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InsiderOnline Blog: January 2010

Worth Checking Out: Free Speech after Citizens United; Are You an Enviropreneur?

• Next Thursday, a panel at The Heritage Foundation will discuss the Supreme Court’s recent decision in Citizens United v. Federal Elections Commission, which overturned on First Amendment grounds limits on political speech by corporations.

The Pennsylvania Independent is another great effort by a state-based think tank to step in where traditional news outlets have failed to meet the need for objective reporting on public affairs. This journalism project, launched by the Commonwealth Foundation, is “dedicated to promoting open, transparent, and accountable state government by reporting on the activities of agencies, bureaucracies, and politicians in Pennsylvania.  Our mission is to promote greater civic engagement and encourage discussion about public policy, politics, government, and other matters of statewide importance.”

The Enviropreneur Institute is an opportunity for 17 conservation leaders to learn how business and economic principles can be applied to environmental problems. Fellows in the two-week program will get to interact and learn from some of the leading thinkers and doers in free-market environmentalism. The program, offered by the Political Economy Research Center, runs June 27 – July 9 in Bozeman, Montana. The application deadline is March 7.  

• Allen Drury’s Advise and Consent is the top conservative novel on National Review’s list of ten best. See the other nine listed at The Corner.

• Who are the go to think tanks? A new report of the Think Tanks and Civil Societies Program at the University of Pennsylvania answers that question. And speaking of go-to think tanks, we should note that InsiderOnline’s extensive database of public policy research features the best work of many of these organizations. And for an online directory of conservative public policy organizations, see

Posted on 01/29/10 01:49 PM by Alex Adrianson

We’re All Rappers Now

Here’s one way to get the kids interested in economics:

Posted on 01/29/10 10:09 AM by Alex Adrianson

Who Is Helping Haiti?

Two countries stood out in providing immediate assistance following the earthquake in Haiti, reports Claudia Rosett in Forbes:  

One was Israel. Thanks to a mix of democratic enterprise and decades of suffering terrorist attacks, the Israelis have become experts in swiftly responding to destruction. While most of the rest of the world struggled to get organized, the Israelis had landed a modern field hospital and staff in Haiti and were busy saving lives.

But the mother of all standout, standup countries has been, as usual, the U.S. As of Jan. 21, the United Nations' ReliefWeb database showed contributions from the U.S. government (a.k.a. U.S. taxpayers) worth $90 million, or 44% of the grand total pledged.

And that’s just assistance from the government, which, as we noted last week, is typically but a fraction of the private charitable response from Americans following natural disasters. Other Western democracies, in particular France and Sweden, have made notable contributions to the United Nations effort in Haiti. On the other hand, reports Rosett, the oil-rich Islamic countries of the Middle East are in a collective tie with Botswanna for amount of aid to Haiti. These are many of the same countries that routinely use the United Nations as a platform to condemn the United States and Israel.

Posted on 01/28/10 03:55 PM by Alex Adrianson

Stimulus Versus the Economy

The evidence shows that stimulus spending is not good for long-run economic growth; but that doesn’t mean there is no political benefit for the Obama administration in pursuing another one. Dan Mitchell explains in the latest Center for Freedom & Prosperity video:

Posted on 01/28/10 02:00 PM by Alex Adrianson

Unions Become the Party of Government

Fifty-two percent of union members now work for the government, according to new data from the Bureau of Labor Statistics. It’s the first time public-sector union members have outnumbered union members in the private sector.

In 2009, private-sector unions lost 834,000 members while public-sector unions actually gained 64,000 members. The trend, however, precedes the recession. In 1973, only 17.3 percent of union workers were government employees. Since that time, the world economy has seen a sustained rise in competition. Trade barriers have generally fallen; deregulation has been pursued by many countries, especially in transportation, energy, and telecommunications; and new technologies such as the Internet have lowered barriers to entry. As Heritage fellow James Sherk explains, unions find it difficult to extract benefits from companies that must compete:

Unionized companies do poorly in the marketplace and lose jobs relative to their nonunion competitors. Toyota and Honda have gained jobs as General Motors and Chrysler have lost them. Thousands of repetitions of this dynamic caused private-sector union membership to fall from 20.1 percent to 7.6 percent between 1980 and 2008. In 2009, private-sector union membership fell further to 7.2 percent. Competition undermines unions. Government employees, however, face no competition as the government never goes out of business.

While signs of more competition in the economy should always be welcomed, taxpayers should also note what this development means for the labor movement. Where the labor movement once focused on trying to extract a higher share of profits from businesses, it has now become a powerful force lobbying for higher taxes and more government. And when government labor unions negotiate for higher benefits, they are negotiating with politicians who may depend on getting the labor vote come election time. Are those politicians really representing taxpayers?

(For further discussion of how competition undermines union power, see “Unions and Protectionism,” by Dan Griswold in the Winter 2010 issue of Cato Journal.)

Posted on 01/27/10 04:48 PM by Alex Adrianson

A Call for Evidence on Affirmative Action Benefits

When the time comes to reassess the constitutionality of considering race in higher-education admissions, we will need social scientists to clearly demonstrate the educational benefits of diverse student bodies, and to better understand the links between role models in one generation and aspirations and achievements of succeeding generations.

Those words come from a chapter written by Sandra Day O’Connor and Stewart Schwab, in the recently published The Next 25 Years: Affirmative Action in Higher Education in the United States and South Africa.

