Is Uncle Sam Bankrupt?

by Laurence J. Kotlikoff

WHEN IT COMES TO NONDISCLOSURE, the United States government is the father of all financial malfeasants. Indeed, Uncle Sam has been misrepresenting the nation’s finances for decades. In the process, he has run up an undisclosed bill that makes the financial bailout and economic stimulus spending look paltry.

Federal Financial Obligations. According to David M. Walker, former chief comptroller general of the United States, the federal government’s current liabilities to Medicare, Social Security, and the federal debt total $56.4 trillion. To put this in perspective:

  • The average Social Security, Medicare, and Medicaid benefit payment per retiree is currently $30,250—or about 80 percent of per capita U.S. gross domestic product.
  • In 20 years, when the baby boomers are fully retired, the average benefit per retiree will be the equivalent of $50,000 today.
  • Multiplied by 78 million (the approximate number of baby boomers in the United States), the total is equivalent to $4 trillion per year today.

But the $50,000 estimate assumes that the Medicare-plus-Medicaid real average benefit will grow at only 3.6 percent per year, whereas between 1970 and 2002 the average level of real Medicare-plus-Medicaid age-specific benefits grew at a rate of 4.6 percent annually. In contrast, real per capita GDP grew at a rate of only 2 percent per year.

Estimating the Fiscal Gap Using Generational Accounting. Generational accounting is a well-established methodology to measure the burden of government. A generational account for any given generation measures the generation’s remaining lifetime net tax bill as a present value—what the generation will pay net of what it will receive, all valued as of today. If the generational accounts of all current and future generations are added together, assuming no change in fiscal policy, the sum amounts to what all current and future citizens are going to pay, on net, in taxes to the government (measured as a present value). This amount has to cover the government’s official debt plus the present value of all future government purchases of goods and services (discretionary spending).

The fiscal gap is the difference between the government’s official debt plus discretionary spending and the amount of taxes current and future citizens will pay. It incorporates all of the government’s fiscal activities—including its financial obligations under Medicare, Medicaid, Social Security, welfare, unemployment, and interest and principal on government debt.

Taking into consideration all of the government’s financial liabilities and projected future tax receipts, the current fiscal gap in the United States is estimated by Jagadeesh Gokhale of the Cato Institute and Kent Smetters of the University of Pennsylvania at $77 trillion—more than five times the United States’ present GDP. Closing that gap by increasing government revenues would require a doubling of the Federal Insurance Contribution Act (FICA) payroll tax—currently 15.3 percent.

To understand how this figure can be so large, consider: There are now roughly 33 million adults in the United States receiving retirement benefits. When the 78 million baby boomers retire, there will be more than twice the number of retirees receiving benefits than there are currently. While there will be a significant increase in those dependent on government programs like Social Security and Medicare when the boomers retire, there will be only about 2.7 workers per retiree to help pay the benefits—down from 3.28 workers per retiree in 1985 and 3.43 in 2000.

Adjusting for Risk. There is reason to believe that the $77 trillion figure would be even larger were the government’s future cash flow discounted, taking into account that future benefit payment outlays appear to be more certain than do future tax receipts.

For example, according to the Social Security Trustees Report, Social Security is 27 percent underfunded. That is, achieving long-term solvency would require an immediate and permanent 27 percent increase in the 12.4 percent employer and employee payroll tax rate that funds Social Security.

Social Security’s long-term solvency estimate also fails to adjust for the riskiness of the system’s cash flow. Periods of high unemployment, for example, might require increased borrowing by the Treasury in order to fund benefits. Preliminary analysis from a recent Boston University study suggests that Social Security’s failure to risk-adjust its cash flow understates its long-term financial gap by more than 20 percent. Thus, if Gokhale’s and Smetters’ projections of all the federal government’s unfunded obligations were risk-adjusted, they would undoubtedly be much higher.

Conclusion. Given the magnitude of the fiscal gap, the country is broke. The United States is currently short more than $77 trillion, and this figure will only increase. In fact, it is estimated that the total gap will amount to nearly $80 trillion in 2010. The United States government, through its various financial agencies, is assuming away the country’s fiscal problems rather than confronting and correcting them. Without dramatic and immediate changes in policy, future generations are likely to face lifetime net tax rates that are twice those imposed now.

Mr. Kotlikoff is a professor of economics at Boston University and a senior fellow with the National Center for Policy Analysis. This article, adapted from Mr. Kotlikoff’s book, Jimmy Stewart Is Dead: Ending the World’s Ongoing Financial Plague with Limited Purpose Banking, was originally published by the National Center for Policy Analysis, and is reprinted here with permission.

