The Heritage Insider: The Left has a new pamphlet, the feds own a lot of the West, apocalypse is always coming, and more
Updated daily, InsiderOnline (insideronline.org) is a compilation of publication abstracts, how-to essays, events, news, and analysis from around the conservative movement. The current edition of The INSIDER quarterly magazine is also on the site.
April 26, 2014
Latest Studies: 39 new items, including a Pioneer Institute report on the lack of validation of Common Core standards, and a Centennial Institute primer on hydraulic fracturing
Notes on the Week: The Left has a new pamphlet, the federal government owns a lot of the West, doomsaying is a going concern, and more
To Do: Fight crony capitalism
Budget & Taxation
• Who Pays Corporation Tax? – Adam Smith Institute
• Regulatory and Compliance Implications of Tax Day – American Action Forum
• Grassroots Government in Colorado: How Does Weld County Compare? – Centennial Institute
• Crown Corporations and Government Divestment – Frontier Centre for Public Policy
• Corporate vs Individual Tax Expenditures – Tax Foundation
• New York Corporate Tax Overhaul Broadens Bases, Lowers Rates, and Reduces Complexity – Tax Foundation
Crime, Justice & the Law
• De Blasio’s Policing Test – Manhattan Institute
Economic Growth
• Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index – American Legislative Exchange Council
Economic Growth
• Job Creation: Policies to Boost Employment and Economic Growth – The Heritage Foundation
• The United States of Envy – Hoover Institution
Education
• Common Core’s Validation: A Weak Foundation for a Crooked House – Pioneer Institute for Public Policy Research
Foreign Policy/International Affairs
• Crisis in Venezuela: UNASUR and U.S. Foreign Policy – The Heritage Foundation
• Time to Reform U.S. International Broadcasting – The Heritage Foundation
Health Care
• Medicare Advantage Cuts in the Affordable Care Act: April 2014 Update – American Action Forum
• Obamacare: Debate Over? – Hoover Institution
Labor
• The Minimum Wage’s Effect on Employment – Alabama Policy Institute
• Minimum Wages and the Business Cycle: Does a Wage Hike Hurt More in a Weak Economy? – Employment Policies Institute
• EEOC Loses Again on Background Checks – The Heritage Foundation
Monetary Policy/Financial Regulation
• Making Central Banks More Resistant to Political Pressures and Fads – e21 – Economic Policies for the 21st Century
• Basel III Capital Standards Do Not Reduce the Too-Big-to-Fail Problem – The Heritage Foundation
• Fannie and Freddie 2.0: The Senate Does Not Get the Government Out of the Market – The Heritage Foundation
• An Analysis of Global HFT Regulation: Motivations, Market Failures, and Alternative Outcomes – Mercatus Center
National Security
• Congress Should Support the Marines’ New Amphibious Combat Vehicle Plan – The Heritage Foundation
• Why the Cybersecurity Framework Will Make Us Less Secure – Mercatus Center
Natural Resources, Energy, Environment, & Science
• Endangered R Us: Unintended Consequences of the Endangered Species Act, 1973-2013 – Centennial Institute
• The Hydraulic Fracturing Primer: Base Energy Regulation on Facts, not Fear – Centennial Institute
Philanthropy
• Profit and the Free Press – Philanthropy Roundtable
Regulation & Deregulation
• Smoking, Plain Packaging and Public Health – Adam Smith Institute
• Plain Packaging: Questions that Need Answering – Institute of Economic Affairs
• An FDA Report Card: Wide Variance in Performance Found Among Agency’s Drug Review Divisions – Manhattan Institute
The Constitution/Civil Liberties
• State Aggregate Limits and Proportional Bans under McCutcheon: Likely Unconstitutional or Highly Vulnerable – Center for Competitive Politics
• Citizens United, States Divided: An Empirical Analysis of Independent Political Spending – Center for Competitive Politics
• Sebelius v. Hobby Lobby Stores, Inc. – Federalist Society
• Executive Power on Steroids – Hoover Institution
Transportation/Infrastructure
• Lessons from Pittsburgh’s Cab-Rideshare Battle – Allegheny Institute for Public Policy
• Ten Fallacies of the Thrive MSP 2040 Plan: Faulty Assumptions are Leading to an Unsustainable Long-Term Plan for the Twin Cities Region – Center of the American Experiment
• Housing Affordability and the Standard of Living in Calgary – Frontier Centre for Public Policy
