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InsiderOnline Blog: July 2011

The Lobbyists Are Doing Fine

Reports Chris Frates:

Some of Washington’s biggest lobbying shops are pulling down good money this year, but you wouldn’t know it from their public disclosures.

The early reports of second-quarter revenue numbers, due at midnight on Wednesday, had lobbyists bemoaning how a slumping economy and a deficit-obsessed Congress were hurting business. But that downturn in lobbying revenue is more than offset by the regulatory work, political intelligence, investigation prep, and agency lobbying that is part of the unreported influence economy, insiders say….

Indeed, the passage of health care and Wall Street reform, from which K Street made a killing lobbying for two years, have now morphed into a regulatory gravy train as corporations scramble to influence the hundreds of rules that will soon govern their industries.

And because regulatory work requires specialists who understand the rule-making process and can help clients comply with, or challenge, the new rules, it is much more lucrative than traditional lobbying—paying two to three times more. [Wrong! Lobby Shops Are Doing Fine, National Journal; h/t: David Boaz, Don’t Cry for the Lobbyists, Encyclopedia Britannica Blog.]

Posted on 07/29/11 01:22 PM by Alex Adrianson

Happy 99th, Milton Friedman!

Milton Friedman’s birthday is officially July 31, but lots of folks in the free market movement are holding events today. Here’s a tribute:

And if the Friedman Century is just getting started, then the year of school choice is just the way to kick it off. That’s how Robert Enlow, executive director of the Friedman Foundation for Educational Choice, thinks of 2011. In a review of this year’s developments on school choice for the magazine Education Week, Enlow notes: “No fewer than 18 voucher, tax-credit, and education-savings-account programs have been adopted since January by state legislatures, Congress, and one local school board.”

Posted on 07/29/11 01:08 PM by Alex Adrianson

Sometimes They Get You Coming, Sometimes They Get You Going

California, for all its fiscal dysfunction, can take solace in one aspect of its policies. According to the Global Business Travel Association’s ranking of the top 50 destinations in the United States, the five U.S. cities whose tax codes discriminate the least against travelers are all in California. Putting higher taxes on things like hotels and car rentals can be a tempting way for states and cities to raise revenues because after all, travelers don’t vote in the places they are visiting. Some states and cities rely on those sources more than others. According to the GBTA ranking, the five least discriminatory cities in the United States are Orange County, San Diego, San Jose, Burbank, and Ontario—all in California. The cities whose tax codes discriminate the most against travelers are PortlandBoston, Minneapolis, New York, and Chicago. Of course, when you consider all taxes faced by travelers—not just those that are discriminatory—California cities drop out of the top five. According to the GBTA, the Florida cities of Fort Lauderdale, Fort Myers, and West Palm Beach, plus Detroit and Portland are the five cities where travelers face the lowest total tax burden. On the other end, Chicago, New York, Seattle, Boston, and Kansas City have the highest total tax burden for travelers.

So, all you event planners for conservative and free market groups, keep these rankings in mind when deciding where to have your conferences. [H/t: Tax Foundation.]

Posted on 07/29/11 12:55 PM by Alex Adrianson

Learn Social Media, Now!

Stop procrastinating! Start using social media today to get your pro-freedom message out! Anja Hartleb-Parson’s “Using Social Media to Advance Freedom,” published by Intellectual Takeout, provides a one-stop overview of how to get started on Twitter, Facebook, MySpace, blogging, and social bookmarking.

Posted on 07/29/11 12:24 PM by Alex Adrianson

Illiteracy Doesn’t Stalk the Land

Borders has closed. Have people stopped reading? Nope. Creative destruction. Don Boudreaux, in a letter to the Boston Globe, sets the record straight:

[T]he number of new titles and editions published in the U.S. has risen spectacularly over the past 20 years. In 1990, 46,738 new book titles were published in the U.S. In 2002 the number was 247,777; in 2005 it was 282,500, and in 2009 the total number of new titles and editions published in the U.S. was a whopping 1,335,475 … .

People no longer need to leave their houses to get new books. And if they buy e-books, they don’t even have to walk to their mailboxes.  Thank you, capitalism!

Posted on 07/29/11 09:29 AM by Alex Adrianson

Regulations Rising

Government regulations, a hidden tax on the economy, have only grown under President Obama, report James Gattuso and Diane Katz:  

During its first 26 months—from taking office to mid-FY 2011—the Obama Administration has imposed 75 new major regulations with reported costs to the private sector exceeding $40 billion. During the same period, six major rulemaking proceedings reduced regulatory burdens by an estimated $1.5 billion, still leaving a net increase of more than $38 billion.

The actual cost of the new regulations is almost certainly higher, for several reasons. First, the reported totals do not include “non-major” rules, i.e., those deemed unlikely to cost $100 million or more annually. Moreover, as agencies estimate the impacts of their own rules, costs are routinely minimized. Nor do agencies always analyze the costs of proposed rules. Twelve of the 75 major regulations adopted by the Obama Administration through the end of March 2011 did not include quantified costs.

The regulations imposed include fuel economy and emission standards for passenger cars, light-duty trucks, and medium-duty passenger vehicles, with an annual cost of $10.8 billion; energy conservation standards for lightbulbs, with an annual cost of $700 million; constraints on “short sales” of securities, at $1.2 billion; and a slew of other costly regulations related to the Dodd–Frank financial regulation statute and Obamacare health regulations.

No other President has burdened businesses and individuals with a higher number and larger cost of regulations in a comparable time period. President Bush was in his third year before new costs hit $4 billion. President Obama achieved the same in 12 months. [Red Tape Rising: A 2011 Mid-Year Report, The Heritage Foundation.]

It’s estimated, note the authors, that all government regulations cost the economy $1.75 trillion annually—nearly twice the amount of individual income taxes collected.

