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The Opportunity-Killing Minimum Wage

By David R. HendersonHoover Institution

“The Right Minimum Wage: $0.00.” That was the title of a 1987 editorial in a major American newspaper. The editorial stated: “There’s a virtual consensus among economists that the minimum wage is an idea whose time has passed. Raising the minimum wage would price working poor people out of the job market.” You might expect the Wall Street Journal editors to write something like that. But the editorial wasn’t in the Wall Street Journal. It did appear, though, in a prominent New York newspaper. Which one? The New York Times.

In a 1970 economics textbook, a famous Nobel Prize–winning economist wrote of 1970’s minimum wage rate of $1.60, “What good does it do a black youth to know that an employer must pay him $1.60 per hour if the fact that he must be paid that amount is what keeps him from getting the job?” Who wrote that? It must have been free-marketer Milton Friedman, right? Wrong. The author of that statement was liberal economist Paul Samuelson.

Among non-economists and politicians, the minimum wage is one of the most misunderstood issues in economic policy. President Biden and almost all Democrats and some Republicans in the US Congress advocate increasing the federal minimum wage from its current level of $7.25 an hour to $15 an hour over four years. They argue that many of the workers earning between $7.25 and $15 will get a raise in hourly wage. That’s true. But what they don’t tell you, and what many of them probably don’t know, is that many workers in that wage range will suffer a huge drop in wages—from whatever they’re earning down to zero. Other low-wage workers will stay employed but will work fewer hours a week. Many low-wage workers will find that their non-wage benefits will fall and that employers will work them harder. Why all those effects? Because an increase in the minimum wage doesn’t magically make workers more productive. A minimum wage of $15 an hour will exceed the productivity of many low-wage workers.

The reason some workers earn low wages is not that employers are greedy exploiters. If exploitation were enough to explain low wages, then why would employers ever pay anyone over $7.25 an hour? Wages are what they are because they reflect two things: (1) workers’ productivity and (2) competition among employers.

Employers don’t hire workers as a favor. Instead, employers hire workers to make money. They hire people only if the wage and other components of compensation they pay are less than or equal to the value of the worker’s productivity. If an employer pays $10 an hour to someone whose productivity is $15 an hour, that situation won’t last long. A competing employer will offer, say $12 an hour to lure the worker away from his current job. And then another employer will compete by offering $13 an hour. Competition among employers, not government wage-setting, is what protects workers from exploitation.

We all understand that fact when we see discussions on ESPN about why one football player makes $20 million a year and another makes “only” $10 million a year. Everyone recognizes the twin facts of player productivity and competition among NFL teams. The same principles, but with much lower wages, apply to competition among employers for relatively low-skilled employees.

Open up almost any economics textbook that discusses the minimum wage and you’ll likely see a demand and supply graph showing that the minimum wage prices some low-wage workers out of the market. For textbooks published in the past twenty years, though, you might also find a statement that although some workers will lose their jobs, there’s controversy among economists about how many jobs will be lost. According to the textbook writers, some economists think the number will be large and others think it will be small or even imperceptible. You could easily conclude that there’s no longer a consensus among economists that an increase in the minimum wage would cause much job loss.

But that conclusion would be wrong. UC-Irvine economist David Neumark and Peter Shirley, an economist with the West Virginia Legislature’s Joint Committee on Government and Finance, showed that in a January 2021 study published by the National Bureau of Economic Research. Neumark is one of the leading scholars on the economic effects of minimum wages.

Neumark and Shirley chose a clever methodology. They read every published study of the effects of the minimum wage on employment in the United States that was done between 1992 and the present. They identified for each study the core estimates of the effect of minimum wages on employment. When that was difficult to do, they contacted the studies’ authors to ask them what they regarded as their bottom-line estimates. Sixty-six studies met their criteria and these criteria had nothing to do with the size or direction of the estimates.

Here’s what they found. The vast majority of studies, 79.3 percent, found that a higher minimum wage led to less employment. A majority of the studies, 55.4 percent, found that the negative effect of a higher minimum wage on employment was significant at the 10 percent level. Translation: for those studies, the probability that there was a negative effect on jobs was 90 percent. Almost half the studies, 47.9 percent, found a negative effect on jobs at the 5 percent confidence level. For those studies, in other words, the probability that there was a negative effect on jobs was 95 percent.

Moreover, found Neumark and Shirley, the evidence “of negative employment effects is stronger for teens and young adults, and more so for the less-educated.” They concluded that the commonly heard refrain that minimum wages don’t destroy jobs “requires discarding or ignoring most of the evidence.”

Moreover, virtually all the studies of the effects of minimum wages in the United States have considered increases in the minimum wage of between 10 and 20 percent. The US government has never raised the minimum wage by anything close to the 107 percent envisioned in the increase from $7.25 to $15.

Why does that matter? Because the higher is the increase as a percent of the existing minimum wage, the more certain we economists are that it will hurt job opportunities for unskilled workers. We are sure of that because of the law of demand, which says that for any good or service, the higher the price, the less is demanded. That applies whether we’re talking about iPhones, skateboards, or labor. So raise that price a lot, and the amount demanded falls more than it would fall if you raised it a little. And what employers don’t demand, willing workers can’t supply.

The effect of the $15 minimum wage would vary a lot from state to state. In New York in 2019, the median hourly wage was $22.44 and the average hourly wage was $30.76. So a $15 minimum would affect a fairly small percent of New York’s labor force. In Alabama, by contrast, the median hourly wage in 2019 was only $16.73 and the average was only $21.60. So the $15 minimum in Alabama could hurt a much greater percent of the labor force.

The University of Chicago’s Booth School has an Initiative on Global Markets (IGM) that occasionally surveys US economists on policy issues. Possibly because of the surveyors’ understanding that the $15 minimum wage would hurt some states more than others, the IGM recently made the following statement and asked forty-three economists to agree or disagree: “A federal minimum wage of $15 per hour would lower employment for low-wage workers in many states.” Unfortunately, the question did not specify what is meant by “many.” Is it ten, twenty, thirty? Some economists surveyed pointed out that ambiguity. That ambiguity could explain why a number of the economists answered that they were uncertain. But of those who agreed or disagreed, nineteen agreed that it would cause job loss in many states and only six disagreed.

One economist who disagreed, Richard Thaler of the University of Chicago, gave as his explanation this sentence: “The literature suggests minimal effects on employment.” No, it doesn’t. As noted earlier, the federal government has never tried to raise the minimum wage by such a large amount and so there is no scholarly literature on such an increase. Would Thaler say that if putting a cat in the oven at a temperature of 72.5 degrees Fahrenheit doesn’t hurt the cat, then putting a cat in the oven at 150 degrees wouldn’t hurt the cat either?

While few economists have actually estimated the effects of such a large increase in the minimum wage, the US Congressional Budget Office (CBO) presented its economists’ estimate earlier this month. According to the CBO, the increase would reduce US employment by 0.9 percent. That might not sound like much, but 0.9 percent translates into 1.4 million workers put out of work.

But wouldn’t the increase in the minimum wage also increase wages for a lot of workers who keep their jobs? Yes, it would, and the CBO estimates that although the workers who lose their jobs would lose income, their loss over the years from 2021 to 2031 would be “only” 34 percent of the gain to the workers who gained wages.

