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InsiderOnline Blog: March 2013

To Do: Book Your Flights, but First Find Out What the Government Knows

• Find out what the government knows about you when you travel.  At noon on April 2, the Cato Institute will host a panel discussing government surveillance of travelers as well as the Transportation Security Administration’s continued refusal to engage in a public comment process for using imaging machines to screen air travelers.

• Law students: Apply now for the Institute for Justice’s 2013 Law Student Conference. The Institute for Justice is one of the premier public interest law firms defending liberty in the courts, and they’ll give away the secrets of their success to select students. The conference will be held July 26 - 28 in Washington, D.C. Don’t miss out on this epic boot camp for future freedom fighters. The application deadline is April 1.

• Don’t forget to register for Resource Bank 2013, which is April 25 - 26 in Orlando, Florida. It’s your best opportunity every year to share ideas and know-how with hundreds of think tank heads, scholars, and activists for liberty from around the world. New Heritage Foundation President Jim DeMint will be there!

• Save the date for the Becket Fund’s annual Canterbury Medal Dinner. The year’s dinner will honor Elder Dallin Oaks, a member of the Quorum of the Twelve Apostles of The Church of Jesus Christ of Latter-day Saint. The dinner will be May 16, 2013 at the Pierre Hotel in New York, N.Y.

• Learn how to use film to promote the core American value of freedom. The Moving Picture Institute’s Hollywood Career Launch Program places talented young filmmakers with major film production companies to learn about the industry first hand. MPI is accepting applications now on rolling basis for the summer and fall semesters.

Posted on 03/29/13 05:53 PM by Alex Adrianson

The States Have It in Their Power to Veto ObamaCare

They can do it, says Cato’s Michael Cannon, simply by doing what the law allows them to do: Decline to create a health insurance exchange and decline to expand Medicaid. Under the law, according to Cannon, the individual mandate and the penalty taxes on employers do not operate where a state declines to create a health insurance exchange. Cannon writes:

To date, 34 states, accounting for roughly two-thirds of the U.S. population, have refused to create Exchanges. Under the statute, this shields employers in those states from a $2,000 per worker tax that will apply in states that are creating Exchanges (e.g., California, Colorado, New York). Those 34 states have exempted at least 8 million residents from taxes as high as $2,085 on families of four earning as little as $24,000. They have also reduced federal deficits by hundreds of billions of dollars.

The Obama administration is nevertheless attempting to tax those employers and individuals, contrary to the plain language of the PPACA and congressional intent, and to deny millions of Americans the opportunity to purchase low- cost, high-deductible coverage. Employers, consumers, and even state officials in those 34 states can challenge those illegal taxes in court, as Oklahoma has done. States can also block those illegal taxes—and even stop the federal government from operating an Exchange—by approving a strengthened version of the Health Care Freedom Act.

The PPACA’s Medicaid expansion, which would cost individual states up to $53 billion over its first 10 years, is now optional for states, thanks to the Supreme Court’s ruling in NFIB v. Sebelius. Some 16 states have announced they will not expand their programs, while half of the states remain undecided. Yet the Obama administration is trying to coerce states into implementing parts of the expansion that the Court rendered optional. States can replicate Maine’s lawsuit challenging this arbitrary attempt to limit the Court’s ruling.

Collectively, states can shield all employers and at least 12 million taxpayers from the law’s new taxes, and still reduce federal deficits by $1.7 trillion, simply by refusing to establish Exchanges or expand Medicaid. [“50 Vetoes: How States Can Stop the Obama Health Care Law,” by Michael F. Cannon, The Cato Institute, March 2013]

Posted on 03/29/13 04:29 PM by Alex Adrianson

If Governments Are Doing the Bargaining …

Reducing trade barriers between the United States and Europe, as President Obama has proposed, can only produce mutual gains for both sides of the Atlantic, right? Economist Pedro Schwartz is skeptical that the effort will really lead to freer markets:

The real obstacles are non-tariff barriers. They would loom large even if all concerned were true friends of free trade. There are genuine differences in property rights protection between the United States and the European Union, especially as regards intellectual property and patents, since the procedures are judge-based in America administrative in Europe. And agreement about accounting standards is still not within reach despite the many years of negotiation. Technical standards differ widely and not all are hidden forms of trade protectionism: examples include differences in data and consumer protection norms, the procedure for the approval of drugs for human use, financial regulations, corporate governance rules, and telecommunications standards, re-export and trade facilitation among many others.

There may be a way to cut through this red tape if there is a will. This way is mutual rule recognition, whereby what is cleared through the proper bodies in America would be automatically accepted in Europe and vice versa. This is what Europeans tried with the Bolkenstein Directive and it has not worked very well among EU States. Is it realistic to expect a better outcome in a future TAFTA? […]

Jeremy Bentham, the utilitarian philosopher, used to call pressure groups “sinister” that were always out to defend their privileges under cover of darkness. These groups will use technical hurdles to keep barriers down. And failing that, they will appeal to feelings of fairness and altruism to put genuine reformers in the wrong. Free trade in food will harm the environment. The cinema or education cannot perform their much needed and indispensable role without public subsidy. Public procurement needs to be fair to local firms. National airlines and airports cannot be left in the hands of foreigners for reasons of defense. Complex regulations must govern the medical and legal professions for fear of a fall in quality. There will be a race to the bottom as free trade forces national workers to compete with the underfed and exploited foreign masses whose products unfairly compete away the social conquests of national workers. And failing all that, we can ask our central banks to wage a little currency war. […]

In the end, our hope for free trade lies with the Internet, with anonymous money, with offshore financial centers. The freedom to trade cannot be put in the hands of governments. [Internal citations omitted.] [Library of Economics and Liberty, March 4]

Posted on 03/29/13 04:03 PM by Alex Adrianson

Making History

In Europe, they’re still busy pretending that Cyprus and Greece belong in a currency union with Germany. How long will that illusion last? What will come next? Now is a good to remember that even when the forces of history seem to be roiling political and economic structures, individuals do matter and they can play a surprising role in shaping events. Ron Granieri’s recent essay on the role of Helmut Kohl in German reunification provides just such a lesson. The piece concludes this way:

Bismarck has famously been quoted as saying, “A statesman cannot create anything himself. He must wait and listen until he hears the steps of God sounding through events; then leap up and grasp the hem of his garment.” Some opportunities appear only once, and for a very brief time. German unity was such an opportunity. [Helmut] Kohl represented a generation that considered reunification a natural goal, but that generation was on its way out by 1989. Considering further what happened in the Soviet Union, especially the intense backlash culminating in the 1991 coup attempt, one sees that it was good that Kohl had moved so quickly, because the window of opportunity was very small. What was possible in 1990 had been unthinkable in early 1989, and would have been unthinkable again by the summer of 1991.

German unification should humble all who profess to be able to predict the course of history, and also demonstrates the limitations of a realism that attempts to reduce international and domestic politics to the sum of external structures. Structures may indeed strongly shape reality, but they alone are not enough. It takes people to give them meaning. The Cold War did not end because the superpowers said so. Or rather, what the superpowers meant by the end of the Cold War would have left the Berlin Wall standing, and a great many other walls besides. It took people with imagination to grasp the possibilities, not simply to end, but to transcend the Cold War.

The fall of the Berlin Wall and the end of communism in Europe is a story full of fascinating characters. They include a man in Rome, born in Cracow with a kindly smile and an iron will; another in Moscow who risked the fate of an empire, and lost, to win a victory for humanity; two men in Washington, mocked as an “amiable dunce” and a “wimp,” who showed both skill and empathy in dealing with friends old and new; and the ponderous, slow-talking man in Bonn who grasped the opportunity to unite his divided nation.