Poverty in Africa: What History Teaches About Property Rights

by James Robinson

ONE OF THE BURNING INTELLECTUAL and policy issues of our day is the poverty in sub-Saharan Africa, attracting the attention of everyone from entrepreneurs such as Bill Gates through movie stars such as Madonna and Angelina Jolie to rock stars such as Bono and Bob Geldof. The World Bank measures poverty levels by the number of people who live on less than $1 a day; the majority of those people, around 350 million of them, live in sub-Saharan Africa. Moreover, Africa is the only part of the world in which the absolute number of poor people is increasing. By 2015, despite all the attention given to the United Nations’ Millennium Development Goals, the number of poor people in Africa is forecast to be more than 400 million.

Why are there so many poor people in Africa today? Has Africa always been like this? There are many views. Some see African poverty as having deep roots in the geography and ecology of the continent. Others argue that Africa is plagued by a culture that does not allow capitalism to flourish.

The real reason that Africa has been poor historically and is poor today has to do with property rights. In short, African countries do not have the type of property rights that are connected with economic progress in Western Europe or North America. And the property rights they do have tend to be insecure.

The form of property rights in Africa—and their absence, in many cases—is the root source of its poverty, which creates both good and bad news. The good news is that Africa is not doomed to poverty; if its property rights institutions can be improved, Africa will grow and its people’s living standards will improve. The bad news is that there is no silver bullet for improving property rights. For example, throwing aid money at Africa may alleviate suffering but is unlikely to improve its institutions. Worse, many of the problems with property rights in Africa stem from problems with politics and political institutions; these problems are not easy for either insiders or outsiders to fix.

Plows and Wheels

When examining the role of property rights in African poverty, we should begin by looking at its history. We know that before the Industrial Revolution began in Great Britain about 230 years ago, differences in the levels of prosperity among countries were much smaller than they are now. Whereas today the average income of a citizen of the United States is about 40 times that of a citizen of a country such as Ethiopia or Sierra Leone, in 1750 that difference was probably only two or three times. Between 1750 and 2009, the United States experienced rapid economic growth, but African countries did not. Even in 1750, however, there were important differences in the structures of the various societies. Although we don’t know when many of those differences emerged, we can open some windows on the past.

In 500 AD, for example, the Kingdom of Aksum flourished in northern Ethiopia; it had a written language, minted its own coins, and enjoyed a diversified agricultural economy based on ox-drawn plows. The kingdom traded with the eastern Mediterranean, the Persian Gulf, the Arabian Peninsula, India, and Sri Lanka. The Roman emperor Constantine converted to Christianity in 312 AD; Ezana, the king of Aksum, did so in 333 AD, a mere 21 years later.

Nevertheless, in both technology and the development of political institutions, Africa’s trajectory seems to have been different from Western Europe’s. Outside Ethiopia, neither the plow nor the wheel was used in sub-Saharan Africa; the great urban centers of Aksum and Mali seem to have been the exception rather than the rule. Moreover, the political institutions of both these societies could best be described as “absolutist” in that they were ruled by kings whose power was relatively unconstrained by checks and balances.

The economic problems created by absolutism are well illustrated by the history of the Kingdom of the Kongo (in what is now the Democratic Republic of the Congo, which took its name from the premodern kingdom). The capital of the Kongo, Mbanza, had a population of around 60,000 when it was first visited by the Portuguese mariner Diogo Cão in 1483, making Mbanza about the same size as Lisbon and larger than London, which had a population of about 50,000 in 1500.

The Kongolese learned about plows and wheels from the Portuguese, who sent missions in 1491 and 1512 to encourage better agricultural practices. Yet neither the plow nor the wheel was widely used until early in the 20th century. We learn why from existing accounts of how the society was organized. The Kongo was governed by a king and an aristocracy whose wealth was based on slave plantations and the extraction of taxes. Slavery, which was central to the economy, was practiced by the elite both to supply their own plantations and to sell to Europeans at the coast. Taxes were arbitrary (one was collected every time the king’s beret fell off).

To have become more prosperous, the Kongolese would have needed to save and invest in plows, for example. But this would not have been worthwhile in that any extra output they produced by using plows and wheels would have been expropriated by the king and his lords. Most people’s property rights were also highly insecure; many moved their villages away from roads so as to reduce the incidence of plunder.

Aksum and its successor, Ethiopia, may not have looked very different from contemporary European societies in 500 AD, even developing a form of feudalism at the same time as Europe did. Yet after this point, very different institutional dynamics took hold and the property rights institutions of Western Europe began to diverge from those of Africa. In Europe, domestic slavery had disappeared by 1400; around the same time, feudal institutions such as serfdom began to crumble. Both institutions continued in Ethiopia until the mid–20th century.

Defeating Absolutism

As 18th-century British historian Edward Gibbon (author of The Decline and Fall of the Roman Empire) put it, the Ethiopians “slept near a thousand years.” But something very different was happening in Britain. Not only did labor market institutions and property rights for people change, so did property rights in ideas and people’s access to land change. The 1623 Statute of Monopolies created the world’s first patent law; as serfdom eroded, private property rights in land developed. Those institutions, which subsequently spread to some European colonies, including the future United States, created a radically different set of economic incentives in Britain.

