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InsiderOnline Blog: April 2010

Protect America Month Begins

Next week, The Heritage Foundation launches its second annual “Protect America Month,” to highlight the need for continued investment in America’s national security. This focus is particularly needed now because of the Obama administration’s planned cuts to military modernization. Protect America Month will feature lectures from Rep. Eric Cantor, Michael Chertoff, John Aschcroft, and many others. Heritage will also publish a series of papers focusing on the country’s defense needs. For more details, see the Protect American Month calendar of activities.

Posted on 04/30/10 02:30 PM by Alex Adrianson

Prof. Randy Barnett Assesses the Constitutionality of Obamacare

Posted on 04/30/10 11:48 AM by Alex Adrianson

See The Cartel Now!

If you haven’t seen The Cartel yet, you should, and this week might be your best opportunity to do it. It’s a great documentary that reveals the waste, the cronyism, and the corruption that have wrecked so many public schools—and how the teachers unions enable it all. The documentary opens today in eight major cities around the county: Boston; Chicago; Denver; Minneapolis; San Francisco; Washington, D.C.; Philadelphia; and St. Louis. See the movie’s Web site for details on theaters.

Posted on 04/30/10 11:11 AM by Alex Adrianson

Is America Sinking into a Dependency Abyss?

Posted on 04/30/10 10:30 AM by Alex Adrianson

What Medicare’s Actuary Says About Obamacare

Richard Foster, the chief actuary of the Centers for Medicare & Medicaid Services, has thrown a bit of cold water on the cost-saving hopes that have been placed on the Patient Protection and Affordable Care Act—aka, Obamacare. In a detailed report released last Thursday, Foster estimated that the health care overhaul passed last month will not “bend the cost curve” downward, but will instead increase national health care expenditures by $311 billion over the next decade. That figure represents the impact of the bill over and above the rise in health care expenditures that would have happened anyway. Creating new health care entitlements, it seems, is not the way to reduce health care spending.

But actual spending is likely to be even higher, says Foster, because down the road Congress will probably recognize that the bill’s various devices (aka, price controls) for keeping Medicare expenditures down come at too high an expense to patient welfare. For example, about the bill’s “productivity updates” that will ratchet provider compensation downward, Foster predicts that because such updates are unrelated to providers’ costs of furnishing services, “roughly 15 percent of Part A providers would become unprofitable within the 10-year projection period.” Many of those providers will likely end their participation in Medicare, which will jeopardize patients’ access to care.  

And, about the law’s injunction to the Independent Payment Advisory Board to make sure Medicare’s per-beneficiary costs increase slower than medical inflation, Foster writes:

Actual Medicare cost growth per beneficiary was below the target level in only 4 of the last 25 years, with 3 of those years immediately following the Balanced Budget Act of 1997; the impact of the BBA prompted Congress to pass legislation in 1999 and 2000 moderating many of the BBA provisions. As an additional comparison, during the last 25 years the average increase in the target growth rate has been 0.33 percent per year below the average increase in nominal GDP per capita—which is approximately the target level for the physician sustainable growth rate (SGR) payment system. Congress has overridden the SGR-based payment reductions for each of the last 7 years (and, to date, for the first 5 months of 2010). [Internal citations omitted.]

Foster is saying that Congress has a history of belatedly recognizing that provider compensation must cover costs or there won’t be providers. That means even Foster’s estimate is a low ball figure.

Posted on 04/29/10 05:51 PM by Alex Adrianson

Ted Cruz Is a Hit

Kathryn Jean Lopez writes about hearing Ted Cruz, former Solicitor General of Texas, speak at the Resource Bank luncheon last week:

Ted’s always been good, but the man is on fire on stage these days. He looks at the tea parties and sees something good: an awakened realization that “America has been the hope and change for the world for 200 years.” And because the stakes are so high — whether or not America will continue to be — he warns Republicans not to blow it.

In talking about the current president, Cruz says: “Barack Obama is a very, very different president than Bill Clinton was.” Obama, Cruz said, “is committed to transforming [America] into a European socialist nation.”

“I think he sleeps well at night,” Cruz said of Obama. Because he knows what he believes and he is governing true to his ideology.  He got to the White House, of course, despite that.

“Republicans win when we effectively articulate what it is we believe. Democrats win when they obfuscate what they believe.” And with respect, but by name, Cruz said that we do not effectively communicate “a lesson of freedom” when we nominate a Bob Dole or a John McCain, despite all the two men have done for freedom.

Ted Cruz has a great story to tell — as we’ve highlighted (see here and here). And he happens to be great at telling it.

I’m not doing Cruz justice. Keep an eye out.

Posted on 04/29/10 12:14 PM by Alex Adrianson

Government’s Bite Keeps Getting Bigger

This chart come from The Heritage Foundation’s 2010 Budget Chart Book, a great resource for facts on federal spending.

Posted on 04/29/10 11:57 AM by Alex Adrianson

Nominate a Think Tank for a Templeton Freedom Award

The Atlas Economic Research Foundation is now accepting nominations for its Templeton Freedom Awards. These awards recognize think tanks and groups from around the world who have done excellent work to advance individual liberty and free markets. The awards are particularly important because they often recognize emerging think tanks in countries with governments that are actively hostile toward civil society. If you would like to nominate a think tank for a Templeton Freedom Award, you can find application materials at the Atlas Foudations Web site. The deadline for nominations is July 1. Atlas will announce the winners at its annual Freedom Dinner in November.