Posted on 07/29/11 09:00 AM by Alex Adrianson

The Problem with Public Sector Unions

A video primer from Encounter Books:

Posted on 07/28/11 11:27 AM by Alex Adrianson

Spending Cuts Aren’t That Hard to Find

Imposing spending caps, creating new commissions—such maneuvers are common to all the various debt ceiling plans and they all amount to leaving the spending cut decisions for future Congresses (and probably different congressman) to make. Congress could make real spending cuts right now if it wanted to. One place to start would be the ideas in Brian Riedl’s Heritage Foundation paper “How to Cut $343 Billion from the Federal Budget.” Focusing on duplicative programs, corporate welfare, outdated and ineffective programs, and waste fraud and abuse, Riedl identified $343 billion that could have been saved in the 2012 federal budget. (Congress never passed one of those.)

Or Congress could consult the Government Accountability Office’s May report “Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue.” That report identified 81 areas where Congress could save money by eliminating duplicative programs. The GAO noted that the government currently has seven agencies for the homeless, 10 on teacher quality, 24 on federal data, 31 for war fighter urgent needs, and five on surface transportation.

Posted on 07/27/11 06:05 PM by Alex Adrianson

Some Taxpayers Already Pay More Than Their Fair Share!

The president, seemingly irrelevant at this point in the debt-ceiling debate, still talks about the need for “shared sacrifice”—i.e., higher taxes—to reduce federal budget deficits. The president wants higher taxes on the rich.

The President should consult the recent OECD study showing that as of 2005, the top ten percent of income earners in the United States pay 45.1 percent of all income taxes, while earning 31.6 percent of the income. In other words, the top 10 percent’s share of the tax burden is one-third greater than their share of income. That’s a higher proportion of tax burden to income for the top 10 percent than other country in the OECD. [No Country Leans on Upper-Income Households as Much as U.S., Tax Foundation.]

Meanwhile, the most recent IRS data show that 36 percent of all income tax filers owe no income tax at all. In total, 51 percent of Americans pay no income taxes. The Tax Foundation’s Scott Hodge points out:

While some of these households don’t earn enough to file a tax return, millions of others have been knocked off the income tax rolls because of the generosity of the credits and deductions that have been created in recent years to help “middle-class” taxpayers. [Shouldn’t Nonpayers Also Share in Cost of Deficit Reduction? Tax Foundation.]

Business as usual in Washington, D.C., can’t go on, and hopefully tax policy hasn’t already given too many citizens a stake in preserving business as usual.

Posted on 07/27/11 04:24 PM by Alex Adrianson

The Long-Term Debt Problem Is a Health Care Entitlement Problem

Whatever Congress hashes out over the debt ceiling isn’t likely to fix the underlying source of the government’s long-term debt problem. This chart, produced by Yuval Levin based on CBO numbers, shows that the problem is the growth in the cost of health care entitlements:

Fixing the problem, says Levin,  

… means above all replacing the fee for service structure of Medicare, which is the chief driver of inefficiency across our health-care system. In addition, the incentives for overspending in Medicaid (where states design benefits and the federal government pays) and the employer system (where higher premiums mean greater tax savings) need to be redirected. That means repealing Obamacare and transforming the employer tax exclusion, Medicare, and Medicaid into a system of defined-contribution health benefits. [The Corner]

Posted on 07/26/11 05:10 PM by Alex Adrianson

Minimum Wage Laws Hurt the Poor

Prices are not a lever, they’re metric, explains Professor Antony Davies in the video below from the Institute for Humane Studies. Setting wages by law doesn’t make a person’s labor worth more; but it can make that person unemployed.

Posted on 07/25/11 11:48 AM by Alex Adrianson

Social Media for Nonprofits: A Guide to the Guides

There are a lot of good Web sites that tell you how to do things with social media. If you’ve got questions, you might just find the answers at one of Becky Wiegand’s Top Ten Technology and Social Media Resources for Nonprofits” (Tech Soup).

Posted on 07/22/11 02:26 PM by Alex Adrianson

The Government Should Spend Less Money

The fight over the debt limit is really a fight over whether government should be bigger or smaller. Milton Friedman explains why it would be a good thing if government spent less money:

Friedman was a sharp one! School choice, the volunteer army, predicting the stagflation of the ’70s, teaching us all to ask over and over again: Who chooses?—these are just a few of Friedman’s contributions to the cause of liberty. July 31st would have been his 99th birthday. On July 29th, a lot of organizations will host events to celebrate him. The Foundation for Educational Choice has a map that lets you find an event near you.

Here are some of the groups hosting Friedman events: Atlas Economic Research Foundation, Bluegrass Institute for Public Policy Solutions (Kentucky), Cascade Institute (Oregon), Grass Root Institute (Hawaii), Heartland Institute (Illinois), Illinois Policy Institute, John Locke Foundation (North Carolina), Maine Heritage Policy Center, Pacific Research Institute (California), Pioneer Institute (Massachusetts), Rio Grande Foundation (New Mexico), Tennessee Center for Policy Research, and Yankee Institute for Public Policy (Connecticut).

Posted on 07/22/11 01:20 PM by Alex Adrianson

Tax Hikes Now and (Maybe) Spending Cuts in the Future

The Senate’s “Gang of Six” plan is not as balanced as the gang would have you believe. The Heritage Foundation’s Alison Acosta Fraser finds net tax increases of $3.4 trillion over ten years. Spending cuts?

The plan presents absolutely no overall spending target, either in dollars or percent of GDP. So how does it stack up to the House-passed budget, or the House-passed “Cut, Cap and Balance” bill? Nobody knows.

