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InsiderOnline Blog: September 2013

Beyond the Scary Headlines: Three Key Facts about the Defund ObamaCare Battle

Defund = shutdown? No.

On Friday, the House of Representatives passed a continuing resolution that will keep the federal government funded through December and also defunds ObamaCare. Notwithstanding those facts, some media outlets have reported this news as a case of the GOP threatening to shut down the government. MSNBC for example used the headline “GOP pushes government toward shutdown,” while CNN went with “House GOP launches shutdown battle by voting to defund ObamaCare.”

The United States, by the way, has a bicameral form of legislature. Of the two houses of Congress, only the House of Representatives—the one controlled by the Republicans—has passed a bill that will avert a government shutdown on October 1. The Senate has yet to take up the bill, but will do so this week. So who wants to shut down the government unless he gets everything he wants? We can say for certain that President Obama has said he would veto the continuing resolution if it reaches his desk in the form passed by the House.

For those who want to look it up themselves instead of relying on MSNBC and CNN, the House bill that funds the government—passed mostly with Republican votes—is House Joint Resolution 59.

Is Sen. Ted Cruz going to oppose a bill he pushed the House to pass? No.

The arcane ways of the Senate played a key role in getting ObamaCare passed (or deemed to have passed); and now they may come up again in the battle to defund ObamaCare. Some reports speculate that Majority Leader Harry Reid may rely on a “motion to strike” maneuver that would strip the continuing resolution of the defunding language. The key thing to know is that the “motion to strike” can occur only after cloture has been invoked ending debate with the House bill still intact. Cloture requires 60 votes. A motion to strike, only 51. The Democrats, holding only 52 seats (along with two independents that normally vote with the Democrats), might not be able to muster 60 votes to remove the defunding language.

If that “motion to strike” scenario occurs, the positions of the parties would appear to be backwards if you don’t understand the procedural gimmick in play. By opposing cloture, the pro-defund side would appear to be voting against the House bill while the Democrats who want to preserve ObamaCare funding would appear to be voting for the House bill.

What would really be going on is that those opposing cloture are trying to uphold the 60-vote threshold. As Sen. Cruz explains on Monday at Real Clear Politics:

Until Reid guarantees a 60-vote threshold on all amendments, a vote for cloture is a vote for Obamacare. It would amount to giving the Democrats a green light to fund Obamacare with 51 votes. […] I intend to use every tool available to me to defund Obamacare, and am encouraged by the thousands of phone calls, tweets, and emails that come to my office each day.

“Government shutdown” = government shutdown? No.

“Government shutdown” is the phrase the media has been peddling to describe what will happen if no funding bill is passed by October 1, but it’s not at all an accurate description. Yes, the government will have to stop doing certain things if Congress fails to appropriate money for them. Many of the most important government functions will continue. Air traffic control will still keep airplanes from colliding, the military will still defend the country, and Social Security and Medicare benefits will still be paid.

As Hans von Spakovsky explains in a recent Heritage Foundation paper, the federal Anti-Deficiency Act, which governs what happens when the government has no appropriated funds for its operations, says government functions that are necessary to protect the safety of human life or protect property will continue. Benefit payments would also continue because they are already authorized by law and do not rely on appropriations bills. In past “shutdowns,” very few federal employees were actually furloughed because so many were deemed necessary to provide essential services. Spakovsky notes:

There have been 17 funding gaps since 1977 ranging in duration from one to 21 days. In November 1995, when President Bill Clinton vetoed a CR and there was a funding gap for five days, only about 800,000 out of a total of 4.475 million federal employees were furloughed.

Only about 280,000 federal employees were furloughed during the December 1995 to January 1996 funding gap. During this time, the Social Security Administration initially retained about 5,000 employees and then called back an additional 50,000 employees within three days to continue paying benefits and processing new claims, keeping over 80 percent of the total employees of the agency employed despite the lack of a CR. [Internal citations omitted.]

So when you hear “government shutdown,” recent history says you should understand this to mean a mild government slowdown.

Posted on 09/23/13 02:22 PM by Alex Adrianson

To Do: Discover Who Has the Best Ideas and Who’s Doing the Best Work for Liberty

• Find out who has the most innovative public policy proposal this year. The Pioneer Institute will hold its 2013 Better Government Competition Awards Dinner, featuring keynote speaker Steve Forbes, on September 30 in Boston.

• Learn who’s doing the best work for liberty in the states at the State Policy Network Annual Meeting. The conference will be held September 24-27 in Oklahoma City. (We’ll be there!)

Nominate a freedom champion for a Milton Friedman Prize. The Cato Institute gives the award every other year to “an individual who has made a significant contribution to advance human freedom.” The winner not only gets a $250,000 cash prize, but also feted at a dinner at the Waldorf-Astoria Hotel, to be held in May 2014.

Hear Governor Rick Snyder tell how he is attracting business to Michigan the right way—by eliminating targeted tax credits and industry favors. Snyder will speak at the American Enterprise Institute at 1:15 p.m. on September 26.

Learn the ins and outs of simplifying the tax code. Antony Davies will speak on tax reform at the Mercatus Center’s next Capitol Hill Campus. The event begins at 11:30 a.m. at B-369, Rayburn House Office Building in Washington, D.C.

Preview the Supreme Court’s 2013 term, which will feature challenges to the Clean Air Act, limits on campaign contributions, and the President’s use of the recess appointment power among other items. Paul Clement, former Solicitor General of the United States, and John Elwood, former Assistant to the Solicitor General, will discuss the upcoming term at The Heritage Foundation at noon on September 24.

Hear a provocative lecture on how the world’s poor educate themselves. James Tooley will deliver the next talk in the David S. Saurman Provocative Lecture Series. The event begins at 5:15 p.m. at the Morris Dailey Auditorium at San Jose State University.

• Since they’re handing out ObamaCare exemptions, why not get yours? You can let the Obama administration know you want one, too, by signing up at Americans for Prosperity’s new page JustExempt.Me.

Posted on 09/20/13 11:16 PM by Alex Adrianson

Which Think Tanks Are Doing the Best Work for Liberty in the Whole World?

For the answer to that question, there’s no better source to consult than the Templeton Freedom Award finalists, announced this week by the Atlas Economic Research Foundation. The nominees are:

The Centre for Civil Society, in India, for its People, Policies, and Principles campaign. The campaign has contributed to real change in key areas including economic freedom and education, where they have given an organized voice to private schools and advocated for fair implementation of reforms.

The Centro de Investigación para el Desarrollo, A.C. (CIDAC), in Mexico, for its work advancing prosperity and productivity. The CIDAC team has successfully developed research and communication products that are changing the national discussion on economic policies including industrial, labor, and criminal justice policy.

