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Should the Government Narrow the Income Gap? | Alan Reynolds | Cato Institute: Commentary: 'The grander estimates of Piketty and Saez are frequently cited as a rationale for increased tax rates on the rich and increased transfer payments to the rich. This is an irrational rationale. Even doubling tax rates and transfer payments would have no direct effect on those estimates, because they explicitly ignore taxes and transfers.'
'the top 1 percent's share always falls in recessions and rises during periods of rapid economic growth such as 1983-89 and 1997-2000. This cyclicality of the top 1 percent's share makes that share a preposterous definition of "inequality" because poverty rises in recessions. Are the unemployed supposed to welcome recessions and stock market crashes simply because such crises demolish top incomes from capital gains, dividends, interest, and small business?'
Friday, December 16, 2011
We Don't Need a Balanced Budget Amendment | Tad DeHaven | Cato Institute: Commentary
We Don't Need a Balanced Budget Amendment | Tad DeHaven | Cato Institute: Commentary: 'The Constitution already places strict limits on what the federal government can and cannot do. The problem is that those limits have become stretched over the years to the point that the federal government can do pretty much what it pleases.'
'Most Republicans are about as enthusiastic to confront this reality as most Democrats are in reversing it. Thus, the convenient resurgence in popularity for a balanced budget amendment on the part of Republicans has been driven by an unwillingness — or inability — to flesh out exactly what federal agencies and programs would have to go in order to bring the budget into balance without raising taxes.
Indeed, it's not a coincidence that the balanced budget amendment wasn't a priority for Republicans when they were jacking up spending and debt during George W. Bush's tenure.'
'Republicans who support the balanced budget amendment cannot cite it as evidence that they're serious about cutting spending unless they're prepared to detail what they would cut in order to bring the budget into balance.
While proponents of the balanced budget amendment argue that it would also reign in spending, almost all the states possess balanced budget requirements and that hasn't stopped state spending from continuing to increase. In fact, the balanced budget amendment would actually end up solidifying the oversized and overbearing federal government we have today. Therefore, policymakers who truly desire a federal government that is smaller in size and scope should concentrate their efforts on convincing the American people that the country would be better off.'
'Most Republicans are about as enthusiastic to confront this reality as most Democrats are in reversing it. Thus, the convenient resurgence in popularity for a balanced budget amendment on the part of Republicans has been driven by an unwillingness — or inability — to flesh out exactly what federal agencies and programs would have to go in order to bring the budget into balance without raising taxes.
Indeed, it's not a coincidence that the balanced budget amendment wasn't a priority for Republicans when they were jacking up spending and debt during George W. Bush's tenure.'
'Republicans who support the balanced budget amendment cannot cite it as evidence that they're serious about cutting spending unless they're prepared to detail what they would cut in order to bring the budget into balance.
While proponents of the balanced budget amendment argue that it would also reign in spending, almost all the states possess balanced budget requirements and that hasn't stopped state spending from continuing to increase. In fact, the balanced budget amendment would actually end up solidifying the oversized and overbearing federal government we have today. Therefore, policymakers who truly desire a federal government that is smaller in size and scope should concentrate their efforts on convincing the American people that the country would be better off.'
Thursday, December 15, 2011
Mandatory Medical Malpractice Caps Hurt Patients | Shirley Svorny | Cato Institute: Commentary
Mandatory Medical Malpractice Caps Hurt Patients | Shirley Svorny | Cato Institute: Commentary: 'Support for caps comes from individuals who see the medical malpractice system as broken, largely based on anecdotal observations. Everyone seems to have heard a story of a high verdict to a plaintiff whose claim was not valid. Yet, careful studies suggest these cases are anomalies, and the court system generally works. While there are no statistics for the country as a whole, based on the existing evidence, we can say confidently that a good chunk of initial claims (likely more than three-quarters) do not move forward because no negligence was involved. The vast majority of cases that do move forward settle.
This means that court signals from earlier trials are clear. If court awards were random, one would expect many more cases to go to court as there would be an expectation of an award even where there was no negligence. Many cases go to court because plaintiffs think they have a case when they do not. We know this because plaintiffs rarely win; less than a quarter of all cases that go to court are resolved in favor of the plaintiff. At least one study found court findings of negligence lined up with assessments by impartial reviewing physicians.'