Hmmm. In an affirmative action case seven years ago, Justice O’Connor wrote an opinion for the Supreme Court that treated as a settled question the educational benefits of diversity in higher education. That case was Grutter v. Bollinger, and the Court’s ruling allowed the University of Michigan to continue using racial preferences in deciding which applicants to accept to its law school.

George Leef notes the apparent second thoughts by O’Connor in a recent essay for the John William Pope Center. He further notes that the one study relied upon by the Court in Grutter has since been revealed as flagrantly superficial. Leef’s advice for future review by the justices:

[T]hey should not bother with “research” that amounts to, as Carl Cohen says, “reporting students’ answers to shamefully loaded questions like: ‘Do you feel that diversity enhances or detracts from how you and others think about problems and solutions in classes.’” Infinitely better would be to examine actual evidence to see if, for example, there is anything to the “role model” hypothesis Justice O’Connor mentions.

My own guess is that there isn’t: Students who have grown up in a highly diverse, interconnected, media-saturated society and are bright enough to get into selective colleges are not apt to be affected in their studies by the racial composition of the faculty. I might be wrong, though. The Court could look for evidence on this, not mere supposition.

Posted on 01/27/10 11:13 AM by Alex Adrianson

HHS: Head Start Has No Lasting Benefit for Preschoolers

Taxpayers have spent more than $100 billion on Head Start since 1965, but according to the government itself, the program has virtually no lasting benefit for the low-income children it serves.  

The Health and Human Services Administration recently released an assessment that compared children in Head Start with those not in the program. The study tracked the progress of 3- and 4-year-old children up through first grade, finding little lasting impact. In their conclusion, the study authors write:

In sum, this report finds that providing access to Head Start has benefits for both 3-year-olds and 4-year-olds in the cognitive, health, and parenting domains, and for 3-year-olds in the social-emotional domain. However, the benefits of access to Head Start at age four are largely absent by 1st grade for the program population as a whole. For 3-year-olds, there are few sustained benefits, although access to the program may lead to improved parent-child relationships through 1st grade, a potentially important finding for children’s longer term development.

The report looked at 112 different measures of cognitive, socio-emotional, health, and parenting outcomes. Only two of those measures showed a beneficial outcome for 4-year-olds in the program. For 3-year-olds, five of the measures showed a beneficial outcome and one of the measures indicated a negative outcome.

There is, however, a federal education initiative that that has been shown to have a lasting beneficial impact. Children in their third year of participation in the D.C. Opportunity Scholarship Program read at a higher level than their public-school counterparts, “equivalent to 3.1 months of additional learning,” according to the most recent assessment by the Department of Education. And those scholarships cost less than $7,000 per student. Unfortunately, Congress decided to discontinue the D.C. school choice program last year. President Obama said he wanted to do what works in education, but so far he is going along with Congress pursuing exactly the opposite policy.

Additional comment on the HHS study: “Head Start Impact Evanescent – HHS Study,” by Andrew Coulson, Cato-at-Liberty, January 13, 2010; “Head Start and America’s Race to the Top in Education,” by Grover J. Whitehurst, The Gov Monitor, January 24, 2010; and “Head Start Earns an F: No Lasting Impact for Children by First Grade,” by David B. Muhlhausen and Dan Lips, The Heritage Foundation, January 21, 2010.

Posted on 01/26/10 07:02 PM by Alex Adrianson

Smart Growth Makes Housing Unaffordable

Australia has 13 of the 24 most expensive housing markets and four of the top five surveyed by the 6th Annual Demographia International Housing Affordability Survey. The survey identifies land-use policies aiming for higher population densities—i.e., “smart growth”—as a primary culprit for making housing unaffordable in Australia and many other markets.  

Survey authors Wendell Cox and Hugh Pavlelitch ranked 272 markets in Australia, Canada, Ireland, New Zealand, the United Kingdom, and the United States. The markets were ranked according to the ratio of median house price to median annual income (median multiple). Among the high-priced Australian markets were Sydney, where the average house costs 9.1 times the average annual income; and Melbourne, where the average house costs 8.0 times the average annual income. Cox and Pavlelitch point to Dallas-Fort Worth and Atlanta as two examples of cities that have kept housing affordable through flexible land use policies that are responsive to consumer demand:

In 1981, Sydney and Dallas-Fort Worth were approximately the same [in] population. Dallas-Fort Worth has grown much faster and is now nearly 50 percent larger than Sydney. In 1981, Melbourne was larger than Atlanta. Atlanta has also grown faster and is approximately 50 percent larger than Melbourne and more than a quarter larger than Sydney … .

Obviously, the demand for housing was greater in the much faster growing markets of Dallas-Fort Worth and Atlanta than in Sydney and Melbourne. Yet, unlike Sydney and Melbourne, house prices did not rise relative to incomes in Dallas-Fort Worth and Atlanta, because the planning systems permitted new housing to be built on cheap land on the urban fringe. In 1981, the Median Multiple in Dallas-Fort Worth was 3.5. By 2008, it had dropped to 2.7. Atlanta had a Median Multiple of 2.6 in 1981 and it remained 2.6 in 2008. These and other liberally regulated metropolitan areas experienced the housing boom, but not the housing bubble.

By comparison, housing affordability deteriorated in Melbourne, from a Median Multiple of 2.9 in 1981 to 8.0 in 2009. Sydney, with its earlier excessive regulation, had a Median Multiple of 4.9 in 1981, but worsened to 9.1 by 2009 … .

