Infrastructure projects that are paid for by users, not by federal taxes, can be a big boost to the economy.
With President Joe Biden looking to pass a major infrastructure bill and other policy priorities, the growing question is how he will pay for them. While some Republican senators have signaled some interest in cutting bipartisan deals, both sides should be focusing on budget cuts and reprioritizing existing revenues. They must avoid tax increases that could undercut the economic recovery as the number of vaccinated Americans grows and we hopefully emerge from the COVID-19 pandemic.
President Biden has called for upping the corporate tax rate from 21 percent to 28 percent. While that’s still lower than the country’s corporate tax rate prior to the 2017 tax cut bill, which was then 35 percent, it’s a bad idea. At 28 percent, the federal corporate tax rate, combined with state corporate taxes, would be over 32 percent, putting the U.S. back to having the highest corporate tax among the highly-developed OECD, Organization for Economic Co-operation and Development, nations. For example, Canada’s corporate tax rate is 15 percent and Mexico’s is 30 percent. One outcome of Biden’s proposed tax hike would be more corporations looking to move out of the U.S. to lower-tax countries.
Decades of research also show higher corporate tax rates get passed on to workers, who end up paying the majority of the costs in the form of lower pay and benefits. The Tax Foundation estimates Biden’s corporate tax increase would eliminate 159,000 jobs, reduce long-run economic output by 0.8 percent and wages by 0.7 percent, with the bottom 20 percent of earners on average seeing a 1.45 percent drop in after-tax income in the long term.
Biden also wants to raise taxes on the wealthiest Americans. “Anybody making more than $400,000 will see a small to a significant tax increase,” Biden recently said to ABC.
Raising taxes on the wealthy consistently polls well with voters of both major political parties, but it’s a bad policy that doesn’t work as intended. An analysis in the Quarterly Journal of Economics of decades of data shows that tax increases on individual incomes reduce average incomes and economic activity, but the effect is the fastest and largest when taxing the top one percent. The so-called 1990 luxury tax, for example, killed so many jobs that the federal government actually lost revenue because of it. That is because the rich do not sit on mountains of gold in their vaults, as some might imagine. Most of their money is either invested or spent so raising taxes on the rich lowers consumption and all the jobs that creates, and lowers investment and all the jobs that creates. Hence, the top one percent pay considerably more in income taxes than the bottom 90 percent of taxpayers combined.
The country is expecting significant economic growth this year as more Americans are vaccinated and able to travel to visit loved ones, go on vacations, eat in restaurants and attend things like sporting events. Tax increases would undercut this growth by taking money that would be invested in expanding existing businesses or opening new ones.
President Biden and Republicans need to show some seriousness about dealing with the nation’s debt and deficits. In the debate leading up to the recent $1.9 trillion spending bill — which came after President Trump’s own $2.2 trillion stimulus bill and four years running up debt and deficits — the GOP could not credibly claim it cared about debt and deficits. Republicans and conservatives “ditched any semblance of fiscal restraint during the last four years of economic expansion (i.e., precisely when it’s easiest to cut spending),” Scott Lincicome recently noted in his newsletter for The Dispatch.
Spending cuts are needed and the country’s massive defense spending, over $700 billion a year, is ripe for cutting. A group of House Democrats is urging Biden to trim the Pentagon’s budget. Unfortunately, Republicans want more, not less, spending. “The problem with decreased or flat defense budgets is that our adversaries aren’t looking at cutting defense spending. It’s the opposite,” Rep. Mike Rogers, the leading Republican on the House Armed Services Committee, claimed.
As a military veteran I’d argue he is wrong because our current military is more than capable of defending our nation and, if we stopped our absurd and broken attempts at nation-building overseas, our defense budget is more than adequate already.
If Republicans aren’t going to support ending our forever wars and reducing defense spending, they should at least try to ensure that any big infrastructure and spending bills embrace the user-pays principle and utilize public-private partnerships. Raising the federal gas tax is counterproductive — as vehicles become more fuel-efficient — and politically unpopular, but private companies and private equity firms are ready to invest billions in major infrastructure projects. From water and sewer systems to roads and bridges, infrastructure can be built via public-private partnerships using private capital and charging user direct fees to pay for it.
Users don’t pay any more than they would’ve otherwise, the projects get built faster, private investors take most of the financial risks of losses if something goes wrong with the project, such as delays and cost overruns, and the companies can make a profit if they deliver the project efficiently.
Infrastructure projects that are paid for by users, not by federal taxes, can be a big boost to the economy. Combining this approach with some smart realignment of other federal spending would allow President Biden to achieve his policy goals without the harmful tax cuts he is considering and the consequent blow to the economy and to lower-income workers.
