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InsiderOnline Blog: January 2007

Serving the Consumer

Want to learn about successful entrepreneurs? Some of the best are to be found in the marketplace for spiritual salvation. Writes Evan Sparks at The American:

Everywhere in the United States, people have more consumer choice in their exercise of religion than they do in almost any other sector of the economy. Individual parish churches, regardless of denominational affiliation, function as independent contractors of salvation in America’s religious free market. Christianity in the United States is dynamic, and American church history is littered with the relics and ruins of denominational change and theological innovation.

With its emphasis on innovation, experimentation, and change in the service of truth, evangelical theology has generated what one might call a favorable regulatory environment for religious innovation. Evangelical entrepreneurs say, “If you don’t like what’s around you, change! Leave! Try something new!” In this way, Protestantism has inculcated and preserved both liberalism and orthodoxy. At any rate, the evangelical entrepreneurs have ensured a wide variety of choice in religious belief and practice in the United States.

Posted on 01/31/07 04:28 PM by Alex Adrianson

The Statistical Middle Class v. the Actual Middle Class

Demographic changes have undermined the statistical picture of who is middle class. According to the Tax Foundation, the median income-earning household is no longer a married couple, but instead is a single earner or single-headed household. In 1960, 68 percent of the middle 20 percent of households were married couples. IRS data show that the figure for 2002 was only 36 percent.

Most married couples today fall into the upper 40 percent of income earners. Says Tax Foundation President Scott Hodge:

These demographic shifts have no doubt contributed to the perception of rising income inequality. When the so-called rich are increasingly couples with two incomes, they will naturally look wealthier than the vast number of single taxpayers who now populate the statistical middle.

Posted on 01/30/07 02:31 PM by Alex Adrianson

Accountability Avoidance Illustrated

Virginia and the federal government can’t agree on how to test immigrant children who are new English speakers. The federal No Child Left Behind program requires that all children be held to the same standards of English proficiency. Fairfax County says it doesn’t make sense to force students just learning the language to be given the same tests as native speakers. The fault, editorializes the Washington Post, lies with both the feds and the Commonwealth.

The law is more flexible than Virginia officials imply. Students new to American schools are exempt from testing for the first year, and states can devise different tests, allow such accommodations as the use of foreign-language dictionaries and even administer content tests in other languages (something Virginia won't consider).

Virginia sat on its hands while every other state was able to satisfy the federal regulations. For reasons we can't fathom, federal officials enabled Virginia's inaction, allowing until now the use of a test both sides agreed was inadequate. The federal officials then barred the test without a good alternative in place.

It gets worse:

Educators tell persuasive and painful stories of the harm caused by making these children sit for tests that are inappropriate. Only recently has that been acknowledged, with Education Secretary Margaret Spellings announcing a partnership with states to come up with better tests. [Emphasis added.]

Wait, isn’t that what we already have?

Saying that both parties are to blame is just another way of saying that neither party is held accountable. The federal-state partnership allows the states to blame the feds and the feds to blame the states when things don’t go right. How does continuing the partnership fix things?

Posted on 01/30/07 10:26 AM by Alex Adrianson

Activists Presume, Markets Discover

BusinessWeek has an article claiming that Corporate Social Responsibility (CSR) makes for good business—that business can do well by doing good. Townhall’s Wayne Winegarden exposes the faulty logic:

[A] wasted investment in a promising technology is not necessarily a bad thing for society—if GE does not try we may never reap the rewards of wind power. Additionally, in a free market there are many other experiments with other technologies (some old, some new) occurring simultaneously. Through this experimental process, our scarce knowledge is put to its best uses and society benefits.

CSR’s policies endanger this process. As opposed to letting those people with the best knowledge experiment, CSR advocates presume they already know the answer. The CSR activists already know that investing in wind power will enhance GE’s profits. Their presumption thwarts the market process that is responsible for so many of the gains our society has made throughout the years.

It also raises a more fundamental question: if CSR activists already know how to maximize profits, why not “do well by doing good” themselves? The answer, to paraphrase Detouches: “Advocating is easy, business is difficult.”

Posted on 01/29/07 02:26 PM by Alex Adrianson

Hillary Clinton Wants Your Input on Health Care

In a previous job, Sen. Hillary Clinton once tried to reorganize the entire health care sector (one-seventh of the U.S. economy) from the White House. Now, as a candidate for President, she seems to be acknowledging that she doesn’t have all the answers. At least she wants to know what other people think. At Yahoo Answers, she posts the following question: “Based on your own family’s experience, what do you think we should do to improve health care in America?” Be sure to tell her what you think.

Posted on 01/29/07 11:53 AM by Alex Adrianson

The Coming Week

Monday: Celebrate Milton Friedman Day. University of Chicago – Memorial Service; YouTube – Challenge the Status Quo video contest in honor of Milton Friedman; PBS – The Power of Choice: The Life and Ideas of Milton Friedman (check schedules).

Tuesday: Find out which tax reform ideas would be good for Georgia, hosted by the Georgia Public Policy Foundation.

Tuesday: Hear an assessment of successes and failures in combating terrorist financing from the Hudson Institute.

Wednesday: Learn how California’s health care system can be fixed at an event featuring Pacific Research Institute’s John R. Graham.

Wednesday: Get the view from the Taiwan Straits. A distinguished panel at Heritage discusses the security situation between Taiwan and China.

Thursday: Take in a debate between David Holmes, of The College of William and Mary, and Dinesh D’Souza, author of The Enemy at Home, on the topic, "In a Free Society, Should Religious Symbols be Considered Free Speech: The Wren Cross Controversy?"

Posted on 01/25/07 05:07 PM by Alex Adrianson

News You Might Have Missed

Control begets control: Because of quotas on imports of corn from the United States, the price of tortillas has gone up in Mexico. But instead of repealing the quotas, Mexico has enacted price controls on tortillas.

It’s a start: Charter schools seem to be inducing at least one competitive response from public schools. The Miami-Dade school district will launch an advertising campaign next month in order to stem its decline in enrollment.

Thanks China! China has been a long-time supporter of a ban on space-based weapons. But that didn’t stop the country from testing an anti-satellite kinetic energy vehicle. The successful test destroyed one of China’s own aging satellites, leaving a large field of debris that could damage other space vehicles in the future.

A bad sign: The private-sector share of personal income has sunk to an all-time low in Maine. Data from the Bureau of Economic Analysis show that Maine’s private sector accounted for 66.2 percent of personal income in 2005. In 1929, the figure was a 92.4 percent. Maine Heritage Policy Center’s J. Scott Moody: “The distinction between the two sectors is important because only the private sector creates new income. The public sector simply redistributes existing income and/or wealth.”