'every review has found claims are concentrated among a very small subset of physicians; less than five percent of physicians are responsible for the overwhelming share of claims. Even if a large percentage of negligent actions are not reported, it would seem that the present system works in identifying physicians whose practice patterns put patients at risk.'
This means that court signals from earlier trials are clear. If court awards were random, one would expect many more cases to go to court as there would be an expectation of an award even where there was no negligence. Many cases go to court because plaintiffs think they have a case when they do not. We know this because plaintiffs rarely win; less than a quarter of all cases that go to court are resolved in favor of the plaintiff. At least one study found court findings of negligence lined up with assessments by impartial reviewing physicians.'
'every review has found claims are concentrated among a very small subset of physicians; less than five percent of physicians are responsible for the overwhelming share of claims. Even if a large percentage of negligent actions are not reported, it would seem that the present system works in identifying physicians whose practice patterns put patients at risk.'
It's Time to Gut, Not Cut, the Federal Government | Doug Bandow | Cato Institute: Commentary
It's Time to Gut, Not Cut, the Federal Government | Doug Bandow | Cato Institute: Commentary: 'But there is no line item in the budget for "waste, fraud, and abuse." Part of the problem is management, which has never been Washington's strong suit. A lot of money is lost due to incompetence or theft. Putting in place the right people and procedures isn't easy.
More basic, however, is the fact that one man's waste is another man's priority. The basic purpose of the national government today is to allow everyone to live off of everyone else. The intent is to give away trillions of dollars. What matters most is giving it away, not giving it away efficiently.'
'The big spending boulders are Social Security, Medicare, Medicaid, the Pentagon, and interest. Cuts here would cause much political pain, which is why politicians prefer not to talk about such possibilities. The people must decide not to have the government do certain things.'
'First, Social Security and Medicare should be narrowed to focus on the poor. No more middle class welfare. If you can afford to care for yourself, you collect no more federal checks. And the young should be allowed to opt out of the programs, putting money aside for their own retirement and health care. Over the long-term this will cut trillions of dollars in unfunded liabilities.
Second, Medicaid should be turned into a competitive voucher program that shares cost savings with frugal recipients. It will never be cheap to provide health care for the poor, but only by changing the program's underlying incentives can much money be saved. Reforming Medicaid is important for state governments as well as Washington.
Third, the U.S. government should focus defense spending on defense. No more social engineering around the world. No more subsidies for rich states and nation-building in poor ones. No more interventions here, there, and everywhere for no good purpose. Then military outlays could be cut substantially.
Fourth, take these steps and the government would borrow less, reducing interest payments naturally. That would create a "virtuous cycle" of falling outlays, deficits, and debts.
Fifth, toss in big reductions in domestic discretionary spending for good measure. Let people spend their own money for their families and communities. Then government would be left doing the few things that it really should do.'
More basic, however, is the fact that one man's waste is another man's priority. The basic purpose of the national government today is to allow everyone to live off of everyone else. The intent is to give away trillions of dollars. What matters most is giving it away, not giving it away efficiently.'
'The big spending boulders are Social Security, Medicare, Medicaid, the Pentagon, and interest. Cuts here would cause much political pain, which is why politicians prefer not to talk about such possibilities. The people must decide not to have the government do certain things.'
'First, Social Security and Medicare should be narrowed to focus on the poor. No more middle class welfare. If you can afford to care for yourself, you collect no more federal checks. And the young should be allowed to opt out of the programs, putting money aside for their own retirement and health care. Over the long-term this will cut trillions of dollars in unfunded liabilities.
Second, Medicaid should be turned into a competitive voucher program that shares cost savings with frugal recipients. It will never be cheap to provide health care for the poor, but only by changing the program's underlying incentives can much money be saved. Reforming Medicaid is important for state governments as well as Washington.
Third, the U.S. government should focus defense spending on defense. No more social engineering around the world. No more subsidies for rich states and nation-building in poor ones. No more interventions here, there, and everywhere for no good purpose. Then military outlays could be cut substantially.