Why did this happen in Britain but not in the Kongo or Ethiopia? Interestingly, the motivation behind the Statute of Monopolies was not to create a patent law but to stop the king from granting monopolies via “letters patent.” Thus the creation of a law that ultimately protected intellectual property rights and stimulated innovation was a byproduct of the conflict between Parliament and the king, an attempt by Parliament to defeat absolutism.

The political conflicts of 17th-century Britain, through the Civil War of the 1640s to the Glorious Revolution of 1688, removed the type of absolutist political rule that led to insecure property rights in the Kongo and Ethiopia. Indeed, we can see the political transition of Britain beginning with the decline of serfdom in the 14th century. After the Black Death of the 1340s, the English state passed the Statute of Laborers, an attempt to stop wages from rising. The ensuing rebellion forced the king to rescind the statue, evidence that he lacked the power to enforce it.

Britain, then, was on a very different political trajectory, one with huge consequences for property rights and prosperity. The kings of the Kongo and Ethiopia also faced domestic opponents, but they were unable to triumph; even if they had, they most likely would have become absolutist kings themselves. What is distinctive about the British experience is not just that absolutism was defeated but that one absolutism was not replaced by another.

What explains the rise of Parliament and the defeat of absolutism in Britain? Why did the rise of Parliament create changes in economic institutions? The answer is that British society had undergone a series of large shocks that not only greatly increased the number of those with an interest in secure property rights but also empowered them.

Even more important than the early shock of the Black Death was the redistribution of land brought on by Henry VIII’s dissolution of the monasteries after 1536, the enormous economic opportunities created by the New World, and the expansion of inter-oceanic trade after 1492. The Whigs who fought and defeated absolutism in 1688 did so to change state policy and institutions in ways that would promote their economic interests. Because their coalition was so broad, what they wanted would benefit society as a whole, with no going back to absolutism. The institutions that protected the privileges of the king at the expense of his subjects, and that allocated monopoly rights for profitable lines of businesses to the elite aligned with the king, were torn down, to be replaced by institutions providing much greater incentives to save, invest, and innovate for a larger slice of society.

It is no coincidence that Britain’s Industrial Revolution began within a century of the Glorious Revolution of 1688 and the ascendance of modern parliamentary democracy over the monarchy. The great inventors—such as Richard Trevithick, builder of the first full-scale working railway steam locomotive; James Watt, the Scottish mechanical engineer and inventor; Richard Arkwright, the mechanical engineer credited with using water power for spinning machines; and Isambard Kingdom Brunel, a British engineer whose designs revolutionized public transportation—were able to take advantage of the economic opportunities generated by their ideas, secure in the knowledge that their property rights would be respected.

Dispersed Rights and Development

The political developments in Britain that led to secure property rights and widespread economic opportunities were the outcome of conflict and the defeat of absolutism. The same was true in the United States; good British institutions were not transmitted to the Jamestown colony. For one thing, British institutions were not yet fully established in 1607. For another, the model of colonization that the settlers had in mind was inspired by Spanish conquistadores Hernán Cortés and Francisco Pizarro—capture the ruler and exploit the indigenous people. But such a strategy was infeasible in the colonies; by 1619, the Virginia Company, having given up trying to exploit both indigenous peoples and colonists, created a general assembly based on universal male suffrage.

As British North America developed, British elites tried time and again to create a relatively oligarchic society with heavily restricted economic and political rights for the vast mass of individuals. In each case this model broke down, just as it had in Virginia, because, as in Britain itself, those with an interest in secure property rights and widespread economic opportunities gained the upper hand, though they did so for different reasons than in Britain itself. In the New World, where land was plentiful and labor scarce, the mass of people had power because they did not rely on elites for access to economic opportunities. Instead, the elite had to rely on the people. Such early conflicts created a society with widely dispersed political and property rights in which economic opportunities were probably more widespread than anywhere else in the world at that time, culminating in the U.S. Constitution and the economic success of the United States in the 19th and 20th centuries.

African institutional dynamics were very different. In Ethiopia was isolation and stasis; elsewhere, the insecurity of property rights was exacerbated by the slave trade, which distorted paths of political development and led to the emergence of states, such as the Kongo, based not on investing but on slavery. Africa’s increasing economic backwardness made it vulnerable to colonialism, which replaced one form of absolutism with another. Later, independence did the same, with predictable consequences for property rights.