But the gain in wages is not an unalloyed benefit to those who gain. The reason is that, as noted above, an increase in wage rates doesn’t automatically make workers more productive. So employers, looking for ways to avoid paying more to workers than their productivity is worth, would search out other ways of compensating. They might cut non-wage benefits, work the employees harder, or reduce training, to name three. Interestingly, on its website in 2006, when Congress was considering an increase in the federal minimum wage, the Economic Policy Institute (EPI), an organization funded partly by labor unions, admitted the last two of these three. It stated, “employers may be able to absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale.” How would an employer make his workers more productive and reduce absenteeism? Probably by working the employees harder and firing those who miss work. How would he reduce training costs? By providing less training. In an article in the winter 2021 issue of the Journal of Economic Perspectives, UC-San Diego economist Jeffrey Clemens noted a negative correlation between minimum wages and employer-provided health insurance. In the workplace as in the rest of the world, there’s no free lunch.

The late economist Walter Williams has written about how, as a teenager, he learned many skills on the job that made him more productive and ultimately higher paid. I wrote recently that he could get those early jobs because the minimum wage was so low. Low-paid jobs are often crucial for black youths and other youths who need to build their work skills and work histories. These skills might be as simple as learning to show up on time. In 1967, when I was sixteen, I worked in a kitchen at a summer resort in Minaki, Ontario. The minimum wage at the time was $1 an hour and I was paid, if I recall correctly, $1.25 an hour. For the first three days of the job, I showed up about twenty minutes late. On the third day, the chef told me that if I was late the fourth day, I shouldn’t bother showing up because I would be fired. I was never late again. I learned the “skill” of punctuality. We adults take such things for granted. Kids don’t. Raise the minimum wage enough and a whole lot of young people won’t learn the basics, or won’t learn them until later in life. That would be tragic.


Heard on the Street: The Butcher of Albany

By D.I. Ogenes

How many Deaths is an elected official allowed before he/she is assigned an accurate but less than complimentary Nom De Plume which reflects his/her accomplishment ?  If you are Ron DeSantis of Florida the number is probably zero. However, If you are Andrew Cuomo , the number is in the thousands. 

The exact number may never be known since the quality of the recordkeeping and reporting is suspect – but published reports of the effect of the his now  infamous March 25, 2021 order, put the number into the thousands. For those who don’t remember, Gov. Cuomo ordered Nursing homes to accept, without testing, medically stable patients without regard as to their COVID 19 status.  Nursing homes were specifically prohibited from requiring testing of a hospitalized resident determined to be medically stable. 

The stated reason for this policy was the urgent need for hospital beds, yet , the Javits Center opened with a 1,000 bed capacity two days after the order was issued. The USNS Comfort , with an additional 1,000 beds arrived March 30. It left New York waters on April 30 having cared for 282 patients, less than 30% of it’s capacity. Yet the order stayed on.

The Javits center closed on May 8, 2020.  The order requiring Nursing Homes to take COVID 19 positive patients remained in place until May 27, 2020 after NY had registered one of if not the highest death rate in the Nation. 

Now many are suggesting that Gov. Cuomo be investigated for attempting to cover-up his handling of the news concerning his lethal order. 

The time is overdue for Mr. Cuomo to receive a Nom De Plum worthy of his actions. Henceforth he shall be known as The Butcher of Albany. 

 Serious consideration should be given to criminal prosecution for the untold number of persons who died because of his infamous order.  Their cries for justice are deafening.


Fact Versus Fiction: An Analysis on Eric Schmidt’s Claims on 5G

By Joel L. Thayer

On February 8, 2021, the Financial Times published an op-ed authored by Eric Schmidt titled US’s Flawed Approach to 5G Threatens Its Digital Future. In it, Mr. Schmidt makes a series of claims, but his central theme is that the U.S. is not doing enough to promote our 5G infrastructure and, worse, forcing us to forfeit the U.S.’s dominant position in the race to 5G to China. He even goes as far as to suggest that the U.S. should throw the proverbial baby out with the bathwater by adopting a more nationalized approach to 5G vis-a-vis the Department of Defense (DoD) spectrum sharing plan. In this article, I address the most glaring of his assertions to put the 5G debate in the proper context. 

Claim: “…China, is already far ahead [in 5G].”

Response: Mr. Schmidt’s article does not provide a metric when he says that China is “far ahead.” Based on the article, it appears that Mr. Schmidt might be comparing the two countries in the following ways: 1) internet speeds; and 2) national 5G coverage. In each case the United States is excelling. Although both countries have taken very different approaches to 5G, both countries’ 5G strategies involve blending their 4G/LTE networks with their nascent 5G networks. Hence, it is appropriate to compare the countries’ progress on those measures.  

In terms of broadband speeds, China has an average internet speed of just 105.2 mbps where the United States has an average of 124.1 Mbps. In terms of broadband speed, we are far ahead of China.  Moreover, a study conducted by Global Wireless Solutions released network performance testing from Super Bowl LV in Tampa and found that all three of the nation’s carriers averaged more than 1 gigabit per second on their respective 5G networks, which for the uninitiated means that we have past light speed and are now entering into ludicrous speed. Hence, we are certainly leading in this area.

In terms of 5G coverage, China appears to be deploying far more infrastructure than the U.S., but basing  China’s success in 5G purely on the amount of infrastructure deployed may be misguided.  The main issue China is having is making its 5G infrastructure compatible with its 4G/LTE networks. This issue is so prevalent that Huawei’s Ryan Ding described China’s 5G rollout as “fake, dumb, and poor,” because most of the applications China is calling 5G is really just disrupted 4G due to the frequent and sporadic handover between the two networks. This is distinct from the U.S.’s plan where it and its carriers have a slower deployment strategy to ensure that its 5G networks can efficiently interoperate with its 4G/LTE networks. However, China’s aggressive 5G policy should be taken seriously, but we should not assume that China is in fact “ahead” of anyone. 

The one place where China may pose a competitive threat is in spectrum. This is because China can more easily clear incumbents from spectrum bands for 5G due to its heavier regulatory control when it comes to property rights. Also, China has much more local zoning control over deployment. It is similar to its government’s control on spectrum where it relies on heavy centralized state control allowing quicker infrastructure deployment without public input.  If the U.S. wanted to emulate China’s approach, then Mr. Schmidt is essentially advocating that the U.S.  allow the FCC to clear bands with disregard to the property rights of incumbents  operating in those bands. 

Claim: The FCC’s C-Band Auction is a “digital setback,” because the auction provided “no meaningful requirement to build necessary network infrastructure.” 

Response: This criticism is simply untrue. As it relates to its C-Band Order, the FCC requires C-Band licensees to meet multiple performance metrics based off of the service or services the provider wishes to provide. For example, In paragraph 93 of the C-Band Order, the FCC requires licensees in the A, B, and C Blocks offering mobile or point-to-multipoint services must provide reliable signal coverage and offer service to at least 45% of the population in each of their license areas within eight years of the license issue date (i.e., first performance benchmark), and to at least 80% of the population in each of their license areas within 12 years from the license issue date (i.e., second performance benchmark). These population benchmarks are actually more aggressive than those for other flexible-use services under part 27 of the FCC’s rules.

There are even performance metrics for licensees providing IoT-type fixed and mobile services on paragraphs 97-99. The C-Band Order requires licensees providing Fixed Service in the A, B, and C Blocks band to demonstrate within eight years of the license issue date (first performance benchmark) that they have four links operating and providing service, either to customers or for internal use, if the population within the license area is equal to or less than 268,000. If the population within the license area is greater than 268,000, the FCC requires a licensee relying on point-to-point service to demonstrate it has at least one link in operation and providing service, either to customers or for internal use, per every 67,000 persons within a license area. The FCC requires licensees relying on point-to-point service to demonstrate within 12 years of the license issue date (final performance benchmark) that they have eight links operating and providing service, either to customers or for internal use, if the population within the license area is equal to or less than 268,000. If the population within the license area is greater than 268,000, the C-Band Order requires a licensee relying on point-to-point service to demonstrate it is providing service and has at least two links in operation per every 67,000 persons within a license area.