Fourth, take these steps and the government would borrow less, reducing interest payments naturally. That would create a "virtuous cycle" of falling outlays, deficits, and debts.
Fifth, toss in big reductions in domestic discretionary spending for good measure. Let people spend their own money for their families and communities. Then government would be left doing the few things that it really should do.'
Laws Shouldn't Supersede Free Speech | John Samples | Cato Institute: Commentary
Laws Shouldn't Supersede Free Speech | John Samples | Cato Institute: Commentary: 'Political scientists have found that contributions explain little about lawmaking once ideology, party, and constituency are accounted for. One scholarly study of lobbying concluded that "the direct correlation between money and outcomes that so many political scientists have sought simply is not there."'
'Even as they fail to deliver benefits, campaign-finance regulations impose costs. The incumbents who write them are tempted to make it harder for challengers to raise money. Scholars have also found that reducing campaign spending leads to fewer and less informed voters.
In addition, those engaged in politics seek to legally evade regulations. So reformers constantly demand new regulations to close "loopholes," producing a complex body of law. Legal advice becomes vital for electoral engagement, discouraging participation — a perverse result for rules purporting to advance democracy.
Finally, the rhetoric of campaign finance reform has poisoned public debate. Instead of arguments, voters hear accusations of corruption. Not surprisingly, many attribute problems to malevolent "moneyed interests."
But our fiscal challenges, for example, come from popular and inadequately funded entitlement programs. No surprise there: Voters' desire for benefits without costs is a very democratic failing. But it is a failing Americans have refused to face; it's easier to blame moneyed interests for our problems.'
'Even as they fail to deliver benefits, campaign-finance regulations impose costs. The incumbents who write them are tempted to make it harder for challengers to raise money. Scholars have also found that reducing campaign spending leads to fewer and less informed voters.
In addition, those engaged in politics seek to legally evade regulations. So reformers constantly demand new regulations to close "loopholes," producing a complex body of law. Legal advice becomes vital for electoral engagement, discouraging participation — a perverse result for rules purporting to advance democracy.
Finally, the rhetoric of campaign finance reform has poisoned public debate. Instead of arguments, voters hear accusations of corruption. Not surprisingly, many attribute problems to malevolent "moneyed interests."
But our fiscal challenges, for example, come from popular and inadequately funded entitlement programs. No surprise there: Voters' desire for benefits without costs is a very democratic failing. But it is a failing Americans have refused to face; it's easier to blame moneyed interests for our problems.'
Wednesday, December 14, 2011
Redeeming the Industrial Revolution - Wendy McElroy - Mises Daily
Redeeming the Industrial Revolution - Wendy McElroy - Mises Daily: '"Free-labor children lived with their parents or guardians and worked during the day at wages agreeable to those adults. But parents often refused to send their children into unusually harsh or dangerous work situations." Reed notes, "Private factory owners could not forcibly subjugate 'free labour' children; they could not compel them to work in conditions their parents found unacceptable."
By contrast, parish children were under the direct authority of government officials.' 'The Poor Law replaced outdoor relief (subsidies and handouts) with "poor houses" in which pauper children were virtually imprisoned. There, the conditions were made purposely harsh to discourage people from applying. Nearly every parish in Britain had a "stockpile" of abandoned workhouse children who were virtually bought and sold to factories; they experienced the deepest horrors of child labor.'
'Thus, in advocating the regulation of child labor, social reformers asked government to remedy abuses for which government itself was largely responsible. Once more, government was a disease masquerading as its own cure.'
' To modern ears, the working and living conditions were terrible with many women turning to prostitution on the side in order to keep a roof over their heads. As terrible as the conditions might have been, however, a fundamental fact must not be ignored. The women themselves believed that flight into the city was in their self-interest, otherwise they would have never made the journey or they would have returned home to farm life in disillusionment. To say factory work "harmed" 18th- or 19th-century women is to ignore the demonstrated preference that they themselves expressed. It ignores the voice of their choices; clearly, the women believed it was an improvement.'