Dallas-Fort Worth and Atlanta have grown more than the five major urban areas of Australia combined since 1981, both in urban footprint and in population (more than double the Australian rate). Sufficient new infrastructure was provided and taxes remained low by national standards in Dallas-Fort Worth and Atlanta. Moreover, the ability of fast-growing markets to provide transport infrastructure is illustrated by the fact that Dallas-Fort Worth and Atlanta have average work trip travel times less than Sydney, despite having larger populations and covering more land area than Sydney. [Internal citations omitted.]

The chart below from the survey also illustrates the tendency of more tightly regulated markets to have higher house prices:

Posted on 01/25/10 05:24 PM by Alex Adrianson

The Generosity of Individuals

Private, voluntary giving in response to humanitarian crises typically exceeds official government assistance, according to figures reported by Heidi Metcalf Little at the Hudson Institute. She notes that American corporations gave $90 million in assistance following the earthquake in China, while official assistance from the U.S. government totaled $3.1 million. Following the Myanmar cyclone, Americans gave $30.1 million privately compared to official U.S. assistance of $24 million. After the 2004 Indian Ocean tsunami, American citizens gave $2 billion for humanitarian assistance compared to $350 million from the U.S. government.

These facts are not recited to suggest that there is a problem with the level of U.S. government assistance, but merely to point out that there is plenty of generosity to be found in individual Americans. See Little’s blog post for a roundup of good charities helping Haiti (read to the bottom of the post).

Posted on 01/22/10 12:52 PM by Alex Adrianson

Corporations Are Composed of People Who Have Free Speech Rights

The government may not restrict political speech simply because it emanates from a corporation, said the Supreme Court Thursday in its opinion in the case Citizens United v. Federal Election Commission. The case concerned efforts by the group Citizens United to distribute Hillary, the group’s unflattering film about then-presidential candidate Hillary Clinton, in 2008. The Court’s ruling strikes down the part of the Bipartisan Campaign Reform Act of 2002 that makes it illegal for a corporation to engage in electioneering communications within 30 days of a primary election and within 60 days of a general election.

Justice Anthony Kennedy, writing the opinion of the Court, rejected the idea that the government could restrict corporations from engaging in electioneering communications while carving out an exception for media corporations: “We find no basis for the proposition that, in the context of political speech, the Government may impose restrictions on certain disfavored speakers.” Kennedy noted various problems with allowing such disparate treatment, including that

… the exemption would allow a conglomerate that owns both a media business and an unrelated business to influence or control the media in order to advance its overall business interest. At the same time, some other corporation, with an identical business interest but no media outlet in its ownership structure would be forbidden to speak or inform the public about the same issue. This differential treatment cannot be squared with the First Amendment.

Supporters of limits on corporate speech argue that the Court is putting the rights of corporations ahead of the rights of citizens. Justice Antonin Scalia addressed this question well in footnote 7 of his concurring opinion:

The dissent says that “‘speech’” refers to oral communications of human beings, and since corporations are not human beings they cannot speak. … This is sophistry. The authorized spokesman of a corporation is a human being, who speaks on behalf of the human beings who have formed that association—just as the spokesman of an unincorporated association speaks on behalf of its members. The power to publish thoughts, no less than the power to speak thoughts, belongs only to human beings, but the dissent sees no problem with a corporation’s enjoying the freedom of the press.

Posted on 01/22/10 12:16 PM by Alex Adrianson

Worth Checking Out: The Sorry Record of the Intellectuals, Ideas for Better Government Sought

• The home page at Charity Navigator currently features a guide for those who want to donate to a charity helping Haiti.

• Thomas Sowell’s new book, Intellectuals and Society, reviews the embarrassing history of disastrously wrong ideas that have been produced by the intellectual class. Ranging from criminology to economics to military strategy, Sowell explains why it is that intellectuals tend to be drawn to ideas that concentrate power and why they are rarely held accountable when those ideas fail. Uncommon Knowledge recently featured Sowell in an excellent five-part interview.

• In How Capitalism Will Save Us, Steve Forbes takes on the myths that perpetuate big government policies, including: that capitalism is an immoral system that helps only the rich; that regulations always safeguard the public good; that globalization destroys jobs; and that free markets can’t provide affordable health care. Forbes makes the case that we need more economic freedom, not less.

• The Pioneer Institute’s 19th annual Better Government Competition seeks innovative proposals for effective, yet affordable government. One grand prize winner will receive $10,000. The deadline for applying is March 29, 2010.

• The Atlas Economic Research Foundation’s New Media Guide covers the basics of using Twitter and Facebook, provides tips on producing videos for the Web, and outlines how to incorporate social media into your overall marketing strategy.

• Know someone who has shown exemplary leadership in philanthropy? You might consider nominating them for the 2010 William E. Simon Prize for Philanthropic Leadership. The Philanthropy Roundtable is accepting nominations until February 19, 2010.

Posted on 01/22/10 09:17 AM by Alex Adrianson

Avatars for Life

The March for Life takes place tomorrow in Washington, D.C. It’s held every year to mark the anniversary of the 1973 Roe v. Wade decision in which the Supreme Court held that the 14th Amendment provides women with a right to have an abortion. That ruling overturned many state laws against abortion.

If you cannot make it to Washington, D.C., you can still show your opposition to abortion and your support for the rights of pre-born children. You can have your avatar do the marching for you! All you have to do is visit, sign up, and pick an avatar. Then you can view yourself in the march, tweet about it, or make a note on your Facebook page. The Virtual March for Life is a project of the group Americans United for Life Action.