Istituto Bruno Leoni, in Italy, for its Index of Liberalization. The Index has become a major reference for opinion-makers, policy-makers and industry stakeholders in debating economic policy, driving reforms in select industries and municipalities related to industry ownership and price fixing.

The Mackinac Center for Public Policy, in the USA, for its Right to Work campaign. After 20 years of consistently producing a wide variety of research, commentary and strategic communications, the campaign achieved a major victory this year with the adoption of Michigan’s right to work legislation.

The TaxPayers’ Alliance, in the UK, for its 2020 Tax Commission and Single Income Tax Report. The project yielded an ambitious and comprehensive reform plan that has given a new credibility to non-Keynesian approaches to fiscal health in Britain and has contributed directly and indirectly to recent taxpayer victories.

The Texas Public Policy Foundation, in the USA, for its Right on Crime project. The project contributed to major reforms, both in Texas and in other states, saving billions of dollars by closing prisons and preventing prison expansion, and reversing a culture of over-incarceration and over-criminalization.

Atlas will announce the winner of the $100,000 prize at its annual Liberty Forum and Freedom Dinner, to be held this year in New York City, November 13-14.

Posted on 09/20/13 10:40 PM by Alex Adrianson

Does Religious Expression Deserve Less Protection than Political Expression?

Conestoga Wood Specialities, a Pennsylvania manufacturer of kitchen cabinets, is taking the Department of Health and Human Services contraceptives mandate to the Supreme Court. Elizabeth Slattery and Sarah Torre report:

[The company’s] owners, the Hahns, run their family business according to their Mennonite faith, including offering an employee health plan aligned with those values. Under the Obamacare mandate, however, the Hahns are forced to provide and pay for coverage of abortion-inducing drugs—despite the family’s religious objections. Conestoga Wood could face fines of up to $95,000 per day for sticking to their deeply held beliefs and not complying with the mandate.

The Hahns sued to stop the implementation of the mandate, arguing that it violates the Free Exercise Clause of the First Amendment as well as the Religious Freedom Restoration Act (RFRA), which requires that government action “not substantially burden a person’s exercise of religion even if the burden results from a rule of general applicability.” RFRA does not define who and what entities qualify as a “person”—and that is precisely the question before the Supreme Court: Does a for-profit business count as a “person” under RFRA and the Free Exercise Clause?

In July, the U.S. Court of Appeals for the Third Circuit denied the Hahns’ request for a temporary halt to the mandate, finding that for-profit businesses are “artificial being[s], invisible, intangible, and existing only in contemplation of law” and could not exercise “an inherently ‘human’ right’” like the free exercise of religion. Earlier this week, the Sixth Circuit agreed.

These rulings are at odds with an earlier en banc decision by the Tenth Circuit, which determined that for-profit businesses can engage in religious exercise—just like an individual can. The court noted that free exercise “strongly connote[s] action” and extends “beyond the walls of a church…to religiously motivated conduct as well as religious belief.” Surely a kosher butcher should not have to abide by a regulation mandating non-kosher butchering practices. The Tenth Circuit concluded that there is “no reason” to grant constitutional protection for a business’s political expression but deny such protection for religious expression. [The Foundry, September 19]

Posted on 09/20/13 10:25 PM by Alex Adrianson

Global Warming Models Are Falling Apart

Ross McKitrick:

The figure [below] is from the draft version [of the upcoming report of the Intergovernmental Panel on Climate Change] that underwent expert review last winter. It compares climate model simulations of the global average temperature to observations over the post-1990 interval. During this time atmospheric carbon dioxide rose by 12%, from 355 parts per million (ppm) to 396 ppm. The IPCC graph shows that climate models predicted temperatures should have responded by rising somewhere between about 0.2 and 0.9 degrees C over the same period. But the actual temperature change was only about 0.1 degrees, and was within the margin of error around zero. In other words, models significantly over-predicted the warming effect of CO2 emissions for the past 22 years.

[Financial Post, September 17]

Posted on 09/20/13 09:47 PM by Alex Adrianson

Now Here’s the Good News on ObamaCare

On Friday, the House of Representatives passed a continuing resolution that funds the government through mid-December and also defunds ObamaCare. [The Hill, September 20] The Senate is expected to consider the measure next week. In case you missed it, ObamaCare has been a little bit in the news:

• According to Investor’s Business Daily, at least 301 employers (as of September 18) have cut work hours or jobs in order to avoid ObamaCare’s mandate to provide health insurance. That’s not helpful for an economy that still hasn’t regained the employment level of 2008. [Investor’s Business Daily, September 18]

• If you think that’s a problem, just wait till the mandate actually takes effect! Earlier this summer, the Obama administration decided to delay the employer mandate until 2015—even though the law doesn’t give the President the discretion to take such an action. So add the Constitution’s separation of powers to the list of ObamaCare casualties. [“Obama Suspends the Law,” by Michael McConnell, Wall Street Journal, July 8]

• The health insurance premiums that people pay will go up because the law will require people to buy more extensive coverage than they would have chosen without the law’s mandates. The Rand Corporation, for example, projects “a 22 percent increase in average premiums” due to Obamacare next year, “with several states experiencing an increase of 30 percent or more.” [“Interpreting Obamacare Premium Estimates for 2014,” by Chris Jacobs, The Heritage Foundation, September 13]

• National Health Care spending is going to be $621 billion higher over the next decade than it would have been without ObamaCare, according to a projection just published this month in Health Affairs. And no, that’s not just the cost of people getting more services (that they wouldn’t otherwise have chosen to purchase). The cost of government overhead is by far the largest component of the estimated increase, rising from $31.1 billion in 2010 to $70.4 billion in 2022. [“Obamacare Number of the Day: $621,000,000,000,” by Chris Jacobs, The Foundry, September 19]

• What is the federal government going to spend all that money on? For one thing, the government hasn’t yet figured out how to build a system that can verify the incomes and insurance status of those who apply for ObamaCare benefits (in order to prevent fraud) [“HHS Gives Up on Obamacare’s Anti-Fraud Measures,” by Philip Klein, Washington Examiner, July 7]; calculate how much beneficiaries will have to pay for the subsidized insurance they receive on the ObamaCare exchanges, [Wall St. Cheat Sheet, September 20]; or secures people’s sensitive data from identity thieves as required by law [“HHS Inspector General: Obamacare Privacy Protections Way Behind Schedule; Rampant Violations of Law Possible,” by Avik Roy, Forbes, August 7; and “How Obamacare Threatens Privacy in America,” by Chris Jacobs, The Heritage Foundation, September 3].

Seems to us the House has just given the Senate a way of fixing these problems.

