Internet Privacy – Careful How we Ask for It

In another life, I founded and built a direct marketing company.  We contacted folks using names acquired from “list companies” that offered to rent to us the names of those people with similar backgrounds.   These lists were developed by companies and organizations that allowed their customer names to be used by us for our clients. Those customer names were owned by organizations and companies that rented names themselves from others to build, in turn, their own customer base.  List were also available that were considered “compiled” names of those with various demographic similarities – where they lived, income level, driver’s license holders, registered voters, catalogue buyers, etc.

We looked for lists of people who had similar interests to the issues or products our clients were promoting.  And we used reputable “mail houses” that received the names we rented and mailed the materials we drafted and printed.  We or our clients never saw the specific names unless a person responded directly to one of their appeals.  Then that person’s name and address were part of our client’s database.  

Multiple surveys showed that those who responded to direct mail appeals, or purchased items from catalogues received in the mail, enjoyed receiving these direct mail solicitations.  They could toss out those letters and catalogues they didn’t like, read those they wanted, and respond if they wanted.  Free choice!

Today the direct marketing and advertising business has exploded thanks to the marvels of the internet.  And internet advertising is much like advertising in other media – aimed at the customer potentially most interested. You can respond or not with the click of your mouse.  Free choice again!

But recently, the un-elected Federal Communications Commission (FCC), tried to “protect the privacy” of individuals by requiring broadband providers to ask customers for specific permission before collecting data to use in selling ads.  They made it sound as if an advertisers were gaining access to all sorts of private information about each of us from our broadband providers.  But this isn’t what is happening.  In actuality, the advertisers are placing ads on our computers based on the data compiled by internet providers but our names are not given directly to the advertisers.  If you or I respond to an ad, then the advertising entity (company, organization, candidate, etc.) has our name and what we purchased in their own database.

But the FCC’s proposed rules would have applied only to internet providers and not to various websites, search engines and others that collect information on all of us as well.  So AT&T, Comcast, Verizon and other internet providers would have been under these new restrictive rules but Google, Facebook and others would not.  That was clearly unfair and sends up all sorts of yellow flags.

So Congress recently stepped in and overruled the FCC and stopped these proposed new “privacy” rules from going into effect until a more reasonable, effective and fair process can be developed.  And hopefully this new approach will protect privacy as the individual might desire and not greatly hinder the growing internet industry.

And like other media that carry advertising – television and radio stations for instance – the advertising revenue is a huge part of the internet providers’ bottom line.  These advertising revenues likely keep our internet access costs lower than they would be otherwise. And that is advantageous to all of us who use the internet each and every day.

But when Congress intervened and overruled these proposed new rules which did not apply evenly to all who use data collection to advertise, some critics went through the roof. That was a typical overreaction by those who don’t seem to understand the realities.  They claimed that Congress was denying us our privacy rights which is completely inaccurate. And, these critics failed to mention that the Federal Trade Commission (FTC) remains the main regulatory agency on privacy issues, not the FCC. Congress did understand and our elected officials took action.

An even handed and reasonable method of allowing those of us who use the internet to restrict how our information is used seems like a good idea.  It would be the same as, when I was in the direct marketing business, a person checking a box off on his or her response device to not share their information with others.  Such requirements would best be voluntarily accepted by the major players in the industry.  However, if the federal government still demands involvement, then it should include the Federal Trade Commission as well as the Federal Communications Commission.  And all internet players should be part of the new rules.  Once the FTC and FCC agree on a universal system, it should be approved or cancelled by our elected Congress.  This is much too important to be left in the hands of a few appointed bureaucrats.

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Government’s War on the Poor: Parent Plus Edition

Rebecca McEvoy, a retired school teacher coping with multiple sclerosis, borrowed $84,000 under the federal Parent Plus program to help her oldest son through art and design school. When he graduated, the government expunged the debt under a law that forgives balances for borrowers deemed permanently disabled. Three years later, she and her husband Dave, also a retired teacher, turned to Parent Plus again. The couple expects to borrow another $50,000 to cover costs for a second son, as Josh Mitchell with the Wall Street Journal tells the story.

