Raiders of the Lost Ark (Again)

February 15, 2013

Latest Studies: 72 new items, including a Kansas Policy Institute report on streamlining Kansas government, and a National Center for Policy Analysis report on how entrepreneurs could solve Medicare’s problems

Notes on the Week: Obama’s higher minimum wage will hurt the poor and help unions, religious liberty is easier to preserve when you don’t have to ask for a religious exemption, and more

To Do: Hear how the battle for religious liberty is going

Latest Studies

Budget & Taxation

• Official Time: Taxpayers Paying for Union Work Is Officially a Scam – Capital Research Center
• The Wages of Sin Taxes – Competitive Enterprise Institute
• Are We Underestimating the Social Security Shortfall? – e-21: Economic Policies for the 21st Century
• Ten Things the Latest CBO Report Tells Us About Federal Finances – e-21: Economic Policies for the 21st Century
• The Rising Cost of Teachers’ Health Care – Education Next
• Budget Cuts Would Not Harm the Economy – The Heritage Foundation
• How the United States’ High Debt Will Weaken the Economy and Hurt Americans – The Heritage Foundation
• America’s Favorite Golfer Gets Fleeced – Hoover Institution
• Obamacare’s Fiscal Nightmare – Hoover Institution
• The End of Charity? – Hoover Institution
• Significant Tax Changes in 2013 – Independent Women’s Forum
• How Privatization Can Streamline Government, Improve Services, and Reduce Costs for Kansas Taxpayers – Kansas Policy Institute
• New York’s Sandy Scorecard – Manhattan Institute
• The Pension Fund That Ate California – Manhattan Institute
• Delaware’s Public Employees’ Retirement System – Mercatus Center
• Sin Taxes: Size, Growth, and Creation of the Sindustry – Mercatus Center
• Soaking the Rich – Reason Foundation
• CBO Overly Optimistic about Economic Growth and the Federal Debt – Tax Foundation
• Maine Governor Sneaks Subtle Income Tax Hike into Budget; Suspends Funding to Local Governments – Tax Foundation
• State and Local Sales Tax Rates in 2013 – Tax Foundation

Crime, Justice & the Law

• Budget Analysis: Next Steps for Effective and Efficient Juvenile Justice – Texas Public Policy Foundation
• American Express Co. v. Italian Colors Restaurant – Washington Legal Foundation
• CLS Bank Int’l v. Alice Corp.: Clearer Software Patent Guidance? – Washington Legal Foundation
• Iskanian v. CLE Transportation: Will California Fall In Line On Class-Wide Arbitration Waivers? – Washington Legal Foundation
• Warning: Alabama Court’s Blame-Shifting Pharma Decision Will Have Serious Side Effects – Washington Legal Foundation

Economic and Political Thought

• Washington’s Birthday – American Enterprise Institute
• The Disenfranchisement of Rural America – Hoover Institution

Economic Growth

• Addressing Russia’s Mounting Human Resources Crisis – American Enterprise Institute
• Killing the Economic Engine: Is Policy Uncertainty Stalling US and Canadian Economic Growth? – Fraser Institute
• The Texas Growth Machine – Manhattan Institute

Education

• Cage-Busting Leadership and the ‘Culture of Can’t’ – American Enterprise Institute
• Counting on Character – American Enterprise Institute
• The ABCs of School Choice – Friedman Foundation for Educational Choice
• Taught to Be Evil – Hoover Institution

Elections, Transparency, Accountability

• Lawyers’ Committee for Civil Rights (but Not Equal Rights) Under Law – Capital Research Center

Foreign Policy/International Affairs

• Tribal Miltias in Yemen: Al Bayda and Shabwah – American Enterprise Institute
• China’s Xi Jinping’s New Hard Line and the U.S.–Japan Alliance – The Heritage Foundation
• United Nations Peacekeeping Mission in Mali: Only After Stability Is Restored – The Heritage Foundation
• The Coming War in the Middle East – Hoover Institution

Health Care

• Health Insurance Exchanges Explained – Independent Women’s Forum
• How Entrepreneurs Could Solve Medicare’s Problems – National Center for Policy Analysis

Immigration

• A Blueprint for Immigration Reform – Center for Immigration Studies
• Amnesty for Illegal Immigrants and the Employment Picture for Less-Educated Americans – Center for Immigration Studies
• Immigration and Obamacare – Center for Immigration Studies
• Should Immigrants Pay at the Gate? – Hoover Institution
• The Economic Benefits of Immigration – Manhattan Institute