Posted on 09/20/13 06:25 PM by Alex Adrianson

Foreign Aid Still Doesn’t Win the United States Support at the United Nations

Brett Schaefer and Anthony Kim with the latest tally:

Voting coincidence with the U.S. in the UNGA on overall non-consensus votes has averaged 32.7 percent since the State Department’s first report. The all-time low was 15.4 percent in 1988. Since 1983, voting coincidence with the U.S. was higher than 50 percent only twice—in 1995 and 2011. [The Heritage Foundation, September 17]

Congress mandates a report every year on voting at the United Nations, but for some reason the Obama administration stopped including in that report information on how much foreign aid is received by UN member states. Schaefer and Kim fill the gap with this chart:

Posted on 09/20/13 03:14 PM by Alex Adrianson

Video of the Week: Modesto Junior College Discovers a Teaching Moment for the Constitution

September 17 was Constitution Day—the 226th anniversary of the signing of the United States Constitution at the Constitutional Convention in Philadelphia in 1787. Robert Van Tuinen wanted to celebrate by passing out copies of the Constitution to his fellow students at Modesto Junior College. Here’s what happened about ten minutes after he started:

As shown in the video, a school administrator tells Van Tuinen that the Supreme Court allows restrictions on the “time, manner, and place” of free speech. But as Robert Shibley, Vice President of the Foundation for Individual Rights in Education, explains in a letter to the President of Modesto Junior College, “time, manner, and place” isn’t a blank check for a public institution to do whatever it wants short of completely barring free speech:

Time and again, courts have determined that to be considered legal, “time, place and manner” restrictions must be “narrowly tailored” to serve a significant governmental interest, leaving open ample alternative channels for communication. MJC’s censorship of Van Tuinen’s expression fails to meet each of these requirements—and by a huge margin. Further, the bureaucratic processes MJC students must endure to exercise their First Amendment rights offend our fundamental free speech traditions. As the Supreme Court declared in Watchtower Bible and Tract Society of NY, Inc. v. Village of Stratton, “It is offensive—not only to the values protected by the First Amendment, but to the very notion of a free society—that in the context of everyday public discourse a citizen must first inform the government of her desire to speak to her neighbors and then obtain a permit to do so.”

Also, check out the infographic on the problem of “Free Speech Zones on Campus” produced by the Foundation for Individual Rights in Education.

Posted on 09/20/13 03:02 PM by Alex Adrianson

The Internal Revenue Service Thought It Was the Speech Police

When the Internal Revenue Service left Tea Party and other conservative groups in limbo over their non-profit status applications in 2010 and 2011, the agency wasn’t just busy vetting them for political activity; IRS personnel were reading the groups’ literatures to see whether they liked the tone and ideology. USA Today has obtained IRS documents that “show the agency flagged political groups based on the content of their literature, raising concerns specifically about ‘anti-Obama rhetoric,’ inflammatory language and ‘emotional’ statements made by non-profits seeking tax-exempt status.”

The internal 2011 documents […] list 162 groups by name, with comments by Internal Revenue Service lawyers in Washington raising issues about their political, lobbying and advocacy activities. In 21 cases, those activities were characterized as “propaganda.” […]

But the word “propaganda” doesn’t appear in section 501(c)(4), which governs the social welfare status that most Tea Party groups were applying for, said John Colombo, a law professor at the University of Illinois. Instead, it appears in section 501(c)(3), which governs public charities. [USA Today, September 17]

Meanwhile, the House Committee on Oversight and Government Reform found that some IRS personnel were looking at tax exempt applications through ideologically tinged lenses. The committee’s latest report notes this testimony from an employee in the IRS’s Cincinnati office:

Normal (c)(4) cases we must develop the concept of social welfare, such as the community newspapers, or the poor, that types. These [Tea Party] organizations mostly concentrate their activities on the limiting government, limiting government role, or reducing government size, or paying less tax. I think it[’]s different from the other social welfare organizations which are (c)(4). [“Interim Update on IRS Investigation of Tax Exempt Applicants,” House Committee on Oversight & Government Reform, September 17]

The scandal so far is not what President Obama asked the IRS to do but the fact that a government agency thought it was in charge of deciding what kinds of speech about the role of government qualify as working for the public welfare.

Posted on 09/18/13 11:48 AM by Alex Adrianson

Science Matters—Unless It Doesn’t Say What Progressives Want It to Say

Unless you believe global warming is an urgent problem, you’re an anti-science knuckle-dragger. So progressives have been saying, but now Europe’s climate action commission has said the science doesn’t matter anyway. From a Telegraph interview with Connie Hedegaard:

“Say that 30 years from now, science came back and said, ‘wow, we were mistaken then now we have some new information so we think it is something else’. In a world with nine billion people, even 10 billion at the middle of this century, where literally billions of global citizens will still have to get out of poverty and enter the consuming middle classes, don’t you think that anyway it makes a lot of sense to get more energy and resource efficient,” she said.

“Let’s say that science, some decades from now, said ‘we were wrong, it was not about climate’, would it not in any case have been good to do many of things you have to do in order to combat climate change?.” [The Telegraph, September 16]

The answer is no because when bureaucrats say “energy efficiency” they always mean exactly the opposite of what consumers understand the words to mean. Efficiency to a consumer means the cheapest way of doing a given thing; energy efficiency to a bureaucrat means making it artificially expensive for people to do things like live in a single family house, use a washing machine that actually get clothes clean, take a vacation in a foreign country, or check out a new restaurant unless it’s conveniently located in walking/public transit riding distance.

The green energy crowd wants people—other people, anyway—to have a lower standard of living in order to fight global warming. Europe’s climate action commissioner just wants other people to have a lower standard of living.

Posted on 09/17/13 05:58 PM by Alex Adrianson

The Washington Navy Yard Is a Gun-Free Zone

Remember this fact when someone tries to hang a gun control argument on the shooting Monday at the Washington Navy Yard: Except for military policemen, military bases are gun-free zones. That’s been the case since 1992, reports The Blaze:

It appears this “gun-free zone” type policy can actually be traced back to Department of Defense (DoD) Directive 5210.56, signed into effect in February 1992 by Donald J. Atwood, deputy secretary of defense under President George H.W. Bush.

The controversial directive states that “it is DoD Policy” to “limit and control the carrying of firearms by DoD military and civilian personnel.”

“The authorization to carry firearms shall be issued only to qualified personnel when there is a reasonable expectation that life or DoD assets will be jeopardized if firearms are not carried,” it says.