Posted on 04/28/10 06:16 PM by Alex Adrianson

General Motors’ Debt to the Taxpayer Grows

General Motors Chairman and CEO Ed Whitacre engages in some clever spin in a new ad. On behalf of GM, Whitacre announces: “we have repaid our government loans, in full, with interest, five years ahead of the original schedule.”

But this news isn’t quite the cause for taxpayer celebration that it sounds, because GM is really only repaying the loan portion of the bailout—$6.7 billion owed to the U.S. government and $1.2 billion owed to the Canadian government. The bailout package in total was $49.5 billion, and that included a 60.8 percent share of the company for the U.S. government and an 11.7 percent share of the company for the Canadian government. Taxpayers will recover those “investments” only when the government is able to sell its ownership stake.

Meanwhile, columnist Shika Dalmia has uncovered that General Motors has applied for a new $10 billion loan from the Department of Energy to retool its plants so that it can meet tougher fuel economy standards. So, if you do the math here, the real story is that GM’s debt to the taxpayers is going up not down. Plus the company will get a 2 percentage point break on the interest rate on its new loan. That’s not a vindication of the bailout!

Posted on 04/28/10 05:42 PM by Alex Adrianson

First Coast Tea Party Leader Billie Tucker at Resource Bank

Posted on 04/27/10 10:56 AM by Alex Adrianson

Odds and Ends from Resource Bank

Here are some more or less unstructured observations, factoids, and other things we learned at Resource Bank last Thursday and Friday:

• Reality can be a good teacher: Panelist Kristina Rassmussen noted that a significant piece of school choice legislation appears to have momentum in the Illinois Senate. One of the primary sponsors is Senator James Meeks, a Democrat who hardly ever votes against the interests of the teachers unions. What has changed his mind? Writing in the Chicago Tribune a few days ago, Meeks says that budget realities now force Illinois to choose policies that both save money and improve performance and giving vouchers to children in the worst performing schools is one of the few options that can do both.

• Three reasons that liberalism is vulnerable, according to Charles Kesler, editor of the Claremont Review: (1) Environmentalist ideology has severed the link between progress and the people in the minds of liberals. (2) The crass self-interest of public employee unions has punctured the pretense of liberalism’s moral superiority. (3) We’re broke.

• The constitutional arguments against Obamacare are strong, but conservatives need to take note of two things: First, as Charles Kesler points out, the neo-nullification version of states rights is not a serious constitutional argument. Second, there’s no guarantee that the Supreme Court will agree with even the stronger constitutional arguments against Obamacare. For that reason, says Ramesh Ponnuru, conservatives need to take the constitutional argument beyond the courts and convince the people that the Constitution really does contain limits on what government may do.

• Ramesh Ponnuru got the best applause line of the Thursday night roundtable when he observed that the passage of Obamacare demonstrates that liberals are willing to risk losing in order to enact something they believe in, and when was the last time a conservative politician took any risks for something he believed in?

• If you believe in and preach consumer choice in health care, then you should sign up for a Health Savings Account. It will make you a better evangelist, says Tarren Bragdon of the Maine Heritage Policy Center.

• One measure of how deep the Medicaid hole is: Florida could increase its sales taxes by 1 cent per year forever and its revenues would still continue to fall behind rising Medicaid expenditures, according to Bob McClure of the James Madison Institute.  

• Fred Shessel, a urologist from Georgia, is a great spokesman for liberty in health care. Anybody looking for the doctor’s view of Obamacare should consider him as a speaker. Shessel predicts severe doctor shortages are on the way, as 45 percent in recent poll say they are leaving practice. And that doesn’t even count the doctors who will now shift to concierge care and see fewer patients. Why would the best and the brightest want to train for 10 years and take on hundreds of thousands of dollars in debt in order to become essentially a government employee?

• ObamaCare will put one in four Americans under 65 on Medicaid, notes Dennis Smith, of Leavitt Partners.  

• Thousands of decisions lie ahead for federal bureaucrats as they move to implement ObamaCare. Many of those decisions will be an opportunity for states to push back and assert their rights. The states should grab those opportunities, says Dennis Smith.

• If you’re looking for a clue as to what’s wrong with our health care system, pretend you have to pay out of pocket for an MRI and see if you can get anybody to give you a price.

• It would help matters greatly, says citizen Tom Feeney, if we could get elected officials to recognize that upholding the Constitution is not just the job of the courts, but also the job of every official who takes an oath of office.

• Eight-five cents of federal highway funding without strings can accomplish as much as $1 of federal funding with strings. So why not just let states fund their own highways? asks Michael Waddoups, President of the Utah State Senate.

• Over 200 different groups were represented at Resource Bank this year. That’s a lot of groups coming together to share ideas and strategies and in many cases to coordinate their efforts. Anybody looking to get involved in the fight for liberty should have no trouble finding allies. A good place to start is to get in touch with your local state-based think tank and you can find a directory of those from the State Policy Network.

Posted on 04/26/10 06:25 PM by Alex Adrianson

Resource Bank Provides Lessons from Think Tanks Doing Journalism

Over the past several years, quite a few state-based free market think tanks have started doing investigative journalism. These organizations have decided that exposing government malfeasance is an important part of their mission of keeping big government in check. And in many cases, they’re also filling a void in local reporting created by the closure or downsizing of traditional media outlets.

On Thursday in Miami, Resource Bank featured a panel on think tanks doing journalism. The Franklin Center for Government and Public Integrity has played on important role in helping think tanks establish themselves as outlets for quality journalism. Jason Stverak, president of the Franklin Center, moderated the panel. The panel also featured Clint Brewer, editor of the Tennessee Center for Public Policy Research’s; Steven Greenhut, editor in chief of the Pacific Research Institute’s; and Kathy Hoekstra, who produces investigative videos for the Mackinac Center for Public Policy Research and writes articles for the Center’s Michigan Capitol Confidential.

