The Heritage Insider: Iran gets lots of buck for little of its bang, Dodd-Frank is costing you, do you live in a cartel state or a competitive state? and more
July 25, 2015
Latest Studies
43 new items, including a Mercatus Center report on three things that really will improve the lives of the poor, and a Washington Policy Center report on how a right-to-work law would impact Washington
Notes on the Week
Iran gets lots of buck for little of its bang, Dodd-Frank is costing you, do you live in a cartel state or a competitive state? and more
To Do
Celebrate Milton Friedman
Latest Studies
Budget & Taxation
• A Remedy for the Lone Star State’s Taxpayer Giveaway to Unions – Competitive Enterprise Institute
• State Death Tax Is a Killer – The Heritage Foundation
• The Appropriations Process: Spending Caps Explained – The Heritage Foundation
• The Rand Paul Tax Plan – National Center for Policy Analysis
• A Comparison of the Tax Burden on Labor in the OECD – Tax Foundation
• Better Management of Local Retirement Systems Under State Governance – Texas Public Policy Foundation
Crime, Justice & the Law
• San Francisco’s Private Police Force – Reason Foundation
Economic and Political Thought
• Classical Liberalism: A Primer – Institute of Economic Affairs
Economic Growth
• Does Reserve Accumulation Crowd Out Investment? – American Enterprise Institute
• 14th Annual State Competitiveness Report – Beacon Hill Institute
• Capitalism’s Assault on the Indian Caste System: How Economic Liberalization Spawned Low-caste Dalit Millionaires – Cato Institute
• Automation and Technology Increase Living Standards – The Heritage Foundation
• Hanoi’s Capitalist Revolution – Manhattan Institute
• Breaking Down the Barriers: Three Ways State and Local Governments Can Improve the Lives of the Poor – Mercatus Center
Education
• Showing Up Is Not Enough: Performance-Based Funding in Federal Education Policy – American Action Forum
• Measuring Diversity in Charter School Offerings – American Enterprise Institute
• The Myth About the Special Education Gap – Education Next
Family, Culture & Community
• 2015 Index of Culture and Opportunity: The Social and Economic Trends that Shape America – The Heritage Foundation
Foreign Policy/International Affairs
• The Failings and Structural Irrelevance of the U.N.’s Small-Arms Process – The Heritage Foundation
• The Iran Nuclear Agreement: Yes, There Is a Better Alternative – The Heritage Foundation
• The U.S. Role in Ensuring that Burma’s Fall 2015 Elections Are “Free and Fair” – The Heritage Foundation
• The Value of America’s Southeast Asian Alliances – The Heritage Foundation
• Truth as the Victim of Kerry’s Promise to Iran – The Heritage Foundation
Health Care
• Medicare Advantage Stars: Are the Grades Fair? – American Action Forum
• The Future of America’s Entitlements: What You Need to Know About the Medicare Trustees Report – American Action Forum
Information Technology
• FCC Should Be Clear and Consistent on Effective Competition – Free State Foundation
• Keeping Up with the Market: The Urgent Need for More Spectrum – Free State Foundation
International Trade/Finance
• Opportunities for Small- and Medium-sized U.S. Businesses in the Transatlantic Trade and Investment Partnership – National Center for Policy Analysis
Labor
• Impact of Right-to-Work on the State of Washington – Washington Policy Center
Monetary Policy/Financial Regulation
• Examining Federal Reserve Reform Proposals – American Enterprise Institute
• How Dodd-Frank Harms Main Street – Competitive Enterprise Institute
• 2015 Proxy Season Wrap-Up – Manhattan Institute
National Security
• Terrorist Plot 72: Congress Needs to Address Rising Islamist Terrorism at Home – The Heritage Foundation
Natural Resources, Energy, Environment, & Science