'An employer wants to maximize the profit on every dollar he or she spends. This creates a strong incentive to be blind to everything but the merit of an employee, to be blind to race, sex, religion or other characteristics other than productivity. A skilled woman who works for $1 less than a similarly skilled man will usually get the job. If she doesn't, then the unbiased competitor down the street will hire her and the biased one will lose a competitive edge. When this dynamic occurs on a massive scale, women workers are gradually able to demand increasingly higher wages and whittle down that $1 differential. The "leveling" factor does not happen immediately, it does not happen perfectly. But over time, out of pure self-interest, employers become blind to race and sex because it is in their self-interest. They do so in the name of profit, and everyone benefits.'
By contrast, parish children were under the direct authority of government officials.' 'The Poor Law replaced outdoor relief (subsidies and handouts) with "poor houses" in which pauper children were virtually imprisoned. There, the conditions were made purposely harsh to discourage people from applying. Nearly every parish in Britain had a "stockpile" of abandoned workhouse children who were virtually bought and sold to factories; they experienced the deepest horrors of child labor.'
'Thus, in advocating the regulation of child labor, social reformers asked government to remedy abuses for which government itself was largely responsible. Once more, government was a disease masquerading as its own cure.'
' To modern ears, the working and living conditions were terrible with many women turning to prostitution on the side in order to keep a roof over their heads. As terrible as the conditions might have been, however, a fundamental fact must not be ignored. The women themselves believed that flight into the city was in their self-interest, otherwise they would have never made the journey or they would have returned home to farm life in disillusionment. To say factory work "harmed" 18th- or 19th-century women is to ignore the demonstrated preference that they themselves expressed. It ignores the voice of their choices; clearly, the women believed it was an improvement.'
'An employer wants to maximize the profit on every dollar he or she spends. This creates a strong incentive to be blind to everything but the merit of an employee, to be blind to race, sex, religion or other characteristics other than productivity. A skilled woman who works for $1 less than a similarly skilled man will usually get the job. If she doesn't, then the unbiased competitor down the street will hire her and the biased one will lose a competitive edge. When this dynamic occurs on a massive scale, women workers are gradually able to demand increasingly higher wages and whittle down that $1 differential. The "leveling" factor does not happen immediately, it does not happen perfectly. But over time, out of pure self-interest, employers become blind to race and sex because it is in their self-interest. They do so in the name of profit, and everyone benefits.'
My Life in the BLS - Shawn Ritenour - Mises Daily
My Life in the BLS - Shawn Ritenour - Mises Daily: 'If the BLS really wanted to save on meeting costs, they would hold every national conference in Kansas City, where the government hotel rates are among the cheapest, the food per diem is the lowest, and, being a central location, air fares are lower. In reality, I was told where the bureau was having the conference and it was up to me to find two other cities where it would be even more expensive for comparison. With New York City and Los Angeles as foils, I could justify any other location my superiors wanted.'
Tuesday, December 13, 2011
Global Oil and Gas Markets, Our Best Energy Security | Jim Powell | Cato Institute: Commentary
Global Oil and Gas Markets, Our Best Energy Security | Jim Powell | Cato Institute: Commentary: 'From a practical standpoint, there's really no such thing as a U.S. oil market. There's a global oil market, and oil shipments tend to go where the best prices are offered. Once a tanker leaves a port loaded with oil, the producing country no longer has control over it. In 1973, oil producing countries continued shipping to European countries that weren't involved with the Yom Kippur War, but much of that oil was re-shipped to the U.S. Some of the OPEC oil shipped to the Caribbean was also re-shipped to the U.S.
In addition, OPEC has experienced the chronic cheating that generally afflicts cartels: it's in the interest of each member to have everybody else cut back sales so that prices will be pushed up, while each member sells as much as possible "under the table" at high prices, making it difficult to maintain those prices. Algeria, Gabon, Indonesia, Iraq, Kuwait, Nigeria, Qatar, the United Arab Emirates and Venezuela reportedly have been among the most notorious OPEC cheaters, selling as much as 40 percent more oil than their assigned quotas.'
'It makes as little sense to worry about our "dependence" on foreign oil as it does to worry about our "dependence" on private enterprise, computers and other wonders. We would be worse off doing things that cost more or don't work as well. We should make the most of our comparative advantages.
