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Economic Freedom

Big Minimum Wage Hikes Harm Those They Are Intended to Help. Make These Reforms Instead.

By Peter CoveRealClear Policy

In 2017, Target announced it would raise its minimum wage to $15 an hour by the end of 2020, drawing praise from labor advocates who have called for other retailers to pay their employees a “living wage.”

But the new wage hike isn’t all it cracked up to be. Harry Holzer, in a 2016 Time Magazine article argued that “most minimum wage earners are not poor adults. They are, instead, young people (ages 16 to 24) or second earners in families where a spouse has a higher-wage job. So minimum wage increases help some poor heads of households, but are not well-targeted on them.”

Then there is this. A  new report by CNN BUSINESS, found the big-box retailer has been slashing employees’ hours since the announced wage hike. So have TJMAXX, Marshalls, The Gap and Old Navy, and fast food chains such as Burger King. Nearly half of D.C. employers said they have laid off workers, and reduced hours due to a minimum wage hike

Heidi Shierholz, who was the chief economist at the Labor Department during the Obama Administration, said the wage hike is being counter-attacked by the company slashing employees’ hours, “Most workers aren’t getting any more of what they really need.”

Since the wage increase, Whole Food employees have told reporters that they have experienced widespread cuts that have reduced schedule shifts across many stores, often negating wage gains for employees. Further, companies often move to a nearby city or state to avoid the increase.

And that’s not all. A recent study suggests minimum wage hikes lead to automation replacing low-skill workers’ jobs. In New York City, the rise had people in a panic fearing the loss of other government subsidies, such as section 8 housing due to the added income.  

Few would argue that finding a way to create living wages is a bad idea. But the unintended consequences of large raises in the minimum wage are clearly not worth the price. Here is a better way.

We now have a successful, if limited, device to raise wages without interfering in the marketplace. It is the Earned Income Tax Credit (EITC).  It is a refundable tax credit for low- to moderate-income working individuals and couples, particularly those with children. Many states already have state EITC’s, which further expand total income for a household. Critically, the EITC encourages work since the credit is only available to those with earned income.

  • The EITC reached 28.5 million tax filers in 2014. Under the 2015 tax rules, a single taxpayer is eligible for an EITC if he or she has an annual income up to $39,131 and if they claim one child as a dependent, up to $44,454 with two children, and $47,747 with three or more children. The refund available from the EITC can be as much as 45 percent of a family’s pre-tax income;
  • The benefits of the EITC have been shown to extend to maternal and children’s health, as well as to children’s development.

What needs to be done is to expand the EITC for single and childless couple workers. Also the 2009 changes in the EITC that reduced the marriage penalty and increased the credit for households with three or more children should be made permanent. These changes combined with a refundable child tax credit could be the basis of a broad wage supplement program. Finally, a reform should be instituted so that the EITC comes on a weekly or bi weekly basis, not the following year.

Holzer wrote that “when the minimum wage increases are moderate in size — up to, say, $10 an hour — such employment losses are very small, so the likely tradeoff between higher wage levels and lower employment becomes worthwhile.”

But when the minimum rises so dramatically, we will likely see much larger employment losses among young or low-income workers. The hard truth is that too many of them have too few skills to merit such high wages, at least in the eyes of prospective employers. Some (particularly immigrants) might instead be hired off the books, and paid in cash, while many more will lose employment entirely”.

Proposals such as those suggested by Isabel Sawhill and Quentin Karpilow along with Holzer combine a modest increase in minimum wage with revisions to the EITC.  This may be the best alternative to large increases in the minimum wage. 

The tsunami of minimum wage hikes comes from a well intentioned benevolence. Its results have been disastrous for the very people they were intended. A small increase in minimum wage combined with smart revisions to the EITC will benefit low wage earners without marketplace disruption and harm to the working poor.


Study: Free College Plans Leave Vast Majority Worse Off

'Over 86% of all households would lose' from free tuition policies

By Yuichiro KakutaniThe Washington Free Beacon

The “free” college plans touted by Sen. Elizabeth Warren (D., Mass.) and other Democratic presidential hopefuls will require radical tax hikes and leave 86 percent of American households worse off, a recent study found.

Warren and Sen. Bernie Sanders (I., Vt.) often promise tuition-free higher education and student debt cancellation on the campaign trail. However, a National Bureau of Economic Research study conducted by University of Wisconsin researchers found that free college translates to a hollowed-out higher education system that leaves many Americans worse off.

Researchers simulated two scenarios: one in which the federal government forces states to adopt tuition-free public colleges and another in which it provides subsidies to encourage states to do so. They calculated how each plan would affect the welfare of American households. The welfare function was derived from, among other things, the positive and negative impacts of higher tax rates and lower education costs.

“Over 86% of all households would lose while about 60% of the lowest income quintile would gain from such policies,” the study found.

In both scenarios, the free tuition policy benefited a group of the poorest Americans at the expense of everyone else. For the vast majority of U.S. households, any benefit derived from a free college plan was outweighed by its negative consequences.

Sens. Warren and Sanders, as well as former Obama official Julián Castro, want to make public college free for all Americans. Other presidential candidates, including South Bend mayor Pete Buttigieg and Rep. Tulsi Gabbard (D., Hawaii), backed a less ambitious plan that removed tuition costs only for middle- and low-income families.

Such proposals could end up hurting students before they get to college. For example, Warren said she would pay for her free-tuition plan by levying an up to 2 percent wealth tax on “ultra-millionaires.” She claims in her policy plan that states will split the cost of college tuition with the federal government but still “maintain their current levels of funding” for academic instruction even after her plan is implemented.

Warren’s plan would force state governments to withdraw resources from public K-12 education to fund the free college program, worsening the overall quality of education students receive before college. The lower education quality, along with higher tax rates, would contribute to a decline in welfare for U.S. households, according to researchers.

“The idea of ‘free’ public colleges is politically seductive. But of course a college education can’t actually be free—someone must pay for it,” the study said. “Allocating additional resources to the college stage may be self-defeating if this entails a reduction of public expenditure in the earlier stages.”

Some scholars, however, argue that lower per-pupil costs do not necessarily lead to lower education quality, but may reflect a more efficient school system. Analysts at the Heritage Foundation found that D.C. public school students drastically underperformed despite the district spending nearly double the national average per pupil.

Other academics have found flaws in existing free college programs. A Harvard University study found that a Massachusetts tuition-free college program for high-performing students actually lowered the students’ college completion rate, complicating claims from 2020 Democrats that their education plans would allow more students to graduate.


Elizabeth Warren’s Untenable Plans

If you’ve been having trouble finding someone to walk your dog, don’t worry. Any day now, Elizabeth Warren will announce “a plan for that.” It will undoubtedly be comprehensive, detailed, and replete with subsidies for lower- and middle-class dog walkers and underserved breeds. It will cost tens of billions of dollars and will receive widespread positive notice from the media. However, to judge by her other recent plans, the one thing it won’t include is any discussion of how she plans to pay for it.

The Massachusetts senator has challenged and possibly overtaken former vice president Joe Biden as the front-runner for the Democratic nomination, largely based on having a plan for the government to tackle every problem facing this country, no matter how big or how small, from issues with military housing to Puerto Rican debt to climate change.

The price tag for this massive expansion of government is enormous. Much of the attention in recent weeks has been focused on Warren’s embrace of Medicare for All, which she refuses to admit would require an increase in middle-class taxes. Even Vermont senator Bernie Sanders has conceded that such proposals, which would cost $30–40 trillion over 10 years, cannot be financed without tax hikes. Warren’s refusal to address this obvious fact makes her look less like a would-be policy wonk and more like a typical politician.

But even setting aside Medicare for All, Warren’s plans are likely to dump oceans of red ink onto our growing national debt. Her non-health-care spending proposals already total some $7.5 trillion per year over the next 10 years. Although these are not quite Bernie levels of government largesse, her proposals would still require nearly double our current levels of spending.

