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InsiderOnline Blog: September 2011

One in Ten Florida Welfare Applicants Fail Drug Tests

Requiring welfare applicants to pass a drug test in order to receive a check from the state is saving Florida a lot of money so far. The program began in July. Tarren Bragdon of the Foundation for Government Accountability, a new Florida-based think tank, reports:

[F]or July, 9.6 percent of otherwise qualified applicants for cash assistance were denied for a drug-related reason. With an approximate annual savings to the state of $1,608 per drug-related denial […] these 574 denials from July 2011 represent annualized savings to Florida taxpayers of $922,992. The cost of reimbursing the 5,390 approved applicants with a negative drug test ($30 average for each) reduces this annualized savings figure by $161,700, for a net savings to taxpayers of $761,292 for the first month of the program alone. Since Florida’s initial denial rate is 9.6 percent, the State is currently saving an estimated $5.71 on drug testing for every $1 it spends reimbursing approved applicants with negative drug tests who ultimately receive cash assistance. If these July trends continue throughout the first year, the drug testing requirement will save Florida taxpayers $9,135,504 from July 2011 through June 2012.

Bradgon calculates that if Florida’s experience holds for other states, then implementing a drug-testing requirement nationally would save taxpayers nearly $130 million annually. For more, see Bragdon’s report, “The Impact of Florida’s New Drug Test Requirement for Welfare Cash Assistance.”

Last month, The Heritage Foundation’s Robert Rector reported a number of surprising facts about the poor, such as that three-quarters of households officially defined as poor have more than one television in their homes and one in seven have more than one personal computer. Now we know that nearly one in ten also have enough money to support a drug habit.

Posted on 09/23/11 03:10 PM by Alex Adrianson

Policy A-Go-Go: Tax Increases on the Wealthy

After proposing last week to increase taxes by $447 billion over ten years to pay for his jobs bill, President Obama this week proposed to increase taxes by an additional $1.5 trillion over 10 years as part of what he describes as “balanced” deficit reduction. Here’s what folks are saying about the president’s proposals:

Curtis DuBay: President Obama wants tax reform to adhere to his newly formulated “Buffett Rule” which states: Families and small businesses making more than $1 million should not pay a smaller share of their income in taxes than a middle income family. But the Congressional Budget Office shows that Buffett Rule is already in effect. The highest earners pay more than double the amount of taxes as a share of their income than middle income earners. The top 1 percent of earners currently pays 29.5 percent of their income in all federal taxes while middle income families pay 14.3 percent. [Heritage Responds to Obama’s Debt Reduction and Tax Proposal, The Heritage Foundation, September 19, 2011.]

Scott Hodge: During his Rose Garden speech yesterday, President Obama once again fueled the general misperception that people who pay the 15 percent tax rate on their capital gains and dividend income are paying a lower rate than salaried workers who pay at the individual rate […] . The reality is that capital gains and dividends are taxed at a lower rate at the individual level because this income has already been taxed at 35 percent at the corporate level before it was distributed to shareholders. Both Mr. Obama and his tax advisor Warren Buffett seem unaware that the U.S. has the 4th highest overall tax rate on dividend income among the largest industrialized countries in the OECD at 52.1 percent. [Correcting Obama and Buffett: U.S. Capital Taxes Among Highest in OECD, Tax Foundation, September 20, 2011.]

Dan Mitchell: Raising the tax burden is not the same as raising revenue. […] [P]eople with more than $1 million of adjusted gross income get only 33 percent of their income from wages and salaries. And the same IRS data shows that the super-rich, those with income above $10 million, rely on wages and salaries for only 19 percent of their income. This means that they […] have tremendous ability to control the timing, level, and composition of their income. [One Simple Reason (and Two Easy Steps) to Show Why Obama’s Soak-the-Rich Tax Hikes Won’t Work, Cato Institute, September 20, 2011.]

Keith Hennessey: You could be forgiven for thinking that the President is claiming that his new proposals are balanced, and that “the larger plan that’s balanced” is what he has proposed this month, consisting of equal-sized spending cuts and tax increases. That is the incorrect conclusion to which you are led, but technically the President is not claiming that. The “larger plan that’s balanced” is one that includes spending cuts enacted over the past six months. [The President’s “Balanced” Misdirection, Keith Hennessey, September 19, 2011.]

Emily Ekins: Results from the Reason-Rupe poll actually demonstrate a willingness by a majority of Americans to increase taxes on the “wealthy.” However these preferences depend greatly on how one defines wealthy. The poll asked the standard question “Do you think the federal government should increase taxes on the wealthy,” with 69 percent in favor and 28 percent opposed. However, respondents in favor were then asked what household income they would use to define someone who is wealthy and should therefore pay higher taxes. Respondents consistently listed incomes that were above their own, even high-income respondents, suggesting that people may want to raise taxes, but just not on themselves. [Tax the Rich, Reason, September 19, 2011.]