A good example of this is Sierra Leone, whose status as a British colony emphasizes that there was no advantage in such status. Six years after independence in 1961, Sierra Leone was taken over by Siaka Stevens, who pulled up the railway line to the south of the country and sold off all the track and rolling stock to isolate the Mendeland region where support for his opposition was strongest. The roads fell to pieces and schools disintegrated. National television broadcasts stopped in 1987. The Sierra Leone Produce Marketing Board expropriated farms; when the governor of the central bank complained about fiscal profligacy in 1980, he was thrown to his death from the roof of the central bank offices. Stevens and his successor, Joseph Momoh, created monopolies, expropriated assets, and looted diamond wealth. In 1991 the regime collapsed into a civil war. Today most of Sierra Leone is controlled by 149 chiefs who are elected for life from “ruling houses.” People without connections to those chiefs and ruling houses can quickly find their land expropriated. Sierra Leone’s per capita income is far below what it was 50 years ago; it also has one of the worst life expectancy rates in the world.

Sub-Saharan Africa’s poverty has emerged over a long period of time. But its origins and persistence have nothing to do with geography.

Many Africans are struggling to change their situation, aspiring to be wealthy and live long and rewarding lives, as witnessed by the thousands who risk life and limb trying to gain access to Europe and a better future for themselves and their families. Should we help them? If so, what can we do? I think we should help them, for several reasons. First, many things we do affect Africa, even if unintentionally, so we are already involved. Second, we cannot help but be influenced by Africa’s poverty, which breeds discontent and false messiahs, such as Osama Bin Laden, that can lead to problems for the United States. Finally, we feel distress and moral outrage at witnessing such suffering and destitution.

Solutions for Africa

What can we do? First, let us be clear about foreign aid: Foreign aid is not the cure, but neither is it the cause. Sierra Leone got little aid in the 1970s and 1980s when Stevens was running the country into the ground. Such aid can be siphoned off by corrupt politicians, giving them more resources to play with, but the roots of Africa’s economic problems long predate foreign aid.

Three things would help sub-Saharan African societies get on the right track economically.

First, give Africans more economic opportunities, which doesn’t mean throwing money at them. What it does mean is opening markets to African exports and trade. In the 17th century, British trade was crucial for developing and strengthening those individuals who ultimately changed politics and property rights. This could also happen in Africa.

Second, economics must play a bigger role in foreign policy. Foreign policy toward Africa has been driven too much by short-term politics without focusing on economic development, but promoting prosperity in Africa is good long-run foreign policy. Supporting dictators who are “pro-Western” risks creating an anti-Western society.

Finally, development assistance must help change the political trajectories of societies. By this I don’t mean imposing democracy, though that could be good if the new democracy could be made to work. The historical evidence suggests that good political and economic institutions emerge from a balance of power in society. To achieve this, we should help civil society and the media promote de facto checks and balances on rulers. This emphasis is likely to be much more effective in Africa than promoting what James Madison, principal crafter of the U.S. Constitution, referred to as “parchment” institutions: those that exist on paper but aren’t reflected in the interests and goals of the people.

Dr. Robinson is professor of government at Harvard University and a faculty associate at the Weatherhead Center for International Affairs. This article is reprinted from his article “Property Rights and African Poverty,” published in Defining Ideas, 2010: 1, with the permission of the publisher, the Hoover Institution on War, Revolution and Peace. © 2010 by the Board of Trustees of the Leland Stanford Junior University.

Brooke Rollins: The Texas Public Policy Foundation Fights for State Sovereignty

THE TEXAS PUBLIC POLICY FOUNDATION is a major shaper of public policy in a state that has become increasingly important in providing an alternative to the high-taxing, high-spending models of California and New York. To that end, Texas has also become increasingly resistant to the conforming influence of funds flowing from federal coffers. Brooke Rollins has been CEO and President of the Texas Public Policy Foundation for the past seven years. We talked with her about how the Foundation has been able to gain influence in Texas policymaking, and why state sovereignty is worth defending.

The Insider: How did you come to be working for a state-based free market think tank?

Brooke Rollins: I had always been very interested in public policy. I grew up in a very small Texas town with a population of a thousand. I was raised by a single mom with a small business. She was a florist in town, and she was very active in educating herself and then educating me and my two sisters on what was going on in the big world even though we lived in a very small town. I went to Texas A&M and got interested in public policy and ended up in law school.

I went off to work for a big law firm for a couple of years, but I wasn’t really loving what I was doing. I had always had this drive to make the world a better place—as clichéd as that sounds—and I felt there must be a better place for me. I left the legal world and went to work for Rick Perry, who is still our governor. That was about 10 years ago. I eventually became his Policy Director. I loved working for Governor Perry. I believe he is one of the best governors in the country and certainly one of the best for Texas in my lifetime.