To pay for all this, Warren proposes a variety of tax hikes, mostly designed to hit corporations or high-earners: higher payroll taxes for those earning more than $250,000 per year; a 7 percent profits tax on companies earning more than $100 million; a 60 percent lobbying tax on firms that spend a million or more on lobbying, and so forth. But the biggest chunk of money would come from Warren’s proposed “wealth tax,” a 2 to 3 percent levy on net worth above $50 million. Warren estimates that this wealth tax will pull in more than $2.75 trillion over ten years. It won’t.

First, there is the slight problem that a wealth tax is probably unconstitutional. Of course, constitutional constraints are quaint notions in the Age of Trump. Regardless, it is worth noting that the Constitution permits the federal government to impose only “direct taxes,” such as a property tax. That’s why it required a constitutional amendment to enact the federal income tax. Many constitutional scholars warn that a wealth tax is neither a direct tax nor income tax.

Even if Warren can find a way around the constitutional guardrails — perhaps by something such as a retrospective wealth tax in which you wait until a taxpayer sells assets or passes away — a wealth tax is unlikely to raise anywhere near the amount of money she predicts.

Simply look at Europe’s experiments with wealth taxes. At one time, a dozen European countries imposed wealth taxes. Today, all but three have abandoned those levies. Among those repealing their wealth tax are the Scandinavian social democracies that Warren admires, Denmark, Finland, and Sweden. Norway retains a wealth tax but has significantly reduced it in recent years. Additional countries abandoning the tax include Austria, France, Germany, Iceland, Ireland, Luxembourg, and the Netherlands. Other countries, such as Great Britain, have considered wealth taxes and rejected them.

They did so because wealth taxes are administratively complex and difficult to enforce. Also, they significantly reduce investment, entrepreneurship, and, ultimately, economic growth. According to the Organization for Economic Cooperation and Development, European wealth taxes raised, on average, only about 0.2 percent of GDP in revenues. By comparison, the U.S. federal income tax raises 8 percent of GDP.

Two groups, however, would benefit substantially from a wealth tax. The tax would be a full-employment opportunity for the tax-preparation industry and for lawyers. After all, we would now have to determine fair market value for everything from homes and vehicles to artwork and jewelry to family pension rights and intellectual property. The other big winner would be lobbyists, who could be expected to descend on Washington en masse seeking exemptions and exceptions for their clients. If you think the tax code is a mess today, just wait until D.C. is done with Warren’s plan.

There is an old Yiddish proverb that goes “Mann tracht, un Gott Lacht,” or “Man plans, and God laughs.” It is all well and good that Senator Warren has a plan for everything. But until she actually figures out how to pay for everything without crippling our economy, such plans really don’t add up


Nonpartisan Report: Medicare For All Would More Than Double Your Taxes And Bankrupt The Nation

An individual earning near the national median at $50,000 a year would pay more than $17,450 more per year in taxes to fund Democrats’ Medicare for All proposal. That’s not even half of it.

By Christopher JacobsThe Federalist

Democratic candidates for president continue to evade questions on how they will pay for their massive, $32 trillion single-payer health care scheme. But on Monday, the Committee for a Responsible Federal Budget (CRFB) released a 10-page paperproviding a preliminary analysis of possible ways to fund the left’s socialized medicine experiment.

Worth noting about the organization that published this document: It maintains a decidedly centrist platform. While perhaps not liberal in its views, it also does not embrace conservative policies. For instance, its president, Maya MacGuineas, recently wrote a blog post opposing the 2017 Tax Cuts and Jobs Act, stating that the bill’s “shortcomings outweigh the benefits,” because it will increase federal deficits and debt.

That centrist position makes CRFB’s analysis of single payer all the more devastating, because one cannot write it off as coming from a right-wing group. And its analysis is devastating, carrying it three main messages, as follows.

Everyone’s Taxes Will Go Up—a Lot

Consider some of the options to pay for single payer CRFB examines, along with how they might affect average families.

A 32 percent payroll tax increase. No, that’s not a typo. Right now, employers and employees pay a combined 15.3 percent payroll tax to fund Social Security and Medicare. (While employers technically pay half of this 15.3 percent, most economists conclude the entire amount ultimately comes out of workers’ paychecks, in the form of lower wages.) This change would more than triple current payroll tax rates.

Real-Life Cost: An individual earning $50,000 in wages would pay $8,000 more per year ($50,000 times 16 percent), and so would that individual’s employer.

A 25 percent income surtax. This change would apply to all income above the standard deduction, currently $12,200 for individuals and $24,400 for families.

Real-Life Cost: An individual with $50,000 in income would pay $9,450 in higher taxes ($50,000 minus $12,200, times 25 percent).

A 42 percent Value Added Tax (VAT). This change would enact on the federal level the type of sales/consumption tax that many European countries use to support their social programs. Some proposals have called for rebates to some or all households, to reflect the fact that sales taxes raise the cost of living, particularly for poorer families. However, using some of the proceeds of the VAT to provide rebates would likely require an even higher tax rate than the 42 percent CRFB estimates in its report.

Real-Life Cost: According to CRFB, “the first-order effect of this VAT would be to increase the prices of most goods and services by 42 percent.”

Mandatory Public Premiums. This proposal would require all Americans to pay a tax in the form of a “premium” to finance single payer. As it stands now, Americans with employer-sponsored insurance pay an average of $6,015 in premiums for family coverage. (Employers pay an additional $14,561 in premium contributions; most economists argue these funds ultimately come from employees, in the form of lower wages—but workers do not explicitly pay these funds out-of-pocket.)

Real-Life Cost: According to CRFB, “premiums would need to average about $7,500 per capita or $20,000 per household” to fund single payer. Exempting individuals currently on federal health programs (e.g., Medicare and Medicaid) would prevent seniors and the poor from getting hit with these costs, but “would increase the premiums [for everyone else] by over 60 percent to more than $12,000 per individual.”

Reduce non-health federal spending by 80 percent. After re-purposing existing federal health spending (e.g., Medicare, Medicaid), paying for single payer would require reducing everything else from the federal budget—defense, transportation, education, and more—by 80 percent.

Real-Life Cost: “An 80 percent cut to Social Security would mean reducing the average new benefit from about $18,000 per year to $3,600 per year.”

The report includes other options, including an increase in federal debt to 205 percent of gross domestic product—nearly double its historic record—and a more-than-doubling of individual and corporate income tax rates. The impact of the last is obvious: Take what you paid to the IRS on April 15, or in your regular paycheck, and double it.

In theory, lawmakers could use a combination of these approaches to fund a single-payer health care system, which might blunt their impact somewhat. But the massive amounts of revenue needed gives one the sense that doing so would amount to little more than rearranging deck chairs on a sinking fiscal ship.

Taxing Only the Rich Won’t Pay for Single Payer

CRFB reinforced their prior work indicating that taxes on “the rich” could at best fund about one-third of the cost of single payer. Their proposals include $2 trillion in revenue from raising tax rates on the affluent, another $2 trillion from phasing out tax incentives for the wealthy, another $2 trillion from doubling corporate income taxes, $3 trillion from wealth taxes, and $1 trillion from taxes on financial transactions and institutions.

Several of the proposals CRFB analyzed would raise tax rates on the wealthiest households above 60 percent. At these rates, economists suggest that individuals would reduce their income and cut back on work, because they do not see the point in generating additional income if government will take 70 (or 80, or 90) cents on every additional dollar earned. While taxing “the rich” might sound publicly appealing, at a certain point it becomes a self-defeating proposition—and several proposals CRFB vetted would meet, or exceed, that point.

Socialized Medicine Will Permanently Shrink the Economy

The report notes that “most of the [funding] options we present would shrink the economy compared to the current system.” For instance, CRFB quantifies the impact of funding single payer via a payroll tax increase as “the equivalent of a $3,200 reduction in per-person income and would result in a 6.5 percent reduction in hours worked—a 9 million person reduction in full-time equivalent workers in 2030.”