Claim: “Future auctions must set stringent build requirements, with penalties for underperformance.” 

Response: In paragraphs 102-103 the C-Band Order goes into detail about the penalties for each licensee for not meeting the performance metric. For example, the C-Band Order outlines that, in the event a particular licensee fails to meet its performance benchmark, the licensee will have its license term substantially reduced and, when the shortened term is exhausted, the C-Band Order states that “licensee’s spectrum rights would become available for reassignment pursuant to the competitive bidding provisions of section 309(j) [of the Communications Act of 1934 that articulates restrictions on spectrum license applications] and any licensee who forfeits its license for failure to meet its performance requirements would be precluded from regaining the license.” 

Claim: “Pursue alternatives to auctions.” 

Response: Mr. Schmidt’s statement is myopic as auctions are only one way the U.S. has advanced 5G. His article failed to review or even mention the myriad of 5G policies in place now. In fact, the U.S. has taken an holistic approach to advance our 5G networks through: 1) a series of subsidy programs (e.g., Rural 5G Fund, RUS Fund, USF programs, etc.); 2) clearing spectrum and auctions (e.g., 24 GHz Auction, CBRS, Ligado Order, and, yes, the C-Band auction); 3) granting key mergers (e.g., T-Mobile-Sprint, AT&T-Time Warner, etc.); and 4) lowering regulatory burdens for wireless infrastructure (e.g., 5G Upgrade Order, 5G Small Cell Order, One Touch Make Ready Order, 6409 Order). Again, Mr. Schmidt fails to mention or even allude to these policies focused on infrastructure. 

Claim: “The defense department has proposed sharing government-controlled spectrum with commercial providers if they build infrastructure quickly.”

Response: Mr. Schmidt’s endorsement of the DoD’s proposal is misguided.As I and others have argued before, the DoD’s blue-chip in 5G is that it sits on most of our Nation’s valuable mid-band spectrum, which is essential for 5G deployment. This is clearly evident from every other countries’ inclusion of these frequencies in their respective 5G plans. This is especially true in the case of China that is a leader in mid-band spectrum deployment for 5G. The DoD’s frequencies in its RFI (i.e., 3450-3550 MHz) are prime “beachfront” mid-band spectrum and are critical to open up for commercial use. This is because U.S. commercial 5G networks are severely lacking in mid-band spectrum; a fact of which the DoD is well aware. DoD’s offer to industry is, thus, enticing, but it comes at a hefty price: every carrier must go through the DoD to access this mid-band spectrum that they all will need to make their networks functional. This is a Hobson’s choice for carriers: either they want a functioning 5G network or not. Hence, they will be compelled to work with DoD if this proposal moves forward. This will most likely translate into the DoD being yet another bureaucratic barrier of entry for carriers looking to deploy 5G, which, in turn, slows down the deployment that Mr. Schmidt says the DoD’s plan will promote.

Conclusion 

In his article, Mr. Schmidt makes assertions that are either exaggerated, myopic, or confused on the issues of 5G.  We can both agree that China’s growth in the area is concerning. However, the arguments Mr. Schmidt presents regarding our auctioning process are not at all the issue and, ironically, is an example of the U.S.’s success in this technological race.

• • • • • • • • • •

Joel L. Thayer is an attorney with Phillips Lytle LLP and a member of the firm’s Telecommunications and Data Security & Privacy Practice Teams. Prior to joining Phillips Lytle, he served as Policy Counsel for ACT | The App Association, where he advised the Association and its members on legal and regulatory issues concerning spectrum, broadband deployment, data privacy, and antitrust matters. Prior to ACT, he also held positions on Capitol Hill, as well as at the FCC and FTC. The views expressed here are his own and do not reflect those of Phillips Lytle LLP, or the firm’s clients.


America opposes the Stealth Green New Deal

And that some Senators are considering adding the bill in the dark of night into a “must pass omnibus spending bill” is truly sinister.

According to recent news reports, Senator Lisa Murkowski (R-AK) and Senator Joe Manchin (D-WV) are pushing for a far reaching energy bill that is shockingly similar to the New Green Deal to be shoe-horned into the “must-pass” government funding bill that is being negotiated during the remaining days of the lame duck legislative session. 

Frontiers of Freedom President George Landrith said:

The Manchin-Murkowski energy bill is a horrible piece of energy legislation that would endanger America’s energy independence, increase costs to consumers, kill jobs, and is effectively the Green New Deal light.  If the bill were a piece of stand alone legislation, it would be entirely worthy of outright defeat which is precisely why the Senators are trying to attach it to “must-pass government funding” legislation where there would be no real opportunity to review and debate the far reaching consequences of the bill. 

This energy bill includes language lifted from the Green New Deal that would commit our nation to very costly and even highly impractical regulations that would restrict energy choices to either 100 percent renewable sources or zero emission sources. This 100% provision as a “Sense of Congress” is dangerous because it would give future Energy Department bureaucrats a blank check from Congress to impose virtually any energy regulations that suit their fancy. This is not government accountability — it is the precise opposite. 

While innovation and the marketplace will continue to find cleaner and cleaner ways to provide consumers and our economy with needed energy, government regulations that attempt to force the issue will compel us into high cost solutions and do far more harm than good.

Even if one thinks that some of the ideas contained in this energy bill deserve consideration, this “slight of hand” procedural move should be universally opposed because it will rush us into radically different direction with virtually no debate or discussion. The economic costs and the job creation costs are obvious. But even national security and foreign policy could be impacted. 

Making America less energy independent or forcing energy shortages on America does not make us more secure or help us keep aggressive adversaries like China or Russia at bay.  To be blunt, China and Russia have to be cheering this effort. They would be its biggest beneficiary. It is the equivalent of the United States voluntarily shooting holes in our Olympic runners’ feet just before the start of their race. 

Major shifts in important public policy that will have significant economic and even national security implications deserve full consideration and should not employ procedural chicanery to help them pass in the dark of night with no significant discussion, review or debate. 

Senators Murkowski (R-AK) and Manchin (D-WV) both have a reputation for being moderate — politically speaking — but there is nothing moderate about their energy proposal. Its impact will harm America economically, reduce job growth at a time we desperately need more jobs, and increase consumer costs to Americans already struggling to make ends meet. On the international front, our adversaries in China and Russia and around the globe have to be cheering this effort.  

The fact that the bill may contain some worthwhile reforms or provisions is largely irrelevant and cannot be a reason for supporting it. Let’s be honest, if you were offered a piece of cake that was made with only 5% poison, you would wisely decline and toss it in the trash. This bill is more than 5% poison and should be discarded with enthusiasm. 

We urge Senators to opposed this move to radically change American energy policy in the dark of night and without serious debate and review. This is a bad energy bill. But the idea of passing it in a procedural move that hides it from the American public is truly sinister. Any Senator supporting this effort is unworthy of their office. 


Frontiers of Freedom Statement on US Postal Service Year-end Financial Results

On November 13th, the U.S. Postal Service reported its Fiscal Year (FY) 2020 results. This revealed many insights about the agency with the largest takeaway being a disappointing $9.2 billion net loss.  USPS, like so many other operations, has been adversely affected by the Covid-19 pandemic; mail volume, for example, declined 13.8 billion pieces. However, it is important to note that the USPS financial troubles far predate the coronavirus pandemic. 