Posted on 01/21/10 04:44 PM by Alex Adrianson

Time to Freeze Government Wages

“In a recession when wages are stagnating,” writes Josh Barro, “you would expect governments to capitalize on the loose labor market by holding the line on employee compensation.”

But public sector compensation (as measured by the Department of Labor) rose 42% faster than private sector compensation over the last three years. Since the end of 2006, hourly total compensation (wages plus benefits) has risen 6.5% for private sector workers, essentially keeping pace with inflation. But state and local government workers saw their hourly compensation rise 9.2%. Federal civilian workers (about 10% of the public sector civilian workforce) are excluded from the above measure, but they did even better, receiving Congressionally-approved wage rises totaling 9.9% over the same period.”

Barro, a senior fellow at the Manhattan Institute, adds that some of the increases are the result of contracts agreed to before the recession. But Congress just gave federal employees a 2 percent pay raise that takes effect this month. According to Barro, “If states and localities had kept pace with private sector wage growth over the last three years, state budget gaps would be approximately $36 billion less than they are today.”

Posted on 01/20/10 03:27 PM by Alex Adrianson

Economic Freedom Matters

… and here’s the evidence:  

These are just a few of the informative charts contained in the 2010 Index of Economic Freedom, just released today by The Heritage Foundation and the Wall Street Journal.

Posted on 01/20/10 12:24 PM by Alex Adrianson

United States Now Land of the Mostly Free

Bailing out banks, automakers, Fannie Mae, and Freddie Mac; regulating executive compensation; intervening in housing markets; politicizing the bankruptcy process; and increasing government spending have all contributed to reducing economic freedom in the United States, according to the 2010 Index of Economic Freedom, just released today by The Heritage Foundation and the Wall Street Journal. The United States economic freedom score declined from 80.7 last year to 78.0 this year. The decline moves the United States from the free to the mostly free category, and drops the United States into eighth place among all countries. For the first time, Canada moves ahead of the United States in the Index to seventh place.

Every year, the Index ranks countries on 10 factors of economic freedom, with a maximum possible score of 100. Hong Kong and Singapore are the top two ranked countries this year, as they have been for each of the 16 years that the Index has been published. Montenegro had the largest gain in economic freedom, moving up 5.4 points over its score from last year. The average country score declined slightly from last year, by 0.1 points to 59.4, largely reflecting the efforts of the major economic powers to spur their economies with more government spending. The 2010 Index reflects economic freedom from the last half of 2008 through the first half of 2009.

The U.S. score fell on seven of the ten factors of economic freedom, in particular on financial freedom (the independence of financial institutions from political control); monetary freedom (freedom from government manipulation of prices); property rights, and government spending. The drop in the U.S. economic freedom score of 2.7 points was the highest among the world’s 20 largest economies. There were, however, a number of smaller countries that saw larger declines in economic freedom. Venezuela’s score, for instance, fell 2.8 points.

Posted on 01/20/10 12:13 PM by Alex Adrianson

Exemptions All Around!

Congress is planning to hit buyers of health insurance with a 40 percent excise tax on premiums that exceed $8,900 for individuals and $24,000 for families, according to latest reports on health care bill negotiations. There is one little exception though: health insurance obtained under collective bargaining agreements would be exempt for five years.

Anyone following the health care legislation probably already knows that this union carve-out isn’t the first special deal that’s been cut in order to secure political support. Under the Senate bill, in Michigan and Nebraska Blue Cross and Blue Shield policies are also exempt from the tax on insurance premiums; the state of Nebraska won’t ever have to pay its share of the Medicaid expansions under the bill; Vermont and Massachusetts will get extra Medicaid funding; Louisiana will get extra Medicare funding; and Medicare Advantage recipients in Pennsylvania, New York, and Florida don’t face the same cuts that recipients face elsewhere.

There’s even an exemption for the Amish. The bill continues the historic carve-out that the Amish have had since the 1960s from Social Security and Medicare taxes. The Amish disdain government assistance and rely on help from within their own community instead. Sen. Charles Schumer (D-N.Y.) thinks that this provision is a no-brainer, reports the Watertown Daily Times. The blog Future of Capitalism asks a good question: “If families relying on one another and communities pitching in to help neighbors works well enough to allow the Amish to opt out, why isn’t it a no-brainer to allow the rest of Americans the choice to opt out, too?”

Posted on 01/19/10 02:45 PM by Alex Adrianson

The Constitution May Not Yet Be Completely Useless

In the video below, Ken Blackwell and Nelson Lund discuss the constitutionality of the Obamacare individual mandate at an event put on by the Family Research Council.

According to some proponents, a mandate on individuals to buy health insurance would be just a tax. According to this view, then, the authority to create such a mandate is found in Congress’s taxing power, not in the Commerce Clause. Lund argues, however, that if one accepts that convoluted argument, there is still a problem: This mandate-tax could not be interpreted as either a tax on income or an excise tax. Rather, people would be taxed merely for existing. Such a tax would have to be interpreted by the courts as a capitation tax, and the Constitution says something about capitation taxes: They have to be apportioned according to each state’s population. But the health care bills contain various exemptions to the mandate that will fall disproportionately among the states, thereby failing to meet the Constitution’s requirements.