• Nationalism in the Skies: The Square Peg in a Round World – Frontier Centre for Public Policy
Welfare
• Liberating the Poor from Poverty – National Center for Policy Analysis
The Left has a new pamphlet. The Left is hailing Thomas Piketty’s Capital in the Twenty-First Century—published in English this month—as the manifesto of the age. Guy Sorman read it and finds the book to be a trove of historical nuggets and superficially impressive statistics combined with recycled Marxist prophecy. Here are a few reasons Sorman finds the book wrongheaded:
Piketty does not believe that free markets can spontaneously generate greater equality: government intervention is therefore needed, mostly through taxation. His market pessimism contradicts the findings of most classical economists, who see the rise of a huge middle class as an outgrowth of capitalism. Piketty rejects what he considers an optimistic illusion about markets born in the 1960s. From the end of the World War II until the late 1970s, a middle class expanded in the West, and incomes from wages and capital converged. But this convergence, Piketty argues, was a historical accident. In the long run, he says, capital owners always prevail over employees. In his insistence, Piketty sometimes contradicts himself. At one point, he argues that income divergence occurs independent of political influence. But he also writes that the current divergence was initiated by the policies of Ronald Reagan and Margaret Thatcher, who “scrapped taxes on the wealthy.” The inadequacy of his framework is powerfully illustrated by the example of France, where the gap between the so-called 99 percent and the 1 percent became wider under a socialist government during the 1980s. Was François Mitterrand a hidden Reaganite?
This contradiction between ideological judgments and objective data is the book’s fundamental flaw. The emergence of a super-wealthy minority (closer to 0.001 percent than to 1 percent, as Piketty himself admits) has likely occurred for different reasons in different countries. For instance, the new oligarchies in Russia, Nigeria, or China can’t be explained as a consequence of the free market. Inequality in these nations results from corruption, a one-party system, and kleptocracy. In the United States, a super-wealthy minority—“superstars and supermanagers,” as Piketty calls them—has attained financial preeminence predominantly through globalization: entrepreneurs like Bill Gates or large hedge fund managers operate in a worldwide market, gaining unprecedented profits. Their riches may be considered excessive or unfair—but that would be a moral judgment, not an economic one. […]
Piketty’s book has other flaws. The author never considers whether some degree of inequality is necessary for growth in a market economy. Instead, he attacks economists for “relying too much on mathematical models and not understanding the deep structures of capital and inequality.” He thus ignores the fact that economists whom he dislikes have identified the actual factors of growth—such as property rights and the rule of law—based on empirical observation. Without the economic models he scorns, countries like China, India, and Ghana would not have seen such spectacular growth—and their poorest citizens would have far fewer opportunities. [City Journal, April 22]
Piketty isn’t interested in growth. Thomas Piketty’s Capital in the 21st Century has the story on inequality and growth backwards, says Allen Meltzer. Where Piketty sees redistribution and labor market regulations as the explanation for the downward trend in income inequality up to 1980, Meltzer sees a different process at work: “Taxing the rich to redistribute did not produce growth. On the contrary, growth reduced the share earned by the highest earners.” Meltzer continues:
During the early twentieth century, the United States absorbed millions of immigrants, many unskilled. Many began employment at low wage jobs. Minimum wage laws did not come until the 1930s. By working, the immigrants learned new skills; their productivity increased and with it their wages. That narrowed the gap between the incomes of the top and the bottom earners. But many did something else. They sent their children to colleges and universities where they learned professional skills that earned middle class incomes.
