Federal workers get paid about 16 percent more in total compensation than comparable private-sector workers, according to a new study by the Congressional Budget Office. The CBO study compared federal civilian employees to private sector workers who resembled them in education level, work experience, and other observable characteristics. The CBO’s approach is broadly consistent with that taken by Jason Richwine of The Heritage Foundation and Andrew Biggs of the American Enterprise Institute.

The CBO found federal workers receive a 2 percent pay premium and a 48 percent premium in benefits. Total federal employee compensation runs around $200 billion per year, and saving 16 percent of that would amount to a 10-year savings of about $390 billion, notes Biggs.

In their own research published last year, Richwine and Biggs found a 61 percent premium in total compensation for federal workers. They found a larger premium in part because their calculation includes the value of greater job security that comes with federal employment. That factor alone, they estimate, is worth about 17 percent of pay.

Read More:
“Comparing the Compensation of Federal and Private-Sector Employees,” The Congressional Budget Office, January 2012.
“Comparing Federal and Private Sector Compensation,” by Jason Richwine and Andrew Biggs, American Enterprise Institute, June 2011.
“Same Worker, Higher Wage: A Study of Workers Who Switch from Private to Federal Employment,” by Jason Richwine, The Heritage Foundation, June 15, 2011.

Unless you work for a church, you’re probably going to pay for other people’s abortions, and even if you work for a religious non-profit, you’ll probably have to pay for them, too. On January 20, the Department of Health and Human Services, using its authority under Obamacare, announced that abortion must be covered without copays by most health insurance plans. That edict, as in the interim rule the agency announced last August, exempts insurance offered to employees by churches and church-run schools, but does not exempt insurance offered by religiously affiliated non-profits, such as Catholic hospitals.

The final rule did, however, give religious non-profits an extra year to figure out how to comply with the coverage requirement. James Capretta predicts this just means an extra year until these nonprofits’ workers are dumped into the public exchanges (“A Clash of Conscience,” National Review, January 30, 2012):

[L]arge Catholic institutions all over the country will be forced to stop offering health coverage to their workers, because continuing to do so will be incompatible with their mission. And when they drop that coverage, they will be forced by Obamacare to pay huge fines to the federal government ($2,000 per worker at the outset). For a Catholic institution with 5,000 employees, that’s $10 million that won’t go toward helping the poor, taking care of patients, or educating future leaders.

Giving parents a choice of their children’s schools leads to better educational outcomes—a handy thing to know since this is National School Choice Week. Rachel Sheffield rounds up some of the evidence (“National School Choice Week: How School Choice Benefits Students, The Foundry, January 26, 2012):

A 2010 gold-standard evaluation of the D.C. Opportunity Scholarship Program (DCOSP)—a voucher program for low-income children in Washington, D.C.—revealed that over 90 percent of DCOSP students graduated from high school, compared to just 70 percent of their peers with similar characteristics who remained in D.C. public schools. Similarly, students in the Milwaukee Parental Choice Program who participated for all four of their high school years had a 94 percent graduation rate, compared to a 75 percent graduation rate of their peers who attended four-years of public high school. […]

In addition to positive student outcomes, parents are more satisfied with their children’s schools when they have a choice. For example, 93 percent of parents whose children participated in the McKay Scholarship Program—a program for special-needs students in Florida—reported that they were satisfied with their children’s schools, compared to only 33 percent of parents whose special-needs children were enrolled in public schools. Parents of DCOSP students as well as parents with children in the Milwaukee Parental Choice Program and those whose children attend charter schools also report high levels of satisfaction with their children’s schools.

The competition from choice schools helps improve public schools, too, notes Sheffield:

Researchers found, for example, that as more private schools participated in Florida’s McKay Scholarship Program, the reading and math achievement of special-needs students in nearby public schools increased significantly.

See also: “A Win-Win Solution: The Empirical Evidence on School Vouchers,” by Greg Forster, The Friedman Foundation for Educational Choice, March 2011.

You can now find out how good your pension benefits would be if you worked for state government. Just visit CalculateYourPublicPension.com, which calculates the pension you would earn if you were a public employee in Florida, Illinois, Maine, New Jersey, or New York.

Becoming a right-to-work state—i.e., not compelling workers to give money to unions in order to work—will help Indiana’s economy grow, reports Paul Kersey (“What a Right-to-Work Law Will Mean for Indiana,” Mackinac Center for Public Policy, January 19, 2011):  

From 2000 to 2010, employment in right-to-work states increased 2.3 percent, compared to a 4.0 percent decline in non-right-to-work states. Indiana saw employment decrease 6.9 percent over the same period. That means Indiana lost roughly 207,000 jobs over the past 10 years. In contrast, 1.2 million jobs were created in right-to-work states.

And, notes Kersey:

A study by the Missouri Economic Research and Information Center found that in 2009, after adjusting for the cost of living, annual per-capita disposable income was $35,543 in right-to-work states, compared to $33,389 in non-right-to-work states. That equates to a $2,154 premium each year for those living in right-to-work states.

