Tech issues don’t move the needle in national elections like yesterday’s, but below I’ll make some general observations, followed by a few on winners and losers in issue areas I cover.

All in all, I think it’s a good election result.

We’re back to divided government. The acute tension between the Republican House and Democratic Senate and president is likely to produce fiscal rectitude, and only legislation on which there is something close to true national consensus will pass.

Neither the Republicans nor the Tea Party movement were awarded any kind of sweeping victory, so they are unlikely to overplay their hands or take public support for granted. They must work to advance their aims by persuading more Americans that their philosophies and leadership are meritorious.

Democrats should, of course, be chastened. They’re rightly paying the price for the careless, go-for-broke strategy they used in the 111th Congress, to pass their sprawling, intrusive health care regulation, for example.

Here’s to at least two years of welcome gridlock.

Now, there were some notable losses among tech-focused representatives. The most worrisome loss is Senator Russ Feingold (D-WI), who has been a consistent and persistent overseer and skeptic of the growing surveillance state. I don’t see anyone to step up and take his place. Privacy lost big in the Wisconsin election.

I’m bucking consensus on the loss of Rick Boucher (D-VA) in the House, at least as far as privacy goes. (On copyright and some telecom issues, I’ll take Mike Masnick’s word.) Boucher is a nice guy and a careful legislator, but his popularity among the Washington, D.C. tech lobby, I think, was a product of lobby-legislator symbiosis, not his actual backing for the interests of tech innovators.

For at least a decade, Boucher has been an advocate of “baseline privacy legislation” that never actually had a serious chance of passing. The result was that tech lobbyists could always report to the home office that they had something to do, and tech trade associations could garner corporate support for all those noon-time strategy meetings over sandwiches—without generating a true threat to the business models of the companies they (purport to) represent.

My point is not that Boucher should have advanced his privacy legislation—it’s not going to be federal law that delivers privacy. I’m just not unhappy that he’s gone. (Not that far gone. Watch for him to take a job somewhere in the D.C. tech lobby. Knowing nothing about his plans, I’d give it a greater than 50% chance.)

The tech lobby will actually have some work to do under Boucher’s likely successor in the role of Democratic tech/consumer protection leader. Ed Markey (D-MA) is a partisan and an ideologue who will actually require the tech lobby to defend itself. He’s canny enough to have decent influence even from his perch in the minority.

UPDATE w/additional thought: Democrat Richard Blumenthal, elected to the Senate from Connecticut, is a technophobe demagogue—or plays one on TV, which is what matters. He went to war against Craigslist to boost his campaign, and his win is a notable loss for tech and free speech.

But—really—the fate of our privacy, the fate of our tech sector, and the fate of our country and society shouldn’t turn on elections. We are not defined by these people, who go to Washington, D.C. to sit atop the coercive authority machine for a while. Elections come and go. I’ll continue to work on returning power to civil society where it belongs.

No, I’m not here to tell you more about the “supersized” FTC. Berin has done yeoman’s work to highlight that issue, among other things with the PFF event you can review here. On TechDirt, Mike Masnick wrote this morning about how the feds are itching to regulate the Internet.

This is about the direct government invasions of privacy likely to occur if S. 3217 passes. On the Cato@Liberty blog I write about the detailed financial market research that new regulatory agencies would do—research aimed at you.

Example:

Section 1071(b) requires any deposit-taking financial institution to geo-code customer addresses and maintain records of deposits for at least three years. Think of the government having its own Google map of where you and your neighbors do your banking. The Bureau [of Consumer Financial Protection] may “use the data for any other purpose as permitted by law,” such as handing it off to other bureaus, like the Federal Bureau of Investigation.

“Washington, D.C. has determined that Washington, D.C. should manage the financial services industry. Your personal and private financial affairs will be managed there too.”

What would I say about my own writing but read the whole thing?

I’ve written before about my dislike of “the cloud.”

The term implies that there aren’t specific actors doing specific things with data, which will tend to weaken people’s impression that they have rights and obligations when using or providing cloud services. We’re talking privacy problems.

When “cloud” services fail, the results can be widespread and significant. Think of cloud computing as a sibling of security monoculture.

TechDirt’s indefatigable Mike Masnick reminds us of this with a tweet today about hiccups in Google Calendar that may have prevented him getting on a conference call. He’s written once or twice about the cloud in terms of legal/discovery issues, privacy issues, and business/regulatory hurdles.

Remote computing is not going away, but it’s a fad that should fade over time. I think I hit the right notes in an earlier post where I said:

There will always be a place for remote storage and services—indeed, they will remain an important part of the mix—but I think that everyone should ultimately have their own storage and servers. (Hey, we did it with PCs! Why not?) Our thoroughly distributed computing, storage, and processing infrastructure should be backed up to—well, not the cloud—to specific, identifiable, legally liable and responsible service providers.

