and connectivity, the court has ensured that the Internet remains a dynamic and open platform. As the FCC enters a new chapter, its priority should shift from ideological skirmishes to pragmatic policies — building better infrastructure, narrowing the digital divide, and ensuring that America retains its leadership in the global digital economy. The internet’s strength has always been its adaptability. Today’s challenge is to nurture that resilience, not smother it in outdated regulation.

More Regulatory Overreach in California

Posted on by Max Sherrill

There’s nothing wrong with a state regulatory agency setting service standards for connectivity, such as time to repair an outage — as long as the regulators adopt a reasonable and workable approach.

Unfortunately, staff at the California Public Utility Commission (CPUC) have jumped the shark. The regulators are proposing to impose draconian outage repair requirements and penalties on carriers, that would require all VOIP (Voice over IP) and wireless outages to be fixed within 24 hours, with costly fines escalating over time. The standard would effectively impose fines on carriers for not fixing outages right away, even when that outage is well beyond the provider’s control.

These fines — which would be automatically credited back to customer accounts — could add up quickly in the case of widespread outages, well in excess of what a customer pays for monthly voice service.

Why is this a problem? Significantly, the proposed action would impose a completely unrealistic perfection standard that provides no flexibility for factors well beyond the control of the carrier.  Reasonable exemptions should be included that at a minimum provide an accommodation when there is a lack of commercial power, wildfires, snowstorms, earthquakes, floods, or falling trees, on the one hand, and lack of access to customer premises on the other. However, the staff proposal does not include sufficient flexibility. It is not hard to imagine the absurd results that this will create. For example, imagine a planned commercial power shutoff (e.g., a PSPS or “public safety power shut off”) put in place by Southern California Edison due to a wildfire that results in a loss of power to a community that stretches into two days and impacts all homes and businesses. Under the standard proposed, VOIP providers would be fined for the loss of their service even though the loss of power (and its restoration) is well beyond their control and core business.

In addition, there is nothing a provider can do to correct or prevent an outage when the cause is outside of the provider’s control, whether they are fined for the outage or not. While the proposed CPUC standard exempts outages during governor-declared states of emergency, factors outside of the voice provider’s control arise at other times, including snowstorms, floods, or downed trees, on the one hand, and lack of access to the consumer on the other.

Indeed, it’s a fact of life that some outages take longer to fix than others. A tree falling on a broadband cable in a remote area will take more time to repair than the typical suburban line problem. A lot of trees falling because of a storm will stress repair capabilities. The staff’s proposed standard does not account for these modern-day realities.

If the  CPUC staff’s proposal is adopted, this could result in less build-out of new lines to vulnerable rural areas. Suppose that a carrier is deciding whether to build out new facilities in an area that is prone to outages due to natural causes (e.g., fire, earthquakes, floods, etc.). Punishing the carriers too heavily for unavoidable outages will make some proportion of the new lines uneconomical to build and maintain. Similarly, on a statewide level, given different and competing regulatory environments throughout the nation, excessively strict outage penalties could discourage telecom investment in California more generally — an unnecessary loss for the state and its consumers.

At the same time, the new standards will give customers an incentive to game the system, since they benefit directly from the fines. If a carrier can’t get access to a customer’s home or property to fix a problem, then the fines—and customer credits—can mount up quickly, even if the carrier can’t do anything.

Finally, excessively onerous service quality standards will require additional repair equipment and personnel, artificially boosting the price of voice services for California residents. Requiring an unrealistic 100% 24-hour repair standard, particularly if it includes causes beyond the provider’s control, is a luxury that poor and middle-class consumers cannot afford.

Nobody likes communication outages, and nobody disagrees that they need to be fixed as soon as possible. But customers also like low prices, greater innovation, and more telecom investment in rural areas. Excessively tight outage repair standards and punitive penalties undercut both of these.

It does not have to be this way. A more effective framework to protect consumers would calibrate penalties and fines to better focus on outcomes that are squarely within the control of the provider. For example, in New York, rather than punishing VOIP providers for loss of service due to a power outage that is beyond their control, automatic consumer credits do not kick in until commercial power has been restored for 24 hours. And the credit is directly proportionate to the length of the outage and the price of the service the customer pays. This still protects consumers while establishing more realistic expectations for providers.

It is time for California regulators to recognize that more and more regulation is not the key to success and effective consumer protection, especially when such regulation punishes conduct well outside of the control of the regulated company.

Regulations and penalties should be targeted and measured to protect consumers and encourage businesses to continue to invest and operate in the state.

Getting the War on Junk Fees Right

Posted on by Max Sherrill

President Biden and his team may have found a winning issue protecting consumers (and voters) from junk fees and hidden costs — but only if they play their policy (and political) cards right.

Regulation that solves old problems without creating new ones will strengthen the economy and bolster Democrats’ brand as practical leaders who put consumers first. But overreach that puts talking points ahead of tangible gains — or regulates for regulation’s sake — is sure to backfire. So far, the Administration’s junk fee push has been a little bit of both.

The Federal Trade Commission’s (FTC’s) CARS rule banning phantom charges in auto sales and DOT’s new requirement that airlines automatically refund canceled fights have been clear winners, delivering concrete, immediate benefits without harmful side effects or unintended consequences.

On the other hand, the FTC’s centerpiece proposal requiring businesses to disclose “total prices” before consumer purchases is turning into more of a mixed bag.