The Indiana House passed right-to-work legislation on Tuesday. An identical bill has already passed the state Senate. If Gov. Mitch Daniels signs the bill into law, which he is expected to do, Indiana will become the 23rd right-to-work state.

One plan for reducing economic inequality would be to let rich people fail while letting poor people become rich. Robert Lawson explains:

The idea that conservative donors become academic thought police when they fund university academic centers is severely misguided, explains Scott Walter in a recent article at Philanthropy Daily (“Are Donors Dangerous?” January 18, 2012).

Walter makes the case that this conservative philanthropy adds to rather than subtracts from the academic conversation. A prime example, he says, was the John M. Olin Foundation’s efforts to start law-and-economics centers at Harvard, Georgetown, Stanford, Yale, the University of Chicago, and other law schools. At Stanford, says Walter, the Olin Foundation worked with law school dean Paul Brest, “a serious scholar in his own right who has never been accused of having conservative views” and who “has praised the law-and-economics donors and urged other funders, regardless of their political views, to learn from them.”

Brest saw firsthand how the donors, grantees, and other scholars functioned, but he voices no concern over threats to academic freedom or integrity. I know from him and the funders involved that both sides, despite their differing views, got along well and knew that their opposite numbers were keen to maintain the highest academic standards.

Of course, one part of high academic standards is vigorous debate that leads to evolving views – something that the law-and-economics donors, far from quashing, have helped foster. Brest notes, for example, that “in recent years, the law and economics paradigm has been challenged by research in behavioral economics,” which means that even a successful academic movement never achieves a permanent victory, but rather spurs further academic work. Real scholars welcome that.

The critics who worry about Koch money seem not to worry at all that George Soros is using his billions to start academic centers devoted to fighting “market fundamentalism.” For them, “more academic freedom” seems to be just a synonym for “fewer conservative ideas.”

Wyoming has the best state tax business climate in the country, according to the Tax Foundation’s new 2012 State Business Tax Climate Index. The rest of the top 10 are South Dakota, Nevada, Alaska, Florida, New Hampshire, Washington, Montana, Texas, and Utah.

Seven of these top ten states do without one or more of the major types of taxes: individual income tax, corporate tax, or sales tax. The index authors note that this gives these states a major competitive advantage in attracting and keeping business. The bottom ten states are Iowa, Maryland, Wisconsin, North Carolina, Minnesota, Rhode Island, Vermont, California, New York, and New Jersey.

Wisconsin Gov. Scott Walker’s reforms of public employee pensions and collective bargaining are working, reports Christian Schneider:

Before the reform, many districts’ annual union contracts required them to buy health insurance from WEA Trust, a nonprofit affiliated with the state’s largest teachers’ union. Once the reform limited collective bargaining to wage negotiations, districts could eliminate that requirement from their contracts and start bidding for health care on the open market. When the Appleton School District put its health-insurance contract up for bid, for instance, WEA Trust suddenly lowered its rates and promised to match any competitor’s price. Appleton will save $3 million during the current school year.

Appleton isn’t alone. According to a report by the MacIver Institute, as of September 1, “at least 25 school districts in the Badger State had reported switching health care providers/plans or opening insurance bidding to outside companies.” The institute calculates that these steps will save the districts $211.45 per student. If the state’s other 250 districts currently served by WEA Trust follow suit, the savings statewide could reach hundreds of millions of dollars.

At the outset of the public-union standoff, educators had made dire predictions that Walker’s reforms would force schools to fire teachers. […] Madison School District Superintendent Dan Nerad predicted that 289 teachers in his district would be laid off. Walker insisted that his reforms were actually a job-retention program […] . So far, Nerad’s district has laid off no teachers at all, a pattern that has held in many of the state’s other large school districts. […]

Thanks to Walker’s collective-bargaining reforms, the Brown Deer school district in suburban Milwaukee can implement a performance-pay system for its best teachers—a step that could improve educational outcomes.

More: “It’s Working in Walker’s Wisconsin,” City Journal, Winter 2012.

Tuesday was the 1,000th day since the U.S. Senate passed an annual budget—which is supposed to happen more or less annually. There’s lots of other stuff that can get done in 1,000 days:

To put the widget above on your Web site, copy this code:

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George Bush’s tax cuts didn’t increase income inequality, but it appears Bill Clinton’s tax increases did. Looking closely at the so-called Gini co-efficient, a common measure of income inequality, confounds the liberal story line, as William McBride explains:

It must be acknowledged that the Gini coefficient has an underlying upward trend between 1986 and 2000. The steepest increase follows the 1986 tax reform, which dramatically lowered the top marginal rate on ordinary income […], and began a long trend of business income moving from the corporate code to the personal code in the form of pass-through entities such as partnerships and S-corporations. This alone might explain much of the measured increase in income inequality over this period. However, Clinton raised the top marginal rate in 1993 to 39.6 percent, and this also ushered in a long period of increasing income inequality. The Gini coefficient went from 0.498 in 1993 to 0.555 in 2000 – an increase of 12 percent.

