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InsiderOnline Blog: April 2011

The Doctor Becomes a Teacher, Too: Hal Scherz Wins 2011 Salvatori Prize for American Citizenship

On Thursday, The Heritage Foundation awarded Hal Scherz, a pediatric urologist from Atlanta Georgia, its Salvatori Prize for American Citizenship. The award recognizes Scherz’s efforts to educate the public about “the federal government’s bureaucratic destruction of the American health care system through the takeover that came to be known as Obamacare,” said Heritage Vice President Matthew Spalding.

Scherz asked that the $25,000 prize be given to his organization, Docs 4 Patient Care, which has spearheaded opposition to Obamacare within the medical profession. In just two years, the group has grown to over 4,000 doctors and 8,000 supporters, has testified before Congress, and has written op-eds for the Wall Street Journal. The award was announced at Heritage’s 34th Annual Resource Bank conference, where we caught up with Dr. Scherz to ask him a few questions.

InsiderOnline: What will happen to the practice of medicine if Obamacare remains law?

Hal Scherz: If Obamacare continues, the private practice of medicine in this country will cease to exist. We’re on the road to the extinction of private practices. There’s going to be a consolidation in which hospitals and the government are going to run health care. When that happens, there’ll be limited choices. There’ll be rationing of care. The quality of doctors will diminish. The number of doctors will diminish. The incentives for people to become doctors and for doctors to work hard will go away. We’ll see a deterioration and a Europeanization of our health care system. We don’t even know what that will look like in the future. It’s all very much up in the air, but the prospects are very frightening.

IO: Are those outcomes by design or are they unintended consequences of the law?

HS: I think it’s a little bit of both. One has to wonder whether there is really such a thing as unintended consequences. There’s no question that doctors are frightened right now. For the first time ever more doctors are working for hospitals than are working for themselves. That’s not a good thing. That just means that somebody else—a bigger institution—is insulating doctors and allowing them to make a living. It’s taking away from the doctor/patient relationship, because hospitals are really not interested in patients. Doctors are interested in patients. Hospitals are interested in money, control, and power. And when they are employing doctors and buying up doctor practices there is a diminishing amount of freedom for doctors and worse care for patients as a result.

IO: Do doctors tend to share your views or do they tend to agree with the American Medical Association’s support for Obamacare?

HS: Most doctors agree with my take. The AMA has a self-interest in Obamacare. They receive a large amount of their income from the medical coding system that is a government-sanctioned monopoly. So they are not in a position to buck the system and speak out for fear of losing that enormous income stream that is probably close $100 million annually. They also make their money—this just came out last week—mining doctor data and selling it—to the tune of about $40 million dollars a year.

They make very little money taking care of their constituency. They don’t have a constituency. When less than 20 percent of doctors in the country belong to the organization, how can you say that it’s representative?

IO: How do your patients respond when you do outreach to them on this issue?

HS: Eighty-nine percent of patients like their doctors. And when you tell them that the opportunity for them to see their doctors is going to go away in the future under Obamacare, many of them don’t believe it. But when you present the facts and they are faced with it, then they are completely shocked and appalled and they are concerned. Patients are very appreciative when you start talking about this and give them facts and give them places where they can go and see for themselves that what we’re telling them isn’t opinion. It’s all fact.

IO: So how does Docs4Patient Care plan to fight Obamacare from here on out?

HS: The 2012 elections are pivotal because if President Obama remains in the White House, health care is finished. It’s over. We have to work very hard to make people understand that this health care law means the end of the health care system as they have come to know it. The health care system is not completely broken. There are flaws, but President Obama has completely subverted health care because of two things he said were problems: access and cost.

What has happened is that Obamacare has increased costs. And it’s going to decrease access. There are going to be fewer doctors and there are going to be fewer doctors who are willing to participate in this government health care. All that this plan will do is enable people to wait in line. That’s all it will do. It will not give them better access.

We are already seeing that happen. We’re seeing thousands of senior citizens being turned away from their doctors of 20 years or more because they are going off Medicare. Or we are seeing new Medicare patients who are finding it impossible to find a doctor because doctors are not taking new Medicare patients.

So in the next two years Docs 4 Patient Care plans to build up its ranks. We’re going to form state chapters around the country. We’ve already got four that are up and running, and we’ve another 20 that are in the formative stages. We are going to have boots on the ground for the 2012 elections to help get the information to patients through the power of our offices.

IO: And what do you think are better ways of fixing the health care system?