Frontiers of Freedom president George Landrith states, “The USPS has been consistently losing money year after year and has requested up to $75 billion in taxpayer money to remain solvent, but until thoughtful postal reform is completed, this money will merely kick the problem down the road.” He continues, “If we give USPS the money they are requesting, but allow the agency to continue with failed policies, we will inevitably have to bail them out again in the future.”

The agency states in the report that losses within the management’s control was $3.8 billion this year. This is a $334 million increase from the controllable loss in 2019. The agency is trending in the wrong direction and without postal reform it will only continue to decline.

In fact, although operating revenue has actually increased by nearly $2 billion due to a surge in e-commerce and greater package demand, the USPS’ out-of-date pricing system means the agency is unable to afford package costs or make a profit on these deliveries. Further, USPS calls shipping and packages its most “labor-intensive” effort, which is especially true during Covid-19, but how and to what extent that translates to its costs and full accounting picture continues to be unclear. 

Landrith concludes, “In order to effectively manage and reduce the agency’s $160 billion debt, the USPS must update its policies and work with the incoming Biden administration to create thoughtful reform that will help preserve and ensure the success of our most important public institutions.”


It’s Vital To 5G To Let The Private Sector Develop It

By Peter RoffTownhall Finance

It’s Vital To 5G To Let The Private Sector Develop It
Source: AP Photo/Mark Schiefelbein

In Washington, bad ideas are like bad pennies: They keep turning up.

In early 2019 a group of well-connected Washington insiders was suggesting with the utmost sincerity that it would be best to have the Pentagon in charge of the push to 5G, the next-level communications network. The primary reason for this, they said, was national security and the threat posed by China.

President Donald J. Trump, a man who is in no way soft on China, wisely rejected their advice. In a Rose Garden press conference with Federal Communications Chairman Ajit Pai, he rejected the government-led approach, calling it “not as good, and not as fast.” Instead, he committed to a 5G buildout that would be “private sector driven, and private sector led,” ending talk of a nationalized network.

Or so we thought. The Wall Street Journal recently reported that the idea of a 5G network run out the Pentagon is once again on the table. A new proposal for a government-managed system under the supervision of a single company is once again under discussion. And, as before, the firm the DoD has in mind has little to no experience managing large information clusters.

The reason the idea’s come back has more to do with the swamp-dwellers who profit off big government contracts than with the science involved, the efficiency needed to bring 5G to life quickly, or the ability of firms in the private sector to make it all happen. It’s crony capitalism at its worst.

The best way to get to 5G is to allow the best minds and best engineers in the best firms to develop competing technologies – with the winner to be chosen in the marketplace. The plan being pushed yet again by the DoD gives one company – in this case, most likely Rivada Networks – control of the spectrum and its allocation as well as access to the protected intellectual property of those who’d be doing the job if the Pentagon had not taken the project over.  At least that’s the opinion of 19 U.S. Senators who wrote the department complaining the way it wanted to move forward “contradicts the successful free-market strategy that has embraced 5G.”

Somehow what President Donald J. Trump likes to call “the race to 5G” is again in danger of being taken over by the officials in charge of it. Instead of fair competition, a vital future national and economic security project is being influenced unfairly by what leading congressional Democrats including House Energy and Commerce Committee Chairman Frank Pallone, D-N.J., say is a plan “specifically crafted to enrich President Trump’s cronies.”

Partisan hyperbole aside, it’s easy to see Pallone’s point. Building a national 5G network requires more than influential political connections. Rivada Networks, the company lobbying hardest to win the bid, is not exactly known for its ability to build out and manage broadband networks. Its proposal to manage FirstNet, a nationwide public safety broadband system, was shot down due to concerns at the Interior Department over concerns about the insecurity of its technology.

One might think this would give the Pentagon pause, yet Rivada’s advocates within the department say they are confident the company can get the job done and have an operating network functioning within three years. Of course these are some of the same people who have already spent more than a decade and hundreds of billions or more on the development of the new multi-service Joint Strike Fight and still haven’t gotten it right.

Chairman Pai, a national hero for his work preventing the Internet from coming under the thumb of the U.S. government as a regulated utility, has dismissed the effort to get to a nationalized 5G run by the Pentagon as being a costly and counterproductive distraction from what America ought to be doing. The federal government moves slowly by design. Processes that work quickly in an authoritarian country like China don’t work in America. Here, roadblocks and rulemaking are the order of the day. Washington can’t compete with the U.S. private sector. In Beijing, the private and public sectors are indistinguishable.

Thanks to President Trump, Chairman Pai, and others who understand the stakes, America is a lot farther down the road to a working 5G network than people might believe. Thanks to a competitive market where the nation’s three largest carriers have all prioritized building the nation’s biggest, fastest 5G network, we’ll get there faster and in better shape than if we let the government do it.


Coalition Letter supporting efforts to encourage pharmaceutical firms to move operations to the United States

Dear Mr. President and Director Navarro,

We write in support of the Administration prioritizing incentives for onshoring certain manufacturing, including pharmaceutical products and ingredients. As you well know, about 72 percent of pharmaceutical ingredients supplying the United States are not manufactured here. That is an alarming percentage, especially considering we are fighting a global pandemic.

For decades, American manufacturing has been disincentivized and pushed overseas. The Trump administration pledged to bring the supply chain and everything that it entails, including jobs and security, back to the United States. That is why President Trump made the tactical move to invoke the Defense Production Act, typically a wartime move, to bring the pharmaceutical supply chain home.

One tangible step the Administration has taken to secure our drug supply chain is early approval of a loan to Eastman Kodak to manufacture key pharmaceutical ingredients in Upstate New York. This move included some controversy, after some alleged that Kodak executives made improper stock transactions in advance of the loan announcement. But now that an internal investigation has cleared the company of wrongdoing, it is imperative that we stay the course and bring pharmaceutical manufacturing home from places like China, that are often at odds with American national security.

The Trump administration should be encouraging any capable American company to move its manufacturing back to the United States. Making America a compelling place to do business and also having robust trade relations with nations of goodwill is smart, but policies must change, and American companies must be incentivized and encouraged to take that step. The Trump administration has the opportunity to revamp American manufacturing – I hope you both follow through.

Thank you for your thoughtful consideration.

Sincerely,

George C. Landrith
President and CEO
Frontiers of Freedom

James L. Martin
Founder/Chairman
60 Plus Association

Judson Phillips
Founder
Tea Party Nation

Richard Manning
President
Americans for Limited Government

Andrew Langer
President
Institute for Liberty

Seton Motley
President
Less Government

Chuck Muth
President
Counsel on Government Relations

Rick Trader
Founder, Producer & Co-host
Conservative Commandos Radio Show

Saulius “Saul” Anuzis
President
60 Plus Association

John Cooper
President
Defending America Foundation

Susan Taylor
President
Strengthening America for All

Scott Johnson
President
The Last Best Hope on Earth Institute

Nicholas Willis
President
Americans for Liberty & Security

Martha Boneta
President
Vote America First

Kerri (Houston) Toloczko
President
Tacita Strategies


America Needs a Plan to Bring Key Manufacturing Home

By Peter RoffIssues & Insights

For years U.S. lawmakers and special interest groups have promoted policies that drove U.S. manufacturing offshore without people really being aware of it. Higher taxes, workplace regulations, environmental rules with onerous penalties, and other actions by government drove the costs of making things in America up so high it became a matter of corporate survival to take it to other countries.

Good for them, bad for us. China’s middle class has risen at the expense of U.S. workers and their families. Jobs have left places like Michigan and New York and Illinois for places with names most Americans can’t pronounce let alone find on a map.