Posted on 09/23/11 02:21 PM by Alex Adrianson

Student Journalists Can Help Keep Colleges Accountable

Student journalists can and should investigate their own schools. Knowing how to use Freedom of Information Requests is just one of the skills they’ll need. The Sunshine Review has collected the best tips for student journalists from its FOIAchat page on Twitter. The advice includes what to look for, who to ask, and how to deal with roadblocks that colleges throw up. Check it out, and check out the Sunshine Review FOIAchat, which happens every Friday from 2 p.m. to 3 p.m.

Posted on 09/22/11 05:21 PM by Alex Adrianson

Regulation Is a Racket

Government regulations, however inane, always produce a constituency that supports them, observes Victor Davis Hanson:

[A] guy on a tractor, a welder on a bridge, and a street paver are supporting distant others who are monitoring what he is doing while being far better paid with far less work. We see variants of this from the new explosion of non-teaching administrators who now oversee and match in number faculty, who upon retirement are replaced by exploited part-timers, the savings to pay for the overhead (universities will end two tenure-track positions in French literature to save one diversity czar), to the legions of clerks milling around in the building inspector’s office or DMV behind the two open public windows with lines out the door. In the Solyndra case, one wonders how many were actually making solar panels versus how many were reporting on the feasibility of the new plant (environment, sound, water, etc.), angling for the loan, lobbying, conducting PR, and then filing compliance reports for the laws their like kind drafted.

Behind the sloganeering of the shovel-ready jobs, infrastructure, investments, or millions of green jobs that a $16 trillion in debt government is borrowing for, is the truth that the new hordes of regulators, trimmers, suers, and explainers are simply overrunning the shrinking number of employers and workers who grow food, generate power, produce oil, mine minerals, teach students, and build or put together things. The background and profiles of the policy-setters at the top of the Obama technocracy are metaphors of our age.

We shouldn’t expect those who get paid to enforce regulations to produce honest cost-benefit assessments of their own activities. And that’s one reason why getting rid of inane regulations is so difficult.

Posted on 09/22/11 12:22 PM by Alex Adrianson

Social Media Might Get Mentioned in the Newspaper!

Just how important is social media for informing and mobilizing members of groups? Lee Rainie, with the Pew Internet & American Life Project, provides some recent data in this slide presentation:


More presentations are available from the Pew Research Center’s Internet & American Life Project.

Posted on 09/21/11 04:42 PM by Alex Adrianson

The Insider: Ottawa, Not Brussels, Provides the Model

Editor’s note from the latest issue of The Insider:

In the 1990s, a Democrat in the Oval Office and a Republican in the Speaker’s chair proved a formula for fiscal restraint. The U.S. federal budget went from a deficit to a surplus, and government got smaller relative to the economy, which grew at a healthy rate of 4 percent per year during the period of divided rule.

Today, a Democrat again sits in the Oval Office while a Republican sits in the Speaker’s chair. But the outlook is very different. Absent reforms, sometime in the next decade the government’s debt will exceed the economy’s annual output. The problem is demographics and health care. The Congressional Budget Office projects that by 2035 non-entitlement spending will increase by nearly 30 percent, while entitlement spending will explode by 55 percent.

In a classic kick-the-can down the road maneuver, Congress created a joint select committee to negotiate how to stop the red ink. If the United States is to avoid the fate of Greece, then it needs to look not west but north for guidance.

In our cover story, Brian Lee Crowley, Jason Clemens, and Niels Veldhuis tell the story of how Canada, like the United States, faced up to large budget deficits in the 1990s. Canada’s reforms proved more enduring, in part because the reformers agreed on the need to trim generous entitlement programs. One key to getting a deal, our authors note, was that “the Liberals in Ottawa directly challenged several of their traditional interest groups, among them the civil service and social welfare advocates.”

Will the United States follow Canada’s example? Or will it become more like the Europe about which Bruce Thornton writes—a Europe of welfare-driven insolvency, low economic growth, and demographic collapse?

In other articles, Diana Furchtgott-Roth traces the rise and fall of union transparency, Charles William Golding and Craig Stewart provide ideas for effective board work, and we talk with Tea Party leader Michael Patrick Leahy.

Posted on 09/21/11 04:25 PM by Alex Adrianson

More Economic Freedom Means More Prosperity

The new edition of the Economic Freedom of the World report from the Fraser Institute and the Cato Institute continues to chart the link between economic freedom and prosperity:

Nations in the top quartile of economic freedom had an average per-capita GDP of $31,501 in 2009, compared to $4,545 for those nations in the bottom quartile, in constant 2005 international dollars.