Information Technology

• Obama’s Cybersecurity Executive Order Falls Short – The Heritage Foundation

Labor• Unions vs. Our Kids – Hoover Institution

Monetary Policy/Financial Regulation

• Bad History, Worse Policy: How a False Narrative about the Financial Crisis Led to the Dodd-Frank Act – American Enterprise Institute
• Evaluating Risk-Based Capital Regulation – Mercatus Center

National Security

• Mass and Supremacy – American Enterprise Institute
• The Second Quadrennial Homeland Security Review: Setting Priorities for the Next Four Years – The Heritage Foundation

Natural Resources, Energy, Environment, & Science

• Using Marginal Damages in Environmental Policy: A Study of Air Pollution in the United States – American Enterprise Institute
• The Great Gator Hoax – Capital Research Center
• U.S. Natural Gas Exports: Lift Restrictions and Empower the States – The Heritage Foundation
• Institutional Choices for Regulating Oil and Gas Wells – Hudson Institute
• Growing California’s Agriculture – Pacific Research Institute

Regulation & Deregulation

• The Intersection of Regulation and Manufacturing – American Action Forum
• A Process for Cleaning up Federal Regulations – Mercatus Center
• Does Competitive Electricity Require Capacity Markets?: The Texas Experience – Texas Public Policy Foundation

Retirement/Social Security

• Understanding Social Security Benefit Adequacy: Why Benefit Growth Should be Slowed – e-21: Economic Policies for the 21st Century

Notes on the Week

Yes, ObamaCare’s Medicare cuts do hurt seniors. Remember when Soledad O’Brien told John Sununu that ObamaCare’s cuts to Medicare ($716 billion over 10 years) were not real cuts because they wouldn’t lead to a reduction in the services and benefits that seniors would receive? Ahem. Bob Moffit observes that hospice care providers are already responding to the $17 billion in Medicare payment cuts they expect over the next 10 years:

San Diego Hospice recently laid off 260 workers, closed a 24-bed hospital, and has recently filed for Chapter 11 bankruptcy. San Diego Hospice’s financial condition is attributed mainly to reduced Medicare reimbursement, fewer patients, and a federal audit that hurt the center’s reputation.

Another provider, Delaware Hospice, had to lay off 52 workers, citing lower federal reimbursement as the cause. “The decision,” said CEO Susan Lloyd, “is a direct result of a consequential decline in census and the need to position the organization to meet additional changes and challenges that the hospice industry anticipates with health care reform.”

“There’s a bit of a squeeze going on,” said Theresa M. Forster, vice president for hospice policy and programs at the National Association for Home Care & Hospice. “Hospices have to do more with less, and you can see how that could take its toll over time.”

Moffitt continues:

Recall that both the actuary of the Centers for Medicare and Medicaid Services and the Medicare trustees projected that Obamacare’s cuts would cause 15 percent of Part A providers to become unprofitable by 2019 and (if the reimbursement rates stay at Obamacare levels) 40 percent by 2050. [ The Foundry, February 12]

If, because of payment reductions, the services seniors were expecting become unavailable, what good does it do them to say the benefits are still covered? As Moffit observes, a better way of controlling Medicare spending would be to unleash the forces of competition and consumer choice, which have improved quality and lowered prices in every area of the economy where they have been allowed to work.

The President wants government to be bigger still. The President’s state of the union address contained proposals that would increase government spending by at least $83 billion per year, calculates the National Taxpayers Union. The costly proposals include combating global warming with a cap-and-trade plan ($56.5 billion per year); Obama’s mini-stimulus bill, the American Jobs Act ($15.3 billion per year); and infrastructure repair ($7.8 billion per year). NTU also says the President’s speech contained 40 proposals with fiscal impacts that could not be calculated. [ National Taxpayers Union, February 13]

But it won’t increase the deficit one dime, he says.

Obama’s higher minimum wage will hurt the poor and help the unions. In his State of the Union address Tuesday, President Obama said the national minimum wage should be raised to $9 per hour. Hey, why not $500 per hour? Wouldn’t an even higher minimum wage raise standards of living even more?

The economy doesn’t work that way. No worker gets a raise just because the government sets a higher minimum. He gets a raise if his employer thinks his labor is worth the higher wage. If his labor isn’t worth the legal minimum wage, then the employer is going to pay him nothing, because he won’t employ the worker. The real minimum wage is zero. The higher the legal minimum wage, the larger the number of people who can’t be employed legally at a wage employers are willing to pay.