It was a tragedy for workers and entire communities as the job providers moved away. Middle America understood what was going on, providing Donald Trump with fertile ground for his rhetoric about “bad trade deals” when he ran for president in 2016. For the coastal elites who only looked at the soaring values of their retirement portfolios, it was another story. It wasn’t until the COVID-19 pandemic struck that they realized what they had done.

For probably the first time since World War II, the U.S. economy was riddled with shortages. No matter how much money you had to spend, in some places, there wasn’t a roll of toilet tissue or a bottle of hand sanitizer to be found. Unless, in a few cases, you were willing to wait and buy it from China.

Memories may be short, but it wasn’t just these common household items that were in short supply. Items thought necessary for treating coronavirus patients like ventilators and pharmaceuticals as well as the personal protective equipment for hospital workers on the frontlines fighting the pandemic needed to protect themselves were not available in the quantities needed. China, where the outbreak was first detected, was hoarding what they made for their own use.

Recognizing the problem and expanding on what he promised while campaign, Mr. Trump has been looking for opportunities to bring the manufacturing of these products — and the jobs that go with them — home. And, unsurprisingly, he’s been criticized for doing it.

The Trump administration recently signaled its support for the launch of Kodak Pharmaceuticals, which would be a branch of the once-mighty Eastman Kodak company, by providing a $765 million loan to get things going. Kodak has been the anchor of Rochester, New York’s economy but has had difficulty adapting to the digital age.

This deal would not only stabilize a domestic supply chain, but it would reestablish the Rochester economy with a huge boom in the job market. So you would think the establishment of a new corporate entity to manufacture pharmaceutical ingredients in the United States that will help secure America’s drug supply chain and create what the Democrats used to call “good jobs at good wages” would be met with cheers and brass bands. Instead, the company finds itself under examination because the news caused the company’s stock to rise in value, creating the illusion that some company executives benefited financially.

It’s that kind of muddled thinking that drove so many jobs and companies out of the United States in the first place. At a time when initiative at home is desperately needed in the corporate sector, the first ones to step to the front of the line find themselves the victims of bad press and potential investigations. This is not to excuse any bad actions or actors – and if there were any, they would have been uncovered by Kodak’s independent review, but none were.

We should expect that a company’s “good news” should lead to an increase in the price of its stock. That’s good for the shareholders, which should be any company’s principal if not the only concern, as well as the country. The idea that people working for the company might also profit is the hallmark of the suspicious, anti-free market attitudes that infected the media, members of the political class, and consumer watchdogs for decades and which, more than once, nearly destroyed the American economy.

Senior White House trade advisor Peter Navarro recently called COVID-19 a wake-up call for the nation, not just because of the threat it posed to our health or healthcare system but because it left us defenseless in economic and national security terms. “We have already witnessed over 80 countries impose some form of export restrictions on medicines or medical supplies, proving that no matter how strong our friendships or alliances may be, they mean nothing in a pandemic,” he told the Wall Street Journal.

Kodak was found innocent of all “charges” after an in-depth internal investigation. Policymakers and watchdogs need to move on and come up with a plan to bring manufacturing and jobs home, by creating incentives to do just that.

There are a lot of tools in the tool kit to make this possible: tax breaks, additional deregulation, export assistance, and opportunity zones are just a few of the things that can be dangled in front of the heads of big companies to lure them to bring their operations home.

America needs a big plan that ties them and other ideas together to bring the manufacture of essential goods like pharmaceuticals and PPE home, before the next global pandemic hits. Breaking our 100% dependence on foreign manufactures located in countries whose interests may diverge from ours at some future and highly inconvenient time must become a national priority now.


Executive Orders Are Not the Best Way to Lower Prices and Maintain High Quality. But a Healthy, Robust Marketplace Is.

By George LandrithFrontiers of Freedom

Unexpected expenses are never welcome and no one likes a costly surprise.  So it isn’t surprising that there has been a lot of talk in Washington and Congress about “protecting” patients from surprise medical bills.  And if rumors swirling around Washington are true, the Administration will enter the fray with an announcement about an executive order that will supposedly “fix” the surprise medical billing problem.  This may sound good, but in reality it won’t be good news despite the Administration’s best intentions.  In the end, a government “solution” will simply drive out and crowd out market forces which if allowed to work would not only solve the surprise billing problem and reduce costs to consumers, but also maintain the highest levels of quality and incentivize innovation in our healthcare system. 

The most common cause of a surprise medical bill is when a person uses a healthcare provider that is not in their insurance plan’s network of providers. While it doesn’t happen that often, it is a real challenge for consumers when it does happen. Insurance companies have contracts with healthcare providers to provide medical services at discounted rates. That makes them “in-network.”  The “out-of-network” providers charge a price without any pre-negotiated discounted rates which means the out of network costs are greater. 

These circumstances, no matter how rare, are used by politicians to make us think they are proactively solving problems for our benefit. Sadly, they are doing nothing of the sort. One only needs remember how President Obama and Vice President Biden repeatedly promised that they would save us all thousands of dollars every year and allow us to keep our health insurance and our doctor.  Obviously, Obama and Biden failed to deliver on that promise.  It was the lie of the year even as judged by liberal fact checkers.  Literally, millions of Americans lost their preferred plans and virtually everyone saw their health insurance costs increase — not decrease by thousands.

So a healthy dose of skepticism about promises to fix surprise billing with government price controls is entirely justified.  Government imposed price controls skew incentives and reduce the availability of quality healthcare.  To make things worse, government imposed price controls also reduce the likelihood of future healthcare innovations and slow the development of promising medicines and procedures.  But the bad news doesn’t end there — government mandates almost invariably shift power to government bureaucrats and health insurance companies, rather than giving consumers more control over their own healthcare. 

And it is fair to ask what is the government’s track record on reducing costs?  And on top of that, government mandates will do nothing to reward innovation or to empower consumers.

The marketplace — and the negotiations that take place when you have two or more parties all trying to maximize the value that they receive — has a knack for providing high quality goods and services for the lowest possible prices. That is the process that has brought us smart phones that have more computing power than was used in the 1960s in the Apollo program. Today, the average American eats better and spends a lot less to feed themselves than our great grandparents did.  We also have access to all manner of foods — something even kings didn’t have a few generations ago.  Additionally, we work far fewer hours to obtain that food. This is the power of the marketplace and the innovation that it encourages. 

We need to harness that market power which will deliver high quality and low prices in the medical arena. Because the government has historically been such a big player in the medical field and because it is always arguing for a larger and more powerful role, we will see less quality and higher prices than the marketplace could have provided. 

Instead of continuing to empower government, let’s try reforms that put economic power back in the hands of healthcare consumers.  Where’s the proof that government run schemes produce the needed quality and lower costs?  Let’s trust the marketplace to do what it does so well — boost quality and keep prices comparatively low.  We trust the marketplace to provide us with food, housing, technology, and a thousand other things. Why not healthcare?


Let’s Get Lower Drug Prices AND More Innovation and New Cures!

By George LandrithBreitbart

President Trump has done a lot in his first term to strengthen the U.S. Economy, make America more competitive, and bring good paying jobs back to America. As a result, before the Chinese COVID pandemic and the almost complete economic shutdown imposed by various governors and mayors, Americans saw their wages on the rise at record levels and had record high employment opportunities. So President Trump gets high marks for his work on the economy and understanding market forces. But I am concerned that his administration’s “most favored nation” executive order, which would impose an international pricing index on medicines and drugs in Medicare Part B, is a huge mistake and will do a great deal of harm both to our economy and to those who suffer from illness and disease and are in need of cures.