This process continued in recent decades for immigrants from Korea, China, Mexico, and Latin America. That history sends an important message. The growth of the middle class and the narrowing of the income distribution was in large part a result of working to acquire new skills and higher productivity.
President Obama’s program works against this process. It doesn’t reward work. It gives the unemployed and underemployed food stamps, healthcare, housing allowances, and income. Instead of working, many learn to live on the government benefits, supplementing them occasionally by working in the underground economy. Instead of acquiring productive skills, they learn how to live without working at regular jobs. That’s one way that the welfare state worked to increase the share of the highest paid 1 percent after 1980. The welfare state contributes also by weakening and even destroying family structure. Single family women are often on the bottom rung of the income distribution.
A different process is at work now. The capital that is most highly rewarded is now human capital—the education and skill that produces innovations like the internet, social media, popular apps, fracking, and three dimensional manufacturing. The top 1 percent of the earners in any year include people like Steve Jobs and Bill Gates who made the internet into a commercially successful, widely used means of communicating. But the top 1 percent also includes leading sports stars with unique skills and rock musicians with enormous popular appeal. [Defining Ideas, April 17]
Video of the Week: The Econ Lessons in Ghostbusters: The classic comedy about entrepreneurial hunters of the extra-dimensional illustrates how free markets create value where regulators often fail:
Doomsaying is a going concern. The folks who want you to believe the debate on climate change is over have a long history of predicting environmental apocalypses that never happen. Richard Rahn rounds up some of this history:
“The Arctic Ocean is warming up, icebergs are growing scarcer, and in some places the seals are finding the water too hot. Reports from fishermen, seal hunters, and explorers all point to a radical change in climate conditions and hitherto unheard-of temperatures in the Arctic zone. Exploration expeditions report that scarcely any ice has been met as far north as 81 degrees 29 minutes. Within a few years it is predicted that due to the ice melt the sea will rise and make most coastal cities uninhabitable.”—from an Associated Press report published in The Washington Post on Nov. 2, 1922.
You may have noticed that the predicted disaster 92 years ago did not happen, nor have other predicted catastrophes from the global-warming crowd.
On July 5, 1989, Noel Brown, then the director of the New York office of the United Nations Environment Program, warned of a “10-year window of opportunity to solve” global warming—“entire nations could be wiped off the face of Earth by rising sea levels if the global-warming trend is not reversed by the year 2000. Coastal flooding and crop failures would create an exodus of ‘eco-refugees,’ threatening political chaos.”
The U.N.-forecast disaster never occurred. However, thanks must be given to Mother Nature for the unexpected 17-year pause in global warming rather than the actions of mankind, which have continued to spew out carbon dioxide at record levels. This little error has not stopped the doomsayers at the U.N.
In 2007, the chief of the U.N. Intergovernmental Panel on Climate Change (IPCC) said, “If there’s no action before 2012, that’s too late. What we do in the next two to three years will determine our future. This is the defining moment.” It is now 2014 and nothing was done before 2012, so, since it is “too late,” why spend any more time and money fighting global warming?
On Jan. 19, 2009, James Hansen, climate expert who until last year was head of NASA’s Goddard Institute of Space Studies, firmly declared that President Obama “has only four years to save the Earth”—which you might have noticed he failed to do. [Washington Times, April 21]
The business of predicting catastrophes has a way of outliving the predicted catastrophes. As Rahn points out, predictions of environmental apocalypse, unlike predictions of gradual climate change to which society can adapt, serve the interests of those who want to expand the power of government to command its citizens. And the scientists making those predictions probably imagine they will be the ones advising government how to use such power. That likely explains the appeal of getting in on the game of predicting apocalypse.