HS: The problem with Obamacare is that it is a top-down system. It is government-run. President Obama and his supporters believe that the government is better at making health care decisions than patients are, and that is just absolutely flat out wrong. Patients need to be in charge of their health care. Patients need to be the ones who can purchase insurance and get tax credits like employers. Patients need to be the ones to decide who their doctor is going to be and they have to be the ones who decide how they are going to pay for it and not let a third party pay for it. We have to revamp the entire health care delivery model so that people are in charge through high-deductible health savings accounts, so that the first dollar out is their dollar and not the insurance company’s or the government’s. Whoever is controlling the payment of health care is controlling the health care of the individual. That should be the patients and not the government or insurance companies.

Posted on 04/29/11 10:13 AM by Alex Adrianson

Econ Throwdown, Part Two

John Maynard Keynes and F.A. Hayek, economists and featured vocalists of Fear the Boom and Bust, are back for round two of rapping about recessions and recoveries.

Posted on 04/28/11 12:57 PM by Alex Adrianson

The Insider: What Would Hayek Say?

Just out is the Spring 2011 issue of The Insider, in which we features two articles showing how Friedrich Hayek’s ideas about the limits of economic planning apply to three of today’s most salient policy issues. Here is the editor’s note with the complete rundown:

Not so long ago it was widely understood—mostly by economists, but by non-specialists, too—that free markets served an essential function: providing signals, in the form of prices, that individuals needed in order to make economic plans. According to this view, prices reflect knowledge that can never be discovered by bureaucracies or by any means other than markets, and without the knowledge embedded in these prices, it would be impossible to calculate what economic activities were worth undertaking in a world of limited resources.

But economic truths are forgotten during a crisis. Thus, we focus in this issue on the ideas of Friedrich Hayek, who, more than any other, developed the intellectual case against attempts by governments to engineer society as if it were a clock whose parts could be made to fit just so.

The evil that Hayek targeted was the comprehensive planning of society by a central authority. Nobody advocates that today, but new government interventions raise some of the same concerns that animated Hayek. As Peter Wallison explains, new regulations in both health care and financial services can only undermine the price mechanism in those areas, which will undermine competition; and a lack of economic competition can only make citizens vulnerable to encroachments on their liberty.

Hayek’s insights about the role of prices also yield a theory of the business cycle that runs counter to the Keynesian views that inform policy today. Again, what we learned in the 1970s, we have seemingly unlearned today. David Azerrad, drawing on the work of Bruce Caldwell, distills 10 Hayekian insights on dealing with tough economic times.

In other articles, Roger Stark warns about the Medicaid disaster ahead, Matthew Spalding explains why a constitutional convention isn’t the best idea, we talk with Bob Chitester and Candy Mead about how is introducing students to the economic way of thinking, and Rory Cooper identifies the essentials of a social media strategy.

Posted on 04/26/11 05:41 PM by Alex Adrianson

Serbia Freeing Its Economy

Serbia has been moving rapidly in the right direction on economic freedom. The country got a 58 out of 100 in the latest edition of The Heritage Foundation/Wall Street Journal Index of Economic Freedom, up significantly from the 43.5 score it received in 2003. In a recent talk at Heritage, Serbian Prime Minister Mirko Cvetkovic explains how his country has made these strides:

Posted on 04/25/11 05:47 PM by Alex Adrianson

Nobody Is Accountable for Regulatory Costs

As unprecedented as current federal budget deficits are, they are still exceeded by the annual economic costs imposed by federal regulations, notes the Competitive Enterprise Institute in its annual 10,000 Commandments report. Author Clyde Wayne Crews Jr. reports that the annual costs of federal regulations top $1.75 trillion, making regulation a hidden tax exceeding 50 percent of the level of federal spending.

Yes, there are benefits to regulations, too. But, as Crews notes, there’s no reason to expect agencies to perform honest cost-benefit analyses of their own rules. It’s time, he says, for Congress to take back control: “Requiring expedited votes on economically significant or controversial agency rules before they become binding on the population would reestablish congressional accountability and would help fulfill the principle of ‘no regulation without representation.’”

Posted on 04/22/11 12:53 PM by Alex Adrianson

Rusher to the Rescue

William A. Rusher, who died last weekend, was the publisher of National Review for 30 years, and a tireless promoter of conservative ideas. He helped draft Barry Goldwater to run for president, helped start Young Americans for Freedom, and helped start the American Conservative Union. He was one of the first conservative media personalities, appearing on the PBS show The Advocates, often winning over the audience despite being outnumbered by liberal guests.

National Review has a symposium  of Rusher memories (“Remembering William A. Rusher,” April 19, 2011). His colleagues remember him as a bon vivant with a quick wit, impeccable taste, and a steely commitment to conservative principles. Above all they remember him as the guy who rescued National Review from fiscal distress and turned it into a going enterprise that’s been going for some 55 years now.