In contrast, the period since 2000 has exhibited no underlying trend in income inequality, but rather dramatic fluctuations resulting from the business cycle. […] Income inequality at the beginning and end of the Bush years was virtually unchanged, with the Gini coefficient going from 0.555 in 2000 to 0.557 in 2008. In 2009 the Gini coefficient fell further, to 0.535, for a 4 percent drop since 2000. There is therefore no evidence that the Bush tax cuts in either the top marginal rate or capital gains rate had any long term effect on inequality.

For more on what measures of income inequality show, see McBride’s post, “Income Inequality Went Up 12 Percent Under Clinton, Zero under Bush,” Tax Foundation, January 20, 2012.

This week is national school choice week. If you agree that parents should have the right to choose the school that’s best for their child, go sign the petition at NationalSchoolChoiceWeek.com.

The Heritage Foundation and the Family Research Council have teamed up to launch the Your Money, Your Values, Your Vote 2012 National Tour. It involves a colorful bus, we hear.

Heritage and FRC are touring the country to help save the American Dream. At each stop, citizens can come out to meet the bus; talk about the issues; register to vote; learn more about the Heritage budget plan, Saving the American Dream; and learn about defending life, marriage, and religious liberty.

You can follow the tour and check the schedule at www.valuesbus.com/.

If your library of liberty is missing something, check out the Liberty Fund’s Spring/Summer 2012 book catalog, which was just published. You’ll find Buchanan, Hayek, Mises, Rogge, Seldon, Tocqueville, plus many of the Founders here at great prices.

Something appears to have gone wrong in Illinois:

More: “The Verdict Is In: The Tax Hike Failed,” Illinois Policy Institute, January 12, 2012.

Check it out: Death and Taxes, 2012:

The port of Charleston, S.C., remains 45-feet deep, which illustrates the threat that too many environmental regulations can pose to the U.S. economy. As George Will explains in his recent column, the Panama Canal is opening a bigger set of locks in 2014. That project, which began in 2006, will allow the canal to accommodate bigger container ships, making it even cheaper to ship goods across oceans. In the United States, meanwhile, studies on the environmental impact of deepening Charleston’s harbor to 50 feet, the depth needed to accommodate the bigger container ships, have been going on since 1999. The Army Corps of Engineers says it will take five years to deepen the harbor by five feet, but between the completion of the studies and the beginning of the dredging will come the lawsuits from environmental groups. Will notes:

The Empire State Building was built in 14 months during the Depression, the Pentagon in 16 in wartime. The aircraft carrier USS Yorktown, which earned 11 battle stars in the Pacific and now is anchored here, was built in less than 17 months, back when America was serious about moving forward.

Source: “Closing Our Ports with Rules,” Washington Post, January 13, 2012.

Organized labor has been busying trying to reverse its long decline in membership by rewriting the rules governing union organizing, and that has kept James Sherk, Senior Policy Analyst in labor economic at The Heritage Foundation, pretty busy. Sherk recently conducted a “labor boot camp” for congressional staffers. We asked Sherk three questions:

InsiderOnline: Organized labor is trying to reverse the decline in its membership by pushing for changes in labor laws and regulations so that organizing is easier. But is it really the rules that are to blame for organized labor’s decline?

James Sherk: The rules, which have changed little in the past two generations, have little to do with the decline in union membership. Rather, the union movement has two main problems: (1) The economy has become more competitive, making it more difficult for unionized businesses to stay afloat with the higher costs they bring employers, while (2) polls show that very few nonunion workers want to join a union. So the union movement is losing more members with unionized firms shrinking or going bankrupt, and they cannot recruit enough new workers to replace those they lose. This is why union membership remains strong in government – government has no competitors, so union inefficiencies do not cause government unions to lose members/jobs to more efficient competitors.

IO: You have written about the RAISE Act, which would allow employers to give performance-based raises without negotiating them with the union. Why would unions not want their members to receive performance-based raises?

JS: Unions want workers to see the union and collective bargaining as the reason they get ahead, not their own individual performance. If the union rate is $15 an hour, but the union member is making $20 an hour, then he will soon start asking why he is paying union dues. He is also unlikely to go on strike to get $16 an hour. Individual performance pay undermines union influence over their own members, so they generally oppose it. Some collective bargaining agreements do allow recognition of individual performance—unions do not universally oppose it—but these are a small minority of all collective bargaining agreements.

IO: You suggest tying federal pay to market rates and market signals. How do you bring market signals into a situation where the employer (the government) doesn’t really have any competitors—in the economic sense—and the bottom line of the enterprise is obviously not the foremost concern of those running it?