Each of the outlets represented on the panel have broken some big stories over the past year. In December, uncovered the secretive system of judicial accountability in Tennessee. It’s a system that in most cases prevents the public from knowing whether judges have even been punished. The report prompted the state Senate to hold hearings in January.

This month, ran a six-part investigation of the Greenlining Institute, a leftwing community organizing group that specializes in shaking down private foundations to support their favored philanthropic causes. The series was co-published by the Washington Examiner.

Hoekstra had a big hit in January with an investigative video revealing the hypocrisy and self-dealing of leftwing agitprop artist Michael Moore. Moore’s film, Capitalism: A Love Story, criticized cozy relationships between big business and government. “We want our money back,” was Moore’s mantra throughout, but the film itself received taxpayer money through Michigan’s film incentive program. The film received the taxpayer subsidy while Moore himself sat on the film program’s advisory council. Before being appointed to the advisory council, Moore had criticized the program as an example of welfare for corporations.

The panelists described their roles not as replacing “old media,” but as filling in the gaps—covering the stories that traditional news outlets could not or did not want to cover. Greenhut said he makes it a point not to go around bashing “old media,” because he sees opportunities for working collaboratively with newspapers. He still writes a weekly column for the Orange County Register.

Stverak emphasized that the goal of each of these journalism projects is to do journalism that meets the highest standards of the profession. The question on a lot of people’s minds is: If a news outlet is part of a think tank with a policy agenda, then how can readers trust the reporting they get from that outlet? Each of the panelists gave their own versions of the same answer: News outlets succeed only by building the trust of their readers over time, and that trust is built by producing a quality product. Stverak’s take is that in order for journalists working at think tanks to overcome the presumption that their reporting is driven by an agenda, they have to work extra hard to make sure they are meeting the highest standards of the profession.

For more on this topic, see also John Hood’s article “Uncovering the Culture of Corruption: How Investigative Journalism Complements the Work of a Think Tank,” in the summer 2007 issue of The Insider.

Posted on 04/26/10 03:22 PM by Alex Adrianson

Resource Bank: The Open Source Option for Your Web Site

At Resource Bank last Thursday, we heard lots of compliments for Cord Blomquist’s presentation on using open source technologies to build Web sites. Before you commit your organization to paying top dollar for a proprietary platform, you should consider what Blomquist has to say about open source. Blomquist likens open source to Henry Ford’s transformation of the automobile industry. You wouldn’t buy a car that only one mechanic can fix or upgrade. Why do it for a Web site?

Blomquist has put the slides for his presentation up on Ready Made Web (audio coming soon). Ready Made Web, created by Blomquist and Jerry Brito, provides lots of information on how to use open source technologies. You can also get an idea of where Blomquist is coming from by reading his article in the latest issue of The Insider—“Open Source May Be the Solution for Your Web Site.”

Posted on 04/26/10 08:21 AM by Alex Adrianson

Resource Bank Reviews Florida’s Successful Education Reforms

Here in Miami, Resource Bank’s panel on education reform included a particularly good discussion of how Florida has dramatically improved the performance of its schools over the past decade. The panel, appropriately, was titled “Reforming Education, Not Waiting for Washington.” Patricia Levesque of the Foundation for Florida’s Future identified four reforms implemented in 1999 that have been key: 1) The state created a more rigorous system for grading schools—giving schools themselves letter grades. 2) Along with better grading came both consequences for poor performance and rewards for good performance, including bonuses given directly to teachers at high-performing schools. 3) The state also ended the practice of social promotion by requiring the retention of third graders who score in the lowest category on reading tests. 4) Another key reform was allowing students at schools receiving failing grades to attend different schools of their choice.

How have these reforms worked out? Consider the following indicators, provided by Levesque as well as Goldwater Institute scholar Matt Ladner: In 1998 Florida ranked near the bottom of the states in fourth and eighth grade scores on the National Assessment of Educational Progress (NAEP) tests. In 2009, however, Florida’s fourth-graders scored above average in both reading and math on the NAEP test, while eighth-graders scored above average in reading on the NAEP test. Between 1990 and 1998, Florida’s graduation rates declined nearly 7 percent, but from 1999 to 2009, graduation rates increased more than 18 percent. When Florida first started giving letter grades, there were more D and F schools than A and B schools. Today, there are more than ten times as many A and B schools as D and F schools—and this in spite of the fact that the state has raised the grading bar several times since then. The state is one of only three in the country recognized as closing the achievement gap between affluent and low-income students. The achievement gap between Hispanics and white students has also been closed: Today, Florida’s Hispanic students score higher on the NAEP test than does the average student of 31 states.

Florida provides a model that other states should consider adopting. The Obama administration’s Race to the Top program incentivizes states to adopt standards designed by Washington, D.C. Florida’s experience suggests that for some states, Race to the Top might amount to lowering their standards.

Posted on 04/22/10 06:08 PM by Alex Adrianson

“Wall Street Reform”: Politicians Still Like Crony Capitalism

Senator Chris Dodd’s “Wall Street reform” bill has drawn fire from numerous commentators, and the most serious charge is that the bill does nothing to end the “too big to fail” problem—the expectation that the federal government will bail out certain firms, which makes those firms willing to take on greater risks in pursuit of higher returns.