But it is not enough to focus only on the powerful. It was the people in their broadest sense that made this history possible, often in the face of criticism from experts who clucked and told them that they needed to accept the permanence of concrete realities. They are the thousands of individuals who marched together for freedom in Leipzig, Dresden, East Berlin, and other German cities and towns, as well as thousands more in Prague, Warsaw, Vilnius, Kiev, and even Moscow. We do not know their names, but we know what they accomplished. By tearing down a hateful monument to dictatorship, they helped build a better world. [“The Fall of the Berlin Wall, the Power of Individuals, and the Unpredictability of History,” by Ronald J. Granieri, Foreign Policy Research Institute, March 2013.]

Posted on 03/29/13 03:40 PM by Alex Adrianson

Green Investments Not Producing a Return

The folks who thought “they were going to strike it rich off the backs of consumers and taxpayers with green energy subsidies and mandates, federal loan guarantees, and the higher energy prices that would make renewable energy competitive with coal, oil, and natural gas once cap-and-trade was enacted” are disappointed with the state of green energy investments. Myron Ebell takes note of the Wall Street Journal’s special report on last week’s “ECO:nomics—Creating Environmental Capital” conference in California:

The lead article by John Bussey was headlined: “Green Investing: So Much Promise, So Little Return: At The Wall Street Journal’s ECO:nomics conference, the talk was about all the innovations taking place in renewable energy—and about all the investors who are losing interest.”

Bussey writes: “Given all the interest in protecting the environment from mankind’s rapid advance, you’d think this might be the best time ever to invest in renewable energy and the Next Big Green Thing.  Guess again.  Large parts of green-tech investment look like the torched and salted fields left behind by Roman conquerors: barren, lifeless—and bereft of a return on capital. Put another way: In some areas, if you aren’t already investor road kill, you’re likely the hedgehog in the headlights about to join your maker.”

On page two, an article on a talk by John Dears, chief investment officer of the California Public Employees’ Retirement System (or Calpers), reveals that their “fund devoted to clean energy and technology which started in 2007 with $460 million has an annualized return of minus 9.7% to date.”  Dears is quoted as telling the conference: “We have almost $900 million in investment expressly aimed at clean tech.  We’re all familiar with the J-curve in private equity.  Well, for Calpers, clean-tech investing has got an L-curve for “lose.”  Our experience is that this has been a noble way to lose money.” [Global Warming.org, March 27]

Posted on 03/29/13 02:01 PM by Alex Adrianson

ObamaCare Will Raise Health Insurance Premiums

The consulting firm Milliman for Covered California, which is charged with setting up California’s new health insurance exchanges, has a new report on how ObamaCare will affect health insurance premiums, reports the Wall Street Journal:

The report estimates that for currently insured people whose income is too high to qualify for subsidies, premiums could go up 30% on average next year, though part of that rise would be due to health-care cost inflation, not the law. […]

The law’s changes to the individual health-insurance market could cumulatively push up premium rates in California by 14%, on average, it suggests. That includes the effect of the ban on setting premiums or denying coverage based on a consumer’s previous health history.

The report says average premiums could go up about 17%, before accounting for subsidies, because consumers will be getting more generous coverage. The law includes requirements that health plans cover certain benefits and limit out-of-pocket charges such as deductibles—tweaks that lead to richer plans with fewer fees for care, but also push up premiums.

The report projects a roughly 9% premium increase due to rising health-care costs not connected to the law. [Wall Street Journal, March 28]

The Journal reporter points out that ObamaCare will lower the out-of-pocket costs for some people because the law’s subsidies will more than offset the increase in premiums. Another way of making that point would be to say that ObamaCare will increase out-of-pocket costs above and beyond the increase in health insurance premiums for some people, because they’ll have to pay the higher taxes that will fund the law’s subsidy programs.

Posted on 03/29/13 01:27 PM by Alex Adrianson

We’ve Got a History with Amnesty

There’s some sympathy for an immigration amnesty in the current Congress. The problem with amnesties is that after you’ve offered one once there’s no reason to think you wouldn’t offer one a second time. Remember, Congress created an amnesty for immigration violations in 1986; and the Senators then were not oblivious to the danger that an amnesty would incentivize more illegal immigration. David Addington notes a question posed by a Senator from Texas during the debate over that amnesty bill:

[O]ne of the things that has concerned me having looked at the problem on our borders, is that there may be those in other countries who will say that since we granted amnesty once maybe we will do it again. And rather than sign up to be on this list of 1.9 million people that have the dream of someday being able to come here, maybe people will just come on across the border thinking it will happen again.

So I ask my colleague, as one who has worked 6 years on this bill, and who clearly is going to have much to say about changes that will occur in the future, is it the clear position of the distinguished chairman that under no circumstances will there be another blanket amnesty in the future?

The response from the Senator from Wyoming:

I can assure the Senator from Texas that as long as I am involved in it that will be exactly the message that will be sent, that this is it. This is a generous Nation responding; instead of going hunting for you and going through the anguish of that in the cities and communities of America, this is it. It is one time.

The coda:

When Congress enacted the IRCA amnesty programs in 1986 for aliens unlawfully in the U.S., the population of aliens unlawfully in the U.S. was an estimated 3.2 million. In January 2011, that population was an estimated 11.5 million. [Internal citations omitted.] [“Encouraging Lawful Immigration and Discouraging Unlawful Immigration,” by David S. Addington, The Heritage Foundation, March 27, 2013.]

As with the moral hazard created by bailouts, the only way to convince people you won’t reward bad behavior with a second amnesty is to not do it the first time. And the only way to convince people you won’t offer a third amnesty is to not do it the second time.

Posted on 03/29/13 12:05 PM by Alex Adrianson

A Boot Camp for Future Freedom Fighters

From the Institute for Justice:

Posted on 03/28/13 10:43 PM by Alex Adrianson

ObamaCare’s Exchanges Cost a Lot to Create

California has received $910 million in federal grants to create a new health insurance exchange under the Affordable Care Act (AKA, ObamaCare), according to data compiled by the Kaiser Family Foundation. The exchanges are supposed to make it easy for consumers to buy health insurance online. As Rob Laszewski points out, the start-up costs just for California’s exchange will dwarf those of some major private-sector web businesses:

The California exchange, “Covered California,” has so far awarded a $183 million contract to Accenture to build the website, enrollment, and eligibility system and another $174 million to operate the exchange for four years.

The state will also spend $250 million on a two-year marketing campaign. […]

Privately funded Esurance began its multi-product national web business in 1998 with an initial $5.5 million round of venture fund investment in 1999 and a second round of $34 million a few months later. […]

Facebook received $13.7 million to launch in 2005. eBay was founded in 1995 and received its first venture money in 1997––$6.7 million. […]

The California Exchange officials also say they need 20,000 part time enrollers to get everybody signed up––paying them $58 for each application. Having that many people out in the market creates quality control issues particularly when these people will be handling personal information like address, birth date, and social security number. California Blue Shield, by comparison has 5,000 employees serving 3.5 million members. [Health Care Policy and Marketplace Review, March 24; h/t Michael F. Cannon, Cato Institute, March 15]

In total, according to Kaiser’s figures, the federal government has granted states $3.4 billion this year to create health insurance exchanges under ObamaCare.

Posted on 03/25/13 06:15 PM by Alex Adrianson

To Do: March for Marriage

• Tell the Supreme Court you support marriage and citizens’ constitutional authority to set marriage policy by attending the March for Marriage. On Tuesday, March 26, the Supreme Court will hear the constitutional challenge to California’s Proposition 8 that defined marriage as a union between one man and one woman. The March, organized by the National Organization for Marriage, will begin on the National Mall in Washington, D.C., at about 9:30 a.m. and will proceed to the Supreme Court. There will then be a rally on the National Mall at about 11 a.m.

• Find out what’s at stake in the marriage cases before the Supreme Court this week. The Heritage Foundation will host a panel discussion on Monday beginning at noon.