• Keystone XL: A Fiscal Win – American Action Forum
• Environmental Disaster: The Renewable Fuel Standard – Capital Research Center
Natural Resources, Energy, Environment, & Science
• A Q & A on the Mandatory Labeling of Genetically Engineered Foods – The Heritage Foundation
Regulation & Deregulation
• Eight Takeaways From the FTC’s Sharing Economy Workshop – Free State Foundation
Retirement/Social Security
• Compulsory Government Pensions vs. Private Savings: The Effect of Previous Expansion to the Canada Pension Plan – Fraser Institute
The Constitution/Civil Liberties
• Spilled Milk: A Brief History of the Dairy Lobby’s Unwholesome Influence on the U.S. Supreme Court – Reason Foundation
Transportation/Infrastructure
• New Homes and Red Tape: Residential Land-Use Regulation in British Columbia’s Lower Mainland – Fraser Institute
• How to Fix Roads and Bridges without Increasing the Fuel Tax: Reform Federal Highway Policy and Use the Savings for Roads – Mercatus Center
• Truck-Friendly Tolls for 21st Century – Reason Foundation
Welfare
• Private Disability Insurance Option Could Help Save SSDI and Improve Individual Well-being – The Heritage Foundation
Notes on the Week
Iran gets a lot of buck for little of its bang. The short version of the story on the agreement over Iran’s nuclear program is that Iran gets certain benefits relatively quickly in exchange for making promises it has not kept in the past—promises that will now be easier to break because of the agreement. Here is the slightly longer version, from James Phillips, Luke Coffey, and Michaela Dodge:
The Vienna Agreement represents a Faustian bargain in which the Obama Administration agreed to dismantle sanctions and legitimize Iran’s nuclear program in exchange for temporary restrictions on uranium enrichment, greater (but still limited) access for U.N. inspectors and promises to comply with the Nuclear Non-Proliferation Treaty (NPT)—promises that Tehran has repeatedly broken in the past. If Iran reneges on the agreement, as it could easily do since most of its concessions are quickly reversible, the international sanctions regime will be almost impossible to put back in place.
After 15 years, limitations on Iran’s stockpile of enriched uranium are ended, and enrichment activities can be moved outside the Natanz facility and scaled up massively, making it easier and faster to stage a nuclear breakout. If Tehran bides its time it will be in a much better position to make a final sprint to a nuclear arsenal.
Iran’s nuclear expansion will be paid for with the huge financial windfall, estimated at up to $150 billion, which the regime will pocket in sanctions relief when its frozen assets are released, with tens of billions more dollars coming from expanded oil revenues after sanctions are ended. This enormous signing bonus also will be used to strengthen the ayatollahs’ brutal police state, build up its conventional military and ballistic missile forces, and escalate its export of terrorism and subversion. [The Heritage Foundation, July 24]
Richard Epstein with some details on why Iran will not fear the re-imposition of sanctions:
[T]here is no more “snap back” here. Once the sanctions set out explicitly in the agreement are lifted from Iran, they won’t be reinstated any time soon. Gone are the days of anytime, anywhere inspections. In stark contrast, Articles 36 and 37 of the agreement outline a tortuous review process to reinstate any sanctions. First the Joint Commission must act, then the Ministers of Foreign Affairs, and then a nonbinding opinion by a three-member Advisory Board must be issued. If the matter is not resolved to mutual satisfaction after this process runs its course, any participant “could treat the unresolved issue as grounds to cease performing its commitments under this ICPOA.”