The bill gives the Federal Deposit Insurance Corporation authority to seize non-bank financial firms that run into trouble and wind them down. The damming passage in the bill, says The Heritage Foundation’s Morning Bell, comes from page 134, which says that the FDIC “may make available … funds for the orderly liquidation of [a] covered financial institution.” The funds referenced would come from a new $50 billion “Orderly Resolution Fund.”

The Manhattan Institute’s Nicole Gelinas observes that the bill instructs FDIC to operate under only “a strong presumption that creditors and shareholders will bear the losses.” The $50 billion fund could still be used for “guaranteeing bondholders, uninsured lenders, counterparties and other creditors to a failed company just as the government did with AIG and Citigroup in 2008.”

The $50 billion bailout fund would not come from taxpayers, but from assessments on the financial services industry, kind of like deposit insurance. Ultimately, of course, the customers of the industry will bear the cost. But the notion that “too big to fail” is fixed merely because taxpayers aren’t billed directly is mistaken. As AEI’s Peter Wallison points out, the damage caused by “too big to fail,” isn’t just the tab with which taxpayers get stuck when a “too big to fail” firm can’t meet its obligations. Rather, the damage is that too much capital flows to the “too big to fail” firms instead of competitors who may be more productive but can’t compete against firms implicitly backed by the government.

Indeed, the bill does nothing to address the most prominent example of the “too big to fail” problem, Fannie Mae and Freddie Mac. These two mortgage guarantors used their implicit government backing to inflate housing prices and lower lending standards. For a review of Fannie Mae and Freddie Mac’s central role in creating the housing bubble, see Wallison’s article “Not a Failure of Capitalism—A Failure of Government,” published by the Research Foundation of CFA Institute.

As long as a resolution authority has the flexibility to bail out some creditors, skewed incentives will persist. For a big-picture discussion of how those bad incentives affect the economy, see Cato scholar Gerald O’Driscoll’s column in the Wall Street Journal, “An Economy of Liars.” Noting that federal regulators ignored evidence of Bernie Madoff’s ponzi scheme, encouraged liar loans, and promulgated accounting rules that let Lehman Brothers hide its liabilities, O’Driscoll argues that regulators are at the heart of what is wrong with Wall Street. He concludes: “Piling on more rules and statutes will not produce something different than it has in the past. Reliance on affirmative principles of truth-telling in accounting statements and a duty of care would be preferable. Deregulation is not some kind of libertarian mantra but an absolute necessity if we are to exit crony capitalism.”

Some other observations that are inconvenient for Senator Dodd’s bill:

• The $50 billion fund should not be taken as a realistic price tag for the next financial crisis, according to Gelinas. She says, if we don’t really fix “too big to fail,” we can expect to pay $20 trillion next time: “The true tab is not the retroactive cost. Rather, it's what investors demand at the time of an acute crisis so as not to flee the unknowable risks of a financial system in meltdown, precipitating depression.”

And, notes AEI’s Alex Pollock, the FDIC model does not bode well for the proposition that the fund will never have to ask for money from taxpayers: “Indeed, the FDIC fund is insolvent, with a net worth of negative $21 billion as of the end of 2009. When the fund had about $50 billion, it was judged more than adequate. As the FDIC’s deficit net worth continues, numerous banks continue to fail. By some estimates, there are several hundred bank failures yet to go in this cycle, and the losses to the FDIC as a proportion of failed bank assets are running greater than the historical experience.”

• The bill places great emphasis on forcing all derivatives onto publicly traded exchanges. A lack of information about counter-party risk may have contributed to freezing credit markets in September/October 2008. But Dodd’s heavy handed proposal ignores the considerable voluntary changes that have taken place in the derivatives market in the past 18 months, including the creation of six clearinghouses for credit-default swaps, new reporting requirements for over-the-counter products, and the establishment of trading conventions that standardize the products. Heritage fellow Dave Mason discusses these changes in his paper, “Senator Dodd and Derivatives: How the Market Has Made Regulation Redundant.”

• One particular provision of the bill has elicited great concern that the spigot of so-called “angel investing” will be shut off as a result of increased reporting requirements. The issue is somewhat technical, but the basic story is that some investors can put their money into a start-up business without the start-up needing to submit a bunch of fussy paperwork for the SEC to review for four months. Section 926 of the Dodd bill would move many investors out of that of class investors, making it harder for start-ups to find “angel investors.” At the Huffington Post, Robert Litan writes explains how this provision will surely cause jobs to be lost.

Posted on 04/20/10 06:32 PM by Alex Adrianson

Spring Issue of The Insider Published

Here is the editors note running down the articles:

Another judicial confirmation season is upon us, so contemplating how to retether the judiciary to democratic legitimacy should be on your to-do list. Start here by reading Robert Bork’s cover story. His subtitle, “Overcoming the Corrupted Judiciary,” requires explanation. Bork writes not about judges receiving payoffs. Not corruption from greed, but corruption from intellectual arrogance—what Bork terms “Olympianism”—is his subject. “Olympianism,” he writes, “is a secular religion which does not recognize itself as a religion. Its acolytes, until recently concentrated in the universities and the mainstream media, claim superior knowledge which they will share with, and if necessary impose upon, the rest of us.”

The Olympian worldview corrupts when, instead of interpreting the law as written, a judge arrives at results because they conform to his vision of how society should be organized. A drift away from republican government and toward “robed oligarchy” has been developing for some time, observes Bork, but efforts to counter this trend have also grown. With continued work, we may yet keep the republic.