An end to the federal deficit? The Congressional Budget Office projects that the federal budget deficit will reach zero in 2010. Unfortunately, those projections are based on assumptions that CBO is required by law to make. Those assumptions include: none of President Bush’s tax cuts will be extended past 2010; the alternative minimum tax will not be reformed, raising taxes for millions of taxpayers; and the war in Iraq and other military operations will require only current levels of spending. More realistic assumptions show the budget deficit at $333 billion in 2010.

The harm of FDA delay: Should terminally-ill patients with no other treatment options have the right to use experimental drugs that have already been proven safe? Currently, the Food and Drug Administration requires drugs to be proven both safe and effective. But proving drugs to be effective can delay their arrival on the market to the detriment of patients with no other options. A group called Abigail’s Alliance has sued the Food and Drug Administration seeking to force the agency to loosen its control over experimental drugs. That case is on appeal in a U.S. court and may soon end up at the Supreme Court.

That pervasive German entrepreneurial spirit: A German Web site is offering protestors for rent. If an organization doesn’t have enough true believers of its own, it can still stage an effective event by hiring individuals to march, hold signs, and shout slogans.

Posted on 01/25/07 05:06 PM by Alex Adrianson

Don’t Pooh-Pooh Tax Cuts

The irrepressible Don Boudreaux writes to the New York Times (January 25, 2007):

To the Editor:

Anthony DiStefano says that cutting taxes is a "facile" solution to "complex and difficult" problems (Letters, Jan. 25).  Mr. Stefano's is a facile understanding of tax cuts.

By keeping more resources in private hands, tax cuts encourage countless entrepreneurs to experiment with different means of solving problems.  And by allowing consumers individually to choose which of these ways they like and which they dislike, tax cuts promote more accurate assessments of each solution's worthiness.

The phrase "cut taxes" is indeed short and straightforward - but it reflects the recognition that reality is far too complex and difficult to be managed centrally by politicians spending other people's money.

Posted on 01/25/07 02:14 PM by Alex Adrianson

Raising the Wage Cap: Some Facts

Some have suggested applying Social Security taxes to the full amount of a worker’s income (i.e., eliminating the taxable wage cap) as a way of shoring up the Social Security system. Heritage’s Rea Hederman and David John find that such a proposal would:

  • Reduce the annual take-home pay of 10.3 million workers by an average of $5,650 in the first year alone after the cap is removed. Most of these workers have incomes below $125,000.
  • Raise taxes on 4.0 million workers over the age of 50—just when they are trying to steer towards retirement.
  • Raise taxes on 3 million small business owners.
  • Greatly increase the top effective federal marginal tax rate.
  • Weaken the U.S. economy by reducing the number of job opportunities and workers’ personal sav­ings. By fiscal year 2015, the number of job opportunities lost would exceed 965,000, and personal savings would decline by more than $55 billion, in real terms.
  • Not save Social Security. A 2003 Social Security Administration study showed that eliminating the Social Security wage cap would delay the program’s deficits for only about six years.

And:

  • raise the taxes of 71,214 elementary and middle school teachers, 97,065 carpenters, 110,908 policemen and policewomen, 254,992 nurses, 208,562 post-secondary teachers, and 237,000 dentists.

Posted on 01/25/07 12:13 PM by Alex Adrianson

More on the Bush Health Care Plan

The Wall Street Journal’s editorial page weighs in on the Bush plan with a lot of detail about why changing the tax code is an essential part of getting the market for health care insurance to work well.

Individuals who buy their own health insurance now struggle because there are so few of them and they can buy only in a single state market. That means insurers have little incentive to develop and market innovative products. But this will change if the equalized tax treatment convinces enough people that it makes more sense to have their own, portable policies than take whatever their boss offers. Imagine the same kind of capitalist energy devoted to selling health insurance as you now see selling where to roll over your 401(k).

These new products are also likely to be policies that put individuals directly in charge of more routine spending. That's because removing the tax advantage would mean it will make less financial sense to "insure" for predictable expenses like several annual office visits. That in turn could put pressure on health care providers to post—and actually compete on—prices. Such new price awareness might even generate pressure for states that overregulate their insurance markets (New York, Massachusetts) to ease their costly mandates.

Since there has been discussion in some quarters on the question of whether Bush’s plan constitutes a tax increase, it’s worth noting that the Wall Street Journal’s editorial page has never been a source of pro-tax shilling for any President. Quite the opposite in fact.

Posted on 01/24/07 05:25 PM by Alex Adrianson

Why Not School Choice Through Federalism?

Cato’s Andrew Coulson reacts to President Bush’s education proposals in his State of the Union address:

In his State of the Union address, the president will propose that “persistently underperforming” public schools, as defined by the No Child Left Behind act, be required offer their students ”promise scholarships” that could be used to transfer to private schools or to out-of-district public schools, or be applied to after-school tutoring.

Promoting educational choice is an excellent idea, but attempting to do it from the Oval Office is not. Even if the U.S. Constitution did not leave power over education in the hands of the states and the people (which in fact it does), a national school choice program would still be undesirable.

Posted on 01/24/07 05:05 PM by Alex Adrianson

What All the Cool Data Are Doing

Ever wonder what charts and graphs would look like if Jerry Bruckheimer produced them? Wonder no more: Check out how income and health data are presented at http://tools.google.com/gapminder. (Not really a Jerry Bruckheimer production.)

Play with the settings, too. It’s fun.

(Via Radley Balko)

Posted on 01/24/07 09:25 AM by Alex Adrianson

Regulate Bad Driving, Not Interactive Technologies

The Center for Auto Safety wants the National Highway Traffic Safety Administration to “restrict the use of systems that carmakers are building into their vehicles so motorists can't make phone calls or fiddle with other interactive gear while they drive.” Progress and Freedom Foundation’s Adam Thierer says that will just shift the demand for interactive technologies to the aftermarket, and in any case new regulations are unnecessary.

Instead of trying to ban technologies (cell phones, radios, iPods, navigation devices, etc.) or specific activities (conversations, singing, smoking, etc.) inside the cabin of an automobile, police officers should simply enforce those laws already on the books dealing with reckless or negligent driving. If a driver is weaving in and out of traffic lanes, or posing a serious threat to others on the road for any reason, they should be pulled over and probably ticketed if the infraction is serious enough. For starters, I'd like to see some of those stupid idiots I see eating while driving, or worse yet, putting on make-up behind the wheel, pulled over and ticketed when they are driving erratically. But the same goes for anyone who is operating a vehicle in a dangerous fashion.