The policy, however, adds, “DoD personnel regularly engaged in law enforcement or security duties shall be armed.” A former member of the Air Force, with experience in base security, thus, told the Washington Post that he would guess there were “no more than a couple of dozen weapons on the Navy Yard.” [The Blaze, September 17]

And, in case anyone needs reminding, this week’s mass shooting was not the first to have occurred in a gun-free zone. Mass shootings occurred at the Sandy Hook Elementary School in Newtown, Conn., in December 2012; at the Sikh Temple in Oak Creek, Wis., in August 2012; at the Singlemark Theater in Aurora, Colo., in July 2012; and, of course, at Fort Hood in Killeen, Texas, in November 2009. All of the locations in that foregoing list were gun-free zones. That is to say, they were places where law-abiding citizens were made defenseless against a mass shooter either by law or by the policy of the location.

Posted on 09/17/13 03:34 PM by Alex Adrianson

Arizona’s Medicaid Expansion Might Have a Problem: It’s Unconstitutional

Arizona Gov. Jan Brewer did a 180 degree u-turn earlier this year when she pushed the Arizona legislature to expand Medicaid. She had opposed expansion while running for re-election, but the financial inducement offered by the federal government caused her to see the issue differently.

But the deal offered to the states by ObamaCare—later modified as a result of a Supreme Court ruling last year—also required states to levy a hospital tax. Arizona’s legislature approved the expansion and the tax, but not by the two-thirds supermajority required for tax increases by the Arizona constitution. The legislation purported to get around that requirement by calling the provider tax an assessment and giving an appointed administrator the power to determine how big the tax is and which hospitals have to pay it.

In a lawsuit filed last week, the Goldwater Institute says merely calling the tax an assessment is unconstitutional, too. The Institute’s brief points out that the ObamaCare legislation requires the provider tax to be a broad-based tax that applies irrespective of whether a hospital accepts Medicaid payment. By definition, therefore, the tax cannot be considered an assessment that doesn’t trigger the two-thirds majority requirement. [Biggs v. Brewer, Goldwater Institute complaint, September 12, 2013]

Renaming the tax an assessment, explains Goldwater, “yields the exact outcome that Arizona’s constitutional checks and balances were intended to prevent: the consolidation of power in an unaccountable bureaucrat who is free to play favorites.” [“Backgrounder (September 2013): Challenge to Unconstitutional Medicaid Expansion,” Goldwater Institute, September 2013]

Posted on 09/17/13 12:34 PM by Alex Adrianson

To Do: Celebrate the Constitution on Constitution Day

Assess the Supreme Court’s October 2012 and 2013 terms by taking in a day-long symposium at The Cato Institute on September 17. The program will conclude with the Annual B. Kenneth Simon Lecture delivered by Judge David B. Sentelle who will speak on the topic of “Freedom of the Press: A Liberty for All, or a Privilege for Some?”

Test your knowledge of the U.S. Constitution. The National Archives will host a panel featuring Prof. Akhil Reed Amar of Yale College and Yale Law School; Sen. Amy Jean Klobuchar (D-Minn.); and Edwin Meese III, Heritage Foundation fellow and former U.S. Attorney General. The discussion will feature real-time audience polling and begins at 7:30 p.m. on September 17.

Learn what makes the Constitution exceptional. The James Madison Institutes will host a talk by David Azerrad of The Heritage Foundation. The talk begins at 7 p.m. on September 17 at Broward College, Coconut Creek, Fla.

Figure out what’s really been going on at the Internal Revenue Service. The Hudson Institute will host an expert panel to discuss the tax collector’s targeting of conservative groups for extra scrutiny. The discussion begins at noon on September 18.

Find out if there is a war on women or a war no men going on. National Review and the Independent Women’s Forum will host a debate featuring Christina Hoff Sommers, author of The War Against Boys; Judy Bachrach, contributing editor at Vanity Fair; Kirsten Powers, columnist for The Daily Beast; and Sabrina Schaeffer, Executive Director of the Independent Women’s Forum. The debate, moderated by Jonah Goldberg, begins at 6 p.m. on September 19 at Decatur House on Lafayette Square in Washington, D.C.

• Save the dates. Later this month:
State Policy Network Annual Meeting, September 24-27, in Oklahoma City;
Nevada Policy Research Institute’s 22d Annual Celebration, featuring keynote speaker Larry Arnn, September 26;
Measuring Economic Liberty, featuring the authors of the economic liberty indices from The Heritage Foundation, Cato Institute, World Bank, and Fraser Institute, September 27 at the American Enterprise Institute;
CPAC St. Louis, with featured panel “Can social conservatives and libertarians ever get along?” September 28;
Implosion: The End of Russia and What It Means for America, featuring author Ilan Berman, September 30 at The Heritage Foundation;
and
the Pioneer Institute’s 2013 Better Government Competition Awards Dinner, featuring keynote speaker Steve Forbes, September 30 in Boston.

Posted on 09/13/13 10:50 PM by Alex Adrianson

Putin Is Wrong: America Is Exceptional

Russian President Vladimir Putin took to the pages of the New York Times this week to make a plea for caution on Syria. In doing so, he criticized the notion of American exceptionalism, writing:  

It is extremely dangerous to encourage people to see themselves as exceptional, whatever the motivation. There are big countries and small countries, rich and poor, those with long democratic traditions and those still finding their way to democracy. Their policies differ, too. We are all different, but when we ask for the Lord’s blessings, we must not forget that God created us equal.    

Heritage Foundation President Jim DeMint responded with a letter to Putin thanking him for “shining an international spotlight on a crucial issue that doesn’t get nearly as much attention as it deserves”:

America is an exceptional nation—that is, one like no other, not just now but in history—because it is dedicated to the universal principle of human liberty. This is grounded in the truth that all men—not just Americans—are created equal and endowed with inalienable rights by their Creator. As a British admirer of America, G.K. Chesterton, once put it: “America is the only nation in the world that is founded on a creed.” We are, in other words, not a nation based on ethnicity, but on beliefs, and not coincidentally, that is why we attract people of all ethnicities and they become proud Americans.

Sure, we make mistakes. When we have used our power, however, we’ve done it for good. When we helped liberate the western half of Europe, we left it democratic and free to decide its own fate. The wall that existed for decades dividing Berlin—and the Iron Curtain that stretched from Stettin in the Baltic to Trieste in the Adriatic—were not there to keep out westerners, but to keep those born in the east from escaping to freedom. But you must know this history well, since you were a KGB agent in Germany at the time.

Read the whole letter to Putin, and also the informative booklet Sen. DeMint enclosed: “Why Is American Exceptional?” by Matthew Spalding, The Heritage Foundation, October 1, 2010.

Posted on 09/13/13 07:48 PM by Alex Adrianson

Some Families Must Go to Great Lengths to Find a Better School than Their Local Public School

Jailyn Baker, for example, gets up at 5 a.m. every school day in order to make a seven-leg 90-minute trip to Josephinum Academy. Josephinum is 15 miles to the north of Jailyn’s assigned public school in Chicago. She makes the trip, passing 15 other public schools along the way, because her mother, Marcia, considers Josephinum the best option for her. Affordable private schools like Josephinum are rare in Chicago because the Illinois House of Representatives has refused to pass even a limited school choice program.

