House Financial Services Chair Maxine Waters (D-Calif.) is pushing discussion draft legislation that would impose unnecessary new reporting requirements on institutional investors. This new regulatory burden would do little to solve the perceived problems being discussed by the Left. Instead, these requirements would impose duplicative, needless compliance burdens on investors that would undermine the free market and threaten retirement security for millions of Americans. 

Rep. Waters wants to expand existing 13F reporting requirements that exist under the Securities Exchange Act of 1934 so that any short or long position in equities or in derivatives needs to be reported. This is part of a concerted effort from the Left to take aim at institutional investors. Securities and Exchange Commission Chair Gary Gensler has also said he wants to impose new disclosure requirements on short selling through regulatory authority.  

The new reporting requirements are duplicative and unnecessary. The Dodd-Frank Act of 2010 requires SEC to adopt rules that increase transparency in the market. This process is already underway through the SEC Regulation Reporting and Dissemination of Security-Based Swap Information (SBSR), rules designed to enhance price discovery, create transparency, and lower transaction costs. 

Given the existence of this regulatory framework, it makes little sense for Congress to impose additional requirements.

New reporting requirements would not solve the problems the Left claims it would. SEC staff have explained that increasing the disclosure of short and long positions would have little or no use to them.

A June 2014 study by the staff of the Division of Economic and Risk Analysis of the SEC concluded that, “… the Division believes that Real-Time Short Position Reporting would provide regulators with little additional information than would be available from CAT.”   

Current reporting provides regulators access to short sale transaction information within a single day – so the problem is not a lack of data. Additional reporting requirements are a solution in search of a problem.

New reporting requirements will be devastating to tens of millions of Americans who depend on institutional investors for retirement and income. The costs of this new regulatory burden will not be absorbed by institutional investors, instead it will be passed along to the millions of Americans that rely on investments for their retirement savings. Pension funds, mutual funds, charities, and others rely on stock lending to earn millions of dollars for Americans across the country.

According to the Managed Funds Association, pensions, university endowments, and nonprofit foundations invest more than $1.4 trillion in hedge funds, a quarter of all U.S. pension assets. This investment vehicle provided strong returns for retirees -- for instance, actively managed hedge funds outperformed the S&P 500 index by nearly 10% during the 2020 market crash.  

At a time when retirement insecurity is a growing problem, these reporting requirements would contribute to the issue further.

In California alone, hedge funds deliver for pensions, colleges, and nonprofits through $164.5 billion in investments. California State Teachers' Retirement System, which invests $15.1 billion in hedge funds, covers 1,209,590 teachers.  

In New York, hedge funds deliver for pensions, colleges, and nonprofits through $121.5 billion in investments. New York State Common Retirement Fund and New York City Police Pension Fund invest $15.6 billion in hedge funds, covering 1,157,643 participants. In Texas, hedge funds deliver for pensions, colleges, and nonprofits through $115 billion in investments. The Teacher Retirement System of Texas invests $14.1 billion, covering 1,629,682 Texas teachers.  

More public disclosure could also essentially force investors to reveal their trading strategies, compromising their ability to manage market risk exposure. It would also lead to others copying their strategies, reducing their return on the immense amount of research they do. This would reduce possible returns, which would harm the retirement security for millions of Americans.

New reporting requirements would play havoc with the free market. While there is little utility to expanding 13F reporting requirements, it would disrupt the natural functions of a free market.

For instance, these new reporting requirements could result in short-sellers facing public shaming and retaliation.  

The fact is, there is nothing to fear from short selling, as it is a common function of the free market. An investor will short a stock when they believe it to be overvalued.  

In-depth empirical research has found that short selling is not responsible for market crashes and economic downturns. Instead, it provides efficiency and information to markets, ultimately softening the blow of a downturn. The 2008 market crash could have been far more widespread if short-sellers hadn’t recognized the housing market was overvalued. Rather than solving market volatility, these reporting requirements could make the market more volatile and exacerbate the pain felt during future market crashes. 

In extreme cases, short selling can help expose corruption. In the past, short-sellers have been instrumental in uncovering corporate fraud such as the Enron and Wirecard cases.  

Rep. Waters' bill to impose new regulatory requirements is completely unnecessary. This legislation would provide little or no useful information to regulators and would instead harm Americans’ retirement securit and remove important market signals that expose corruption and soften the blow of economic downturns. 

Inflation is running rampant in Joe Biden’s America. The Bureau of Labor Statistics (BLS) found that in June, consumer prices increased by 5.4 percent on an annualized basis. From May to June, consumer prices increased by 0.9 percent. In January 2021, before Joe Biden took over the presidency, annual inflation was at a stable 1.4 percent. While inflation has already hit American families hard, President Biden is pushing policies which would this problem even worse.   

