Products that would not exist without subsidies are products that are not worth having. General Motors announced this week that it will cut 15 percent of its work force. Kevin Williamson writes:
Never mind the moral hazard, the rent-seeking, the cronyism and the favoritism, and all of the inevitable corruption that inevitably accompanies multibillion-dollar sweetheart deals between Big Business and Big Government. Set aside the ethical questions entirely and focus on the mechanics: Businesses such as GM get into trouble not because of one-time events in the wider economic environment, but because they are so weak as businesses that they cannot weather one-time events in the wider economic environment. GM's sedan business is weak because GM's sedans are weak: Virtually all of the best-selling sedans in the United States are made by Toyota, Honda, and Nissan. The lower and middle sections of the market are dominated by Asia, and the high end of the market by Europe: Mercedes, Audi, BMW. GM can't compete with the Honda Civic at its price point or with the Audi A7 at its price point. Consumers like what they like, and they aren't buying what GM is selling. It isn't winning in the dino-juice-powered market, in the electric-car market, or in the hybrid market, either: GM is not exactly what you would call a nimble corporation.
So, things are grim for GM.
On the car front, anyway. GM has a much healthier business selling trucks and SUVs, a business that it now will focus its resources on — as it should have done long ago. Why didn't it do that?
In part, because we — you and me, suckers — paid them not to. We were told that we simply must bail out General Motors during the financial crisis because if we failed to, that would lead to a bloodbath of job losses and cascading business failures. But the job losses were always going to come: Paying people to build things that consumers don't really want isn't a sustainable business model. That's a reality you cannot bail your way out of.
[Kevin D. Williamson, "The Bailouts at Ten: I Told You So," National Review, November 28]
Missing a chance to help millions out of poverty. Robert Doar writes:
The last time unemployment was as low as it is now, in 2000, about 6 percent of the American population was on SNAP. And even though SNAP enrollment has declined since its peak in 2013, the enrollment rate (11.9 percent) is still nearly twice what it was 18 years ago. The traditional relationship between unemployment and SNAP enrollment, which tracked very closely between the advent of food stamps and the Great Recession, has not been restored. And labor force participation among working-age adults is still two percentage points lower than it was in 2000.
There are still between 7 and 9 million SNAP recipients who are capable of work and are telling SNAP administrators that they have no earnings. Passing the farm bill without any movement toward encouraging work among this group means that we may be missing the best chance we will have in years to get millions of Americans into earnings and out of poverty.
[Robert Doar, "The Farm Bill: On SNAP, Congress Chooses Welfare over Work Once Again," American Enterprise Institute, November 30]
The real story on whether prison reform can work. Critics of the prison and sentencing reforms in the First Step Act are echoing a claim, attributed to sociologist Robert Martinson, that when it comes to reducing recidivism among prison inmates, nothing works. As John-Michael Seibler writes, the critics are missing the full story of Martinson's research:
Martinson's survey hoped to shed light on what actually worked, but it was so full of "methodological complications"—as Martinson himself wrote in a 1974 essay titled "What Works? Questions and Answers about Prison Reform"—that "one cannot be certain how stable and reliable the various findings are."
The programs that Martinson surveyed suffered from so many disparate problems—ranging from a lack of training or "buy in" among prison officials who were administering them, to inadequate evaluation methods—that ultimately, the researchers concluded that more work was needed.
Yet in the same 1974 essay, Martinson posed the question, "Does nothing work?"
He answered that while he and his colleagues had discovered no silver bullet to reduce recidivism, "it is just possible that some of our treatment programs are working to some extent, but that our research is so bad that it is incapable of telling."
Nevertheless, as corrections expert Jerome G. Miller observed, Martinson's arguments "were enthusiastically embraced by the national press, with lengthy stories appearing in major newspapers, news magazines, and journals, often under the headline 'Nothing Works!'" [...]
In the interest of not maintaining the status quo and expecting different results, consider the part of Martinson's story that many people miss.
The quality of data and research on corrections practices has improved since Martinson's original survey, just as Martinson had hoped they would—and just as they did for the Oakland A's, HR departments, government inspectors, and a myriad of corporations that now rely on data instead of hunches to make better decisions.
In 1979, after studying more anti-recidivism programs, Martinson wrote, "Contrary to my previous position, some treatment programs do have an appreciable effect on recidivism. Some programs are indeed beneficial; of equal or greater significance, some programs are harmful."