According to Lund, Democrats could reach a result that is identical to the individual mandate, yet entirely constitutional: All they would have to do is raise everybody’s income taxes and then provide an equivalent tax credit for those who purchase the kind of insurance they want everyone to buy. Why don’t they do that? Probably because it would then become obvious that President Obama is breaking his campaign pledge not to raise taxes on the middle class. Lund: “That suggests, I think, that the Constitution may not yet be completely useless as a check on federal power. If the Constitution does nothing more than force Democrats into a choice between admitting that they are raising taxes on the middle class, or risking judicial invalidation of their so-called reform, it will once again have performed a real service to the American people.”  

Posted on 01/15/10 06:02 PM by Alex Adrianson

The Other Disaster in Haiti

Check out this photograph of the Haiti-Dominican Republic border. It’s from a few years ago. The brown areas on the left are Haiti while the green areas on the right are the Dominican Republic.

Oscar Abello at the Center for International Private Enterprise explains the difference:

Haiti’s earth had been suffering long before it quaked. Generation upon generation of political instability and disenfranchisement of the poor had led them to seek economic livelihoods by carving out farms and fuel from the only opportunity afforded them to do so – the country’s forests. Haiti is now left with only four percent of its original tree coverage, sapping the earth of its ability to hold water and to produce nutrients for other plant life, including food crops. Satellite photographs like the one above illustrate how the Dominican Republic’s political stability has cultivated governance processes for effective resource management. Perhaps, paradoxically, the earth’s instability may eventually spur effective governance in Haiti.

Roger Noriega at The American:

One cannot pay anyone in this hemisphere less than you can pay a Haitian for an honest day’s work. But you do not see capital rushing into Haiti—because corruption and an ineffective state make it extraordinarily difficult to do business there. What a difference the rule of law makes: Haitians’ gross domestic product per capita was $1,300 in 2008, while their Dominican neighbors attained a rate six times greater.

Haiti’s score in the 2009 Index of Economic Freedom was 50.5 while the Dominican Republic’s was 59.2. On two key components of the Index, the Dominican Republic scored much better than Haiti. It scored 30 on both property rights and freedom from corruption, which is hardly great, but much better than the scores of 10 and 16 received by Haiti. The 2009 scores are roughly consistent with the scores the countries have received since the Index was started in 1995 

Hopefully, as Haiti recovers from a natural disaster, people will become more aware of the man-made disaster that has been inflicted on the Haitian people for decades.

Posted on 01/15/10 02:03 PM by Alex Adrianson

Worth Checking Out: A Look Inside the Tea Parties, Share Ideas on Marketing Liberty

A New American Tea Party: The Counterrevolution Against Bailouts, Handouts, Reckless Spending, and More Taxes is an account of the Tea Party movement from one its key organizers. Author John M. O’Hara traces the rise of the tea parties from tax day 2009 to the September 12 march on Washington, D.C., explaining why the movement is real and where it is headed.

The Nerve, a new journalism project of the South Carolina Policy Council, aims to expose malfeasance and misguided policies in South Carolina government. This week, the Nerve just wrapped up a ten-part series on corporate welfare. In addition to featuring reports from a staff of veteran investigative journalists, The Nerve provides a forum for anyone who wants to become a citizen reporter.

• Marpex Inc. has made both the House and the Senate health care bills searchable online.

• Calling all budget-conscious governments! Leonard Gilroy of the Reason Foundation will suggest steps that state governments can take to fix their budget messes. Gilroy is an expert on public-private partnerships, competition, government efficiency, transparency, accountability, and government performance. The talk, to be held in Atlanta on January 26, is hosted by the Georgia Public Policy Foundation.  

• As part of its plan to become a center for Christian thought in the heart of New York City, Kings College will host 31 leading writers, activists, musicians, and artists throughout the winter and spring. The school’s Distinguished Visitors Series includes talks from Bob Woodson, Norman Podhoretz, Ed Feulner, Rich Lowry, and Robert George.

• The Illinois Policy Institute will host a regular conference call to share ideas on how best to market liberty. The first call will be held on February 18 at 3 p.m. and will feature American Enterprise Institute President Arthur Brooks. If you would like to participate in the call, send an e-mail to Heather Wilhelm at

Posted on 01/15/10 12:14 PM by Alex Adrianson

Perverse Incentives: Health Care Bills Penalize Work, Reward Lack of Insurance

Low- and middle-income workers who succeed in increasing their earnings would face significant penalties for their efforts under either the Senate or the House health care bills. The bills mandate that everyone have health insurance and the amount that individuals would have to pay for health insurance rises with income, leaving workers with smaller and smaller amounts of take-home pay for each additional dollar of income they earn. In his latest paper for the Cato Institute, Michael Cannon runs through these effects and provides estimates of the effective marginal tax rates produced.

According to Cannon’s calculations an individual increasing his annual income from $15,000 to $45,000 would face an effective marginal tax rate of 59 percent under the House bill. On the other hand, if the Senate version became law, then an individual increasing his annual income from $11,000 to $45,000 would face an effective marginal tax rate of 53 percent. Additionally, a family of four that increases its annual income from $29,000 to $87,000 would face an effective marginal tax rate of 74 percent under the House bill. Alternatively, if the Senate bill became law, a family of four increasing its annual income from $22,000 to $87,000 would face an effective marginal tax rate of 62 percent.

It gets worse: Cannon’s calculations include only the effects of the health care bills plus those of federal payroll taxes, income taxes, the child tax credit, and the earned-income tax credit. State taxes and other means-tested programs are not included, which means that effective marginal tax rates for many individuals will actually be higher. Further, the implicit tax thresholds created by the bills are unlike those of the individual tax code in that each progressively higher rate applies not only to the income above the threshold but to all of the income earned by the individual. For individuals whose income is near a threshold for a higher rate, the effective marginal tax rates could easily exceed 100 percent. “For example,” notes Cannon, “under the Senate bill, adults with an annual income of $14,560 who earn an additional $560 would see their total income fall by $200.” Those individuals would be better off not having made the effort to increase their earnings.