By contrast, deficit financing a single-payer system would minimize its drag on jobs, but “be far more damaging to the economy.” The increase in federal debt “would shrink the size of the economy by roughly 5 percent in 2030—the equivalent of a $4,500 reduction in per person income—and far more in the following years.”

Moreover, these estimates assume a great amount of interest by foreign buyers in continuing to purchase American debt. If the U.S. Treasury cannot find buyers for its bonds, a potential debt crisis could cause the economic damage from single payer to skyrocket.

To say single payer would cause widespread economic disruption would put it mildly. Hopefully, the CRFB report, and others like it, will inspire the American people to reject the progressive left’s march towards socialism.


From Woke to Broke

Column: The political contradictions of progressivism

By Matthew ContinettiThe Washington Free Beacon

“The fact is there is no more money. Period,” says Chicago mayor Lori Lightfoot.

She’s talking about the teachers’ strike that has paralyzed her city’s public schools—enrollment 360,000—for the past week. The public employee union is demanding more: more money for salaries (only eight states pay teachers more than Illinois), more support staff (Illinois ranks first in spending on administrators), more teachers per student. Their cause has attracted national attention. Elizabeth Warren joined the picket line.

Which is ironic. Lightfoot is not some stingy Republican. Nor is she a centrist Democrat like her predecessor Rahm Emanuel. She’s as progressive as you can get. But she now finds herself in the same position as many of her political brethren: facing criticism for failing to reconcile the contradictions in the left’s agenda.

Lightfoot has discovered that there is no limit to the appetite of the constituencies generated by government spending. She has learned that the special interests bargaining for higher benefits also desire policies that make such benefits unattainable. I hope she’s taking notes.

Chicago Public Schools has run a deficit for the past seven years. Why? Pensions granted to earlier generations of teachers are expensive. And the cost is growing. A quarter of the school budget is devoted to benefits—money that can’t be spent on classrooms, facilities, and instruction. Expect that number to rise as America goes gray and the bill comes due for the promises we made to ourselves.

The federal government can put Social Security and Medicare on the credit card for as long as demand for U.S. Treasuries is high. States and municipalities don’t have that luxury. There is an upper bound to what even the most progressive mayors and governors can grant the lobbies that mobilize voters for their campaigns. But it’s a glass ceiling. Public sector unions are eager to break it.

Nor does being woke protect you. It’s impossible to appease fully the groups fighting to claim resources and honor. They often won’t take yes for an answer. GM might tout to investors the fact that it is “leading in gender equality.” That didn’t stop the UAW from striking.

Public policy inspired by the ethic of social justice inflames the tension between progressive leaders and the voting public. Andrew Cuomo might sympathize with Mayor Lightfoot. His fealty to environmental groups has backed him into a corner. Banning fracking and canceling pipelines hasn’t just denied New York revenues, jobs, and lower energy bills. It also led energy supplier National Grid to cancel gas hookups in Long Island. Cuomo had to retaliate before the company restored service. Want to be a progressive? Claim credit for resolving a crisis of your own making after threatening to unleash state power on private actors responding to price signals. Cuomo makes it look easy.

Gavin Newsom also has been struggling to reduce the conflict between the imperatives of the new progressivism and the quality of life of everyday people. He has his hands full. Rising numbers of homeless have led to a breakdown of public order in areas of Los Angeles and San Francisco. Land-use regulations have restricted the supply of housing, leading to high prices and shortages, and Newsom’s answer is statewide rent control that will make things worse. California’s budget depends so heavily on revenues from the wealthy that it might not recover from another out-migration like the one the state experienced after a 2012 tax hike.

Pacific Gas & Electric is a case study in the progressive self-own. The state-regulated utility spent years deferring maintenance while it invested in renewable energy and promoted the ideology of diversity, equity, and inclusion. Among the consequences of its neglect were terrible wildfires that devastated communities. The ensuing legal bills drove PG&E into bankruptcy. It says it’s been forced to engage in “de-energization”: purposeful mass blackouts to prevent further damage and legal action. In early October more than two million people were left in the dark. No house, no power, no prospects—welcome to the California Republic.

The contradictions of progressivism generate crises of affordability and governance. But the political class suffers few consequences. Chicago, New York, and California remain Democratic strongholds. What scattered opposition exists is internal to the political machine. On rare occasions parts of the coalition splinter from the whole and are able to defeat radical measures. Think of Bill de Blasio’s stalled plans to cancel entrance exams for New York City’s magnet schools. For the most part, though, the Democrats’ hold on power continues. It’s one monopoly progressives don’t seem to mind.

Are the voters in these communities merely complacent? Are they so content with the patchwork of benefits and status the jerry-rigged welfare state provides that they tolerate dysfunction? Or is the partisan alternative so appalling they won’t even consider it?

Questions worth pondering as progressives prepare to scale up their model nationwide. Who knows? One day, President Warren might be on the other side of that picket line.


Frontiers of Freedom Joins Coalition of Free Market Organizations Opposing APEX Act’s Price-Setting Over Aluminum Reference Prices

By Frontiers of Freedom

WASHINGTON, D.C. –  Frontiers of Freedom recently joined 16 other free-market organizations to oppose The Aluminum Pricing Examination (APEX) Act.

The APEX Act would grant the U.S. Commodity Futures Trading Commission expansive authority over the setting of reference prices in the aluminum market, allowing political pressure potentially to distort the market by manipulating price signals.

As part of the effort a coalition letter was released urging Congress to reject the legislation that reads, in part:

By granting the government authority to arbitrarily alter market signals, supporters of the APEX Act—such as certain beer manufacturers with a history of working with politicians to distort the free market—are openly seeking to artificially deflate the price of aluminum. Such an outrageously crony abuse of government is unethical, and history shows that it will only worsen matters by further distorting the market and creating or exacerbating shortages. Domestic producers, faced with extensive government regulations and thinner profit margins, would find it increasingly difficult to survive and further erode domestic supply, a boon for foreign producers.
Republicans and Democrats alike have voiced concerns regarding America’s competitiveness within the aluminum industry. There is wide agreement that the market for American metals must remain a vibrant aspect of the U.S. economy. The APEX Act is dangerous piece of legislation, reflecting both a misunderstanding of industry pricing as well as a misapplication of government authority.
Representatives from the following 17 organizations joined the letter: American Consumer Institute, American Encore, Campaign for Liberty, Center for Freedom and Prosperity, Citizen Outreach, Competitive Enterprise Institute, Consumer Action for a Strong Economy, Frontiers of Freedom, Institute for Liberty, Institute for Policy Innovation, Less Government, Market Institute, National Black Chamber of Commerce, National Tax Limitation Committee, Taxpayers Protection Alliance, Tea Party Nation, and the 60 Plus Association.


The Fallacies Underlying the Warren Social Security Plan

By Charles BlahousHoover Institution

Elizabeth Warren, U.S. senator from Massachusetts and candidate for president, recently released a Social Security plan that would exacerbate many of the program’s existing problems while also creating several new ones. The plan was announced in an article she posted on Medium, along with an analysis authored by Moody’s Analytics’ Marc Zandi. Normally, members of Congress have their Social Security proposals scored by the nonpartisan Social Security Administration Office of the Chief Actuary, but this proposal was introduced in a campaign context rather than a legislative one, hence the private analysis. While the proposal contains several substantive flaws, it serves the simple rhetorical message of promising higher Social Security benefits for all. The rationales given in Sen. Warren’s article for her plan exhibit several points of substantive confusion, which may partially explain why the proposal contains as many problems as it does.

It is impossible for an outside analyst to state with certitude why any particular public figure embraces a specific policy. Policy choices derive from several things, including subjective value judgments, gut instincts, one’s read of the substantive realities, political considerations, and many other factors. It is common for public figures to release plans accompanied by analytical findings that appear to support the proposed policies. However, the inclusion of such material rarely means that the policy was developed on the basis of neutral analysis of available information. At least as often, the analysis is provided as an after-the-fact rationale for policy choices driven by other subjective goals. This is particularly important to bear in mind when reviewing a Social Security plan such as Sen. Warren’s. An accurate understanding of the issues discussed in her Medium article would lead to policy proposals starkly different from the ones she has put forward.