And there are more catastrophes to come! Marc Morano has compiled a list of the tipping points, windows of opportunity, and deadlines for action that environmentalists have identified over the decades. You can read “Earth ‘Serially Doomed’: UN Issues New 15 Year Climate Tipping Point – But UN Issued Tipping Points in 1982 & Another 10-Year Tipping Point in 1989!” at Climate Depot (April 16).
Using math to teach passive-aggressive note writing: Stephen Colbert’s take: “Common Core testing prepares our students for what they’ll face as adults: pointless stress and confusion.”
A sign of a death spiral? If you’re in the ObamaCare exchanges, expect higher premiums next year. The reason, explains Grace-Marie Turner, is that the folks in the ObamaCare risk pool don’t look like the folks in a normal health insurance pool:
Pharmaceutical benefit manager Express Scripts found that enrollees in the ObamaCare exchanges are likely to be more expensive than patients in commercial risk pools. Its new study shows that enrollees in federal and state exchanges have a 47% higher use of specialty medications than in commercial plans in general. The rate for HIV medications in ObamaCare exchange plans is four times higher, and the proportion of pain medication prescribed was 35% higher than commercial plans.
While it was to be expected that those with more health needs would have a greater incentive to sign up for coverage, their higher costs will not be offset by the 40% of healthy younger people who the administration needed to enroll and pay disproportionately higher rates for their insurance. Only 28% of enrollees were in the coveted 18-34 age group. [Forbes, April 22]
This result, of course, is the one that you expect when regulations limit insurers’ ability to vary premiums by health status and the penalties for not signing up are small relative to the premiums. In short, it doesn’t pay for the young and healthy to sign up. Of course, higher premiums next year may induce even more healthy people to drop out.
Happy Tax Freedom Day. This year, the average American will work 111 days to earn enough money to pay his 2014 tax bill, making April 21 this year’s Tax Freedom Day. That calculation, done by the Tax Foundation every year, includes federal, state, and local taxes.
This year’s Tax Freedom Day is three days later than last year. That shift reflects the effect of progressive tax rates; as the economy gradually improves, more people pay higher rates. The latest ever Tax Freedom Day was May 1 in 2000.
As the Tax Foundation points out in this chart, the average American this year will pay more in federal, state, and local taxes than he spends on housing, clothing, and food:
Learning from the gun rights movement: Saturday and Sunday we’ll be in Indianapolis at the National Rifle Association’s annual meeting. We’ll be at The Heritage Foundation booth, so if you are in the neighborhood, stop by and say hello. Speaking of the NRA meeting, Jim Geraghty asks a good question:
The past two decades have not been a cavalcade of successes for conservatives. The national debt has grown and exploded, and Americans support a smaller government in the abstract but keep electing lawmakers who love to spend more. There’s little or no stigma left to accepting government assistance, and 108 million Americans now live in a household that included people on “one or more means-tested program.” As Charles Murray noted, the white working class now endures problems on par with poor African-American neighborhoods, with high rates of births out of wedlock, children raised in homes without fathers, higher unemployment, lower church attendance rates. A culture of “delayed adolescence” is taking root, with more than a third of Millennials living with their parents and exceptionally high unemployment rates among the young, delaying the launch of careers and independent, responsible adulthood. After we paid a high price in blood and treasure in Iraq and Afghanistan, the world seems as dangerous and unstable as ever. Our borders are unsecured, and there isn’t even a national consensus that entering the country illegally should be punished with a serious consequence.