But I wasn’t crazy about the politics. I lived through a re-election campaign and got to see the political side firsthand. We won that race fairly big, but I was really more interested in moving into public policy. When I was in the governor’s office I was a little bit amazed at how little information was coming to us. Obviously we were inclined towards free markets and limited government, but we just weren’t receiving any information on those ideas. The tendency of government is to grow and grow and grow. While we were inclined to go the other way, there is just so much minutia in day-to-day government that I just didn’t have enough information on a lot of issues and I didn’t even know about the Texas Public Policy Foundation.

Ultimately when I found out about the Texas Public Policy Foundation, they were looking for a new CEO. Wendy Gramm was Chairman of the Board and I had a great talk with the governor at the time and we both agreed that a great next step would be for me to go to this fledgling little think tank based in San Antonio with a handful of employees and really try to build it into something great and that’s how I ended up where I did seven years ago.

TI: Does the problem you just mentioned—of not having the information you need—arise because most of the information flowing to the government comes from parties who just want the government to give them money?

BR: That is exactly right. I remember, about eight or 10 years ago, Texas was facing a homeowner’s insurance crisis. Mold had become a big deal and lots of trial lawyers had gotten involved and people’s insurance rates where skyrocketing, and even though we work in a conservative state with very conservative leadership, the tendency was to regulate more. The attitude was: “We need to regulate those companies. We need to show them who is boss and tell them they can’t charge that kind of money!” I instinctively knew that wasn’t the right answer, but there was nothing out there that showed me. I remember doing my own research late at night and finding that some states like New Jersey had gone down the regulatory path while others like South Carolina had gone exactly the opposite direction and de-regulated everything. And, of course, the best outcome for the consumer, the citizen, was the state with less regulation, and so that experience became very instructive for me.

TI: Like a number of other state-based think tanks, the Texas Public Policy Foundation started out rather small, right?

BR: That’s right. When I joined up we had been around for about 12 or 13 years. So it wasn’t brand new but it had certainly struggled a little bit with funding and employees and providing a consistent message and being part of the debate. What I brought to the organization was that I had been inside a governor’s office and I knew how legislative sessions worked and I knew how laws where passed. So I had a really good feel for how to influence the system and how to make the system work for our ideals—work for a freer and more prosperous Texas.

We moved to Austin and set up shop about a block from the capitol. My goal from the beginning—part of my first five-year plan—was to hire not just people who were really great writers and really great researchers—which we had always done—but also writers who could articulate what our message was and who could take it to the capitol every single day and meet with the policymakers. And so we were going to do more than just write the big papers.

TI: Today you’ve got gubernatorial candidates citing your papers as support for their positions. What advice would you give other groups that are trying to increase their credibility as a source of ideas and information for policymakers?

BR: I think the first thing we have to realize in this line of work is that producing really good papers is not enough. You have to give the product legs. It helps to bring people on board who are well respected. We now have a former Texas House Appropriations chairman as the full-time director of our Center for Fiscal Policy—Talmadge Heflin. This man wrote state budgets. When Texas had its $10 billion shortfall in 2003, he was Chairman of House Appropriations, and he is the one who wrote the budget that didn’t raise taxes; he cut spending. For us to hire him full-time to continue his work after he left the legislature has been extraordinary. Even through all these years of surpluses in Texas we have never increased spending more than population growth plus inflation. We have left a lot of money on the table.

Our executive director is also a former legislator. The director of our Center of Energy Policy ran the Texas EPA for six years. Getting the right people involved who can make things happen is how you change the world.

TI: So when you say “give the product legs,” what do you mean by that?

BR: Putting out a beautifully written document that is 50 pages long on how to shrink Medicaid in your state is not good enough. Maybe a handful of people will read it. You have to go the next step, which means working with the media, meeting with editorial boards, meeting with legislators, and testifying in front of committees. That is how we have been able to produce change in Texas.

TI: Texas is a big and diverse state. Do you do any special outreach to promote free market ideas to different kinds of audiences?

BR: We do. We work with several Spanish-language media outlets, and our goal is to expand that project over the next couple of years. The polls will tell you that the Spanish-speaking population in Texas leans much more conservatively than you would expect based on voting. If you ask them, they believe in less government and they don’t want a government handout. We have to do a better job of reaching out and articulating our ideas to the whole population, not just to a certain segment of the population. That is something we have been slowly wading into and that we are looking to greatly expand in the next few years.

TI: On a number of issues Texas has become a leader in reasserting the state end of the federalism equation. What do Texans have to gain from doing things their way instead of doing what the feds want?

BR: There is no question that the federal government in every respect has expanded its power and has encroached on what are normally state prerogatives. That’s true not just under the current administration but under the former administration as well. The health care bill is just the latest example of federal intrusion into state issues.

We see an opportunity for Texas policies to have national impact. Texas said no to Race to the Top funding, which is an effort by the federal government to tell us what our education standards should be. That is not their business; that is our business. Texas also turned down nearly half a billion dollars in unemployment funds from the stimulus bill. I do not know if there were any other states that turned down funding of an amount that significant. Texas’s unemployment compensation fund is still solvent. The program is working well, and employers are not going to be burdened with an additional $80 million in tax increases, which would have happened had we accepted that money.