All they tell us is their plan would work in three phases. Phase one is what they call an “immediate aggressive deficit reduction down payment” of $500 billion. Is that spending cuts or “immediate aggressive” tax hikes? Unclear. And even if the “down payment” is all cuts, how soon is “immediate”? …

Phase Two of the plan would put various congressional committees to work getting spending reductions, budget process reforms and the tax hike details fleshed out. Again, everything happens in the future. Results could be delivered in six months, but there is no requirement or mechanism to make sure it happens. [What’s Wrong with the Gang of Six Plan?]

Fraser isn’t the only analyst who finds problems. Keith Hennessey says the plan contains a few good things and only 17 bad things. [Why I Oppose the Gang of Six Plan.] Cato’s Dan Mitchell, also finding a lack of specifics about spending, suggests hanging on to your wallet. [The Gang of Six Is Back from the Dead: Contemplating the Good, the Bad, and the Ugly in Their Budget Plan.] National Review calls it a “plan to have a plan.” [Government by Platitude.] Heritage’s Baker Spring warns that the proposal will compromise national security. [‘Gang of Six’ Plan Could Gut Defense.] And Heritage’s Ed Feulner says Colonel Nicholson might well have understood the Gang of Six. [The Fight We’re In.]

Posted on 07/21/11 02:28 PM by Alex Adrianson

Government Doesn’t Think Like You Do

No kidding. A helicopter pilot’s recent experience with the Federal Aviation Administration:

[T]he FAA inspector looked at my random drug testing program to make sure that everything was in place. I’m subject to the same drug testing requirements as United Airlines. I am the drug testing coordinator for our company, so I am responsible for scheduling drug tests and surprising employees when it is their turn to be tested. As it happens, I’m also the only “safety-sensitive employee” subject to drug testing, so basically I’m responsible for periodically surprising myself with a random drug test. As a supervisor, I need to take training so that I can recognize when an employee is on drugs. But I’m also the only employee, so really this is training so that I can figure out if I myself am on drugs. As an employee, I need to take a second training course so that I learn about all of the ways that my employer might surprise me with a random drug test and find out about drug use. But I’m also the employer so really I’m learning about how I might trap myself.

Given the costs of this guy’s salary, pension, government-issued car, supervisor, and office space, I estimate that the records inspection cost the U.S. taxpayer $500. Just a handful of these inspections, therefore, would have paid for an online system that would eliminate the need for inspectors to drive around to folks’ hangars and houses.

Five minutes after the FAA inspector left, I received a phone call. “I’m from the FAA and we’d like to schedule an audit of your drug testing program.”

That’s from Philip Greenspun, “Revitalizing the U.S. Economy through Government Spending,” June 16, 2011 (h/t: Walter Olson, “Overregulation: The View from a Helicopter Cockpit,” Cato-at-Liberty, July 14, 2011).

Posted on 07/20/11 05:45 PM by Alex Adrianson

Corruption Kills

Failure to build for earthquakes can cost hundreds of thousands of lives, yet, as Claire Berlinski observes, some of the most at-risk cities in the world have done nothing to prepare. And the problem isn’t merely that some cities—e.g., Port-au-Prince—have few resources to devote to problems that are certain to happen in the long run but are incommensurable with the dire poverty they face in the short run. Berlinski:

On the anniversary of the Haiti earthquake, Nicholas Ambraseys and Roger Bilham published an extraordinary study in Nature. Using data from Transparency International’s Corruptions Perception Index, they calculated that 83 percent of all deaths from building collapses in earthquakes in the past 30 years took place in countries that were “anomalously corrupt”—that is, in countries that were perceived to be more corrupt than you would predict from their per-capita income.

Economist Charles Kenny’s definitive 2007 study argues persuasively that the construction industry is the most corrupt sector of the world economy. And the more corruption there is in construction—whether it consists of companies’ using substandard materials or of governments’ granting permission to build in zones unsuitable for habitation—the likelier you are to die. In China, the buildings that crumble during earthquakes are schools and hospitals, while the Party’s headquarters and the houses of its functionaries remain standing. In Turkey, building inspectors work on the contractors’ payroll, creating a massive conflict of interest. Changing that system could save countless lives. But the construction companies, for obvious reasons, don’t want that to happen—and all of Turkey’s major political parties run on construction money.

It’s enough to make you wonder why Berlinski lives in Istanbul! Her sobering article carries the sobering title “1 Million Dead in 30 Seconds“ (City Journal, Summer 2011).

Posted on 07/20/11 03:18 PM by Alex Adrianson

Fake Ethanol Reform

The government’s support for ethanol is just complicated enough that what sounds like a reform bill is really just rearranging the deck chairs. Making gas out of grain was supposed to be good for the environment, but producing biofuel actually ends up releasing more carbon dioxide than what is saved from burning less gasoline. Plus, diverting corn to your gas tank makes food more expensive. So ending the ethanol blender’s subsidy, as senators John Thune and Amy Klobuchar want to do, can only be good, right? Tim Carney reports the dirty little details:

Historically, this blender’s subsidy boosted ethanol demand by bringing down the effective price of a gallon of ethanol. But the 2005 energy bill created an ethanol mandate, requiring refiners to use a certain amount of ethanol every year. The 2007 energy bill expanded the mandate, and in 2011, refiners are required to use 13 billion gallons of ethanol. This mandate now sets demand, with the tax credit having little or no effect. The Congressional Budget Office recently wrote: “In the future, the scheduled rise in mandated volumes would require the production of biofuels in amounts that are probably beyond what the market would produce even if the effects of the tax credits were included.”

So if the ethanol blender subsidy doesn’t increase ethanol demand, what does it do? It simply lowers the blenders’ costs, resulting in a subsidy for blenders, gas stations, and even consumers.