• Put your lights on! Human Achievement Hour is this Saturday beginning at 8:30 p.m. The event takes place wherever you want to celebrate the genius of human achievement.

• Learn from the leading lights of liberty by checking out the Cato Home Study Course. The course is composed of 12 audio lectures on such topics as The United States Constitution, Adam Smith’s Wealth of Nations, Henry David Thoreau, and the “Austrian” school.

Posted on 03/22/13 05:08 PM by Alex Adrianson

A Bull Market in Non-Government Money?

Markets have a way of evolving around and eventually bypassing government control:

 

[h/t: Marginal Revolution, March 21]

Posted on 03/22/13 04:15 PM by Alex Adrianson

Marriage Matters

This coming Tuesday, the Supreme Court will hear arguments in challenges to the federal Defense of Marriage Act and California’s Proposition 8 that defined marriage as a union between one man and one woman. The cases together represent a challenge the constitutional authority of citizens to make marriage policy. The Heritage Foundation’s Ryan Anderson explains what is at stake:

Government recognizes marriage because it is an institution that benefits society in a way that no other relationship does. Marriage is society’s least restrictive means of ensuring the well-being of children. State recognition of marriage protects children by encouraging men and women to commit to each other and take responsibility for their children. While respecting everyone’s liberty, government rightly recognizes, protects, and promotes marriage as the ideal institution for childbearing and childrearing.

Promoting marriage does not ban any type of relationship: Adults are free to make choices about their relationships, and they do not need government sanction or license to do so. All Americans have the freedom to live as they choose, but no one has a right to redefine marriage for everyone else.

In recent decades, marriage has been weakened by a revisionist view that is more about adults’ desires than children’s needs. This reduces marriage to a system to approve emotional bonds or distribute legal privileges.

Redefining marriage to include same-sex relationships is the culmination of this revisionism, and it would leave emotional intensity as the only thing that sets marriage apart from other bonds. Redefining marriage would further distance marriage from the needs of children and would deny, as a matter of policy, the ideal that a child needs both a mom and a dad. Decades of social science, including the latest studies using large samples and robust research methods, show that children tend to do best when raised by a mother and a father. The confusion resulting from further delinking childbearing from marriage would force the state to intervene more often in family life and expand welfare programs. Redefining marriage would legislate a new principle that marriage is whatever emotional bond the government says it is.

Redefining marriage does not simply expand the existing understanding of marriage. It rejects the anthropological truth that marriage is based on the complementarity of man and woman, the biological fact that reproduction depends on a man and a woman, and the social reality that children need a mother and a father. Redefining marriage to abandon the norm of male–female sexual complementarity would also make other essential characteristics—such as monogamy, exclusivity, and permanency—optional. Marriage cannot do the work that society needs it to do if these norms are further weakened. [“Marriage: What It Is, Why It Matters, and the Consequences of Redefining It,” by Ryan T. Anderson, The Heritage Foundation, March 11, 2013]

Posted on 03/22/13 03:59 PM by Alex Adrianson

Free Speech a Big Winner in Australia

This week, the Australian government abandoned both an effort to create a new regulator of media and an effort to expand anti-discrimination laws. The proposed media regulator would have had the power to decide what is fair and accurate reporting, and to issue licenses. Without a license, reporters would have faced liability under privacy laws.

The anti-discrimination proposal would have made it illegal to discriminate against someone’s political views in the workplace. Businessmen faced the prospect of liability for posting political signs that their employees disliked. The government, it seems, wanted to make it illegal to offend someone’s political views. The Australian public found the proposal very offensive.

The Institute of Public  Affairs, Australia’s free market think tank, played a big role in mobilizing public opinion against these measures. Why did it take backlash from the public to preserve fundamental freedoms? The IPA’s Simon Breheny identifies the problem:

Worryingly, the loudest voices in favour of these restrictions on freedom of speech came from taxpayer-funded bodies, such as the Australian Human Rights Commission. It is a damning indictment on these organisations that they failed to stand up for freedom of speech when it was under a very real threat.

Doubly so because they were shown up by ordinary members of the Australian community whose taxpayer dollars they use to fund their incessant lobbying. [The Australian, March 22]

Posted on 03/22/13 03:26 PM by Alex Adrianson

Of Course, the EU Is Not a Democracy

The demands made on Cyprus this week by Chancellor Merkel, et al., are not the first time anybody has thought of putting a tax on (i.e., confiscating a portion of) bank deposits:

Back in 1941, with the memory of the Great Depression still weighing heavy, an American wrote into the Federal Reserve with an idea. “Would it not be feasible,” the member of the public asked, “to impose a Federal tax on the deposit of funds in bank checking accounts?”

The reply from the Fed was polite but succinct: while there’s no doubt a tax on bank deposits would have “the advantage of administrative simplicity”, it is “not in accord with one of the fundamental principles of taxation in a democracy, namely, that taxes should be imposed in accordance with ability to pay”. [The Real Economy, March 16; h/t Marginal Revolution, March 18]

Posted on 03/22/13 11:38 AM by Alex Adrianson

Chilling Speech

Britain is on the verge of putting news outlets under the thumb of a new regulatory body. The nation’s political parties have negotiated a royal charter that would, as the New York Times describes it, “replace the newspaper industry’s self-regulating body with an independent agency that could levy fines of up to £1 million, or $1.5 million, order editors to issue prominent corrections and provide arbitration for people who believed they had been wronged by the press.” Publishers don’t have to participate in the system, but if they don’t, their liability for defamation or privacy violations would be higher. The move is the government’s response to the News of the World phone hacking scandal.

Britain will end up with a media that only the pro-EU crowd in Brussels could love, says Daniel Hannan, British Member of the European Parliament:

In many European countries, newspapers receive tax-breaks or other forms of state subsidy. In a surprising number, it is quite normal for journalists to submit their copy before publication to the politicians about whom they have written. The result is the deferential attitude that supporters of press regulation like to call ‘grown-up’ and ‘responsible’.

It’s true that the papers in, say, France, are much less likely to intrude into the personal lives of politicians or celebrities; but it’s equally true that they are less likely to deviate from the approved line on questions of tax, immigration, Europe and so on. That’s the trouble with putting the state in charge of the media. What begins as an attempt to protect privacy ends with politicians deciding which opinions are acceptable.

Guess who is not standing up for free speech:

The [British] Europhile publications have been surprisingly muted in their opposition to state regulation; indeed, several of them have positively welcomed it. These, by and large, are also the papers that have been most peevish about the political pluralism ushered in by the rise of electronic media. [The Telegraph, March 20]

Publishers of content outside Britain—e.g. bloggers—should take note: “Lawyers who have looked at the proposal say it would also cover Internet news and opinion sites outside the country that could be read in Britain.” [New York Times, March 19]

Posted on 03/20/13 05:59 PM by Alex Adrianson

The Murray Budget Means Slower Growth

Senator Patty Murray’s 2014 budget calls for tax increases of $975 billion over ten years, with most of the increase likely hitting capital gains and dividend income. That means the cost of capital investment will go up. Rea Hederman Jr. and John Ligon estimate the consequences:

The Murray tax proposal would slow private business investment substantially over the 10-year forecast period. Increasing taxes on capital and corporate income would slow business investment by $82 billion annually over the 10-year forecast.

The slowdown in business investment and capital in the U.S. economy contributes to a slowdown of $1.4 trillion in real economic output and an average 853,000 U.S. jobs over the 10-year forecast period. […]

The tax increases would likely slow the S&P 500 Index of Common Stocks by an average 17 percent from baseline levels over the first five years and an average 14 percent relative to baseline levels over the 10-year period.

