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InsiderOnline Blog: December 2011

Merry Christmas and Happy New Year!

Hope all your travels turn out well. Thanks for reading. We’ll be back next year.

Posted on 12/21/11 11:34 PM by Alex Adrianson

You Bought a Volt, Too, Taxpayer

The Chevy Volt “might be the most government-supported car since the Trabant,” says James Hohman, who toted up all the loans, rebates, grants, and tax credits that both federal and state government have provided to support work on the Volt. Hohman, who works for the Mackinac Center for Public Policy, found 18 discrete government programs helping the Volt, totaling $3 billion in assistance.

Some details, from Michigan Capitol Confidential:

The analysis includes adding up the amount of government subsidies via tax credits and direct funding for not only General Motors, but other companies supplying parts for the vehicle. For example, the Department of Energy awarded a $105.9 million grant to the GM Brownstown plant that assembles the batteries. The company was also awarded approximately $106 million for its Hamtramck assembly plant in state credits to retain jobs. The company that supplies the Volt’s batteries, Compact Power, was awarded up to $100 million in refundable battery credits (combination tax breaks and cash subsidies). These are among many of the subsidies and tax credits for the vehicle.

It’s unlikely that all the companies involved in Volt production will ever receive all the $3 billion in incentives, Hohman said, because many of them are linked to meeting various employment and other milestones. But the analysis looks at the total value that has been offered to the Volt in different aspects of production […] .

GM has estimated they’ve sold 6,000 Volts so far. That would mean each of the 6,000 Volts sold would be subsidized between $50,000 and $250,000, depending on how many government subsidy milestones are realized.

These figures don’t include the federal government’s 26 percent stake in General Motors.

Posted on 12/21/11 11:26 PM by Alex Adrianson

Don’t Cry for Kim, North Korea

Kim Jong-Il and the government he ran were evil, and here’s a reminder from Ira Stoll:

Ri Hyon Ok was a 33-year-old mother of three who was publicly executed by the North Korean government on June 16, 2009, for the crime of giving away bibles. Her husband and children were banished to North Korea’s vast political prison system the day after she was killed.

Son Jong Nam was tortured by North Korean authorities and imprisoned for three years, from 2001 to 2004. He lost 70 pounds while in captivity and emerged walking with a permanent limp. Arrested again in 2006 after police found bibles at his home, he was sentenced to death by firing squad.

Soon Ok Lee is a survivor of the Kaechon prison camp. She testified on April 30, 2003, at a hearing of the House Subcommittee on International Terrorism, Nonproliferation, and Human Rights that women political prisoners in North Korea “were unconditionally forced to abort because the unborn baby was also considered a criminal by law.” She testified, “Women in their 8th or 9th month of pregnancy had salt solutions injected into their wombs to induce abortion. In spite of these brutal efforts, some babies were born alive, in which case the prison guards mercilessly killed the infants by squeezing their necks in front of their mothers. The dead babies were taken away for biological tests. If a mother pleaded for the life of her baby, she was publicly executed under the charge of ‘impure ideology.’”

More: “Remembering Kim Jong-Il’s Victims,” Reason, December 19, 2011.

Posted on 12/21/11 10:38 PM by Alex Adrianson

We Could Use a Little Less Self-Esteem

There seems to be a consensus that innovation has slowed down and one reason might be that we’re now reaping the fruits of the misguided self-esteem movement. That’s the hypothesis of Katrina Trinko, who notes that the consensus on declining innovation runs from libertarian entrepreneur Peter Thiel to liberal economist Paul Krugman. The self-esteem movement, explains Trinko, “urged parents and teachers to bolster children’s confidence by being quick to praise and slow (if ever) to criticize, even when a kid opts to pursue PlayStation expertise over pre-algebra.” She continues:

Essentially, when children are praised readily and frequently, regardless of their efforts’ outcomes, there is no incentive for them to strive for genuine excellence—or even recognize that it can exist.

It also encourages self-centeredness: Narcissism has been on the uptick for years. As The Atlantic’s Lori Gottlieb reported this summer: “According to (University of San Diego psychology professor Jean) Twenge, indicators of self-esteem have risen consistently since the 1980s among middle-school, high-school, and college students. … (And) rates of narcissism among college students have increased right along with self-esteem.” Factor in Facebook and other social networking sites, and it’s clear that our culture not only condones but exacerbates everyone’s “me, me, me” tendencies.

The relationship between self-esteem and narcissism is troubling—and suggests a reason our innovation rates are so stagnant. “Many children who are convinced that they are little geniuses tend not to put much effort into their work,” observed the Manhattan Institute’s Kay Hymowitz in a 2009 review of the child development book NurtureShock.