Over at TechDirt, Mike Masnick has an interesting post asking “Why Did Apple Approve Spotify?” which builds on an AdAge column asking a similar question: “Did Apple Sacrifice ITunes With Latest Apps?”  As the title of that AdAge piece suggests, some folks are wondering if Apple shot itself in the foot by approving Spotify, a music streaming app that some regard as a potential iTunes killer.  I don’t really have any comment on the business angle here, rather, I wanted to just comment on Mike’s suggestion that one possible explanation for Apple’s approval of the app is that:

As we noted when the app was approved, Apple appears to be somewhat gunshy, following the FCC inquiry into why it “blocked” Google Voice on the iPhone (and, yes, Apple still insists it didn’t actually block the app, but Google says otherwise). Given the scrutiny, Apple probably realized that it was in for some serious political trouble if it blocked an app like Spotify, which would have received a lot of press attention. Oddly, the AdAge article doesn’t mention this at all.

Indeed, it is odd that AdAge didn’t bother mentioning that fact.  But what I find doubly odd here is that nobody is even blinking an eye at the prospect of such political meddling with — or even possible FCC regulation of — Apple, iTunes, or music streaming market in general!  Seriously, have we gotten to the point now in our Bold New World of Neutrality Regulation that innovative high-tech companies must live in fear of constant regulatory intervention even when they completely lack any statutory authority to play these games?  Moreover, does anyone think that the a bunch of Beltway bureaucrats can micro-manage music and high-tech application markets and give us more options than we have today?

I know the prospect of such meddling makes some academics and regulatory activists groups happy, but I can’t see how this ends well for consumers or high-tech markets more generally.  Regardless, for those of you who laugh when we suggest that the slippery slope of regulation is real, consider this case to be Exhibit A.  Or perhaps it’s Exhibit B since the Google Voice spat with Apple was already moving the FCC in the direction of becoming a device regulator and applying “handset neutrality” principles that have no basis in law.  It’s your anything-goes government at work.

Just before the New Year, Mike Masnick reported:

It’s been well over five years since we first heard about a plan in Oregon to attach GPS devices to cars and tax drivers based on how much they drove and the idea hasn’t become any better in the intervening years… but apparently it’s still being pushed. Oregon’s governor is trying to move forward with the plan.  One of the reasons behind the bill has nothing to do with a more efficient way to tax drivers, but because the state is gaining less revenue from its gas tax since there are more fuel-efficient cars on the roads these days. Of course, rather than reward drivers for driving more fuel efficient cars, this sort of tax punishes them, and actually encourages the use of less fuel efficient vehicles. And, of course, that doesn’t even begin to get into the potential (and likely) privacy problems brought about by any system whereby the government has full access to a GPS system on your car.

This is a great example of the problems that often arise when trying to bring into the digital age areas of the economy monopolized or dominated by government.  There’s a clear (if imperfect) analogy here to Obama’s ambitious goal of digitizing health records:  both are great ideas that raise special privacy concerns because of the heavy involvement of government.  These privacy concerns are certainly not unwarranted:  I wouldn’t want the government to have access to my car’s location or my medical history at any given moment or a complete record of where I’ve driven or what doctors I’ve seen.  But just as relying on paper health records is clearly stupid (and dangerous), it would make a hell of a lot more sense for drivers to pay for road use depending on “where, when and how far they drove”—as in a small pilot project in the UK.

Today, state and Federal taxes on every gallon of gasoline are intended to serve two conflicting purposes—but do a poor job with both.  First, the taxes fund the cost of building and maintaining roads.  But the tax provides only a very rough proxy for how much driving Americans are doing, and says nothing about which roads are actually being used or when.  So government road planners have to guess at which roads need to be upgraded or where new roads are required.  Worse, the current system does nothing to encourage rational decisions on the part of drivers, who currently have no direct economic incentive (other than saving time) not to drive during rush hour or to use less-congested roads.

Second, the current tax system is what economists would call “Pigouvian“: it is intended to correct the negative externalities (air pollution) caused by driving.  But, again, taxing total gallons of gas consumed is a poor proxy for emissions.  As Cato’s Jerry Taylor points out (start podcast at 1:33), cars are already sufficiently computerized that if we really wanted to punish pollution through the tax system, we could directly tax emissions themselves by having each car keep track of unhealthy emissions and then uploading that data, say, at the car’s annual inspection.

So in a rational world, we’d abolish gasoline taxes entirely and institute user fees to fund the cost of roads & highways that reflect actual use.   If government insists on it, we could also tax emissions directly.  (We could make the whole transition revenue-neutral, lest this reform result in higher taxes/fees.)  Merely by reducing congestion, better economic incentives could significantly reduce air pollution.

If roads weren’t run by government monopolies, this kind of change would have happened a long time ago.  Although many people associate toll booths with road privatization, no private business would ever choose a technology as cumbersome (and costly) as toll booths if they had the option of using a system as seamless and invisible to the user as GPS-tracking or even existing transponder-based systems ( e.g.,  E-Z Pass, FasTrak).  Maybe there’s a more efficient or privacy-friendly option out there, or at least on the horizon.  I don’t know, but I suspect competing road operators would figure it out.