So the mandate is still in place, plus, Carney reports, the Thune/Klobuchar bill simply redirects the blenders’ subsidies—delivered in the form of tax credits—to small ethanol producers and for ethanol blender pumps to be installed at gas stations. Carney’s report is “As Ethanol’s Ravages Grow, Phony ‘Reform’ Emerges,” Washington Examiner, July 17, 2011.

Posted on 07/20/11 12:23 PM by Alex Adrianson

Poverty Might Not Mean What You Think It Means

The Census Bureau says 30 million people live in poverty in the United States. Poverty, as defined by the government, however, does not mean destitute. A new report from Robert Rector and Rachel Sheffield of The Heritage Foundation finds that the typical household in poverty today has two televisions with cable or satellite service, air conditioning, a clothes washer and dryer, a microwave oven, and a DVD player. If the household has a child in it, then it is more likely than not to have a personal computer and a video game system.

And the lot of the poor, just like most other households, has been improving over time. One typical chart from the report, for example, shows that in 2005 over 78 percent of poor households had air conditioning, up from 41 percent in 1980. A poor household in 2005 was more likely to have air conditioning than was an average household in 1995.

Rector and Sheffield’s report also details the poor’s access to food, housing, and medical care. Suffice it to say that while there are households that do struggle, not being able to put a roof over one’s head or food on the table is far from the norm of officially defined poverty. Incredibly, as Rector and Sheffield note, the Obama administration has recently tinkered with the formula for calculating poverty. The income thresholds designating poverty will now be adjusted upwards in direct proportion to increases in the living standard of the average American. That makes it really a formula for measuring inequality, not poverty.

Rector and Sheffield’s report is “Air Conditioning, Cable TV, and an Xbox: What is Poverty in the United States Today?” published by The Heritage Foundation, July 18, 2011.

Posted on 07/20/11 11:11 AM by Alex Adrianson

Signs that Progress Is Slowing Down …

… thanks to overregulation. Richard Rahn summarizes the views of Peter Thiel as presented at the recent FreedomFest:

Fifty years ago, it was widely predicted and assumed that commercial airplanes would be traveling at speeds of 2,000 miles an hour or more by now. It hasn’t happened. In fact, travel times have gotten slower. The Concorde, which became the first supersonic commercial airplane in 1976, was abandoned eight years ago. Planes now fly no faster than they did in the 1960s because of government policies and restrictions. In addition, the government’s incompetent Transportation Security Administration has unnecessarily managed to increase trip times to another hour or so.

Nuclear power was supposed to bring us electricity too cheap to meter. But government restrictions on many types of power production and excessively costly regulation have driven up energy prices in real terms after centuries of falling energy prices. After the first moon landings, many confidentially predicted that the moon would have permanent manned bases by now and, perhaps, even be colonized – but now the space shuttle has been abandoned with no replacement. Drug approvals are dramatically down at the Food and Drug Administration compared with where they were a decade or more ago. Meanwhile, the promised cure for cancer is still in the future, even though progress has been made.

Some industries, notably education, have been showing negative productivity, in that it now costs more in real terms to provide the same level of education in primary and secondary school as well in college than it did four decades ago.

But Rahn isn’t entirely pessimistic:

The government has not figured out how to destroy the Internet and advances in computers. So the struggle goes on … [“The End of Progress,” Washington Times, July 18, 2011.]

Posted on 07/19/11 02:15 PM by Alex Adrianson

World Almanac of Islamism

A bombing in Mumbai, an assassination in Kabul, an attack foiled in Ankara—all part of another week in the West’s war with Islamic terrorism. Are we winning?

Assessing the battle can be hard to do because there are many different Islamic terror movements spread throughout dozens of countries. To help keep track of it all, the American Foreign Policy Council has created the World Almanac of Islamism. The Almanac features up-to-date reports on seven different Islamic movements: Al Qaeda, Hezbollah, Hizb ut-Tahrir, Lashkar-e Taiba, Muslim Brotherhood, Tablighi Jamaat, and the Taliban. You can also find reports on 58 different countries and a report for each region of the world. Each article is written by a leading expert in the field. Better still, the almanac isn’t just a static collection of articles: They will be updated as events warrant.

Posted on 07/18/11 04:52 PM by Alex Adrianson

Quote of the Week

“In the history of human thought science has often come out of superstition. Astronomy came out of astrology. Chemistry came out of alchemy. What will come out of economics?”

Peter Berger tells us those are the opening lines of an essay Bernard Lewis has not yet written. We suspect Lewis is thinking specifically about macroeconomics:

Posted on 07/15/11 12:34 PM by Alex Adrianson

Measuring Your Social Media Health

There’s more to measuring the effectiveness of your social media efforts than just clicking the report buttons. Maria Ogneva’s “Seven Steps to Measuring Your Brand’s Social Media Health,” (Mashable) gives you the overview of what you should be doing.

Posted on 07/15/11 12:32 PM by Alex Adrianson

A Call to Arms

From Broadside Books:

Liberalism is entering its twilight years. Intellectually discredited, morally bankrupt, and rapidly losing its grip on political power – the ideology that produced communism and fascism, as well as the modern welfare nanny state, has finally exhausted the reserves that gave it life. In short, it’s a spent force.

This does not mean that Liberalism will go quietly. Rather, it’s much more likely that it will end, not with a whimper, but a bang – a Liberal Supernova. Desperation is a powerful force. Thus, Liberalism’s last fits and gasps can be expected to become more irrational and aggressive as it nears its end.

This is not a cause for celebration, but a call to arms.

What should be done? Check out Broadside’s symposium on “Where and how should Conservatives attack Liberalism next?“ for ideas from Charles Kesler, Herb London, Daniel Pipes, Roger Simon, Yuval Levin, Glenn Reynolds, and more.