As Diana Rickert of the Illinois Policy Institute details in her “day in the life of Jailyn” story in the Chicago Tribune, Jailyn and her mother make great sacrifices just to find a decent school. Imagine how much simpler their daily routines would be with a little bit of school choice. Imagine how many other Chicago families would like an option beside their failing local public school. [And read Rickert’s article for a great example of how to tell a story about how public policy choices really do affect people: “In Search of an Education,” Chicago Tribune, September13.]

Posted on 09/13/13 07:08 PM by Alex Adrianson

Barack Obama’s Policies Have Been Terrible for “the 99 Percent”

The Left says all the time that the rich get richer while the poor get poorer, and now it seems like the claim is actually true of the Obama years. The Huffington Post has 12 infographics on how terrible the recovery has been for everybody except the 1 percent. Here are two particularly telling graphics:

And:

[Huffington Post, September 13]

The Huffington Post caters to liberal readers who will probably see these charts as confirmation that what they already believed has been happening is continuing to happen. But clearly, the first graphic above shows that something is different. What is different is that United States has less economic freedom than it used to have. Salim Furth explained the problem this way in a recent issue of The Insider:

With new regulations and business requirements in health insurance, small-business finance, environment, energy, and tax compliance, not to mention the ever-expanding reach of state licensure boards, it is expensive to open a business. In a report published by the Weidenbaum Center at Washington University in St. Louis and the George Washington University Regulatory Studies Center, Melinda Warren and Susan Dudley have calculated how much money the federal government spends to develop and enforce regulations. They calculate that the federal budget for economic regulation increased to $9.2 billion in 2012 from $6.3 billion in 2007. In President Barack Obama’s first three years in office, 106 new major regulations were created (four times more than in President George W. Bush’s first three years), report The Heritage Foundation’s James Gattuso and Diane Katz. Those regulations cost earners $46 billion annually. The biggest new fixed costs come from the Dodd–Frank bill, ObamaCare, and the activist Environmental Protection Agency. In all three cases, enormous discretion is left to regulators to write and implement rules as they see fit. Under arbitrary enforcement, large firms with lobbyists and lawyers have a competitive advantage over unconnected newcomers.

High fixed costs and onerous regulation are textbook “barriers to entry.” Incumbent firms favor many of these barriers, because they keep competitors out of the market, which keeps profits high. In banking, the stringent regulations of the Dodd–Frank Act not only make it hard for small or start-up banks to survive, they discourage banks from lending to borrowers who do not have a strong track record. Less credit for unknown borrowers means fewer start-up jobs created.

Other factors that might discourage competition and firm creation include: elevated uncertainty over the implementation of new regulations, expectations of higher tax rates in the future to pay for rising debt, implicit promises of bailouts for large incumbent firms, and slow demand growth since the recession.

As long as start-ups are held down by bad policy and feckless deficits, incumbent firms can earn profits without expanding supply. [“Why Such a Slow Recovery,” by Salim Furth, The Insider, Winter 2013.]

Of course the rich do relatively better than everyone else when government policy makes it hard for upstarts to compete.

Posted on 09/13/13 04:40 PM by Alex Adrianson

Never Forget

Wednesday was the 12th anniversary of the attacks on 9/11. We write a lot about national security and terrorism in this space, but this week we’d just like to say that we should never forget the 3,000 people who died at the World Trade Center, at the Pentagon, and on American Airlines Flight 77. When you have a moment, go listen to some of the stories of 9/11 victims remembered by those who loved them at StoryCorp.org. You can also find biographies and remembrances at the websites for both the National 9/11 Pentagon Memorial and the 9/11 Memorial in New York City. And if you can, make a trip in person to the memorials, too.

Posted on 09/13/13 03:01 PM by Alex Adrianson

Tony Abbott Was Elected Prime Minister of Australia Because He Was a Conservative

John Roskam’s analysis:

The Australian electorate is by and large conservative. John Howard was a self-confessed conservative. To get elected in 2007 Kevin Rudd pretended to be a conservative. Tony Abbott is a conservative. Maybe that’s a pattern. Julia Gillard was not a conservative and she failed to win a majority. Howard’s introduction of Work Choices was not the act of a conservative and it was a key factor in his defeat. The same applies to Gillard’s carbon tax.

Economics is going to be a key challenge for Abbott as prime minister, but not because of the reasons that are usually given. It’s simply not true that Abbott has no interest in economics. In his book, Battlelines, for example, there’s an extensive discussion not just of economics, but also of Australia’s tax and welfare system. If there’s a reason Abbott sometimes comes across as not being interested in economics, it’s because he’s interested in so much more than just economics. One of the few people in the federal parliament who comes close to being as well-read as Abbott is another Rhodes Scholar, Malcolm Turnbull. […]

Nor does Abbott’s background with the Democratic Labor Party disqualify him from being an economic reformer.

It’s true that Abbott is no Hayekian free-marketer. But then again few of his colleagues are either (unfortunately). Abbott’s economic principles sit firmly in the middle of the spectrum of opinion across the Liberal Party. The DLP’s concerns were not primarily economic ones. They were political. The DLP was established in the 1950s as part of the fight against communism in the Australian trade union movement. The DLP’s economic policies were not very different from those of Menzies’ Coalition. A highly regulated mixed economy with a private sector supported by a substantial government sector was the mainstream economic orthodoxy. Australian politicians and policymakers from the 1950s through to the 1970s knew of no other alternative.

Several decades on, we now know there is an alternative. The alternative is a reform program of the size and scope of the 1980s. Abbott is very aware of this. [Institute of Public Affairs, September 6]

Posted on 09/13/13 12:45 PM by Alex Adrianson

Another Government that Raised Taxes Has Been Voted Out

Tony Abbott called Australia’s carbon tax a “big fat tax” and said: “More than anything this election is a referendum on the carbon tax.” Then last Saturday, Tony Abbott won the election to be Australia’s next prime minister. One lesson appears to be that putting an adjective in front of the word “tax” doesn’t make a new tax either good politics or good policy. In a new study for the Institute for Energy Research, Alex Robson, Professor of Law and Economics at Griffith University in Brisbane, assesses the economic damage that’s in store unless the carbon tax is ditched. Some key points:

Under the carbon tax, most of the abatement that Australia will take credit for over the period to 2050 will be undertaken overseas, with Australian businesses paying their foreign counterparts to reduce emissions. Nevertheless, the tax will have significant economic costs. […] According to the Australian Industry Group (AIG), energy cost increases have averaged 14.5 per cent for businesses as a result of the carbon tax, whilst TD Securities and the Melbourne Institute found that due to the introduction of the carbon tax, the price of electricity for households rose by 14.9 per cent. The increase in household electricity prices after the carbon tax was introduced was the highest quarterly increase on record.