The poor especially need more economic freedom:

In the top quartile, the average income of the poorest 10% of the population was $8,735, compared to $1,061 for those in the bottom quartile, in constant 2005 international dollars. Interestingly, the average income of the poorest 10% in the top quartile is almost double the overall income per capita in the bottom quartile ($4,545): the poorest people in the most economically free countries are nearly twice as rich as the average people in the least free countries. Life expectancy is 79.4 years in the top quartile compared to 60.7 years in the bottom quartile. The $1.25-per-day poverty rate is 2.7% in the top quartile compared to 41.5% in the bottom quartile.


[T]he United States, has suffered one of the largest declines in economic freedom over the last 10 years, pushing it into tenth place. Much of this decline is a result of higher government spending and borrowing and lower scores for the legal structure and property rights components. Over the longer term, the summary chain-linked ratings of Venezuela, Zimbabwe, United States, and Malaysia fell by eight-tenths of a point or more between 1990 and 2009, causing their rankings to slip.

The report ranks Hong Kong, once again, as the most economically free country in the world.

Posted on 09/20/11 01:02 PM by Alex Adrianson

Another Glitch in Obamacare

David Hogberg reported on September 7 that Obamacare’s subsidy scheme appears to have a hole in it, and now the problem could be even bigger than Hogberg first reported. As Hogberg noted then, the law says tax credits are available for those purchasing health insurance through state-run exchanges, but it doesn’t make a similar provision for the federal exchanges that would be set up if states decline to participate. The Internal Revenue Service, however, has ruled that the subsidies are available in either type of exchange. That would seem to settle this issue unless someone had standing to challenge the IRS in court. 

There may well be someone. Hogberg’s latest report on the problem suggests that companies whose employees get insurance through an exchange would have standing to sue:

Under ObamaCare, a company with 50 or more employees faces a $2,000 annual fine per employee if it does not provide insurance. But it’s only fined if one of its employees applies and qualifies for a premium tax credit via a health insurance exchange. […]

“Because of Internal Revenue Service regulations, a company is liable if one of its employees received a tax credit through a federally run exchange,” said James Blumstein, professor at Vanderbilt Law School. “The company could challenge the fine on the grounds that the employee had received the tax credit in error.”

Hogberg goes on to cite another expert who disagrees, which suggests this issue is an open question needing judicial resolution. In any case, the snafu is another example of why major legislation should not be voted on until both Congress and the public has had a chance to review the bill. See Hogberg’s report, “Companies Could Challenge Obamacare Employer Fines,” Investor’s Business Daily, September 16, 2011.

Posted on 09/19/11 12:59 PM by Alex Adrianson

That’s How EPA Rolls (Over Due Process)

The Safe Drinking Water Act allows the Environmental Protection Agency “to commandeer anybody at random and force him to clean up, at his own expense, a contamination that he could prove he’d had nothing to do with.” That’s essentially what the EPA is now claiming in a case involving a drinking well allegedly contaminated by fracking. The agency now agrees that the well was never polluted at all, but insists in court that it was not obligated to meet any standard of proof when it issued an endangerment finding against Range Resources Corporation last December.

Mario Loyola of the Texas Public Policy Foundation says this interpretation of the law demonstrates why the Safe Drinking Water Act violates the Constitution’s guarantees of due process. To learn more about the case, read Loyola’s report “The Case of Range Resources.”

Posted on 09/16/11 03:27 PM by Alex Adrianson

Malcolm Wallop, R.I.P.

Former Wyoming Senator Malcolm Wallop died Wednesday. Myron Ebell, who used to work for Wallop in the Senate, notes that he was one of the very few members of Congress whose views moved rightward after coming to Washington, D.C., because “he was so appalled by how Washington works […] .”

Malcolm was a great leader of the conservative movement because he was principled, passionate, and courageous. And he fought like hell for what he believed in. He loved America and what it stands for. He thought that being an American citizen was a great honor, and consequently he detested the modern devaluation of citizenship. He was deeply concerned that when people lose their high sense of citizenship it makes it much easier for government to get away with treating them as subjects.

Perhaps the central motivating force in Malcolm’s politics was his reverence for the Constitution. He said on the Senate floor and often repeated that what was most wrong with the Senate was that too many of his colleagues did not view the Constitution as the guide star of their conduct, but rather as something that had to be got around so that they could do what they wanted to do. In Malcolm’s own political conduct, he was always guided and restrained by the Constitution and our tradition of ordered freedom.