The plan is a complex one and raises more issues than can be covered here. Below I will review a few of the major problems with it.

Problem #1: Misunderstanding Social Security benefits and replacement rates. In arguing for an across-the-board Social Security benefit increase, Sen. Warren writes:

“For someone who worked their entire adult life at an average wage and retired this year at the age of 66, Social Security will replace just 41% of what they used to make. That’s well short of the 70% many financial advisers recommend for a decent retirement—one that allows you to keep living in your home, go to a doctor when you’re sick, and get the prescription drugs you need.”

This presentation is inaccurate. The 41% percentage cited by Sen. Warren comes from a Social Security Administration (SSA) Actuary’s office memo, and is not actually a percentage of what a retiree “used to make” while working. Instead it is a percentage of the worker’s prior earnings “wage-indexed to the year before retirement”—that is, multiplied by subsequent average wage growth in the national economy. In other words, it’s not a comparison of that individual’s retirement benefits to his or her ownprevious earnings, but instead to the earnings of others who are working at the time the beneficiary retires. While this comparison may be of interest to some, it is not a measure of the degree to which retirees maintain their own pre-retirement standards of living.

This is a very significant error that essentially invalidates the argument advanced above. The nonpartisan Congressional Budget Office (CBO) recently reported that Social Security will provide the average retiree born in the 1960s a benefit equal to 55% of the average inflation-adjusted value of their own career earnings. For workers in the lowest-income quintile, the average replacement rate is a much higher 80%.

When Sen. Warren’s mistaken interpretation of Social Security replacement rates is corrected, her foundational case for an across-the-board benefit increase disappears. Social Security replacement rates for low-income workers are already above the level Sen. Warren cites financial advisers as recommending, so they cannot be further increased without causing these Americans’ standards of living as workers to be much lower than they would later be as beneficiaries. In addition to being problematic for the workers themselves, this perverse outcome would create huge disincentives for labor-force participation and personal saving. Even middle-income Americans are already in a situation where Social Security is crowding out much of the saving they could or would otherwise do on their own for retirement. Unless we want to have Social Security displace nearly all long-term saving done by the lion’s share of Americans, the across-the-board benefit increase specified in Sen. Warren’s proposal runs counter to widely-expressed societal objectives for Social Security—namely, to provide a base of income protection underlying other retirement saving.

In fairness to Sen. Warren, SSA’s method of calculating replacement rates is counterintuitive and not widely understood. However, given the centrality of the data point to her piece’s case for a sweeping benefit expansion, it would presumably have been checked with a Social Security expert, most of whom are aware of the difference between how SSA defines this number and how the senator’s piece presents it. In addition, the CBO recently provided a comprehensive report to Congress detailing how SSA’s replacement rate calculations differ substantially from comparing a worker’s Social Security benefits to his or her own prior earnings.

Problem #2: Misunderstanding benefit increases under current law. Sen. Warren’s piece also contains the following statement in support of the case for an across-the-board benefit increase:

“…Congress hasn’t increased Social Security benefits in nearly 50 years.”

What this sentence omits is critical: a core reason no such legislation has been enacted in nearly 50 years is that federal law was changed back then to cause Social Security benefits to increase automatically without Congress having to act. Prior to the 1970s, Social Security operated very differently. Before then, Social Security benefits didn’t increase unless Congress enacted legislation to increase them. But in 1972, Congress passed a law (amended in 1977) that would cause Social Security benefit levels to increase over time, not only in absolute terms, but substantially faster than consumer price inflation. While people can differ over how large and generous the Social Security program should be, it is inaccurate to suggest that its benefits haven’t increased in nearly 50 years. The following graph shows how benefits for medium-wage workers have increased in real (inflation-adjusted $2019) dollars in recent decades.

Social Security Benefits Increase Automatically Under Current Law

Instead of failing to increase Social Security benefits, we have the opposite situation: The current benefit formula causes benefits and costs to grow faster than our economic capacity and faster than workers’ earnings. It has been known since the 1970s that this rate of cost growth cannot be financed via a stable tax rate. Congress’s Social Security Consultant Panel cautioned back in 1976, “this Panel gravely doubts the fairness and wisdom of now promising benefits at such a level that we must commit our sons and daughters to a higher tax rate than we ourselves are willing to pay.” Sen. Warren’s proposal would cause the required tax increases to rise even faster, while her statement above creates a misimpression that is exactly opposite of what is happening. Instead of reflecting the reality that program benefits and costs are growing faster than is sustainable (as shown in the following figure reproduced directly from the Social Security trustees’ report), it fosters confusion to the effect that benefits haven’t been increasing at all.

Social Security Costs Grow Faster than Worker Wages

(All Numbers Expressed Below as a % of US Workers’ Taxable Wages)

Problem #3: Worsening the treatment of younger generations. One of the biggest problems arising under current Social Security law is that it treats younger generations much worse than older ones. Because Social Security is not a savings program but rather an income transfer program, it is a zero-sum game at best: No one can gain net income through Social Security without someone else losing it. The largest such income transfers occur across generations. The trustees’ report shows that unless something is done to moderate the benefit growth rate for current participants, younger generations will lose income through Social Security equal to 3.4% of their career taxable earnings—net of all benefits they receive. The program cannot reasonably provide social insurance for young workers if it is making them more than 3% poorer over the course of their lives. By increasing benefits for today’s participants (including the wealthiest) well beyond what their own future taxes can finance, the Warren plan would substantially worsen the aggregate net income losses of younger generations.

Problem #4: Enabling state/local workers to double-dip benefits at Social Security’s expense. The Warren proposal would repeal provisions of Social Security law called the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). In effect the plan would allow state and local employees to double-dip from the Social Security system, receiving much higher benefits than the program’s benefit formula intends. The reason that the WEP and GPO exist is that Social Security’s formula for computing benefits is very crude: It simply averages one’s highest 35 years of earnings, and applies a progressive benefit formula that pays higher returns to lower-wage workers than higher-wage workers. Because the system only “sees” earnings covered by Social Security, and because it computes benefits on the basis of lifetime average wages, at first glance it mistakes someone who works for 15 years under Social Security and 20 years in a state retirement system as having 20 years in which they earned nothing at all, in effect treating this person as having a much lower income than someone with the same annual earnings for 35 years under Social Security. The WEP/GPO adjusts benefits so that state and local workers aren’t mistakenly treated as much lower-income households than they actually are. The WEP/GPO doesn’t work perfectly and should be reformed. Texas Congressman Kevin Brady has a bill that would fix the formula to accurately reflect workers’ actual earnings, a perfectly good solution. Better still would be to reform the Social Security benefit formula altogether to obviate the need for the WEP/GPO. It would make no sense, however, to repeal the WEP/GPO without a replacement provision to prevent large overpayments of Social Security benefits.

Problem #5: Reducing saving. Social Security provides retirement income without generating additional saving to finance it, and accordingly has a net negative effect on national saving. The effects are particularly severe for low-income workers, whose burden of paying payroll taxes, combined with their income and liquidity constraints and Social Security’s benefit structure, causes many low-income households to suffer lower standards of living as workers than they anticipate as beneficiaries. Simply put, these households have neither the ability or incentive to engage in retirement saving after paying their Social Security taxes. Sharply increasing Social Security costs and benefits as in the Warren plan would considerably exacerbate these adverse trends, driving saving by low-income households even lower and discouraging saving by the middle class. Ironically, Sen. Warren’s piece cites low savings rates as a rationale for further expanding Social Security, when doing so would worsen this problem.