The McEvoys’ finances likely would have raised red flags with private lenders, Mitchell dryly notes. They live off modest pensions, and existing debts eat up much of their income. Odds are, they won’t be able to meet their payment obligations for the second round of student debt any more than they could the first.

As of September 2015, more than 330,000 people, or 11% of borrowers, had gone at least a year without making a payment on a Parent Plus loan. The student loan debt crisis is engulfing not only students but many parents. An estimated 41,000 Parent Plus borrowers had their checks garnished in FY 2015.

“This credit is being extended on terms that specifically, willfully ignore their ability to repay,” said Toby Merrill with the Harvard Law School’s Legal Services Center. “You can’t avoid that we’re targeting high-cost, high-dollar-amount loans to people who we know can’t afford to repay them.”

Parent Plus defaults began rising during the Great Recession. By 2011, Obama administration officials recognized that they had a problem and put tighter restrictions into place. Writes the WSJ:

But after schools argued stiffer underwriting would prevent many students from covering tuition, thus reducing college access for minorities and poor students, the administration rolled back the new rules. Research shows that restricting access to loans based on credit scores leads to lower college enrollment.

The Government Accounting Organization (GAO) estimates that taxpayers ultimately will forgive $108 billion on student loans made through the current fiscal year, says the WSJ. Colleges are the only winners here. Federal loans allow them to jack up tuition, but they suffer no adverse consequences when students or parents cannot repay the debt.

Bacon’s bottom line: Thus has the student loan program, created with the best of intentions, been corrupted: simultaneously saddling taxpayers with the cost of a massively expensive entitlement and burdening students and parents alike with billions of dollars in loans they can never repay. That’s quite a two-fer. Two… Two… Two massively destructive unintended consequences in one!

It hasn’t always been this way. Once upon a time, student loans weren’t dogged by subprime mortgage-scale bad debt. The problem arose when Uncle Sam began treating student loans as an entitlement for anyone who wanted to attend college. Refusing loans to students with no credit rating and/or parents with poor credit ratings constituted “discrimination” against the poor and minorities. Once you play the discrimination card, the debate is over.

The unintended consequence, of course, is that when poor and minority students and parents load up with debt they cannot repay, they suffer disproportionately — even when billions of dollars in bad debt are written off. Except in rare instances like Ms. McEvoy’s, student loan debt cannot be dispelled. Uncle Sam extracts its pound of flesh by garnishing wages and social security. Families living on the edge of poverty are pushed into poverty; families living in poverty are pushed into destitution.

All for what? A significant number of poor students make it through college, obtain degrees, and get good jobs that allow them to service their debt. But millions don’t. Federal law limits undergraduate federal loans to $27,000 over four years. Even when parents step in by borrowing under the Parents Plus plan, many poor students lack the resources to graduate. (The problem may be compounded by a lack of academic preparation — student loan programs apparently don’t take that into account either.) Meanwhile, millions of well-paying, semi-skilled jobs go unfilled. Washington could not have better designed a system to crush the poor if it tried.

(This article first ran in Bacon’s Rebellion on April 25, 2017)


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Manufacturing in Virginia: Producing More with Less

Manufacturing often gets a bad rap.

That’s probably because the sector has declined by more than 4.9 million jobs since January 2000.

The industry also has perception issues. Who wants to work in a dirty old factory with oil on the floor and dust in the air?

But the manufacturing industry has changed — it is more high tech and offers better wages, making for a good career choice.

Manufacturing employs more than 12.6 million people in the U.S. The Bureau of Labor Statistics forecasts that figure will decline by about 900,000 in the next 10 years.

However, the sector will add about 2.8 million workers during that same period, because employees in manufacturing either are retiring or moving into new occupations.

And even though the industry is shedding jobs, output continues to grow. Since 2000, manufacturing production increased by 38 percent, or by $1.604 trillion, according to the Bureau of Economic Analysis. Total manufacturing output for 2015, the latest data available, was $5.83 trillion.

Productivity gains are part of the reason for the decline in jobs as well as the expected future decline.