Posted on 04/22/11 12:34 PM by Alex Adrianson

On Economic Growth: Three Questions for Arthur Laffer

Arthur Laffer, famous supply-sider and key economic adviser to President Ronald Reagan, will give a keynote talk at The Heritage Foundation’s 34th Annual Resource Bank next week. We asked him for his views on the economy:

InsiderOnline: You’ve predicted another crash this year. Do you still think that will happen, and if so why?

Arthur Laffer: About a year ago I predicted there would be a recession in 2011 if the Bush tax cuts were not extended. If you know they are going to raise tax rates next year, what will you do? You will accelerate income into this year, causing a recession next year. But by extending the tax cuts, Congress eliminated the prospects of a recession in 2011.

IO: What does the United States need to do in order to prevent another lost decade like the 1970s?

AL: Well, Washington really needs to recommit to pro-growth economics. And good economics is not partisan; it’s just economics. There have been great Democratic presidents like John F. Kennedy and Bill Clinton and great Republican presidents like Calvin Coolidge and Ronald Reagan—and each side has had its fair share of duds too. But in a long weekend you could put together all of the necessary legislation to really right this economy: a low-rate, flat tax; spending restraint; sound money (putting the Fed on a single mandate of price stability); free trade; and minimal regulation. If those changes were put in place, the economy would take off like you’ve never seen.

IO: Your research has found that the tax code is so complex that we spend $431 billion per year just figuring out how to fill out the forms and keeping track of records. What’s your ideal reform plan to simplify the code?

AL: My idea of tax reform is for Congress to enact a true flat tax, a la Jerry Brown's proposal in 1992. Congress should replace all federal taxes (except sin taxes, which are really designed to change behavior rather than raise revenue) with two flat-rate taxes, one on personal income and one on business net sales. This tax code would remove loopholes and almost all deductions, and the static revenue neutral rate would be less than 12 percent. Can you imagine what would happen to the United States economy if there were just two flat rate taxes of 12 percent?

Posted on 04/22/11 11:39 AM by Alex Adrianson

California Shrugged, Lawmakers Wonder Why

Seventy businesses have left California this year, and last week a group of lawmakers from the Golden State followed some of them to find out why they left. John Fund reports that the group, mostly Republicans, traveled to Austin to meet with ex-California businesses that have relocated to Texas. The group also included Calif. Lt. Gov. Gavin Newsom, who described himself and Gov. Jerry Brown as “pro-jobs Democrats” who “get it” on the need for business-friendly policies.

What the lawmakers heard, reports Fund, is that excessive regulations and high taxes make it too difficult to run a business in California. For example:

Andy Puzder, the CEO of Hardee’s Restaurants, was one of many witnesses to bemoan California’s hostile regulatory climate. He said it takes six months to two years to secure permits to build a new Carl’s Jr. restaurant in the Golden State, versus the six weeks it takes in Texas. California is also one of only three states that demands overtime pay after an eight-hour day, rather than after a 40-hour week. Such rules wreak havoc on flexible work schedules based on actual need. If there’s a line out the door at a Carl’s Jr. while employees are seen resting, it’s because they aren’t allowed to help: Break time is mandatory.

Fund’s article, “California Dreamin’—of Jobs in Texas,” (Wall Street Journal, April 22, 2011) also reports that more Democrats would have gone on the trip but were pressured to drop out by public employee unions.

Not entirely by coincidence, The Heritage Foundation’s 34th Annual Resource Bank also takes place in Texas—next Thursday and Friday in Dallas in fact. Among the offerings will be remarks from Texas Gov. Rick Perry, a keynote speech from pro-growth guru Arthur Laffer, and a panel on what other states can learn from Texas. You can still register.

Posted on 04/22/11 11:19 AM by Alex Adrianson

Paul Krugman Is Wrong, Wrong, Wrong …

 … says Bill Beach in an open letter to the New York Times columnist. Krugman had accused The Heritage Foundation of essentially “cooking the books” in order reach specific results in its analysis of the economic effects of Rep. Paul Ryan’s budget plan. In his open letter, Beach offers a point-by-point rebuttal, noting among other things that Heritage analysts used the U.S. Macroeconomic Model of IHS Global Insights, Inc., a model that has been around for 50 years and isn’t really susceptible to the sort of manipulation Krugman alleges. “[G]iven the fact that the Budget Committee gave us final inputs only a few days prior to publication of their budget,” writes Beach, “we only had time to make sure that this detailed model would solve with the enormous changes to public policy we had to introduce into it.”