More: “Is Narcissism Killing Innovation in America?USA Today, December 20, 2011.

Posted on 12/21/11 10:30 PM by Alex Adrianson

Give Your Think Tank a Makeover

The Atlas Foundation has assembled an online comprehensive toolkit designed to guide intellectual entrepreneurs working to build an effective organization. The components of the toolkit are Guiding Principles, Boards, Tech, Fundraising, Communications, and Management. Each section of the toolkit has a page full of materials that are chock full of practical how-to advice on everything from building the best board to cultivating donors to using social media effectively.  You’ll cover more material by studying the full array of resources in this toolkit than you would in a semester long college course, and you’ll avoid the biased professor to boot. Bookmark the page and come back to it often.

Posted on 12/21/11 06:28 PM by Alex Adrianson

Your Non-Profit Is Becoming Irrelevant

If you do everything right, you’re doomed. You’re metrics can’t tell you whether you’re succeeding without a theory of change. Theories of change come from an N of one. These and other insights abound in Clayton Christensen’s recent Manhattan Institute lecture on disruptive innovation and the non-profit sector. Check it out.

Posted on 12/20/11 06:38 PM by Alex Adrianson

Václav Havel Was a Hero

Václav Havel, who died Sunday at age 75, was the last president of Czechoslovakia and the first president of the Czech Republic. But before that he wrote plays; issued commentary that wasn’t pleasing to the Communist government; worked at a brewery when the government banned his plays; spent years in prison; co-authored Charter 77, which became the guiding manifesto of the Czech underground; and then in 1989 stepped forward as the leader of the Velvet Revolution—so called because it ended a totalitarian government without bloodshed. He “was not just a dissident; he was the epitome of the dissident, as we came to understand that novel term,” says Timothy Garton Ash. “He was not just the leader of a velvet revolution; he was the leader of the original velvet revolution, the one that gave us a label applied to many other non-violent mass protests since 1989.” Ash continues:

He was also one of the most engaging human beings I have ever known. I first met him in the early 1980s, when he had just emerged from several years in prison. We spoke in his riverside apartment, with its large writer’s tables and tableau view of Prague. Although the communist secret police then assessed the active core of the Charter 77 movement – probably realistically – at just a few hundred people he insisted that silent popular support was growing. One day, the flickering candles would burn through the ice. It’s important to remember that no one knew when that day would come.

More: “Václav Havel: Director of a Play that Changed History,” The Guardian, December 18, 2011.

Posted on 12/19/11 05:51 PM by Alex Adrianson

Economic Freedom Matters, Especially Over the Long Run

Real life can never give social scientists the kind of laboratory-quality tests that natural scientists can create, but sometimes it comes close. Since the two Koreas are virtually identical culturally, it would appear that the different political systems explain the outcome illustrated by the figure below, which comes from Monday’s Washington Post:

Since the Korean War divided the country, South Korea’s citizens have enjoyed greater freedoms than their northern cousins, and that includes economic freedom. The Heritage Foundation/Wall Street Journal Index of Economic Freedom measures economic freedom over the recent decades. Since 2001, South Korea’s score on the Index of Economic Freedom has ranged from the high 60s to low 70s on a scale of 100. North Korea’s score for the same period has been no higher than 10, and currently stands at 1.0.

Posted on 12/19/11 05:11 PM by Alex Adrianson

Independent Doctors Are Going Away

“2011 will mark the last year that a majority of America’s physicians own their own medical practices and operate their own offices or clinics,” argues Scott Gottlieb, who traces the problem to the Medicare payment caps in the 1997 budget deal. Under those price controls,

the only way for doctors to increase their income was to increase the volume of patients they saw and reduce costs by squeezing the level of service. Enter the 15-minute office visit, and waiting rooms with bad magazines.

Obamacare, says Gottlieb, tries to extend this mechanism:

The entire law is premised on the belief that consolidating doctors, and turning them into salaried employees of hospitals and health plans, makes it easier to control utilization and make care more coordinated and efficient. At the core of this premise is a concept called the “Accountable Care Organization”.


The kind of changes needed to introduce real innovation in healthcare services require significant investment of capital. But liberals don’t want to see entrepreneurs earn above market returns on their healthcare service ventures. They see each dollar of excess profits as a buck taken away from direct patient care. So venture capitalists – who have been the source of most of the meaningful innovation in healthcare delivery – aren’t touching business plans being circulated by would-be ACOs.