Productivity in the manufacturing industry grew an annual average 1.7 percent from 2007 through 2016 compared with 1.1 percent for nonfarm businesses.

Although high productivity means doing more with fewer workers, it also means the remaining workers are paid well.

Average annual wages for manufacturing workers was $63,907 during the 12 months that ended Dec. 31, compared with $52,291 for all industries, based on data computed by Chmura Economics & Analytics.

The manufacturing industry is similar in the Richmond region.

It employs more than 32,000 workers locally. The sector is expected to shed about 2,700 jobs during the next decade.

Yet, more than 7,000 openings will occur as employees retire or switch occupations.

The average annual manufacturing wage during the 12 months that ended Dec. 31 was $63,015, compared with $49,162 for all industries.

And what about the perception issues?

Consider touring the Rolls-Royce North America plant in Prince George County, where the company makes components for aircraft engines.

As you drive to the plant in the Crosspointe development, you pass through a well-manicured campus that would convince you that you were in an upscale office park.

Entering the nearly 300,000-square-foot plant, you see spotless floors, large machines suspended off the floors, and workers with computer skills operating the facility.

On the same campus is the Commonwealth Center for Advanced Manufacturing, a 60,000-square-foot research center jointly operated by private companies and several Virginia universities.

The environment at both facilities is far from your grandfather’s plant.

(This article first ran in the Richmond Times Dispatch on April 3, 2017)

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Animal agriculture loses common sense exemption

Senior Judge Stephen Williams, U.S. Court of Appeals for the District of Columbia, wrote on April 11, 2017, that an EPA rule governing air releases of ammonia and hydrogen sulfide from animal waste storage must be reported to state and local authorities. (This rule was finalized in December, 2008.)

The common sense rule proposed by EPA exempted certain animal farming waste storage operations from reporting the releases of ammonia and hydrogen sulfide. EPA concluded that reporting these air emissions from AFOs and CAFOs was “…impractical and unlikely [the EPA] would not respond to them since there is no reasonable approach for the response.”

Public comments did request that emissions from the largest concentrated animal feeding operations would continue reporting air emissions under Emergency and Planning Community Right-to-Know Act of 1986. EPA agreed. The final rule did not require reporting air emissions under CERCLA-Superfund Act.

Environmental groups weigh in
Environmental groups such as Waterkeeper Alliance, Sierra Club, Humane Society of the United States (HSUS), Environmental Integrity Project, and the Center for Food Safety filed a lawsuit against EPA claiming the agency could not grant reporting exemptions to AFOs and CAFOs, but instead all entities would be required to report any and all releases over a certain reportable quantity.

The environmentalists also argued EPA’s rule was arbitrary because it treated ammonia and hydrogen sulfide releases from farms differently than from leaky ammonia tanks, animal wastes at zoos or slaughterhouse.

The National Pork Producers Council argued that EPA’s rule was faulty because it was based on the public’s interest and desire for information which was not relevant to facilitating an emergency response. The court dismissed the Pork Producers’ challenge.

Common sense exemption
EPA attempted to create a common sense exemption because it believed the reporting of ammonia and hydrogen sulfide from the storage of manure was impractical and unlikely to lead to any response of any governmental agency. EPA said its exempting animal feeding operations from reporting would save operators more than a million hours and save “…more than $60 million in compliance costs and cut out roughly 160,000 hours and $8 million in government costs related to those reports.”

This reasonable action by EPA was not upheld by the U.S. Court of Appeals. Why?

The Court claims EPA appeared to be making a de minimis argument; however, it concluded EPA did not do enough to justify such an exception. Based on the Court’s opinion, it appears EPA and its Department of Justice lawyers did not know or argue to the Court sufficient facts to preserve agriculture’s exemption. EPA made it clear that it would not be taking response action from the release of ammonia and hydrogen sulfide from animal waste. As we know, the number of pounds of air pollutants from CAFOs varies from day to day as the animals grow.