We have isolated our electricity grid from the rest of the country to avoid federal regulation of our markets, and that has provided better prices, more supply, and better consumer choice.

TI: In one area, though, it seems like Texas is similar to a lot of other states: A good chunk of the state’s budget comes from the federal government. I think the figure is around 40 percent. Is that something about which Texans should be concerned?

BR: Yes, that is something we continue to work on and is really one of our top priorities. For many years, we have been saying: “Texas does not have to take federal funds; there is a better way.” That message really fell on deaf ears because people saw that money as “free money.” We’re working to change that debate so that people understand that it is not “free money,” that it hamstrings our government and our taxpayers.

Last year, Texas said “no thanks” to the unemployment funds and to some other things coming down from Washington. That really opened the discussion. People are finally beginning to realize what depending on federal funds really means and what a huge driver of our own spending those funds have been.

TI: Is dependence on federal funds really a problem that states can fix on their own? The way federal grants are typically structured, states get more money for spending more money. Don’t those incentives need to be changed?

BR: No question they do. For example we will face an $11 billion shortfall in the next biennium essentially because of Medicaid and the Children’s Health Insurance Program. For several years, we have been working with our governor’s office to try to get a block grant for the state instead of using all the federal formulas so we can essentially figure out for ourselves how best to distribute that money and to do it in a more efficient way so we do not have to spend as much. It is possible.

TI: The hot topic of the day, of course, is health care. How do you see Obamacare affecting Texas?

BR: I’m sure most people have read that AT&T, which is a Texas company, just took a billion dollar charge. That is not pocket change. It is a prime example out of the gate of what government taking over a sixth of the economy will do. Same with Caterpillar. Caterpillar is based out of San Antonio, and it has announced a big hit. I think we are going to continue to see that. The health care bill is going to take money out of the private sector where it would have created jobs and helped to lift our economy.

TI: Beyond repealing Obamacare, what specific reforms does the Texas Public Policy Foundation advocate in health care?

BR: Obviously the problem is that we do not have a free market system in the health care industry and so you have costs that are out of control because the consumer isn’t shopping. We all understand that. So how do you fix it? You allow for interstate purchasing. You provide tax credits for individuals. You expand health savings accounts (HSAs), which lower the cost of health care 10 percent to 12 percent in the first year and cut health care inflation in half in subsequent years. Our little group with 25 employees has had HSAs for a number of years now and they work. Block granting Medicaid is another possibility we have already talked about. Introducing sliding scales into Medicaid so that it isn’t just a 100-percent-pay system would also make consumers more a part of everyday health care decisions. Just having those very minor changes in the way we are practicing health care today will have a tremendous impact.

TI: What is your number one issue going forward?

BR: Our number one issue is really sort of an umbrella issue, and that is the Tenth Amendment. We have already spoken a lot about that, but it covers, among other things, health care and energy. Texas is in the crosshairs of energy policy because we are such an energy-driven state. So whether it is health care, energy, tort reform, education, or criminal justice, we need to consider what is the proper role of the state and what is the proper role of the federal government in all these issues. We want to help Texas provide an example for the rest of the country on how to achieve prosperity, and that means less government and less regulation. So the Tenth Amendment is our priority for this year.

Open Source May Be the Solution for Your Web Site

by Cord Blomquist

YOU’VE HEARD THE SALES PITCH: a one-of-a-kind, custom Web site solution for your organization that will do everything you want it to do. A few months and tens of thousands of dollars later, you’re left with a Web site so custom, so tailor-made that it’s compatible with little else.

To make matters worse, the company that built your white elephant is the only one that can maintain it, because no other Web developer would know what to do with it. You’re locked into a relationship with a contractor who built a product you don’t like, and it cost too much.

Thankfully, open source software has become an open industry standard for developing high-quality Web sites that can save you from this sort of situation. You wouldn’t buy a custom car that could be serviced by only one mechanic, so why buy a Web site that can be updated by only one developer? You need to separate the software from the contractor. Open source is the Web site equivalent of a Ford truck—something that can be fixed by anyone.

Unfortunately, the same folks who make a killing selling you proprietary software say a lot of disparaging things about open source software, claiming it’s too expensive to implement, hard to maintain, unreliable, or a Communist plot. These claims couldn’t be farther from the truth.

What Is Open Source Software?

Open source differs from proprietary software, which is released under strict licenses that keep the underlying computer programming code a secret. Instead, open source software is released under a license that allows anyone to use it, so long as the code is kept open. Such licenses allow anyone not only to examine the quality of the code, but also to change it, fix it, and add to it. Making the code accessible allows a community of coders to perfect a software product and to extend its functionality.