JS: There are several market signals that can be used, even in those cases. Job applications are a sign that potential employees view a job as desirable, or not. Similarly with voluntary quits. If few workers are applying for a position at an agency, and the agency is having difficulty retaining workers in that job, it is probably undercompensated. Conversely, if few employees voluntarily leave a position and vacancies are swamped with job openings, it is a sign it may be overcompensated. You can also use market pay for jobs that require similar skill levels as a guide.

For a primer on current federal labor law issues, see the series of Web memos Sherk wrote for The Heritage Foundation’s “labor boot camp” seminar:

• Who Pays for “Official Time” and Why Americans Should Be Concerned
• Understanding Mandatory Paid Sick Leave
• The Workplace Democracy and Fairness Act
• Rewarding Achievement and Incentivizing Successful Employees (RAISE) Act
• Why the Davis–Bacon Act Should Be Repealed
• Federal Compensation: Why Government Pay Is Inflated
• Extended Unemployment Insurance Benefits.

The U.S. tax code penalizes companies that want to repatriate profits earned abroad and invest them in the United States. This video from the Tax Foundation explains the problem:

Even by government standards, the Department of Health and Human Services did a poor job assessing whether its rules implementing Obamacare will be worth their costs or whether there were better alternative regulations, says the Mercatus Center.

HHS has so far issued eight major regulations to implement the major components of the Affordable Care Act that will take effect in 2014. Christopher Conover and Jerry Ellig used the Mercatus Center’s Regulatory Report Card scoring system to grade HHS’s regulatory impact analyses for these rules. According to Conover and Ellig, “the health regulations were less transparent than the major proposed rules issued by the Bush and Obama administrations in 2008 and 2009,” making it “difficult for the lay public or even experts to understand how the analysis calculated at least some of its estimates of benefits or costs.” In some cases, they continue, “the analysis failed to demonstrate that there was some market failure or other systematic problem that could be addressed only through federal government action.” Further, they add, “not one of these rules sought to monetize expected benefits, making it unclear why the agency concluded that the rule had benefits that exceeded its costs.”

For example, they say, “none of the eight rules mentions moral hazard”—people take more risk when someone else pays the bill—even though it is well understood to increase the cost of health insurance. According to Conover and Ellig, correcting this oversight alone “might well have reversed the presumption that benefits exceeded costs” for at least three of the eight regulations.

It appears, conclude Conover and Ellig, that the “agencies used analysis as a post hoc justification of a regulatory approach already decided upon.”

Source: “The Poor Quality of Affordable Care Act Regulations,” Christopher J. Conver and Jerry Ellig, Mercatus Center, January 12, 2012.

One problem with the Office of Legal Counsel’s opinion saying the Senate’s pro forma sessions are really a recess during which the President may make a recess appointment is that it conveniently identifies these pro forma sessions as the period January 3 through January 23. “But,” says Todd Gaziano

the pro-forma sessions began when most senators left town on Dec. 17. Why not mention the even longer period of time, since that might ordinarily help the President’s argument? The answer is on page 21, where the opinion has to acknowledges that twice during such “pro-forma” sessions, the Congress actually passed bills that became law (on Aug. 5, 2011 and Dec. 23, 2011). Since the President signed these bills into law, it really had no choice but to admit that those pro forma sessions mattered.

The not-too-deft argument in the OLC memo is that the President is free to take the Senate at its word that it would not conduct business during any period it sees fit except that the basis for that assumption also applied from Dec. 17 to Jan. 3. With unanimous consent, such business clearly can and was conducted during the period of time that OLC ignores. Moreover, those facts defeat the repeated finding in the opinion that the Senate is not available to receive messages from the President and act on them. The action on Dec. 23 proves beyond any doubt that they can receive such messages, loudly and clearly, and can act when they want to do so. Their desire not to act cannot be converted so easily into an inability to do so.

For discussion of additional problems with the Office of Legal Counsel’s opinion, see: “Whitewash on Legal Appointments Won’t Work,” The Foundry, January 12, 2012.

There are some bad dudes who will be released from Guantanamo if President Obama follows through on his plan to release five senior Taliban leaders in order to entice the Taliban to come to the negotiating table. Here are some of the details, pulled from WikiLeaks’s “Gitmo Files” by Marc Thiessen:

Mullah Mohammed Fazl, deputy defense minister. Fazl is “wanted by the UN for possible war crimes while serving as a Taliban Army Chief of Staff and … was implicated in the murder of thousands of Shiites in northern Afghanistan during the Taliban reign.” He has “operational associations with significant al-Qaida and other extremist personnel,” was “involved in Taliban narcotics trafficking,” and is so senior in the Taliban hierarchy that he once threatened the Taliban’s supreme leader, Mullah Omar. Military officials assess that Fazl wields “considerable influence throughout the northern region of Afghanistan and his influence continued even after his capture” adding, “If released, [Fazl] would likely rejoin the Taliban and establish ties with anti-Coalition militias (ACM) participating in hostilities against US and Coalition forces in Afghanistan.” […]

Mullah Norullah Noori, governor-general of Afghanistan’s northern zone. Noori “is considered one of the most significant former Taliban officials detained at JTF-GTMO” who “led troops against US and Coalition forces” and “was directly subordinate to Taliban Supreme Leader Mullah Omar.” He “is wanted by the UN for possible war crimes,” is “associated with members of al-Qaida,” and is assessed “to be a hardliner in his support of the Taliban philosophy.” He “continues to be a significant figure encouraging acts of aggression and his brother is currently a Taliban commander conducting operations against US and Coalition forces…. (Analyst note: Detainee would likely join his brother if released.”)