Section 37 then contains a murky provision under which the UN Security Council might possibly reimpose sanctions in part. But the entire procedure could take months, and at the end of this process Iran is free to walk if it does not like the outcome. Iran would also know that reassembling the original set of sanctions would be extremely difficult. Putting this agreement in place will likely end collective sanctions irreversibly. [Hoover Institution, July 20]
And, as Peter Huessey points out, the claim that the agreement is needed because the sanctions regime was crumbling and the claim that reimposing the sanctions regime would constitute an effective threat cannot both be true:
If sanctions were unraveling, as the administration claims, why would their re-imposition keep Iran from cheating either within the confines of the interim agreement, the NPT or the new deal? […] If Iran knows the sanctions are going away, then what is their incentive to worry about them once they are gone? [Breaking Defense, July 17]
Where did the idea of religious tolerance come from? Religious tolerance is an American innovation. How did that happen? Larry Schweikart explains:
Do you live in a cartel state or a competitive state? Some states compete for citizens with good policy while other states want to limit that competition by forcing other states to have the same policies they do. The former approach is called competitive federalism while the latter is called policy cartelization. To which camp does your state belong? Michael Greve has sketched out where the states fall on this issue in the map below:
Greve explains how the states are grouped:
The map below shows the states’ positions—competition versus cartel—in three highly salient policy dimensions:
Labor Regulation. Competitive states have right-to-work laws; cartel states do not. (Right-to-work laws are a very good proxy for states’ overall business regulation.)
Affordable Care Act. The ACA’s expansion of Medicaid and its health care exchanges embody a comprehensive cartel regime, financed through federal transfer payments and subsidies. Competitive states opposed the ACA in NFIB v. Sebelius (2012); cartel states supported the act.
Climate Change. “Green” policies entail high-cost production. States that are committed to such policies put themselves at a competitive disadvantage. Thus, their strategy is to raise their competitive (and, typically, energy-producing) rivals’ costs through federal climate change regulation. Competitive states opposed such regulation in Massachusetts v. EPA (2007), Utility Air Regulatory Group v. EPA (2014), or both; cartel states supported federal regulation.
States supporting the competitive position in two or three criteria are shown in light and dark aqua, respectively. States supporting the cartel position are shown in orange. [Mercatus Center, July 20]
The culture matters. Conservatives tend to see the mediating institutions of civil society as playing a vital role in solving society’s problems, whereas liberals tend to believe that the only collective action is government action. Yuval Levin thinks conservatives have the better understanding, which also explains why you should check out the new edition of The Heritage Foundation’s Index of Culture and Opportunity:
Because our most important social institutions are those that are most defined by intergenerational obligations, our most significant social problems are often those that arise at the juncture of the generations: failure of family formation, failure to meet parental obligations, failure to protect the very youngest and the very oldest—the most innocent and vulnerable among our fellow citizens.
Because freedom is ultimately made possible by and exists for the sake of our most direct and personal commitments, the greatest challenges to liberty are challenges to the freedom of action of our institutions of civil society—challenges that are often advanced under the banner of liberating individuals but that actually take the form of restricting dissent and constraining expression and action (as we have seen of late, for instance, in some prominent public battles over religious liberty).
Because liberals tend to ignore the significance of much that happens at the juncture of the generations and much that is done by our mediating institutions, they often find themselves perplexed by the deepest and most enduring social problems we confront—unable to explain the problems’ persistence except by inventing scapegoats to blame and incapable of addressing them except by frantically moving money around in the hope of finding just the right balance of payments to heal our society.
Conservatives, on the other hand, know that explaining the persistence of entrenched, intergenerational poverty—despite half a century of massive public programs to address it—requires taking into account the interconnectedness of the generations and the institutions that make up communities. Conservatives blame neither any malice of the wealthy and powerful nor any failure of will among the poor, but instead the intrinsic inclination of all human beings to fall into self-serving apathy or self-defeating vice in the absence of sound social institutions and norms. Conservatives understand that material poverty and spiritual disorder exacerbate one another in an ever-intensifying spiral of misery that can be broken only by material support and social order—a blend of aid and love that must be delivered in person. A true social safety net has to involve more than a government check.