Posted on 01/23/07 06:52 PM by Alex Adrianson

Behold the Power of Nuclear Power

American Spectator’s William Tucker has an idea for forging a consensus on global warming:

I'm in an interesting dilemma. I'm just finishing up a book on global warming and nuclear power. The premise is this:

A. Global warming is a serious problem that should be solved.

B. Nuclear power is the only way we're going to solve it.

It's a simple premise that defies both liberal and conservativesfair enough. But ultimately it could get both on the same side. Then we might get something done in the country. Environmentalists hate nuclear but they worry about global warming more. Conservatives pooh-pooh global warming but they do like nuclear power. So maybe we could get going on a nuclear economy that would at least free us from coal (the worst polluter) and maybe eventually cut into our imported oil.

Posted on 01/23/07 06:29 PM by Alex Adrianson

How Government Schools Lead to Social Conflict

Those who want a high wall between church and state argue that religious conflict is the source of social discord. There is much irony, notes Cato’s Neal McCluskey, when that argument is made in opposition to school choice:

Imposing government-run schooling on every American—the opposite of freedom and choice—has been the cause of constant social and political conflict, while enabling people to select schools that reflect their own values, use the curricula they desire, and so on, is essential to defusing social conflict. Indeed, the misery in places like the Balkans and the Middle East is much more the consequence of forcing different ethnic and religious groups together—just as public schooling attempts to do—than letting them remain apart.

Choice’s salutary effects are not just theoretical. In other nations as well as our own, we have seen educational choice defuse social conflicts. The Netherlands, for instance, was split between Protestants, Catholics, and socialists, for generations, and these divisions caused constant battles over what should be taught in the public schools. Eventually, in a drive to end these conflicts, the Netherlands instituted a voucher system that let families choose their preferred public or private schools. By the 1960s, the social divisions that had previously torn the country apart had almost disappeared.

Posted on 01/23/07 06:23 PM by Alex Adrianson

How's the Economy?

President Bush will report on how the economy is doing tonight. But if you can’t wait till then, here’s Larry Kudlow:

The fact is, jobs continue to boom. So do real incomes, productivity, and profits. Economist Michael Darda points out that real wages over the first five years of the Bush expansion are actually growing more rapidly than over the first five years of the Papa Bush/Bill Clinton boom.

Meanwhile, unemployment today is only 4.5 percent. Federal, state, and local tax collections are soaring through the roof. Budget deficits are plunging. Inflation-adjusted GDP is averaging just more than 3 percent. Family wealth stands at a record of slightly more than $54 trillion. Total employment is at a record 146 million.

Stock markets, as you might have noticed, also continue to rise. They have done so, almost without interruption, for four years, on the shoulders of a remarkable surge in business profits—which itself is a function of the high-tech, knowledge-based product explosion.

Posted on 01/23/07 05:13 PM by Alex Adrianson

For Kids to Succeed, Allow Schools to Fail

Charles Murray says too many people go to college instead of vocational school. Arnold Kling agrees, but worries that Murray’s apparent IQism points in the direction of a rigid educational tracking system. Kling:

I would like to see more students and parents exploring alternatives to standard K-12 education and college. Government funds and alumni contributions go to the entrenched establishment. Innovators are starved for funds.

The best sign of a vibrant education sector would be more institutional failure. With sufficient competition and innovation, we would see colleges and universities fold or merge at the same rate as ordinary businesses. We would see schools shut down because parents send their children elsewhere. We would see large layoffs in some school systems, with hiring taking place among successful start-ups.

I do not know what education models would emerge in a dynamic market. However, unless human ability is as rigid and one-dimensional as Charles Murray presumes, a dynamic market would produce diverse educational methods and opportunities rather than tracking into an educational hierarchy.

Posted on 01/23/07 10:59 AM by Alex Adrianson

The Road to Health Care Reform Runs Through the Tax Code

President Bush wants to change the tax code so that health insurance purchased by individuals receives the same tax break as health insurance purchased by employers for their employees. The proposal aims to break the link between employment and health insurance, which could go a long way toward mending our health care system. National Review:

We pay taxes on the wages, but not on the health care, that our employers give us. So instead of asking them for a raise and buying health insurance ourselves, we ask them to buy insurance for us. And it leads us to ask them for insurance that covers even routine medical expenses, rather than just the catastrophic events insurance should cover. Since people don’t pay out of their own pockets for those routine expenses, they have no incentive to keep costs down. So the tax code has underwritten a large share of our medical inflation. It has also increased our anxiety: Under this arrangement, we lose our health coverage if we lose our jobs. Or we may have to pass up an otherwise good job opportunity because it would mean trading a good health plan for a lousy one.

The President’s proposal creates a new standard tax deduction ($15,000 for families and $7,500 for individuals) for the purchase of health insurance that replaces the existing exclusion that is available only for insurance purchased by employers. And by limiting the exclusion, the proposal reduces the incentive toward over-consumption of health care. Heritage’s Stuart Butler and Nina Owcharenko:

Under the President's reform, employees and employers would have less incentive to bargain for compensation such as top-of-the-line tax-free health plans. Rather, they would face greater incentives to bargain for higher cash earnings to pay for other needs, such as housing and education.

While the proposal will raise taxes on some workers, all consumers will benefit if moderated consumption leads to lower health insurance premiums.

Posted on 01/22/07 06:22 PM by Alex Adrianson

Government Planning Threatens Homeownership

Housing in a number of markets around the world has become less affordable, say Wendell Cox and Hugh Pavletich, authors of the 2007 Demographia International Housing Affordability Survey. The report notes, however, that not all markets have deteriorated. Cox and Pavletich identify excessive land-use restrictions as the primary culprit in those that have.

Cox and Pavletich surveyed data from 159 housing markets in Australia, Canada, the Republic of Ireland, New Zealand, the United Kingdom and the United States. In the United States, Los Angeles, San Diego, San Francisco, Miami, Riverside-San Bernadino and San Jose have experienced the worst declines in affordability. In Los Angeles, the increase in the median price of a house since 1996 is equivalent to 16 years worth of additional gross income for the median-income household.

The good news for the United States, according to the report, is that most areas remain affordable. The country with the most significant decline in housing affordability, say the authors, is Australia. Cox and Pavletich: “This may seem absurd in a nation that is 0.3 percent developed and in which large swaths of land exist that could be developed adjacent to all major markets.”

Cox and Pavletich consider and reject a number of explanations for the decrease in affordability. Noting that the problem is land prices, not housing inflation per se, the authors put the blame on misguided public policies. In particular they cite urban growth boundaries, insufficient “land release” rates by planning authorities, construction and development moratoria, onerous zoning requirements that favor more expensive house features, lengthy approval processes, and infrastructure financing that relies on discriminatory taxation against new home buyers. Cox and Pavletich:

A culture of control appears to have emerged in which development is allowed to occur only in accordance with government planning. The alternative to a culture of control is a more liberal land use regime, driven by the market, consistent with reasonable environmental regulations and standards.