On the surface, this one should be a policy and political gimmee. No one supports surprise last-minute charges or Rube Goldberg pricing schemes that make it impossible to figure out what something costs until you’ve clicked through multiple screens to buy it. The basic idea is so logical and popular that the worst offenders — industries like ticketing services, hotels, and short-term rental services — have been scrambling to get ahead of the regulators and banish or more clearly disclose dubious “convenience” and “destination” fees.

But the FTC’s proposed rule doesn’t only apply to these obvious targets; it covers the entire economy. And in its rush to pump out the broadest possible rule ahead of fall elections, the agency is ignoring costly unintended consequences that could undermine both the policy and the political benefits of the rule.

The biggest problem is the FTC’s failure to consider the confusion and other harms caused by applying the new rules to consumer businesses that are already subject to existing transparency requirements. This oversight isn’t surprising, given the agency is clearly focused on a handful of high-profile consumer industries that do not already have such obligations. But by sweeping everyone else in too, it poses real problems for businesses that are already fully regulated and for consumers who would end up swamped with confusing or conflicting disclosures.

Banking services, for example, must comply with the extensive requirements of the Truth in Lending Act, including disclosure of “life of the loan” borrowing and financing costs a well as company policies around default, late payments, and service charges and fees. Adding new disclosure obligations alongside these existing requirements would be confusing, duplicative and costly, driving up borrowing costs and potentially freezing lenders in place with no way to satisfy conflicting regimes.

Communications companies are also already covered by industry-specific — and absolutely mandatory — rules dictating how they describe and disclose prices and related policies, including the 2019 Television Viewer Protection Act as well as the Federal Communications Commission’s (FCC’s) recently enacted “All In Pricing” and “Broadband Nutrition Label” regulations. And these existing requirements differ substantially from the proposed FTC rules on critical issues like whether or not to include government fees and taxes in “total costs” (required by the FTC but not the FCC) or how to explain regional pricing variations to consumers (the FCC says companies can reference these differences in ads while the FTC does not).

The result would be defensive, “double messaging” to consumers offering two different and conflicting sets of disclosure, as businesses subject to overlapping regulatory regimes attempt to manage the tension. Consumers would almost certainly be more confused and prices would likely rise in these industries due to the high costs of complying with such complex and risky overlapping obligations.

One tool to avoid these missteps is the Bipartisan Regulatory Early Notice and Engagement Act, which requires agencies to give an early heads-up when they are considering new regulations — giving the people and businesses affected a chance to flag potential conflicts and unintended consequences.

Another is even simpler — regulate where needed — but no farther. By limiting the application of their new rule to industries that aren’t already covered by more specific, tailored regulations, policymakers can stop confusion and conflicts before they even get started.

That’s how to protect consumers, boost the economy, and win the war on junk fees without making the Democratic brand collateral damage.

Regulators Deserve a Nudge, Not a Shove

Posted on by Max Sherrill

SCOTUS just did away with Chevron deference, effectively trimming the discretion enjoyed by hundreds of thousands of federal regulators across 70+ agencies.

As expected, anti-regulation voices are sounding off with unbridled glee as conservative lawmakers blow the dust off of old legislative proposals that have never garnered bipartisan traction.

If such reactions are misplaced, then how should one process this admittedly momentous decision by the high court?

Let’s start by acknowledging a truth that some on the left are loathe to admit: the work of federal regulators—thousands of new mandates every year, imposing tens of billions of dollars in costs–largely escapes oversight by elected officials. In my recent report for the Progressive Policy Institute, I note that just 8% of all new rules are reviewed by the White House, and just 17% of all new rules are required by Congress. Regulators are most certainly driving the bus.

And let’s acknowledge another truth ignored by some on the right: the public benefits enormously from regulation. Benefits exceed costs by a large margin—a conclusion drawn across numerous studies, including annual reports from the Office of Management and Budget. And polling shows that the public overwhelmingly supports regulatory protections—think clean air, safe transportation, unadulterated medicines, fiscally sound banks.

So what can and should be done, if anything, to ensure appropriate checks and balances on the so-called administrative state?

Deferring to the courts is not a viable long-term solution. Judges are ill-equipped to play the role of regulator—they lack expertise in the very technical matters that are often at the heart of any rulemaking action.

Greater reliance on the president is better, but not much. Executive orders govern the regulatory review process, but executive orders do not have the force of law, and some of the most active regulatory agencies are, by design, not subject to White House control.

No, the key take-away from the SCOTUS ruling is that Congress, which delegates its authority to regulators, needs to elevate its game when it comes to oversight. It should pass a law that shines a light on troublesome rules before they are issued. But it should do so without sacrificing the issuance of necessary rules, which are legion. Regulators deserve a nudge, not a shove.

Fortunately, such a solution—in the form of regulatory early notice—was recently introduced in the House of Representatives. The bill, H.R. 8204, co-sponsored by Rep. Don Davis (D-NC), Guy Reschenthaler (R-PA), and Tim Burchett (R-TN), would require agencies to disclose to Congress every newly initiated rulemaking, along with an explanation of its necessity and the rationale behind it. And the public would be invited to submit ideas on how best to achieve the regulatory objective at the lowest cost.

In many ways, the bill does not break new ground. It borrows language from a Clinton-era executive order that has been in place since 1993 and affirmed by every President since. And it embraces recommendations of the Administrative Conference of the United States, which was established to convene legal scholars and other experts to identify needed reforms.