And yet, in the middle of all this, the gun-rights movement has won, or is in the process of winning, one of the most substantive, far-reaching, and consequential policy victories in recent memory. They’ve won big at the Supreme Court, and we’ve seen gun-control proposal after gun-control proposal get rejected in the legislatures, state and national. […] What is the gun-rights movement doing right that the rest of the conservative movement can or should emulate? Or is the Second Amendment defenders’ success unique to their issue? [National Review, April 24]
As Geraghty notes in his follow up report, part of the answer is that gun-rights supporters are especially focused on their issue. “But,” he writes: “Charlie Cooke reminded me of another factor: 32 percent of Democrats report having a gun in the home. The divide between the Democratic party’s elites and their grassroots may be sharpest on this issue.” [National Review, April 25]
If You Like Your Home Health Care … Doug-Holtz Eakin points out one impact of ObamaCare that hasn’t been talked about enough, the arbitrary cuts to Medicare’s home health care benefit:
[The Center for Medicare and Medicaid Services (CMS)] has elected to cut Medicare funding for home healthcare by 14 percent over the next four years, ostensibly to pay for the Affordable Care Act. As a line item on a budget spreadsheet, this might seem reasonable. But in reality and as acknowledged by CMS, these cuts will drive approximately 40 percent of all home health agencies into the red by 2017– pushing agencies into bankruptcy, leading to layoffs of direct caregivers, and impacting the care seniors need. It is hardly surprising that earlier this month, the Labor Department reported 3,800 home health jobs were lost in February alone – the largest single-month job loss in the sector in more than ten years.
For decades, skilled home health care has been of great value to the Medicare program because it allows seniors to receive high-quality, coordinated health care in the lowest cost setting – the patient’s own home. Seniors who might otherwise require lengthy and expensive hospital stays or institutional care can receive skilled care for chronic conditions – an area that leaders in Congress have identified as needing improvement.
In addition to having more chronic conditions, home health patients are generally older and poorer than other Medicare populations, and therefore much more vulnerable to the negative consequences of a deep cut in their Medicare benefit. [The Hill, March 27]
ObamaCare gave CMS the option of cutting home health care by as much as 14 percent over four years, but it didn’t require it. The administration chose the deepest cut allowed by law, apparently in order to be able to say that ObamaCare is saving money. One way of controlling costs without arbitrarily cutting services that are vital to beneficiaries would be to transform the entire Medicare program into a defined-contribution, premium support plan that lets seniors decide where they get the best value for their health care dollars. That approach, laid out in The Heritage Foundation’s Saving the American Dream plan (see pages 17-23), wouldn’t put any particular health care provider, service, or delivery model out of business—unless the patients controlling the health care dollars decide they don’t provide enough value.
Images of the week: Where the federal government owns land: These maps, from the National Atlas of the United States, show federal lands controlled by the Bureau of Land Management (yellow), Bureau of Reclamation (red), Department of Defense (pink), the Forest Service (celadon), the Fish and Wildlife Service (orange), the National Park Service (dark green), and the Tennessee Valley Authority (light green).
According to figures from a 2012 Congressional Research Service report, the federal government owns 47 percent of the land in the 11 western states plus 62 percent of the land in Alaska. And those figures don’t include land that the federal government manages but doesn’t own. The federal government owns 81 percent of the land in Nevada. [“Federal Land Ownership: Overview and Data,” by Ross W. Gorte, et al., Congressional Research Service, February 8, 2012]
• Hear Sen. Mike Lee’s ideas on making anti-cronyism an essential part of the conservative growth agenda. Lee will speak at The Heritage Foundation on April 30 at 12:30 p.m.
• Figure out what role Tumblr should play in your online marketing strategy. The Cato Institute’s next New Media Lunch, at noon on May 1, will feature Liba Rubenstein of Tumblr.
• Learn whether Oklahoma should expand Medicaid. The Oklahoma Council on Public Affairs will host a discussion between experts for and against Medicaid expansion. The discussion will take begin at 11:30 a.m. on May 1 at the Oklahoma History Center in Oklahoma City.
• Examine whether intellectual property rights have any role to play in securing a vibrant and innovative Internet. The Hudson Institute will host a panel discussion on whether the Internet and IP rights are friends or foes. The event will begin at noon on May 1.
(Want more stuff to do? Check out InsiderOnline’s Conservative Calendar.)
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