Problem #6: Mismeasuring inflation. The Warren plan would use an experimental index called the CPI-E to calculate beneficiaries’ annual cost-of-living adjustments. As I stated in a previous piece about another Social Security bill, “there is a general consensus among economists that CPI-E overstates price inflation relative to CPI-W (the measure Social Security currently uses), which in turn overstates inflation relative to C-CPI-U, a more accurate measure tracked by the Bureau of Labor Statistics. Relative to accurate inflation indexing, the bill’s CPI-E would cause COLA overpayments of roughly 0.5 percentage points annually. . . . These overpayments would disproportionately benefit higher-income seniors who live longer, pushing costs and worker tax burdens higher.”

Problem #7: Weakening the economy through massive tax increases. The Warren proposal would increase national Social Security tax burdens by roughly 30% relative to current law. Even the Zandi memo issued in support of the proposal recognizes that these tax increases would reduce economic growth by having a “negative impact on the supply of labor.” Elsewhere the Zandi memo argues that the Warren proposal would increase economic growth over the long term primarily by reducing federal indebtedness, but this finding relies on an accounting convention that does not reflect actual law. This scoring convention assumes that in the absence of action, the federal government would continue to pay full Social Security benefits without collecting taxes sufficient to finance them, even though there is “no legal authority to make such payments.” Under a literal no-action scenario, current law would instead cause Social Security benefits to be cut dramatically when its old-age benefits trust fund runs dry in 2034. Alternatively, a different package of reforms to prevent trust fund depletion could be enacted before then. The key point is that the Warren plan would reduceeconomic growth relative to either a literal no-action scenario, or relative to an alternative solvency package that eschews the massive tax increases in her plan. Her plan only appears to improve economic growth starting in the 2030s, and only relative to a fictional budgetary scenario at variance with actual law.

The Warren Social Security plan would worsen Social Security’s intergenerational inequities, undermine saving, reduce labor-force participation, lower economic growth, employ an inaccurate measure of inflation, allow state and local employees to double-dip, and is premised upon fundamental misunderstandings of Social Security’s benefit structure. The plan would result not only in a far more expensive Social Security system, but also one with benefits less efficiently targeted for actual need.


Healthcare Reform Must Not Empower Big Government – It Must Harness the Innovation, Quality and Price Competition of the Marketplace

By George LandrithRedState

Before the passage of ObamaCare, we were told that it would solve all the problems with high costs and accessibility of healthcare. We were repeatedly told that Americans would save thousands of dollars every year. Of course, none of the promised benefits materialized. Now many of the same people who misled us about ObamaCare are now back trying to sell us on other “solutions.”

Speaker Nancy Pelosi — who laughably told us we had to pass ObamaCare to find out what’s in it — is now peddling a new drug plan claiming it will lower costs. However, Pelosi’s plan would supposedly lower costs by imposing up to a 95 percent excise tax on hundreds of prescription medicines. Imposing confiscatory taxes is no way to lower costs, or to encourage innovation. But it is a huge stride towards socialized healthcare which is her real goal. In the end, this plan leaves consumers and patients at the mercy of government bureaucrats. Imagine when you are sick having an experience like at the Department of Motor Vehicles – long lines, lots of waiting, and poor service. 

Pelosi’s plan isn’t even constitutional because it imposes a confiscatory retroactive tax on the total sales of a drug, not the profits, but the gross receipts. To escape this ruinous and confiscatory tax, Pelosi’s plan allows drug companies to agree to, and accept, government set prices. This is so abusive that it makes the mob’s protection money schemes look legitimate. 

The biggest losers of Pelosi’s plan will be the Americans who will suffer and die because the medicines that could have been developed to cure their condition will not exist or will not have been developed. So as Americans age and need cures for cancer, Alzheimer’s, diabetes, etc, those cures won’t exist and it will be Nancy Pelosi’s fault. These policies have long term consequences. If she were serious about improving things, she would unleash the power of the market and competition. Instead, she empowers government at the expense of Americans.

But there is no shortage of bad ideas on Capitol Hill, masquerading as solutions. For example, Senators Chuck Grassley (R-Iowa) and Ron Wyden (D-Ore.) have proposed legislation that would change Medicare Part D prescription drug rebates to penalize drugs whose prices rise faster than the rate of inflation. It is strange that the Grassley/Wyden proposal targets Part D because it is one of the few government health care programs to successfully foster price-based productivity increases. 

In most parts of the economy, over time, prices go down and quality goes up, due to increases in productivity. The underlying mechanism driving this is competition. One sign of how successful Part D has been in wielding competition is that in its first decade of existence, it cost over 40% less than what the Congressional Budget Office estimated it would. This is an historical achievement.

At the very least, the Grassley/Wyden proposal will increase the cost of participating in the market, both in terms of compliance costs, and in the changed incentives and their inevitable unintended consequences. For example, a company that requires more revenue to economically survive might raise prices slightly on all its products, instead of steeply on just one. How this all plays out is impossible to predict. What can be said for certain is the market’s “logic” would now be less about providing the most value for customers at the lowest price, and now more about the political ramifications of pricing decisions.

The Grassley/Wyden proposal exemplifies the folly of centrally-designed price controls and thus, should be cast in the dustbin of bad socialist ideas. 

For example, Senator Bill Cassidy (R-La.) is a medical doctor and has been advocating for market-based approaches to healthcare reform. 

There are some good ideas out there. Senators Bill Cassidy (R-La), Steve Daines (R-Mont.), James Lankford (R-Okla.) and Ben Cardin (D-Md.) are sponsoring an amendment to the horribly misguided Grassley/Wyden bill. They suggest creating new tiers of drugs for generics and biosimilars, rather than lumping them in with brandname drugs. This is an idea that makes a lot of sense and it would benefit consumers. But it should be a stand alone bill. The Grassley/Wyden bill is bad enough that such amendments do not actually cure its horrible defects. But the underlying idea of this amendment, as stand alone legislation, would have a lot of merit.  The Administration has the authority to do this now under existing statutory authority — it should do so. 

The problem with healthcare and medical reforms in Washington is that there is too much blind faith in the ability of big-government to simply wave a wand and somehow magically lower prices. Rather than the promised benefits, what we actually receive are terribly high unintended consequences. We saw this with the ObamaCare fiasco.  Policy makers should place their confidence in the marketplace to incentivize innovation and high quality products at competitive prices. 


Sen. Rand Paul: If socialists can’t find a crisis, they’ll create one

By Sen. Rand PaulFox News

Most socialist governments rise up claiming to be the solution to a widespread economic disaster, such as peasants starving while corrupt leaders wage pointless wars. However, today’s socialists have to overcome the longest economic expansion in American history.

When Rep. Alexandria Ocasio-Cortez, D-N.Y., arrived in Washington, she set off a race on the left to see who could endorse the most extreme proposals. If you first heard about the “Green New Deal” by word of mouth, you might be forgiven if your initial impression was one of disbelief.

The cost alone is mind-boggling. Former Congressional Budget Office (CBO) director Douglas Holtz-Eakin estimates that the low-carbon electricity grid alone will cost $5.4 trillion. The “New Zero Emissions Transportation System” will cost about $2 trillion. Ocasio-Cortez’s program for a “guaranteed job for everyone”— somewhere between $6.8 trillion and $44.6 trillion. Wow!

“Medicare-for-all” — over $30 trillion. Guaranteed “green” housing, $1.6 to $4.2 trillion, and “food security,” $1.5 billion. Anybody else alarmed that the projects are so grandiose that the cost can only be approximated to within a few trillion dollars?

But is the Green New Deal socialism? Let’s consider how AOC and Bernie and their merry troupe of socialists will accomplish their dream. How and who will close down the fossil fuel factories? What government SWAT team will shut down the automobile manufacturers and the gas stations? Who will force the people from their current homes into “green living quarters”?

And what about all those carbon-producing cows? AOC is ready with an answer. In the outline she and Sen. Edward Markey, D-Mass., released, they explained that they “set a goal to get to net-zero, rather than zero emissions, in 10 years because we aren’t sure that we’ll be able to fully get rid of farting cows and airplanes that fast.”

