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Weekly Capitol Hill Roundup
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Press Release

Weekly Capitol Hill Roundup

President’s Budget

02/05/2003
Cut Spending First
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Press Release

Cut Spending First

Congressional critics of the President’s $2.23 trillion budget proposal have narrowly focused their complaints on tax cuts and budget deficits. Have they forgotten that under our system of government the president proposes a budget and the Congress appropriates? Have they forgotten that the president has proposed the largest federal budget in history? If they do not like the size of the budget deficit, why don’t they start with trimming some of the excess spending in the president’s budget?

02/05/2003
Will the President’s Budget Bolster the Economy?
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Press Release

Will the President’s Budget Bolster the Economy?

On Monday, President Bush sent his budget request to Congress. While not surprising, the budget is sobering. Beyond the tax cuts and initiatives outlined in last week’s State of the Union address, the new budget demonstrates the growing expanse of government and the urgent need for Medicare and Social Security reform. As the budget makes quite clear, if today’s deficits are disconcerting, the mounting liabilities of Social Security and Medicare are cataclysmic. The president outlines an ambitious agenda: “winning the war against terrorism, securing the homeland, and generating long-run economic growth,” all while tackling the excessive government spending and the looming fiscal crises of Social Security and Medicare.

02/04/2003
Texas Education Funding - A Hot Button Issue
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Press Release

Texas Education Funding - A Hot Button Issue

Senate Education Committee Chairman Florence Shapiro and House Public Education Chairman Kent Grusendorf have filed legislation which would sunset the current school finance system, known as Robin Hood, in September 2005. The bold legislation forces a debate on school finance. If passed, a special session would likely be called to address the issue. In the current, two-year budget cycle, 118 "wealthy" districts are giving up about $1.5 billion in property taxes to poorer districts. Texas public education facts:

02/04/2003
CSE on the Bush ’04 Budget: “The Good and the Ugly”
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Press Release

CSE on the Bush ’04 Budget: “The Good and the Ugly”

President Bush’s new 2004 budget proposal includes tax cuts and important reforms and begins to slow the rapid growth in government over the past three years. CSE President Paul Beckner commented: “The President’s budget is a significant turn away from the spending bonanza of the past few years. He’s right to focus on spending restraint, and also on the crisis in Medicare, which is the greatest looming threat to U.S. fiscal stability.”

02/03/2003
GOP Groups Slam Bush on CO[2] Credits
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GOP Groups Slam Bush on CO[2] Credits

A bevy of conservative, Republican-oriented groups have sent the White House a letter objecting to the Bush administration s plan for transferable credits for companies that reduce greenhouse gas emissions. The letter, spearheaded by the Competitive Enterprise Institute, echoes an earlier, October 2002, letter warning against regulatory offsets for carbon reductions. Since then, notes the letter, Sens. John McCain(R-Ariz.) and Joe Lieberman(D-Conn.) have introduced their cap-and-trade greenhouse legislation, and the president has introduced his latest tax proposal, which includes increases in tax expensing of capital investments. The McCain-Lieberman legislation, says the letter, would have the same effect as an energy tax, with the greatest impacts on the poor and seniors. The letter warns that "early reductions" in the White House plan would have full value only if emissions are capped. Thus, companies that are interested in earning credits for early reductions "will gain incentives to lobby for the bill." On the other hand, the administration s approach to expensing "is a better way to speed up carbon intensity decline." The letter observes, "Your growth and jobs plan calls for increasing the small business expensing option from $25,000 to $75,000. This is a good first step, but we think the limits on expensing should be expanded even further, and extended to all capital investment." Expensing all capital investment, says the letter, would remove "the tax penalty on capital investment" and "would encourage more rapid turnover of plant and equipment. In general, state-of-the-art facilities are more productive than older units, delivering more output per unit of input, including energy inputs. Expensing would thus accelerate carbon intensity decline yet without building political support for energy rationing." Groups joining CEI in the letter were Citizens for a Sound Economy, National Taxpayers Union, American Association of Small Property Owners, American Conservative Union, Small Business Survival Committee, 60 Plus Association, Americans for Tax Reform, American Legislative Exchange Council, The Seniors Coalition, African American Republican Leadership Council, Citizens Against Government Waste, Consumer Alert, and Strategic Issues Research Institute.

02/03/2003
Conservatives Pan Emissions Credits
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Conservatives Pan Emissions Credits

Fourteen conservative groups asked President Bush last week not to support credits for reductions of carbon dioxide and other greenhouse gas emissions. In a letter to Bush, the Competitive Enterprise Institute and 13 other groups, including Americans for Tax Reform, American Conservative Union and Citizens for a Sound Economy, said the White House should come out in favor of tax cuts, instead of an emissions credits plan, to stimulate economic growth and increase energy efficiency. ''Removing tax barriers to investment in new plants and equipment will reduce emissions and energy intensity while also boosting productivity,'' CEI Senior Fellow Marlo Lewis Jr. said. Bush Tuesday said his pollution-reduction plan, called ''Clear Skies,'' which would begin a national cap-and-trade emissions program, is one of his top legislative priorities.