To understand the practical importance of the rule of law, it may help to examine societies that are governed not according to general principles but by the whims of absolute rulers. James Robinson harvests some lessons from history about how the creation of legal property rights both promotes prosperity and creates economic interests with the political incentive to resist arbitrary rule.

You may have heard that the federal government’s books are in a shabby state. But how big is the fiscal hole? Laurence Kotlikoff says Uncle Sam is already bankrupt.

In other articles in this issue, Cord Blomquist provides a how-to for using off-the-shelf technologies to build Web sites, Dave Mohel and Amber Christian explain the benefits of hosting radio rows at conferences, and we talk with Brooke Rollins about how the Texas Public Policy Foundation has become a major shaper of policy in a state that takes the Tenth Amendment seriously.

Posted on 04/19/10 06:02 PM by Alex Adrianson

The Redistribution in the Federal Highway Program

So it turns out that funneling money to Washington, D.C., so that the federal government can then send it back to the states to spend on roads creates equity problems. How could that have happened? Heritage fellow Ron Utt explains:

Under current law, the federal fuel taxes paid into the trust fund by motorists and truckers are returned to the states by a series of mathematical formulae that attempt to match the scope and usage of each state’s surface transportation system with payments received from the trust fund.

These formulae, however, embody a number of serious flaws that cause many states (called donors) to consistently receive shares that are less than they pay in while others (called donees) consistently receive more. This deficiency in turn exacerbates regional transportation problems because the shortchanged states are typically those with above-average population growth and transportation needs that exceed those of the slower-growing states, which often receive shares that are greater than the amounts that they pay in. [Internal citations omitted.]

Utt’s paper calculates return ratios for all 50 states, and the big winners and losers tend to be the same from year to year. Over the last 52 years, Texas has received only about 80 percent of the fuel tax revenue it has sent to Washington, D.C. Alaska, meanwhile, has received more than five times what it has sent to Washington, D.C., and Hawaii has gotten back nearly three times as much.

Posted on 04/16/10 12:20 PM by Alex Adrianson

Too Many Taxes Might Be California’s Problem

… says

Posted on 04/16/10 11:46 AM by Alex Adrianson

Reminder: The Best Resource Bank Ever Is Next Week

Don’t forget that next week over 500 think tankers, activists, scholars, film makers, journalists, public-interest lawyers, and other assorted upstanding citizens will gather in Miami for the annual Resource Bank, the nation’s premier conservative public policy conference. There are also sunny beaches in Miami, we hear. Maybe you should be there, too.

The theme of this year’s conference is: “From Tea Parties to Taking Charge: Ideas and Strategies That Will Lead the Way.” Highlights from the agenda include sessions on reforming education without waiting for Washington, advancing reforms through investigative journalism, a q-and-a session on where conservatives will lead, how to make effective YouTube videos, and returning sovereignty to the states. Also, open throughout the conference will be a TechLab that will let you try out the latest gee-whiz stuff.

Posted on 04/16/10 11:12 AM by Alex Adrianson

Bottom-Up Development

Ending the government telephone monopoly in Kenya has produced not only a vast expansion of cell phone service, but also financial innovations that have made banking services accessible to Kenya’s very poor. Warren Coats writes about this development at the Daily Caller:

Some years ago, DFID—the UK Department for International Development — partnered with Vodafone to develop a secure software platform for performing a number of basic payment functions on mobile phones. These included transferring “E-Money” to anyone with a mobile phone and paying for call time on mobile phones (few people in developing countries can afford monthly plans).

This and similar payment applications have dramatically changed life for the better in Africa, where very few people had access to banking services until very recently. Workers in Kenyan cities now send money home to their families in the villages by using their mobile phone, instead of carrying cash by bus.

By the end of 2008, half of Kenya’s population had mobile phones. By the end of 2009, over one-fifth of the population had mobile phone e-money accounts (over 9 million from zero three years ago). Surprisingly, banks have responded competitively by increasing branch offices and becoming mobile phone payment agents.

Cell phones are a capitalist success story in many other places on the continent, too, as the blog AidWatch recently documented.

Posted on 04/16/10 10:12 AM by Alex Adrianson

Pension Mess Worse Than Reported

Teacher pension plans report they are underfunded by $332 billion. In response to lower revenues stemming from the economic downturn, states have been putting off their obligations to the plans, and now they are another item on the taxpayer’s credit card.

But the real shortfall is nearly three times bigger than the officially reported one, say Josh Barro and Stuart Buck. In a new paper for the Manhattan Institute and the Foundation for Educational Choice, Barro and Buck explain that in calculating the present value of their future liabilities, public pension plans use a discount rate that reflects the plans’ expected returns on high-risk investments such as stocks. But, because the plans are legally obligated to pay a defined-benefit to retirees, the plans must bear the full risk of those investments. Using a discount rate that better reflects those risks, Barro and Buck calculate that the real shortfall in teacher pension plans is $933 billion. How big is the problem? Barro and Buck note that one “Ohio newspaper found that fixing the teachers’ retirement plan in Cleveland alone ‘could cost more than the Cleveland schools spend on textbooks each year and more than it spends to get students to school. The budget hit to Cleveland schools would be about what it costs to put 110 teachers in classrooms.’”