Beach also points out that, contrary to Krugman, Heritage’s projections of the 2001 tax cuts stand up very well. Heritage predicted at the time that output, after-tax income, and nearly every other major economic indicator would grow above trend as a result of the tax cuts, which they did. Beach acknowledges that Heritage’s projections overstated the growth of the labor force since 2001, a trend that the Congressional Budget Office and nearly every other forecasting outfit in the country missed as well. Read the whole thing: “An Open Letter to Paul Krugman,” The Foundry, April 18, 2011.

For the record, Heritage estimates that if the Ryan plan were passed the economy would grow by 1.6 million jobs and $149.5 billion in output annually compared to current policies. See “Economic Analysis of the House Budget Resolution,” William Beach, et al., April 5, 2011.

Posted on 04/21/11 05:36 PM by Alex Adrianson

Overspending by Government Isn’t an Accident

There’s a reason for it. Here it is:

Posted on 04/21/11 03:09 PM by Alex Adrianson

Soaking the Rich Robs the Rest of Us, Too

Did you know that one consequence of Britain’s soak-the-rich tax policy was the break up of the Beatles? George Cassidy has the story:

[I]n his famous 1966 song “Taxman,” George Harrison, singing in the guise of a sardonic tax collector, warns listeners that he will keep 19 of every 20 pounds they earn … “Taxman” was inspired by the fact that during their heyday, the Beatles were subject to the super tax, meaning that their earnings were taxed at marginal rates of up to 95 percent. …

In 1967, the Beatles were informed that they would need to invest the large pile of cash they had amassed if they wished to avoid a major haircut from Her Majesty’s tax collectors. In late 1967 and early 1968, the Beatles duly started the ill-starred Apple group of companies — Apple Records, Apple Electronics, Apple Films, Apple Publishing, and the Apple Boutique.

Most of the companies under the Apple umbrella began losing money extravagantly and quickly. …  John Lennon, after fearing publicly that he would be broke in another six months, brought in Allen Klein, a divisive figure who affected a gangster’s air of bluntness, to take an axe to the Apple tree. Over McCartney’s objections — he was outvoted 3 to 1 — Klein began to manage the Beatles’ affairs.

Klein was on a collision course with McCartney from day one. Klein’s laser focus on money often slighted artistic goals — witness the doctored Let It Be tapes, released without McCartney’s consent. McCartney, finding the prospect of continuing with Klein unacceptable, ultimately enraged the other Beatles by suing them to dissolve their partnership in 1970.

… [N]o super tax, no Apple fiasco. No Apple fiasco, no Allen Klein. No Allen Klein, no lawsuit. [“What the Taxman Wrought,” National Review, April 15, 2011.]

Posted on 04/20/11 05:10 PM by Alex Adrianson

Supreme Court Asked to Make Global Warming Policy

Whether and how to fight global warming (decisions that could impose significant costs on consumers and taxpayers) are choices that could be denied to the political branches of government—i.e., those accountable to the voters. That would happen if the Supreme Court ends up agreeing with the plaintiffs in a case it heard on Tuesday. In American Electric Power v. Connecticut, six states and New York City want the Court to rule that the carbon emissions from five energy companies are a public nuisance that contributes to global warming.

According to David Rivkin and Lee Casey, global warming is a prime example of a political question that courts should not attempt to resolve. They point out that while there is considerable uncertainty about the extent to which manmade emissions contribute to warming, the entire human population produces carbon emissions. And, they say, without any standards created by the political branches, the courts cannot determine whose activities constitute a “nuisance” and whose do not. Further, Rivkin and Casey observe, there is likely no judicial remedy for the problem, since American courts cannot order China or other developing countries to curb their rapidly growing emissions. See “Climate Change Heads to the Supreme Court,” Wall Street Journal, April 15, 2011.

The AP reports that the justices were extremely skeptical of the plaintiff’s arguments.

For further discussion of the “political question” doctrine, see “Too Hot for the Courts to Handle: Fuel Temperatures, Global Warming, and the Political Question Doctrine,” by Laurence H. Tribe, Joshua D. Branson, and Tristan L. Duncan, Washington Legal Foundation, January 2010; and “Climate Policy by Judicial Fiat: How Global Warming Lawsuits Subvert the Democratic Process,” by Hans A. von Spakovsky, The Insider, Summer 2010.

Posted on 04/19/11 06:14 PM by Alex Adrianson

Made in the World

Trade data are set to get a makeover from the World Trade Organization, which is good news because the current method of accounting for the value of trade flows is misleading. Critics of free trade want to describe trade as a conflict between “us” and “them.” But who is “us” and who is “them”? Many products today contain parts that are produced in multiple countries. Official trade data, however, assign the value of those products to the country where the final assembly of the product occurred.