Read Ebell’s thoughts at, and check out the lecture Wallop gave for The Heritage Foundation in 1995. As the nation anticipated post-Cold War tranquility, Wallop warned of strategic drift:

With no defined defense role, the Kasich freeze takes on a logic of its own, a sort of “Nice nations have defense and we’re a nice nation.” Thus is was that little alarm was raised […] when defense is proposed to be underfunded by 150 billion dollars.

Posted on 09/16/11 02:34 PM by Alex Adrianson

Happy 224th Birthday, U.S. Constitution!

Tomorrow is Constitution Day. No, we don’t celebrate the Constitution because we think a bunch of dead white guys had all the answers two centuries ago. Rather, we celebrate constitutional limits on government, because without them those running the government would probably claim to have all the answers for us. Or, as Rep. Paul Ryan, speaking at Hillsdale College on Thursday, put it:

If we succumb to this view that our problems are bigger than we are—if we surrender more control over our economy to the governing class—then life in America will become defined by a new kind of class warfare: A class of bureaucrats and connected crony capitalists trying to rise above the rest of us, call the shots, rig the rules, and preserve their place atop society at the expense of working Americans, entrepreneurs, and the small businesswoman who has the gall to take on the corporate chieftain.

The Constitution’s Framers knew that there is a human inclination to increase personal power at the expense of law, so they created Congress as a decentralized and internally divided institution, but they granted it ample authority to secure the rule of law in every case.

Ryan’s complete remarks, reproduced at National Review Online, provide an overview of the ways that the rule of law has been undermined in recent years. Read the whole thing, and then check out Americans for Prosperity’s directory of Constitution Day Festivals.

Posted on 09/16/11 01:28 PM by Alex Adrianson

Fraud Is No Accident

There’s fraud in Medicare precisely because government programs cannot be like private insurance, explains Peter Suderman:

One of the biggest reasons doctors are dropping out is that Medicare pays considerably less for medical services than private insurers. The payment system’s instability has made the situation even worse: Thanks to a poorly designed payment formula introduced in the 1990s, doctors face major potential reimbursement cuts every year or so, even though the cuts are almost never implemented. If doctors are going to work for Medicare’s lower rates, they expect at least to be paid promptly and without hassle. Adding layers of anti-fraud procedures on top of the current process would annoy the providers that the system relies on to provide seniors with care. […]

Medicare’s pervasive waste belies the argument that it’s more efficient than private providers; in 2010, the system made improper payments equal to nearly four times the total amount of all U.S. health insurer profits. But predictive modeling is only a small part of private-sector success; insurers also engage in extensive underwriting and human case-by-case review. Many doctors don’t look kindly on such bureaucratic intrusions. The Association of American Physicians & Surgeons, for example, has issued reports warning of the “negative impact” and “adverse side effects” of anti-fraud efforts, claiming they “have made it more difficult for patients to get care from the most honest and qualified physicians.” The real price of stepping up fraud prevention, they caution, may be paid by seniors who lose access to medical services. That’s a price few politicians are willing to pay. 

[…] It’s the classic political problem of diffuse costs and concentrated benefits. The cohorts that stand to benefit most from an inefficient system are also those with the loudest and most influential voices on the issue. [“Medicare Thieves,” Reason.]

Posted on 09/16/11 11:50 AM by Alex Adrianson

Poverty Isn’t Destitution

The Census Bureau said this week that 46.2 million people live in poverty in the United States—up from 43.6 million last year. The government’s definition of poverty, however, probably doesn’t match what people typically think of as poverty. Being hungry and homeless is very far from the typical experience of those in poverty. In fact, according to a new report from Robert Rector and Rachel Sheffield, poor households have quite a few of the same conveniences that middle-class families have. Rector and Sheffield find that personal computers, video game systems, cable or satellite televisions, DVD players, and microwaves, are some of the appliances present in more than half of all poor households. One in seven poor households has at least two computers.

And the lot of the poor improves over time, too. Today, 80 percent of poor households have air conditioning; in 1970, only 36 percent of all households had them.

A small percentage of those defined as poor do struggle, of course. Rector and Sheffield note that 4 percent of the poor are temporarily homeless at some point in the course of a year. One in eight poor households report that they sometimes do not have enough food to eat.

One reason the picture of the poor is misleading is that almost none of the $871 billion per year that the government spends on means-tested benefits counts as income in determining poverty status. That’s a system that only the professional welfare lobby could favor: Pushing for more ever welfare spending won’t decrease the number who are apparently in poverty. In fact, to the extent that welfare discourages work, increasing it can only increase the official poverty count.

Rector and Sheffield’s report is “Understanding Poverty in the United States: Surprising Facts About America’s Poor,” published September 12, 2011.