Posted on 04/15/10 12:40 PM by Alex Adrianson

2009 Earmarks Tallied, Exposed in The Pig Book

Budget earmarks were down slightly in 2009, according to the tally in the latest edition of “The Pig Book,” the annual review of pork-barrel spending put out by Citizens Against Government Waste. But only slightly: “The 9,129 projects in the 2010 Congressional Pig Book represent a 10.2 percent decline from the 10,160 projects identified in fiscal year 2009, and the $16.5 billion in cost is a 15.5 percent decrease from the $19.6 billion in pork in fiscal year 2009.” Among the more ridiculous earmarks identified by Citizens Against Government Waste:

• $400,000 for the Institute for Sustainable Agriculture, which promotes “slow food” as an answer to fast food. According to the institute’s Web site, slow food has been “expanding over the past decade from dealing with issues of quality in cooking to include environmental and sustainable agriculture, social justice, and food sovereignty, among others.”

Nearly $5 million for wood utilization research. The forest products industry, by the way, accounts for about 6 percent of total U.S. manufacturing, generating more than $200 billion in annual sales.

$10 million for the National Institute for Hometown Security. The National Institute for Hometown Security does not actually do research related to security. Rather, the institute is devoted to helping colleges and universities in Kentucky compete more effectively for research funds for projects that improve homeland security. In other words, this earmark will help Kentucky institutions of higher education seek more earmarks.

Posted on 04/14/10 06:19 PM by Alex Adrianson

On Tax Day, Make Your Voice Heard for Lower Taxes

Here are three good Web sites to check for tax day events:,,

Posted on 04/14/10 03:38 PM by Alex Adrianson

About Taxes and Government Spending

Tomorrow being tax day, the topic of taxes and government spending might come up. Arm yourself with some facts. Here’s a few resources to check out:

• “2010 Budget Chart Book” by Nicola Moore, Steve Keen, and John Fleming, The Heritage Foundation, April 2010
• “Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index,” by Arthur B. Laffer, Stephen Moore, and Jonathan Williams, American Legislative Exchange Council, April 2010

• “Tax Day or Payday? How the Tax Code Is Expanding Government and Dependency,” by Curtis Dubay, The Heritage Foundation, April 2010
• “April 9 Is Tax Freedom Day,” by Kail M. Padgitt, Tax Foundation, April 2010
• “2010 Facts and Figures: How Does Your State Compare?” Tax Foundation, April 2010
• “Record Numbers of People Paying No Income Tax; Over 50 Million ‘Nonpayers’ Include Families Making over $50,000,” by Scott Hodge, Tax Foundation, March 2010
• “Who Wants to Tax a Millionaire?,” by Vernonique de Rugy, Reason, February 2010
• “A Review of Significant State Tax Changes During 2009,” by Joseph Henchman, The Tax Foundation, December 2009
• “The National Taxpayer Advocate’s 2009 Annual Report to Congress,” Internal Revenue Service, December 2009

Government Spending
• “2010 Congressional Pig Book Summary,” Citizens Against Government Waste, April 2010
• “Public Sector Unions and the Rising Costs of Employee Compensation,” by Chris Edwards, Cato Journal, Winter 2010
• “Why States Have Debt Limits,” by Benjamin Barr, The Insider, Winter 2010.

Debt and Deficits
• “Quantifying the National Debt,” by James Agresti, Just Facts Foundation
• “America in the Red,” by Donald B. Marron, National Affairs, Spring 2010
• “Simple Solutions to the Long-Term Budget Challenge,” by Arnold Kling, Mercatus Center, March 2010
• “Can Income Tax Hikes Close the Deficit?” by William Ahern, Tax Foundation, March 2010
• “Is Uncle Sam Bankrupt?,” by Laurence J. Kotlikoff, National Center for Policy Analysis, January 2010
• “Realistic Budget Baseline Shows $13 trillion in Debt over the Next Decade,” by Brial Riedl, The Heritage Foundation, January 2010

Posted on 04/14/10 03:03 PM by Alex Adrianson

Is Government-Subsidized News on the Way?

Is the Federal Communications Commission building a case for government-subsidized news? It’s not hard to imagine that will be the outcome of the Commission’s “Future of Media” inquiry. The digital age has produced a “democratic shortfall,” according to one source cited in the inquiry’s public notice. Another scholar working on the project for the FCC has said that today’s media abundance calls for “public media entities” that will serve “as both a filter to reduce information overload and a megaphone to give voice to the unheard.”

In other words, a free marketplace of ideas isn’t good enough for some. They want the government to pick winners and losers—as long as the winners express views with which they happen to agree. Care to guess which views those will be?

As Randolph May of the Free State Foundation notes, the justifications for a government role in controlling content are ever shifting. Once, alleged scarcity was the reason that the FCC could impose the fairness doctrine on radio without running afoul of the First Amendment. (See, for instance, the Supreme Court’s 1969 Red Lion decision.) Now it’s not scarcity but abundance that government is supposed to fix by acting as a filter. Meanwhile, the FCC has no problem telling private industry that filtering content is a no-no. Disallowing Internet service providers from discriminating among sources or kinds of content is the intent of the Commission’s push for net neutrality.

If you are concerned about what the FCC is up to with its “Future of Media” inquiry, then you should attend the Free State Foundation’s event this Friday at noon at the National Press Club. The event, titled “The FCC’s ‘Future of Media’ Inquiry: What Is the FCC Is Doing – And Why?” features a presentation from Steven Waldman, who is leading the FCC’s inquiry. That will be followed by a discussion from a panel of three experts on communications policy: Catholic University professor and Free State Foundation fellow Donna Coleman Gregg, James Taranto of the Wall Street Journal, and former FCC commissioner and current Free State Foundation fellow Deborah Taylor Tate.