U.S. sales of Apple iPhones, for example, are said to have contributed $1.9 billion to the 2009 U.S. trade deficit with China. But when the intermediate stages of production are accounted for, it turns out that China accounts for only 3.9 percent of the iPhone’s contribution to the U.S. trade deficit. Germany, Japan, and South Korea comprise much larger shares. [“Trade in Value Added: What Is the Country of Origin in an Interconnected World?” by Andreas Maurer, World Trade Organization, April 14, 2011.]

WTO’s “Made in the World” initiative aims to identify more accurate ways of accounting for the value of trade flows between countries. Hopefully it will help improve the quality of debate about trade policy. For more on this topic, see Dan Ikenson’s post “Lies, Damned Lies and Trade Statistics,” published December 16, 2010 at Cato-at-Liberty.

Posted on 04/18/11 03:53 PM by Alex Adrianson

The Tax Code Is Way Too Complicated

Another film we’re looking forward to seeing:

Posted on 04/15/11 11:28 AM by Alex Adrianson

There Is No Male-Female Wage Gap

Women on average earn only 77 percent what men make. But, explains Carrie Lukas of the Independent Women’s Forum, the reason isn’t that women are forced into lower paying jobs; rather, they make choices about what kind of work makes sense for them:

The Department of Labor’s Time Use survey shows that full-time working women spend an average of 8.01 hours per day on the job, compared to 8.75 hours for full-time working men. One would expect that someone who works 9% more would also earn more. This one fact alone accounts for more than a third of the wage gap.

Choice of occupation also plays an important role in earnings. While feminists suggest that women are coerced into lower-paying job sectors, most women know that something else is often at work. Women gravitate toward jobs with fewer risks, more comfortable conditions, regular hours, more personal fulfillment and greater flexibility. Simply put, many women—not all, but enough to have a big impact on the statistics—are willing to trade higher pay for other desirable job characteristics.

Men, by contrast, often take on jobs that involve physical labor, outdoor work, overnight shifts and dangerous conditions (which is also why men suffer the overwhelming majority of injuries and deaths at the workplace). They put up with these unpleasant factors so that they can earn more.

Recent studies have shown that the wage gap shrinks—or even reverses—when relevant factors are taken into account and comparisons are made between men and women in similar circumstances. In a 2010 study of single, childless urban workers between the ages of 22 and 30, the research firm Reach Advisors found that women earned an average of 8% more than their male counterparts. [“There Is No Male-Female Wage Gap,” Wall Street Journal, April 12, 2011.]

Posted on 04/15/11 11:14 AM by Alex Adrianson

The Poor Are Getting Richer

Class war rhetoric is in the air again. Yes, the top 20 percent today earns more than the top 20 percent earned in 1970, while the share received by the other quintiles has fallen. There’s just one problem, however: Comparing quintiles across time doesn’t tell us what happens to actual people. To check in with reality take a look at this chart from the Pew Economic Mobility Project:

This chart shows what happens when you compare the incomes of parents (1967-71) with those of their children (1995-2002): The children of all earners except those in the top 20 percent saw their incomes improve over those of their parents. The children of earners starting in the bottom 20 percent saw the biggest increase over their parents incomes.

At Cafe Hayek, Russ Roberts has much more on income mobility in his post “There’s No Their There,” April 13, 2011.

Posted on 04/15/11 10:30 AM by Alex Adrianson

The Tax Code Is Too Complicated

U.S. taxpayers will spend $431 billion just complying with the tax code this year, according a new study by Arthur Laffer, Wayne Winegarden, and John Childs. That’s not money collected by the Internal Revenue Service; that figure represents just the value of the time taxpayers will spend keeping records and filling out tax forms, and the cost of paying professional tax preparers to do it for them, plus the cost of the bureaucracy needed to administer the tax code. That $431 billion amounts to 30 percent of the total of income taxes collected.

Why does it cost so much to comply with tax laws? For starters, the tax code is long. It contains 3.8 million words as of 2010. And the task of figuring it out is all the more impossible because the law is constantly changing. In 2001, the tax code contained “only” 1.4 million words, but since then there have been approximately 4,428 changes to the tax laws. There were 579 changes in 2010 alone. The National Taxpayer Advocate routinely identifies tax law complexity as the number one problem facing taxpayers.

One tax system that’s easier to comply with would be a flat tax system that features one low rate and many fewer deductions and credits. Why doesn’t Congress adopt such a system? Probably because that would mean abandoning the idea of using the tax code to advance social agendas, and politicians like the idea of trying to change people’s behaviors.

The Laffer paper is “The Economic Burden Caused by Tax Code Complexity,” published by the Laffer Center for Supply-Side Economics. For an overview of the flat tax, see “A Brief Guide to the Flat Tax,” by Daniel J. Mitchell, published by The Heritage Foundation, July 7, 2005.