For example, companies like WordPress use the open source approach to make their product more robust—and far more popular—than that of their closed source competitors. WordPress not only makes its code available at no cost, but also actively facilitates the exchange of ideas between developers building tools for their platform. Their community-focused site features extensive documentation, user forums, a blog detailing new developments in the core product, and a vast archive of user-created add-ons.

This has enabled developers like Arne Brachold, a German-based WordPress developer to build a tool that helps search engines find the content in WordPress-powered Web sites. This sort of basic search engine optimization development is incredibly valuable, as search engines are the primary driver of traffic to nearly every Web site.

Brachold gives this software away, because it’s a way for him to demonstrate his programming prowess and gain more notoriety and business. This works pretty well. His sitemap tool for WordPress has been downloaded a staggering 3.2 million times. It’s good for WordPress, good for Brachold, and good for you.

The add-on’s popularity motivates Brachold to keep it updated. Last year alone saw more than 10 updates to his software, including those that fixed bugs and kept his sitemaps up-to-date with changes at Google, Yahoo, Bing, and

Other such software add-ons—developed by everyone from freelance programmers to large million-dollar Web design firms—transform WordPress from a simple blogging platform to a social network, discussion forum, photo gallery, video gallery, or even a full-fledged magazine site like, which recently adopted WordPress.

With more than 8,700 add-ons made for the platform, WordPress is a widely used standard. That’s a lot more after-market parts than the typical Ford! If you were still using that white elephant proprietary system, you’d have to pay a developer to design each of these tools from scratch.

WordPress benefits from these third-party add-ons by incorporating them into its core software. By fostering a community of developers who seek publicity or just simply recognition by giving away their code, WordPress outsources a great deal of its product development—or, more accurately, WordPress crowd-sources its product development.

By harnessing the power of not just dozens or hundreds of minds, but tens of thousands, WordPress has created incredibly intensive peer-review and quality-assurance systems, resulting in a rock solid Web site platform.

For these reasons, big-name brands like CNN, the BBC, the New York Times, and even America’s finest news source, the Onion, have adopted open source solutions like WordPress to run their Web sites. In fact, open source software powers 60 percent to 70 percent of Web servers worldwide and is used by most Fortune 500 companies including IBM, Google, Yahoo, Nokia, Dell, Intel, and even Microsoft. Open source is no fringe movement; it’s the mainstream.

But what about the high costs of implementing an open source site? What about maintenance?

While it’s true that platforms like WordPress—or other content management systems (CMS) like Drupal or Joomla—often need a professional Web designer to customize them to fit your needs, the same can be said for any proprietary, closed source alternative. Typically, however, the open source solution is drastically cheaper to install and maintain, because the customer doesn’t need to pay for writing or re-writing code, but only the minimal cost of implementing free, off-the-shelf code.

How to Choose an Open Source Product

So now that you’re a convert to the wisdom of open source software, how do you pick the right software for you and your organization?

First, figure out what you really need. Avoid the typical “wish list” approach—these turn your attention toward technologically novel features, instead of the core functionality your Web site needs.

Assume users are incredibly impatient—this is true in most cases. Focus on straightforward content organization that will make sense to people unfamiliar with your organization and get them where they want to go quickly.

Once you have this assessment done, compare your list to features found in the big three systems—WordPress, Drupal, and Joomla—and see how they compare. Keep in mind that many of the features you’re looking for may not be supported by any of these systems out-of-the-box, but could be part of an add-on developed by a third party.

If you’re interested in looking beyond the market leaders, consult Water & Stone’s 2009 Open Source CMS Market Share Report (available at It’s an unbiased evaluation of which open source CMS solutions are widely used, are gaining in popularity, and have the greatest amount of third-party support.

Also, consult with your friends and colleagues. It’s likely that someone in your professional network has some experience with an open source project. Get references for both content management system solutions and good contractors.

If you need further help finding a contractor that fits your needs, consult sites like Guru, Elance, and Sortfolio. Each lets you find Web developers who fit your budget and work in your area. Be sure to get a ton of references from any contractor. (A good portfolio often masks a lot of very unhappy customers.)

When selecting a contractor, remember that a big price or a big name is not an indicator of quality. Some of the best programmers around are small freelancers who charge bargain prices, and some of the most unprofessional, sloppy, and embarrassing code emerges from high-priced PR firms.

Ultimately, choosing a CMS or a contractor is all about staying flexible. To keep up with the pace of technological change, the software you choose needs to be cheap, and the relationships you form with contractors shouldn’t be permanent. Open source software meets both criteria, keeping your organization agile and ahead of the game.

Mr. Blomquist is New Media Manager at the Mercatus Center and a co-founder of, an online guide to using off-the-shelf technology to build your Web site, promote your brand, and enhance your productivity.