Posted on 07/14/11 04:55 PM by Alex Adrianson

The Feds Still Aren’t Taking Health Care Fraud Seriously

“The federal government’s systems for analyzing Medicare and Medicaid data for possible fraud are inadequate and underused,” said the Government Accountability Office on Tuesday. The Associated Press summary continues:

The Government Accountability Office report said the systems don’t even include Medicaid data. Furthermore, 639 analysts were supposed to have been trained to use the system—yet only 41 have been so far, it said.

The Centers for Medicare and Medicaid Services—which administer the taxpayer-funded health care programs for the elderly, poor and disabled—lacks plans to finish the systems projected to save $21 billion. The technology is crucial to making a dent in the $60 billion to $90 billion in fraudulent claims paid out each year.

Private insurers are better at identifying fraudulent claims because they’ve invested money in developing the systems to do it. That helps keep overall costs—and thus premiums—lower than they otherwise would be. It’s an area where the government should be learning from the private sector. (“The Government’s Health Care Fraud Problem,” by Merrill Matthews and Meredith Matthews, The Insider, Summer 2009.)

Obamacare, however, is expected to put upwards of 20 million new enrollees into Medicaid coverage, including some middle-income families who could afford private coverage. (“A Glitch in Obamacare Could Give Middle Class Insurance Coverage Intended for the Poor,” Washington Examiner, June 21, 2011.)

Posted on 07/13/11 06:51 PM by Alex Adrianson

HHS Is Just Getting Started Regulating

The 347 pages of Obamacare regulations released Monday contain 811 instances of the word “require,” reports Chris Jacobs of the Republican Policy Committee. Jacobs further reports: “Page 11 of the Exchange rule notes that most of the critical elements of Exchanges are NOT included in [Monday’s] regulations”:

Subjects included in the Affordable Care Act to be addressed in separate rulemaking include but are not limited to: (1) standards for individual eligibility for participation in the Exchange, advance payments of the premium tax credit, cost-sharing reductions, and related health programs and appeals of eligibility determinations; (2) standards outlining the Exchange process for issuing certificates of exemption from the individual responsibility requirement and payment under section 1411(a)(4); (3) defining essential health benefits, actuarial value and other benefit design standards; and (4) standards for Exchanges and QHP issuers related to quality.

So if you thought 811 times was a lot to use the word “require,” just wait until all the regulations are issued.

Posted on 07/12/11 04:42 PM by Alex Adrianson

The Song Remains the Same for New Paternalism

Letting people opt out of—rather than in to—401(k) savings plans was supposed to increase savings. But the Wall Street Journal reports:

[A]n analysis done for The Wall Street Journal shows about 40% of new hires at companies with automatic enrollments are socking away less money than they would if left to enroll voluntarily, the Employee Benefit Research Institute found. …

Among plans Aon Hewitt administers, the average contribution rate declined to 7.3% in 2010, from 7.9% in 2006. The Vanguard Group Inc. says average contribution rates at its plans fell to 6.8% in 2010, from 7.3% in 2006. Over the same period, the average for Fidelity Investments’ defined contribution plans decreased to 8.2%, from 8.9%.

Vanguard estimates about half the decline “was attributable to increased adoption of auto-enrollment.” [“401(k) Law Suppresses Saving for Retirement,” Wall Street Journal, July 7, 2011.]

Meanwhile, the headline of a July 6 Washington Post story tells us: “Calorie counts don’t change most people’s dining-out habits, experts say.”

Mario Rizzo cites these examples in commentary at Cato-at-Liberty (“New Paternalist Surprises, July 8, 2011). Rizzo explains that the new paternalism—which holds that government can “nudge” people toward decisions that better reflect their true preferences—faces a knowledge problem just like the old paternalism:

Trying to determine what people’s true or underlying preferences are (Do they want more 401k savings? Do they want to reduce calorie consumption? Do they want to incur the opportunity costs of each?) is more difficult than it may seem at first. Trying to engineer the appropriate response from individuals requires a detailed knowledge of the interaction of many conflicting incentives.

Rizzo has a whole paper on the topic: “The Knowledge Problem of the New Paternalism,” October 2009.

Posted on 07/12/11 03:07 PM by Alex Adrianson

The Interest-Rate Risk of Hitting the Debt Ceiling Is Minimal

Says Cato’s Michael Tanner:

A 1 percent increase in interest rates could cost taxpayers more than $100 billion per year.

Still, we should keep that in perspective—it’s less than the amount that the government expects to borrow this month. And that is sort of worst case scenario. In 1979, the federal government actually did briefly default on its debt as the result of a debt ceiling impasse (as well as technical problems). That resulted in just a 60-basis-point increase in interest rates.

If we are really worried about a hike in interest rates, what about the hike we can expect if we fail to get federal borrowing under control? Both our deficit and total liabilities are already higher as a percentage of gross domestic product than Greece—or any of the other failing welfare states of Europe.

Despite this, creditors have been willing to lend us money at very low interest rates, simply because they trust the U.S. economy over the long-term. If we don’t get our budgetary house in order, however, that won’t be the case forever. Eventually, we will have to hike interest rates to ensure that the Chinese and others keep buying our bonds.

Former Federal Reserve governor Lawrence Lindsey estimates that if interest rates simply return to their historic average, it is likely to cost taxpayers $420 billion in higher payments in 2014, and $700 billion by 2020. The $100 billion or so that we might have to pay if we miss the debt ceiling looks good by comparison. [“What the Debt Ceiling Really Means,” Politico, July 11, 2011.]

Posted on 07/12/11 12:21 PM by Alex Adrianson

Hitting the Debt Ceiling Doesn’t Mean Default

J.D. Foster:

In the unlikely event that the U.S. government would hit the real ceiling on August 2 as advertised, the federal government would still be on track to collect about $2.2 trillion in the fiscal year. That wouldn’t change. And net interest for the year would still be about $205 billion, or less than a tenth of incoming revenues. And in light of the consequences, there is no doubt that President Obama and his Treasury Secretary would ensure that the interest payments are made on time and in full.