02/03/2003
Economics: Tax Cuts and Growth
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Economics: Tax Cuts and Growth

BY Bob Edlin

Act leader and former Labour Finance Minister Richard Prebble predictably promoted tax cuts when he commented on the pre-Christmas Economic and Fiscal Update and its fiscal projections. "New Zealand can afford a tax cut for every worker and a cut in the company tax rate to below Australia's rate right now," he insisted. The Treasury predicted a $3.5 billion surplus this financial year, compared with a Budget night expectation of just $2.3 billion, and projected a pattern of rising surpluses reaching $5.2 billion by 2005/06. Prebble's interpretation of this is that we are being over-taxed by $3.5 billion. "The Government can claim no kudos from a surplus - it simply means we're all paying too much tax," he said. Former Reserve Bank governor Don Brash, now National's finance spokesman, curiously did not mention tax cuts in the press statement he issued on the EFU. The revenue numbers reflected what we already knew, he said - New Zealand had enjoyed a buoyant economy over the past two years, thanks to good export prices, a relatively low exchange rate, good times down on the farm, strong immigration and - he claimed - the beneficial effects of the reforms of the late '80s and early '90s. Labour's encumbent Finance Minister Michael Cullen shouldn't kid himself that we're well on the path to the much-vaunted target of four percent sustainable growth, Brash cautioned, while expressing disappointment that government spending will continue to grow at roughly the same speed as the economy, remaining steady at a fairly high 40 percent of GDP. Just a few weeks previously, Brash told a 2002 tax conference in Christchurch that increasing the country's sustainable growth rate demanded reductions in the rates of tax most relevant to those who will invest and produce for the future. "The Government could cut the company tax rate and the top personal tax rate to 30 percent and still have a budget surplus," he said. But we can forget about tax cuts for companies and those on the top tax rate if Dr Cullen remains Finance Minister, and there's no sign of him being dislodged any time soon. He's already ruled out the bigger-than-expected surplus being used for more government spending and he rejected company tax cuts. If the tax burden is relieved for anybody, it will be for low to middle-income families, he said. More important in this Government's fiscal priorities is the reduction of debt. In the United States, meantime, the champions of tax cuts were riding high. President George W Bush freed himself from his obsession with Iraq just long enough to fire Treasury Secretary Paul H O'Neill and White House economist Lawrence B Lindsey. O'Neill's replacement is CSX Corporation chief executive John W Snow, who sounded just like Cullen during the 2000 campaign when he told BusinessWeek magazine that the top priority for President Bush would be to "secure the surplus... and use a significant part of it to pay down the debt". But this won't happen. Economists now reckon the short-term deficit will rise as high as US$250 billion. Bush is putting his faith in the stimulation from aggressive tax cuts, hoping this will boost growth to 3.5-4 percent, which would trim the deficit to a fairly small share of gross domestic product. Supply-side economists, however, were sending conflicting messages to the Bush administration and Congress, about the types of tax cuts that would best do the trick for the still-sluggish economy. Club for Growth president Steve Moore was favouring cuts in capital gains and payroll taxes, which fund the pay-as-you-go Social Security and Medicare systems; economists at the Heritage Foundation and Citizens for a Sound Economy were urging the elimination of double taxation on dividends and making the Bush marginal rate cuts permanent. Moore called for an "emergency anti-recession plan" - a cut in "anti-growth taxes" that impede job creation and retard economic growth. These tax cuts would increase incentives for businesses to hire workers to work, investors to invest and families to save, he argued. This would primarily benefit working-class American families. Heritage's Dan Mitchell and CSE's Wayne Brough, however, claimed tinkering with the payroll tax wouldn't help the economy and might hurt the chances of social security reform. This squabbling was grist for the mill of the administration's political opponents, who accused it of having no general theory of what makes the economy grow or of what specifically government can do to encourage growth. The same criticism should be avoided here. It is tempting to clamour for tax cuts, but there must be more to stimulating growth than lopping taxes. If that's all there is to it, as Democratic commentators in the US scoffed, then who needs an economic team?