Posted on 04/14/11 01:44 PM by Alex Adrianson

IRS Wants to Help Foreign Governments Collect Taxes

The Internal Revenue Service wants to turn American banks into deputy tax collectors for foreign governments. The IRS has proposed a rule requiring American financial institutions to report any interest they paid to foreigners. The purpose is to make it easier for foreign governments to tax this U.S. source income. As Dan Mitchell explains in the video below, the rule not only puts American banks at a competitive disadvantage, but flouts the rule of law. Congress has passed no law providing for the taxation on interest paid to for non-resident foreigners, and IRS regulations are supposed to implement only U.S. laws.

Posted on 04/13/11 05:55 PM by Alex Adrianson

Reclaiming America’s Lost Principles: Patrick Henry College Turns 10

“God gave us the freedom to raise warriors,” said Michael Farris. He was addressing a crowd of 570 gathered to celebrate the 10th anniversary of the founding of Patrick Henry College. Farris is the founder and chancellor of the tiny, private, upstart college in Purcellville, Virginia. Among those listening to his words Tuesday night were former Pennsylvania Senator Rick Santorum and Dr. James Dobson. What were they celebrating?

Farris, a constitutional lawyer, is the founder of the Home School Legal Defense Association and the president of Patrick Henry College embodies Farris’s lifelong commitment to educational choice and academic rigor, as reflected in the school’s mission to “prepare Christian men and women who will lead our nation and shape our culture with timeless biblical values and fidelity to the spirit of the American founding.” In order to maintain its independence, the college accepts no federal funding or federally-backed student grants or loans.

Despite its youth, Patrick Henry College has been making waves in the academic community. In 2004, Patrick Henry beat Oxford on British turf in a moot court tournament on British Contract Law. The college’s moot court team has won five out of the past seven American Collegiate Moot Court Association national championships. Patrick Henry students attained the highest scores in the nation on the Intercollegiate Studies Institute’s American Civic Literacy Test, outperforming Harvard, Yale, and Princeton. Patrick Henry students have SAT and LSAT scores that rival the top schools in the nation.

Patrick Henry College is not your typical college campus—i.e., it’s not a hive of leftwing hijinx. As part of the classical liberal arts tradition, Patrick Henry requires all students to take 63 credits of core curriculum, including courses on philosophy, religion, political theory, constitutional law, and history. These courses ground students in a holistic understanding of ideas that have shaped world history, preparing students to advocate a principled-centered worldview that emphasizes Founding principles and limited government.

This education has prepared graduates of Patrick Henry College for incredible successes. Alumni are pursing graduate studies and law degrees at the top-ranked law schools in the nation, including Harvard, Yale, and Columbia. They have argued in front of Supreme Court justices, directed documentaries, worked on presidential campaigns, landed jobs in the White House, written for national publications, and even worked at The Heritage Foundation.

At the 10th anniversary event, Patrick Henry College unveiled an ambitious plan to enlarge the student body from its current size of 350 students to 1,400 students. Yet, as the college grows, it remains committed to its Christian and American roots. During the celebration, Senator Santorum was asked what the mission of everyone in the room should be. His reply was simple: “to reclaim America’s lost principles.” That mission remains a cornerstone of the vision of Patrick Henry College.

By Nicole Frazer, a member of the Heritage Foundation Young Leaders Program and current student at Patrick Henry College.

Posted on 04/13/11 11:43 AM by Alex Adrianson

Free or Equal: A Personal View

As big fans of Milton Friedman’s Free to Choose, we’re looking forward to seeing Free or Equal: A Personal View. It’s a new film from the Free to Choose Network, and is hosted by Johan Norberg. In the film, Norberg follows Friedman’s travels from Free to Choose to see what actually happened in those places where his free market ideas were implemented. A sneak preview will be screened at the Cato Institute on April 29, 2011, and Norberg will be there to take questions.

To wet your appetite, here is episode one of Free to Choose:

Posted on 04/12/11 07:01 PM by Alex Adrianson

We Need a Simpler Tax Code

Two senators are working together on a serious effort to streamline, simplify and modernize our complicated tax system:

Posted on 04/11/11 08:55 PM by Alex Adrianson

What Izzit?

If you think your child’s schooling in social studies isn’t very complete—that perhaps it’s lacking in basic concepts about the value of free markets, for example—then you should check out You might even recommend it to your child’s teachers. is a service that provides great short videos targeted at students in grades four through 12.

Anybody can order the videos, but teachers—including homeschoolers—can get them for free. We just watched one called Freedom’s Sound, which tells the story of how the collapse of Communism allowed the Estonia Piano Company to make great pianos instead of mediocre one, expand its business, and provide a bigger payday for its workers.