Don’t laugh. California is well on its way to regulating cows out of existence. According to the Los Angeles Times, the San Joaquin Valley Air Pollution Control District claims that “gases from ruminating dairy cows, not exhaust from cars, are the region’s biggest single source of a chief smog-forming pollutant.”

It would be funny if these climate change alarmists weren’t serious. It’s not only cows these crazies want to eliminate, but humans as well. CO2 exhalers — aka all animals, including humans — are a big part of the problem, according to environmentalist Diane Francis. Writing at the Canadian National Post, she claims that “the world’s other species, vegetation, resources, oceans, arable land, water supplies and atmosphere are being destroyed and pushed out of existence as a result of humanity’s soaring reproduction rate.”

Francis’s answer? She believes that a “planetary law, such as China’s one-child policy, is the only way to reverse the disastrous global birthrate currently, which is one million births every four days.”

Think about that. In addition to eliminating the belching cows, some environmental extremists actually propose emulating China’s mass abortion and mandatory reproductive limitations.

Beyond the mind-boggling costs and outright lunacy of restricting the populations of humans and cows, the Green New Deal also promises a primary goal of socialism — communal ownership.

AOC’s legislative resolution calls for “providing and leveraging, in a way that ensures that the public receives appropriate ownership stakes … [in] businesses working on the Green New Deal mobilization,” as well as “community ownership” in “local and regional economies.”


Attack on Saudi Arabia Proves Need for Layered Defensive System

By George LandrithNewsmax

Just last week, Houthi rebels in Yemen, who are closely aligned with Iran, claimed credit for a drone attack on Saudi oil processing facilities.

News changes fast — a surprising development is that now the Houthi’s say Iran is responsible for the attack and that the Iranians have more attacks planned in the near future. The Houthi’s also vowed not to launch any additional attacks themselves.

Something that is not surprising is that missile defense critics in the U.S. are now arguing that the drone attack proves that missile defense doesn’t work. This is, of course, entirely without merit. Meanwhile, Russian President Vladimir Putin is offering Russian missile defense systems to “help” protect against future attacks from its client state of Iran. Let that sink in.

Given Russia’s intimate relationship with Iran, it is entirely possible the attack was coordinated with Russia. It is not as if this would be out of character for Putin. Of course, Putin has never done anything on the international stage simply to be helpful. He is simply trying to help himself and advance his ambitions.

Imagine if he could get U.S. allies to insert and integrate Russian hardware into their U.S.-made defensive systems. Imagine the hacking potential on something like that. Putin would love to learn more about our defensive systems. For that reason, the U.S. earlier this year canceled sales of high-tech American defensive systems to Turkey, a member of NATO, after they integrated Russian equipment in their defensive systems.

But back to the missile defense critics in the U.S. who are unwittingly helping Putin.

Right now very little is actually known about the attack. While preliminary indications are it was a drone attack, we are not even certain precisely what weapons were used. It is profoundly unhelpful to jump to hasty conclusions to support a misguided ideology — particularly when the primary beneficiary of those hasty conclusions will be an adversary like Putin’s Russia.

Beyond not jumping to silly conclusions without any real facts, it is important to realize that an effective missile defense system is layered. Parts of the system protect against ICBMs which actually at some point in their flight are out of the Earth’s atmosphere. Parts of the system protect against intermediate range missiles and other parts protect against shorter range missiles. Each of these missiles has different travel paths and different vulnerabilities. Thus different defenses are needed.

In football, a good defensive coordinator employs a different defense if the opposing team needs only one yard to score than he would if the opposition need twenty-five yards to score. The same concept is true with missile defense.

Having only one layer of missile defense in place to defend against all sorts of attacks leaves the region vulnerable to the other risks. For example, the Patriot defensive missile system is designed to protect against high-flying targets such as jets and ballistic missiles. It wasn’t designed to defend against low flying drones and short range cruise missiles. Patriot’s radars are not intended to scan such low flying means of attack. Nor was Patriot designed to intercept ICBM’s just outside the Earth’s atmosphere. But we know the Patriot system works very well as we’ve seen it in real life combat defend both troops and civilian populations from missile attack.

Criticizing any particular layer of missile defense for not stopping an attack that it was never designed or intended to stop is like criticizing a 350 pound defensive nose tackle for not doing a good job of racing down the sideline to cover a speedy wide receiver. A good defensive football team is made up of different parts, with different skills and capabilities. Together they are a formidable defense. But playing out of position, they are ineffective.

To defend Saudi oil faculties, they would need a layered system — one that has the ability to protect against ballistic missile attack as well as drones and low-flying cruise missiles. Missile defense critics know this, but they don’t care. They simply want to use an unfortunate news event to promote their misguided anti-missile defense ideology in hopes of a short-term political victory.


Best Way To Lower Seniors’ Drug Costs? Reverse Obama Rule-Changes

By George LandrithRedState

One of the problems in health care today is that it turns Oscar Wilde’s quip on its head: In the United States, everyone knows the value of health care, but nobody knows the price of anything (because most spending is covered by insurance or by federal programs such as Medicare).

Pricing information is crucial in any system, because when people know what price they’re paying for a good or service, they can make informed decisions. Also, prices tend to come down over time as people demand better service at lower prices.

However, unlike Walmart or Amazon.com, the federal government isn’t especially good at negotiating lower prices. And now, crony health care interests are fighting to eliminate one of Medicare’s few pricing successes.

The issue involves prescription medicines. Since Medicare Part D was put into place to cover prescription drugs, generic and biosimilar medicines have usually been added to the program as soon as the FDA approved them. That’s given seniors access to safe, effective drugs at a much lower cost. In 2018, for example, generic drugs saved consumers almost $300 billion, with $90 billion of that going to Medicare recipients.

Sadly, though, they could have saved much more. In 2016, the Obama administration changed Medicare policy so that many generics would be priced in the same band as name brand drugs. That’s increased prices for seniors by more than $6 billion.

A good chunk of that money flowed to Pharmacy Benefit Managers (PBMs), which negotiate to get the generic meds priced in a higher band, then pocket “rebates” (kickbacks) from the big drug companies that make name brand drugs. Consumers, meanwhile, miss out on potential savings.

Under the Trump administration, the Center for Medicare & Medicaid Services (CMS) is finally taking steps to roll back the price increases. Next year, it wants to stop Medicare Part D plans from moving generic drugs into branded drug tiers. Instead, it plans to create a new tier reserved just for generics and biosimilars.

Many lawmakers support this sensible policy. “I am pleased to find that CMS is considering an ‘alternative’ policy,” Sen. Bill Cassidy of Louisiana wrote to HHS Secretary Alex Azar. “I applaud CMS for considering these cost-effective policies and urge the Agency to make them final for CY2020.”

Cassidy is a doctor and a leader in the fight for a more conservative approach to health care. He also joined fellow Republican Senators Steve Daines and James Lankford and Democrats Sherrod Brown and Robert Menendez in sponsoring an amendment to The Prescription Drug Pricing Reduction Act of 2019 that would have “ensured lower-cost generic drugs are placed on generic tiers and higher-cost brands stay on brand tiers.” They dropped that amendment for internal reasons, because Finance Committee Chairman Charles Grassley told them he’ll make certain the language makes it into the final bill.

Many other lawmakers are also pushing for the reform. “We encourage CMS to move forward with this policy effective CY2020 to lower out-of-pocket costs for millions of Americans, ensuring that they receive the full value of generic and biosimilar competition,” a bipartisan group of House lawmakers wrote to Azar. “Price competition is vital in the Part D program and beneficiaries deserve a choice at the pharmacy counter when possible.” 

Seniors can thank these lawmakers, and should keep a sharp eye on Sen. Grassley. He has a chance to move forward in a bipartisan fashion with a plan that would save Medicare recipients money. That ought to be an easy sell in these divided times.

Conservatives are wary about expanding Medicare, of course. But we’re eager to use pricing power to improve the state of American health care. Let’s not allow PBMs to block this important step toward systemic reform.


