The U.S. Postal Service (USPS) just announced a net loss of $6.5 billion for the fiscal year ending on September 30. The beleaguered agency has lost more than $100 billion over the past fifteen years, and even repeated bailouts by Congress have failed to slow the pace of USPS losses. America’s mail carrier has responded to recent losses by hiking postage rates four times over the past 2 years. In October, the USPS filed notice with the Postal Regulatory Commission to hike the price of First-Class Mail Forever stamps yet again, from 66 cents to 68 cents. The Postal Service Reform Act of 2022 was supposed to herald the beginning of a new, more fiscally responsible USPS. Instead, it achieved the opposite. By wiping the slate clean on $60 billion worth of unpaid bills, Congress gave the agency a blank check to waste taxpayer dollars with zero accountability and consequences. Real Postal reform is long overdue. America’s mail carrier can get back on track with affordable mail trucks, targeted
law enforcement spending, and pricing adjustments to reflect delivery costs. It’s time to end the sorry status-quo. Congress and the President need to address this now before more taxpayer money is squandered.

Digital Discrimination Backfires

The Federal Communications Commission (FCC) voted on an order regarding digital discrimination at its Wednesday, November 15^th meeting. The order is incredibly (and impermissibly) vague and broad. The move threatens to derail the Biden administration’s goals of closing the digital divide with sweeping regulations on conduct involved in deploying broadband service. FCC Commissioner Brendan Carr recently described the plan as “an expansive and disfavored theory of liability that Congress neither directed nor authorized the FCC to adopt.” Carr noted that Section 60506 of the Infrastructure Investment and Jobs Act (IIJA) states that it is the policy of the United States, insofar as technically and economically feasible, for subscribers to benefit from equal access to broadband. That section directs the FCC to adopt rules to facilitate that equal access and to prevent and eliminate digital discrimination based on income level, race, ethnicity, color, religion or national origin. Despite two
years and several rounds of comments that led the FCC to conclude that “there is little or no evidence” to indicate intentional discrimination, the commission intends to move forward with rules that could impose “potentially unbounded liability,” as Carr calls it, if the agency judges actions of providers result in a disparate impact. “Reading this theory of liability into the law conflicts with the Supreme Court’s civil rights precedent,” Carr said. “The FCC should not adopt it.” Unfortunately, the FCC adopted it along party lines.

The Taxpayers Protection Alliance (TPA) previously noted that while it is important that providers do not intentionally discriminate against legally protected groups, Chairwoman Jessica Rosenworcel’s proposal goes too far in using the disparate impact standard, which holds providers accountable for unintentional actions that ultimately lead to discrimination. The plan is a slippery slope that could unfairly place blame on providers for digital divides, pointing out that a provider could be called to task under the disparate impact standard for not serving a rural area with a mostly nonwhite population. This would be despite that fact that the same scenario often occurs in other rural areas with majority white populations due to the economics of serving low-population areas. Former FCC Chief Economist Glenn Woroch examined Form 477 data showing wireline deployment at the census block level and found that 93.8 percent of nonwhite households received broadband service at the 100Mbps/20 Mbps
level compared to 88.8 percent of white households. Woroch also found that income level didn’t affect access because both those populations above and below the federal poverty guidelines had access to broadband at about a 90 percent rate. The simple explanation for the findings is that cities, which enjoy more broadband deployment, have a higher nonwhite population than rural areas.

One of the bigger sticking points of the order is the FCC’s ability to regulate pricing. The commission removed some language from the upcoming Title II order that would have given it the ability to regulate broadband rates, but that language wasn’t really needed because it is in the digital discrimination order. The result is the FCC engaging in unlawful price regulation by including price in the covered elements of service in this order. Carr called the move a plan to give the “Administrative State effective control of all Internet services and infrastructure.” In a time when tens of billions of taxpayer dollars are being allocated to close the broadband gap, the FCC is concocting overly broad and vague rules that will only deter innovation and deployment.

Dangerous and Costly Menthol Bans

The U.S. Food and Drug Administration (FDA) has taken the final steps for a national ban on menthol cigarettes and flavored cigars. Recently, the agency submitted proposed rules to the Biden administration’s Office of Management and Budget. This is the last bureaucratic office to review the rules prior to implementing. This ban will hurt small businesses, take away consumer choice and potentially increase police interactions with lower income communities. With the ever-encroaching prohibition, the FDA aims to reduce youth tobacco use and also advance “health equity” through a supposed reduction of “tobacco-related health disparities.” While reducing smoking among American adults is a laudable goal — prohibitions on consumer goods have not correlated with decrease in such goods. Moreover, cigarette rates among adults have and continue to decline, cigar smoking “has remained generally stable” and youth use of both products are at record lows. These proposed bans fail to consider these public
health wins and the negative externalities associated with any ban on current products adults are legally and responsibly using. Nearly one-third of cigarettes sold in retail stores in the United States are mentholated and an estimated 56 percent of the U.S. cigar market is comprised of flavored cigars. Not only are adults responsibly enjoying menthol cigarettes and flavored cigars, it equates to revenue for businesses, as well as governments who impose draconian excise taxes on these products. Removing such a large portion of these products would slash billions of dollars from the American marketplace during a period of economic uncertainty.