For details on the others, see: “Don’t Let These Taliban Leaders Loose,” Washington Post, January 9, 2012.

Nowhere does the Constitution say the President gets more power whenever Congress doesn’t do what he wants it to do. The President seems to think otherwise. Last week he explained his making of recess appointments when Congress is not in recess by saying: “I refuse to take ‘no’ for an answer.” But, as former federal judge Michael McConnell explains, sometimes taking no for an answer is the President’s only constitutional options:

It is hard to imagine a plausible constitutional basis for the appointments. The president has power to make recess appointments only when the Senate is in recess. Several years ago—under the leadership of Harry Reid and with the vote of then-Sen. Obama—the Senate adopted a practice of holding pro forma sessions every three days during its holidays with the expressed purpose of preventing President George W. Bush from making recess appointments during intrasession adjournments. This administration must think the rules made to hamstring President Bush do not apply to President Obama. But an essential bedrock of any functioning democratic republic is that the same rules apply regardless of who holds office.

It does not matter, constitutionally, that congressional Republicans have abused their authority by refusing to confirm qualified nominees—just as congressional Democrats did in the previous administration. Governance in a divided system is by nature frustrating. But the president cannot use unconstitutional means to combat political shenanigans. If the filibuster is a problem, the Senate majority has power to eliminate or weaken it, by an amendment to Senate Rule 22. They just need to be aware that the same rules will apply to them if and when they return to minority status and wish to use the filibuster to obstruct Republican appointments and policies.

More: “Democrats and Executive Overreach,” Wall Street Journal, January 10, 2012.

The critics of the Supreme Court’s Citizens United decision have it wrong. Super PAC money is good for democracy, as the Iowa caucuses have shown, writes John Samples:

The $14 million in Iowa super PAC spending funded an assault on Gingrich for committing ethics violations, being soft on illegal immigrants and teaming with Nancy Pelosi on global warming issues. The Gingrich ad to come apparently says Romney’s company, Bain Capital, looted companies and left people unemployed.

Are these charges true? That’s the wrong question. If government could suppress “false” speech, the First Amendment would be meaningless. Those in power would find that their critics are lying and suppress their criticisms.

We should rather ask: Do these ads constitute legitimate political speech? Wouldn’t voters want to know if Gingrich had violated ethics rules, received large payments from Freddie Mac despite claiming to be against big government and had supported positions contrary to the views of most Iowa Republicans? Romney says he is a businessman who knows how to create jobs. Should voters hear claims to the contrary? Of course.

And who cares that the onslaught of commercials are overwhelmingly negative in tone? Far from being anti-democratic, harsh TV ads — no matter who’s funding them — offer needed criticisms of candidates that help inform voters. John Coleman, a political scientist at the University of Wisconsin-Madison, found that spending on negative ads increased voter information about candidates, especially among those who were least informed prior to the ads.

Other political scientists have found that, contrary to the caricature, negative advertising increases voter turnout and reduces the advantages normally held by incumbent officials. Perhaps it is not surprising that Republican turnout in Iowa was higher than experts expected.

Source: “Super PACs: Money Well Spent,” The Cato Institute, January 11, 2012.

The fact that the top 1 percent of income earners have a larger share of national income today than they did 20 years ago doesn’t mean what the grievance peddlers think it means. The comparison involves mostly different sets of people, explains Veronique de Rugy:

Using IRS data, the Tax Foundation has shown that of the 675,000 taxpayers who reported $1 million in pre-tax income at some point between 1999 and 2007, only about half remained millionaires just one year later […]. A tiny 6 percent, or 38,000 people, retained their millionaire status for all nine years. In other words, most top earners are likely to lose their membership in the millionaires club.

And things look rosier at the bottom of income distribution, too. The same Tax Foundation analysis showed that about 60 percent of households that were in the lowest income quintile in 1999 had moved to a higher quintile by 2007. And about one-third of those in the lowest quintile moved to the middle quintile or higher. While it may be difficult to rise literally from rags to riches, there is still plenty of opportunity for Americans to climb up the income ladder.

So if upward mobility is so common, why are there still plenty of poor people in this country? In a recent video about income mobility hosted by the Institute for Humane Studies, economist Steven Horwitz of Saint Lawrence University explains: “Immigrants and young people entering the labor force come into that income distribution at low levels of income. They become the new poor when the old poor slowly move their way up.”

More: “For Richer and for Poorer,” Reason, February 2012.