That is why liberals seeking to describe the most significant challenges our country now confronts tend to resort to abstract portraits of inequality while conservatives point to the key indicators of social health and human flourishing—that is, to the state of American families and of civil society. [2015 Index of Culture and Opportunity, The Heritage Foundation, July 2015]
Dodd-Frank made the big banks more powerful at consumers’ expense. The Dodd-Frank bill (formally known as the Wall Street Reform and Consumer Protection Act) became law five years ago this week. The purpose of the law, coming after the financial crisis of 2008, was to minimize the risk that failures of large banks would require taxpayer bailouts in order to prevent a broader systemic crisis in the banking system. In practice, it has meant even more power for bigger banks and fewer banking options for consumers, as Ian Murray explains:
[Insurers] have proved exceptionally stable over the years, with lifespans far exceeding most banks. They are not particularly interconnected with other financial firms, and are at very low risk of presenting a systemic risk to the financial system.
Why then is the [Financial Stability Oversight Council] designating them as [Systemically Important Financial Institution]’s? As Willie Sutton put it, “because that’s where the money is.” […] Insurers have large amounts of low-risk assets that make for an attractive pool of money. So in the event of an orderly liquidation, anyone with an insurance policy will pay for the process. An April 2013 study by the consultancy Oliver Wyman found that the OLA would raise consumers’ aggregate life insurance premiums from $3 billion to $8 billion a year, with the bulk affecting retirees, who will see their incomes drop. […]
It is, however, small and community banks—Main Street banks—that are suffering the most from Dodd-Frank. Large banks can absorb the costs of burdensome new regulations. […] Smaller banks, however, only have a few compliance staffers. […]
Two thousand community banks and credit unions have closed or merged since 2010. A recent Harvard study found that the rate of decline in community banks as a proportion of the U.S. banking system has doubled since 2010[.] […]
A February 2015 Mercatus Center study found that many such banks have stopped offering home mortgages, home equity lines of credit, overdraft protection, or credit cards. Thanks to the CFPB’s qualified mortgage rule, community bankers can no longer based their loan decisions on what they know about the applicant and instead have to qualify applicants based around a host of consumer “protections” that have caused banks to withdraw from the market altogether. As a result, customers have found their banking choices severely restricted. […]
Other restrictions introduced by Dodd-Frank have compounded the problem. The Durbin Amendment’s caps on the “swipe fees” charged to merchants for use of debit card payment networks have significantly increased the cost of providing debit cards to customers. […] Retail industry groups claim the savings were passed on to consumers. However, David Evans of the University of Chicago Law School and colleagues estimate that only about half of the savings reached consumers, while all of the reduced profits faced by the banks were passed through to their customers in the form of higher fees, resulting in a net present cost to the economy of around $25 billion.
The effect on bank customers has been subtle but visible. The number of free checking accounts decreased considerably, with the number of banks offering free checking halving after the passage of the Durbin Amendment (one of the few bright spots for small banks was their ability to increase free checking because of their exemption from the cap). The average minimum monthly holding requirement for no-fee banking tripled from $250 to $750. Average monthly fees doubled.
The most pernicious effect of these fee increases is that the banking system became too expensive for about a million people—largely from the poorest sectors of society—who have turned to alternative financial services, including prepaid debit cards […], payday lenders, and check cashing shops. [Competitive Enterprise Institute, July 20]
Obergefell threatens religious liberty. Each of the justices who dissented from the majority decision in the marriage case (Obergefell v. Hodges) warned that recognizing marriage as a constitutional right would end up threatening the religious liberties of those who wish to follow the traditional definition of marriage—for example, bakers who believe their faith does not permit them to provide cakes for same-sex weddings.
Justice Thomas, in particular, wrote:
Although our Constitution provides some protection against such governmental restrictions on religious practices, the People have long elected to afford broader protections than this Court’s constitutional precedents mandate. Had the majority allowed the definition of marriage to be left to the political process—as the Constitution requires—the People could have considered the religious liberty implications of deviating from the traditional definition as part of their deliberative process. Instead, the majority’s decision short-circuits that process, with potentially ruinous consequences for religious liberty. [Obergefell v. Hodges, Justice Thomas, Dissenting, June 26]
Now 57 conservative leaders have issued a call to action that highlights the developing threat to religious liberty. The memo, released by the Conservative Action Project, reads in part:
The loss of freedom due to the redefinition of marriage has already been seen in states across the country. State governments have unfairly punished and discriminated against Americans from all walks of life simply for living according to their beliefs in support of man-woman marriage.