Posted on 01/22/07 12:46 PM by Alex Adrianson

The Coming Week

Monday: Hear Robert Young of North Carolina State University hold forth on the topic: Decoding Shakespeare: The Bard as Poet or Politician?.

Tuesday: Learn how our current model of public education produces endless social conflict over what is taught in the schools.

Tuesday: Listen to John Berlau explain how environmentalism is hazardous to your health.

Wednesday: Hear author David Graetzer discuss why health care policy is in such dire straits in spite of great medical progress over the past half century.

Wednesday: Attend a symposium on terrorism and democracy, keynoted by Rand Beers.

Thursday: Learn about the Future of Fusionism. Cato’s David Boaz and Brink Lindsey, National Review’s Ramesh Ponnuru, and The New Republic’s Jonathan Chait discuss whether the conservative/libertarian alliance will be overtaken by a liberal/libertarian alliance.

Saturday: Find out how to pick the right college.

Posted on 01/19/07 06:01 PM by Alex Adrianson

News You Might Have Missed

In the name of competition, states seek to limit competition: Consumers might like the idea of getting a prescription for $4 at Wal-Mart, but a number of states have decided that what consumers really want, though they may not know it, is to pay a little more than that—just enough anyway to prevent Wal-Mart from driving its competition out of business. California, Colorado, Hawaii, Minnesota, Montana, Pennsylvania, Tennessee, Wisconsin, and Wyoming have all used state laws against unfair competition to force Wal-Mart to raise its price from $4 to $9 on a number of prescription drugs. Competition, apparently, is just fine up until the point where it might actually force other businesses to do something different in order to keep up.

A foreign government action that the U.S. Supreme Court should note: The Venezuelan government has refused to renew broadcast licenses for a TV station that has been critical of President Hugo Chavez. Supporters of the move say the station airs material unsuitable for children. I wonder where this sort of problem has been mentioned before?

Laffer curve, military dictatorship style: A newspaper run by the government of Myanmar has accused pro-Democracy activist Aung San Suu Kyi of evading taxes by spending her money from the 1991 Nobel Peace prize and other awards overseas.

But when are we going to fix the Playstation 3 gap? St. Paul, Minn., has announced plans to bridge the so-called digital divide by building a fiber network reaching every home and business in the city. The $300 million project will put the city in direct competition with cable companies who are already aggressively expanding broadband.

An earmark lesson learned? Recipients of Ted Stevens earmark largesse have been indicted for misusing federal funds. Write your own joke.

It’s 11:55 p.m. Do you know where your metaphor is? Everything changes with the times, including the time. On Thursday, the Bulletin of Atomic Scientists set the hands of its Doomsday Clock two minutes closer to midnight, to 11:55 p.m. During the Cold War, the Bulletin’s stock in trade, expressed through the Doomsday Clock, was moral equivocation about the nuclear arms race. But with the new adjustment of the clock, the Bulletin updated its franchise, citing, in addition to nuclear proliferation, global warming as a potentially catastrophic event. Hey guys, why a clock? Why not a Doomsday Thermometer?

Posted on 01/19/07 03:54 PM by Alex Adrianson

What Lotteries Really Do

The California Lottery Commission advertises itself as the savior of the state’s public education system. But if you’re not sure the Commission is an objective source, take a look at what Profs. Jonathan J. Bean and Donald W. Gribbin found when they examined the history of state lotteries. Writing for the Independent Institute, they argue that state lotteries are largely a tool for helping politicians conceal the greedy hand of government:

Lotteries enable politicians to avoid making tough (and unpopular) decisions regarding state budgets. Research indicates that when states faced fiscal stress in the 1960s and beyond, politicians adopted lotteries. Frequently this fiscal stress was the result of mismanagement and pork barrel spending. Without additional lottery revenues, state politicians would probably receive greater pressure to operate government more efficiently through privatization, competitive bidding, and so forth.

Posted on 01/19/07 12:09 PM by Alex Adrianson

How Not to Do Tax Reform

Mayor Michael Bloomberg has announced $1 billion in tax relief for New York City. Unfortunately, says Hudson Institute’s Diana Furtchgott-Roth, the Mayor’s tax cuts do not sufficiently increase incentives to work, save, and invest:

Of course, lowering any tax will help the city. Lower property and sales taxes will help many families and encourage businesses to settle in New York, but not to the same extent as lowering income taxes would. Many eminent economists, including Princeton's Harvey Rosen and Columbia's Glenn Hubbard, have shown that lowering individual and corporate income taxes is the key to increasing incentives for Americans to work and for businesses to invest. Unfortunately, under Mayor Bloomberg's plan, income taxes remain unchanged.

Moreover, temporary tax cuts are less beneficial than permanent cuts. Mayor Bloomberg's temporary cuts are no exception. To persuade potential residents and businesses to invest in New York City rather than elsewhere, property tax reductions should be permanent. The mayor's tax cut is for one year only. Mayor Bloomberg said, "It would be great if we can extend this in the years to come, but we can't know that we'll be as fortunate in the future with our revenues and expenses so right now it would not be fiscally sensible to commit to doing so." Homeowners or businesses will reasonably view temporary tax cuts as an unwelcoming invitation to the city because taxes might very well rise the following year. Perhaps a good many more New Yorkers will simply leave for the suburbs themselves.

Posted on 01/19/07 11:30 AM by Alex Adrianson

New Magazine for Freedom in Slovenia

The Free Society Institute in Slovenia has launched a new publication, The Tribunal. It’s a Slovenian language publication, so I can’t claim to have read the articles. But contributors to the content include Cato’s Tom Palmer and Margaret Thatcher. As well, there is an article about Milton Friedman and another about steps Slovenia should take to become a freer society.

The journal will include translated columns and commentaries covering economic policy issues from a free-market perspective, as well as articles written by Slovenian business executives. FSI plans to distribute 30,000 – 50,000 copies. Cover price: $0.

Posted on 01/18/07 05:58 PM by Alex Adrianson

The Dangers of Indecency Regulation

Solveig Singleton, in a new report for the Independent Women’s Forum, says government regulation of media content is a bad idea, concerns about indecency notwithstanding. Among the important points she makes:

Parents today have many tools for making sure material they find objectionable does not reach their kids.

Government regulation of content is unlikely to influence personal behavior significantly:

Public policy makers often make decisions based on individuals who are at risk and who are likely to benefit from government intervention. But would a kid who is at risk because of absent or uninvolved parents benefit from a top-down approach to media regulation? It is highly unlikely; media consumption is a relatively small factor in determining an individual’s life outcome, and entertainment programming is only part of the media.