Posted on 09/15/11 05:45 PM by Alex Adrianson

Infrastructure Not the Way to Go

Even if you think like a Keynesian, the President’s jobs plan is misguided, say Veronique de Rugy and Matthew Mitchell. Their new paper for the Mercatus Center (“Would More Infrastructure Spending Stimulate the Economy?”) catalogs the ways infrastructure spending fails to be timely, targeted, and temporary:

By nature, infrastructure spending fails to be timely. Even when the money is available, it can be months, if not years, before it is spent. This is because infrastructure projects involve planning, bidding, contracting, construction, and evaluation. According to the GAO, as of June 2011, 95 percent of the $45 billion in Department of Transportation [Recovery Act] infrastructure money had been appropriated, but only 62 percent ($28 billion) had actually been spent.

[…] Unemployment rates among specialists, such as those with the skills to build roads or schools, are often relatively low. Moreover, it is unlikely that an employee specialized in residential-area construction can easily update his or her skills to include building highways. As a result, we can expect that firms receiving stimulus funds will hire their workers away from other construction sites where they were employed rather than from the unemployment lines. […] [N]ew data confirm that a plurality of workers hired with [Recovery Act] money were poached from other organizations rather than from the unemployment lines. [Internal citations omitted.]

De Rugy and Mitchell also note:

A review of historical stimulus efforts has shown that temporary stimulus spending tends to linger and that two years after an initial stimulus, 95 percent of the spending surge remains. […] Data from 50 states over a 13-year period show that temporary grants from the federal government to state and local governments cause the latter to increase their own future taxes by between 33 and 42 cents for every dollar in federal grants received.

Posted on 09/15/11 02:16 PM by Alex Adrianson

Slow Permitting Still Hinders Energy Supplies

Slow permitting is still putting a dent in America’s energy supplies and the economy of the Gulf states. Up to 20 deepwater drilling rigs currently in the Gulf of Mexico may soon relocate because they haven’t yet been permitted to drill, says a new report from FBR Capital Markets. The report, as summarized by Kevin Mooney of the Pelican Institute, finds that the permitting process needs to speed up to support the number of drilling rigs that had been operating in the Gulf prior to the April 2010 Deepwater Horizon explosion and subsequent drilling moratorium:

The backlog of permits that have been approved, but not activated, must reach a level of 60 as opposed to the 30 that were counted at the end of August to support the active rig count, which now stands at 20, the report says. […]

“Between 2006 and 2010, there were typically three times the number of permits in backlog than there were deepwater rigs working in the GOM (Gulf of Mexico),” the report says. “…Using the August 2011 pace of eight unique well APDs (A Permit to Drill) per month, the best-case scenario would be a rig count of just 14 rigs, less than the 28 marketed rigs in the Gulf. However this assumes sustainable just in-time permitting which, in our opinion, is unlikely. […] “

The report, notes Mooney, goes on to identify “hiring and funding constraints, potential safety and permitting legislation, pending drilling safety regulation revisions and ongoing environmental litigation,” as the obstacles slowing down permitting.

“Hiring and funding constraints”? Funny how those aren’t stopping the government from adding 5,000 new workers just to implement the Dodd-Frank regulations on financial services firms.

Posted on 09/14/11 01:30 PM by Alex Adrianson

Competition Works

Some people really hate Wal-Mart and other big chain stores. But, as Art Carden explains in this video from the Institute for Humane Studies, chain stores typically provide great benefits to consumers. And when they don’t, the reason is usually that the stores are responding to political, not market, incentives:

Posted on 09/13/11 06:17 PM by Alex Adrianson

No Energy in Obama’s Jobs Plan

While the Obama administration has been “throwing sand in the gears of the permitting process for exploration and exploitation on federal lands,” Canada has unleashed the animal spirits in its energy sector to great effect, writes Mary Anastasia O’Grady:

Alberta’s oil and gas industry supports more than 271,000 direct jobs and hundreds of thousands of indirect jobs in sectors such as construction, manufacturing and financial services. The province has an unemployment rate of 5.6%. There are also some 960 American companies involved in Alberta energy, supplying equipment and technology, among other things. As an example, Mr. Liepert says, “dozens of Caterpillar tractors, made in Illinois and Michigan and costing $5 million a piece” work the oil sands. He says the region is on track to create more than 400,000 direct American jobs by 2035. The Bakken region of North Dakota, where private land ownership gives drillers relief from federal obstructionism, shares a similar, if smaller, story. Oil production there is booming, and North Dakota unemployment is 3.3%.

TransCanada’s Keystone XL pipeline, if the U.S. ever issues the permit, will mean $20 billion in investment. The company says the construction phase will require 13,000 direct hires and indirect new jobs could total 118,000 in the U.S.