The Government’s own modelling (which, as the report discusses, are likely to have underestimated the costs of the tax) indicates that Australia’s Gross Domestic Product (GDP) will be lower than it otherwise would be for every year that the tax is in place. Depending on the discount rate used, the present value of these costs could be as high as 83 per cent of current Australian GDP, or $1.25 trillion.

And:

Overall, Australia’s exports are relatively emissions intensive. Hence a carbon tax is likely to increase the cost of exports, whose prices are largely determined on world markets. There is little opportunity for Australian export industries to pass on the increases in costs that are due to the carbon tax. In other words, the effect of the carbon tax on Australia’s emissions-intensive, trade-exposed industries is similar to a tax on exports or a tax on import-competing industries. Providing free permits to these industries does not alter marginal incentives. Domestic emissions in these industries may fall after a carbon tax is imposed, but that cannot be counted as an environmental gain if the ultimate effect is that the businesses shut down and emissions simply rise overseas. The net effect will be a pure deadweight cost to the Australian economy. [“Australia’s Carbon Tax: An Economic Evaluation,” by Alex Robson, Institute for Energy Research, September 2013]

Posted on 09/13/13 12:32 PM by Alex Adrianson

There Are Now Two Fewer Anti-Gun Rights Senators in Colorado

The replacement of Colorado state senators John Morse and Angela Giron via recall elections Tuesday shows that gun rights isn’t a Republican-only fetish. David Kopel writes:

It’s one thing for a deliberately polarizing legislator like Morse to lose a close race in a swing district. It’s quite another for Giron to lose by 12 points in a district that is 47% Democratic and 23% Republican. One reason is that in blue collar districts like Pueblo, there are plenty of Democrats who cling to their Second Amendment rights. As the Denver Post noted, 20% of the voters who signed the Giron recall petitions were Democrats.

Kopel also writes that the reason Morse and Giron were recalled wasn’t just that they supported legislation that restricted gun rights. Citizens were also offended by the disregard for the normal legislative process shown by Senate President Morse and committee chair Giron in order to get the bills passed:

At Morse’s instruction, only 90 minutes of testimony per side were allowed on each of the gun bills. As a result, hundreds of Colorado citizens were prevented from testifying even briefly. Many of them had driven hours to come to the Capitol, traveling from all over the state.

That same day, 30 Sheriffs came to testify. They too were shut out, with only a single Sheriff allowed to testify on any given bill. So while one Sheriff testified, others stood up with him in support.

Admirably, Morse had urged his Committee Chairs to be polite and courteous to all witnesses, and they were. But President Morse did not follow the standard practice of the Colorado legislature, by which any citizen who wishes to testify is allowed to be heard, at least briefly. The patient endurance of Colorado legislative committees which have heard hour upon hour of testimony on bills about gay rights, motorcycle helmets, and other social controversies is a tribute to our republican form of government.

When Morse shut that down, and Chairperson Giron went along, they crossed the double-red line of Colorado government. […] While the gun control bills were before the Senate in March, President Morse urged his caucus to stop reading emails, to stop reading letters from constituents, to stop listening to voicemails, to vote for the gun bills and ignore the constituents. Giron, presciently following this strategy, had allowed citizens to raise Second Amendment concerns at a single town hall meeting, and thereafter refused to discuss the issue at public fora. [Volokh Conspiracy, September 11]

Posted on 09/11/13 12:40 PM by Alex Adrianson

Repealing “Green Fuels” Mandates Could Cut Food Prices Significantly

The European Union’s very own researchers say that a lot of food inflation could be avoided if the EU scraps its targets on renewable fuels. Europe sets an overall target of 20 percent of energy used to come from renewable sources and 10 percent of total transport fuel consumption to come from renewable energies by 2020. The news site Euractiv.com describes the findings from the new report from the EU’s Joint Research Centre :

If biofuels received no EU policy support, the price of food stuffs such as vegetable oil would be 50% lower in Europe by 2020 than at present – and 15% lower elsewhere in the world – according to new research by the EU’s Joint Research Centre (JRC).

The “significantly lower” results are because global prices for vegetable oils – which are 60% palm and soy oil – are “strongly driven” by their use as food, says the paper by the JRC, the EU's official scientific and technical research laboratory.

When more soy and palm oil are used for biofuels production, less is available for food use and the resulting scarcity drives food price inflation. [Euractive.com, September 9]

Posted on 09/10/13 06:10 PM by Alex Adrianson

To Do: Research Your Rates, Feel Free to Be Shocked

• If you purchase health insurance in the individual health insurance market, find out how ObamaCare will affect your rates by checking out the Manhattan Institute’s new interactive ObamaCare rate map.

Get the inside story of the first constitutional challenge to ObamaCare, from the development of the constitutional argument against it all the way to the Supreme Court’s decision. Josh Blackman will talk about his new book Unprecedented: The Constitutional Challenge to ObamaCare at the Cato Institute. The talk begins at noon on September 13.

Learn about the strategies of the state attorneys general who are fighting federal overreach. The Heritage Foundation will host a discussion with four state AGs: Scott Pruitt of Oklahoma, Derek Schmidt of Kansas, Luther Strange of Alabama, and Alan Wilson of South Carolina. The talk begins at noon on September 13.

Meet some women who support gun rights. At the next meeting of the Conservative Women’s Network, Emily Miller will talk about her new book Emily Gets Her Gun. The book details what a person has to do in order to exercise her Second Amendment rights in the nation’s capital. The meeting, sponsored by the Clare Boothe Luce Policy Institute and The Heritage Foundation, begins at noon on September 13 at Heritage. Men are encouraged to attend, also.

• Congratulate the Mississippi Center for Public Policy on 20 years of working for limited government, free markets, and strong families. The think tank will have a celebration dinner on September 13 in Jackson, Miss.

• Sharpen your understanding of the case for free markets by checking out the Free Markets Series, produced by the Montreal Economic Institute. The series consists of 14 short episodes (approx. 27 minutes each) that originally aired on PBS. The series features Steve Forbes discussing sound money, Richard Epstein talking about liberty and the law, Lawrence Reed discussing Adam Smith, David Gratzer talking about health care and liberty, and many other bright minds.

• Circle Constitution Day, September 17, on your calendar. We’ll have a list of events in next week’s issue.