Declining asset values and lower income (after-tax personal income would decline an average $180 billion annually) would leave households with an average $1.8 trillion less net wealth annually. […]

The Murray tax proposal would generate less federal revenue as the economy slows. Dynamically, when accounting for the economic feedbacks of the increased taxes on personal and corporate incomes, the Murray proposal would achieve about 57 percent ($878 billion) of the $1.55 trillion static revenue estimate. [Internal citations omitted.] [The Heritage Foundation, March 19]

Posted on 03/20/13 01:24 PM by Alex Adrianson

Television News Serving Up More Opinion Less News—Especially MSNBC

Says the Pew Research Center’s State of the News Media 2013 report:

CNN, which has branded itself around reporting resources and reach, cut back between 2007 and 2012 on two areas tied to that brand—in-depth story packages and live event coverage. Even so, CNN is the only one of the three big cable news channels to produce more straight reporting than commentary over all. At the other end of that spectrum lies MSNBC, where opinion fills a full 85% of the channel’s airtime.

According to the survey, the balance for Fox News was 55 percent commentary/opinion and 45 percent factual reporting. [“The Changing TV News Landscape,” by Mark Jurkowitz et al., in The State of the News Media 2013,” Pew Research Center, March 18, 2013]

Posted on 03/19/13 05:42 PM by Alex Adrianson

The United States Is Losing Its Investment Appeal

Twenty-two countries are more attractive places for foreign direct investment than the United States, according to the Milken Institute’s Global Opportunity Index. The United States’ score in the index has fallen 9.35 percent since 2007, largely because of expanding public debt and tightening regulatory barriers, say the authors of the report. The Global Opportunity Index is composed of 67 variables that measures such things as trade openness, economic performance, restrictions on capital flows and bank ownership, tax and regulatory burdens, the costs of crime, the presence of corruption, and the strength of legal protections for property rights. The authors say the index explains 65 percent of the variation in foreign direct investment levels between countries.

As in The Heritage Foundation/Wall Street Journal 2013 Index of Economic Freedom, Hong Kong and Singapore rank first and second in the Global Opportunity Index. Australia, Switzerland, Denmark, and Canada are also in the top ten of both indices. The United States, which has slipped in the Index of Economic Freedom but remains in the top ten (10th), comes in 23rd in the Global Opportunity Index.

Posted on 03/19/13 05:13 PM by Alex Adrianson

Austerity via Spending Cuts Works Better than Austerity via Tax Increases

Alberto Alesina and Veronique de Rugy review the economic literature:

[W]hile not all fiscal adjustments lead to economic expansion, spending-based adjustments are less recessionary than those achieved through tax increases. Moreover, when successful spending-based adjustments were not expansionary, they were associated with mild and short-lived recessions, while tax increases were unsuccessful at reducing the debt and associated with large recessions. These findings hold even when using the IMF definitions of fiscal adjustments.

In fact, these findings are consistent with IMF studies themselves. For instance, IMF economists Jaime Guajardo, Daniel Leigh, and Andrea Pescatori studied 173 fiscal consolidations in rich countries and found that “nations that mostly raised taxes suffered about twice as much as nations that mostly cut spending. “IMF researchers, however, downplay this result and incorrectly attribute it—as shown by Alesina, Favero, and Giavazzi—to different reactions of monetary policy to different types of fiscal adjustments.

[…] [S]uccessful and expansionary fiscal adjustments are those based mostly on spending cuts rather than tax increases. Also, these adjustments lasted slightly longer and were associated with higher growth during the adjustment. Using data from 21 Organisation for Economic Co-operation and Development (OECD) countries from 1970 to 2010, Alesina and Ardagna find that successful fiscal adjustments on average reduced debt-to-GDP ratio by 0.19 percentage points of GDP in a given year. GDP grew by 3.47 percentage points in total, which is 0.58 percentage points higher than the average growth of G7 countries. Successful adjustments lasted for three years on average. […] Alesina, Favero, and Giavazzi’s work shows that taking the business cycle and monetary policy into account does not change the main finding. [Internal citations omitted.]

And: “Besides, it is not clear that the alternative to reducing spending is more economic growth. In fact, the alternative for certain countries could be a very messy debt crisis.” [“Austerity: The Relative Effects of Tax Increases versus Spending Cuts,” by Alberto Alesina and Veronique de Rugy,” Mercatus Center, March 7]

Posted on 03/19/13 04:03 PM by Alex Adrianson

The Young Single Mom Is Still Here, Just a Little Older

Teen pregnancy is down, but child-bearing by unmarried 20-somethings is up. What’s going on? Kay Hymowitz, W. Bradford Wilcox, and Kelleen Kaye explain:

The knowledge economy and greater professional expectations have made higher education essential for middle-class life and integral to a personal sense of achievement for many women and men. This has meant changing not just the timing but the meaning of marriage. Once marriage was the foundation for adult identity, finances and family; now it has become a crowning achievement that only happens after a young adult is vocationally, psychologically and financially set.

But this model of marriage has left many less-educated, less well-off Americans without a viable life script. With manufacturing jobs and median male wages on the decline, less-skilled men are finding it ever harder to become financially “set.” Under these circumstances, it is no surprise that growing numbers of Middle Americans are postponing marriage or forgoing it altogether.

Meanwhile, many whose jobs do not give them membership in the professional class turn to a traditional source of young adult identity—parenthood—for meaning and satisfaction. Although nearly all unmarried young adults say it’s important to them to avoid pregnancy at the present moment, a third also say they would be at least a little happy if they did find themselves pregnant. And so young women often drift “unintentionally” into parenthood with men whom they believe are not good enough to marry or not ready for it.

The sad irony is that the unmarried 20-something parent is often both responding to and helping to produce the economic and social troubles now enveloping much of the country. Children born to stable, married parents are more likely to graduate from high school and from college, well-equipped to thrive in a knowledge economy and, in turn, more likely to marry and start their own families on a stable footing. The converse is true for children from homes marked by instability. Without a stable family, their chances of moving up the education and income ladder are stunted, which—in turn—reduces their odds of getting married as adults. [Wall Street Journal, March 15]

Posted on 03/18/13 06:48 PM by Alex Adrianson

To Do: Hear Cuban Dissidents Discuss Raul Castro’s Reforms

• Learn what life in Raul Castro Cuba’s is like. The Cato Institute will host a discussion featuring dissident Cuban bloggers Yoani Sanchez and Orlando Luis Pardo Lazo. The event begins March 19 at 12:30 p.m.

Commemorate the 30th anniversary of President Reagan’s Strategic Defense Initiative speech. The Heritage Foundation and the George C. Marshall Institute will host a mini conference on March 19 beginning at 10 a.m. at The Heritage Foundation.

• Find out if the philanthropic sector has become too polite to be effective. The Hudson Institute will host an event called “Is Philanthropy Killing Itself with Kindness?” on March 25 beginning at noon.

• Hear out how the Pentagon can become more efficient by shrinking bureaucracy, reducing overhead, and eliminating excess infrastructure. The American Enterprise Institute will host a panel discussion on March 21 beginning at 9 a.m.

Posted on 03/15/13 05:19 PM by Alex Adrianson

Achievement Is Down, but Staffing Is Up!

Since 1950, employment in the nation’s K-12 public education system has grown nearly four times faster than enrollments, according to Department of Education data. Benjamin Scafidi looks in detail at this staffing surge in a new report from the Friedman Foundation for Educational Choice:

Nationally, states could have saved—and could continue to save—more than $24 billion annually if they had increased/decreased the employment of administrators and other non-teaching staff at the same rate as students between FY 1992 and FY 2009. […]

There are very large differences in the employment of non-teaching personnel across states. For example, whereas Vermont has only 8.8 students for every administrator or other non-teaching employee and Maine has only 9.4 students per non-teaching employee, Rhode Island has 20 students per every administrator or other non-teaching employee. Wyoming has 9.9 students per every non-teaching employee, whereas Idaho has 22.7 students per non-teaching employee. Those differences are much larger than the differences in the employment of teachers.