Another perverse incentive: Cannon also calculates that for most people (any individual making over $16,000 per year and any family making more than $32,000 per year), it will be cheaper to forgo getting health insurance, pay a penalty of 2.5 percent of adjusted gross income (the penalty established by the bills for being uninsured), and buy insurance only when they get sick. This adverse selection is made possible because the bills require insurance companies to sell insurance to anybody and forbids them from charging different rates based on health condition.

If those provisions are included in a final health care bill, expect healthy people to opt out of the insurance pool and, therefore, insurance premiums to rise. That, argues Cannon, means Congress will either have to increase the level of subsidies and therefore the cost of its health care plan, or abandon the idea of fixing health care with a rob-Peter-to-pay-Paul approach.

Posted on 01/13/10 06:43 PM by Alex Adrianson

Incentives to Do Foolish Things

Understanding what has happened in the world of finance the past few years requires understanding how government policies abet the problem of moral hazard. Here’s Nicole Kurokawa explaining it in another edition of the Center for Freedom & Prosperity’s Economics 101 series:

Posted on 01/12/10 01:20 PM by Alex Adrianson

The Employment Trend Is Bad

The current job-loss trend, as a percentage of peak employment, compared to those of previous recessions:

This chart comes from Calculated Risk.

Posted on 01/12/10 10:48 AM by Alex Adrianson

Why Are Marriage Supporters on Trial in California?

Whatever one thinks about gay marriage, it should be disturbing that opponents of California’s Proposition 8 are basing their legal challenge to the law not on questions of law, but on the motives of those who supported Proposition 8. Proposition 8 stipulated that the government of California would recognize only unions between a man and a woman as a valid marriage. The trial began today in San Francisco. Former attorney general Ed Meese III writes about the case in yesterday’s New York Times, noting in particular, the unusual rulings of the presiding judge, Vaughn R. Walker:

Judge Walker’s decisions have been surprising because they differ from those of other judges who have previously scrutinized marriage laws — in Iowa, Hawaii, Massachusetts, New Jersey and elsewhere in California, for example. In those instances, the courts have decided legal challenges to state marriage laws based on legislative history, scholarly articles and testimony by social scientists and other experts. They have, in some cases, looked for evidence of legislative intent in the statements published in official voter information pamphlets.

But in this case, Judge Walker has ruled that things like TV advertisements, press releases and campaign workers’ statements are also relevant evidence of what the voters intended. The judge went so far as to order the Proposition 8 campaign to disclose private internal communications about messages that were considered for public use but never actually used. He has even ordered the campaign to turn over copies of all internal records and e-mail messages relating to campaign strategy.

Most troubling, Judge Walker has also ruled that the trial will investigate the Proposition 8 sponsors’ personal beliefs regarding marriage and sexuality. No doubt, the plaintiffs will aggressively exploit this opportunity to assert that the sponsors exhibited bigotry toward homosexuals, or that religious views motivated the adoption of Proposition 8.

Posted on 01/11/10 05:54 PM by Alex Adrianson

Politicized Medicine Coming?

The “Cornhusker Kickback” is only the beginning of the political deal-making that will define health care in the United States under the Senate health care bill, writes the Galen Institute’s John Hoff at The American:

The government, for example, will divide the entire country into separate geographic areas for calculating insurance premiums. To draw these lines, the Department of Health and Human Services (HHS) will have to decide whether lower-cost communities should be included in a rating area with contiguous higher-cost ones. This is a political question of how much cross-subsidization there should be between cities and suburban areas. However HHS decides, some areas will be unhappy and will seek redress in Congress.

HHS will have to specify the healthcare services that insurers must cover, and the scope of benefits they provide must be equal to those under “a typical employer plan.” The bill lists ten categories of care that must be included, including hospitalization and ambulatory patient services. But this requirement is meaningless unless HHS specifies under what circumstances insurers must pay for inpatient care and when they can limit coverage to outpatient services. In the real world, however, it is impossible for the government prospectively to make this delineation for every patient and every health condition.

But there’s more. To make this impossibly complex exercise even more impossible, the bill requires HHS to ensure that coverage reflects “an appropriate balance among the categories” of care. It must determine what share of an insurer’s payments for care must be for hospitalizations and how much for outpatient care. Patients, insurers, and various healthcare professionals may not agree with whatever “balance” HHS imposes and will ask Congress for help.

Posted on 01/11/10 05:37 PM by Alex Adrianson

No Evidence for Stimulus Found in Transportation Spending

Infrastructure spending was supposed to be the most stimulative part of the economic stimulus Congress passed last spring. A new analysis from the Associated Press finds otherwise. The AP compared more than 700 counties that got the most stimulus money per capita for road construction with the more than 700 counties that received no money at all for road construction and found no statistically significant difference in employment trends between the two groups of counties.