But Keystone XL is only a fraction of the potential that could be released if Mr. Obama changed his energy policy. In a study commissioned by the American Petroleum Institute and released last week, the energy consultancy Wood MacKenzie estimates that pro-development policies could, by 2030, “support an additional 1.4 million jobs, and raise over $800 billion of cumulative additional government revenue.” [Canada’s Oil Sands Are a Jobs Gusher, by Mary Anastasia O’Grady, Wall Street Journal]

As O’Grady notes, the President’s jobs plan doesn’t address the energy sector.

Posted on 09/12/11 06:05 PM by Alex Adrianson

Obamacare Consultant Finds Obamacare Makes Health Insurance More Expensive

Jonathon Gruber, a health policy expert at the Massachusetts Institute of Technology, helped design the plan that we all know today as Obamacare. The state of Wisconsin recently employed Gruber to produce a report on how Obamacare will affect insurance coverage in the state. Reason’s Peter Suderman summarizes his findings, which are probably surprising only to those who asked Gruber to write the report:

Gruber projects that the average individual market health insurance premium will cost about 30 percent more than if ObamaCare had never passed. For most individual market enrollees, the average premium increase will be even higher: 87 percent of the individual market is projected to see a premium price increase of 41 percent.

Defenders of the law might note that more than half—about 57 percent—of those who get their insurance through the individual market will benefit from the law’s generous health insurance subsidies. But even discounting the enormous public cost of financing those subsidies (which account for roughly half of the law’s $950 billion price tag over the next decade), it’s still not much consolation for the majority of individual market enrollees.

That’s because more than half the individual market will still end up paying more: “After the application of tax subsidies,” the report projects, “59 percent of the individual market will experience an average premium increase of 31 percent.”

One factor in the price increase is the addition of new coverage mandates that will make health insurance more expensive: An estimated 40 percent of the Wisconsin’s current individual market enrollees don’t carry coverage that meets ObamaCare’s minimum coverage standards. Thanks to the law, they’ll be required to purchase more expensive coverage.

Posted on 09/09/11 03:33 PM by Alex Adrianson

Tax Hikes Are Not Pro-Growth

Not even under during the Clinton years:

Posted on 09/09/11 03:20 PM by Alex Adrianson

The Government’s Finances Are in a Bad Way

Accounting for all future receipts and outlays, the federal government’s fiscal situation is even grimmer than the official debt indicates, argues Laurence Kotlikoff::

The U.S. fiscal gap, based on the Congressional Budget Office’s long-term Alternative Fiscal Scenario, is nowhere close to the $14 trillion official debt. Indeed, the U.S. fiscal gap is $211 trillion—15 times larger than the official debt. …

To get a sense of the distance between the forest and the trees when it comes to stabilizing the United States’ total—official plus unofficial—debt, note that the fiscal gap rose by $6 trillion last year, whereas Congress and the administration settled on reducing the official debt by just $2.5 trillion over not one year, but 10 years!

With the retirement of the baby boomer generation, millions will turn to Uncle Sam for Social Security, Medicare and Medicaid benefits—roughly $40,000, on average, per beneficiary per year. This means the fiscal gap will increase exponentially in the coming years. 

The fiscal gap needs to be zero for the United States’ fiscal policy to be sustainable. The country needs the stream of projected future taxes to cover, in present value, the stream of project future outlays, plus the current official debt. Achieving this result via tax hikes alone would require an immediate and permanent increase in all federal tax rates (corporate, personal income, excise and estate and gift taxes) of 64 percent! Each year’s revenue would be 64 percent higher, implying that the present value of all future revenues would rise by 64 percent.

Alternatively, the United States could immediately and permanently cut all non-interest spending by 40 percent. [Internal citations omitted.]

Kotlikoff’s paper is “America’s True Debt – The Fiscal Gap” published by the National Center for Policy Analysis.

Posted on 09/09/11 02:56 PM by Alex Adrianson

Creating Jobs Is Easy—If You’re Willing to Lower Standards of Living

The Cato Institute dissects Obamanomics:

Posted on 09/09/11 01:05 PM by Alex Adrianson

Obamacare’s Writers Forgot Something

We’re still finding out what’s in Obamacare, which must make Nancy Pelosi happy. Investor’s Business Daily reports that the whole structure of the new entitlement may well collapse because of an oversight in the law’s writing. The law provides tax credits to those who purchase health insurance through state-run exchanges. Section 1311 of Obamacare instructs the states to establish such exchanges. Section 1321 lets the federal government establish an exchange for a state if that state fails to do so. Yet, as David Hogberg reports:

ObamaCare states that the tax credit is available to people who are enrolled in an "an exchange established by the state under (Section) 1311." It makes no mention of people enrolled in federal exchanges being eligible for the tax credit. …

The Internal Revenue Service appears to be overlooking the problem. In a proposed regulation, the IRS states that a taxpayer is eligible for the tax credit if he or a member of his family "is enrolled in one or more qualified health plans through an exchange established under Section 1311 or 1321."