What is new is this: the bill would allow Congress to see exactly how federal agencies use their delegated authority long before a new rule is issued. Just as sunlight is the best disinfectant, disclosure is the best way to ensure stronger, more defensible regulation from the get-go. The concept is, to coin a phrase, radically pragmatic. Congress should act on it.

For more on the need for regulation reform that promotes transparency and accountability in federal rulemaking, check out a recent PPI paper titled “Stronger Regulation from the Get-Go.”

About the Author

Keith B. Belton is Senior Director, Policy Analysis and Statistics, with the American Chemistry Council. His research and writings explore the intersection of public policy and private markets, with particular focus on economic development, regulation, and competitiveness.

How Early Notice Can Promote Smarter Regulation

Posted on by Max Sherrill

New PPI regulatory reform proposal inspires bipartisan legislation on Capitol Hill

 

Washington, D.C. — To promote transparency and accountability in federal rulemaking, U.S. agencies should be required to give the public and Congress early notice of their intent to create new regulations, so concludes Stronger Regulation from the Get-Go, a new report released today by the Progressive Policy Institute (PPI).

“By providing early notice, regulatory agencies can benefit from public input and congressional oversight, which will lead to more defensible regulation,” says Keith B. Belton, the report’s author. Its core proposal has become the basis for H.R.8204, the Regulatory Early Notice and Engagement Act (RENEA), recently introduced in Congress by U.S. Representatives Don Davis (D-N.C.), Guy Reschenthaler (R-Pa.), and Tim Burchett (R-Tenn.).

“This legislation is about ensuring that federal agencies operate with full transparency and engage the public in the regulatory process from the outset,” said Congressman Don Davis. “By providing early notice of proposed regulations and inviting public input, we can make the regulatory process more inclusive and effective. I’m proud to introduce this bipartisan legislation which promotes good governance, strengthens public trust, and ensures that regulatory decisions are made in the best interest of the American people.”

Belton’s report suggests requiring federal agencies to explain the rationale for every newly initiated rulemaking activity and make this information available to Congress and the public through a regulatory early notice. This early notice would identify the problem to be addressed and invite public recommendations on achieving the rule’s objectives at the lowest cost. The bill puts Congress in an oversight role and codifies requirements from a 1993 Executive Order, issued by President Bill Clinton and affirmed by every president since, which outlines the philosophy behind federal regulation.

The early notice proposal builds on PPI’s previous work on regulatory accumulation and reform. In 2013, PPI called for the creation of a Regulatory Improvement Commission — a base-closing-style body that would compile a list of existing regulations that have outlived their usefulness and recommend their modification or rescission. Now, as Congress is considering new reforms for regulatory oversight and transparency, PPI is again proposing a bipartisan solution to streamline and improve the rulemaking process.

Read and download the report here.

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org. Find an expert at PPI and follow us on Twitter.

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Media Contact: Tommy Kaelin – tkaelin@ppionline.org

Stronger Regulation from the Get-Go

Posted on by Max Sherrill

INTRODUCTION

For federal regulators, the stakes have never been higher. On the one hand, the Biden Administration sees regulation as an important mechanism to advance its ambitious
policy priorities — and is employing a whole-of-government approach unprecedented in terms of both its breadth and depth — for example, to address climate change, to advance its pro-labor agenda, and to regulate artificial intelligence.

On the other hand, the Supreme Court, with its 6-3 conservative majority, is taking aim at regulatory overreach. In its last two terms, SCOTUS has shown a growing interest in
curtailing the so-called administrative state, narrowing the ability of regulators to interpret broadly their statutory authority — for example, by vacating Biden regulations to forgive student loan debt and narrowing the scope of federal jurisdiction over waters subject to pollution control. The current SCOTUS term — which began in October — offers more of the same. Among the cases to be decided are those challenging long-standing tenets of administrative law, such as the major questions doctrine, the non-delegation doctrine, and Chevron deference.

The stakes are high because, once in place, regulation has staying power. The Code of Federal Regulation (CFR), a compendium of all federal rules — has grown from just two volumes in 1938 to approaching 250 volumes and more than 185,000 pages — four times larger than the U.S. Code of Laws, a compendium of statutes enacted by Congress. Containing more than one million restrictions (and counting) and touching every aspect of American life, the CFR has expanded by 3% year after year (see Figure 1), reflecting the roughly 3,500 new rules issued annually by more than 70 regulatory agencies employing hundreds of thousands of regulators.

When crafted well, regulation saves lives and improves the quality of life. Our food is safer, air is cleaner, consumers are better informed, and household savings are better protected — in no small part because of regulation that sets a high bar on performance that Americans have come to expect. But when crafted poorly, regulation can extinguish opportunity: builders who must wait more than a decade for a federal permit, food processing facilities that must adhere to thousand-page rulebooks from two different federal agencies, innovators who must navigate an increasingly lengthy and costly government approval process that, in some cases, was never applied to competing products that had been in commerce for decades.

Whether a regulation provides a net plus or minus depends critically on the process used to create it. A flawed process leads to flawed outcomes, and vice versa.

