The Office of Information and Regulatory Affairs was, in an irony that will quickly become apparent, created by the Paperwork Reduction Act of 1980. Last month, after some delay by meddling and petty Senators with the temerity to express concern over the nominee's political views, Cass R. Sunstein was confirmed by the Senate as OIRA's head making him the current administration's latest "Czar." 20 days later Mr. Sunstein's book, "On Rumors: How Falsehoods Spread, Why We Believe Them, What Can Be Done," hit the stands. Good timing probably. Sunstein probably wasn't expecting to receive a confirmable appointment when he first started work on the piece- though at 88 pages of grade-school level prose he may well have begun writing quite a bit after the Wall Street Journal leaked his appointment in January of this year. Perhaps as recently as last month, actually. One would expect that a more public airing of the prose in Sunstein's work, which seems almost singularly focused on shutting up "members of the Republican Party spread[ing] rumors about the appointee of a Democratic president," (have anyone in particular in mind?) without causing a constitutional crisis might have caused problems.
Normally, such goings on would slip thankfully under the radar at Zero Hedge. Unfortunately, a newly emerging posture with respect to free speech evident in the stance of the United States seems to have erected itself since the current administration's swearing(s) in and, hence, such matters attract our attention. Particularly troubling are the following passages:
On the Internet in particular, people might have a right to "notice and take down." Under this approach, modeled on the copyright provisions of the Digital Millennium Copyright Act, those who run websites would be obliged to take down falsehoods upon notice. It is true that this approach might be burdensome. It is also true that because of the nature of the Internet, notice and takedown cannot provide a complete solution. But if it is taken down, it will not be in quite so many places, and at least the victim of the falsehood will be able to say that it was taken down.
What would be so terrible about a requirement that people take down libelous material after they are given notice that it is libelous- at least if they do not have reason to believe that the material is accurate or at least supported by evidence?
We cannot think of a worse model for "falsehood" regulation than the Digital Millennium Copyright Act, which effectively enables anyone with an internet connection to bluff U.S. (and many foreign) internet service providers into forcibly removing content that fails to possess even a passing resemblance to infringement. Zero Hedge, of course, experienced this first-hand more than once in the days before our technological exodus from the gentle regulatory ministrations of the United States.
In addition, answering the question "what would be so terrible" posed by Sunstein's second passage is quite simple. Shifting the burden of proof to the content provider "on notice," is a major shift from current practice (outside of the DMCA) and presents a difficult logical problem. "Prove the content is not libelous," is rather a troublesome contention. Since when do we reverse the burden of proof on content providers and require of them positive certifications of the non-libelous nature of their prose in order to be blessed with the right to publish? Who exactly will determine what constitutes "accurate or at least supported by evidence"? When will this finding be made? (Before or after the "take down"?) When will CNBC be forced to close up shop or move their studio to the Caymans? Will this impact Bartiromo's wardrobe significantly? (Please tell us it will not alter Gasparino's).
Actually, we think we know the answers to these questions already and therefore, quite obviously, Zero Hedge's Q2 2009 "short American free-speech" trade continues to provide some of our portfolio's most dramatically outsized risk-adjusted returns.