Most of the nations that would be used in the international pricing index have socialized medicine. So, effectively such an approach would simply import an element of socialized medicine to America. President Trump has wisely opposed attempts to socialize our medical industry.

It is worth noting that the U.S. is the unchallenged world leader in the development of new, innovative, and life-saving medicines. There is a reason for this, and it isn’t because all the smart medical minds are born in America. We are the world’s leader in innovation because our system of intellectual property makes it potentially profitable to invest millions and even billions into research to develop new devices, processes, and medicines. Most medicines cost hundreds of millions of dollars to develop. Some work and provide miracle cures. Some don’t pan out. But that investment has to be recovered at some point. That’s simply how reality works.

If you’re going to invest and risk millions of dollars trying to develop something new and innovative, you want to know that if you’re successful, you can get your investment back over time when the new product is sold to the public.

If government makes it clear to those who do such research that the law will not permit them to recover their investment, that needed research will come to an effective end. Then we will see far fewer innovative cures that save and improve lives in the future. Who pays the cost of that policy?  Everyone who at some point during their life becomes sick, needs medical help, and hopes not to live a diminished life or even worse, die. People who are suffering and dying of terrible diseases will be left to suffer and die because government de-incentivized medical research that could have treated them.

Many of the nations that would be used in the international pricing index tell American drug manufacturers what they will pay and typically demand prices well below the costs of developing the medicine. Often, they are only willing to pay the cost of producing the pill, but won’t accept paying for the full research and development that made the pill possible.

Why do American firms sell to them given the legal plunder that these governments engage in? Because often if they don’t sell at the demanded price, they are told they cannot sell any medicine in that nation. So in effect, these foreign governments engage in legalized robbery or blackmail of American pharmaceutical firms. That leaves Americans to pay the full cost of the research and development. And it is one of the big reasons Americans pay more for medicines than Europeans. Simply stated, Europe cheats and steals.

President Trump has worked hard to be sure that Americans are treated fairly in the trade agreements that he has negotiated. As a result, we see a resurgence in American manufacturing and good paying American jobs. The administration should use trade agreements to require developed nations — like those in Europe — to pay their fair share for the medicines they use.

Every developed nation should be sharing the costs of research and development. When Europeans buy mobile phones or computers or TVs, the cost they pay includes not just the cost of the parts to build the device, but also the costs of research and development for the product. There is no reason why they shouldn’t do the same for medicine.

If developed nations are paying their fair share of the research and development costs, Americans won’t be forced to bear the full cost. So if you want to have lower cost medicine and lots of future new and innovative medicines and cures, forcing developed nations to pay their fair share is a much better approach than importing their incentive-killing socialized medicine tactics.

I encourage the administration to continue to use trade agreements as a way to make sure that Americans are not cheated and robbed by other nations. This is a win-win approach. We will get the benefit of less costly medicines and we will get the benefit of a system that incentivizes innovation and research into new cures and medicines. This will save American dollars and lives! That is a policy that we can all get behind!


Greens Threaten U.S. National Security: Pebble Mine Project Deserves a Green Light

By Peter RoffAmerican Action News

Erin McKittrick, www.aktrekking.com/pebble via Wikimedia Commons

The United States is in a race for strategic mineral supremacy. Many of the essential minerals involved in the design of computer components vital to the nation’s defenses are found, ever increasingly, overseas. And that, during a time of conflict, would leave America in an untenable position.

Just as both President Donald Trump and former Vice President Joe Biden have promised to bring manufacturing jobs back to our shores they should also place America on a course to minimize our reliance on other countries in potentially dangerous parts of the world to provide us with the strategic resources needed to keep the economy flowing and our defenses strong. 

The opening of Alaska’s Pebble Mine, which analysts believe may be one of the richest sources of gold and copper remaining untapped anywhere in the world, would significantly reduce the nation’s need to import certain vital minerals. It’s in the final stage of the permitting process and, since the U.S. Army Corps of Engineers recently gave it a positive environmental review, there should be nothing in the way of its beginning to operate save for a few final, minor bureaucratic hurdles.

Unfortunately, that’s not the case. America’s so-called “green” organizations, which oppose the expansion of U.S. development of indigenous fossil fuel resources like oil and natural gas are equally bent on bringing the once robust mining industry to heel. Through their efforts they’ve managed to elevate the possibility of damage to the “native” salmon population to a level that’s getting the attention of policymakers that, incredible as it seems given what’s at stake, block the Trump Administration’s “final Record of Decision” expected sometime in the next few weeks that would give Pebble Mine the green light to begin operations. 

The project, just like any that come before the Army Corps of Engineers for review, has been through a well-established environmental review process. It should be given the go-ahead. For some reason, some former senior Trump officials including Nick Ayers, the former chief of staff to Vice President Mike Pence, are reportedly engaged in efforts to stop it.

Pebble Mine would not only be a source of strategic minerals, it would provide jobs at a time when the economy needs them desperately. The U.S. Bureau of Labor Statistics recently reported that, in the last quarter for which the numbers are available, on an annualized basis nearly a third of the nation has become jobless because of the coronavirus lockdown. As the final Environmental Impact Statement compiled by the Army Corps found the concerns regarding the salmon to be baseless and pose no significant threat to its genetic diversity, the continued effort by the greens to push this line of argument is without merit.

Yet the implications of the outcome go well beyond this one project. “Pebble Mine is the poster-child of critical projects delayed by a broken permitting process,” Mike Palicz, a policy analyst with the non-profit group Americans for Tax Reform recently blogged. “The Obama Administration went as far as issuing a preemptive veto to prevent the mine from even receiving a proper environmental review. Last year, the Trump Administration righted this wrong by withdrawing Obama’s preemptive veto, allowing the project to move through the standard review process.”

That process is now nearing completion. The administration has the power to keep things on track and get the mine open. It should ignore additional calls from both environmental activists and those who pretend to be its friends for additional delays and unneeded further evaluation. The final Record of Decision, based on the Army Corps’ review, is expected to be favorable and should be allowed to stand.

Many of those who oppose the Pebble Mine project oppose all mining projects. They want the industry to go the way of the Passenger Pigeon and other extinct species. Their interests and America’s do not coincide.


Doing Dialysis Differently – Savings Lives, Saving Money

By Peter RoffReal Clear Health

If all you did was listen to the politicians and commentators, you’d think America’s health care system was on the verge of collapse. Nothing could be further from the truth. There are problems, but most of them have been caused by the self-same reformers who’ve been trying for more than two decades to “fix” it.

Much progress has been made since the New York Times and presidential candidate Bill Clinton declared a crisis existed and proposed solving it by increasing the role played by the government in managing the delivery of services and prices. Once the voters learned the potential adverse impacts on the quality of care they received, the debate changed.

Through it all, America has continued providing the best care anywhere. The spirit of invention and innovation that is the hallmark of our civilization exists robustly in the health care sector and, because it does, people are living longer, generally healthier lives. Yet, instead of encouraging that, scholars and policymakers continue to focus on flattening the cost curve through fiat. Price controls and rationing may reduce the perceived costs of medical care but won’t solve the problem.

The real solutions will come from innovations in care. That means continuing the development of radical new treatments that were unthinkable a generation ago and, in a few cases, going back to what was working before the government messed things up.

One place where looking back is already helping us move forward is kidney dialysis. In 1972, thinking they were helping, Congress passed legislation creating a Medicare program to pay for dialysis treatment and patients with end-stage renal disease gravitated to more expensive, center-based care using machines built for use in centers that are large, hard-to-use, and too expensive for home use.