With so much riding on regulation, now is an opportune time to identify and fix flaws in the process. The purpose of this report is to propose a new reform, developed by the author in collaboration with the Progressive Policy Institute, that would promote transparency and rigor in federal rulemaking. It has recently been introduced in Congress as H.R.8204, the “Regulatory Early Notice and Engagement Act (RENEA) by Representatives Don Davis (D-N.C.), Tim Burchett (R-Tenn.), and Guy Reschenthaler (R-Pa.).

Read the full report.

The SEC’s Approach of Regulation by Enforcement for Crypto Assets

Posted on by Alyssa Brown

As crypto assets have gained mainstream popularity, most industry leaders have been vocal about the need for a defined regulatory framework for decentralized finance in the United States. Now, in lieu of a successful legislative effort from Congress, the SEC has taken matters into its own hands. Crypto exchange platforms Coinbase and Binance are both facing lawsuits filed by the SEC as of last week, with the agency alleging that the companies are guilty of operating unlicensed securities trading platforms in the United States.

The suits represent a sort of regulation by enforcement, penalizing exchange platforms that have struggled to find where they exist in the current financial system. It is the responsibility of the SEC to protect investors where necessary and, with a robust history of fraud, the industry has not done its credibility any favors. However, considering the dynamism of still-developing crypto markets, the SEC must ensure that their aggressive enforcement efforts, absent clear laws or guidance from Congress, don’t throttle the entire crypto industry, effectively punishing good actors alongside the bad ones while paralyzing innovation.

The cases against Coinbase and Binance rest on a hotly disputed question: Do crypto assets qualify as a security under U.S. financial regulation, and if so, which ones? The SEC seems to think yes in many cases, with Chair Gary Gensler leading the charge toward defining them as such. But even in the eyes of the SEC not every crypto asset is a security, and the lack of clear legal definitions makes it impossible for exchanges to ensure complete compliance laws not written with crypto in mind.

In the past, courts have applied the Howey test, a common framework for determining whether an asset is a security, to crypto assets. The test has four basic requirements. A security is defined in instances in which there (1) must be investment of money, (2) in a common enterprise, (3) with reasonable expectation of profit, (4) derived from the efforts of others. Under this test, it is generally agreed upon that Bitcoin and Ethereum are decentralized enough — meaning that they are detached from any collective effort or organization promoting them — that they are not considered securities. But in other cases, such as Balestra v. ATBCOIN LLC, courts have determined that certain crypto coins do in fact qualify as securities, because the model of the organization behind the coin acted more like a centralized investment fund than a decentralized system.

Though they have lost momentum since the last congressional session, efforts have been made to codify the differences between an asset’s classification as a security or commodity. Senators Lummis and Kirsten Gillibrand’s Responsible Financial Innovation Act, for example, established that under the Howey test some assets should qualify as securities based on their level of decentralization. But the bill did not pass–and without clear lines being drawn by Congress, it has been up to companies and the SEC to provide their own guesses as to which is which. While the SEC’s stance has been made clear, there is also currently no way for crypto exchanges to register with the SEC, meaning these companies couldn’t avoid these suits even if they happen to independently arrive at the same conclusions as the agency.

Within this uncertain environment, Coinbase has been adamant that based on the Howey Test crypto assets are not securities, as explained in their February 2023 blog post on the matter. This is consistent with the company’s many statements insisting their compliance with the law to the best of their abilities, though this a moot point if their legal interpretation doesn’t match the one now touted by regulators.

With legislation stalled in the United States and slow rollout of regulation in the European Union, the recent filings by the SEC represent some of the first widespread attempts for a government to act on defining crypto assets around the globe. As such, the SEC should do so in a way mindful of the impact it will have on crypto’s ability to innovate in U.S. markets. Without policy changes, crypto exchanges will be left with three options if the SEC finds success with its recent filings: shut down crypto exchanges in the US entirely, find another legal avenue to register with the SEC, or only allow trading of coins which have been accepted as being decentralized enough to not qualify as a security–likely excluding everything but Bitcoin and Ethereum.

The crypto space has not been without its problems, but current efforts by the SEC may undermine the ability for an honest, robust industry to thrive in the United States. Though crypto trading platforms should be held to a high level of scrutiny to protect investors, the SEC must balance this with an approach that still allows Congress to move forward with legislative efforts to regulate the industry in a way that both provides guidance and preserves crypto’s innovative potential.

PPI Statement on Supreme Court Decision to Preserve Section 230

Posted on by Alyssa Brown

Malena Dailey, Technology Policy Analyst at the Progressive Policy Institute (PPI), released the following response in reaction to the U.S. Supreme Court’s rulings in Gonzalez v. Google and Twitter, Inc. v. Taamneh, leaving intact Section 230 of the Communications Decency Act, the legal framework through which websites are able to host third-party content.

“PPI has consistently argued any changes to the landmark Section 230 statute must consider the potential risks to American innovation and the digital ecosystem, including in an amicus brief filed in the case of Gonzalez v. Google.

“Since Section 230’s inception, the internet has been a platform for entrepreneurship, advocacy, and community, empowered by the ability for individuals to lift up their voices online. The preservation of Section 230 is a win for American innovation and the growing digital economy — all of which have spurred American job growth in the last several decades.

“There is a clear need for moderation of content users post on online platforms. While there may be room to update content liability to reflect the harms of the modern internet, any changes must keep in mind the integral role Section 230 plays in the development of an ever-growing digital ecosystem.”

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.

Follow the Progressive Policy Institute.