Treating the entire country as if it were a dysfunctional family on the off chance of having a minimal impact on a minimal number of youngsters is a dangerous direction for our republic. There are many better ways to help at-risk kids, starting with school vouchers to improve the quality of educational opportunities and to bring safer schools and better role models within kids’ reach.

The Federal Communications Commission acknowledges that it cannot define indecency once and for all. Yet, it is contrary to historical experience to expect that regulators would not abuse the power to decide on a case-by-case basis what is indecent:

Presidents Nixon and Kennedy both ordered crackdowns on radio stations critical of their policies under the now defunct “Fairness Doctrine.” How far could newspapers have pursued their aggressive reporting on the Watergate scandal if there had been “public interest” controls on the print media?

Posted on 01/18/07 04:29 PM by Alex Adrianson

A Reading List for Fundraisers

Kevin Gentry of the Charles G. Koch Charitable Foundation offers a fundraising tip of the week. This week, he recommends reading.

Are you adding constantly to your personal knowledge—by reading about direct marketing, public relations and other areas related to development?

There are many good books available to you that can help you learn about

  • Specific fundraising techniques, such as how to write a persuasive letter
  • The psychological motivations of giving, and what influences decision-making
  • What is essential to positioning yourself in others' minds, such as the use of branding
  • How relationship cultivation can be key to long-term success

This week's Fundraising Tip is quite simple—consider reading more.

Through reading, you can improve your efforts to advance the free society, if only through better sales and marketing.

Successful leaders in this field have generously suggested good books to me over the years. Here's my top ten, taken from the recommendations of Richard Viguerie, Roger Craver, Tyler Cowen, Dino Cortopassi and others:

  1. Positioning: The Battle for Your Mind, by Al Ries & Jack Trout
  2. Influence: The Psychology of Persuasion, by Robert Cialdini
  3. Tested Advertising Methods, by John Caples
  4. Ogilvy on Advertising, by David Ogilvy
  5. All Marketers Are Liars, by Seth Godin
  6. The Millionaire Next Door, by Thomas Stanley & William Danko
  7. The Tipping Point, by Malcolm Gladwell
  8. Selling the Invisible, by Harry Beckwith
  9. Revolution in the Mailbox, by Mal Warwick
  10. Fund Your Cause with Direct Mail, by Ben Hart

There's a lot here. Pick three as a start. You don't necessarily have to read them word for word—that can actually be overwhelming. But just get started, perhaps for that next long flight or for a Sunday afternoon amid some miserable January weather. You'll be amazed about how many new, effective techniques you'll learn. Perhaps you already know them, but reading about them again might give you just the tip you need to implement them effectively. I try to read at least one new (or old) marketing book every week.

Posted on 01/18/07 02:07 PM by Alex Adrianson

Stossel’s Deficit

Like the United States, John Stossel has a current account deficit. But he doesn’t care:

I buy stuff from the Food Emporium every week. I spend thousands of dollars a year there. But the supermarket never buys anything from me. Not one thing.

And yet that is no problem. It's better than no problem—It's fantastic! Imagine if I could only buy from the store to the extent that it needed my services. I'd starve. That would be barter, and mankind dumped barter for the money economy eons ago precisely because it is so inconvenient.

Trade statistics obscure reality. Individuals exchange only when each expects to benefit. If they didn't expect it, they wouldn't trade. That's true even if one party is American and the other Chinese. Trade is trade.

If we don't care about trade balances at the individual level, why does it matter if in a given year Americans as a group buy more from the Chinese than they buy from us?

It doesn't.

Posted on 01/17/07 05:17 PM by Alex Adrianson

The Coming Week

Tuesday: Hear P. J. O’Rourke use Adam Smith’s ideas to tackle current topics like outsourcing, blogs, central banks, and lobbyists, to name just a few.

Thursday: Listen to T. Kenneth Cribb, President of the Intercollegiate Studies Institute explain where conservatism is headed.

Thursday: Learn about the impact of lean budgets on our military capabilities. American Enterprise Institute hosts the authors of the newly published Of Men and Materiel: The Crisis in Military Resources.

Friday: Hear historian Thomas Evans tell the story of Ronald Reagan’s political education and the formative role played by his years working as a spokesman for General Electric.

Posted on 01/12/07 05:26 PM by Alex Adrianson

News You Might Have Missed

No. 1 taxpayer problem: National Taxpayer Advocate Nina Olson, in her annual report to Congress, said the complexity of the tax code is the most serious problem faced by taxpayers, and that the Alternative Minimum Tax is “the poster child for tax-law complexity.” Olson: “While the AMT was originally designed to prevent wealthy taxpayers from escaping tax liability through the use of tax-avoidance transactions, most of the significant tax loopholes that enabled taxpayers to escape tax at the time the AMT was written have long since been closed. Today, the AMT is left to punish taxpayers for engaging in such “classic tax-avoidance behavior” as having children or living in a high-tax state.”

Disabled and foster children can have school choice, too: The Arizona Supreme Court has dismissed a legal challenge to a state school-choice program for disabled and foster-care children. The suit, filed by the ACLU and People for the American Way, was the first ever to challenge a school choice program designed for disabled and foster-care children. The suit claimed that the program violated the state’s constitutional prohibition against public funding of private and religious schools. The Institute for Justice, which represented five families of children in the program, says previous rulings by the Arizona Supreme Court had already established the precedent that these types of programs do not violate the state constitution.

A check on taxpayer-funded lobbying: The Texas Association of Counties can no longer lobby with taxpayer funds, so says Williamson County District Judge Ken Anderson who ruled the association in violation of a Texas law against taxpayer-funded organizations attempting, directly or indirectly, to influence legislation.

Michigan is No. 1 … in departures: According to data from United Van Lines, reports the Mackinac Center’s Michael LaFaive, Michigan is the state people like to leave the most, tied with North Dakota. UVL’s data show that 66 percent of Michigan-related rentals are departures. North Carolina is the state with the best ratio of arrivals to departures, ringing in at 64 percent arrivals to 36 percent departures. Michigan achieved its dismal showing in spite of the fact that that it ranks sixth in spending on higher education as a percentage of personal income. Maybe cutting taxes and letting people spend their own money would be a better policy.

Tom Sowell is funny: Nothing is called "secondhand" any more, except "secondhand smoke." Why is it not called "pre-owned" smoke?

Posted on 01/12/07 03:24 PM by Alex Adrianson

Links You Can Use

For researching corruption: Revolving Door: A directory of people passing between government and the private sector

For making presentations of data more effective: A Periodic Table of Visualization Methods (Make sure you roll your pointer over the boxes to view the pop-up windows.)