That’s also why ACOs are mostly attracting the attention of hospitals which are mostly using the concept to conceal their desire to roll up doctor practices. Hospitals have long wanted to solidify their local market power, but Medicare provisions and the Federal Trade Commission has stood in their way. Now those pro-consumer protections are being waved or ignored by an Administration zealous to double down on the dream of ACOs.

More: “Modern Medicine Is Undergoing Idustrialization,” Real Clear Markets, December 14, 2011.

Posted on 12/16/11 05:56 PM by Alex Adrianson

Happy Bill of Rights Day

Thursday was Bill of Rights Day—the 220th anniversary of the Bill of Rights going into effect. The Bill of Rights Institute celebrates the occasion with this video on the importance of the constitutional principle of the rule of law:

Posted on 12/15/11 06:11 PM by Alex Adrianson

Euro Crisis Could Cost U.S. Taxpayers, Too

The United States isn’t just a spectator of the Euro crisis. Desmond Lachman points out that the International Monetary Fund has extended over $100 billion in loans to Greece, Ireland, and Portugal. Since the United States has a 17.75 percent share in the IMF, U.S. taxpayers are currently at risk for almost $20 billion. But, the EU countries have recently agreed to loan the IMF another $260 billion for potential lending to Italy and Spain. Thus, any claims on the IMF resulting from such loans would also be partly an obligation of the U.S. taxpayer. Lachman estimates that “the IMF’s combined lending commitment to Italy and Spain could be of the order of US$1.3 trillion,” which means, “the US taxpayers’ eventual exposure could be of the order of US$220 billion.”

For more on this topic, see Lachman’s testimony before the House Committee on Oversight and Government Reform Subcommittee on TARP, Financial Services, and Bailouts of Public and Private Programs, December 15, 2011.

Posted on 12/15/11 06:01 PM by Alex Adrianson

Courtrooms Are a Great Source of Humor

There’s a guy suing the Playboy Mansion for letting beautiful women attend its “Leather Meets Lace” party for free while charging him and other men $1,000. Really.

The plaintiff says this unequal treatment is illegal sexual discrimination. Someone should ask that guy whether he normally drops $1,000 to attend parties not attended by gorgeous women.

That’s just one of the lawsuits featured in the December edition of’s “Most Ridiculous Lawsuit of the Month” Poll. Check it out.

Posted on 12/15/11 01:05 PM by Alex Adrianson

Macroeconomics Asks the Wrong Questions

The claim that Friedrich Hayek was not an important macroeconomist is meant to obscure Hayek’s essential challenge to the macroeconomic approach. That’s Mario Rizzo’s take on the latest “Krugmanic Outburst”:

Hayek’s approach attacks, root-and-branch, the macroeconomic way of thinking. It is not simply a challenge to a particular theory of the determinants of mass unemployment, inflation, business cycles and the like. Hayek is not accepting the rules of the game or the parameters of the sub-discipline of modern macroeconomics. Hayek does not want to argue that the government expenditure multiplier is 0.5 instead of 2.0, for example. He does not want to discuss just how much fiscal stimulus should be undertaken and what form it should assume.

In short, he does not want to focus on aggregate spending and aggregate consequences. Hayek’s approach says: Let us pierce the veil of aggregates and look at the distortive effects on relative prices and relative output produced by boom-time credit expansions. Let us look at the distortive effects that booms leave us as we work our way through a recession. Let us concentrate on sustainable lines of expenditure both during the boom and during the road out from the bust.

Suffice it to say this greatly erodes the intellectual capital of a field of economics – although one not noted for its successes. It mocks the claim that Keynes was a true revolutionary in economic thought. It opens the possibility that he was muddled, inconsistent and unaware of the contributions to monetary and business cycle theory made by the “classical economists” on the eve of the General Theory. [“Yes, Paul: It Is Hayek Versus Keynes,” ThinkMarkets, December 7, 2011.]

Posted on 12/15/11 12:24 PM by Alex Adrianson

Common Currency Illustrates Pitfalls of Common Core

Europe’s difficulties parallel the problems that would arise under national education standards, argues Jay Greene:

The Euro is in trouble because it was an attempt to impose a common currency on countries that were too diverse in their economic needs and political traditions. The Euro is too strong of a currency for countries with un-competitive labor forces and undisciplined budget deficits, like Greece, Italy, and Spain. But if the European Central Bank significantly loosens the currency to bail out these countries, it will create serious inflation problems in countries like Germany and others with more skilled labor forces and reasonable deficits. […]

Similarly, national standards will fail because it is not possible to have a centrally determined set of meaningful standards that can accommodate the legitimate diversity of needs, goals, and values of all of our nation’s school children. […]

In a country as large and diverse as ours there is no single, right set of knowledge for all students to possess, no single, best way to assess that knowledge, and no single, best method for teaching it. The attempt to impose a nationalized system onto this diversity is doomed to fail just as the Euro is doomed to fail in imposing a common currency on such diverse economies and political systems.