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Media Contact: Amelia Fox – afox@ppionline.org

Amicus brief submitted by PPI highlights potential risks to America’s digital economy 

Posted on by Alyssa Brown

Today, PPI submitted an amicus brief to the Supreme Court in the case of Gonzalez v. Google. The brief highlights the potential risks to America’s digital economy under the circumstances of a ruling against Google, considering the implications of changes to what falls under the liability protections provided to online platforms through Section 230 of the Communication Decency Act. Though there is certainly room for reform to Section 230 to better reflect the harms associated with the modern internet, efforts to do so must tread carefully and be targeted to specific harms to avoid destabilizing the digital economy.

The brief highlights the following points:

1.  “The digital economy, fortified by Section 230, is critical to the American economy.”

The digital economy is an enormous creator of American jobs, thus, significant changes to the fundamental legal regime through which that economy operates risks the stability of a robust industry. This is also a sector that has proven otherwise stable in the face of pandemic shutdowns and periods of high inflation.

2. “Algorithmic recommendation is critical to the digital economy.”

Action against curated algorithms will have impacts that reverberate through the economy. They are the fundamental mechanism behind a variety of business models that empower both online entrepreneurship and the use of access to information for consumers. Potential changes to liability protections for algorithms would also be misguided from a technological standpoint, as algorithms of varying complexity are the means through which all online platforms sort third-party content.

3. “Section 230 reform is warranted, but that reform should be the result of careful, holistic policymaking.” 

Given the significance of online platforms in Americans’ everyday lives, changes to Section 230 must be made with great intentionality. Internet policy should be made by Congress, not the courts. There is a need to address issues posed by dangerous online content, but a catch-all approach may result in significant unintended consequences.

PPI’s full amicus brief can be read here.

Give the children’s online protection bills the due process they need

Posted on by The Progressive Policy Institute

President Biden began the year calling on Congress to pass stronger digital privacy protections for minors. Now, with just two weeks left in 2022, there is talk that the Senate is looking to fulfill that request by adding two major children’s online privacy and safety bills to the potential omnibus spending package.

Protecting young people online is a challenging task. Both digital privacy and content moderation have proven challenging in a legislative, constitutional, and technical context. Adding these bills to the omnibus spending package does not give the topics the due process and consideration they deserve. A better focus for Congress would be to pass universal privacy protections and then augment those protections with youth privacy and online safety rules.

Though the bills have different sponsors and come from different committees, together they address the two most important areas of online safety for children: privacy and child-appropriate content. One, the Children and Teens’ Online Privacy Protection Act, would protect the online privacy of anyone under 16 years old. The second bill, the Kids Online Safety Act (KOSA), is a youth content moderation bill that seeks to prevent young people from seeing harmful content on the websites they access.

The Children and Teens’ Online Privacy Protection Act is an update to the current children’s privacy regulation, the 1998 Children’s Online Privacy and Protection Act (COPPA). The current regulation is straightforward. It applies to companies knowingly handling data of youth under 13 years old. To comply with COPPA, firms must gain consent from parents before collecting children’s data and “implement reasonable procedures to protect the security” of that data. The Children and Teens’ Online Privacy Protection Act updates the current rules, taking into account the changes in the digital landscape in the last 25 years.

First, the new bill would increase the age requirement for parental consent to 16. Next, it limits the use of children’s personal data and adds privacy and security requirements for children’s data. The bill makes it illegal to show targeted ads to youth, adds a digital marketing bill of rights to limit data collection of minors, and requires platforms to create privacy dashboards for parents to see how sites use youth data.

As PPI has previously written, in its current form, COPPA has always been difficult to enforce because there is no easy way to check if a website user is under 13 years old. The new legislation, while providing pragmatic and relevant updates to the original text, risks not only reproducing that challenge, but increasing it because the Children and Teens’ Online Privacy and Protection Act applies to more young people. Instead, we advocate for universal privacy protections for all Americans that can be updated, as needed, for children.

The other bill under consideration is the Kids Online Safety Act. This bill follows California and the United Kingdom, both of which have passed youth content moderation protections. It applies to any online software with child users and can be broken down into three areas. First, a blanket duty of care for platforms to act in the best interest of minors using the site by demoting content that could be harmful to them. The bill defines harmful content as promoting eating disorders, self-harm, bullying, sexual exploitation of youth, or alcohol or addiction content. Next, it requires safeguards, or “parental controls,” on youth accounts. The controls would provide extra privacy, data, and content ranking settings. Finally, it requires audits from companies on their online safety risks and practices, gives the Federal Trade Commission enforcement powers, and establishes a Kids Online Safety Council to advise and implement the Act.

This bill gets a few things right. First, it defines a set of harmful content, making it easier for companies to know what is and isn’t covered. The requirement to add additional settings for parental control on individual online accounts is also valuable. It creates an easy opt-in tool for parents to better manage their children’s accounts.

The challenge is in the duty of care mandate. In theory, as long as platforms can demonstrate in their audits that they are taking appropriate steps to prevent youth from accessing harmful content, they will be safe from lawsuits. However, addressing content moderation is challenging. The First Amendment protects the right to freedom of speech with minimal exceptions, giving private companies a broad mandate to define what content is shown on their platforms. And many companies already go above and beyond in shielding all users from the content defined in KOSA.