The article’s diagnosis is that “[t]ransportation spending is too small of a pebble to quickly create waves in the nation’s $14 trillion economy.” That’s surely what proponents of a second stimulus would argue, too. Keynesian theory, however, holds that deficit spending generally, not just transportation spending, should increase the size of the economy. But the evidence is in that deficit spending hasn’t worked, says Heritage fellow Brian Riedl:

[D]espite the historic 7 percent increase in GDP deficit spending over the previous year, the economy shrank by 2.3 percent in FY 2009. To argue that deficits represent new money injected into the economy is to argue that the economy would have contracted by 9.3 percent without this “infusion” of added deficit spending (or even more, given the Keynesian multiplier effect that was supposed to further boost the impact). That is simply not plausible, and few if any economists have claimed otherwise. … The economic models that assert that every $1 of deficit spending grows the economy by $1.50 cannot explain why $1.4 trillion in deficit spending did not create a $2.1 trillion explosion of new economic activity. [Internal citations omitted.]

Despite this evidence, Congress is seriously considering passing another stimulus bill whose overall price tag would be $75 billion, and a portion of that would be more infrastructure spending.

Posted on 01/11/10 01:45 PM by Alex Adrianson

It Pays to Work for the Government

One step that would help close state budget gaps would be to trim the excessive pay and benefits of public employees, says the Cato Institute’s Chris Edwards:

Public sector pay averaged $39.66 per hour in 2009, which was 45 percent higher than the private sector average. The public sector advantage was 34 percent in wages and 70 percent in benefits…. During good times and bad, “layoffs and discharges” in the public sector occur at just one-third the rate of the private sector. … U.S. Bureau of Labor Statistics data show that the average quit rate in the state and local workforce is just one-third the rate in the private sector. That suggests that state and local pay is higher than needed to attract qualified workers. … In 2009, [defined-benefit retirement] plans were available to 84 percent of state and local workers but just 21 percent of private workers. [Internal citations omitted.]

Posted on 01/08/10 01:41 PM by Alex Adrianson

Death—Now Tax Free in 2010

This year and this year only, dying is tax free. For the first time since 1916, there is no estate tax—assuming Congress doesn’t renew the tax retroactively. However, in 2011 current law will reset the death tax to its 2001 level of 55 percent, with a $1 million exemption. In 2009, the estate tax was 45 percent with a 3.5 million exemption.

There is one certain way to avoid the estate tax: If you spend most of your money before you die, you won’t have to pay an estate tax. But if you use your wealth to start a business and add to the economy, the estate tax penalizes you for that. It’s one perverse result of taxing some income twice. According to a study by Douglas Holtz-Eakin and Cameron Smith, eliminating the estate tax permanently would raise employment by 1.5 million. In the video below, an estate planner explains how the death tax hits small businesses particularly hard:

The Heritage Foundation has a rapid response page with more resources on the death tax.

Posted on 01/08/10 01:11 PM by Alex Adrianson

Worth Checking Out: Top Ten Pro-Liberty Books of the Decade and One More for Beginners

• A poll of 22 classical liberal thinkers has produced the Top Ten Pro-Liberty Books of the Decade. The poll was conducted by Diogo Costa, editor of Ordem Livre (a Portuguese-language site produced by the Atlas Economic Research Foundation).

A Beginners Guide to Liberty outlines the argument for liberty for those seeking an introduction to classical liberal or libertarian thinking. Its 10 short chapters introduce the reader to workings of the free market, the value of free trade, the importance of property rights, and much more. A good book to hand off to that pesky socialist nephew.

• For better or worse, legislators just won’t leave the tax laws alone. Fortunately, the Tax Foundation keeps track of it all, and has cataloged all the significant tax policy changes in 2009. The results this year are for the worse: Nine states increased individual incomes taxes, while only four lowered them. Seventeen states and the federal government raised tobacco taxes. None lowered them.

• The Pacific Research Institute has joined the growing number of state-based think tanks that have decided the best way to fix bad journalism is by doing good journalism. The group recently launched, which will investigate California government spending and regulatory programs to expose waste, fraud and abuses of power.

• A new Web site launches Monday with aspirations to be the conservative version of the Huffington Post: The Daily Caller, run by Fox News political analyst and Cato Institute fellow Tucker Carlson, will offer a mix of breaking news, opinion, and original reporting. Free lancers take note: The Daily Caller has developed a pay-for-eyeballs model that it believes will handsomely reward articles that generate lots of traffic.

• This week another outlet joined Andrew Breitbart’s fleet of Web sites seeking to hold accountable all things big. This time it’s Big Journalism that’s being held to the fire. The site currently features stories examining the media’s coverage of ClimateGate and an article on The Top Twelve Faux Media Scares of the Past Decade.

Posted on 01/08/10 11:51 AM by Alex Adrianson

Gun Ownership Up, Crime Down

Violent crime in the United States fell 4.4 percent in the first half of 2009, according to the FBI’s latest semiannual crime report. The report also indicates that property crime fell 6.6 percent.

Could it be that, contrary to liberal belief, an increase in legal gun ownership deters criminals? Indeed, since late 2008 gun ownership is up, judging from background checks and gun permits. Joe Gimenez at American Thinker rounds up the data:

The Toronto Star reported a 15% increase of 108,000 more FBI background checks in October 2008 than during the same month in 2007. … Then, in November 2008, the number of FBI background checks on applicants buying guns spiked 42% from the previous year. The FBI performed 12.7 million background checks in 2008, compared to 11.2 million in 2007, a 13% increase.

… Through June 2009, the Texas Department of Public Safety received a monthly average of 12,700 applications for concealed handgun licenses, up 46% from the average in 2007. … Even in liberal Massachusetts, gun permits surged 15% over the last two years (after falling several years before that).