Keep in mind that major oil producers have strong incentives to sell their oil. In most cases, it dominates their economies and generates a substantial percentage of government revenues. Moreover, many of these countries live beyond their means. They have spent huge sums on weapons, wars, palaces, religious police and money-losing nationalized industries. Generally the major oil producers have failed to diversify their revenue sources by providing an attractive business climate where different industries could develop.'
In addition, OPEC has experienced the chronic cheating that generally afflicts cartels: it's in the interest of each member to have everybody else cut back sales so that prices will be pushed up, while each member sells as much as possible "under the table" at high prices, making it difficult to maintain those prices. Algeria, Gabon, Indonesia, Iraq, Kuwait, Nigeria, Qatar, the United Arab Emirates and Venezuela reportedly have been among the most notorious OPEC cheaters, selling as much as 40 percent more oil than their assigned quotas.'
'It makes as little sense to worry about our "dependence" on foreign oil as it does to worry about our "dependence" on private enterprise, computers and other wonders. We would be worse off doing things that cost more or don't work as well. We should make the most of our comparative advantages.
Keep in mind that major oil producers have strong incentives to sell their oil. In most cases, it dominates their economies and generates a substantial percentage of government revenues. Moreover, many of these countries live beyond their means. They have spent huge sums on weapons, wars, palaces, religious police and money-losing nationalized industries. Generally the major oil producers have failed to diversify their revenue sources by providing an attractive business climate where different industries could develop.'
Monday, December 12, 2011
Smashing Protectionist "Theory" (Again) - Murray N. Rothbard - Mises Daily
Smashing Protectionist "Theory" (Again) - Murray N. Rothbard - Mises Daily: 'The best way to look at tariffs or import quotas or other protectionist restraints is to forget about political boundaries. Political boundaries of nations may be important for other reasons, but they have no economic meaning whatever. Suppose, for example, that each of the United States were a separate nation. Then we would hear a lot of protectionist bellyaching that we are now fortunately spared. Think of the howls by high-priced New York or Rhode Island textile manufacturers who would then be complaining about the "unfair," "cheap labor" competition from various low-type "foreigners" from Tennessee or North Carolina, or vice versa.
Fortunately, the absurdity of worrying about the balance of payments is made evident by focusing on interstate trade. For nobody worries about the balance of payments between New York and New Jersey, or, for that matter, between Manhattan and Brooklyn, because there are no customs officials recording such trade and such balances.
If we think about it, it is clear that a call by New York firms for a tariff against North Carolina is a pure rip-off of New York (as well as North Carolina) consumers, a naked grab for coerced special privilege by less-efficient business firms. If the 50 states were separate nations, the protectionists would then be able to use the trappings of patriotism, and distrust of foreigners, to camouflage and get away with their looting the consumers of their own region.'
'American labor is more costly than Taiwanese because it is far more productive. What makes it productive? To some extent, the comparative qualities of labor, skill, and education. But most of the difference is not due to the personal qualities of the laborers themselves, but to the fact that the American laborer, on the whole, is equipped with more and better capital equipment than his Taiwanese counterparts. The more and better the capital investment per worker, the greater the worker's productivity, and therefore the higher the wage rate.
In short, if the American wage rate is twice that of the Taiwanese, it is because the American laborer is more heavily capitalized, is equipped with more and better tools, and is therefore, on the average, twice as productive. In a sense, I suppose, it is not "fair" for the American worker to make more than the Taiwanese, not because of his personal qualities, but because savers and investors have supplied him with more tools. But a wage rate is determined not just by personal quality but also by relative scarcity, and in the United States the worker is far scarcer compared to capital than he is in Taiwan.'
'the fact that American wage rates are on the average twice that of the Taiwanese, does not make the cost of labor in the United States twice that of Taiwan. Because US labor is twice as productive, this means that the double wage rate in the United States is offset by the double productivity, so that the cost of labor per unit product in the United States and Taiwan tends, on the average, to be the same. One of the major protectionist fallacies is to confuse the price of labor (wage rates) with its cost, which also depends on its relative productivity.'
'The problem faced by less efficient US textile or auto firms is not so much cheap labor in Taiwan or Japan but the fact that other US industries are efficient enough to afford it, because they bid wages that high in the first place.