Small business owners have been fined for following this belief. Last week, an Oregon Labor Commissioner ordered Aaron and Melissa Klein to pay a fine of $135,000 for declining to bake a same-sex wedding cake. The commissioner also imposed a gag order on the Kleins, ordering them to “cease and desist” discussing their case publicly. The order demonstrates that this assault on our most essential freedoms will not stop with the free exercise of our religion; it endangers the freedom of speech as well. States have even shut down long standing adoption and foster care providers for not sharing the government’s view of marriage. These are only a few examples. By inventing a constitutional “right” to same-sex “marriage,” the Court has opened the door wide to more severe forms of discrimination against those who believe in natural marriage. The dissenting justices explain very clearly what we must now prepare for: a majority opinion that “will be exploited by those who are determined to stamp out every vestige of dissent.”
We commit ourselves to the work of ensuring that the government never penalizes or discriminates against anyone simply for believing what President Obama believed about marriage just three years ago.
The Constitution guarantees the freedom of speech, association, and religion for every American, but those freedoms will now collide with a Supreme Court ruling that places demands on Americans who continue to abide by the truth of marriage as the union of man and woman. [Conservative Action Project, July 10]
There’s a headstone cartel! New Jersey has one, anyway. The Institute for Justice is fighting it:
To Do: Celebrate Milton Friedman
• Celebrate Milton Friedman’s 103rd birthday. The father of school choice will be celebrated around the country by many free markets groups, including the Center of the American Experiment (6:30 p.m. to 8:30 p.m. on July 28 at the Brookview Golf Course in Golden Valley, Minn.); the Georgia Public Policy Foundation (11:30 a.m. to 1:30 p.m. on July 29, at Vics on the River in Savannah); the Rio Grande Foundation (7:30 a.m. on July 31 at the Albuquerque Museum); the Pioneer Institute (8 a.m. to 10:30 a.m. on July 31 at Metro Meeting Centers in Boston); the Mackinac Center (9 a.m. on July 31 at the Herbert D. Doan Welcome Center in Midland, Mich.); the Yankee Institute for Public Policy (11:30 a.m. on July 31 at the Sheraton Stamford); the Maine Heritage Policy Center (11:30 a.m. on July 31 at DeMillo’s on the Water in Portland, Maine); the John Locke Foundation (noon on July 31 at the John Locke Foundation in Raleigh, N.C.); and the Grassroot Institute of Hawaii (6:30 p.m. to 8:30 p.m. on July 31 at the Manoa Grand Ballroom in Honolulu).
• Students, learn how to become an effective advocate of conservative ideas. The Young America’s Foundation’s 37th Annual National Conservative Student Conference will show you how to improve your club’s reach on campus, teach you how to talk to your classmates about conservative principles, and give you an opportunity to meet like-minded allies from other schools around the country. Plus you’ll get to hear the biggest conservative stars. July 27 to August 1 at George Washington University’s Cloyd Heck Marvin Center.
• Say hurrah for the Magna Carta. Danniel Hannan, Member of the European Parliament for the United Kingdom, and A.E. Dick Howard, professor of law and public policy at the University of Virginia Law School, will offer their thoughts on the Great Charter of Liberties signed 800 years ago by King John. 5 p.m. to 7 p.m. on July 29 at The Heritage Foundation.
• Examine the threat posed by China’s military modernization. Rep. Randy Forbes (R-Va.) and former Sen. Jim Talent (R-Mo.) will have a conversation about what an effective U.S. pivot to Asia would look like. 11:45 a.m. on July 29 at the American Enterprise Institute.
• Find out if the Vienna agreement will contain Iran. Sen. Tom Cotton (R-Ark.) will give his views on how the proposed inspection regime would work and what Iran’s capabilities will be when the agreement expires. 11:45 a.m. on July 28 at the Hudson Institute.
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