Twenty-one “Top-Heavy States” employ fewer teachers than other non-teaching personnel. Thus, those 21 states have more administrators and other non-teaching staff on the public payroll than teachers. Virginia “leads the way” with 60,737 more administrators and other non-teaching staff than teachers in its public schools.

There are significant differences in total employment ratios across states. Vermont, Maine, Wyoming, and the District of Columbia each have fewer than six students per public school employee. That compares to more than 10 students per public school employee in Idaho, South Carolina, Arizona, California, Utah, and Nevada. [“The School Staffing Surge: Decades of Employment Growth in America’s Public Schools, Part II,” by Benjamin Scafidi, Friedman Foundation for Educational Choice, February 2013]

As Scafidi points out in his report from last October, math scores on the National Assessment of Education Progress tests have been flat since 1992 while reading scores have actually declined. Graduation rates for the same period when up by half a percentage point—from 74.2 percent to 74.7 percent. It seems the investment in staff, in other words, has not produced a return in increased learning. [“The School Staffing Surge: Decades of Employment Growth in America’s Public Schools,” by Benjamin Scafidi, Friedman Foundation for Educational Choice, October 2012]

Posted on 03/15/13 03:17 PM by Alex Adrianson

A Transparency Crisis?

You may have heard about the Competitive Enterprise Institute’s lawsuit against the Environmental Protection Agency’s failure to respond to Freedom of Information Act requests. As Mark Tapscott notes in his column on Sunshine Week (this week), CEI isn’t the only requester having trouble getting the government to release its records: “A recent study by the Transactional Records Access Clearinghouse at Syracuse University found a 28 percent increase in the number of FOIA suits filed during the last two years of Obama’s first term, compared to the last two years of President George W. Bush’s second term, from 562 to 720 cases.” [The Washington Examiner, March 10]

Posted on 03/15/13 02:47 PM by Alex Adrianson

The Rest of the Medicaid Story

On Obamacare’s proposed Medicaid expansion, a number of governors have decided take the federal money and run, reasoning that their own taxpayers won’t see any savings if they turn down the federal money while other states accept the deal. Even so, are governors figuring the long-run costs correctly? According to a new analysis by The Heritage Foundation, a few big states that already have bloated Medicaid programs—like New York—will see savings, but nationally most will end up paying more for Medicaid in the long-run. Forty states will “see costs exceed savings when the federal match rate is lowered after the first three years.” Here, for example, is what the projections for Florida show:

For more state estimates, see “Obamacare and the Medicaid Expansion: How Does Your State Fare?” by Drew Gonshorowski, The Foundry, March 5.

And those estimates assume the federal government continues to provide the same matching rate indefinitely. What happens if it doesn’t? Will governors then start kicking people off the Medicaid rolls? Of course, by then the governors are not likely to be the same people who decided to expand today.

Posted on 03/15/13 02:36 PM by Alex Adrianson

Neutrality, Neutrality at All Costs

By a vote of 99.8 percent to 0.2 percent, Falklanders said they wanted the Falkland Islands to remain British. In the Monday referendum, 92 percent of the Islanders voted, and all but three choose to vote for continuing political union with Britain.

In response, the Obama administration shrugged. In the past, the President of the United States was often called the leader of the free world, but this administration values what it calls “neutrality” more than self-determination. State Department spokeswoman Victoria Nuland:

The residents have clearly expressed their preference for a continued relationship with the United Kingdom. That said, we obviously recognize that there are competing claims. Our formal position has not changed. We recognize the de facto UK administration of the islands, but we take no position on sovereignty claims. [Agence France Press, March 13]

Right:

The U.S. military uses and benefits from bases on Britain’s overseas territories, including Diego Garcia in the Indian Ocean, the Sovereign Base Areas of Akrotiri and Dhekelia on Cyprus, Ascension Island in the mid-Atlantic, and Gibraltar. Some of these overseas territories, such as Gibraltar, are controversial, but the U.S. uses them and supports British claims to them. It appears that because the U.S. military does not use the Falkland Islands, the U.S. applies a different standard to them. [“The United States Should Recognize British Sovereignty Over the Falkland Islands,” by Luke Coffey, Theodore R. Bromund, and Nile Gardiner, March 4]

Posted on 03/15/13 01:36 PM by Alex Adrianson

Losing Limitedness

The annual budget from House Budget Committee Chair Paul Ryan isn’t quite the limited-government standard that it used to be, says Dan Mitchell, who notes the good and the bad of this year’s edition:

[F]ederal spending grows by an average of 3.4 percent annually, and that modest bit of fiscal discipline is enough to reduce the burden of government spending to 19.1 percent of economic output by 2023. […]

[T]op tax rates would be reduced to 25 percent and many forms of double taxation, like the death tax and capital gains tax, presumably would be reduced or eliminated. […]

But:

[T]he budget assumes that the federal tax burden should remain at about 19 percent of GDP, higher than the long-run average of 18 percent of GDP and—for all intents and purposes—permanently enshrining Obama’s fiscal cliff victory. […]

Two years ago, [Ryan] put forth a budget that limited spending so that it grew 2.8 percent per year. Last year, he put forth a budget that limited spending so that it grew 3.1 percent per year. Now, spending will climb 3.4 percent per year. [Cato Institute, March 12]

Posted on 03/15/13 12:12 PM by Alex Adrianson

Separation of Powers Gives Consumer Freedom a Reprieve

On Monday, a New York State trial court overturned New York City’s ban on large-size sodas that was set to go into effect on Tuesday. The court ruled not that consumers have a right to choose their own soda size, but that the rules were arbitrary and capricious and that the city’s Department of Health had no authority to issue the rules under existing law. The department was, in effect, writing new law, a power reserved for legislatures and city councils. As Walter Olson explains, this separation-of-powers ruling nevertheless contains “the germ of a much-needed rebuke to some actors in the public-health movement”:

The New York City Health Department was asserting a breathtakingly broad definition of its powers, on the grounds that successive city charters give it sweeping authority to address all matters relating to health. Under the interpretation advanced by Bloomberg’s lawyers, this vague charter language would empower the department to issue pretty much whatever diktats it pleases for New Yorkers to obey on any topic somehow related to advancing health. (They did concede that the department could not take actions that were otherwise unconstitutional–say, suspending freedom of the press or quartering troops in civilian homes during peacetime.)

Against this, Judge Tingling reasoned (as have judges in other cases) that the charter language could not have been meant to grant the department an absolute and monarch-like authority over a subject populace; natural and reasonable limits must be read into it. What are the natural and reasonable limits to the authority of a public health agency? Looking at cases where the agency’s authority to act had been upheld, the judge noted instances of emergencies, particularly those relating to epidemics of contagious or communicable diseases. Those are indeed the traditional functions at the core of a public health agency; saving us from voluntarily assumed dietary choices that may very gradually undermine our health is not among them. [Commentary, March 13]

Posted on 03/15/13 11:47 AM by Alex Adrianson

20,000 Pages of Obamacare Regulations in One Picture

The Department of Health and Human Services released 828 pages of ObamaCare regulations on Monday, bringing the total Obamacare regulations written so far to 20,000 pages. Sen. Mitch McConnell has produced a picture of what those pages look like stacked in one pile:

As then-Speaker of the House Nancy Pelosi correctly stated back in 2010, Congress had to pass the law in order for anybody to find out what was in it. And we’re all still finding out.