In 1973, 40 percent of dialysis patients received treatment at home. Today, 90 percent receive treatment at dialysis centers and hospitals — at much greater cost and at greater risk to their health because the entire time they are there, checking in, checking out, waiting for and receiving treatment, they’re in the company of others who might be sick with something like COVID-19 that science tells us preys on those whose immune systems are compromised.

We spend more than $110 billion on kidney disease, the ninth leading cause of death in the United States. More than 37 million Americans have some form of this disease and the money paying for their dialysis comes from Uncle Sam through Medicare. That’s not sustainable.

The alternative to spending more is to spend smarter. The Trump Administration, which earlier this year announced a plan to “shake up” the kidney care medical complex is pushing for a return to home-based hemodialysis as a cost-saving measure and one more in line with patient concerns. His executive order on the issue included a direction to the Department of Health and Human Services to develop policies to reduce the number of Americans getting dialysis treatment at dialysis centers.

That’s the right move. The in-home care alternative will have the biggest impact in the shortest amount of time. The current care cycle, where treatment begins when it’s too late to stop disease progression. Must be broken. Instead of throwing more money at dialysis clinics, the priority is being repurposed in the right place, on early diagnosis, better patient education, and comprehensive and holistic care services.

Home-based options for hemodialysis, where blood is pumped out of the body under supervision into a machine that acts as a kidney and filters the blood before returning it to the body, and peritoneal dialysis, where blood vessels in the lining of the belly filter the blood with the help of a cleansing fluid, exist and should be utilized to the fullest extent possible.

Starting in 2021, ESRD patients will also be able to enroll in Medicare Advantage plans – great for the ESRD patients, but it could increase premiums for all seniors if we don’t help these plans negotiate for fair rates and prevent costs from rising. The Centers for Medicare and Medicaid Services should remove any roadblocks that exist to making this option viable.

With COVID-19 is changing how people go about their lives, the incentive to adapt and innovate in the health care sector is there. Telehealth, which was generally frowned upon before the current crisis, has taken off like a moonshot. Changing the kidney dialysis model to one where the care is mostly provided at home could liberate those receiving treatment now held prisoner by their illness and could lead the transformation of American medicine. Anyway, it’s worth a try.


The oil market doesn’t need an intervention

By George LandrithThe Huntsville Item

In late spring, oil prices dipped below zero for the first time ever. Futures contracts for May delivery traded as low as negative $37 a barrel, as producers and speculators paid refineries and storage facilities to take excess crude off their hands. 

In some sense, this historic moment was inevitable. Oil markets are completely saturated. Worldwide coronavirus lockdowns have depressed energy demand. And in March, Saudi Arabia and Russia announced they would increase production, thus exacerbating the glut.

President Trump has tried to help beleaguered U.S. producers. He recently mediated a deal between Saudi Arabia, Russia, and other major oil producers, who collectively agreed to cut production by nearly 10 million barrels a day.

But prices are still falling. And now, the White House is toying with other ways to prop up U.S. oil producers, ranging from tariffs on imported oil to direct cash payments to energy companies.

This desire to help energy companies, and the millions of workers they employ, is commendable — but ultimately counterproductive. In the long run, the industry will emerge stronger if the White House allows the free market to resolve this crisis.

This pandemic-induced economic crisis is going to be painful for the energy sector. Cost-cutting and layoffs are already underway.

But the industry is strong and adaptive, and has bounced back from past crises by investing in technology. In fact, economic pressure encourages the kind of innovation and belt-tightening that helps companies thrive in the long run.

The United States last faced low oil prices in 2014 and 2015, when Saudi Arabia ramped up output to try to cripple U.S. producers that specialized in fracking — a technique used to extract oil from underground shale rock. By early 2016, prices had dropped below $30 a barrel, well below what U.S. shale producers needed to break even.

The government didn’t come to the rescue, which forced frackers to get creative. They researched how to extract more oil for less, and came up with a variety of new techniques, like drilling several wells simultaneously and using drones to detect faulty equipment. As a result, the average break-even price for frackers dropped from $69 a barrel in 2014 to an average of $40 a barrel by 2017. Had the government tried to solve the problem by slapping tariffs on Saudi crude, the U.S. oil industry likely would have never set its all-time production record of 13.1 million barrels a day in February.

We can be confident the U.S. energy industry will apply its ingenuity to this crisis, too — because these days, it excels at invention. In 2019, the oil and gas sector increased adoption of digital technologies, including cloud data storage and new software. Over the next five years, digitizing could slash the cost of oil production by almost 10 percent.

By using sensor technology — tiny, data-tracking devices attached to oil-field gear — producer ConocoPhillips recently cut in half the amount of time it took to drill new wells in South Texas. Other companies are using data analytics to search for the best drilling locations.

In short, the pressures of a downturn are likely to encourage even more future-focused transformation. The industry doesn’t need to hide behind tariffs. If we trust the free market to encourage creativity, in the long run, we’ll all benefit from a cheaper and more efficient energy supply.


The Costs Of Regulation And Centralization In Health Care

Editor’s Note: This is an edited excerpt, comprising the Introduction and Conclusion, from a longer essay by Mr. Atlas. Titled ‘The Costs Of Regulation And Centralization In Health Care,' it is published by the Hoover Institution as part of a new initiative, "Socialism and Free-Market Capitalism: The Human Prosperity Project."

By Scott W. AtlasThe Hoover Institution

Introduction

The overall goal of US health care reform is to broaden access for all Americans to high-quality medical care at lower cost. In response to a large uninsured population and increasing health care costs, the Affordable Care Act (ACA, or “Obamacare”) aimed first and foremost to increase the percentage of Americans with health insurance. It did so by broadening government insurance eligibility, adding extensive regulations and subsidies to health care delivery and payment, and imposing dozens of new taxes. The ACA was projected to spend approximately $2 trillion over the first decade on its two central components: expanding government insurance and subsidizing heavily regulated private insurance.

Through its extensive regulations on private insurance, including coverage mandates, payout requirements, co-payment limits, premium subsidies, and restrictions on medical savings accounts, the ACA counterproductively encouraged more widespread adoption of bloated insurance and furthered the construct that insurance should minimize out-of-pocket payment for all medical care. Patients in such plans do not perceive themselves as paying for these services, and neither do physicians and other providers. Because patients have little incentive to consider value, prices as well as quality indicators, such as doctor qualifications or hospital experience, remain invisible, and providers do not need to compete. The natural results are overuse of health care services and unrestrained costs.

In response to the failures of the ACA, superimposed on decades of misguided incentives in the system and the considerable health care challenges facing the country, US voters at the time of this writing are being presented with two fundamentally different visions of health care reform: (1) a single-payer, government-centralized system, including Medicare for All, the extreme model of government regulation and authority over health care and insurance, which is intended to broaden health care availability to everyone while eliminating patient concern for price; or (2) a competitive, consumer-driven system based on removing regulations that shield patients from considering price, increasing competition among providers, and empowering patients with control of the money. This model is intended to incentivize patients to consider price and value, in order to reduce the costs of medical care while enhancing its value, thereby providing broader availability of high-quality care.

Outside a discussion of the role of private versus public health insurance are two realities. First, America’s main government insurance programs, Medicare and Medicaid, are already unsustainable without reforms. The 2019 Medicare Trustees report projects that the Hospitalization Insurance Trust Fund will face depletion in 2026. Most hospitals, nursing facilities, and in-home providers lose money per Medicare patient. Dire warnings about the closure of hospitals and care provider practices are already projected by the Centers for Medicare and Medicaid due to the continued payment for services by government insurance below the cost of delivery of those services. Regardless of trust fund depletion, Medicare and Medicaid must compete with other spending in the federal budget. America’s national health expenditures now total more than $3.8 trillion per year, or 17.8 percent of gross domestic product (GDP), and they are projected to reach 19.4 percent of GDP by 2027. In 1965, at the start of Medicare, workers paying taxes for the program numbered 4.6 per beneficiary; that number will decline to 2.3 in 2030 with the aging of the baby boomer generation. Unless the current system is reformed, federal expenditures for health care and social security are projected to consume all federal revenues by 2049, eliminating the capacity for national defense, interest on the national debt, or any other domestic program.