There’s no more reason to care what professional football players think about right-to-work laws than there is to care what they think about, say, global warming. The NFL Players Association released a statement earlier this week opposing right-to-work legislation being contemplated by Indiana lawmakers. James Sherk explains why the NFL Players Association is out of touch with the interests of most workers:

Even the poorest NFL player makes $390,000 a year. The average NFL player makes $1.9 million. NFL players make enough to barely notice union dues. They also have jobs. Right-to-work makes little difference to them.

The same is not true for most workers in Indiana. Union dues cost the typical worker hundreds of dollars a year. For many families, that is not pocket change. Almost 300,000 unemployed Hoosiers cannot find work. A policy that creates jobs and saves money matters to them.

Right-to-work does that. Right-to-work protects workers from being fired for not paying union dues. If workers want to join a union, they can—but they do not have to. […] NFL players certainly appreciate the value of choice—they (temporarily) decertified their union last year. The Players Association should focus on the playoffs instead of on restricting workers’ freedom to choose.

Source: “NFL Players’ Union Opposes Right-to-Work,” The Foundry, January 9, 2012.

Economic freedom matters for prosperity and unfortunately it continues to decline from its 2008 peak, says the 2012 Index of Economic Freedom. The average country score in this year’s Index declined 0.2 points to 59.5. The Index, published Thursday by the Wall Street Journal and The Heritage Foundation, ranks countries in ten categories of economic freedom with 100 being the highest possible score. The average country score in the Index of Economic Freedom has now declined 0.7 points from its all time high of 60.2 in 2008.

The score for the United States declined 1.5 points to 76.3 percent, largely reflecting continued increases in government spending. The countries with the biggest declines in economic freedom were Greece, which lost 4.9 points; Equatorial Guinea, 4.7; Saudi Arabia, 3.7; and Argentina, 3.7. Zimbabwe achieved the highest increase of 4.2 points, though it has a long way to go: In spite of the big increase, Zimbabwe remains second to last among the 179 ranked countries, with a score of 26.3. Guinea-Bissau achieved the second-highest increase. Its gain of 3.6 points gives the country a score of 50.1, just barely moving Guinea-Bissau from the “Repressed” category to “Mostly Unfree.”

Hong Kong, as it has been since the Index was first published in 1995, is rated the most economically free country in the world, with a score this year of 89.9. New to the top 10 economically free countries is Mauritius, which comes in eighth with a score of 77.0. Mauritius now ranks ahead of the United States, which remains tenth. Mauritius has come a long way; it was only the 72d most economically free country in the world a decade ago. Its ranking this year is the highest ranking ever by a Sub-Saharan African country.

This year’s data again confirm that the most economically free countries are the most prosperous ones:

See also the new 2012 Index of Economic Freedom Web site, which lets you dig into the raw data and make you own charts.

New York provides a good example of what states should not do if they want to reform public employee compensation, the growth of which has been one of the major drivers of state fiscal imbalances. In 1982, the state passed a law that requires public employers to maintain all contractual perks for unionized public employees after the expiration of a collective bargaining agreement. Called the “Triborough Amendment,” the law gives unions a built in “what’s mine is mine, what’s yours is negotiable” advantage when it comes time to negotiating new collective bargaining agreements. Under this set-up, no matter how much public employee compensation is out of sync with private-sector standards or how dire the state’s finances get, public employees can continue receiving pay increases merely by saying “no” to any new contract. According to the Empire Center for New York State Policy, the pay hikes required under the Triborough Amendment cost the state government $140 million per year, while the required pay increases for teachers add almost $300 million per year to school budgets across the state. But, says the Empire Center:

These figures only tell part of the story. Since the Triborough Amendment makes it easier for unions to resist proposals for more significant and lasting changes to work rules, staffing requirements and fringe benefit cost-sharing arrangements, the full cost impact of the provision is incalculable.

More: “Triborough Trouble,” by E.J. McMahon and Terry O’Neil, Empire Center for New York State Policy, January 11, 2012.

Contrary to the slogans of the Occupy Wall Street crowd, it’s not just the “1 percent” who are getting bailed out by the government. Spending on welfare programs has increased, and not just because there are more unemployed during a recession but also because eligibility requirements have been relaxed and benefits levels increased. The increase since 2006 has been substantial:

This chart comes from Casey B. Mulligan’s recent paper “The Expanding Social Safety Net” (National Bureau of Economic Research, December 2011). Kevin Hassett (“Stealth Redistribution,” January 9, American Enterprise Institute) summarizes:

The average monthly unemployment-insurance payment received was $834 at the beginning of 2006, while by the end of 2010 it was $2,667. Home retention actions (mortgage modifications) were almost nonexistent in 2006 but increased sharply due to pressure from Uncle Sam. Consumer loan charge-offs (commercial banks’ declaring that a debt-usually credit-card debt-is unlikely to be collected) increased significantly over the four-year period, for the same reason. Other transfers, such as food assistance, increased as well.