The fact that the Euro is in such trouble and creating such political and economic turmoil ought to scare us away from trying to impose a centralized solution on too much diversity. The Euro crisis is an argument against national standards, unless we are eager to have similar difficulties here.

More: “Checker’s Case for World Government (and Common Core),” Jay P. Greene’s Blog, December 13, 2011.

Posted on 12/15/11 11:04 AM by Alex Adrianson

War on Poverty Keeps Bureaucrats Employed

If the government really wanted to lift people above the official poverty levels, it could do so for far less money than it currently spends on means-tested assistance, as Hadley Heath observes:

Our federal government spent nearly $700 billion on means-tested welfare programs in 2011. States added $250 billion to that for a rough total of $950 billion. Divide that by the 49 million Americans who are poor. That’s nearly $19,400 per person, or $77,600 for a family of four.

The federal government says you’re poor if you live alone and make less than $10,890, or if you’re in a family of four earning less than $22,350 per year. The problem, of course, is that just cutting people a check would put a lot of the bureaucrats out of work.

This observation comes from Heath’s report, “Welfare and Charity: Two Different Things,” published by the Independent Women’s Forum, December 2011.

Posted on 12/14/11 03:57 PM by Alex Adrianson

Navy Uses Its Shrinking Budget to Boost Biofuels

The United States Navy plans to buy 450,000 gallons of jet fuel for four times the going rate from the California firm, Solazyme. It must be really good gas!

Actually, what makes this fuel so special is that it’s a blend of biofuel and regular jet fuel. The Navy, which announced the purchase last week, says the nation’s dependence on fossil fuels is a national security threat. But if we’re running out of fossil fuels, why are they so much cheaper than biofuels? The Institute for Energy Research notes:

The amount of oil that is technically recoverable in the United States is more than 1.4 trillion barrels, and when combined with resources from Canada and Mexico, total recoverable oil in North America exceeds 1.7 trillion barrels. That amount of oil is more than 4 times the amount of oil that the United States consumed over the last 100 years. [Internal citation omitted.] [“Navy Buys Fuel at $15 per Gallon: They Should Read IER’s New Report,” Institute for Energy Research, December 7, 2011.]

Solazyme, by the way, might have a leg up on any competitors. Lachlan Markey reports that one of the Solazyme’s board members, T.J. Glauthier served on President Obama’s transition team where he worked on the part of the stimulus package dealing with energy policy. [“Navy Buys Biofuels for $15 Per Gallon from Stimulus-Linked Firm,” The Foundry, December 13, 2011.]

Getting the Navy to splurge on biofuels is one way for the administration to subsidize the industry without Congressional action. Meanwhile, according to the House Armed Services Committee, contemplated cuts to the defense budget would give the nation its smallest Navy since before World War I.

Posted on 12/13/11 05:59 PM by Alex Adrianson

Timing Matters in Social Networking

Yes, it’s possible to do Facebook too often and at the wrong times. When is the best day and time to reach your Facebook fans?  How many messages can you send before you start “spamming” them? Reaching fans at the right time with the right message maximizes your social networking effectiveness.

Marketing research teaches us that Thursday, Friday, and Saturday are the best days for reaching people who work. Marketers also discovered that posting before and after normal business hours results in a 20 percent bump in engagement.

The frequency of your posts should be no more than once per day, but if you notice a large number of people clicking “unlike” then you’re over communicating with them.

For more, see Devon Burke’s “Timing Influences Everything on Facebook,” published by Edelman Digital.

Posted on 12/12/11 10:29 AM by Alex Adrianson

Register for CPAC 2012 Today!

The 39th annual Conservative Political Action Conference (CPAC 2012), hosted by the American Conservative Union, will feature an all-start lineup of speakers, including Ann Coulter, Senators Jim DeMint and Marco Rubio, former Speaker of the House Newt Gingrich, former Governors Mike Huckabee and Mitt Romney, Colonel Allen West, and many more. Attendees will meet and hear from our nation’s most courageous conservative leaders, participate in setting the conservative agenda for the coming year, and rally support against the big-government policies destroying America. The conference takes place February 9 - 11, 2012, in our nation’s capital. Space is going quickly! To register today, participate in exciting contests, or learn more about CPAC 2012, visit

Posted on 12/09/11 02:41 PM by Alex Adrianson

FCC Gets in the Way of Competition

In seeking to block the AT&T-T-Mobile wireless merger, the Federal Communications Commission is not, as it claims, preserving competition but obstructing it, says Bret Swanson:

AT&T’s acquisition of T-Mobile is all about spectrum. AT&T doesn’t have nearly enough of it to meet the needs of its growing business. T-Mobile doesn’t have enough spectrum to turn around its severely declining business, let alone compete in the fourth-generation (4G) mobile marketplace. Its parent company, Deutsche Telekom, repeatedly said it wouldn’t invest for the next generation and desperately sought a buyer. Best of all, AT&T and T-Mobile’s existing spectrum positions and network technologies are perfectly suited for a seamless merger. The result would be better mobile call quality, broader coverage, and a quicker deployment of the fastest kinds of 4G data services.

Only in Washington could such an ideal marriage look bad. The chief challenge of the U.S. wireless industry is not competition. Prices are dropping and consumers are gobbling up mobile devices and services. The big obstacles are capacity and coverage. But even if we grant the FCC’s old-school priority of a kind of perfect competition in a mature industry, its case still makes no sense. Deutsche Telekom is getting out of the business. If T-Mobile is not a viable competitor, then how does AT&T’s acquisition of it “reduce competition”? Moreover, as spectrum-hobbled companies, AT&T and T-Mobile couldn’t effectively compete in 4G services with more spectrum-rich Verizon and Sprint-Clearwire. The only conclusion to be drawn is that the FCC wants someone else to get T-Mobile’s assets and will decide who that someone is. Central planning at its finest.

More: “Obama Administration Snatching Defeat from the Jaws of Victory,” The American, December 7, 2011.

Posted on 12/09/11 12:30 PM by Alex Adrianson

Federal Workers Get Paid for Time Spent Negotiating How Much Time They Don’t Have to Work

The federal government paid its workers $129 million in 2009 and $137 million in 2010 for not working for taxpayers, reports the Office of Personnel Management. Diana Furchtgott-Roth explains:

The time that union representatives spend not working for taxpayers is labeled “official time” by OPM. According to the report, “Official time is time spent by Federal employees performing representational work for a bargaining unit in lieu of their regularly assigned work.” […]

But federal union representatives cannot negotiate salaries or fringe benefits for anyone. Federal employee compensation, including fringe benefits, is set by statute, not by union representatives. Moreover, federal employees are prohibited by statute from striking.

No salary negotiations? No strikes? What is a federal union representative on the public dime to do with his “official time”? It turns out that one of the most important issues that they negotiate is how much time they, the union representatives, will be given not to work for the taxpayers.

Of the more than 3 million hours of “official time,” less than 10 percent is for any form of “negotiations,” slightly more than 10 percent is for “dispute resolutions,” and roughly 80 percent is for “general labor management relations.” The approximate bureaucratic translation of the last category is “not working for the taxpayer.” […]

Not surprisingly, the most generous is the National Labor Relations Board, the agency that seeks to block Boeing from using its newly built manufacturing plant in South Carolina.

In 2010, the NLRB had 11,480 hours of “official time” per year, or 10.67 per bargaining unit employee. The next highest is the Treasury, with 649,170 hours, or 7 hours per bargaining unit employee.

For the rest, see: “The Feds Pay Bureaucrats $137M/Year Not to Work,” Real Clear Markets, December 8, 2011.

Posted on 12/09/11 11:33 AM by Alex Adrianson

Wall Street Cashes in on Subsidies for Home Solar

Free markets don’t make Wall Street powerful; Washington’s schemes do. T.J. Rodgers notes in the Wall Street Journal (“Subsidizing Wall Street to Buy Chinese Solar Panels” December 8, 2011) that Wall Street firms have figured out how to get home owners to sign long-term contracts to buy the electricity from solar panel systems the company installs in their homes. As part of the deal, the company receives the federal income-tax credit for the home solar system.

However when the system is paid off and the monthly LLC profit jumps to 100% of the electricity bill, the LLC solar electricity price to the homeowner is maintained just below market—and the profit really begins to roll into the LLC. Since the risks to the LLC grow as the solar systems age, many banks offload their risk by selling the LLCs before their 20-year lifetime is up, locking in much of the long-term profit. There is now a growing market for what might be called “solar-backed securities.” […]

One of the largest solar-system installers in the U.S., SolarCity Corp., uses the LLC strategy and currently buys a majority of its solar panels from the low-cost Chinese supplier, Yingli. […]

Just last week, the U.S. International Trade Commission found the Chinese solar industry guilty of “dumping” solar panels in the U.S. Tariffs are likely to be levied against Yingli and others. Here then, is a practical guide to the Obama administration’s nonsensical solar policy: Washington gives tax breaks to Wall Street to fund LLCs that buy solar panels from the Chinese to “help” the American solar industry, while the ITC threatens to levy a tariff on those solar panels, which would raise the price of solar energy to U.S. homeowners. In short, Wall Street pockets the money and consumers get higher solar-energy prices.