Coming to You Live: Radio Rows Provide Priceless Benefits to Conferences

by Amber Christian and Dave Mohel

POLITICAL CONFERENCES HAVE EVOLVED over the years and create unique opportunities for like-minded leaders to gather. While the experiences at such conferences may be unique, the event infrastructure is considered standard industry-wide. Logistics decisions such as speakers, schedules, attendees, and so on are the backbone of a successful conference. More recently, however, a new conference element has found a home at political gatherings across the country. “Radio rows,” which are a collection of broadcasters that air live content from the same location, have become more prevalent at large and small conferences.

Radio rows are a critical part of annual events like the Conservative Political Action Conference (CPAC). Conference planners have come to realize the benefits of adding a radio row to their gathering, which include securing free advertising to promote the event, building relationships with key talk radio leaders, and gaining added incentives for co-sponsors and attendees seeking media attention.

For decades, talk radio has been a haven for conservative ideas. Ideas of limited government, individual freedom, and family values have benefited from the long format only talk radio has to offer. Thoughtful discussion of ideas that cannot be summed up in a five-minute television interview play out every day on three- and four-hour radio shows. Listener calls and participation advance the grassroots nature of radio programs and the conservative movement. National issues with local impact and local problems with global implications find a voice on radio airwaves. Candidates for president and local offices use talk radio to engage with voters. Talk radio has played a key role in promoting and unifying conservative ideas, which increases the importance of including it at conservative conferences.

Thanks to emerging technologies lowering the expense of remote broadcasts and increased competition among national and local radio shows, hosts are more willing to leave their studios for these special opportunities. Recently, radio stations have been impacted by the economic downturn. Less advertising as well as competition from new media has caused many stations to cancel their local shows in place of nationally syndicated content. As a result, competition among hosts in each market has increased. Therefore, while the number of shows available to attend a radio row has decreased, thriving stations are more motivated than ever to take part in events that set them apart from the crowd.

Once a radio program has agreed to attend a gathering, it is up to the organizers to assist in providing compelling content. Policy experts, authors, elected officials, and grassroots leaders should be encouraged to take part in the tremendous opportunity available.

“What a host is looking for in a radio row is the ability to bring the newsmakers live to their listeners,” said Martha Zoller, a radio host syndicated statewide in Georgia and veteran of many radio rows. “Access is key and radio rows, if done correctly, give you that access.”

A conference can guarantee hosts hours of quality guests, breaking news, and information.

Of course, radio rows are not just rewarding to the event organizers and broadcasters, but also to the co-sponsors, speakers, and invited guests. At CPAC, for example, most attendees took advantage of the benefits radio row access provided. The face-to-face interaction between hosts and organization leaders is an incentive for groups to participate in any conference. While the conference receives free advertising by hosting a radio row, the attendees get the opportunity to discuss their issues on local and nationally syndicated shows, with the prospect of reaching millions of listeners across the country.

“CPAC co-sponsors and panelists look forward to being a part of radio row,” said Lisa De Pasquale, CPAC Director at the American Conservative Union. “Local groups and candidates gain national exposure, and experts can rely on doing dozens of interviews in a single day.”

Conference organizers may worry that media coverage will be one-sided or scarce. Including a radio row in a conference ensures that the message will be complete and somewhat controllable.

Technology has made radio rows a more viable solution to the media coverage concern for even the smallest of events. Most hotels, conference spaces, and convention centers are already wired with the necessary digital lines, Internet connections, and additional phone lines needed for a high-quality broadcast. Additional equipment, if needed, can be rented at a nominal cost.

“CPAC makes it easy by having good equipment, an engineer on site, and available guests,” said Zoller.

In hosting a radio row, organizers must make major decisions about broadcast lengths and workspace sizes.

Allowing shows to broadcast multiple days at a conference can make equipment rental more economical and provide more extensive coverage. At CPAC 2010, nearly three dozen shows and networks broadcasted from 6 a.m. to 9 p.m., sharing 11 workstations. Local programs from Wilmington, N.C., and Toledo, Ohio, were followed by nationally syndicated shows with hundreds of affiliates and millions of listeners each. CPAC 2010 Radio Row delivered over 300 hours of conference coverage and up-to-the-minute news to millions of potential activists, donors, and citizens.

An event that brings together large groups of attendees can instantly inform and motivate a large number of supporters. If the event is successful in developing long-lasting and mutually beneficial relationships with members of the media, indispensible returns on the radio row investment will continue over time.

As more people become involved in supporting conservative initiatives, political gatherings grow, and activism becomes more commonplace. Tea parties, town halls, and conventions are sprouting up organically every day. Talk radio has played an influential role in furthering conservative ideas for decades. A conference with a strong broadcast component energizes attendees and enables organizers to relay news as it happens at the event.

Ms. Christian and Mr. Mohel work for Advocacy Ink, a public relations firm that also coordinates radio rows for events.