Harmful content violates the terms and conditions of most platforms and is already moderated. Companies do their best to demote and remove videos included in the “harmful content” definition, but it is currently technically impossible to do this work with 100% accuracy. Content that is bullying or harassing can happen in real-time, like in chat rooms on video games. If a video game has users under 16, which many do, the company could censor certain words in the chat, but online language is constantly evolving and uses new abbreviations and emoji combinations to get around censorship.

It’s unclear what additional steps firms will need to take to comply with KOSA’s broad mandate. There are currently no enforceable age restrictions on the internet, meaning KOSA elicits the same enforcement challenges as COPPA. Some sites might choose to be more heavy-handed, such as restricting users under 16 from making accounts (as many sites now do for kids under 13 due to COPPA requirements), requesting proof of age when signing up, or moderating content, including user-generated content that depicts legal products for adults like alcohol and cigarettes, for everyone to protect youth.

There is little doubt that young people need protection from harmful internet content. The proposed bills are broad in scope, applying to any website, social media, video game, or app that connects to the internet. Without universal privacy protections for all Americans and with the First Amendment, as well as other challenges with internet content moderation, these bills may be difficult to enforce and face legal scrutiny. While they likely won’t alter the internet as we know it, more time is needed to see how these bills will impact platforms and content across the internet.

Bledsoe and Sykes for the Hill: GOP killed permitting reform — giving Democrats a new campaign issue

Posted on by The Progressive Policy Institute

By Paul Bledsoe, PPI’s Strategic Advisor, and Elan Sykes, PPI’s Energy Policy Analyst

Over the last two years, Congress has passed a series of landmark bills that together fund more than $500 billion in clean energy investment, by far the largest ever enacted. More importantly, generous tax incentives can spur many trillions in direct private sector investments, creating a powerhouse U.S. advanced energy sector. Yet, right now, a broken U.S. energy permitting system short circuits thousands of major projects, imposing tremendously high costs in time and money to build clean infrastructure projects, if they get built at all.

Congress had an opportunity to fix this roadblock through a permitting reform bill, but despite claiming to support reform, Senate Republicans effectively killed the measure in a nakedly political effort to deny Democrats a popular policy win. Democrats should turn the tables on the GOP, making the economic and climate costs of this hypocritical action a major campaign issue in the upcoming midterm elections.

Ironically, in the name of environmental protection, a perverse process has developed over decades whereby often unnecessary and duplicative government reviews and nuisance lawsuits have pushed average time for permitting to 4.3 years for electricity transmission, 3.5 years for pipelines and 2.7 years for renewable energy generation projects. In the mid-Atlantic and near-Ohio valley alone, more than 2,500 projects are awaiting approval, 95 percent of which involve renewable energy. In fact, a new Progressive Policy Institute (PPI) report finds that without extensive permitting and regulatory reforms, large projected economic benefits and emissions reductions from recent laws would be substantially limited, and fail to meet policy goals.

Read the full piece in The Hill. 

Digital Documents as a Tool for Inclusion

Posted on by The Progressive Policy Institute

Photo identification is necessary for modern life. However, more than 21 million Americans do not possess valid ID, and those without home addresses cannot register for state driver’s licenses. Without that physical license, a person can’t get a job, receive aid or health care, vote, or represent themselves in court. Luckily, IDs aren’t the only way to prove identity. Those born in the US have official paper trails through birth certificates and social security cards. To lose these documents and to obtain new copies require paying a fee or appearing in court. How can legislators ensure documents are accessible and protected? The City of Austin Innovation Office’s LifeFiles initiative offers a unique and scalable approach to inclusive documents.

LifeFiles distinguishes itself from global digital ID programs in its decentralized administration and accessibility. In its initial prototype funded by Bloomberg, LifeFiles sought to help people experiencing homelessness gain autonomy over identity documents by creating an official, digital repository of documents like birth certificates. Using a web application, the program was designed for all levels of tech literacy and access: First, by making it accessible from any computer and second, by offering multi-modal sign in methods, password, biometrics, social attestation, or a security question to unlock the documents. Initial testing enabled official free notarization of uploaded documents using blockchain so the digital repository could be used in government settings like applying for a driver’s license or for food and social welfare benefits.

LifeFiles is open source and never collects user data. It uses a combination of blockchain and encryption to secure user documents. Blockchain technology creates an encrypted hash to ensure secure notarization. Then, public-private key infrastructure shares documents, giving an identity verifier the ability to check the blockchain ledger to guarantee authenticity. Decentralized identifier technology (DID) allows these official documents to be accessed via web browser without having a record of identifying information saved in that browser. Technological alternatives to LifeFiles without DID are less secure.

Though piloted as an inclusion tool, digital documents are universally advantageous. User-controlled release of identifying data and encryption make LifeFiles secure and private. The system may also lessen the paperwork burden for individuals and governments through official, centralized, digital storage of essential documents. LifeFiles researchers concluded the program may eventually lower the costs of administering IDs.

The city of Austin’s Chief Innovation Officer, Daniel Culotta, suggests the program could function nationally. Without further grant funding, LifeFiles halted its testing of prototype documents, but the code is still publicly available for replication and scaling. If the government administers the program, onboarding is as simple as volunteer-led document uploading clinics.

This pilot has potential to be adopted by many states and localities. Currently there are 47 states including Washington DC where digital notarization is legal. Eventually, widespread adoption of digitized records will save money, and digital copies of birth certificates at the time of birth will prevent the loss of important records later on, all with users’ autonomy over their identities.