Amazing admissions
In fact, EPA told the Court “…it had never taken response action based on notifications of air releases from animal waste.” In another amazing admission, EPA told the Court it could not “foresee a situation where [it] would take any future response action as a result of any such notification[s]…because in all instances the source (animal waste) and nature (to the air over a broad area) are such that on-going releases makes an emergency response unnecessary, impractical and unlikely.” (How did animal agriculture lose this case?)

According to the Court, EPA even requested comments on whether there might be any situation which might trigger an appropriate response and if so, what would a response look like or be. EPA told the Court there were no public comments which suggested a reason for reporting air releases from animal waste.

EPA said “…in most cases, a federal response is impractical and unlikely [and]…would not respond to them since there is no reasonable approach for the response.”

Notwithstanding this very practical approach from EPA, the Court said “A plaintiff suffers an ‘injury in fact’ when agency action cuts him off from information which must be publicly disclosed pursuant to a statute.” Clearly this is a case where common sense should have prevailed. It did not. More lawsuits will follow!

(This article first ran in Farm Futures on April 25, 2017)

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Some Surprising Possible Consequences of Autonomous Vehicles

My in-box these days is flooded by commentaries and studies dealing with our autonomous vehicles (AV) future. It’s hard to keep up, but three recent items struck me as particularly interesting.

The first was from Scientific American, “How Pedestrians Will Defeat Autonomous Vehicles,” by Karinna Hurley. She summarizes a recent paper in the Journal of Planning Education and Research by Adam Millard-Ball, on the subject of the interaction between AVs and pedestrians in cities. Millard-Ball begins with the reasonable premise that AVs “will almost surely be programmed to avoid hitting people.” But, as a consequence, pedestrians will come to understand this, and the result will be a new cross-walk game of chicken. He then offers three possible outcomes of this new situation:

  • Pedestrian supremacy—if those on foot always win out, a consequence would be much slower car travel in the city, with walking becoming more efficient than motoring.
  • Regulatory response—in which the blame for pedestrian-car accidents is shifted to law-breaking pedestrians, which could be politically untenable.
  • Human driver return—in which many people revert to driving their own vehicles to retain the advantage of faster travel in the city.

My second discovery was a provocative report from Ptolemus Consulting Group called Autonomous Vehicle Global Study 2017. I only had time to read the free abstract, which itself is over 100 pages long. Here are a few of its speculations.

First, as I’ve written in previous newsletters, driverless vehicles could seriously disrupt public transit. Without the cost of a driver, robo-taxis and shuttles could operate door-to-door services where public transport is uneconomic. And, “In turn, this will allow more people to move away from densely populated areas,” a point also made in my third discovery, “Will Self-Driving Cars Make the Suburbs Great Again?” by Nicole Kobie in New Statesman (Dec. 19, 2016). She reports on a presentation by Karen Harris of Bain & Company, based on the idea of spatial economics—as the cost of distance goes down, people won’t mind traveling longer distances, as long as they can make good use of the time. And this could accelerate a trend of professionals moving to exurbs.

Another speculation from the Ptolemus report is that AVs may increase urban traffic congestion. The report cites a study from the Center for Transport Studies, Imperial College London, in which the impact of making car travel as comfortable as light rail or high-speed rail, in terms of smooth acceleration, was weighed against congestion at traffic lights. At least with a mixed fleet of 25% AVs, their scenarios all showed that slower acceleration of the AVs (for a smoother ride) would increase congestion in the vicinity of the intersection—in some scenarios by 50%. In addition, the report looks at what may happen if most AVs are personally owned (rather than being in shared-vehicle fleets). Since the vehicle would go elsewhere after delivering a commuter to the office, its return journey would be empty, significantly adding to the number of vehicles on the road. They also speculate that visions of most people sharing rides in robo-taxis (which means sharing with strangers in a small, enclosed space, with no driver) are completely untested and might be found unacceptable by many people.

These are still very early days in the coming AV world. And regardless of how rapidly the technology improves, there are large unknowns in what choices people and institutions will make, and what the transition to this world will be like. My best advice at this juncture: do not count on any glittering scenario to be anything more than a set of guesses.

(This article first ran in the April issue of Surface Transportation Innovations)

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