ATR Leads Coalition Opposed to Pelosi’s 95% Drug Tax

By Alex HendrieATR.org

ATR today released a coalition letter signed by 70 groups and activists in opposition to the Pelosi drug pricing proposal to create a 95 percent tax on pharmaceutical manufacturers.

As noted in the letter, this bill calls for a retroactive tax on sales that is imposed in addition to existing against income taxes:

Under Speaker Pelosi’s plan, pharmaceutical manufacturers would face a retroactive tax of up to 95 percent on the total sales of a drug (not net profits). This means that a manufacturer selling a medicine for $100 will owe $95 in tax for every product sold with no allowance for the costs incurred.

The tax is used to enforce price controls on medicines that will crush innovation and distort the existing supply chain as the signers note:

“The alternative to paying this tax is for the companies to submit to strict government price controls on the medicines they produce. While the Pelosi bill claims this is “negotiation,” the plan is more akin to theft.”

This proposal will create significant harm to American innovation to the detriment of jobs, wages, and patients, as the letter notes:

”[The Pelosi] proposal would crush the pharmaceutical industry, deter innovation, and dramatically reduce the ability of patients to access life-saving medicines.

The full letter is found here and is below:

Dear Members of Congress:

We write in opposition to the prescription drug pricing bill offered by House Speaker Nancy Pelosi that would impose an excise tax of up to a 95 percent on hundreds of prescription medicines. 

In addition to this new tax, the bill imposes new government price controls that would decimate innovation and distort supply, leading to the same lack of access to the newest and best drugs for patients in other countries that impose these price controls.

Under Speaker Pelosi’s plan, pharmaceutical manufacturers would face a retroactive tax of up to 95 percent on the total sales of a drug (not net profits). This means that a manufacturer selling a medicine for $100 will owe $95 in tax for every product sold with no allowance for the costs incurred. No deductions would be allowed, and it would be imposed on manufacturers in addition to federal and state income taxes they must pay.

The alternative to paying this tax is for the companies to submit to strict government price controls on the medicines they produce. While the Pelosi bill claims this is “negotiation,” the plan is more akin to theft.

If this tax hike plan were signed into law, it would cripple the ability of manufacturers to operate and develop new medicines.

It is clear that the Pelosi plan does not represent a good faith attempt to lower drug prices. Rather, it is a proposal that would crush the pharmaceutical industry, deter innovation, and dramatically reduce the ability of patients to access life-saving medicines.

We urge you to oppose the Pelosi plan that would impose price controls and a 95 percent medicine tax on the companies that develop and produce these medicines.

Sincerely, 

Grover Norquist
President, Americans For Tax Reform

James L. Martin
Founder/Chairman, 60 Plus Association

Saulius “Saul” Anuzis
President, 60 Plus Association            

Marty Connors
Chair, Alabama Center Right Coalition                       

Bob Carlstrom
President, AMAC Action 

Dick Patten
President, American Business Defense Council

Phil Kerpen
President, American Commitment 

Daniel Schneider
Executive Director, American Conservative Union

Steve Pociask
President/CEO, The American Consumer Institute Center for Citizen Research

Lisa B. Nelson
CEO, American Legislative Exchange Council 

Michael Bowman
Vice President of Policy, ALEC Action

Dee Stewart
President, Americans for a Balanced Budget

Tom Giovanetti​​​​​​​
President, Americans for a Strong Economy

Norm Singleton
President, Campaign for Liberty

Ryan Ellis
President, Center for a Free Economy

Andrew F. Quinlan​​​​​​​
President, Center for Freedom & Prosperity

Jeffrey Mazzella ​​​​​​​
President, Center for Individual Freedom

Ginevra Joyce-Myers
Executive Director, Center for Innovation and Free Enterprise

Peter J. Pitts
President, Center for Medicine in the Public Interest 

Olivia Grady
Senior Fellow, Center for Worker Freedom

Chuck Muth ​​​​​​​
President, Citizen Outreach

David McIntosh
President, Club for Growth

Curt Levey​​​​​​​
President, The Committee for Justice

Iain Murray
Vice President, Competitive Enterprise Institute

James Edwards
Executive Director, Conservatives for Property Rights

Matthew Kandrach​​​​​​​
President, Consumer Action for a Strong Economy

Fred Cyrus Roeder​​​​​​​
Managing Director, Consumer Choice Center

Tom Schatz ​​​​​​​
President, Council for Citizens Against Government Waste

Katie McAuliffe​​​​​​​
Executive Director, Digital Liberty

Richard Watson
Co-Chair, Florida Center Right Coalition

Adam Brandon
President, Freedomworks​​​​​​​

George Landrith ​​​​​​​
President, Frontiers of Freedom 

Grace-Marie Turner
President, Galen Institute

Naomi Lopez
Director of Healthcare Policy, Goldwater Institute

The Honorable Frank Lasee ​​​​​​​
President, The Heartland Institute

Jessica Anderson
Vice President, Heritage Action for America 

Rodolfo E. Milani ​​​​​​​
Trustee, Hispanic American Center for Economic Research
Founder, Miami Freedom Forum 

Mario H. Lopez
President, Hispanic Leadership Fund

Carrie Lukas
President, Independent Women’s Forum

Heather R. Higgins
CEO, Independent Women’s Voice

Merrill Matthews
Resident Scholar, Institute for Policy Innovation

Chris Ingstad​​​​​​​
President, Iowans for Tax Relief

Sal Nuzzo​​​​​​​
Vice President of Policy, The James Madison Institute

The Honorable Paul R LePage ​​​​​​​
Governor of Maine 2011-2019

Seton Motley
President, Less Government

Doug McCullough
Director, Lone Star Policy Institute

Mary Adams
Chair, Maine Center Right Coalition

Matthew Gagnon​​​​​​​
CEO, The Maine Heritage Policy Center

Victoria Bucklin ​​​​​​​
President, Maine State Chapter – Parents Involved in Education

Charles Sauer ​​​​​​​
President, Market Institute

Jameson Taylor, Ph.D.
Vice President for Policy, Mississippi Center for Public Policy

The Honorable Tim Jones
Leader, Missouri Center-Right Coalition 

Brent Mead
CEO, Montana Policy Institute

Pete Sepp ​​​​​​​
President, National Taxpayers Union

The Honorable Bill O’Brien
The Honorable Stephen Stepanek​​​​​​​
Co-chairs, New Hampshire Center Right Coalition

The Honorable Beth A. O’Connor
Maine House of Representatives

The Honorable Niraj J. Antani​​​​​​​
Ohio State Representative

Douglas Kellogg
Executive Director, Ohioans for Tax Reform

Honorable Jeff Kropf ​​​​​​​
Executive Director, Oregon Capitol Watch Foundation

Daniel Erspamer ​​​​​​​
CEO, Pelican Institute for Public Policy

Lorenzo Montanari​​​​​​​
Executive Director, Property Rights Alliance

Paul Gessing ​​​​​​​
President, Rio Grande Foundation

James L. Setterlund​​​​​​​
Executive Director, Shareholder Advocacy Forum

Karen Kerrigan
President and CEO, Small Business Entrepreneurship Council

David Miller & Brian Shrive
Chairs, Southwest Ohio Center-right Coalition

Tim Andrews
Executive Director, Taxpayers Protection Alliance

Judson Phillips
President, Tea Party Nation

David Balat ​​​​​​​
Director, Right on Healthcare – Texas Public Policy Foundation

Sara Croom ​​​​​​​
President, Trade Alliance to Promote Prosperity

Kevin Fuller
Executive Director, Wyoming Liberty Group


The Best Economic News No One Wants to Talk About

Something’s happening to wages that neither Democrats nor Republicans care to acknowledge.

By Derek ThompsonThe Atlantic

Stop me if this sounds familiar: For most American workers, real wages have barely budged in decades. Inequality has skyrocketed. The richest workers are making all the money. Earnings for low-income workers have been pathetic this entire century.