According to BLS, the cost of many goods and services have increased significantly over the past year: 

• Gasoline has increased 45.1 percent in the past 12 months. 
• Energy 24.5 percent in the past 12 months. 
• Bacon has increased 8.4 percent in the past 12 months. 
• Fresh fish and seafood has increased 6.4 percent in the past 12 months. 
• Fresh whole milk increased 7.5 percent in the past 12 months. 
• Fresh fruits increased 8.4 percent in the past 12 months. 
• Major appliances increased 13.7 percent in the past 12 months. 
• Furniture and bedding increased 8.6 percent in the past 12 months. 
• Footwear increased 6.5 percent in the past 12 months. 
• Airfares increased 24.6 percent in the past 12 months. 
• Commodities have collectively increased 9 percent in the past 12 months. 

Not only does inflation harm consumers by increasing household costs, but it can also have long lasting economic damage. As detailed in the New York Times:   

“Inflation can erode purchasing power if wages do not keep up. A short-lived burst would be unlikely to cause lasting damage, but an entrenched one could force the Fed to cut its support for the economy, potentially tanking stocks and risking a fresh recession.”  

The erosion of purchasing power is especially concerning given that wages are decreasing. The BLS found that seasonally adjusted real average weekly earnings decreased 0.9 percent in June. Seasonally adjusted real average hourly earnings have declined by 1.7 percent over the past year. 

Here is Biden on video promising he would "lower costs.".
Today US gov reports inflation up to 5.4% annual and wages fell in June. pic.twitter.com/9eDQrgPkbo

— Grover Norquist (@GroverNorquist) July 13, 2021

Despite the Biden administration’s assurances that inflation should not be a concern, voters are still deeply concerned about it. 

88 percent of voters say they are concerned about increased inflation, according to a recent Harvard CAPS and Harris poll. When asked what causes inflation, the top three answers were "Massive government spending," "Significant amounts of money being injected in the economy by the Federal Reserve," and "Uncontrollable government deficits."   

With these trends in mind, it is especially concerning that President Joe Biden is pushing a multi-trillion dollar budget, taking the U.S. to its highest sustained levels of federal spending since World War II, which is considered one of the most financially desperate times in American history. The budget calls for $6 trillion in spending for Fiscal Year 2022, spent on "infrastructure" and "human infrastructure." In reality, these plans are packed with wasteful spending. Flooding the U.S. economy with this kind of spending is bound to exacerbate inflation. 

The Biden administration has also proposed trillions of dollars in tax hikes on businesses. This, similarly, will be passed on to consumers through higher prices. Raising the corporate income tax from 21 to 28 percent will certainly have this effect. According to a 2020 National Bureau of Economic Research paper, 31 percent of the corporate tax rate is borne by consumers through higher prices of goods and services.  

The Biden administration should focus on growing the economy and helping businesses and working families. Instead, at the expense of Americans’ financial security, they are pushing massive new spending projects to finance a liberal wish-list. 

Last week, President Joe Biden issued an Executive Order on Competition policy. This EO contains several proposals related to prescription drugs, which if implemented could harm American innovation, reduce access to care, and pave the way for socialist healthcare policies. 

The EO directs the federal government to continue pushing for the importation of prescription medicines from Canada. In addition, the proposal calls for the HHS to develop a plan to reduce the cost of prescription medicines. 

Importation of prescription medicines from Canada is unrealistic, may not result in savings, and could even lead to unsafe drugs flooding the U.S. market. 

While importation may sound like a reasonable concept, this proposal is highly flawed and would likely do little or nothing to reduce costs. 

First, Canada does not have the scale to successfully import drugs to the U.S. in any meaningful way. Canada is one-tenth of the U.S. with a population of 37.5 million and an economy of $1.7 trillion. By comparison, the U.S. has a population of 327 million and an economy of $20.5 trillion. Canada also represents just 2 percent of the world’s pharmaceutical consumption while the U.S. makes up almost 45 percent. 

Instead, this proposal may destabilize the Canadian supply chain, a concern raised publicly by Canadian officials. If 40 percent of Canada’s existing prescriptions are diverted into America, Canadian supply would run out in just 118 days – or 16 weeks. In this scenario, Canadian officials would naturally be incentivized to reduce the supply of imported drugs to keep their prices low and avoid shortages.  

Second, it is unclear whether there will be any savings from importation. The non-partisan Congressional Budget Office (CBO) has previously estimated that importing drugs from Canada would have a “negligible reduction in drug spending.” 

Many high-cost drugs will likely be excluded from the importation plan, further undercutting the potential to deliver savings. According to the American Action Forum, 42 of the top 50 Medicare Part B drugs by total spend and 31 of the top 50 Medicare Part D drugs by total spend would not be eligible for importation under an earlier version of this proposed plan.  