Posted on 09/06/13 11:51 PM by Alex Adrianson

Humanitarian Aims Do Not Make a War Moral

On Wednesday, President Obama offered this justification for proposing military action against Syria: “I would argue that when I see 400 children subjected to gas […] and we have the opportunity to take some action that is meaningful, even if it doesn’t solve the entire problem may at least mitigate [it], then the moral thing to do is not to stand by and do nothing.”

But, as Kim Holmes points out, it takes more than good intentions to justify a war on moral grounds:

Aristotle says that we must measure the moral value of an act not by its intention, but by its consequences. We may very well intend to stop another use of chemical weapons by Assad, but sadly that is not even the purpose of the military mission as outlined by the administration. Instead it is to “take action … even if it doesn’t solve the entire problem,” as President Obama said. […]

It’s clear the President is more interested in limiting the action than achieving success. Indeed it’s unclear exactly what the measure of success would be. “Degrading” a few military targets is not likely to deny Assad his chemical-warfare capability. In fact, the administration has made clear that attacking chemical sites has been taken off the table because of fear of contamination.

Why does this matter? Because even a small military strike will kill people. We had better have a very sound reason—which includes a clear definition of success—before we use that force.

Also:

The responsibilities of a democratic or republican government are different from those that govern our private lives. The state’s responsibility is to secure liberty so that I, as an individual, have the freedom to act in a virtuous manner.

It would be another matter entirely if Assad’s chemical weapons were threatening America’s security interests. Then the social compact of security with the federal government kicks in, and it is obligated to not only protect us but to enlist our help in doing so. But that is not what the moral argument for Syrian intervention claims. It says that the mere horrific nature of the act suffices to justify the use of force. Perhaps the Founders should have put that particular proviso in the Constitution; or perhaps Congress should have passed a law to that effect. That they didn’t do so is proof that the doctrine of humanitarian warfare is far beyond what Americans have signed up for. [The National Interest, September 6]

Posted on 09/06/13 10:47 PM by Alex Adrianson

There Has Been No Hiring Takeoff Yet

Here are some takeaways from the August jobs report released Friday by the Bureau of Labor Statistics:

James Sherk and Salim Furth:

The headline unemployment rate dipped a statistically insignificant 0.1 percentage points to 7.3 percent. However, that decrease occurred solely because 516,000 Americans left the labor force. Labor force participation fell to 63.2 percent—its lowest level in 35 years. [The Heritage Foundation, September 6]

Neil Irwin:

The nation has averaged 148,000 new jobs a month for the last three months. The number was 160,000 for the last six months, and 184,000 a month over the last year. That looks to me like a downward trend, no two ways about it. It’s certainly not the gradual acceleration that most mainstream economists have forecast as 2013 advances and the impact of tighter fiscal policy fades.

Want another sign? The proportion of the U.S. population that had a job in August was 58.6 percent. Six months earlier, the number was a whopping — wait for it — 58.6 percent. The year is nearly three-quarters over, and the economy isn’t growing fast enough to put a higher proportion of its citizens back to work. [Washington Post, September 6]

James Pethokoukis:

Even at 169,000 jobs a month, it would take an unbelievable 9 years and 10 months to return to pre-Great Recession employment levels, according to Brookings. See you in 2023 — assuming no recessions between now and then. [AEIdeas, September 6]

Posted on 09/06/13 10:21 PM by Alex Adrianson

Tell More Stories

Stories move people in a way that a plain recitation of the facts do not. Last week we attended a great session at RightOnline about how to use the principles of storytelling to engage your audiences. Patrick Reasonover, of Ozymandias Media, and Clay Broga, of FreeThink Media, led the session, which focused on using stories in video. Here are some points to think about when you are creating content:

• You are more likely to engage an audience successfully by giving them information that they want, not information that you think they need.

• A video doesn’t need a lot of bells and whistles if it has a good concept behind it.

• If you use data to make a point, make sure you provide a comparison to something with which people are familiar. A number on its own is not likely to mean much.

• A good metaphor for understanding how stories can motivate people comes from Jonathan Haidt’s The Happiness Hypothesis in which he describes the self as like a rider on an elephant. The rider is the rational mind, and the elephant is the unconscious mind that’s really in charge.

• Stories work like a mirror. The brain places the viewer into the story, so that what happens to the characters really happens to the viewer.

• Your audience is always someone specific.

• You create content for people who are not like you.

• Ask yourself: What is the Bambi’s-mom-dies moment in my story?

• Use feedback to assess your own work. Get to the fail: Find the point at which the audience stopped watching and then figure out what went wrong.

• Music is not a substitute for storytelling in a video. Music should support the moment, not define it.

• Appealing to a niche audience doesn’t necessarily mean your story won’t be a hit with a broader audience. That kind of focus can be the key to making the content interesting.

Posted on 09/06/13 06:58 PM by Alex Adrianson

Man Announces Intention to Vote Legally

No, we’re not recycling Onion headlines; we’re referring to some excellent monkey wrenching perpetrated by … who else:

Independence Institute president Jon Caldara’s decision to vote in the Senate District 11 recall kicks off the “Bring in the Vote” educational campaign, highlighting the significant legal changes in Colorado’s “Voter Access and Modernized Elections Act,” signed into law by Gov. John Hickenlooper on May 10.

Calling attention to the lax new election law sponsored by Senators John Morse and Angela Giron, both facing recall elections, Caldara announced that he has the “intention” to make his permanent home in Senate District 11, currently represented by Morse.

Under HB 1303, the “intention” to establish residence along with a few minor requirements such as being 18 years of age, living in Colorado for 22 days, and having an address in the district, permits almost anyone to “Bring in the Vote” and cast a ballot in any district.

“It is my belief that this extremely sloppy new election law was designed to legally move voters into districts where their vote is most useful. I will show how this dangerous new law works by easily and legally voting in the John Morse recall election,” explained Caldara.

“John Morse sponsored this law and worked its passage through the Senate. And now, sadly, under this law future Colorado elections will be decided by which candidate has the most buses.” [The Cauldron, September 5]

The Independence Institute has also put up a new website called Bring in the Vote that provides Coloradans with a guide to voting under the new election law.

Posted on 09/06/13 03:21 PM by Alex Adrianson

Are There Good Guys in the Syrian Civil War?

A report from the ground in Syria:

The Syrian rebels posed casually, standing over their prisoners with firearms pointed down at the shirtless and terrified men.

The prisoners, seven in all, were captured Syrian soldiers. Five were trussed, their backs marked with red welts. They kept their faces pressed to the dirt as the rebels’ commander recited a bitter revolutionary verse.

“For fifty years, they are companions to corruption,” he said. “We swear to the Lord of the Throne, that this is our oath: We will take revenge.”