These claims help drive the interpretation of breaking economic news. For example, the Labor Department yesterday reported that the unemployment rate fell to a 50-year low, while wage growth stalled. “The wage numbers here are INSANE,” the MSNBC host Chris Hayes tweeted. “The tightest labor market in decades and decades and ordinary working people are barely seeing gains.”

So, let’s play a game of wish-casting.

  • Imagine a world where wage growth was truly stagnant only for workers in high-wage industries, such as medicine and consulting.
  • Imagine a labor market where earnings growth for low-wage workers, such as those who work in retail and restaurants, had doubled in the past five years.
  • Imagine an economy where wages for the poorest Americans were rising twice as fast as hourly earnings for high-wage earners.

It turns out that all three of those things are happening right now.

According to analysis by Nick Bunker, an economist with the jobs site Indeed, wage growth is currently strongest for workers in low-wage industries, such as clothing stores, supermarkets, amusement parks, and casinos. And earnings are growing most slowly in higher-wage industries, such as medical labs, law firms, and broadcasting and telecom companies.

Bunker’s analysis is not an outlier. A Goldman Sachs look at data from the Bureau of Labor Statistics found growth for the bottom half of earners at its highest rate of the cycle. And even among that bottom half, the biggest gains are going to workers earning the least. A New York Times analysis of data from the Federal Reserve Bank of Atlanta found that wage growth among the lowest 25 percent of earners had exceeded the growth in every other quartile.

In fact, according to Bunker’s research, wages for low-income workers may be growing at their highest rate in 20 years.

What’s happening here? Donald Trump hasn’t sprinkled MAGA pixie dust over the U.S. economy. In fact, his trade war has clearly diminished employment growth in industries, that are sensitive to foreign markets, such as manufacturing. Rather, a tight labor market and state-by-state minimum wage hikes have combined to push up wage growth for the poorest workers. The sluggishness of overall wage growth is concealing the fact that the labor market has done wonderful things for wages at the low end.

One reason you haven’t heard this economic narrative may be that it’s inconvenient for members of both political parties to talk about, especially at a time when economic analysis has, like everything else, become a proxy for political orientation. For Democrats, the idea that low-income workers could be benefiting from a 2019 economy feels dangerously close to giving the president credit for something. This isn’t just poor motivated reasoning; it also attributes way too much power to the American president, who exerts very little control over the domestic economy. Meanwhile, corporate-friendly outlets, such as The Wall Street Journal’s editorial pages, have reported on this phenomenon. But they’ve used it as an opportunity to take a shot at “the slow-growth Obama years” rather than a way to argue for the extraordinary benefits of tight labor markets for the poor, much less for the virtues of minimum-wage laws.

Democrats don’t want to talk about low-income wage growth, because it feels too close to saying, “Good things can happen while Trump is president”; and Republicans don’t want to talk about the reason behind it, because it’s dangerously close to saying, “Our singular fixation with corporate-tax rates is foolish and Keynes was right.”

But good things can happen while Trump is president, and Keynes was right. “Tighter labor markets sure are good for workers who work in low-wage industries,” Bunker told me. “This recovery has not been spectacular. But if we let the labor market get stronger for a long time, you will see these results.”


Warren Backs AOC’s Illegal Immigrant Welfare Plan

Bill package includes federal rent control, welfare for illegal immigrants and ex-cons

By Collin AndersonWashington Free Beacon

Democratic presidential candidate Elizabeth Warren endorsed a Rep. Alexandria Ocasio-Cortez (D., N.Y.) policy proposal that includes taxpayer-funded welfare benefits for illegal immigrants.

Ocasio-Cortez’s proposal, dubbed “A Just Society,” calls for nationwide rent control and bans the federal government from denying welfare benefits based on an individual’s immigration status and previous criminal convictions. Warren became the first Democratic presidential candidate to endorse the plan, calling it “just the type of bold, comprehensive thinking we’ll need” to make “big, structural change.”

Ocasio-Cortez is considered to be “one of the most important endorsements in America,” and Warren’s immediate support of her latest policy marks another attempt to win the freshman congressman’s nod of approval. Warren’s quick embrace of Ocasio-Cortez’s plan is the latest sign of the social media superstar’s policy impact on the Democratic presidential field.

Neither Ocasio-Cortez nor Warren returned requests for comment.

Ocasio-Cortez’s proposal, consisting of six separate bills, calls for the expansion of welfare. Bills three and four make it illegal for the federal government to deny welfare benefits to ex-convicts and illegal immigrants. The legislation does not address how to pay for the rising cost of welfare, nor does it explain how it would accomplish its goals.

“It’s been really hard for me to find housing. I have the money to move places and stuff, but they deny me for my felony history. It’s not right,” a man with a face tattoo said in the legislative package’s announcement video.

Ocasio-Cortez’s second bill, titled “The Place to Prosper Act,” calls for federal rent control by imposing a 3 percent national cap on annual rent increases. Similar legislation has failed at the local level amid concerns that such policies increased housing prices while limiting supply. A recent study by the American Economic Association found that San Francisco rent control policy “drove up market rents in the long run, ultimately undermining the goals of the law.” The Council of Economic Advisers found that in 11 metropolitan areas with housing regulations, deregulation would reduce homelessness by an average of 31 percent. More than 80 percent of economists surveyed by the University of Chicago in 2012 found rent control to be bad policy.

Ocasio-Cortez’s proposal also includes an official poverty guideline that accounts for “new necessities,” such as internet access, while the fifth bill creates a “worker-friendly score” based on union membership and other factors that would be used to evaluate or award government contracts.

The last bill in Ocasio-Cortez’s proposal establishes health care, housing, and healthy food as government-provided rights.

A Just Society is Ocasio-Cortez’s latest major policy initiative since introducing the Green New Deal, a $94.4 trillion environmental policy proposal that would have no effect on the environment.

All major Democratic presidential candidates quickly supported the Green New Deal, including Warren, Sanders, former vice president Joe Biden, and South Bend mayor Pete Buttigieg.

To date, only Warren has endorsed “A Just Society.”


Sanders: Medicare for All Not Free for the Middle Class

By Elizabeth MatamorosWashington Free Beacon

Medicare for All is not free and will require anyone earning more than $29,000 a year to pay more in taxes, presidential candidate Sen. Bernie Sanders (I., Vt.) said on The Late Show Thursday.

“Is health care free? No, it is not,” Sanders told host Stephen Colbert. “So what we do is exempt the first $29,000 of a person’s income. You make less than $29,000 you pay nothing in taxes. Above that, in a progressive way with the wealthiest people in this country paying the largest percentage, people do pay more in taxes.”

Sanders’s 2020 campaign website details the Vermont senator’s Medicare for All plan, but contains no mention of a tax increase on the middle class. Colbert confronted the Vermont senator about whether his proposal would lead to tax increases. Sanders acknowledged that taxes would have to rise if the government took control of one of the nation’s largest industries.

Sanders said people will no longer pay premiums, co-payments, or out-of-pocket expenses, offsetting the higher taxes once the government takes control of the health care sector. Sanders also said there will only be a private health care market for non-basic health care services, such as cosmetic surgery.

Colbert previously asked the same question of rival 2020 candidate Sen. Elizabeth Warren (D., Mass.). Warren and Sanders are among the leading Democratic presidential candidates who have adopted Medicare for All as a key component of their 2020 campaign platforms. Warren declined to directly answer when Colbert asked about middle class taxes, focusing only on broad health care spending.

“So, here’s how we’re going to do this,” Warren said. “Costs are going to go up for the wealthiest Americans, for big corporations … and hard-working middle-class families are going to see their costs go down.”

“But will their taxes go up,” Colbert asked a second time. Warren did not clarify. 

Presidential candidate and South Bend mayor Pete Buttigieg (D.) criticizedWarren for being “evasive” about how she would pay for Medicare for All.

“Senator Warren is known for being straightforward and was extremely evasive when asked that question,” Buttigieg told CNN after her appearance. “And we’ve seen that repeatedly. I think that if you are proud of your plan and it’s the right plan, you should defend it in straightforward terms.”


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