Posted on 03/14/13 06:42 PM by Alex Adrianson

Obama’s Man for Labor Led Race-Conscious Civil Rights Division, says Inspector General

The Justice Department division headed by Thomas Perez, President Obama’s putative choice to be the next Secretary of Labor, appears to have been guided by the idea that civil rights laws protect only minorities—i.e., not white people. Perez is currently the Assistant Attorney General for the Civil Rights Division at the Department of Justice. A 300-page report by the department’s Office of Inspector General, released this week, contains evidence supporting the accusations of former Voting Section chief Christopher Coates and department lawyer J. Christian Adams. Following the department's decision to dismiss a case against the Black Panthers for intimidating white voters in Philadelphia, Coates and Adams charged that their colleagues were not interested in enforcing civil rights laws in a race-neutral manner. Previously Coates’s Voting Section had sued and won a judgment against black Noxubee County election officials for violating the rights of white voters. The IG report notes the response to this case within the department:

Coates and other career attorneys told the OIG that they were aware of comments by some Voting Section attorneys indicating that the Noxubee case should have never been brought because White citizens were not historical victims of discrimination or could fend for themselves. Indeed, two career Voting Section attorneys told us that, even if the Department had infinite resources, they still would not have supported the filing of the Noxubee case because it was contrary to the purpose of the Voting Rights Act, which was to ensure that minorities who had historically been the victims of discrimination could exercise the right to vote. […]

Many of those individuals told the OIG that they believed that the reason the voting rights laws were enacted was to protect historic victims of discrimination and therefore the Section should prioritize its resources accordingly. Additionally, some of these individuals, including one current manager, admitted to us that, while they believed that the text of the Voting Rights Act is race-neutral and applied to all races, they did not believe the Voting Section should pursue cases on behalf of White victims.

And regarding efforts to remove Coates as head of the Voting Section, the report notes:

Attorney General Holder told us that he understood from what others told him that Coates was a divisive and controversial person in the Voting Section and that one concern about Coates was that he “wanted to expand the use of the power of the Civil Rights Division in such a way that it would take us into areas that, though justified, would come at a cost of that which the Department traditionally had done, at the cost of people [that the] Civil Rights Division had traditionally protected.”

The OIG report describes these conflicts in Perez’s Civil Rights Division as “deep ideological polarization” that “fueled disputes and mistrust that harmed the functioning of the Voting Section.” [“A Review of the Operations of the Voting Section of the Civil Rights Division,” Department of Justice Office of Inspector General, March 2013]

Posted on 03/14/13 05:59 PM by Alex Adrianson

When the Patient Spends His Own Money

Fixing health care could be as simple as making consumers see real prices. That’s what happens when physicians stop taking insurance and accept only direct payment from their patients. More and more doctors are turning to that model, as Jim Epstein reports, and their experience shows that bypassing third-party payers leads to lower prices:

Dr. [Ryan] Neuhofel, based in the college town of Lawrence, Kansas, charges for his services according to an online price list that’s as straightforward as a restaurant menu. A drained abscess runs $30, a pap smear, $40, a 30-minute house call, $100. Strep cultures, glucose tolerance tests, and pregnancy tests are on the house. Neuhofel doesn’t accept insurance. He even barters on occasion with cash-strapped locals. One patient pays with fresh eggs and another with homemade cheese and goat’s milk. 

“Direct primary care,” which is the industry term for Neuhofel’s business model, does away with the bureaucratic hassle of insurance, which translates into much lower prices. “What people don’t realize is that most doctors employ an army of people for coding, billing, and gathering payment,” says Neuhofel. “That means you have to charge $200 to remove an ingrown toenail.” Neuhofel charges $50. […]

This model is growing in popularity. Leading practitioners of direct primary care include Seattle, Washington-based Qliance, which has raised venture capital funding from Jeff Bezos, Michael Dell, and comedian (and Reason Foundation Trustee) Drew Carey; MedLion, which is about to expand its business to five states; and AMG Medical Group, which operates several offices in New York City. Popular health care blogger Dr. Rob Lamberts has written at length about his decision to dump his traditional practice in favor of this model. […]

When she was operating a traditional practice, [Dr. Lisa] Davidson witnessed firsthand how our “payment plans for routine expenses” drive up prices and block innovation. She recalls that one insurance company paid $118 for a routine PSA test. Now that her patients pay the bill directly the cost is $18. Insurance used to pay $128 for a bag of IV fluid. Now Davidson doesn’t bother passing on the cost of IV bags because they run $1.50 each. [Reason, March 13]

Posted on 03/13/13 01:53 PM by Alex Adrianson

To Do: Get Your Ticket for Resource Bank

• Register for Resource Bank, the annual meeting that brings together hundreds of policy experts, think tanks heads, film makers, activists, and journalists to share ideas and strategies for advancing liberty and constitutionally limited government. The theme of this year’s conference, hosted by The Heritage Foundation is: “Advancing the Opportunity Agenda.” In addition to the usual great panels, strategy sessions, and speakers, this year’s event will be held in conjunction with the Future of Journalism Summit, co-hosted by The Heritage Foundation and the Franklin Center. We’ve heard that the Franklin Center has already received over 600 nominations for this year’s Breitbart Awards, which will be presented at the closing lunch. Resource Bank will be held April 24 to 26 at the Omni Orlando Resort in Orlando, Fla.

• Don’t forget about two other big deal conferences coming up this month. We’ve mentioned them before but here’s a reminder: For high school students, the Young America’s Foundation High School Conference will be held March 21, 2013 at the Reagan Ranch. And for activists of all ages, the Conservative Political Action Conference will be March 14 to 16 at the Gaylord National Hotel at the National Harbor in Maryland (across the river from Alexandria, Va.).

• If you are fan of Reason magazine, now would be a good time to renew your subscription, which Reason is offering for a sequester-special discount of 2.3 percent off! (Well played, Reason. Well played.)

Posted on 03/08/13 05:44 PM by Alex Adrianson

Hugo Chavez Dead at 58 This Week

Michael Moynihan sums up his legacy this way:

[The Observatorio Venezolano de la Violencia] reckons that 2012 saw an astonishing 21,692 murders in the country—in a population of 29 million. Last year, I accompanied a Venezuelan journalist on his morning rounds at Caracas’s only morgue to count the previous night’s murders. As the number of dead ballooned, the Chávez regime simply stopped releasing murder statistics to the media.

All of this could have been predicted, and wasn’t particularly surprising from a president who believed that one must take the side of any enemy of the “empire.” That Zimbabwe’s dictator Robert Mugabe was a “freedom fighter,” or that Belarusian dictator Alexander Lukashenko presided over “a model of a social state.” Saddam Hussein was a “brother,” Bashar al-Assad had the “same political vision” as the Bolivarian revolutionaries in Venezuela. He saw in the madness of Col. Gaddafi an often overlooked “brilliance” (“I ask God to protect the life of our brother Muammar Gaddafi”). The brutal terrorist Carlos the Jackal, who praised the 9/11 attacks from his French jail cell, was “a good friend.” He praised and supported FARC, the terrorist organization operating in neighboring Colombia. The list is endless.

 His was a poisonous influence on the region, one rah-rahed by radical fools who desired to see a thumb jammed in America’s eye, while not caring a lick for its effect on ordinary Venezuelans. In his terrific new book (fortuitously timed to publish this week) Comandante: Hugo Chávez's Venezuela, The Guardian’s Rory Carroll summed up the legacy of Chávez’s Venezuela as “a land of power cuts, broken escalators, shortages, queues, insecurity, bureaucracy, unreturned calls, unfilled holes, uncollected garbage.” One could add to that list grinding poverty, massive corruption, censorship, and intimidation. [Daily Beast, March 5]

Posted on 03/08/13 03:28 PM by Alex Adrianson

Hyping the Sequester

Charles Krauthammer, on the cancellation of White House tours: “The president’s travel expenses alone for the golfing outing with Tiger Woods would pay for a year of White House visits. So I suggest that, perhaps, he curtail the travel or perhaps auction off a set of clubs and he might be able to allow those Iowa tots to come through the White House.” [Real Clear Politics, March 7]

Diana Furchtgott-Roth, writing on monetary policy, notes:The Fed spends $85 billion each month purchasing Treasury bonds and mortgage-backed securities. That’s the amount of the entire sequester for fiscal 2013.” [Washington Examiner, March 5]

The editors at the Wall Street Journal, on the prospect that meat inspectors will be furloughed: “[T]wo divisions of the Agriculture Department will underwrite the 26th California Small Farm Conference in Fresno next week. The event will feature USDA speakers, field trips, a banquet and a tasting reception, according to the conference website. Conference organizers promise the tasting will be a ‘mouthwatering event’ featuring ‘fine wines and exceptional micro-brews paired with seasonally driven culinary delicacies.’” [Wall Street Journal, March 5]

Posted on 03/08/13 03:04 PM by Alex Adrianson

Toolkit: Prepping for a Media Interview

The most important thing to remember when doing an interview with the media is that you are not having a conversation with the journalist to whom you are talking; you’re getting a message to an audience that’s on the other side of the journalist. So be assertive, stick to your talking points, and answer only the questions you want to answer on your terms.