The moment the poem ended, the commander, known as “the Uncle,” fired a bullet into the back of the first prisoner’s head. His gunmen followed suit, promptly killing all the men at their feet. […]

The soldiers had been captured when Mr. Issa’s fighters overran a government checkpoint north of Idlib in March.

Their cellphones, the former aide said, had videos of soldiers raping Syrian civilians and looting.

Mr. Issa declared them all criminals, he said, and a revolutionary trial was held. They were found guilty.

Mr. Issa, the former aide said, then arranged for their execution to be videotaped so he could show his work against Mr. Assad and his military to donors, and seek more financing. [New York Times, September 5]

Posted on 09/06/13 02:58 PM by Alex Adrianson

Video of the Week: Ronald Coase on Markets, Firms, and Property Rights

Nobel Laureate Ronald Coase, who died at 102 this week, reviewed his own work for a conference last year:

Posted on 09/06/13 02:46 PM by Alex Adrianson

President Obama’s Understanding of the Separation of Powers: A Review

Things President Obama thinks his administration can do without (or in spite of) Congress:

Regulate carbon dioxide emissions even though Congress has never passed a law for that purpose;
Make appointments when Congress is in session and declare them to be recess appointments that don’t require congressional approval (three courts, most recently the U.S. Court of Appeals for the Fourth Circuit, have ruled the appointments unconstitutional) ;
Impose universal service obligations on Internet service providers (net neutrality) even though the U.S. Court of Appeals for the District of Columbia Circuit had already ruled that the Federal Communications Commission has no authority to impose network neutrality requirements;
Allow states to change what counts as “work” so as to make inoperative the work requirements in the federal Temporary Assistance for Needy Families (welfare) program;
Waive requirements of the No Child Left Behind law for states that adopt certain curriculum standards even though federal law expressly forbids the Department of Education from interfering in curriculum decisions;
Refuse to enforce immigration laws for certain classes of illegal immigrants;
Refuse to defend the Defense of Marriage Act in court;
Delay the implementation of employer mandates in the Affordable Care Act;
Expand eligibility requirements for health insurance subsidies by announcing that fraud protections will not be enacted;
Allow members of Congress and their staffs to continue receiving health insurance benefits that the Affordable Care Act (passed by Congress) expressly disallowed;
Raise cell phone taxes. [For more examples, see: “The Imperial Presidency,” by the Office of House Majority Leader Eric Cantor, October 2012.]

Things President Obama wants Congress’s permission to do:

Be Commander-in-Chief, a power given to the President by Article II, Section II, Clause 1 of the United States Constitution.

Posted on 09/06/13 02:20 PM by Alex Adrianson

The Case for Action in Syria Hasn’t Been Made

The President wants to take military action against Syria for the government’s alleged use of chemical weapons against rebel forces. It’s not at all clear how such an action would advance U.S. security or national interests, writes Brett Schaefer:

The President stated over the weekend that a U.S. military operation in Syria would be “narrow and limited” and would not involve troops on the ground. Yet the Administration’s draft resolution states that the purpose of the military action is to “prevent or deter the use or proliferation” of weapons of mass destruction or to “protect the United States and its allies and partners against the threat posed by such weapons.” This is a very broad objective.

The Administration has been careful to say that strikes would “degrade” Syria’s chemical weapons capacity. But limited military strikes are very unlikely to destroy Syria’s chemical weapons stocks or delivery capacity. This is doubly true since the Syrian government has now had more than a week to move and protect those weapons. […]

The President stated that the August 21 chemical weapons attack “presents a serious danger to our national security.” Yet he failed to articulate a direct threat to the U.S. or its allies. Obama said we need to send a signal to dissuade Syria and other nations from stockpiling or using weapons of mass destruction. But retaliation to one chemical weapons attack—and not others—does not send a clear signal. American vacillation in the face of Iran’s nuclear ambitions sends a far more direct signal than a belated, “narrow and limited” military action in Syria. [The Foundry, September 4]

There is also, as Schaefer notes, the question of whether by assisting the rebels we would be assisting al-Qaeda.

Posted on 09/05/13 05:03 PM by Alex Adrianson

Ronald Coase, R.I.P.

Ronald Coase, a Nobel Prize winning economist whose work spawned reappraisals of the wisdom of government regulations, died on Monday at the age of 102. Coase’s body of work, writes David Henderson, reflected a curiosity about how actual economies work that led him to challenge what he called “blackboard economics.” [Wall Street Journal, September 3]

Coase was one of the first economists to show, in his 1937 paper “The Nature of the Firm,” the important role of transaction costs (what he called “marketing costs” at the time) in shaping the organization of economic activities. Because there are transaction costs—e.g., time spent bargaining to reach a deal—companies choose to have certain tasks performed in-house by their own employees rather than contracting out for those services, argued Coase. The firm exists in order to reduce transaction costs.

Coase also challenged the standard prescription of regulation and taxation as the best way to deal with pollution or other externalities. In his paper “The Problem of Social Cost,” published in 1960, he pointed out that where property rights are well defined and transaction costs are low, it makes no difference how liability for pollution is initially assigned; the polluter can pay his neighbor for the right to pollute (if he values the production that produces the pollution more than his neighbor values the absence of pollution) or his neighbor can pay the polluter not to pollute; either way the parties will reach a bargain that results in the same optimal allocation of resources to productive activities.

Coase also stipulated that in the real economy transaction costs frequently are not low, and therefore it does matter how rights are initially assigned. When regulators get those choices wrong, high transaction costs can prevent optimal solutions. According to a survey published last June, “The Problem of Social Cost,” is the most-cited law review article of all time. [Michigan Law Review, Vol. 110: 1483]

Coase developed his ideas on social cost in the process of writing a different article. In “The Federal Communications Commission,” published in 1959, Coase argued that the rights to use electromagnetic spectrum for broadcasting could be sold via auctions and then resold in a free market, rather than simply being assigned by the Federal Communications Commission. That argument eventually won; the FCC began auctioning spectrum in 1994.

Coase’s ideas on social cost spawned the field of study known as law and economics. Coase was the editor of the Journal of Law and Economics from 1964 to 1982. In 1991, he received the Nobel Prize in Economics “for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy.” [See also: Ronald Coase’s acceptance speech at Nobelprize.org.]

Coase also had one great question about regulation. As David Henderson observes, Coase would ask: “If regulation works so well in the market for goods, then it should work even better in the market for ideas. “

Why? As Coase said in a 1997 Reason interview, “It’s easier for people to discover that they have a bad can of peaches than it is for them to discover that they have a bad idea.” Many intellectuals thought Coase was arguing for government regulation of ideas. He wasn’t. His point was to get intellectuals to see that their case for regulating goods is weak. [Wall Street Journal, September 3]

Posted on 09/04/13 02:02 PM by Alex Adrianson

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