LifeFiles is an open-source response to the difficulties citizens face when they lose important documents. If states fully support this approach, it could aid more than 20 million Americans in controlling their identity and accessing services.

 

Applying Antitrust Law to the U.S. Tech Sector: A critique of the American Innovation and Choice Online Act

Posted on by Alyssa Brown

EXECUTIVE SUMMARY

In 2019, the House Judiciary Committee initiated an investigation into the state of competition in digital markets, looking particularly at the dominance of America’s biggest online platforms. Three years later, a slew of bills have been introduced at both federal and state level intended to curb the power of “Big Tech.” The driving force behind many of these efforts is the claim that companies like Google, Amazon, Facebook (Meta), and Apple are simply too big, with their size posing a competitive threat to smaller tech companies. A handful of these bills are being introduced with the purpose of updating America’s antitrust laws to meet the challenge of today’s supposed tech monopolies.

The American Innovation and Choice Online Act (S. 2992) sponsored by Senators Amy Klobuchar, D-Minn., and Chuck Grassley, R-Iowa, for example, is being sold to Congress and the American public as being comprehensive antitrust legislation to rein in the power of “Big Tech.” Whatever its merits, however, the bill isn’t really based in antitrust law and policy. Rather, it’s an ad hoc set of new rules which replace the current standards for antitrust enforcement based on market power and consumer welfare with a more generalized approach which targets just one industry — online platforms. The Senate bill looks at platforms with a large number of users and assumes excessive market power as a result of size, forgoing the need for economic analysis required to prove illegal monopoly power. The bill then imposes additional competitive requirements onto this predetermined set of companies.

A genuine antitrust analysis would examine not just firm size, but the conditions of the market in which a company operates, the presence of direct competitors, and its potential for consumer harm. Instead, the Senate bill takes a cookie cutter approach to antitrust enforcement: An online platform that hosts third party business users with over 50 million U.S. monthly active users (or 100,000 business users) and a market capitalization or net annual sales over $550 billion should be subject to different rules regarding competition. Essentially, a company-specific carveout without precedent in antitrust law.

There is a demonstrated need for changes in how antitrust law is enforced in order to encompass the business models of today’s digital platforms and e-commerce sites. However, the Senate bill fails to offer a rigorous economic analysis of digital markets, fundamentally changing enforcement methods in ways unacknowledged by the bill’s supporters.

This report explores three ways in which the Senate bill falls short:

• For the past 40 years, U.S. antitrust enforcement has been based on the assessment of quantifiable harm resulting from a firm’s market power, which most often takes the form of price effects. Supporters of the Senate bill, however, make no such assessment.

• In addition to being incompatible with current antitrust law and practice, the American Innovation and Choice Online Act’s size-based model would put American companies at a competitive disadvantage against other big competitors in global markets.

• Businesses such as internet platforms with low costs and significant network effects require a more sophisticated approach to examining consumer harm which accounts for damage to consumers other than rising prices. This might include adverse changes to company policies or reduction in accessibility of a service and may, in the end, warrant additional regulation. The current proposed legislation does not make such a case.

Today’s dominant technology companies may warrant scrutiny under antitrust law, but to investigate the merits of this claim it is critical that assessment of an illegal monopoly is based on market power rather than size. By considering metrics of consumer harm beyond price effects, it is possible to evaluate harmful market power in a way that considers the nature of these growing industries without discounting the additional value to the consumer presented by companies with large network effects.

READ THE FULL REPORT

The War in Ukraine Highlights a New Era in Information Warfare

Posted on by The Progressive Policy Institute

The war in Ukraine has relied heavily on information warfare and the struggle to control the global narrative. It has highlighted both the impact that online campaigns can have on international crises, as well as the danger posed by false information on internet platforms. Social media-based disinformation is not the unknown threat it once was, but despite acknowledgement by internet platforms, online users, and American public officials that state-sponsored disinformation was likely to disseminate in the days following the Russian invasion, false claims have succeeded in blunting the world’s overwhelmingly adverse global reaction to Putin’s war. The response to this disinformation makes it clear that while we have learned from some of the mistakes of the past, false claims persist in both online and traditional media. Internet platforms have had to assume a defensive role, and right-leaning American media sources have echoed an online narrative consistent with that of the Russian state, further blurring the line between fact and fiction. Now, as we approach two months since the Russian invasion, it is important to assess what has worked well as a defense against false claims, as well as where state-backed disinformation continues to spread.

Given the familiar history of Russian weaponization of internet platforms for political purposes, the online propaganda offensive is hardly a surprise. In fact, the battle to frame the “special military operation” as essential to Russian security predates the invasion, with the European Expert Association identifying the dissemination of online rumors aimed at justifying the invasion of Ukraine sourced in Russian news media as early as October 2021.

This reality of Russian-backed disinformation on social media is a familiar one for many Americans following the 2016 election, during which at least 10.4 million tweets, 61,500 Facebook posts, and 116,000 Instagram posts were traced back to Russian state actors looking to influence the campaign debate. Since then, the question of how to counter false information online has shaken global politics, from claims of misinformation regarding the pandemic to the question of online censorship. As a result, global governments and online platforms were better prepared to combat disinformation than they have been in past conflicts.