If you are new to doing media interviews or you want to improve your performance, read the rest of our Toolkit feature “Tips on Prepping for Media Interviews,” by Amy Payne.

Posted on 03/08/13 02:40 PM by Alex Adrianson

Hearing the Voices They Fund

The “Europe for Citizens’” program is billed as the European Commission’s effort to engage in dialogue with civil society in order to build popular support and democratic legitimacy for European union. What it really amounts to, says a recent study by Christopher Snowdon, is the European Union funding its own cheerleaders in the non-profit sector:

• The composition of ‘civil society’ at the EU level is largely dictated by which groups the Commission chooses to fund. There has been a bias towards centre-left organisations, with a particular emphasis on those promoting policies that are unpopular with the public, such as increasing foreign aid, restricting lifestyle freedoms and further centralising power within EU institutions.

• The [Eurpopean Commission’s] favoured civil society organisations are also marked by a homogeneous worldview and similarity of jargon. The literature and websites of these groups suffocate the reader with vague rhetoric about ‘stakeholders’, ‘sustainability’, ‘social justice’, ‘capacity building’, ‘fundamental rights’, ‘diversity’, ‘equity’ and ‘active citizenship’.

• Many of the groups which receive the Commission’s patronage would struggle to exist without statutory funding. For example, Women in Europe for a Common Future received an EC grant of €1,219,213 in 2011, with a further €135,247 coming from national governments. This statutory funding made up 93 per cent of its total income while private donations contributed €2,441 (0.2 per cent) and member contributions just €825 (0.06 per cent).

• There is virtually no funding for organisations which seriously question the Commission’s direction of travel. By contrast, groups that favour closer union and greater centralisation are generously funded. The ‘Europe for Citizens’ programme which ‘gives citizens the chance to participate in making Europe more united, to develop a European identity, to foster a sense of ownership of the EU, and to enhance tolerance and mutual understanding’ has a €229 million budget for 2014-20.

Snowdon concludes:

The Commission spends vast sums of money encouraging ‘active citizens’ to make their voices heard and yet when the masses are consulted through the democratic process, they are ignored. The only message that has been unambiguously sent from the demos to the Commission in the past 15 years is the one message that it will not act upon – that is, to slow down or reverse the process of political integration. [“Euro Puppets: The European Commission’s Remaking of Civil Society,” by Christopher Snowdon, Institute of Economic Affairs, February 2013]

Posted on 03/08/13 02:16 PM by Alex Adrianson

Extrajudicial Killing of American Noncombatants Not an Enumerated Power of the Federal Government

A 13-hour filibuster—a old-fashioned talking filibuster, not the procedural kind—by Sen. Rand Paul (R-Ky.) provoked the following response in a letter from Attorney General Eric Holder: “It has come to my attention that you have now asked an additional question: ‘Does the President have the authority to use a weaponized drone to kill an American not engaged in combat on American soil?’ The answer to that question is no.” [Washington Post, March 7]

Duly noted. Sen. Paul’s filibuster briefly held up the nomination of John Brennan to head the Central Intelligence Agency. By the way, relying exclusively on targeted killings is not likely to stem Islamist terrorism, either. As The Heritage Foundation has noted:

While covert strikes can be a successful tactic for hunting down the leaders of terrorist groups, attrition is counterproductive when combating an insurgency. The prospect of “body counts” as the proper metric for measuring success should give Americans pause about the strategy pursued by the Administration. Additionally, without persistent presence and engagement of threatened governments and civilian populations, the U.S. will lack the real-time actionable intelligence necessary for effective targeting of terrorists and the successful suppression of insurgencies. [“A Counterterrorism Strategy for the ‘Next Wave’,” The Heritage Foundation, August 24, 2011]

Posted on 03/08/13 11:05 AM by Alex Adrianson

Pharmaceuticals Are Curing AIDS Today, but Will the Innovation Keep Coming?

“A Mississippi baby born with the AIDS virus appears to have been cured after being treated with an aggressive regimen of drugs just after her birth 2½ years ago, an unusual case that could trigger changes in care for hundreds of thousands of babies born globally each year with HIV,” reports Ron Winslow: “The new case was discovered after the baby girl’s mother stopped treatment on her, and doctors realized that the virus was undetectable even without drugs, which HIV patients normally must take for the rest of their lives.” [Wall Street Journal, March 3]

This breakthrough should be a “teaching-learning moment” for critics of the pharmaceutical industry, says Paul Howard:

After HIV antivirals lose patent protection, of course they are cheap permanently, meaning that a relatively few years of high prices leads to enormous social gains down the road that aren't captured by the manufacturers. Indeed, in a 2005 NBER paper researchers at the University of Chicago estimated that manufacturers only capture about 5 percent of the social value of HIV medicines. The rest goes to patients, current and future, who benefit from the medicines. […]

[P]olicymakers who advocate plans to lower drug prices now – through price controls or other strategies – ignore the dynamic effects of drug pricing on future innovations, and the enormous gains to future patients that accrue from innovation. Price controls assume a static stock of innovations, and push costs much closer to the actual marginal cost – the cost to manufacture each pill – of producing those medicines today.

Such policies are pennywise, but pound foolish. As today’s announcement shows, gains from HIV antiretrovirals continue to accrue to patients decades after the original discovery. Medical innovation is dynamic, and as economists know well, very responsive to pricing signals. Price controls would diminish the number of future innovations, leaving us with fewer new medicines – and more lost lives. [Medical Progress Today, March 4]

Posted on 03/07/13 08:48 PM by Alex Adrianson

Who Really Earns the Minimum?

Earning the minimum wage doesn’t mean you’re living in poverty. Most likely it means you’re a teenager working an after-school job. James Sherk reports that just over half of all minimum wage earners are between ages 16 and 24:

Minimum-wage workers under 25 are typically not their family’s sole breadwinners. Rather, they tend to live in middle-class households that do not rely on their earnings. Generally, they have not finished their schooling and are working part-time jobs. Over three-fifths of them (62 percent) are currently enrolled in school. [Internal citation omitted.]

Those part-time jobs that can help young people gain the work skills they need to be successful and earn more when they get older—if their employers don’t respond to a higher minimum wage by replacing them with higher-skilled workers or substituting more capital for their labor.

And raising the minimum wage isn’t likely to help adults in poverty, either, says Sherk. Only one-quarter of those earning the minimum wage live in poverty. Two-thirds of those living in poverty don’t even work. [The Heritage Foundation, February 28]

Posted on 03/07/13 08:18 PM by Alex Adrianson

Meet the New Mortgage Boss, Same as the Old

The same bad lending that produced the 2008 mortgage crisis is likely to happen again, write Peter Wallison and Edward Pinto: “The new Qualified Mortgage rule finalized in January by the Consumer Financial Protection Bureau turns out to be simply another and more direct way for the government to keep mortgage underwriting standards low.” On their own, lenders would require substantial down payments and good credit histories; but those requirements are absent from the new rule, explain Wallison and Pinto:

Substantial downpayments and good credit histories are unpopular with community “activists,” realtors, homebuilders and other members of what we call the Government Mortgage Complex. They want continued lending to as many potential home buyers as possible, even if these borrowers don’t have the incomes, assets and credit histories to meet common sense underwriting requirements. This coalition has been effective in moving Congress in the past—and the Consumer Financial Protection Bureau in its recent rule—to encourage lending to borrowers whose credit positions are shaky. 