Posted on 01/12/07 03:21 PM by Alex Adrianson

The Left Likes Study Showing That Marginal Tax Rates Matter

Specialists in class warfare (Paul Krugman, et al.) point frequently to one particular study as evidence of growing inequality in the United States. And indeed, the study, by Thomas Piketty and Emmanuel Saez, does show that the share of income going to the top 1 percent of earners has almost doubled in the past 25 years. However, as Cato’s Alan Reynolds notes in a recent paper, what the study actually shows is that marginal tax rates matter. And the authors agree with that conclusion, too. Saez noted in 2004 that most of the increase in the share of income received by the top 1 percent coincided with tax reform:

It seems clear that the sharp, and unprecedented, increase in incomes from 1986 to 1988 is related to the large decrease in marginal tax rates that happened exactly during those years.

Reynolds:

This was not a sudden two-year spurt in inequality. It was a sudden increase in the amount of high income reported on individual income tax returns rather than being concealed, deferred, or reported on corporate income tax returns.

Posted on 01/12/07 10:40 AM by Alex Adrianson

Government Purchasing Power v. Private Bulk Buying

A new fact sheet prepared jointly by a large group of health care researchers gathered from D.C.’s think tank vineyards provides some good information on why it would be a bad idea to have Medicare negotiate directly with drug makers for lower prices.

In particular, the fact sheet notes an important difference between the leverage of government bulk buying and that achieved by private bulk buyers. This difference helps provide an answer to the question: Why shouldn’t Medicare use its leverage as a bulk buyer to get lower prices from drug makers? After all, if the power of bulk buying is used frequently in the private sector, how can it be a bad thing for the government to do it, too? Isn’t that just part of how the market works?

As the paper notes, a government agency negotiating directly with drug makers (as the Veterans Administration does) is armed with a different kind of leverage than a private bulk buyer is. VA beneficiaries are captive consumers; they cannot take their VA benefits somewhere else. So if the VA decides not to include a drug in its formulary, beneficiaries will not have access to it, and the drug maker’s sales will suffer. On the other hand, in Medicare’s current set-up, beneficiaries sign up through private plans that they choose. So

individual drug plans can decide not to sign a contract with drug companies if they can't make a deal on the price, but seniors still have other options: If seniors don't see the drugs and the coverage they want in one plan, they can choose a different plan. And seniors' choices show that they are very concerned about having access to up-to-date medications.

Because consumers may leave a plan, the private drug plans must be responsive to the fact that consumers care about both price and access to medicines. On the other hand, a government agency that doesn’t have to worry about losing customers would not be so disinclined from emphasizing budgetary imperatives over consumer satisfaction.

Posted on 01/11/07 07:01 PM by Alex Adrianson

Mine Your Own Business

Mine Your Own Business is a new film that looks at the dark side of the environmental movement. It looks at how wealthy environmental activists promote poverty in less developed countries by opposing projects, in particular new mines, that would create good jobs. It's a film that looks worth seeing.

Check out the trailer.

Take in a screening.

Posted on 01/11/07 05:05 PM by Alex Adrianson

Heads Up: Heritage on Raising Payroll Taxes

We don’t usually do previews of research to come, but some of you might be interested: Would increasing payroll taxes be a good way of fixing the long-term financing problems faced by Social Security?

No.

Currently, there is an upper limit on the amount of an individual’s income that is subject to the payroll tax of 12.4 percent (6.2 percent paid by the employee and another 6.2 percent matched by employers). For this year, the figure is $97,500. Some have proposed eliminating that upper limit entirely as a way of increasing revenue to the Social Security Trust Fund.

Later this month, Heritage’s David John and Rea Hederman will have a paper out addressing this question. The short answer is that eliminating the earnings limit on payroll taxes is a poor solution to the long-term financing problems inherent in Social Security’s set-up. Here is a little of what the research shows:

  • Eliminating the cap would affect 10 million workers with an average hit of $5,600.
  • For every so-called "super-rich" person picked up in raising the cap, there are 27 workers affected who earn $125,000 or less.
  • Four million of those affected by raising the cap are over the age of 50.
  • Ninety-seven percent of those affected by raising the cap earn between $97,500 – $125,000. 

The bottom line today is much the same as it was when John and Hederman looked at the question in 2005. They wrote then:

The cost of eliminating the cap would be substantial. It would result in the largest tax increase in the history of the United States, sub­jecting millions of American families to a massive hike in their payroll taxes and further reducing the already dismal rate of return to Social Security. It would also negatively affect America's economic prospects, slowing U.S. output growth and elimi­nating hundreds of thousands of employment opportunities.

Yesterday, Bloomberg’s Amity Schaes noted that increasing the earnings limit amounts to an increase in marginal tax rates, thus diminishing the rewards of those who work hard.

As economics Nobel Prize winner Edward Prescott recently noted, heavy social insurance costs – health care, government pensions – mean that European workers paid their governments as much as 60 percent of the last euro they earned in recent decades. In the U.S., the equivalent marginal rate was something like 40 percent.

This difference turns out to matter, to make us an espresso at-the-desk culture, instead of a cafe culture like Europe. Prescott showed that the desire to work correlates, over decades, with marginal tax rates. The lower the tax, the more the desire to work. As a result of our system, Americans worked half again as much as Europeans.

Posted on 01/11/07 01:39 PM by Alex Adrianson

Earmark Reforms Left Undone

Will the House of Representatives’ new rules clean up the budget process? The rules require members requesting funding targeted “to an entity, or targeted to a specific State, locality or Congressional district, other than through a statutory or administrative formula driven or competitive award process” to make such requests in writing to the chairman of the relevant committees.

Citizens Against Government Waste has a report on what the earmark reforms don’t do that they should have done. CAGW notes that the House’s definition of earmark excludes multi-state pork and it also doesn’t count pork funneled through a federal agency, such as the defense earmarks for which Rep. Randy “Duke” Cunningham was convicted of accepting bribes from a contractor.

Some of the other ways, says CAGW, that the House rules come up short: There is no disclosure of earmark requests until after a bill has passed, and then only if the request was funded. There is no requirement that earmarks be included in the text of the bills. There is no requirement that reports be made available at least 48 hours before floor consideration. There is no prohibition against funding a project that has not been the subject of a congressional hearing.