Thus it should not be surprising, as Fox Business News senior correspondent Charlie Gasparino wrote in a New York Post piece some days ago that “just about every private-sector economist I speak to says that Treasury could simply use its ample cash on hand to pay off our creditors first—then begin to prioritize payments for the military and various social programs.”

This view appears to be shared in spades by the credit markets, which so far have reacted to the Obama-media scare tactics with a big yawn. When the markets fear real default, they respond by jacking up interest rates, as we’ve seen in Greece, Italy, Portugal, etc. It’s happening right now in those countries.

In sharp contrast, U.S. long-term rates are actually falling. The 10-year Treasury bond rate, which only a few days ago was around 3.15 percent, has dropped 20 basis points to 2.95 percent. [“The U.S. Government Debt Default Bogie Man Scares No One,” The Foundry, July 11, 2011.]

Posted on 07/12/11 11:41 AM by Alex Adrianson

If Any Country’s Wealthy Pay Their Fair Share, It’s Those in the United States

The Obama administration wants more tax revenue as part of a “balanced” approach to cutting the deficit—and making a deal on the debt ceiling. And judging from President’s targeting of tax breaks for corporate jets, the administration thinks the wealthy don’t pay their fair share. But, as Scott Hodge of the Tax Foundation points out, the United States leans more heavily on its rich than any other country.

Data from the Organisation for Economic Cooperation and Development show that in the United States the top 10 percent of earners paid 45.1 percent of income taxes while earning 31.6 percent of the income in 2005. Both figures are higher than the OECD-24 averages of 31.6 and 28.4 respectively. But for the United States, the ratio of tax burden share to income share is far higher than that for any other country in the OECD-24. The U.S. ratio is 1.35 while the OECD-24 average is 1.11. Hodge:

Even in the three countries with a comparable distribution of income, the ratio of taxes to income was less, 1.18 in Italy, 0.84 in Poland, and 1.20 in the U.K.

Interestingly, countries with top personal income tax rates that are higher than in the U.S., such as Germany, France, or Sweden, have ratios that are closer to 1 to 1. Meaning, the share of the tax burden paid by the richest decile in those countries is roughly equal to their share of the nation’s income. By contrast, we prefer to have the wealthiest households in this country pay a share of the tax burden that is one-third greater than their share of the nation’s income. [“No Country Leans on Upper-Income Households as Much as U.S.,” Tax Foundation, March 21, 2011.]

Posted on 07/11/11 04:50 PM by Alex Adrianson

Something’s Not Working

The average length of unemployment has been reaching new heights nearly every month since the end of the recession:

If you’re wondering why businesses might not be hiring, here are five policy choices the Obama administration has made that either raise business costs or are expected to raise them in the near future, as identified by Rea Hederman Jr. and James Sherk:

The health care reform legislation raises the costs of employer-sponsored health insurance; [t]he new financial regulations make accessing capital difficult for smaller businesses; [t]he pending Environmental Protection Agency (EPA) regulations of carbon dioxide and coal-fired power plants will raise the cost of energy; [t]he promised tax increases on successful businesses discourage entrepreneurs from taking risks on new ventures; and Obama’s activist National Labor Relations Board (NLRB) seeks to foist unions on employers and employees, despite the fact that unionized businesses create fewer jobs. [“Heritage Employment Report: June Jobs Wilt in Heat,” The Heritage Foundation, July 8, 2011.]

Posted on 07/11/11 11:34 AM by Alex Adrianson

The District of Columbia’s Taxi Plan Squeezes the Little Guy

Medallion systems are form of protectionism that benefit the politically connected at the expense of consumers and independent drivers, as this segment from explains:  

Posted on 07/08/11 03:47 PM by Alex Adrianson

The Ban on Fracking Doesn’t Add Up

New York’s moratorium on shale gas development costs the state far more economically than the environmental benefits it gains, says a new report from the Manhattan Institute. The report authors reviewed all of the reported environmental violations at shale gas wells in neighboring Pennsylvania from 2008 to 2010, and found that the typical well generated about $14,000 in environmental damages. At the same time, they calculate, the typical well generated about $4 million in economic benefits.

The report is “The Economic Opportunities of Shale Energy Development,” by Timothy J. Considine, Robert W. Watson, and Nicholas B. Considine, June 2011.

Posted on 07/08/11 02:05 PM by Alex Adrianson

Too Much Government Spending Is a Threat to Our Future

Concerned Women for America held a Capitol Hill briefing yesterday that provides a good overview of our fiscal crisis. Here’s a video of the first speaker, Janice Crouse:

Videos of the other speakers in the briefing are also online at the CWA Website.

Posted on 07/08/11 01:06 PM by Alex Adrianson

The Recovery Is Going Very Slowly

If job growth over the next ten years matches job growth this year, then the unemployment rate in January 2021 will still stand at 7.4 percent:

For more details on our slow economic recovery, see James Sherk’s new Heritage Foundation paper “Years of High Unemployment Ahead at Recovery’s Pace,” published July 5, 2011.

Posted on 07/08/11 12:51 PM by Alex Adrianson

Professional Basketball Players Vote with Their Feet

Last year, LeBron James saved $25 million by “taking his talents to South Beach” where, like all residents of Florida, he faces no income taxes. That move helped the Miami Heat reach the NBA finals. The NBA champion Dallas Mavericks also hail from a state that has no income taxes.

