Category Domestic Policy

The Republican Study Committee’s Excellent Idea on Copyright Law

Danny Vinik 1 Comment

On Friday, the Republican Study Committee released a study on Copyright law that was very insightful and put forward a number of good ideas to fix the law. Unfortunately, they pulled the study just a few hours later. It’s still available from the RSC website via the Google html cache of it and if you want to see it in PDF form, the Maryland Pirates have it as well.

At the beginning of August, I wrote a blog post for the Washington Monthly titled “Online Piracy Isn’t a Problem” and went through the academic literature on online piracy of music and determined that there may be too much copyright protection. Specifically, I pointed out that copyright law is not meant to protect artists’ profits:

Copyright law is meant to create an economic bargain between artists and the public. Article I, Section 8, Clause 8 of the Constitution (the Copyright Clause) says,

Congress shall have Power … To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

The Constitution gives artists a limited monopoly over their work in return for the eventual dedication of it to the public domain. The law is not meant to protect artists’ profits or revenue. As long as the quality and quantity of music is not dropping, Congress has no reason to further incentivize artists. By definition, the incentives are already there.

Based on its redacted report, the Republican Study Committee agrees:

It’s a common misperception that the Constitution enables our current legal regime of copyright protection – in fact, it does not.

And:

Thus, according to the Constitution, the overriding purpose of the copyright system is to “promote the progress of science and useful arts.” In today’s terminology we may say that the purpose is to lead to maximum productivity and innovation.

This is a major distinction, because most legislative discussions on this topic, particularly during the extension of the copyright term, are not premised upon what is in the public  good or what will promote the most productivity and innovation, but rather what the content creators “deserve” or are “entitled to” by virtue of their creation.

The Committee proposes reforming statutory damages, expanding fair use, creating a punishment for false copyright claims and significantly reducing the term limit for copyright. The proposal is excellent. Go read the full thing. It’s only nine pages and certainly worth the time.

Middle Income is Not $250,000!

Danny Vinik Leave a comment

The Tax Policy Center’s Howard Gleckman points out the 10 biggest differences in President Obama and Mitt Romney’s tax plans in his newest piece. At the end, he points out a couple of ways that the candidates are similar:

And both apparently believe that households making up to $200,000 or $250,000 are middle-income.

It’s amazing that we just gloss over this like it’s okay. Gleckman is right here. Romney deems the high-end of middle-income Americans to be $250,000 while Obama has continually pushed to raise taxes on high-income Americans, starting at $250,000.

In what world is making $250,000 a year middle class? Or $230,000? Or $200,00?

Here’s the Census Bureau’s 2011 estimates for household income and where that falls across America:

United States
Estimate Margin of Error
Quintile Upper Limits:
Lowest Quintile 20,585 +/-48
Second Quintile 39,466 +/-89
Third Quintile 63,001 +/-119
Fourth Quintile 101,685 +/-108
Lower Limit of Top 5 Percent 187,087 +/-436

The 95th percentile of Americans makes $187,087 a year! And yet, we’re okay saying that earning $250,000 a year is the upper limit! Once you look at the numbers, it’s crazy but we’ve grown to accept it.

Why? I’d hypothesize that people making $250,000 really do believe that they’re in the middle class. They hear all about these millionaires and billionaires and don’t put themselves in the same category as them. And it’s true, they aren’t in the same category: those billionaires and millionaires are at the high level of upper class, but households making $250,000 a year are certainly still upper class.

But this also works in the opposite direction as well. People at the other end of the spectrum dream of making it to the middle class. They want to believe that making $250,000 a year is middle class because that sounds attainable for them. If we were to drop the upper limit of middle-class down to the 80th percentile – $101,685 – people in the lowest 20 percent would probably find themselves disheartened. Yes, low-income households dream of making $100,000 a year but they also dream of a lot more. If we lower the upper limit of the middle class, we may cut back their dreams.

Of course, that’s just a hypothesis. But it doesn’t make it okay for the media to let this lie permeate across every campaign, tax proposal and policy statement. It’s tough to make arguments about the tax code when we are so clueless about what income level constitutes the middle class.

It’s Immoral NOT to Spend Money on Infrastructure Now

Danny Vinik 2 Comments

Here’s Mitt Romney on reducing the deficit from the debate last night:

I think it’s not just an economic issue, I think it’s a moral issue. I think it’s, frankly, not moral for my generation to keep spending massively more than we take in, knowing those burdens are going to be passed on to the next generation and they’re going to be paying the interest and the principal all their lives.

And the amount of debt we’re adding, at a trillion a year, is simply not moral.

President Obama didn’t object to this at all and instead demonstrated a commitment to reducing the deficit. They’re both wrong.

We need to spend a lot of money rebuilding our infrastructure across the country – $2 trillion in total. If we put it off, the next generation will have to pay for it. If we do it now, the next generation will have to pay for it too. Our deficits aren’t going down over night and the next generation is inevitable going to either face higher taxes or reduced spending on programs. Either way, the next generation will have to pay to redo our decaying infrastructure. But, they’ll pay less if we do it now.

Here’s why:

We have to repair our infrastructure soon.

Right now, the rate on U.S. Treasuries is really low. So low, in fact, that when you account for inflation, people are actually paying us to keep their money. The current rate for a 1-year Treasury is 0.18%. That means that if you buy a 1-year Treasury at a $100 face value, the U.S. will take the $100 now and pay you $100.18 next year. But that $100.18 really is worth less than that because a year has passed and its purchasing power has decreased because of inflation. The current CPI, the most commonly used measure of inflation, from the Bureau of Labor Statistics is 1.7%. Let’s be generous and call it 1.5%. That $100.18 in 2013 is the equivalent of $98.51 in 2012.

Now, if the U.S. government took $100, held on to it and then gave you back $100.18, that would be dumb. It would lose money there. But, what if the U.S. took that $100 and bought $100 in infrastructure improvements? In a year, those improvements are still worth $100 (2012 dollars). but the government is only paying $98.51 (2012 dollars again). The government just made a profit!

Normally, when the U.S. borrows money, the interest rate is greater than inflation. Imagine if the 1-year Treasury rate was 3%. Now, the U.S. government is paying out $103 in 2013, worth $101.48 in 2012 dollars. In that case, the government loses money.

That’s how the real rate of inflation works. Right now, most U.S. Treasuries have a negative real rate of inflation. In the future, this will almost certainly not be the case. If we delay these infrastructure improvements until the next generation, they will have to pay for them with Treasuries that have a positive real rate of inflation. Instead of profiting on the infrastructure improvements, the next generation will be losing money. But they won’t have a choice. Our roads and bridges will be deteriorating so much that we will have to make those improvements and accept the losses.

By not spending money on infrastructure repairs now, we are making the next generation spend more. That’s what is really immoral. (Image via)