Yes, unemployment is high, but is it any wonder?

President Obama claiming the power to make recess appointments when Congress is not legally in recess is but the most recent example of his administration’s authoritarian style, write Fred Siegel and Joel Kotkin:

He has already explained that “where Congress is not willing to act, we’re going to go ahead and do it ourselves.” On a variety of issues, from immigration to the environment to labor law, that’s just what he’s been doing—and he may try it even more boldly should he win reelection. […]

The logic for running the country from the executive has been laid out already. Republican control of just the House, argues Chicago congressman Jesse Jackson, Jr., has made America ungovernable. Obama, he said during the fight over the debt limit, needed to bypass the Constitution because, as in 1861, the South (in this case, the Southern Republicans) was “in a state of rebellion” against lawful authority. Beverley Perdue, the Democratic governor of North Carolina, concurred: she wanted to have elections suspended for a stretch. (Perdue’s office later insisted this was a joke, but most jokes aren’t told deadpan or punctuated with “I really hope someone can agree with me on that.” Also: Nobody laughed.) […]

The mechanisms of control already exist. The bureaucratic apparatus, the array of policy czars and regulatory enforcers commissioned by the executive branch, has grown dramatically under Obama. Their ability to control and prosecute people for violations relating to issues like labor and the environment—once largely the province of states and localities—can be further enhanced. In the post-election environment, the president, using agencies like the EPA, could successfully strangle whole industries—notably the burgeoning oil and natural gas sector—and drag whole regions into recession.

See: “The New Authoritarianism,” City Journal, January 6, 2012.

Rising health care costs appear to be a major part of the explanation for increased inequality in cash compensation among workers. In the Winter 2012 issue of Regulation, Peter Van Doren summarizes some recent research:

Employers may be paying all their employees a more or less equivalent increase on a percentage basis, but for lower-paid workers much of that pay is not showing up in cash. Thus, if this view is correct, inequality in the cash component of compensation has increased while inequality in total compensation has not increased because the fixed costs of health insurance are a much larger percentage of the total compensation of lower-earnings workers. […]

If one analyzes data on only working-age individuals (age 25–61), inflation-adjusted real pre-tax, post-cash-transfer money income grew 1.9 percent and 10.5 percent respectively for the first (poorest) and 10th (richest) deciles from 1995 to 2008. But if one adds the value of health insurance, the first (poorest) decile grew 12.3 percent while the top decile grew 11.7 percent.

Our health care system shields health care consumers from bearing the cost of their consumption directly, and the tax preference for employer-provided insurance plays no small role there. This problem has grown over time, but rather than examining how such inducements to overconsumption (and thus rising costs) increase inequality in take-home pay, critics claim there is something wrong with labor markets that requires further government interventions. Maybe less government intervention is the solution.

Even the liberal New Republic thinks President Obama’s attempt to redefine what it means for the Senate to be in recess—so that he may make a “recess” appointment of Richard Cordray to the Consumer Financial Protection Bureau and three new members to the National Labor Relations Board—is constitutionally suspect. TNR senior editor Tim Noah reports that the White House justifies its action by pointing to a 1905 report of the Senate judiciary committee that defines a Senate recess as

the period of the time when the Senate is not sitting in regular or extraordinary session as a branch of the Congress or in extraordinary session for the discharge of executive functions; when its members owe no duty of attendance; when its chamber is empty; when, because of its absence, it cannot receive communications from the President or participate as a body in making appointments […] .

“The trouble with this definition,” Noah points out, “is that it would define as a Senate recess just about every weekend of the year.” Noah might be worried that a future Republican president could use Obama’s precedent to eviscerate the Senate’s constitutional role of giving advice and consent on nominees.

More reading on the Cordray “recess” appointment: “Obama’s Recess Appointments Are Unconstitutional,” by Edwin Meese III and Todd Gaziano, Washington Post; “Obama’s Reckless Ploy,” by David B. Rivkin and Lee A. Casey, Wall Street Journal; “Mr. President: Why Refuse to Answer Whether the Justice Department Issued a Legal Opinion?,” by David S. Addington, The Foundry.

By all means, let’s root out waste in the defense budget, but let’s not think that defense is, as other areas of the federal budget are, just another optional government program. You can find that and other wise counsel in the pages of The Insider, Winter 2012. Here is the editor’s note:   

“Government as such, is not only not an evil but the most necessary and beneficial institution as without it no lasting cooperation and no civilization could be developed and preserved.”

Some may be surprised to learn that the author of this sentence was Ludwig von Mises, who was no worshipper of state power. Von Mises, in fact, led a courageous life battling the intellectual forces supporting all manner of state-led social engineering in the 20th century.

Von Mises understood that human nature made limits on government necessary—and some government indispensable: “[I]in order to preserve peace, it is, as human beings are, indispensable to be ready to repel by violence any aggression, be it on the part of domestic gangsters or on the part of external foes. Thus, peaceful human cooperation, the prerequisite of prosperity and civilization, cannot exist without a social apparatus of coercion and compulsion, i.e., without a government.”