Posted on 01/06/10 02:49 PM by Alex Adrianson

Mayo Drops Medicare

Senior citizens seeking treatment from the Mayo clinics in Arizona will have to pay out of their own pockets from now on. Mayo announced last week that its Arizona facilities would no longer accept Medicare patients. Mayo’s Arizona facilities lost $120 million treating Medicare patients last year, and Mayo lost $840 million nationwide on Medicare patients.

This is that outfit that President Obama pointed to as a model for the entire health care system. In September, he praised Mayo for having “the best quality and the lowest cost of just about any system in the country.”

Mayo is hardly the first provider to drop Medicare patients because the program’s reimbursement rates are too low. According to a 2008 report by the Medicare payment advisory commission, 29 percent of Medicare beneficiaries have trouble finding a primary care doctor willing to treat them.

But seniors’ access to health care could get worse: The Senate health care bill cuts $493 billion from Medicare over the next 10 years, and the government agency charged with running the program has warned: “providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and … might end their participation in the program (possibly jeopardizing access to care for beneficiaries).”

(Most of the information in this post comes from Jeff Jacoby’s excellent column today at the Boston Globe.)

Posted on 01/06/10 12:17 PM by Alex Adrianson

Now It’s Phantom Zip Codes Plaguing

The news gets worse for In November, we learned that the government’s Web site that is supposed to track stimulus spending showed stimulus being spent in non-existent congressional districts, such as North Dakota’s 99th congressional district. North Dakota actually has only one congressional district. A number of watchdog organizations now report that shows stimulus funds being spent in non-existent Zip codes. found that Zip codes reported for some of the projects in New Mexico don’t match any Zip code known to the U.S. Postal Service. The group also found a number of Zip codes for New Mexico projects that really belong to other states. found hundreds of thousands of dollars of stimulus spending associated with incorrect Zip codes.

In West Virginia, meanwhile, $28 million in stimulus funds were spent in four unknown Zip codes, according to’s review of The watchdog also reports that shows three Virginia Zip codes as receiving funds in West Virginia.

In Nebraska, $2.2 million in stimulus was spent in four zip codes that do not exist, according to’s review of’s data. The Nebraska watchdog also found a Florida Zip code indicated as receiving stimulus funds in Nebraska.

And in Washington State, according to the Evergreen Freedom Foundation, “Nearly $3.5 million in federal stimulus spending has been attributed to Zip Codes in Washington state that either belong somewhere else or don’t exist at all.”

If the government doesn’t know where stimulus funds are being spent, then how can it know whether the funds are being spent wisely? How can taxpayers know?

Posted on 01/05/10 04:33 PM by Alex Adrianson

Things to Avoid When Writing a Grant Proposal

For you grant writers, here’s a list of things to avoid when writing a grant proposal, courtesy of Ann Fitzgerald:

1. Overuse of words like “unique” (as in “this is a unique project”) or “crucial” (it is “crucial that we act now.”)

2. The word “obvious” (as in “the problem is obvious.”) This sounds both insulting and lazy. On one hand, it says the reader should be smart enough to understand the problem without you spelling it out. On the other hand, it says you are too lazy to think through the problem.

3. Unsubstantiated claims. If you really can prove that your ideas, products, services, etc. can impact “every American across the country,” great. If not, don’t make such a bold claim.

4. Superlatives such as “best” or “most important.” Be proud of your work but don’t be boastful about it.

5. Filler. Don’t include unnecessary information but do give the program officer enough so that he or she can take it to the board.

6. Disparaging other organizations. While it’s important to distinguish your work from other groups, don’t do it at the cost of discrediting another nonprofit.

7. Jargon and acronyms. Make sure your writing is easy to understand by the layman. Abbreviations are fine if they are spelled out initially.

8. Unrequested materials. While you may think the CD you produced is a great example of your organization in action, it won’t be welcomed by the foundation unless it asks for it.

9. A sense of entitlement. No one “owes” you a gift. No matter how carefully you have matched your interests with those of the foundation, there is still a chance you will be denied.

You can get 91 more smart tips on grant writing by visiting and ordering or downloading a copy of “100 Tips, Techniques and Templates for Persuasive Proposal Writing.”

Posted on 01/04/10 03:33 PM by Alex Adrianson

2009 Stimulus Bill Loads the Dice for State Tax Increases

The 2009 stimulus bill is going to limit state budget options in 2010 and 2011, predicts the Wall Street Journal. Specifically, says the Journal, the bill’s “maintenance of effort” provisions make spending cuts less likely than tax increases or another federal stimulus/bailout for states facing major gaps in their budgets.

In 2009, Congress was concerned that states would simply use stimulus funds to offset state spending cuts, which would have undercut the central idea of Keynesian fiscal stimulus—deficit spending. So Congress required states accepting stimulus money to maintain their own funding in 15 areas, including road building and welfare, at the levels they were at on July 1, 2008. So even though state revenue declined 10 percent in 2009, a lot of state spending is protected from cuts until 2012.

Washington state’s situation, notes the Journal, illustrates the budget bind now facing states that accepted the stimulus funding:

A study by the Evergreen Freedom Foundation in Seattle found that “because Washington state lawmakers accepted $820 million in education stimulus dollars, only 9 percent of the state’s $6.8 billion K-12 budget is eligible for reductions in fiscal year 2010 or 2011.” More than 85% of Washington state’s Medicaid budget is exempt from cuts and nearly 75% of college funding is off the table. …

The combined budget deficits of the states for 2010 and 2011 could hit $260 billion, reports the Journal.

Posted on 01/04/10 03:29 PM by Alex Adrianson

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