So, by imposing protective tariffs and quotas to save, bail out, and keep in place less efficient US textile or auto or microchip firms, the protectionists are not only injuring the American consumer. They are also harming efficient US firms and industries, which are prevented from employing resources now locked into incompetent firms, and who could otherwise be able to expand and sell their efficient products at home and abroad.'
'The alleged "deficit" was paid for by foreigners investing the equivalent amount of money in American dollars: in real estate, capital goods, US securities, and bank accounts.
In effect, in the last couple of years, foreigners have been investing enough of their own funds in dollars to keep the dollar high, enabling us to purchase cheap imports. Instead of worrying and complaining about this development, we should rejoice that foreign investors are willing to finance our cheap imports. The only problem is that this bonanza is already coming to an end, with the dollar becoming cheaper and exports more expensive.'
Fortunately, the absurdity of worrying about the balance of payments is made evident by focusing on interstate trade. For nobody worries about the balance of payments between New York and New Jersey, or, for that matter, between Manhattan and Brooklyn, because there are no customs officials recording such trade and such balances.
If we think about it, it is clear that a call by New York firms for a tariff against North Carolina is a pure rip-off of New York (as well as North Carolina) consumers, a naked grab for coerced special privilege by less-efficient business firms. If the 50 states were separate nations, the protectionists would then be able to use the trappings of patriotism, and distrust of foreigners, to camouflage and get away with their looting the consumers of their own region.'
'American labor is more costly than Taiwanese because it is far more productive. What makes it productive? To some extent, the comparative qualities of labor, skill, and education. But most of the difference is not due to the personal qualities of the laborers themselves, but to the fact that the American laborer, on the whole, is equipped with more and better capital equipment than his Taiwanese counterparts. The more and better the capital investment per worker, the greater the worker's productivity, and therefore the higher the wage rate.
In short, if the American wage rate is twice that of the Taiwanese, it is because the American laborer is more heavily capitalized, is equipped with more and better tools, and is therefore, on the average, twice as productive. In a sense, I suppose, it is not "fair" for the American worker to make more than the Taiwanese, not because of his personal qualities, but because savers and investors have supplied him with more tools. But a wage rate is determined not just by personal quality but also by relative scarcity, and in the United States the worker is far scarcer compared to capital than he is in Taiwan.'
'the fact that American wage rates are on the average twice that of the Taiwanese, does not make the cost of labor in the United States twice that of Taiwan. Because US labor is twice as productive, this means that the double wage rate in the United States is offset by the double productivity, so that the cost of labor per unit product in the United States and Taiwan tends, on the average, to be the same. One of the major protectionist fallacies is to confuse the price of labor (wage rates) with its cost, which also depends on its relative productivity.'
'The problem faced by less efficient US textile or auto firms is not so much cheap labor in Taiwan or Japan but the fact that other US industries are efficient enough to afford it, because they bid wages that high in the first place.
So, by imposing protective tariffs and quotas to save, bail out, and keep in place less efficient US textile or auto or microchip firms, the protectionists are not only injuring the American consumer. They are also harming efficient US firms and industries, which are prevented from employing resources now locked into incompetent firms, and who could otherwise be able to expand and sell their efficient products at home and abroad.'
'The alleged "deficit" was paid for by foreigners investing the equivalent amount of money in American dollars: in real estate, capital goods, US securities, and bank accounts.
In effect, in the last couple of years, foreigners have been investing enough of their own funds in dollars to keep the dollar high, enabling us to purchase cheap imports. Instead of worrying and complaining about this development, we should rejoice that foreign investors are willing to finance our cheap imports. The only problem is that this bonanza is already coming to an end, with the dollar becoming cheaper and exports more expensive.'
Tariff Lesson for Obama – and Us | Daniel J. Ikenson | Cato Institute: Commentary
Tariff Lesson for Obama – and Us | Daniel J. Ikenson | Cato Institute: Commentary: 'Trade barriers and subsidies, while burdensome to foreign companies, are foremost matters of domestic economic policy. Australia's experience affirms that the most compelling case for dismantling trade restrictions is not that they are "concessions" to exchange for foreign market access, but domestic reforms that benefit the domestic economy, regardless of what other countries do with their own trade barriers.'
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