Posted on 01/09/07 01:40 PM by Alex Adrianson

In Case You Weren't Sure That the U.S. Tax Code is Progressive

The CBO recently put out a report on effective federal tax rates. Here are the rates for 2004 (via Greg Mankiw’s blog):

Lowest quintile, 4.5
Second quintile, 10.0
Middle quintile, 13.9
Fourth quintile, 17.2
Highest quintile, 25.1

Top 10 percent, 26.9
Top 5 percent, 28.5
Top 1 percent, 31.1

Posted on 01/08/07 06:20 PM by Alex Adrianson

Two Senators for Education Federalism

Count Sen. John Cornyn (R-Texas) and Sen. Jim DeMint (R-S.C.) among those who want to return authority in education policy to the states. At a Heritage event today, the two senators marked the fifth anniversary of No Child Left Behind by proposing that states be allowed to opt out of the controversial federal education law. In remarks, both senators noted that increased federal funding has not led to a significant improvement in student achievement. They suggested that the way forward is to move accountability back to the state and local levels. The senators emphasized that teachers and school administrators should be focused on teaching, not on complying with federal mandates. The Cornyn/DeMint plan would allow each state to forgo federal regulatory burdens while keeping federal funding. In return, states opting out of NCLB would agree to meet certain performance standards.

Heritage has a similar proposal.

Watch

Listen

Posted on 01/08/07 05:28 PM by Alex Adrianson

An Odd View of Flat Taxes

Want to know what’s going on with flat taxes in Eastern Europe? You might want to consult somebody other than the International Monetary Fund. Heritage’s Dan Mitchell says the IMF’s recent study on flat taxes in Europe is oddly hostile. Instead of assessing flat tax reform by looking at things like economic growth, job creation, unemployment rates, investment, or any other measure of prosperity and competitiveness, the study looks at whether there has been a Laffer effect. Is the reader supposed to conclude that flat taxes are not successful because they haven’t yielded increased government revenues?

Mitchell points out that the study’s authors use the crude straw-man version of the Laffer effect argument, but Laffer effects exist even when lower tax rates do not yield higher government revenues. The idea of the Laffer effect simply says lower taxes rates induce taxpayers to create additional wealth and comply more frequently with the tax code. Thus, the tax base will be greater with lower tax rates, which is not the same as saying that lower taxes will always yield greater tax revenue.

Instead of noting the success of flat tax systems in Eastern Europe, the IMF speculates that some countries will start to move away from flat taxes. Mitchell:

This is a rather bizarre claim since Romania and Georgia adopted a flat tax last year, while Macedonia and Kyrgyzstan joined the flat tax club this year. Moreover, no nation with a flat tax has chosen to go back to a discriminatory tax regime. Even the new government in Slovakia, comprised of socialists and nationalists, decided to preserve the flat tax rather than risk killing the goose that is laying golden eggs.

It’s unfortunate that socialist governments have a better understanding of tax reform than bureaucrats at the IMF.

Posted on 01/08/07 02:34 PM by Alex Adrianson

Nothing Looks Good

There’s no better time to appreciate the value of doing nothing than right after the busyness of the holidays. Accordingly, Andrew Roth of The Club for Growth looks at what happens to the stock market when Congress is not in session—i.e., when Congress is not doing stuff. He finds that if you had invested a dollar in the S&P 500 every day that Congress was not in session in 2006, you would have earned a return of 11.56 percent. If you had done the same when Congress was in session, your rate of return would have been 2.25 percent. The spread is even worse for the NASDAQ: 8.19 percent when Congress is out versus -5.70 percent when Congress is in session.

Noting that researchers have found that this correlation holds over many, many years, Roth says investors don’t like even the prospect that Congress might create additional regulatory burdens. In order to allay that fear and promote economic growth, says Roth, Congress should work less.

It’s an old joke but worth repeating: If “pro” is the opposite of “con,” then what is the opposite of Congress?

Posted on 01/08/07 10:47 AM by Alex Adrianson

The Coming Week

Monday: Learn about an alternative to the No Child Left Behind program. The Heritage Foundation hosts Sen. John Cornyn (R-Texas) and Sen. Jim DeMint (R-S.C.) as they unveil a plan to return authority in education policy to the states.

Monday: Get an update on the global war on terror. The John Locke Foundation and the Jesse Helms Center host Robert Wilkie, Assistant Secretary of Defense for Legislative Affairs.

Tuesday: Find out if U.S. income inequality has increased. The Cato Institute’s Alan Reynolds will discuss his new book, Income and Wealth.

Tuesday: Hear John Taylor discuss his experiences on the front lines of finance. The American Enterprise Institute hosts the former Under Secretary of the Treasury for International Affairs as he discusses his new book Global Financial Warriors: The Untold Story of International Finance in the Post 9-11 World.

Wednesday: Hear Mark Steyn explain why the world may be headed for a new dark age. At The Heritage Foundation, the syndicated columnist discusses his book America Alone: The End of the World as We Know It.

Thursday: Listen to Gene Heck discuss his new book, Building Prosperity: Why Ronald Reagan and the Founding Fathers Were Right on the Economy at this National Center for Policy Analysis event.

Thursday: Find out if the Massachusetts health care plan provides a good model for state reform of health care. The American Enterprise Institute hosts Mark Pauly of the Wharton School as he assesses Massachusetts’ experiment with universally mandated health insurance coverage.

Posted on 01/05/07 07:26 PM by Alex Adrianson

News You Might Have Missed

Going wiki on terrorism: The United States military is working to adapt the ideas of the new flat, decentralized, networked business world to the fight against leaderless terrorist organizations.

Christians persecuted in Iraq: Christians are a very vulnerable minority in Iraq, in part because they have been helpful to U.S. troops there. But the Bush administration has done little to protect them. Forty percent of Iraqi refugees are Christians; only 3 percent of the Iraqi population are Christian. Some commentators believe that, as the United States assesses the future of Iraq, it needs to start thinking about how to protect its friends in that country as well. Might that mean making room for them over here?

Sic semper tyrannis not the United Nation’s motto: The United Nations High Commissioner for Human Rights has asked Iraq not to carry out planned executions of two ex-officials from Sadam Hussein regime, claiming that there are questions about the fairness of their trials and about the appeal process. Meanwhile, Ban Ki Moon, the new Secretary General of the United Nations stated that capital punishment is an issue for member states to decide. A spokesman later clarified that the United Nations is opposed to capital punishment.

Health care on hold: It seems Britain’s health care planners haven’t quite got a hold on how to prevent people from spending other people’s money. Now budgetary pressures are forcing Britain’s National Health Service to delay or deny routine procedures, including surgery for varicose veins, bad backs, and wisdom teeth. Hospitals are being threatened with non-payment if they do not adopt extreme measures to control costs, and staff are being offered voluntary redundancy.