The Biden administration’s decision to get out early and make public intelligence about Putin’s intent to invade Ukraine was hugely successful. It drowned out Russian state propaganda depicting Ukrainian leaders as “Nazis,” threatening Russian security. In early February, President Biden warned of the potential for a false flag operation under which Putin would invade Ukraine in response to some staged provocation. Despite Moscow’s claims that the Ukrainian government had plans to attack separatist regions of the country, the attempts to justify the invasion as a preemptive strike fell flat with a global audience. At the same time, social media posts coming out of Ukraine quickly went viral, leading to an outpouring of international sympathy and solidarity. Russian propagandists could not compete with vivid posts and videos capturing the horrors of war — for example, scenes of conditions in bomb shelters or one video of a Ukrainian vlogger being interrupted by a nearby missile strike. At this point, Russia was clearly losing the “information war.”

However, as the war continues, Russian disinformation has gained more traction online. For example, a map posted on left-wing websites showed recent airstrikes in in Syria, Yemen, and Somalia.  Evidently its purpose was to underscore that all conflicts are deserving of progressives’ attention, not just the war in Ukraine. However, the first iteration of the image was posted by Redfish, a company staffed by former employees of the state-run outlet Russia Today. More recently, Moscow has filled social media with bogus claims that Ukraine is developing biological weapons funded by the United States. In fact, these supposedly sinister “biolabs” are a part of a longstanding U.S. program to support public health infrastructure in former Soviet countries. The story gained mainstream attention in the U.S. after the Russian Defense Ministry put out a statement claiming that funding for the biolabs could be traced back to Hunter Biden and George Soros, a preposterous claim that nonetheless has parroted in the U.S. by Fox News’s Tucker Carlson and some popular conservative podcasts.

This echoing of Kremlin propaganda on the Trumpist right shows that much work remains to be done to combat the deliberate pollution of online discourse with lies. The Biden administration should continue to wield accurate U.S. intelligence on what’s happening in Ukraine and in Putin’s ruling circle in Moscow. Washington should also redouble efforts to counter disinformation in countries friendly to Russia, including China, Brazil, and India. Additionally, while the value of an informed public holds its own weight, the urgency is heightened when one considers how the online narrative around the war has shaped real world outcomes. The early surge of online support for Ukraine unified the Western democracies in condemning and calling for tough economic sanctions on Russia and provoked an outpouring of donations to Ukraine from internet users, including $67 million in cryptocurrency.

Particularly considering these implications, moderation of online content and safeguards against state-sponsored propaganda online are critical in controlling the spread of harmful disinformation. U.S. lawmakers should encourage and support social media platforms in stepping up efforts to filter out lies and propaganda and support an ongoing push for media literacy to equip Americans with tools necessary to defend themselves against online disinformation. The recent proliferation of fables such as the Ukrainian American biolabs show that, although platform companies are more aware of and prepared to deal with disinformation than they were in the past, bogus information and conspiracy theories will still get through. The United States, which led the world into the digital age, must now take the lead in separating fact from fiction online.

Improving government customer service should be highlighted in Biden’s State of the Union

Posted on by Alyssa Brown

President Biden is set to give his first State of the Union address on March 1. The address comes at a tumultuous moment when the President’s ambitious agenda has been obscured by interrelated crises of inflation, war, and the pandemic. But one of Biden’s more recent accomplishments that could serve as an enduring theme of his presidency is an executive order quietly passed on December 13, 2021: Transforming Federal Customer Experience and Service Delivery to Rebuild Trust in Government.

The customer service executive order is the most far-reaching outline in decades to modernize and improve service delivery and the government’s relationship with citizens. With only about 24% of Americans stating they have trust in government, this executive order is a commitment to allay that skepticism. The upcoming address should highlight this goal.

Service delivery is at the foundation of the purpose of democratic governance. It touches everything from taxes to emergency support and retirement assistance. High quality, easy to access services are a strong measure of the capacity of the government to use taxpayer dollars efficiently.

It could not come at a better time. In the pandemic, many Americans accessed government services in new ways. Lacking digital systems means we’re still fully unpacking the success of those interactions. Along the way, the pandemic did expose how lack of funding, lack of staff, and lack of digital capacity created roadblocks and paperwork burdens in moments when citizens were in real need.

Proposed improvements to U.S. systems include making online applications, portals, and mobile-accessible sites for the USPS and SSA along with passport.gov, WIC, Veterans Affairs, and the Department of Agriculture.

Digitizing service delivery is particularly hard for a nation slow to universalize at-home broadband access, low digital literacy, and an electorate suspicious of spending additional taxpayer dollars. The transformation will not come cheap and will likely face growing pains along the way.

Fortunately, digital development is agile and adaptable by design. A prime example is healthcare.gov. When it launched in 2013, only 50% of Americans had at-home broadband access and the software was nearly unusable, leading the Obama administration to recommend analog, phone, or in-person applications. Today, with improved website functionality and a 25% increase in at-home broadband means nearly 77% of Americans have the choice to bypass phone or in-person applications.

While Americans may be naturally suspicious of government, particularly when systems like healthcare.gov fail, good service speaks for itself; critiques of the healthcare website have entirely dried up. The evolution of healthcare.gov is illustrious of how other government services could be improved.

Biden’s goal to fully realize the potential gains of public sector modernization demonstrates a prioritization to make government work. The executive order should be just the beginning. Calling for legislation to fund and operationalize these goals could allay doubts about the Democrat’s agenda and overall improve public trust.