Posted on 12/08/11 06:57 PM by Alex Adrianson

American Psychiatric Association Is a Downer for Job Creators

Lawsuit-wise, employing people might get riskier in the coming years, which surely won’t encourage job creation. The American Psychiatric Association is planning an update to its Diagnostic and Statistical Manual to be released in 2013. As Walter Olson notes, the new edition is expected to please the lawsuit industry:

Introducing a new category of Mild Neurocognitive Disorder, for example, could entitle workers to begin claiming job-related accommodation for cognitive deficits often associated with advancing age — perhaps especially significant since federal law has made it unlawful for most private employers to set policies of automatic retirement at any particular age. As Foley notes, the task force is also planning to reduce the diagnostic threshold for two disabilities that generate many ADA claims already: Attention Deficit Disorder and Generalized Anxiety Disorder.

Employers already face serious legal risks under existing law if they decline to accommodate employees with mental and behavioral deficits (which may include substance abuse, at least if the worker has entered rehab). As I noted the other day at Overlawyered, a hotel chain has agreed to pay $132,500 for dismissing an autistic front desk clerk rather than working with a state-paid “job coach” to remedy his deficiencies. The EEOC sued an insurance company that rescinded a job offer as an agent to an applicant after he tested positive for methadone. An Iowa jury awarded $1.1 million against a university for failing to accommodate an employee’s request for a lighter work load and other changes after she was diagnosed with depression, post-traumatic stress disorder and anxiety.

Olson also notes that 8,000 people have signed a petition challenging the proposed widening of the definitions of mental disorder. See: “Revised DSM-5 Could Open Up Wider Legal Claims,” Cato-at-Liberty, December 5, 2011.

Posted on 12/08/11 05:40 PM by Alex Adrianson

The Budget Act Threatens America’s Security

Implementing across-the-board cuts, one scenario under the Budget Control Act, is no way to design a national security strategy, argues Mackenzie Eaglen:

The military is a vital tool of U.S. foreign policy. Slashing defense spending without any reduction in U.S. foreign policy commitments around the world is not only dangerous, but also more costly in the long run than maintaining stable defense budgets. A review of roles and missions will not change U.S. foreign policy; only the President can do that. […]

[T]he military has been largely on a procurement holiday regarding the purchase of next-generation systems, which has resulted in an aging inventory. Cutting procurement also forces the military to invest more in the maintenance and upgrades for current platforms. Thus, any cuts in procurement will increase cost pressures in the O&M account, which is harder to predict, manage, and reduce smartly.

Canceling procurement programs does not recover sunk costs. Prior to the acquisition of weapons systems, the Department of Defense invests in initial research and development programs. Today, the RDT&E proportion of the costs for each program is much higher than before. […]

[C]anceling weapons systems also costs money up front, something largely overlooked in budget drills as severe as sequestration and on Capitol Hill. In many cases, the government owes contractors reimbursement for costs incurred and for premature contract termination.

Other problems identified by Eaglen: Some military suppliers that the DOD will need may just shut down instead of waiting out the funding uncertainty; and Congress will likely fund defense with continuing resolutions, the rules of which make it harder for the military to change plans based on current operations. For more, see “Super Committee Failure and Sequestration Put at Risk Ever More Military Plans and Programs,” The Heritage Foundation, December 5, 2011.

Posted on 12/08/11 01:25 PM by Alex Adrianson

You Only Think You Know How to Make a Cheeseburger

It’s easy to forget even the simplest things require specialization and trade, a fact Waldo Jaquith learns when he ponders making a cheeseburger from scratch:

Not just regular “from scratch,” but really from scratch. Like, I’d make the buns, I’d make the mustard, I’d grow the tomatoes, I’d grow the lettuce, I’d grow the onion, I’d grind the beef, make the cheese, etc.

[…] I realized that my prior plan hadn’t been ambitious enough—that wasn’t really from scratch. In fact, to make the buns, I’d need to grind my own wheat, collect my own eggs, and make my own butter. And I’d really need to raise the cow myself (or sheep, and make lamb burgers), mine or extract from seawater my own salt, grow my own mustard plant, etc. This past summer, revisiting the idea, I realized yet again that I was insufficiently ambitious. I’d really need to plant and harvest the wheat, raise a cow to produce the milk for the butter, raise another cow to slaughter for its rennet to make the cheese, and personally slaughter and process the cow or sheep. At this point I was thinking that this might all add up to an interesting book, and started to consider seriously the undertaking.