"Congress did not delegate this discretion to the IRS," Cannon said. "Congress created a tax credit for A, and the IRS is saying it applies to A and B. If the IRS offers this tax credit to federally run exchanges, the IRS will be assuming powers the Constitution vests only in Congress to alter the tax code and spend money."

This means states could theoretically shut down the new entitlement program on their own simply by refusing to participate.

Posted on 09/09/11 12:59 PM by Alex Adrianson

We’re Safer—and more Vigilant—Now

Since September 11, 2001, at least 40 terrorist plots against the United States have been thwarted. That’s the count that comes from looking at just public sources of information. James Carafano and Jessica Zuckerman have compiled a list of the incidents in a new report for The Heritage Foundation, “40 Terror Plots Foiled Since 9/11: Combating Complacency in the Long War on Terror.” (They’ve also produced a handy timeline.)

They write: “While all categories of terrorist attacks against U.S. targets at home and overseas have been declining steadily since 2005, thwarted plots have more than doubled during the same period, showing that terrorists continue to plan to harm the United States and its people.” Among the priorities they identify for keeping America safe are: preserving the counterterrorism tools in the PATRIOT ACT, upgrading the Terrorist Watchlist with more data and better data sharing, holding Pakistan accountable for rooting out terrorists on its soil, and ending senseless policies like requiring the scanning every shipping container.

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

Free Trade Isn’t Just Theory

Free trade has been put into practice, and it works. Witness: the Free Trade Zone of the United State—AKA, the U.S. Constitution, which prohibits states from erecting trade barriers. “If protectionism is such a dandy thing, then you’d think each state could make its citizens wealthier by putting up trade restrictions,” explains Don Boudreaux in the video below:

Posted on 09/07/11 06:05 PM by Alex Adrianson

The Post Office Needs to Change

Congress could learn a thing or two from looking at postal privatization in other countries. Recently, Postmaster General Patrick R. Donahoe warned Congress that the Postal Service won’t be able to make an annual $5.5 billion payment due this month. The service’s money troubles are no mystery. Its volume is down 22 percent from five years ago because the Internet allows people to communicate and pay bills without having to lick a stamp. Eventually, a letter mail monopoly will be as worthless as a typewriter monopoly. By law, the service cannot offer non-postal products and it must provide service six days per week to every address in the country regardless of profitability. Collective bargaining has also pushed employee compensation above private sector levels and hampered efforts to find labor efficiencies.

As Robert Carbaugh and Thomas Tenerelli observe in The Cato Journal (Winter 2011), privatization could remove many of the legal and political obstacles to the Post Office adapting to a changing market. It’s worked in other countries, they write, particularly in Germany:

Germany’s former postal monopoly, which has gone the furthest insofar as privatization is concerned, epitomizes many of the efficiencies gained by liberalization. Deutsche Post World Net was transformed by modernizing its compensation structure and importing managers from other industries, modernizing the mail and parcels network within Germany, and developing new products such as hybrid mail and e-commerce. Deutsche Post World Net has interests in not only the traditional mail and parcels business but also express mail logistics, banking, and more. It appears that the confluence of market forces in the face of a few critically maintained postal regulations has created an effective environment for maintaining affordable, reliable, and increasingly efficient postal delivery services.

Posted on 09/06/11 05:33 PM by Alex Adrianson

We’ve Come a Long Way Indeed

“Even after the worst financial crisis since the 1930s, U.S. per capita income is still higher than at the peak of the 1990s boom or in the mid-aughts.” That and other fun facts are found in this video covering the history of economic progress in four minutes:

Posted on 09/02/11 02:08 PM by Alex Adrianson

Texas Schools Are Alright

Arne Duncan was off-base when he criticized the performance of Texas schools under Governor and now Republican presidential candidate Rick Perry. (Why would he pick on Texas?) Duncan said: “Far too few of their high school graduates are actually prepared to go on to college. I feel very, very badly for the children there.”

Andrew Biggs [The Obama Administration’s Lone Star Mistake, The American] runs down the data:

If you look at Texas’s simple average test scores in reading and math for fourth and eighth grade students, they’re about average—not great, but not terrible. … But even then, the comparison is bogus simply because Texas schools serve a population with several challenges, in particular many low-income and Spanish speaking children.