So the rule, in effect, takes the underwriting standards out of the hands of the lender and gives them to the government. If the automated underwriting systems of the GSEs or the FHA give the loan their stamp of approval—even if it is not ultimately guaranteed by these agencies—the loan is considered a prime loan, no matter what its quality. […]

Because of their government backing, FHA and the GSEs have lower cost structures, which make it much easier for them to stay below the 1.5 percent cap on risky loans. Thus, originators will have competitive incentives to sell their loans to the GSEs and FHA rather than through private channels. Once again, this threatens the taxpayers with potential losses when these weak loans default. [Washington Times, March 3]

In other words, the Consumer Financial Protection Bureau hasn’t changed anything.

Posted on 03/06/13 05:50 PM by Alex Adrianson

What’s in the Bin Laden Files?

So far, the Obama administration has released to the public 17 of the documents captured at Osama bin Laden’s Abbottabad compound on May 1, 2011. Those documents seem to show bin Laden as having little active role in coordinating al Qaeda operations in recent years. Thomas Joscelyn, writing in the Weekly Standard, says there are reasons to think the rest of the trove—the size of a small college library—tells a different story, one that undermines the administration’s foreign and counter-terrorism policies. Joscelyn writes:

Consider what the Guardian’s Jason Burke reported on April 29, 2012—just days before the [West Point Combating Terrorism Center] report was published. Burke reported that the documents recovered in bin Laden’s compound “show a close working relationship between top al Qaeda leaders and Mullah Omar, the overall commander of the Taliban, including frequent discussions of joint operations against NATO forces in Afghanistan, the Afghan government, and targets in Pakistan.” Both Osama bin Laden and his replacement, Ayman al Zawahiri, were involved in coordinating attacks with the Taliban.

Mysteriously, the documents Burke reported on were not among those the administration allowed the CTC to publish just four days later. Why? As Burke noted beforehand, the documents “undermine hopes of a negotiated peace in Afghanistan, where the key debate among analysts and policymakers is whether the Taliban—seen by many as following an Afghan nationalist agenda—might once again offer a safe haven to al Qaeda or like-minded militants, or whether they can be persuaded to renounce terrorism.” […]

Another, more startling example of what the administration excluded from the documents released to the public was offered by Bruce Riedel, a former adviser to President Obama. Riedel said the files show a close relationship between bin Laden and the leader of Lashkar-e-Taiba (LeT), Hafiz Saeed. The LeT is a Pakistan-based terrorist group with known ties to the Pakistani military and intelligence establishment. It was responsible for the November 2008 siege in Mumbai, India, in which 166 people were killed and hundreds more wounded. 

“The documents and files found in Abbottabad showed a close connection between bin Laden and Saeed, right up to May 2011,” Riedel told the Hindustan Times.

As Joscelyn notes, it was John Brennan, the President’s nominee to head the CIA, who announced the release of the 17 documents last April; and it has been John Brennan who has pushed the view that al Qaeda is no longer a cohesive network that requires a robust American military response. [The Weekly Standard, March 11]

Posted on 03/05/13 06:32 PM by Alex Adrianson

To Do: Learn How to Honor Our Veterans

• Hosting a screening for Veteran Nation, a new documentary about how America treats its veterans, the challenges veterans face, and how the American people can best serve those who served.

• Nominate an individual for a Breitbart Award. The awards, which honors Andrew Breitbart’s truth-seeking legacy, will be presented by the Franklin Center and The Heritage Foundation at Resource Bank on April 26 in Orlando, Fla. Nominations close March 31.

• Nominate a professor for the Powerline 100 best college professors in the country poll, open now.

• Students, apply for an Institute for Humane Studies Summer Seminar. IHS will host a number of seminars around the country for students. They’ll focus on the following themes: Exploring Liberty, Liberty & Society, Morality, Capitalism & Freedom, Revolutionaries, Reformers, and Radicals: Liberty Emerges, and Freedom Renewed: Libertarian Visionaries. Applications are due by March 31.

Posted on 03/01/13 05:20 PM by Alex Adrianson

Who Is the Bully?

Progressives have shifting standards for judging things, notes Barton Hinkle:

Somehow, progressives have concluded that striving to satisfy consumer preferences is a sneaky, underhanded thing to do, and therefore wrong. Private corporations, many progressives seem to believe, should not be trying to entice you to buy their commercial products by making those products extremely attractive.

Which, when you think about it, is hilarious.

Why? Because progressives have no compunction whatsoever about using the coercive power of the state to make you buy a commercial product whether you want it or not. Just eight months ago, progressives were whooping and high-fiving over the Supreme Court’s ruling that the federal government can force you to buy health insurance. Now they’re going to war again over the government’s power to make religious institutions buy contraception coverage. [Richmond Times Dispatch, February 24]

The Left avoids feeling cognitive dissonance by telling itself that people working for the government exercise coercion only for the public good. No doubt that’s why Citigroup was so eager to have Jack Lew return to government that it  gave him a big bonus for doing so.

Posted on 03/01/13 02:56 PM by Alex Adrianson

ObamaCare Magic Not Yet Working

Democratic strategist and ubiquitous talking head Donna Brazile is puzzled as to how health insurance premiums in 2013 could be going up—nearly three years since the passage of ObamaCare! Below, two of her tweets, one from March 2012, and the other one from just this week.

As Jim Geraghty at The Corner puts it, the real answer is probably not one that a fan of ObamaCare would consider good. For many people, the health insurance menu today is much more limited, thanks to ObamaCare. You can’t get a new plan that doesn’t offer the following: no lifetime dollar limits, coverage of children up to 26, no pre-existing condition exclusions for children under 19, and coverage of preventive care with no extra co-pays or deductibles. Insurance companies now are also limited in their ability to apply annual spending caps and must deal with additional red tape such as new reviews for rate increases and transparency requirements.

And since there’s no such thing as a free lunch, those costs get passed to the consumer.

But if Brazile thinks premiums are increasing too fast now, she’ll be really sad in 2014 when the combination of guaranteed issue and a weak individual mandate will create an adverse selection death spiral for private health insurance. Even MIT’s Jonathan Gruber, on whose work the original claim that ObamaCare would lower premiums is based, now thinks that the law will increase premiums when those provisions kick in. [See Avik Roy’s March 2012 Forbes article on Gruber’s change of mind.]

Posted on 03/01/13 01:45 PM by Alex Adrianson

The Budget Ideas Are Out There

If President Obama does not like the meat cleaver, as he calls sequestration, he can find other ideas for cutting federal spending by checking the appendix of Patrick Louis Knudsen’s November 2012 Heritage Foundation paper, “$150 Billion in Spending Cuts to Offset Defense Sequestration.”

Just a few of the ideas worth considering:  Eliminating subsidies for intercity rail would save $4.2 billion per year, consolidating duplicative federal job training programs would save $5 billion, various reforms to Medicaid would save $10 billion, repealing federal grants for health insurance exchanges would save $4 billion, reducing energy subsidies would save $4.5 billion, returning Pell Grants to 2009 levels would save $12 billion, phasing out the ineffective Head Start program would save $3.5 billion, and cutting the corporate welfare programs known as farm subsidies would save $4.5 billion. Also, rescinding unspent stimulus would save taxpayers tens of billions of dollars.

Posted on 03/01/13 11:24 AM by Alex Adrianson

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