Posted on 04/13/10 01:24 PM by Alex Adrianson

10 Commandments on Twitter Etiquette

Vadim Lavrusik’s “10 Commandments on Twitter Etiquette” offers some good ideas. Three things to make sure you do are: include links, credit your sources, and respond to your followers. Some of the finer points discussed are the different ways of giving credit, and the importance of distinguishing between your voice and the voice of your sources.

Read the whole article, and for future reference, you can also find the article linked in the InsiderOnline Tool Kit.

Posted on 04/12/10 12:11 PM by Alex Adrianson

A Reader’s Guide for Your Reading List

Two Australian free market think tanks, the Institute of Public Affairs and the Mannkal Economic Education Foundation, have recently published 100 Great Books of Liberty: The Essential Introduction to the Greatest Idea in Western Civilization. It’s a wide-ranging review, with chapters covering Aristotle’s The Republic, Harold Bloom’s The Western Canon, Walt Whitman’s Leaves of Grass, Arthur Koester’s Darkness at Noon, Anthony Burgess’s A Clockwork Orange, Jacob Burckhardt’s The Civilisation of the Renaissance in Italy, Milton Friedman’s Capitalism and Freedom, and Winston Churchill’s A History of the English-Speaking Peoples.

Posted on 04/09/10 11:59 AM by Alex Adrianson

Is the Profit Motive Guiding How Police Do Their Jobs?

A report from the Institute for Justice finds that, indeed, police departments are incentivized by opportunities to pad their budgets through civil forfeiture. According to the IJ report, the more robust are the protections for property owners in state law, the more likely are law enforcement agencies to seize assets under federal civil forfeiture laws instead. When state law enforcement agencies seize assets jointly with federal law enforcement authorities, they are allowed to keep 80 percent of forfeited assets. This revenue set-up is called “equitable sharing.” The report finds that

… law enforcement agencies in generous forfeiture states receive significantly lower equitable sharing payments from the Department of Justice. For example, each 25 percentage point decrease in the state profit motive (say, from 100 percent to 75 percent) boosts federal equitable sharing by $7,500 per year. This is for a law enforcement agency serving an average-sized population of 300,000. Thus … law enforcement agencies in states with no profit motive will receive, on average, four times that amount—$30,000—compared to agencies in states where 100 percent of proceeds go to law enforcement.

This and similar results from the study raise the question of whether law enforcement agencies are being driven by the wrong incentives. One survey of 770 police managers and executives “found that almost 40 percent of respondents agreed or strongly agreed with the statement that civil forfeiture is ‘necessary as a budget supplement.’”

See “Policing for Profit: The Abuse of Civil Asset Forfeiture,” by Marian R. Williams, Jefferson E. Holcomb, Tomislav V. Kovandzic, and Scott Bullock, published by the Institute for Justice, March 2010.

Posted on 04/08/10 04:53 PM by Alex Adrianson

What Does the American Founding Have to Do with Health Care?

Matt Spalding, director of The Heritage Foundation’s B. Kenneth Simon Center for American Studies, explains:

Posted on 04/08/10 10:42 AM by Alex Adrianson

High-Tax, High-Spend Model Still Does Not Work

State government finances are in a bad way, and for an examination of why that is the case, see the latest edition of “Rich States, Poor States,” released this week by the American Legislative Exchange Council. The basic story, as anyone following state fiscal issues will surely know, is that too many states went on spending binges in the early part of the decade when revenue was rolling in, but didn’t leave enough in reserve to handle the collapse in revenues caused by the 2008-2009 recession. The ALEC volume is, as past editions have been, chock full of great information. For instance:

• Did you know that if states had just kept their spending growth the same as population growth plus inflation between 2002 and 2007, they could have maintained all their services and still provided a $500 billion tax cut?

• Why did states leave nothing in reserve? Political pressure, especially from government employee unions is a big part of the story. State legislatures, for instance, have lavishly enhanced pension benefits, but state employees should have little confidence that the states will ultimately make good on those promises. Only 9 percent of state pension plans have enough assets to be considered safe according to government standards.

• Many state legislatures, unwilling to take on the well-organized lobbies for government spending, have resorted to raising taxes on the rich. But that will only exacerbate the boom-and-bust budget cycles, as Maryland’s experience demonstrates:

Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25 percent. … Already, Maryland has seen a one-third decline in tax returns from millionaire households. The rich have literally disappeared from the state tax collectors’ sights. Instead of the state coffers gaining the extra $107 million the politicians predicted, millionaires paid $257 million less in taxes than they did last year… . [Internal citations omitted.]

• Yes, taxpayers and businesses vote with their feet, because some states’ policies—e.g., lower taxes, less labor regulationare better for the economy than others. Utah, Colorado, Arizona, South Dakota, and Florida are the top five ranking states in the ALEC-Laffer State Economic Competitiveness Index for 2010. The top ten states in that index have had population growth of 18.5 percent over the decade 1998-2008, while the ten lowest ranking states had population growth of only 5.2 percent over that period.

Posted on 04/07/10 06:26 PM by Alex Adrianson

Disasters Make Us Poorer, Not Wealthier

A simple but important lesson that too many policymakers seem not to understand:

Posted on 04/07/10 01:38 PM by Alex Adrianson

Alliances Should Be Composed of Allies

It’s time for the United States to change it’s stance toward NATO, says Heritage Vice President Kim Holmes:

What is disturbing about the NATO operation in Afghanistan is how smaller (and less affluent) non-NATO countries like Georgia and Macedonia are more willing to go out on a limb than France or Germany. Georgian troops are gearing up for a deployment to the south – where the majority of the action will be seen in the next few months; Macedonian troops faithfully man the front gates at the NATO headquarters in Kabul, where suicide bombers present a daily threat. These countries want to become members of NATO, but they are being blocked by the very same countries that are refusing to carry their weight in Afghanistan – specifically, France, Germany and Greece. The same kind of nearsighted parochialism that leads Paris and Berlin in particular to shirk their “shared” responsibility in Afghanistan is behind their cold shoulder toward NATO expansion.