In a paper published last year, Mark Wilson reports that most empirical research over the last 70 years confirms that minimum wage increases reduce employment among low-wage, low-skilled workers. Wilson writes:

Evidence of employment loss has been found since the earliest implementation of the minimum wage. The U.S. Department of Labor’s own assessment of the first 25-cent minimum wage in 1938 found that it resulted in job losses for 30,000 to 50,000 workers, or 10 to 13 percent of the 300,000 covered workers who previously earned below the new wage floor. […]

Following passage of the federal minimum wage in 1938, economists began to accumulate statistical evidence on the effects. Much of the research has indicated that increases in the minimum wage have adverse effects on the employment opportunities of low-skilled workers. And across the country, the greatest adverse impact will generally occur in the poorer and lower-wage regions. In those regions, more workers and businesses are affected by the mandated wage, and businesses have to take more dramatic steps to adjust to the higher costs.

As an example, with the original 1938 imposition of the minimum wage, the lower-income U.S. territory of Puerto Rico was severely affected. An estimated 120,000 workers in Puerto Rico lost their jobs within the first year of implementation of the new 25-cent minimum wage, and the island’s unemployment rate soared to nearly 50 percent.

Similar damaging effects were observed on American Samoa from minimum wage increases imposed between 2007 and 2009. Indeed, the effects were so pronounced on the island’s economy that President Obama signed into law a bill postponing the minimum wage increases scheduled for 2010 and 2011.

But minimum wages do help some workers—union workers. As James Sherk explains, most companies can substitute high-wage/high-skill labor for low-wage/low-skill labor. Higher minimum wages tend to reduce the competition between those two groups of workers, leading to even higher wages for the high-wage/high-skill workers—who tend to be unionized workers. Sherk writes:

This is not just a theoretical argument. Researchers have found that this is what happens when the minimum wage rises. Using data from government surveys, economists at the Federal Reserve and the University of California-Irvine examined how past increases in the minimum wage affected the earnings of both low-income and unionized workers.

They found that increasing the minimum wage had few statistically significant effects for unionized workers who earn well above the minimum wage. For example, United Auto Workers members in Detroit who earn $75 an hour do not usually perform work that could be done by any number of unskilled workers. But the minimum wage significantly increases the earnings of union members who compete with low-skilled workers for jobs. The researchers estimated that if the minimum wage were hiked 40 percent, unionized workers who earn between the minimum wage and twice the minimum wage could see their earnings rise between 20 and 40 percent. The evidence shows that a higher minimum wage unambiguously helps union members. [Internal citations omitted.] [“ Union Members, Not Minimum-Wage Earners, Benefit When the Minimum Wage Rises,” by James Sherk, The Heritage Foundation, February 7, 2007]

A flat tax lesson from the Bible: That’s what Ben Carson, director of pediatric neurosurgery at Johns Hopkins, provided when he addressed the National Prayer Breakfast last Thursday:

What we need to do is come up with something simple. And when I pick up my Bible, you know what I see? I see the fairest individual in the universe, God, and he’s given us a system. It’s called a tithe.

We don’t necessarily have to do 10% but it’s the principle. He didn’t say if your crops fail, don’t give me any tithe or if you have a bumper crop, give me triple tithe. So there must be something inherently fair about proportionality. You make $10 billion, you put in a billion. You make $10 you put in one. Of course you’ve got to get rid of the loopholes. Some people say, “Well that’s not fair because it doesn’t hurt the guy who made $10 billion as much as the guy who made 10.” Where does it say you’ve got to hurt the guy? He just put a billion dollars in the pot. We don’t need to hurt him. It’s that kind of thinking that has resulted in 602 banks in the Cayman Islands. That money needs to be back here building our infrastructure and creating jobs. [as quoted in the Wall Street Journal, February 8]

Maybe the National Prayer Breakfast isn’t the time and place for a lecture on public policy. On the other hand, is there another time and place when Washington’s governing class would have been interested in hearing this kind of argument?

Marriage fights poverty. National Marriage Week ended February 14, AKA Valentine’s Day. One thing to remember year-round is that, as Andrew Walker notes, there is a strong link between being married and staying out of poverty:

In recent years, the percentage of intact households has been in steady decline. Nearly 80 percent of all adults were married in 1980. Today, that number has fallen to 52 percent. Combine that with the fact that 41 percent of children in America are born outside of marriage. The number tragically climbs to 71 percent in the African American community.