Second, beyond the growing burden from lifestyle-induced diseases, including obesity and smoking, that will require medical care at an unprecedented level, America’s aging population means more heart disease, cancer, stroke, and dementia—diseases that depend most on specialists, complex technology, and innovative drugs for diagnosis and treatment. The current trajectory of the system is fiscally unsustainable, and millions are already excluded from the excellence of America’s medical care.

Conclusion

In most nations, heavy regulation of the supply of health care goods and services care is coupled with marked centralization of payment for medical care. The United States has a far less centralized but still highly regulated system in which health expenditures are roughly equal from public and private insurance. The system is characterized by its unique private components: more than 200 million Americans, including most seniors on Medicare, use private insurance. The US system is the world’s most effective by literature-based, objective measures of access, quality, and innovation, but US health care demands reform. Health care costs are high and increasing, and the projected demand for medical care by an aging population and the future burden of lifestyle-related disease threaten the sustainability of the system.

Although the regulatory expansion under the Affordable Care Act reduced the uninsured population, it generated increased private insurance premiums, a withdrawal of insurers from the market, and sector-wide consolidation that is historically associated with higher prices and reduced choices of medical care. In its wake, American voters are now presented with two fundamentally different visions for reform that have a diametrically opposed reliance on regulation and centralization: (1) the Democrats’ single-payer proposals, including Medicare-for-All, based on the most extreme level of government regulation and authority over health care and health insurance; or (2) the Trump administration’s consumer-driven system that relies on strategic deregulation to increase market-based competition among providers and empowering patients with control of the money. Both pathways are intended to contain overall expenditures on health care and broaden access.

Intuitively, a single-payer model of health care represents a simplification, but the reality is that such centralized systems impose overwhelming restrictions on both demand and supply. Government-centralized single-payer systems actively hold down health care expenditures mainly by sweeping restrictions on the utilization and payment for medical procedures, drugs, and technology under the single authority of the central government. The overall costs of this false simplification are enormous, creating societal costs that extend beyond calculated tax payments that are required to support such a system.

The alternative approach involves rule elimination and decentralization, that is, strategic deregulation, to induce competition for value-seeking patients. Reducing the price of health care by competition, instead of more regulation, generates lower insurance premiums, reduces outlays from government programs, and broadens access to quality care. Broadly available options for cheaper, high-deductible coverage less burdened by regulations; markedly expanded health savings accounts; and tax reforms to unleash consumer power are keys to achieving price sensitivity for health care. Reforms to increase the supply of medical care by breaking down long-standing anti-consumer barriers to competition, such as archaic certificates‐of‐need for technology, unnecessary state‐based licensure of physicians, and overly regulated pathways to drug development, while facilitating transparency of price and quality among doctors and hospitals, would generate further competition and reduce the price of health care. Preliminary results from such deregulatory actions demonstrate promising results and offer an evidence-based context for the broader discussion of the role and reach of government regulation in socialism compared with free-market systems.


The Marketplace Drives Prices Down and Quality Up

By George LandrithTownhall

Unexpected expenses are never welcome and no one likes a costly surprise. So it’s no wonder that there is a lot of talk in Washington and Congress about “protecting” patients from surprise medical bills. Current legislation — SB 1895 — sponsored by Senators Lamar Alexander (R-Tenn) and Patty Murray (D-Wash.) makes such claims. It sounds good until you realize that all the “protecting” talk is just that — talk.  Even worse, is that rather than protecting consumers, it will make things worse. 

The most common cause of a surprise medical bill is when a person uses a healthcare provider that is not in their insurance plan’s network of providers. While it doesn’t happen that often, it most typically happens in a hospital emergency room — either because the patient is not able to consent to care or because the patient received inaccurate information about insurance coverage.  

Insurance companies have contracts with healthcare providers (both doctors and hospitals) to provide medical services at pre-negotiated discounted rates. That makes them “in-network.” The “out-of-network” providers charge a price without any pre-negotiated discounted rates, meaning the out of network costs are greater. 

While it is true that most doctors are in most insurance networks and hospitals often have ways to shield their patients from higher costs, there are occasional gaps that remain. And while it is uncommon, it can be costly when it occurs. But despite their rarity, these circumstances are used by politicians to make us think they are proactively solving problems for our benefit. Sadly, they are doing nothing of the sort.  

There are a number of proposals currently under consideration in the halls of Congress to fix surprise billing, but they have a couple important things in common. In one-way or another, all of these pieces of legislation entrust the government with the power to set prices. This will impose heavy costs even if executed properly, an idea that is almost laughable given the government’s track record on reducing costs.

This reminds me of the Obama-Biden repeated promise that they had a plan that would save us all thousands of dollars every year and allow us to keep our healthcare plan if that’s what we wanted. Obviously, Obama and Biden failed to deliver on that promise. It was the lie of the year even as judged by liberal fact checkers. Literally, millions of Americans lost their preferred plans and virtually everyone saw their health insurance costs increase, not decrease, by thousands. 

So a healthy dose of skepticism about promises to fix surprise billing with government price controls is entirely justified. It should not be enough for politicians to repeat over and over the mantra that they’ve got the fix. We’ve seen this play before. It doesn’t end well.  

Government-imposed price controls skew incentives and reduce the availability of quality healthcare.  To make things worse, government-imposed price controls also reduce the likelihood of future healthcare innovations and slow the development of promising medicines and procedures. But the bad news doesn’t end there — current proposals shift more and more power to health insurance companies, rather than giving consumers more control over their own healthcare. 

Regardless of what their true motives were or are, the results we have witnessed in the last 50 years from politicians promising “fixes” has been that things end up costing a lot more than promised, and government gets more and more control. Those who can afford lobbying efforts may escape the costly impact of these government mandates. But rarely do these promised fixes on balance help the average citizen.   

The marketplace — and the negotiations that take place when you have two or more parties all trying to maximize the value that they receive — has a knack for providing high quality goods and services for the lowest possible prices. That is the process that has brought us smart phones that have more computing power than was used in the 1960s in the Apollo program. It’s also the process that allows consumers to own huge flat screen televisions at a cost of several hundred dollars. We need to harness that power and that drive to high quality and low prices in the medical arena.

Instead of continuing to empower government and those who can afford lobbyists to protect their interests, let’s try reforms that put economic power back in the hands of healthcare consumers. Let’s trust the marketplace to do what it does so well — boost quality and keep prices comparatively low. We trust the marketplace to provide us with food, housing, technology, and a thousand other things, why not our healthcare as well? 

Today, the average American eats better and spends a lot less to feed themselves than our great grandparents did. As a result, we have access to all manner of foods — something even kings didn’t have a few generations ago. Additionally, we work far fewer hours to obtain that food. As a result, we have more money for larger, more comfortable homes, nice automobiles, vacations, and hospitals — something average Americans in 1776 didn’t even dream about.   

So if we want to see more affordable and better quality healthcare available to us all — why not harness the power of the marketplace? Where’s the proof that government-run schemes produce the needed quality and low costs? In contrast, the marketplace has a strong track record. Let’s try it! 


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