02/01/2003
Verizon Pursues Appeal of RIAA Subpeona As Opposition Grows
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Verizon Pursues Appeal of RIAA Subpeona As Opposition Grows

Backed by growing number of allies, Verizon said Thurs. it would appeal decision permitting RIAA to use subpoena issued under Digital Millennium Copyright Act (DMCA) to uncover identity of subscriber said to be committing massive online copyright infringement. At news briefing, company said it would ask U.S. Dist Court, D.C., to stay its Jan. 21 order pending appeal to U.S. Appeals Court, D.C. Case, RIAA v. Verizon Internet Services, is considered test case on DMCA subpoena power. Verizon is seeking stay so it doesn't have to turn over personal information about its subscriber, as it was ordered to do by lower court, Verizon Senior Vp-Deputy Gen. Counsel John Thorne SAID. In its appeal, Verizon will argue that: (1) Art. III of Constitution confines federal court power -- including subpoena power -- to "cases and controversies," something that it said was lacking in this situation because RIAA never filed actual lawsuit. (2) First Amendment grants citizens right to speak anonymously. (3) DMCA subpoena provision doesn't apply to people who merely use Internet to view Web sites or send e-mail. Legal issue, Thorne said, is whether private parties can compel disclosure of who someone is and where the person lives based on an Internet address. Safeguards that apply in normal subpoena cases aren't present here, Thorne said, because RIAA is suing "software agents" or "bots" that scour Internet looking for potential infringers and then generate take-down notices. Issue goes beyond copyright, he said, because if trial court's decision is left standing, stalkers, strangers and anyone else will be able to obtain user's identity via DMCA's automated process. Verizon met with RIAA last week to ask group's approval for seeking stay, Thorne said. Not only did RIAA refuse -- saying it wanted immediate enforcement of decision -- but it told Verizon volume of subpoenas it anticipated being issued would be so large that it needed to link to Verizon's computers to facilitate transfer of identifying information. That's a "nonstarter," Thorne said. RIAA said it would, "not surprisingly," oppose Verizon's request for stay. Court had rejected Verizon's claims and company shouldn't "be permitted to ignore a law Judge Bates thought clear," said Matthew Oppenheim, RIAA senior vp- business & legal affairs. "It's a shame that Verizon has resorted to mischaracterizations and consumer scare tactics, a trait we understand they are well known for in public policy debates. Just ask some of the small, local telephone and DSL providers." Verizon has received support from several groups. At briefing Thurs., Consumer Federation of America (CFA) Research Dir. Mark Cooper said consumers considered this a "big case." DMCA is "bad law and bad policy," he said: It's unconstitutional and destroys the "open, dynamic environment the Internet was." While "real police" have to convince judge or magistrate of need for subpoena, he said, "Internet KGB" doesn't. CFA believes in enforcing copyright traditional way, he said, and DMCA destroys consumers' faith in balance between consumer rights and copyrights. Peter Swire, who was Clinton Administration's chief counselor for privacy and is now law prof. at Ohio State U.'s Moritz College of Law, said he would file declaration on behalf of Verizon arguing that what RIAA was doing was invasion of privacy. Under DMCA, he said, once Web site picked up someone's address, anyone could gain access to it without due process or judicial supervision. "I've never seen any provision like this," he said. Law opens door to scenarios in which either subpoenas are filed fraudulently or there's an arguable copyright claim, he said. Verizon's decision to appeal was hailed by many. Alliance for Public Technology said online privacy must be protected. Digital Media Assn. Exec. Dir. Jonathan Potter called RIAA's action "another court test of the customer- monitoring and policing obligations of all [ISPs] and connected digital services." Public Knowledge said it supported enforcement of copyright laws to limit illegal peer-to-peer file-swapping, but "these laws should not be enforced without due process." Allowing copyright owners to learn names of Internet users without any judicial imprimatur permits virtual "witch hunts" for defendants "presenting the worst facts of having profiles least likely to garner public or judicial sympathy," group said. Telecom Research & Action Center, telecom-focused consumer group, said it was concerned that giving up personal information without legal safeguards would "irrevocably harm consumers and ultimately the usefulness of online services." National Assn. of Consumer Agency Administrators said RIAA's subpoena "represents an issue of grave concerns to consumers and consumer advocates." Many consumers, it said, don't trust companies to keep their personal information private. American Legislative Exchange Council (ALEC), bipartisan organization of state legislators, urged court to stop RIAA from seeking identity of Verizon's subscriber. DMCA doesn't create class of property superior to tangible property, said Morgan Long, dir. of ALEC's telecom & information technology task force. "The property interests of RIAA are of not less significance constitutionally and statutorily than that of Verizon's own property rights and the property rights of its customers." Citizens for a Sound Economy branded trial court decision "neither proconsumer nor reasonable public policy." U.S. Internet Industry Assn. also criticized ruling, saying Congress never intended for copyright holders to have right to invade consumers' personal privacy without due process of law. World has changed since DMCA was enacted in 1998, CFA's Cooper said. At time, he said, no one thought act was aimed at home Internet users. If DMCA were "rattling around" now it would be viewed much differently," he said. -- Dugie Standeford

01/31/2003
Chilling Assault on P2P Networks
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Press Release

Chilling Assault on P2P Networks

District Court Judge John Bates made a flawed interpretation of the Digital Millennium Copyright Act (DMCA) his January 21, 2003 ruling, because the allegedly infringing content never resided on the ISP’s servers. CSE President Paul Beckner commented, “Citizens for a Sound Economy works for consumer rights and sound public policy. This court decision is neither pro-consumer nor reasonable public policy.

01/30/2003

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