Further reflection revealed that it’s quite impractical—nearly impossible—to make a cheeseburger from scratch. Tomatoes are in season in the late summer. Lettuce is in season in spring and fall. Large mammals are slaughtered in early winter. The process of making such a burger would take nearly a year, and would inherently involve omitting some core cheeseburger ingredients. It would be wildly expensive—requiring a trio of cows—and demand many acres of land. [“On the Impracticality of a Cheeseburger”]

For timeless wisdom on this theme, read Leonard Reed’s I, Pencil.

Posted on 12/07/11 06:36 PM by Alex Adrianson

Building Your Brand by Brandishing Your Best Brochures

An essential element of marketing your ideas is designing catchy brochures and other informational materials. Following the best-practices of brochure design gets your hard work read instead of being glanced at and then tossed into the nearest circular filing cabinet.

Your brochure should be pithy, concise, focused on the benefits the target audience will receive, and full of graphics.  Don’t overload the brochure, but include copious amounts of captioning and headings.  Ask yourself, “what questions would my supporters want answered?” and “what how-to’s can I provide them?”

For more information check out the guide to “Nonprofit Brochure Basics,” put out by the

Posted on 12/05/11 09:23 PM by Alex Adrianson

Feds Make Cars More Expensive

The price of your next car just went up, thanks to new fuel economy standards, says Diane Katz:

The official proposal unveiled last week—all 893 pages—by the National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) calls for a fleet-wide fuel economy average of 54.5 miles per gallon by 2025. (The 2011 standard is 27.3 miles per gallon.) However, each manufacturer’s actual average would vary based on their vehicle mix. Every model would be assigned an individual standard based on its “footprint,” a formula that factors its wheelbase and track dimensions. Fines are levied for vehicles that do not meet the standard.

The government pegs the cost of compliance at $8.5 billion annually, on average, with wide variation between the early and latter years. This translates into a spike in sticker prices of at least $2,000–$2,800, according to official projections, which typically run lower than industry estimates.

That is hardly a prescription for reviving a moribund auto industry. According to, auto sales declined 41 percent from a seasonally adjusted annual rate of 15.72 million in December 2007 to a low of 9.32 million in February 2009. Based on the current pace of recovery, auto sales for 2011 are expected to total 12.9 million—a decline of 17.9 percent from the onset of the recession. [Internal citations omitted.]

More: “CAFE Standards: Fleet-Wide Regulations Costly and Unwarranted,” The Heritage Foundation, November 28, 2011.

Posted on 12/02/11 12:27 PM by Alex Adrianson

The U.S. Gets a $100 Billion Gift from China

Don’t worry about China manipulating its currency, says Mark Perry:

In the best of all possible worlds for the United States, China would use its labor and capital to manufacture consumer products like clothing, footwear, furniture, electronics, and appliances and send $300 billion worth of these products to U.S. consumers for free every year as a gift or a form of foreign aid to the American people. In addition, the Chinese would produce and send to America another $100 billion worth of raw materials, parts, industrial supplies, inputs, and natural resources at no charge, as a gift to American manufacturers every year. […]

Unfortunately, that extreme Chinese generosity is not realistic, so here’s a possible second-best outcome:

Instead of sending us $400 billion worth of goods annually for free, China offers an attractive alternative. It agrees to send us $500 billion worth of consumer and industrial goods every year, but agrees to sell us those manufactured goods at a substantial 20 percent discount for only $400 billion. In that case, the amount of foreign aid will be less than the $400 billion in the first example, but will still be significant—a $100 billion gift every year from the Chinese people to the American people.

How will China generate this $100 billion in annual foreign aid to the United States? One way is to keep its currency undervalued to bring about the 20 percent discount on its products coming to America. […]

If you wouldn’t object to China sending products to the United States for free, then on what basis would you object to currency “manipulation” that allows you to purchase undervalued Chinese imports at a huge discount and great bargain?

Read the whole thing: “Why We Should Thank the Chinese Currency Manipulators,” The American, December 2, 2011.

Posted on 12/02/11 12:13 PM by Alex Adrianson

Enron Still Hurts, Thanks to Congress

The political fallout from the Enron bankruptcy, which happened 10 years ago today, was much more damaging than the bankruptcy itself, reflects John Berlau:

While there was certainly damage to employees and, temporarily, to surrounding businesses in Houston, the bankruptcy barely caused a blip to the larger economy. The economy, already reeling because of the 9/11 attacks three months earlier, soon had a remarkable recovery.