The collapse of marriage correlates strongly with child poverty. Parents who forgo marriage increase the likelihood that their children will experience some aspect of poverty. A child raised outside of marriage is six times more likely to experience poverty than a child who grows up in an intact family, and 71 percent of poor families with children are headed by single parents. By contrast, 73 percent of all non-poor families with children are headed by married couples. [ The Foundry, February 12]

Gun shows aren’t the problem. The enthusiasm for background checks for gun-show sales is either misguided or disingenuous, contends Robert Levy:

Survey data indicate that less than 2 percent of guns used by criminals are bought at gun shows and flea markets—and that includes sales through licensed dealers. Still, the New York Times editorializes that background checks “prevented nearly two million gun sales” over a 15-year period. Of course, that’s ridiculous; there is no way for the Times to determine how many sales did not happen. Violence-prone buyers who do not pass the background check go elsewhere for their purchases.

Here are the figures for a recent year: The National Instant Criminal Background Check System (NICS) denied 79,000 would-be buyers. Of those, 105 were prosecuted and 43 were convicted. That’s a conviction rate of 5/100ths of one percent. Either the remaining denials were false positives – legitimate purchases unjustly blocked by NICS – or, if the denials were proper, then 99.95 percent of the 79,000 rejected applicants escaped punishment. Neither conclusion offers much hope for an expanded system of background checks.

Further, the claim that background checks take just a few minutes to process on the telephone is disingenuous at best. A significant number of checks last 72 hours, and most gun shows are two-day events. The intent of requiring checks for private sales may be to drive gun shows out of business. Indeed, existing delays and the large number of false positives have reduced gun shows by about 14 percent. Some say that’s a good thing. But they know that a law banning gun shows would not pass constitutional muster; so they try to accomplish the same thing through the backdoor. [ National Law Journal, February 11]

It’s easier to preserve religious liberty, when you don’t have to ask for a religious exemption. Conflicts between government edicts and religious liberty—such as the battle over the Department of Health and Human Service’s contraception mandate—are a danger whenever government takes over a significant part of the economy, explains Ilya Shapiro:

As my colleague Roger Pilon has written , when health care (or anything) is socialized or treated as a public utility, we’re forced to fight for every “carve-out” of liberty. Those progressive Catholics who supported Obamacare, or the pro-life Democrats who voted for it, who are now appalled by certain HHS rules should have thought of that before they used the government to make us our brother’s keeper.

The more government controls — whether health care, education, or even marriage — the greater the battles over conflicting values. With certain things, such as national defense, basic infrastructure, clean air and water and other “public goods,” we largely agree, at least inside reasonable margins. But we have vast disagreements about social programs, economic regulation and so much else that government now dominates at the expense of at the expense of individual liberty. Those supporting Wheaton and Belmont Abbey Colleges and Hobby Lobby are rightly concerned that people are being forced to do what their religious beliefs prohibit. But that all comes with the collectivized territory.

If you value religious liberty, then you should be wary of collectivizing economic choices more generally.

To Do: Hear How the Battle for Religious Liberty Is Going

• Get a report from the front lines in the fight for religious liberty. Adele Keim of the Becket Fund, Kellie Fiedorek of the Alliance Defending Freedom, and Ken Klukowski of the Family Research Council will speak at the Family Research Council at noon on February 20.

• Hear Peter Wallison talk about his new book Bad History, Worse Policy: How a False Narrative about the Financial Crisis Led to the Dodd-Frank Act. Wallison will speak at the American Enterprise Institute at 12:15 p.m. on February 19.

• Learn how the underrated Silent Cal Coolidge was really one of the most eloquent voices defending the principles of the American Founding against the progressive onslaught. Amity Shlaes will talk about her new book Coolidge at The Heritage Foundation at noon on February 20.

• Future religious leaders, put the Toward a Free and Virtuous Society Conference on your calendar. The conference explores “the nature of the human person and the created order from the perspectives of Scripture and natural law, examining concepts such as justice, equality, stewardship, and virtue,” and focuses on “applying the principles of economic liberty to complex issues such as poverty, welfare reform, and globalization.” The Acton Institute will host the conference, which runs February 28 to March 3 in Bandera, Texas.