To account for this, I tabulated average test scores by race for each state using data from the National Center for Education Statistics, then weighted the scores using Census data on the racial composition of each state. I then calculated Texas’s standing in the distribution. A percentile figure indicates the percent of states whose scores Texas beats; for instance, Texas’s weighted average test score in fourth grade reading is in the 62nd percentile, meaning that Texas students score better than 62 percent of students nationwide. (For those of you who didn’t attend Texas schools, that means that Texas did pretty well.)

… [O]nce you take the racial composition of the states into account, Texas does a lot better than Duncan gave it credit for. In eighth grade math Texas is at the 88th percentile, meaning it beats almost nine out of ten states. Overall, Texas is at the 71st percentile, which isn’t shabby at all.

Posted on 09/02/11 02:01 PM by Alex Adrianson

These Are the Data You Are Looking For

Data hounds will by delighted by Vito Tanzi’s new book Government Versus Markets: The Changing Economic Role of the State, says Richard Rahn, who notes that the book also makes a very good case for lower taxes and smaller government:

Some advocates of higher taxes argue that tax rates on labor do not have much impact on the willingness to work, but Mr. Tanzi gives us a very clear chart plotting the tax rate on labor versus the number of hours worked per year in many countries. It shows that there is a strong inverse relationship between tax rates on labor and hours worked. Such facts are inconvenient for the big-government, high-tax crowd. Mr. Tanzi is far from being anti-government, but the facts and data he presents show how most governments have grown far beyond the optimum point, and he is a bit pessimistic about the ability of democracies to rein in excessive and destructive government.

Near the end of the book, Mr. Tanzi observes: “Once the population of a country (or, more often, groups within it) come to see the government as a potential cow that can be milked, there is no longer a limit to the demands for more public spending. There are literally infinite ‘needs’ of the population, and infinite groups capable of organizing politically, to press for more government spending or other government actions that would benefit them.”

But despite Mr. Tanzi’s pessimism, he documents how two countries, Sweden and Canada, have changed course and reduced the size of government because the body politic came to understand that the cow was being over-milked and soon would go dry or die.

Posted on 09/02/11 01:25 PM by Alex Adrianson

Government Can’t Even Sell Booze as Well as the Private Sector Can

Pennsylvania’s Auditor General reported this week that the state’s wine kiosk program has failed, costing taxpayers more than $1 million. Jacob Sullum at Reason magazine runs down the details on the fiasco:

When they are working, the kiosks dispense a limited selection of wines at limited locations and times (not on Sunday, of course!) to customers who present ID, look into a camera monitored by a state employee, breathe into a blood-alcohol meter, and swipe a credit card. The Pennsylvania Liquor Control Board (PLCB) originally expected to have 100 kiosks in grocery stores throughout the state, each selling 30 to 50 bottles a day. But only 32 machines were ever up and running at one time, and only 15 manged to hit the bottom end of that sales target. In June the Wegmans supermarket chain withdrew from the kiosk program, bringing the total number of machines down to 22.

Sullum goes on to note that last week Walmart joined Wegman’s in deciding not to participate in the program, presumably because “they want shoppers to feel like valued customers instead of suspected criminals forced to take a sobriety test.”

Posted on 09/02/11 12:34 PM by Alex Adrianson

The Sun Plays a Role, Too

The hypothesis that changes in solar, rather than human, activity account for global warming gained credence last week. Sixty-three scientists from CERN—the nuclear research laboratory in Genevareported in the journal Nature that a laboratory simulation has found that cosmic rays induce cloud formation in the earth’s atmosphere. The more cloud cover there is, the more sunlight is reflected, and the cooler Earth is. So changes in cosmic rays could explain fluctuations in Earth’s temperature.

Here’s what the CERN scientists said about their experiment, dubbed CLOUD:

The CLOUD results show that a few kilometres up in the atmosphere sulphuric acid and water vapour can rapidly form clusters, and that cosmic rays enhance the formation rate by up to ten-fold or more. However, in the lowest layer of the atmosphere, within about a kilometre of Earth’s surface, the CLOUD results show that additional vapours such as ammonia are required. Crucially, however, the CLOUD results show that sulphuric acid, water and ammonia alone – even with the enhancement of cosmic rays – are not sufficient to explain atmospheric observations of aerosol formation.

The “alarmists” have run with the qualifications in this and other statements from CERN to suggest that the experiment actually failed to link cosmic rays with global warming. More accurately, the findings demonstrate that the anthropogenic global warming orthodoxy is incomplete. As CERN itself says:

[I]t is clear that the treatment of aerosol formation in climate models will need to be substantially revised, since all models assume that nucleation is caused by these vapours and water alone. It is now urgent to identify the additional nucleating vapours, and whether their sources are mainly natural or from human activities.

Posted on 09/02/11 12:21 PM by Alex Adrianson

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