Martinson concluded with the following: "The current system of sentencing in the United States must be reformed. … Those treatments that are helpful must be carefully discerned and increased; those that are harmful or impotent eliminated."
[John-Michael Seibler, "Here's What Opponents of Criminal Justice Reform Get Wrong," The Daily Signal, November 29]
More health care options are coming. The Trump administration has proposed a new rule that gives workers more health insurance options. It could, writes Chris Pope, become the first step away from the employer-provided health insurance model.
While only 9 percent of employers offer a health plan with a narrow network, 73 percent of individuals responsible for purchasing their own coverage opt for narrow network plans. These are on average 16 percent cheaper than comparable broad network plans, and are particularly popular with younger enrollees. Not only must broad network plans pay for more expensive doctors and hospitals, they have less leverage to get good deals from relatively low-cost providers. This problem is compounded for self-insured plans, which account for 61 percent of employer-sponsored insurance. Under those plans, insurers merely process claims, and pass on medical costs incurred to employers.
The Affordable Care Act sought to remedy the bias of the tax code towards employer-sponsored insurance by imposing a 40 percent "Cadillac tax" on high-cost healthcare plans. But making employer-sponsored coverage more expensive would do nothing to make insurance more affordable for individuals to purchase, and might instead push millions into public entitlements. The implementation of this tax has rightly been delayed, and is likely to be repealed altogether.
A regulation proposed by the Trump administration attempts a more constructive approach. Acting within the existing tax code, it would allow employers to deposit funds in Health Reimbursement Accounts for individuals to purchase their own preferred health insurance coverage. (Previously, HRA funds could only be used to pay out-of-pocket expenses associated with a group plan.) [...]
The Trump administration's rule allows employers to deposit up to $1,800 in HRAs to subsidize the purchase of plans that are exempt from the ACA's regulations, so long as employers subsidizing HRAs continue to provide the option of a comprehensive benefit package compliant with the ACA's minimal essential coverage requirements. The premiums of the recently deregulated plans average $1,488 per year, compared with $4,716 for ACA-regulated coverage. As such insurance would be portable between jobs, and subject to renewal guarantees, it would also protect individuals from the risk of being disqualified on the basis of having developed a pre-existing condition prior to seeking new coverage associated with a change in employment status.
[Chris Pope, "Should We Move Away from Employer-Sponsored Insurance?" Economics 21, November 30]
The Supreme Court appears ready to put a check on civil asset forfeiture. Jason Snead and Elizabeth Slattery write:
The case at issue involves a man named Tyson Timbs, who sold $225 worth of heroin to undercover police officers on two occasions, as a means of raising money to support his own drug habit. Police arrested Timbs while he was driving to a third drug deal, and he ultimately pleaded guilty.
He was sentenced to a year of home confinement and five years of probation, and assessed roughly $1,200 in court costs and fees. Then the state of Indiana moved to forfeit the vehicle he was driving that day: a $42,000 Land Rover, which Timbs purchased with funds from his father's life insurance policy. [...]
[S]eizing a $42,000 car as an instrumentality in a minor drug offense, the maximum criminal fine for which was $10,000, raised an important question: Was the seizure of Timbs' car unconstitutional under the Excessive Fines Clause of the Eighth Amendment? [...]
When Justice Stephen Breyer asked Fisher whether, under his theory, "a state needing revenue" could forfeit every vehicle found merely to be speeding, Fisher responded, "Yes."
Several justices seemed perturbed by the implication that states and localities would be able to levy otherwise unconstitutional fines merely by saying they are forfeitures.
Many law enforcement agencies already treat forfeiture as an easy means of seizing their way to bigger budgets. Each year, hundreds of millions of dollars in cash and property are forfeited and the revenues subsequently spent with little oversight or accountability.
Timbs' attorney, Wesley Hottot of the public interest law firm the Institute for Justice, picked up on this, arguing that exempting forfeitures from the Excessive Fines Clause would permit "governments at all levels to impose constitutionally excessive civil in rem forfeitures based on nothing more than a label." [...]
[T]he court can—and likely will—hold that the Eighth Amendment's protections against excessive fines are incorporated against the state, leaving the more complicated question of how to define an "excessive" civil forfeiture to another day.
If it does, the court will have delivered a significant victory for the property and due process rights of millions of Americans.
[Jason Snead and Elizabeth Slattery, "The Supreme Court Signals It May Rein in Abusive Property Seizures," The Daily Signal, November 30]
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