The United States needs a new alliance strategy, one that relies less on old, purely regional alliance structures like NATO and more on stalwart allies who are willing to pull their weight in defending freedom, and new allies who share that goal. America needs to lead a new Global Freedom Coalition that would complement NATO.

Posted on 04/07/10 10:13 AM by Alex Adrianson

Ideas from Young People Wanted

The Center for International Private Enterprise’s Youth Essay Contest 2010 is now accepting submissions. The contest is an opportunity for “young people to share their ideas on how to create opportunities for youth to strengthen democracy and the private sector in their own countries.” The contest is open to anyone age 18 to 30. The contest guidelines call for essays between 2,000 and 3,000 words, written in English, and addressing one of three topics: “Democracy that Delivers”; “Entrepreneurship and Society”; or “Women and Participation.” The submission deadline is June 18, 2010. Contest winners, to be announced in the fall, will receive a $1,000 honorarium.

Posted on 04/06/10 09:58 AM by Alex Adrianson

Hockey Is More Dangerous Than You Thought

The Consumer Product Safety Commission has announced a voluntary recall of several models of hockey sticks because they have paint with lead levels in excess of the federal standard. Apparently, as Gilbert Ross of the American Council on Science and Health notes, the CPSC is worried that when players aren’t using their sticks to smack opposing players in the ribs or trip them, they’ll chew on the sticks and ingest the lead from the paint. Thanks for looking out for us CPSC!

Posted on 04/05/10 05:47 PM by Alex Adrianson

Unions and State Spending

Why are some states finances in worse shape than others? It might have something to do with government employee unions, which can be very effective at lobbying for higher benefits for their members. The chart below, produced by Chris Edwards of the Cato Institute, provides some evidence for this view. The chart shows that the union share of state government workforce is positively correlated to state debt as a percentage of state gross domestic product:  

But spending lots of taxpayer money in order to make public-sector unions happy is not a model that can go on forever, because taxpayers can move. According to the latest issue of the Rich States, Poor States report by the American Legislative Exchange Council, the nine states with the highest marginal income tax rates had population growth of 6.33 percent for the decade of 1997 to 2007. Over the same period, the nine states with no personal income tax at all had population growth of 15.62 percent.

Posted on 04/05/10 05:29 PM by Alex Adrianson

The Best in Activism for Liberty Recognized

The Sam Adams Alliance this week announced the winners of its annual Sammie awards. An awards ceremony will be held on April 16 in Chicago and will feature a keynote address by Andrew Breitbart. This year’s winners include a watchdog who helped shut down red light cameras in Schaumberg Illinois, a video putting the Keynes-Hayek debate to a rap song, and a Wilmington businessman who led the charge to change Delaware’s notorious eminent domain laws. Check out the entire list of winners.

Posted on 04/02/10 12:18 PM by Alex Adrianson

Transparent and Efficient

Here’s a datum to keep in mind anytime someone claims that increasing government transparency will cost the taxpayers money: The Environmental Protection Agency has reduced its backlog of FOIA requests by 96 percent simply by posting frequently requested information online, reports the journal Government Executive.

Posted on 04/02/10 12:02 PM by Alex Adrianson

The Beautiful Tree Wins the Fisher Award

James Tooley’s The Beautiful Tree, published by the Cato Institute tells the story of how private schools in developing countries are opening up opportunities for poor people while the state-run schools are failing them. It wasn’t the story Tooley expected to find when he first investigated the topic. And, in case you haven’t checked the book out yet, here’s another reason to do so: The Beautiful Tree just won the Sir Antony Fisher International Memorial Award, given every year by the Atlas Economic Research Foundation to the book that best promotes understanding of the free society.

Posted on 04/02/10 11:02 AM by Alex Adrianson

That’s Your Baby, Mr. President!

How generous of Barack Obama to share credit for Obamacare! On Tuesday, he told NBC’s Matt Lauer that the health insurance exchanges in his plan was an idea “that originated from The Heritage Foundation.”

But it’s not true, and Heritage President Ed Feulner made that very clear in a statement released a fewer hours later. He explained: “the exchanges we and most others support are very different from those in his package. True exchanges are simply a market mechanism to enable families to choose their health insurance. President Obama’s exchanges, by contrast, are a vehicle to introduce sweeping regulation and federal standardization on health insurance.”

The President obviously was trying to paint his overhaul as a centrist measure, but anyone who takes the time to browse through the gazillion papers Heritage has published on health care over the past year can’t miss the fact that Heritage research shows that the President’s plan will raise health care costs, reduce consumer choice, introduce all manner of new perverse incentives into the system, explode the federal deficit, and raise economy-killing taxes. The Obama administration must have missed those papers. As Feulner put it: “We made every effort over the past year to share our ideas for better health care reform with the President and members of both parties in Congress, but were not invited behind the closed doors. Now, after the bill is signed, it seems the President wishes we were along for the ride. We were not. We remain fervently opposed to the President’s partisan plan, and urge its immediate repeal.”

Read Feulner’s entire statement. For Heritage’s ideas on real health care reform, visit

Posted on 04/02/10 10:40 AM by Alex Adrianson

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