Rather, the most damaging action of the Enron affair occurred in the aftermath of post-Enron reform. This would be the Sarbanes-Oxley Act of 2002. Ten years later, even the Obama administration agrees that Sarbox’s crushing burden of accounting mandates is holding back economic growth.

And Sarbox has little to show in results for investors, having failed to stop Lehman Brothers, Countrywide and now MF Global, which was run into the ground by a former politician who had championed the 2002 law. […]

Pointing out that “the data clearly shows that job growth accelerates when companies go public,” the Obama jobs council noted with dismay that there were fewer U.S. venture-backed initial public offerings (IPOs) in 2008 and 2009 than in any year since 1985. As I have noted previously, the data also show that even the recession years of the early ’90s had more IPOs than any year since Sarbox went into effect.

And here’s another thought to consider:

Today, with all of its dealings with banks, it would probably have been deemed “too big to fail.”

But luckily, this was before Hank Paulson and Tim Geithner occupied the Treasury Department. Enron was allowed to fail, and its executives were punished for fraud under decades-old securities laws.

These snippets come from Berlau’s article, “On 10th Anniversary of Enron Collapse, Time for Sarbanes-Oxley to Go,” at, December 2, 2011.

Posted on 12/02/11 11:55 AM by Alex Adrianson

Remy Misses the Light Bulb

No more 100-watt incandescent lights bulbs after December 31. You’ll have to make do with halogen. Thanks Congress.

Posted on 12/02/11 11:33 AM by Alex Adrianson

Markets for Marrow Ready to Save Lives

Thousands of Americans waiting for a blood marrow donation to treat their cancers or other genetic disorders got a ray of hope Thursday, when the Court of Appeals for the U.S. Ninth Circuit ruled that federal law does not prohibit compensation for blood marrow donations. They can thank the Institute for Justice for bringing the case.

“Every year, nearly 3,000 Americans die because they cannot find a matching bone marrow donor, but the federal government has made it illegal to do the one thing that will make finding donors easier: paying them,” said Jeff Rowes, lead attorney on the case for the Institute for Justice. “Today’s decision will put a stop to this irrational prohibition, and it could save thousands of lives in the process.”

The government had argued that compensation for marrow donations, like compensation for organ transplants, is prohibited by the National Organ Transplant Act. The court disagreed, ruling that the law’s prohibition on compensation for marrow donations applies only when doctors remove the spongy tissue from inside the bones, not when marrow cells are taken out of a donor’s bloodstream through his arm in a manner much like giving blood. Thats the most common way donations are made.

The ruling means that groups like the nonprofit can launch pilot programs to offer compensation for marrow donations. plans to offer bone marrow donors $3,000 in the form of scholarships, housing allowances, or gifts to charities selected by the donor. Compensation will now be legal within the boundaries of the Ninth Circuit, which includes Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington, and various other U.S. territories.

To learn more about the case, check out the IJ press release or watch this video:

Posted on 12/02/11 11:19 AM by Alex Adrianson

Job Creation Matters More than Job Protection

The real cause of persistent high unemployment is not a high level of layoffs, but a lack of job creation, explains James Sherk:

From the recession’s onset to the first quarter of 2009, private job creation fell by 24 percent to 5.8 million jobs. That was the lowest quarterly job creation on record. Since then, job creation has only slightly recovered. In the first quarter of 2011, employers created just 6.3 million new jobs—1.3 million fewer jobs than in the quarters before the recession began.

Fewer existing businesses are expanding, while fewer entrepreneurs are starting new businesses. In the first quarter of 2011, the number of workers hired in new business establishments fell to just 660,000, 27 percent fewer than when the recession began. This is the lowest number of workers hired at new businesses that the BLS has ever recorded—lower even than the worst points of the recession. [Internal citations omitted.]

What this means, as Sherk explains, is that the federal government should stop worrying about preserving existing jobs and adopt policies that allow entrepreneurs to create new businesses:  

Government industrial policies have a long record of failure—a fact highlighted by Solyndra’s recent implosion. The government can encourage job creation, however, by creating a favorable climate for entrepreneurs and investors. Research shows that potential entrepreneurs start more new companies in countries with smaller governments and lower regulatory burdens. Lower taxes and non-intrusive regulations increase the return and reduce the risks of starting or expanding an enterprise. Washington has done the opposite.

For more, see Sherk’s paper, “Reduced Job Creation—Not Increased Layoffs—Explains High Unemployment,” The Heritage Foundation, November 29, 2011.

Posted on 12/01/11 10:48 PM by Alex Adrianson

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