Every video at comes complete with a lesson plan. The service also provides a daily e-mail containing a social studies lesson drawn from the recent news. In many ways, the lessons provided by constitute a young student’s version of Milton Freidman’s Free to Choose. The service is in fact a part of the Free to Choose Network run by Bob Chitester. We talked with Chitester and director of curriculum development, Candy Mead recently. Stay tuned for the article in our forthcoming issue of The Insider, out later this month.

Posted on 04/08/11 03:09 PM by Alex Adrianson

A Path to Prosperity Indeed

Passage of Paul Ryan’s Path to Prosperity Budget, in addition to reducing the national debt by $9.9 trillion over the period 2012-2012 compared to the current budgetary path, would have significant positive economic benefits, according to The Heritage Foundation’s Center for Data Analysis. Here’s what happened when CDA applied the macroeconomic models from Global Insight, Inc., to Rep. Ryan’s proposed budget:

Private employment grew by an annual average of 1.6 million jobs above the CBO alternative budget baseline. Total employment grew by an average of 1.3 million jobs, which indicates shrinkage of public-sector employment of 300,000 on average.

The Gross Domestic Product grew by an average, inflation-adjusted amount of $149.5 billion above baseline over the 10-year period. By 2021, GDP is $401 billion higher than baseline.

The after-tax, inflation-adjusted disposable income of households by 2021 is $164 billion higher than the baseline. Lower taxes and a friendlier economy led to the formation of an average of 123,000 more households per year.

See “Economic Analysis of the House Budget Resolution,” by William Beach , Karen Campbell, John Ligon and Guinevere Nell,” The Heritage Foundation, April 5, 2011.

Posted on 04/08/11 02:39 PM by Alex Adrianson

Democracy Is Difficult in the Middle East

The history of the Middle East does not support a case for optimism about the “Arab Spring of 2011.” The region has almost no successful experience with democratic rule. Indeed, in the last half of the last century, Egypt, Iraq, Iran, Libya, and Yemen all overthrew dynastic rule, only to be governed by a different set of tyrants.

One explanation for this anti-democratic pattern is climate. Simply put, it doesn’t rain much in North Africa and the Middle East, which makes access to bodies of water like the Nile River crucial for agriculture. According to Stephen Haber and Victor Menaldo, control of those sources of irrigation is easily concentrated in a few hands, and that tendency has produced societies “composed of a wealthy elite and a vast, impoverished peasantry.” That predisposes revolutions in such societies to emphasizing class warfare rather than securing individual rights for all. Their evidence:

The Middle East and North Africa are part of a much vaster area of low precipitation, the Afro-Asian Dry Belt, which extends from Mauritania (on Africa’s Atlantic Coast), eastward across Mali, Niger, Chad, and the Sudan, and northwards across Morocco, Algeria, Libya, Tunisia, and Egypt. It then continues eastwards, encompassing all of the nations of the Middle East, Central Asia, Northwestern China, and Mongolia.

Across that vast stretch of the earth, encompassing a broad range of ethnicities, language groups, and colonial experiences, there is only one country that has managed to sustain a democracy: Israel. The fact that it is the exception suggests the power of our rule: Israel did so on the basis of an immigrant population that brought their human capital with them, allowing them to transform deserts and briny marshes into farmland. [“A Democratic Middle East?,” Defining Ideas, March 31, 2011.]

As Israel demonstrates, environment isn’t destiny; but in setting current policy, it never hurts to heed the predispositions indicated by history.

Posted on 04/07/11 02:00 PM by Alex Adrianson

School Choice Tax Credit Program Constitutional

School choice tax credit programs that allow religious organizations to participate are constitutional, said the Supreme Court earlier this week. The American Civil Liberties Union had sued Arizona, claiming the state’s scholarship tax credit program, by allowing taxpayers to get a tax credit for donating to religiously affiliated nonprofits, violates the Constitution’s prohibition against government establishment of religion. The Court disagreed—making it five times the ACLU has lost a challenge to this particular Arizona law.

Writing for the Court, Justice Anthony Kennedy explained that the plaintiffs had failed to identify an injury from the law that would have given them standing to sue in the first place:

When Arizona taxpayers choose to contribute to STOs [school tuition organizations], they spend their own money, not money the State has collected from respondents or from other taxpayers. Arizona’s [scholarship tax credit law] does not “extrac[t] and spen[d]” a conscientious dissenter’s funds in service of an establishment, or “‘force a citizen to contribute three pence only of his property’” to a sectarian organization. … Like contributions that lead to charitable tax deductions, contributions yielding STO tax credits are not owed to the State and, in fact, pass directly from taxpayers to private organizations. Respondents’ contrary position assumes that income should be treated as if it were government property even if it has not come into the tax collector’s hands. That premise finds no basis in standing jurisprudence. Private bank accounts cannot be equated with the Arizona State Treasury.