Finally, there are also long-standing concerns that importation will flood the U.S. market with unsafe, unvetted drugs. Every single FDA Commissioner and HHS Secretary over the past two decades have raised concerns about importation and declined to vouch for its safety. Four former FDA commissioners from the Obama and Bush Administrations wrote a letter to members of Congress expressing numerous problems with importation, chief among them that importation “...could lead to a host of unintended consequences and undesirable effects, including serious harm stemming from the use of adulterated, substandard, or counterfeit drugs”  

There is no way for the FDA to properly verify that imported drugs are safe. Canada allows drugs to be imported from anywhere – including third world countries – into Canada and then into the United States, raising serious doubts about the safety of these drugs. 

The EO’s directive to combat high prescription drug prices and price gouging could result in socialist price controls. 

While this directive is vague, it is likely a precursor to socialist price controls that would dramatically expand the size and scope of the federal government.

House Democrats are pushing H.R. 3, the Lower Drug Costs Now Act. This legislation imposes new taxes and government price controls on American medical innovation. Under the legislation, pharmaceutical manufacturers that do not agree to foreign price controls would face a retroactive tax of up to 95 percent on the total sales of a drug (not net profits). This means that a manufacturer selling a medicine for $100 will owe $95 in tax for every product sold with no allowance for the costs incurred. No deductions would be allowed, and it would be imposed on manufacturers in addition to federal and state income taxes they must pay.  

Others on the Left are pushing to have the government takeover private sector negotiation in Medicare Part D. Instead of having the government directly provide care, Medicare Part D leverages competition between pharmacy benefit managers (PBMs), pharmaceutical manufacturers, plans, and pharmacies to provide coverage to seniors. This lowers costs and maximizes access for seniors.

At the core of this program is the non-interference clause which prevents the Secretary of Health and Human Services (HHS) from interfering with the robust private-sector negotiations. The Congressional Budget Office has even said that there would be a “negligible effect” on Medicare drug spending from ending non-interference.

This structure has been successful in driving down costs. Since it was first created, federal spending has come in 45 percent below projections - the CBO estimated in 2005 that Part D would cost $172 billion in 2015, but it has cost less than half that – just $75 billion. Monthly premiums are also just half the originally projected amount, while 9 in 10 seniors are satisfied with the Part D drug coverage.

Either proposal would severely harm medical innovation, threaten high-paying manufacturing jobs, and limit access to cures. 

According to a study by the Galen Institute, patients in the U.S. had access to nearly 90 percent of new medical substances launched between 2011 and 2018. By contrast, other developed countries had a fraction of these new cures. Patients in the United Kingdom had 60 percent of new substances, Japan had 50 percent, Canada had 44 percent, and Spain had 14 percent. In many cases, Americans are able to buy less expensive generics before countries with socialized medicine can even access the underlying new medicines. 

Nationwide, the pharmaceutical industry directly or indirectly accounts for over four million jobs across the U.S and in every state, according to research by Economy Partners, LLC. This includes 800,000 direct jobs, 1.4 million indirect jobs, and 1.8 million induced jobs, which include retail and service jobs that are supported by spending from pharmaceutical workers and suppliers.

The Biden administration’s healthcare proposals could harm medical innovation and open the U.S. market to counterfeit, dangerous drugs. Rather than pushing proposals that dramatically expand the size and scope of the federal government, policymakers should look to solutions that promote competition and improve the quality of healthcare for Americans across the country.

In April, Arizona Governor Doug Ducey signed a bill legalizing both retail and online sports betting.  This legislation makes available a total of twenty sports betting licenses, ten of which are reserved for tribes.

 Arizona will tax retail sports gambling at 8% and online sports gambling at 10%.  These modest rates encourage Arizonans to support the new industry as shown by a Copenhagen Economics study concluding that tax rates of 15% and higher reduce betting activity. 

Furthermore, low taxes on sports betting reduces the incentive of placing a bet for a lower fee on the $150 billion black market for sports betting, rather than through legal means. 

Arizona’s proposed rates are competitive, but setting a tax rate lower than 8% could help Arizona compete with neighboring states such as Nevada, where bets are taxed at 6.75%. 

Despite many positive aspects of the Arizona Department of Gaming’s proposal, the language regarding the regulation of league data usage could amount to a giveaway to sports leagues.  The Department’s regulations state that official league statistical data must be used for in-game betting unless the sports book proves that the use of other data is “necessary”.  Sports books should not have to justify the use of non-official data as necessary as long as the information is good and comparable. 

The department says even though they are making sports books use “official” data, that they will make sure the costs are “commercially reasonable.” Yet, they would interfere in the market, which would determine commercially reasonable prices for free – if allowed to function. This language should be eliminated from the regulations, or at minimum, be rewritten to allow sports books to use statistics which are sufficient for integrity, rather than defaulting to using league-approved data.   

A low tax approach deserves support, and should provide optimism for consumers and the industry’s economic prospects. With most states not mandating using league-approved statistics, and not facing any unique integrity issues as a result, there is little justification for requiring operators use that data only for in-game betting.