So who is right? Will these bills potentially hurt open content creation online? Or will they still allow creative content, but truly stop violations of copyright laws? It is hard to know without looking at the wording of the bill itself. It is a bit daunting to read a bill and try to understand its wording.

Luckily Sal Khan from the Khan Academy has made a video walking through some of the wording in the bill that has raised the most concern. He puts it into language that is easy to understand. It gives a clear picture of the possible problems that could arise if these bills pass as they stand January 18, 2012.

Click on the link below to watch the video and tell us what you think. Don’t forget to tell your elected representatives how you feel as well.

SOPA and PIPA Explained

Complexities in the code and a labyrinth of rules to obtain credits mean tax compliance costs are unacceptably high for small businesses.

Small businesses want simplicity in the tax code and they want rates for individual taxpayers kept low. Close to 75 percent of small businesses pay tax on their business income at the individual level, making it imperative that the 2001 tax cuts be made permanent.

Unduly burdensome regulations disproportionately affect the small-business community costing them around 36 percent more per employee than their larger counterparts.

In FY 2010, federal agencies unleashed 43 major new rules’  and the costs of implementing these rules was $28 billion.

According to the Congressional Budget Office, the budget deficits in 2009 and 2010, as measured as a share of GDP, were the largest since 1945. They represent almost 10 percent of the GDP and the estimated budget deficit for 2011 is going to stay in that range.

The businesses that face potential penalties are those with 50 or more full-timers or full-time equivalents (FTEs) as well as owners with multiple businesses totaling 50 or more full-timers or FTEs

The penalties are steep.  For employers that do not provide health insurance coverage, the penalty is $2,000 per year per employee (minus the first 30 employees).  For employers that do provide coverage, if one or more of its employees receive insurance subsidies, then the business will pay $3,000 per subsidized employee or $2,000 per employee (minus the first 30) – whichever is less.

Readers of this site know that we always look at incentive structures.  We know that changing the rules of the game, the rewards and the punishments, will change economic behavior.

NFIB economists predict that the mandate will affect the economy in the following ways.

Businesses will spend real resources determining how many employees they have with respect to the employer mandate. They will face time-consuming, arbitrary administrative burdens associated with employees seeking insurance subsidies in the new insurance exchanges.

The mandate makes it extremely expensive to cross the 50-employee threshold. For example, a mid-sized restaurant that goes from 49 to 50 employees will face a $40,000 per year penalty. A business can avoid the penalties by firing employees, by not hiring new ones, or by outsourcing. Estimating the costs of hiring and expanding will be complex and confusing.

Businesses subject to the employer mandate will receive monthly government reports on subsidized employees that inadvertently reveal personal financial data on employees’ spouses and families. This raises discomforting privacy concerns and exposure to liability for employers.

For some firms, the employer mandate will result in large fines when there are private changes in their employees’ households. For example, an employee’s spouse losing a job or an employee’s spouse’s elderly relative moving into their house could trigger thousands of dollars in annual penalties. Employers will not be entitled to know the details of what caused their penalty – unless they challenge the employee’s honesty before a government agency.

The employer mandate will increase costs, and producers will pass them along to consumers.

Competition is a by-product.  It’s not something desirable in itself – it’s just what happens when other desirable things happen.

Competition comes about when three conditions hold.

1. People are free to serve others.  That is, they are free to provide labor on behalf of other people, to make others lives better.  This condition contains the converse – that people are also free to receive service from others, without intervention/prevention from others.

2. People are free to exchange services with one another in ways that mutually benefit them.

3. People are free to decide between any number of servers/services offered the one that they prefer and feel will most benefit them.

When these conditions hold, what you have is groups of people working for the opportunity to serve one another and offering more and more in exchange for the privilege of being chosen to give the service.  In return for the service, they also receive service (or goods, usually in the form of money) in return.

When people who offer the same service make themselves available simultaneously, the person receiving service has the choice to choose the provider they believe will serve them best.  The two service providers will each work and improve to be able to provide the service.  The net result is that the person served will be able to exchange, perhaps, fewer services in return than may have been necessary.  This is a benefit to the receiver – it means he has that much more service to exchange later for additional services he otherwise might not have been able to “purchase”.

Competition is nothing more than the result of allowing people to freely serve one another and allowing those served the freedom to choose those servers/services that they feel will best serve them.

Any effort to reduce “competition” must NECESSARILY do one or more of the following to the three conditions.

1. Take away people’s freedom to serve one another; that is, to disallow or prohibit service
2. Take away people’s freedom to voluntarily trade service with each other
3. Take away people’s freedom to choose between providers of services and instead mandate that if they want the service at all they must use just one provider (which they did not choose).

People who want to do away with free markets or competition are really just people who want to eliminate service, freedom, prosperity, and choice.

Nice people!

A tough liability system does more than provide compensation for serious harms after the fact. It also sorts out the wheat from the chaff—so that in this case companies with weak safety profiles don’t get within a mile of an oil derrick. Solid insurance underwriting is likely to do a better job in pricing risk than any program of direct government oversight. Only strong players, highly incentivized and fully bonded, need apply for a permit to operate.

In an environment of unlimited liabilities for harmful externalities, insurance would be a must, and insurance companies will be far better regulators than the government.  After all, the government employee gets paid the same amount of money with the same amount of (never-ending) job security whether he actually assesses risk correctly or not.  The insurance company?  One wrong risk assessment, and it’s in the breadline.

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