Some drivers might still be uncomfortable with the idea of a private company having access to their driving data, but that private company would have a strong incentive to compete for privacy-sensitive drivers by offering strong data protection policies (such as data anonymization and retention limits), which would of course be enforced under the FTC’s existing “unfair & deceptive trade practices.”

But because government has virtually monopolized the road system, we’re stuck with a terrible choice:

• Continue to use a “pricing” (tax) system from the 1950s when modern satellite and computer technology offers us clearly superior alternatives that could reduce congestion and pollution and perhaps even save lives; OR
• Risk putting the data created by those modern technologies directly into the government’s hands.

It’s a hard choice.  I don’t know what the right answer is—other than privatizing the roads, enforcing corporate privacy policies strictly under existing law, and increasing Fourth Amendment protections against government access to user data kept by companies.  Since road privatization is unlikely to happen in an era when we are (re)nationalizing core industries through bailouts, I suspect that we’ll end up having to choose either technology (with all its benefits)  or privacy, when we should be able to have both.

President Obama has talked about “investing” $50 billion in tax money over the next five years to subsidize the digitization of health records.  While one might hope that these records wouldn’t be directly accessible to government in the same way that driving records would be under the Oregon or UK projects, it’s by no means clear that this won’t be the case, given the Federal government’s dominant role in the health care sector.  If the Golden Rule (“He Who Has the Gold, Makes the Rules”) holds, increased government spending on health care across the board—whether in the name of e-Health or universal health—will surely lead to greater government control of the health care system.  That will probably mean greater access to e-health records.  If politicians can access FBI files of their opponents, they’ll probably abuse access to health care records, too.  No safeguards are ever perfect, of course, and invasions of privacy would happen if the data were kept by private companies, but at least those companies would be accountable in court, in the court of public opinion and in the marketplace if they allowed such violations by their employees or corporate partners, or simply failed to protect such a “honey pot” of data.

I’d like to see the most modern technology used across the board—whether it’s for roads or health care.  I just don’t want the real Big Brother—government—to have access to that information, a problem that is only going to increase as government’s role in our lives grows.

Is there any other issue under the tech policy sun today that creates stranger intellectual bedfellows than collective licensing of online music? After all, as I noted here before, on the pro-collective licensing side we find mortal enemies EFF and RIAA (at least Warner) in league. And on the anti-collective licensing side, we have Mike Masnick and Andrew Orlowski. If you locked those two guys in a room and tossed out any other copyright topic, they’d probably end up killing each other with their bare hands. But somehow they agree on this one (albeit for somewhat different reasons).

Anyway, I continue to have mixed, but generally skeptical, feelings about online collective licensing. There are countless thorny fairness issues on both the artist and consumer side of things. What’s the pay-in rate? How is it set? Who all pays in? Who gets paid out, how much, and by what formula? And God only knows how you deal with those parties (whether they be ISPs, consumers, or even artists) who don’t want to be a part of the scheme.

For these reasons, I’ve always felt a voluntary collective licensing scheme for the Internet is challenging, if not impossible. It would have to be compulsory to be a truly blanket license that covered all music, all users, and all platforms. I’m not too fond of that approach, but I think that’s where we are likely heading in the copyright wars. After all, that’s how it has been resolved in many other contexts historically. But that doesn’t give me any comfort since those other systems have been a mess in practice. This 2004 Cato study by Robert Merges provides some details and makes the case against apply the compulsory licensing approach to the online music marketplace.

… environmental attorney Dusty Horwitt, who recently published this outlandishly stupid and highly offensive editorial in the Washington Post calling for an information tax to reduce the supply of information in society. “[I]n our information-overloaded society,” he argues, “the concept of [too much information] is no joke. The information avalanche coming from all sides — the Internet, PDAs, hundreds of television channels — is burying us in extraneous data that prevent important facts and knowledge from reaching a broad audience.” His repressive solution?

It’s possible that over time, an energy tax, by making some computers, Web sites, blogs and perhaps cable TV channels too costly to maintain, could reduce the supply of information. If Americans are finally giving up SUVs because of high oil prices, might we not eventually do the same with some information technologies that only seem to fragment our society, not unite it? A reduced supply of information technology might at least gradually cause us to gravitate toward community-centered media such as local newspapers instead of the hyper-individualistic outlets we have now.

Mike Masnick of TechDirt and Richard Kaplar of the Media Institute do a fine job of ripping Mr. Horwitt’s absurd proposal to shreds. As Kaplar argues, it is “sheer lunacy” to “tax the technologies of freedom.” Unlike gasoline, there are no good reasons — not one — for government to ever take steps to reduce the supply of information. Mr. Horwitt is calling for public officials to use their taxing powers to destroy or limit opportunities for human communications and the free exchange of speech and expression. It is completely antithetical to a free society.

Moreover, if Mr. Horwitt really thinks there is too much information in this world, then perhaps he should lead by example and take his own site offline first! The rest of us will take a world of information abundance over a world of information scarcity any day of the week.