Convenient stores are often locations where adults responsibly purchase menthol cigarettes and flavored cigars. Despite being widespread across the U.S., the convenience store industry are small businesses, with more than 60 percent of convenience stores being “single-store operators.” Should the ban go into effect, these small businesses would stand to lose more than $23.7 billion in sales. States and the federal government would also lose out in excise tax revenue and tobacco settlement payments. The Tax Foundation estimates the states and federal government would stand to lose $7.3 billion in excise tax revenue attributed to cigarettes and cigars, including $6.5 billion in cigarette excise taxes lost due to a menthol ban.

The ban is also unlikely to dramatically reduce use of combustible cigarettes among adults, as statewide flavor bans have not led to reductions in cigarette use. Massachusetts first banned menthol cigarette sales in June 2020, while California’s ban went into effect in January of this year. In Massachusetts, smoking rates only decreased by 4.5 percent between 2020 and 2021, while nationally, smoking rates declined by 7.1 percent during the same period. Even more alarmingly, the percentage of Massachusetts young adults aged 18 to 24-years-old who were smoking increased by 8.8 percent the year after the ban went into effect. A recent study examining discarded cigarette packs collected from trash bins in California localities this year found that menthol prevalence was reduced by only 13.9 percent.

In 2022 it was reported cartels were already producing illicit cigarettes in Mexico in a “network which reportedly manufacturers cigarettes and forces vendors to sell them.” In August, Republican Tennessee Rep. Mark E. Green, Chairman of the U.S. House Committee on Homeland Security, sent a letter to the Department of Homeland Security “urging the agency to work with the [FDA] to halt [the proposed ban] … as these rules could empower cartels to increase their profits by smuggling illicit tobacco products.” In fact, according to the discarded cigarette pack study, more than one-quarter of packs collected this year were cigarettes intended to be sold in non-domestic markets. There are already cross-border sales of illicit products happening. Rather than imposing draconian bans on adult consumer goods, the FDA should be focusing on other tobacco-control measures, including allocating ample resources towards education and cessation, as well as accelerating the authorization of novel safer
tobacco products including e-cigarettes and heated tobacco devices. Revolutionizing and embracing innovation in a regulated marketplace to account for products that adults are using would allow the agency to target youth use and help adults quit — avoiding significant negative externalities.

Blogs:

Monday: TPA Urges Strong Oversight of DOJ’s Antitrust Policy Ahead of Congressional Subcommittee Hearing ([link removed])

Tuesday: Watchdog Group Slams Postal Service After $6.5 Billion Net Loss ([link removed])

Wednesday: FCC’s Incredibly Broad Digital Discrimination Rules Would Harm Efforts to Close Broadband Divide ([link removed])

Thursday: GOP Senators Support Environmentalist Protectionism ([link removed])

Friday: FDA’s Menthol and Cigar Ban is Bad for Consumers and Health ([link removed])

Media:

November 10, 2023: Inside Sources ran TPA’s op-ed, “A Misguided Crusade Against Private Equity.”

November 13, 2023: WBFF Fox45 (Baltimore, Md.) interviewed me about Mayor Scott’s plan to prevent car thefts.

November 13, 2023: TPA’s work on government owned networks was mentioned on KKFT 99.1 (Reno, Nev.).

November 13, 2023: TPA’s work on government owned networks was mentioned on KXL 750 AM (Portland, Ore.).

November 13, 2023: TPA’s work on government owned networks was mentioned on Supertalk radio (Jackson, Miss.).

November 13, 2023: TPA’s work on government owned networks was mentioned on KTSA 550 AM (San Antonio, Texas).

November 15, 2023: RealClearMarkets ran TPA's op-ed, "FCC's Discrimination Rules Would Delay Closing of Digital Divide."

November 15, 2023: I appeared on 55KRC Radio (Cincinnati, Ohio) to talk about inflation, FDA reform, and the Postal Service.

November 15, 2023: The Blaze ran TPA's op-ed, "Foolish Subsidies Won't Make Democrats' EV Dreams Come True."

November 16, 2023: I appeared on WBOB 600 AM (Jacksonville, Fla.) to talk about recent polling on entitlement reform and social media regulation..

November 16, 2023: WBFF Fox45 (Baltimore, Md.) interviewed me about declining casino revenue in Maryland.

November 16, 2023: WBFF Fox45 (Baltimore, Md.) quoted TPA in their story, “Maryland Teachers Union employees earn $181,000 on average.”

Have a great weekend!

Best,
David Williams
President
Taxpayers Protection Alliance
1101 14th Street, NW
Suite 1120
Washington, D.C. xxxxxx
www.protectingtaxpayers.org ([link removed])

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