But the correlation between low taxes and basketball success goes further. Drew Johnson has tabulated all the state and local income tax rates for each NBA team. He finds that the ten teams with the lowest rates had a combined 2010-2011 winning percentage of 57.8. The ten teams in the middle had a combined winning percentage of 52.9. The ten teams facing with the highest income tax rates had a winning percentage of only 39.3. Johnson explains:

The NBA operates under a salary cap that not only limits the total amount a team can spend on the combined salaries of all players, but also places a ceiling on the amount that individual players can earn.  As a result, top players with similar years of service in the league make roughly the same salary regardless where they play.

Since the maximum salary available to an elite level player varies little from one team to the next, state and local income tax rates play the greatest role in determining the difference in how much money star players ultimately pocket from team to team.

See his post “How Tax Policies Determine Winners and Losers in the NBA,” at the Taxpayer’s Protection Alliance blog, June 14, 2011.

Posted on 07/08/11 12:37 PM by Alex Adrianson

The Stimulus Didn’t Boost Consumption

Looking at actual data instead of relying on models, Stanford economist John Taylor finds an explanation for high unemployment:

In sum, this empirical examination of the direct effects of the three countercyclical stimulus packages of the 2000s indicates that they did not have a positive effect on consumption and government purchases, and thus did not counter the decline in investment during the recessions as the basic Keynesian textbook model would suggest. Individuals and families largely saved the transfers and tax rebates. The federal government increased purchases, but by only an immaterial amount. State and local governments used the stimulus grants to reduce their net borrowing (largely by acquiring more financial assets) rather than to increase expenditures, and they shifted expenditures away from purchases toward transfers.

Some argue that the economy would have been worse off without these stimulus packages, but the results do not support that view. According to the empirical estimates of the impact of ARRA, if there had been no temporary stimulus payments to individuals or families, their total consumption would have been about the same. And if there had been no ARRA grants to states and localities, their total expenditures would have been about the same. The counterfactual simulations show that the ARRA-induced decline in state and local government purchases was larger than the increase in federal government purchases due to ARRA.

Taylor’s new paper is “An Empirical Analysis of the Revival of Fiscal Activism in the 2000s.”

Posted on 07/08/11 12:05 PM by Alex Adrianson

“Amazon” Taxes Don’t Yield New Revenues

California’s expectation of an extra $200 million per year from its new “Amazon tax” is likely to be unmet. California’s new law, which went into effect on July 1, requires online retailers who have in-state affiliates to collect state sales taxes. Six other states have passed similar laws in recent years, claiming that online retailers who sell to in-state residents have an unfair advantage over “bricks-and-mortar” outlets that must pay sales taxes. The Tax Foundation reports, however, that these states have received very little tax revenue from these new laws:

Rhode Island revenue-analysis office head Paul Dion stated in December 2009 that the six-month-old law had collected no revenue. An affiliate trade group believes that Rhode Island has seen less tax revenue come in because the elimination of the affiliate program reduced income and thus income tax collections. State Treasurer Frank Caprio echoed this, saying, "The affiliate tax has hurt Rhode Island businesses and stifled their growth, as they've been shut out of some of the world's largest marketplaces, and should be repealed immediately."

North Carolina has also not seen additional revenue from the law. Illinois has seen an outflow of Internet-related businesses after its law's passage. While New York is collecting revenue, it is because is collecting taxes under protest while the issue is litigated. If New York loses the case, it will have to refund those collections to taxpayers. [Internal citations omitted.] [“California Becomes Seventh State to Adopt ‘Amazon’ Tax on Out-of-State Online Sellers,” Tax Foundation, July 1, 2011.]

Amazon responded to the passage of California’s law by immediately terminating its affiliate programs with about 25,000 California businesses who are expecting to lose revenue because of the law.

Posted on 07/08/11 11:54 AM by Alex Adrianson

Breaking Things Doesn’t Create Economic Growth

Art Carden of Rhodes Colleges explains the broken window fallacy in this video for the Institute for Humane Studies:

Posted on 07/07/11 05:39 PM by Alex Adrianson

Get Your Writing Recognized (and Win Some Money)

If you’ve done some clever scribbling on freedom this past year, then you should consider entering either the Bastiat Prize for Journalism or the R.C. Hoiles Prize for Regional Journalism, both sponsored by the International Policy Network.

The Bastiat prize, now in its 10th year, recognizes writers “whose published articles eloquently and wittily explain, promote and defend the principles and institutions of the free society.” The Hoiles Prize is new this year, and “recognizes journalists addressing regional US issues whose writing best reflects the Freedom Philosophy developed by R. C. Hoiles.”

The Bastiat prize is named after Frederic Bastiat, a 19th century Frenchman whose acerbic writings revealing the folly of statist economic policies. In his “Candlemakers Petition,” Bastiat asked the French Chamber of Deputies to protect the commerce of “Manufacturers of Candles, Tapers, Lanterns, sticks, Street Lamps, Snuffers, and Extinguishers,” and “Producers of Tallow, Oil, Resin, Alcohol” by passing “a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull’s-eyes, deadlights, and blinds — in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses.”

The Bastiat Prize has been upped substantially this year. First place now receives $50,000; second place receives $15,000, and third place receives $5,000. The contest is open to writers anywhere in the world.

R.C. Hoiles believed that the only legitimate functions of the government are to protect citizens from force and fraud. Starting in California in the mid 1930s, Hoiles built a family of local newspapers whose editorial pages reflected this libertarian outlook for many decades. First place in the Hoiles prize receives $10,000; second place receives $4,000; and third place receives $1,000.

The deadlines for both contests are July 31.

Posted on 07/07/11 04:41 PM by Alex Adrianson

Rep. Ann Marie Buerkle Seeks to Unite Conservative Women and Restore the American Dream

The American Dream is rooted in the history of the United States; it is the backbone of our society. Unfortunately, the national promise that prosperity and success will be attained through hard work is all but gone. Now jobs are harder than ever to find, even for the college-educated, and once-thriving communities have decayed into mere ghost towns.