A bold plan: A new study by the Center for Economic Policy Research points the way toward a more environmentally friendly society. Some, no doubt, will like it. It involves working less. That’s right. If we work less, we will use less energy. Also because we will be impoverished, we will live more frugal lives, using fewer appliances and living in smaller houses that require less energy to heat, and so forth. Sign up your friends now!

Wait, what? In this week’s “that can’t be true, but apparently is” category, Australian researchers have found a surprising failure among jurors who were asked what verdict they had just rendered. In spite of the fact that verdicts themselves are supposed to be unanimous, few juries actually answer the question with unanimity. In 19 out of 25 juries surveyed, at least one juror answered incorrectly when asked what the jury's verdict had been.

Posted on 01/05/07 06:34 PM by Alex Adrianson

Sowell: Income Inequalities Mean Little

There has been a lot of talk about income inequality lately. Thomas Sowell has a five-part series dispelling the idea that such disparities carry either moral or policy significance. In Part 1, he points out that not understanding why something works as it does is the normal condition of most people most of the time. So if you don’t understand why someone makes a lot of money, don’t think any more of it than the fact that you don’t know how to fix your car:

Ninety-nine percent of all the things that happen in this world "make no sense" to any given individual. Do you understand how your automobile's transmission works? Could you repair it if something went wrong?

Do you understand how aspirin stops headaches? How to make yogurt?

Years ago, a famous essay pointed out that nobody knows how to make a simple lead pencil. That is, there is no single individual anywhere who knows how to grow the wood, mine the graphite, produce the rubber, and manufacture the paint.

Complex economic processes cause all these things to be done and coordinated by a wide variety of people, just in order to produce something as simple as a lead pencil. Multiply that by a hundred or a thousand when it comes to the complexity of producing a car or a computer.

If you cannot understand something as simple as making a lead pencil, why should you be surprised that you don't understand why someone is making a lot more money than somebody else?

Sowell says it makes no sense to talk about income gaps without understanding the sources of those gaps. For a variety of reasons, some people are more productive than others, and most of those reasons are not amenable to change by policy. One particularly important factor, says Sowell (examining the international dimension of income gaps in Part 2), is culture:

In our own time, the economic effects of these cultural differences often dwarf the effects of differences in material things like natural resources.

Natural resources in Uruguay and Venezuela are worth several times as much per capita as natural resources in Japan and Switzerland. But income per capita in Japan and Switzerland is about double that of Uruguay and several times that of Venezuela.

Nobody likes to see poverty in a world where technology and economic know-how already exist that could give everyone everywhere a decent standard of living.

All you have to do is change people. But have you ever tried to do that?

In Part 3, Sowell points out that millions of people around the world in the past couple of decades have risen out of destitution for reasons that have nothing to do with efforts to redistribute income.

An important question for those who take offense at income disparities is: How would you go about deciding how much money someone else should make? In Parts 4 and 5 Sowell develops the idea that economic value makes no sense apart from the context of individuals voluntarily agreeing to trade one thing for another:

[I]f there were an objective value—whether of goods or of labor—then economic transactions would make no sense.

When you buy a computer, the only reason you part with your money is that the computer is worth more to you than the money. But the only reason someone sells you the computer is that the money is worth more to them than the computer.

The difference in value of the same thing to different people is the whole basis for economic transactions. If there was any such thing as an objective value, these transactions would make no sense. Why bother making an exchange if what you get is no more valuable to you than what you give?

Those who earn a lot of money do so because they have convinced somebody else to pay them that money. Sowell:

Things are worth it or not worth it to particular individuals. What these things might be worth to somebody else is irrelevant.

People who think that they, or the government, ought to be deciding how much income people make are in effect saying that they know the value of people's output better than those who use that output and pay for it with their own money.

Posted on 01/05/07 01:14 PM by Alex Adrianson

Minimum Wage: What's In It for Low-Income Workers?

George Will has a good rundown of the facts about minimum wage workers. In brief, few earn the minimum wage, and most of those who do are not poor:

Most of the working poor earn more than the minimum wage, and most of the 0.6 percent (479,000 in 2005) of America’s wage workers earning the minimum wage are not poor. Only one in five workers earning the federal minimum lives in families with earnings below the poverty line. Sixty percent work part time, and their average household income is well over $40,000. (The average and median household incomes are $63,344 and $46,326, respectively.)

Forty percent of American workers are salaried. Of the 75.6 million paid by the hour, 1.9 million earn the federal minimum or less, and of these, more than half are under 25 and more than a quarter are between ages 16 and 19. Many are students or other part-time workers. Sixty percent of those earning the federal minimum or less work in restaurants and bars and earn tips—often untaxed, perhaps—in addition to wages. Two-thirds of those earning the federal minimum today will, a year from now, have been promoted and be earning 10 percent more. Raising the minimum wage predictably makes work more attractive relative to school for some teenagers and raises the dropout rate. Two scholars report that in states that allow people to leave school before 18, a 10 percent increase in the state minimum wage caused teenage school enrollment to drop 2 percent.

Will concludes:

But the minimum wage should be the same everywhere: $0. Labor is a commodity; governments make messes when they decree commodities’ prices. Washington, which has its hands full delivering the mail and defending the shores, should let the market do well what Washington does poorly.

What is the mess that Washington will make by fiddling with this commodity price? As James Sherk of The Heritage Foundation explains, employers respond to higher minimum wages by hiring different kinds of workers—i.e., those whose labor is actually worth the higher wage. Those higher-skilled workers turn out not to be the poorer workers—i.e., those whom the law intended to help. Commenting on one study on the impact of minimum wages on restaurant employment, Sherk concludes:

A higher minimum wage is great news for a high school student working part time to buy an iPod. But it hurts the lower-skill adult workers who need the job to support themselves and their families.

Posted on 01/04/07 04:44 PM by Alex Adrianson

Got Ideas?

The Pioneer Institute for Public Policy Research is looking for good ideas: Pioneer’s Sixteenth Annual Better Government Competition will award $10,000 for the best idea on reforming state and local government.

The theme for Pioneer Institute’s 16th Annual Better Government Competition is Building Competitiveness at the State and Local Level. We seek ideas to improve the quality and efficiency of government, strengthening our economy for both businesses and individuals. As ever, we welcome proposals for the reforms at the state level. We’d also like to encourage the reform of county and municipal government operations. Entries can describe ideas that have already been implemented, or innovations not yet undertaken. They can address any aspect of government: improved delivery of government services (including education, public order, housing, transportation, environmental protection, general regulations, etc.); fiscal reforms; and efforts to encourage business development and job creation.

Anyone can enter the competition. The deadline for submission is March 26, 2007.

How to Enter

Posted on 01/04/07 01:51 PM by Alex Adrianson

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