This wisdom should guide today’s efforts to cut government spending. That project is needed not merely to help the economy, but also to get the federal government out of areas that should be left to the people. The task thus calls for judgment about the appropriate role of government, something that will not be accomplished merely by “putting everything on the table.” We should begin by observing, as Mackenzie Eaglen and Marion Smith note in our cover story, there are people in the world who mean the United States harm. History teaches that there always have been. The Founder’s anticipated that: They gave us a government of limited and enumerated powers, and defending the people was one of those powers.

In other stories this issue, Derek Scissors and J. D. Foster point to the lessons of Japan’s “Lost Decade,” Scott Hodge outlines how our tax code is broken, the Georgia Family Council shares its plan for finding solutions in civil society, and Isabel Isidro advises how to get your Web content found.

Defining Internet access as a fundamental human right, as some European governments like France and Estonia have done, is misguided. Vinton Cerf, “Father of the Internet,” explains why in Tuesday’s New York Times:

It is a mistake to place any particular technology in this exalted category, since over time we will end up valuing the wrong things. For example, at one time if you didn’t have a horse it was hard to make a living. But the important right in that case was the right to make a living, not the right to a horse. Today, if I were granted a right to have a horse, I’m not sure where I would put it.

The year 2011 was dubbed the “Year of School Choice,” but that doesn’t mean 2012 can’t be an even better year for progress freeing children from our largely monopoly public school set-up. So get ready for National School Choice Week! It’s going to be January 22 through 28. Groups around the country will host events promoting policies that let children and their parents choose their schools. So far 94 events have been planned around the country, including a big kickoff party in New Orleans. The list of events also includes seminars on how to advocate effectively for school choice, panel discussions with policy experts, school choice fairs, balloon launches, film screenings, and more. Check out the National School Choice Week Web site for more info on how to get involved.

President Obama’s apparent recess appointments of Richard Cordray to head the Consumer Financial Protection Bureau (CFPB) and three other individuals to the National Labor Relations Board are constitutionally suspect because Congress is not really in recess. Todd Gaziano explains:

The Constitution, in Article I, section 5, plainly states that neither house of Congress can recess for more than three days without the consent of the other house. The House of Representatives did not consent to a Senate recess of more than three days at the end of last year, and so the Senate—consistent with the requirements of the Constitution—is having pro forma sessions every few days. In short, Congress is still in session, and no one in Congress is saying (or can reasonably say) otherwise. It does not matter a wit that most Members of Congress are not in town voting on legislation, because ending a session of Congress requires the passage of a formal resolution, which never occurred.

[The power to make recess appointments] has been interpreted by scores of attorneys general and their designees in the Department of Justice (DOJ) Office of Legal Counsel (OLC) for over 100 years to require an official, legal Senate recess of at least 10–25 days of duration.

The CFPB is almost entirely beyond Congressional oversight, which is probably one reason why, as Mark Calabria points out, the law that created the CFPB stipulated “that authorities under the Act remain with the Treasury Secretary until the Director is ‘confirmed by the Senate’.  A recess appointment is not a Senate confirmation.”

Read more: “A Tyrannical Abuse of Power: Obama Attempts to Appoint Cordray to CFPB,” by Todd Gaziano, The Foundry, January 4, 2011; “Obama’s Constitutional Gamble on Consumer Finance Nomination,” by Mark Calabria, Cato-at-Liberty, January 4, 2011.

If you have an idea for making government better, then you should enter it in the Pioneer Institute’s Better Government Competition. The winning idea gets $10,000. Three runners-up also get $1,000 each.

Anyone can enter the contest; and ideas can come from reforms already implemented, but they must be replicable in Massachusetts.

The Pioneer Institute has been hosting this competition annually since 1991, and over that time the implementation of winning entries in the competition has saved Massachusetts taxpayers over half a billion dollars. Last year’s winner was a proposal for state and local government pension reform, from State Rep. Will Brownsberger. Brownsberger’s proposal would have simplified the pension system for new Massachusetts employees, while bringing their retirement benefits in line with those of Social Security recipients.

The deadline for idea papers (up to five pages long) is Monday, April 9, 4:00 p.m. ET. Winners will be announced on May 7. Check out the Better Government Competition Web page for more information on how to enter.

On April 26 and 27, hundreds of think tank leaders, policy experts, investigative reporters, activists, and philanthropists will confab at the Broadmoor Hotel in Colorado Springs, Colo., to share the latest ideas and strategies on how to advance constitutionally limited government, free markets, and individual liberty. Attendees of this year’s Resource Bank will learn about innovative state policy initiatives, get polling updates and messaging tips from the pros, hear about the latest challenges to Obamacare, learn about building successful fundraising programs, train with the top social media professionals, and meet rising stars in the fight for liberty. Don’t miss out. Save the date!