The erosion of the American Dream inspired Rep. Ann Marie Buerkle (R-N.Y.) to run for Congress in 2010. Speaking at the recent Conservative Womens Network, hosted by The Heritage Foundation and The Clare Boothe Luce Policy Institute, Buerkle explained her crusade for preserving the American Dream and reviving it among conservative women.

As a freshman member of Congress, Buerkle has experienced firsthand a divide among conservative women. She believes this divide is directly hindering the restoration of the American Dream, which is why she is focused on reaching out to them directly.

Conservative women have been burdened because, unlike their liberal counterparts, they have not been able to find common ground. Buerkle contends: “Liberal women are extremely unified regarding pro-abortion, which transcends any other issue, allowing them to remain so strong.”

She continued: “Most women are looking for a place to go. And it’s not necessarily about abortion. We must reach the hearts and minds of women, one at a time. The disadvantage we have is that women are busy raising families.”

In order for conservatism to expand, it is important for women to build upon their relationships and overcome stereotypes. Buerkle says we need to do this by talking to each other. “We need to take the context of their lives and relate them to liberal policies and how they’re destroying the nation.”

Buerkle believes most women in this nation aren’t liberal, but because the Democratic Party has acted like it cares, it has been a safe place for women to go. More importantly, conservatives need to stop acting like they belong to a club and look hard for common ground, but without compromising principles.

Buerkle’s passion to preserve the American Dream stems from her experience as a product of that ethos. A grandchild of Italian immigrants, she worked her way through school, eventually earning nursing and law degrees. She grew up believing hard work would result in achieving the American Dream. At 59, however, Buerkle realized the opportunities she had wouldn’t be the same for her grandchildren, igniting her congressional campaign.

Her campaign defied all odds and she now is the first woman to hold the seat in the area surrounding Syracuse, NY. After being given a 5 percent chance of winning by The New York Times and being outspent five to one by a Democratic incumbent, she was victorious. According to Buerkle, “We won because we ran a grassroots campaign about people and how the government affects their lives. It’s not about the money, it’s about the message.”

Buerkle remains on a mission to communicate conservative principles and prove it is not the government that can turn the country around, but individuals.

This post was written by Abigail White, a member of the Young Leaders Program at The Heritage Foundation. For more information, see The Heritage Foundation Internship Program Web page.

Posted on 07/06/11 01:28 PM by Alex Adrianson

Facebook Guide for Nonprofits

Facebook has a new guide on how nonprofits can build their Facebook audiences. The guide covers topics such as what kind of content creates conversations, how to learn about your supporters through Facebook, and how to promote your Facebook page. Check it out. (You can find the link to this and other guides on social media in our tool kit for think tanks.)

Posted on 07/05/11 05:30 PM by Alex Adrianson

Tilting the Playing Field Won’t Save Unions

Failure to win certification elections isn’t the reason that unions represent only 6.9 percent of private-sector workers today—down from 35 percent in the 1950s. The National Labor Relations Board thinks otherwise and wants to help unions by allowing “quickie” elections that make it hard for employers to make an effective anti-union pitch. But, as James Sherk details (“Labor Union Snap Elections Deprive Employees of Informed Choice” Heritage Foundation, March 31, 2009), unions already enjoy many advantages in the current set up. That’s why they win 68 percent of certification elections.

In his recent Bloomberg column, Ramesh Ponnuru notes a study by economist Henry Farber and sociologist Bruce Western finding: “If the NLRB had held no unionization elections since 1972, the percentage of Americans in unions would have dropped by only an additional 1.7 percent.”

The real reason for union decline, as Brink Lindsey describes in his Cato paper “Nostalgianomics,” is that deregulation and more open trade policies have made the American economy more competitive since the 1950s. “With the unleashing of competitive forces under the Washington Consensus,” Lindsey writes, “unionized firms, saddled with above-market wages and restrictive work rules, found themselves at a critical disadvantage. They shrank accordingly, and union rolls along with them.” [Internal citations omitted.]

Posted on 07/01/11 11:25 AM by Alex Adrianson

A Slush Fund for the Worst Governments

The U.N Convention on the Law of the Sea (UNCLOS), which some U.S. senators are still hoping to ratify, could divert billions to state sponsors of terrorism. Under the treaty, U.S. energy companies that extract oil and natural gas from the extended continental shelf of the United States would pay royalties to the International Seabed Authority instead of the U.S. Treasury. Heritage Foundation fellow Steven Groves writes:

[I]t is unlikely that the United States would be able to prevent the Authority from distributing Article 82 revenue to Cuba and Sudan, UNCLOS members that the U.S. State Department has designated as state sponsors of terrorism. It would also be difficult for the United States to block the Authority from sending funds to the undemocratic, despotic, and/or brutal regimes in Belarus, Burma, China, Somalia, and Zimbabwe. Finally, the United States would have limited ability to stop the transfer of Article 82 revenue to corrupt regimes, especially given that 13 of the 20 most corrupt nations in the world are UNCLOS members. …

UNCLOS is silent on how UNCLOS nations that receive Article 82 royalty revenue should spend it. UNCLOS does not require recipient nations to spend the revenue on anything related to the oceans or the maritime environment. Nor does it require them to spend the revenue on humanitarian or development projects, even though most, if not all, of the eligible recipients are supposed to be poor, developing countries. Recipients are apparently free to spend the funds on military expenditures or simply deposit them into the personal bank accounts of national leaders. [Internal citations omitted.]

Groves notes that the royalties from just the Alaskan outer continental shelf are expected to amount to about $92 billion over the next 50 years. His paper is “U.N. Convention on the Law of the Sea Treaty Erodes U.S. Sovereignty over U.S. Extended Continental Shelf,” published June 7, 2011.

Posted on 07/01/11 09:58 AM by Alex Adrianson

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