The typical family receiving a scholarship through the Arizona program has an annual income that’s almost $5,000 lower than that of the typical family statewide, according to research by Vicki Murray of the Pacific Research Institute. [“An Analysis of Arizona Individual Income Tax-credit Scholarship Recipients’ Family Income, 2009-10 School Year,” Program on Education Policy and Governance, Harvard Kennedy School, 2010.]

Posted on 04/06/11 05:37 PM by Alex Adrianson

FDA Decides Not to Ban Fun

Here’s what a birthday cake might have looked like if the Food and Drug Administration had decided to ban artificial food coloring:

The Center for Science in the Public Interest had asked the FDA to ban artificial food colors claiming they worsen the symptoms of kids with behavior problems. The FDA decided last week there wasn’t enough evidence to support the ban.

But for some food activists, making foods they don’t think you should eat unappetizing is just the point. “These dyes have no purpose whatsoever other than to sell junk food,” Marion Nestle, a professor at New York University, told the New York Times.

What can you say? Sprinkles on a donut make some people sad; others, happy.

Posted on 04/05/11 11:58 AM by Alex Adrianson

A Debt Crisis Is Coming …

…unless government cuts spending now. House Budget Committee Chairman Paul Ryan has a plan:

It’s a pretty good plan, says Alison Acosta Fraser, who notes:

This budget pares back non-security discretionary spending—the small part of the budget that Congress actually writes a budget for—and tackles other parts of the budget such as farm subsidies and the federal bureaucracy. The budget also repeals Obamacare. Most crucially, Ryan’s budget tackles entitlement programs with transformative changes in Medicare and a solid approach to controlling Medicaid’s spiraling costs. These changes will result in a stronger and bigger economy with more job creation, more savings and investment, and higher household incomes.

But it could be better, explains Fraser:

Although this budget does rein in welfare spending on Medicaid and food stamps, it continues to approach the rest of the $950 billion welfare system in the same piecemeal fashion of the past. More notably, Ryan has not touched Social Security, preferring instead to fast-track solutions outside the budget process. He has also opted to essentially grandfather the grandparents: Benefits for those in or near retirement will not be touched. That also means that spending reductions will come slower than they might otherwise. Will we exempt so many baby boomers from contributing to the most urgent economic problem we face? While it is politically difficult to consider benefit changes for this group, it is virtually impossible to balance the budget within the near term without doing so. This is a discussion we must have as a nation. [“Morning Bell: Chairman Ryan’s Budget Resolution Changes America’s Course,” The Foundry, April 5, 2011.]

Posted on 04/05/11 10:39 AM by Alex Adrianson

Fannie Mae Execs Rewarded for Fed Buying Spree

Selling junk to the Federal Reserve is a business plan that can earn you better pay—if you work for a giant mortgage guarantor that bought too many bad assets and had to enter a government conservatorship. The top three executives at Fannie Mae earned $18.2 million in 2009 and 2010, according to a new IG report. The President and CEO of Fannie Mae, Michael J. Williams, earned $9.3 million in those years. The executives’ pay included  performance bonuses for meeting the goal of Fannie Mae issuing more than 37.5 percent of all new mortgage-backed securities in 2009. But that was questionable as a performance benchmark, says the IG, because

… in November 2008, the Federal Reserve announced that it would purchase up to $1.25 trillion in the Enterprises’ MBS. Under this program, the Federal Reserve purchased essentially all of the Enterprises’ net MBS issuances in 2009. … It seems unlikely that Fannie Mae could have commanded such a large share of the market without the Federal Reserve’s purchases of its MBS.

Since Fannie Mae and Freddie Mac entered a government conservatorship in 2008, they have been propped up to the tune of $153 billion from the Department of the Treasury. During that time, the top six executives from the two companies have earned combined salaries of $35 million, says the IG report. See “Evaluation of Federal Housing Finance Agency’s Oversight of Fannie Mae’s and Freddie Mac’s Executive Compensation Programs,” Federal Housing Finance Agency, Office of Inspector General, March 31, 2011.

Posted on 04/04/11 04:59 PM by Alex Adrianson

The Recovery Forgot to Set Its Alarm

Below is a chart, from the blog Calculated Risk, showing previous recessions and recoveries by percentage loss in employment. The recovery from the 2007 recession, indicated by the bright red trend line, is already longer than all but one of the post-World War II recoveries and still has quite a ways to go before regaining the 2007 level of employment.

Posted on 04/04/11 02:23 PM by Alex Adrianson

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