The Biden administration is committed to applying the freshest thinking of the 1930s to contemporary challenges, while congressional Democrats are keen on mandating that all 50 states adopt what is worst and most destructive in California practice. These two tendencies come together in the PRO Act.
The PRO Act, which already has been passed by the House, is being sold as a measure to make it easier for American workers to join labor unions. What it is, in fact, is a measure that would make it much harder for workers to stay out of unions when they want to, by overriding state right-to-work laws and adopting California’s so-called ABC test to treat certain independent contractors as employees.
The union bosses went to bat for Joe Biden in 2020, and this is their payoff. Joe Biden takes a rosy view of unions, and it probably is easy to be sentimental about blue-collar work when you have been in elected office since the early 1970s. Nobody named Biden has lifted anything heavier than money in decades.
Why would a worker want to avoid joining a union? Wouldn’t they prefer to have someone looking out for their interests? That might be the case — if American workers were naïve enough to believe that the Teamsters and the other unions are looking out for their interests, rather than looking out for the interests of, say, a union boss’s brother getting paid a $42-an-hour wage on a New York City construction site while operating a coffee concession. There are, as it turns out, a great many blue-collar workers not much interested in paying for the privilege of enriching politically connected labor leaders who do no real work.
Beyond the corruption and the desire to be free of union politics, other workers have practical, bottom-line reasons for wishing to remain free of union entanglements. For instance, owner-operators involved in long-haul trucking cut their own deals with their clients, working on their own terms rather than on terms set by a union boss. They can do that even where a union already is present. Under the PRO Act, some of these independent operators would risk being reclassified as employees — meaning reclassified out of business. That is because of the second prong of the ABC test insists that independent contractors must be engaged in incidental work rather than core business activities — owner-operators who do drive for trucking services (as opposed to contracting with a farm or a construction company) wouldn’t pass the test to qualify as independent contractors.
Right-to-work laws, which have been passed in the majority of states, do not restrict voluntary union activity. What they do is forbid unions from forcing workers who do not wish to belong to the union to pay dues anyway as a condition of employment — which is to say, they forbid a particularly nasty form of extortion. Anybody who is not a union official who demands a kickback out of workers’ wages as a condition of employment is considered to be engaged in racketeering. The PRO Act would (probably unconstitutionally) supersede laws duly enacted by the state legislatures, making such extortion a mandatory business practice from coast to coast.
In early February congressional Democrats launched an effort to allow unions to implant themselves once again into the lives of workers – whether they’re wanted there or not. The PRO ACT, which the U.S. House of Representatives will soon consider and which, ironically enough, stands for “Protecting the Right to Organize,” would let big labor once again establish a stranglehold over the American economy.
For decades, since President Jimmy Carter’s epic mismanagement of the U.S. economy, the percentage of workers in the private sector belonging to unions has plummeted. The increased cost of membership along with diminishing satisfaction with what unions were able to do to protect the jobs of their members has led more and more of them to seek alternative arrangements.
In some states, worker independence from big labor is made easier by the existence of laws prohibiting agreements between employers and labor unions concerning the extent to which an established union can require employees to be members or to pay union dues or fees as a condition of employment either before or after they’re hired.
This concept, known popularly as “right to work” has worked well since it was first introduced in the period just after the end of World War II. It’s now law in more than half the states and others are moving toward adopting it. If the PRO Act passes, right-to-work laws would be eliminated, meaning workers could be forced to join a union or pay fees equivalent to membership dues as a condition of getting or keeping their job.
To protect against this possibility, U.S. Sen. Rand Paul has introduced the National Right to Work Act to preserve the options right-to-work laws make available to workers in states that have them and extend to workers in states that do not. The key point, he says, is that workers, not the unions themselves, should make the relevant decisions regarding membership.
“The National Right to Work Act ensures all American workers have the ability to choose to refrain from joining or paying dues to a union as a condition for employment,” Sen. Paul said. There are 27 states with right-to-work laws on the books, the Kentucky Republican said, adding “It’s time for the federal government to follow their lead.”
More than eight in ten workers believe preserving worker choice in such matters is a preeminent concern, according to a Gallup Poll, with more than seven in ten saying they would vote for a ballot measure protecting right-to-work.
The survey data indicates workers already in unions would like to see their options expanded, likely to leverage efforts at reform. One survey conducted nearly a decade ago for the National Right to Work Legal Defense Fund found that 91 percent of private-sector union members believed there was too much secrecy in how their dues money was spent, 79 percent said union membership should be voluntary, and 63 percent said they would vote out their union leadership for spending dues money on political ads if it could be done by secret ballot to protect them from retribution.
The Paul legislation would repeal six existing statutory provisions allowing private-sector workers and airline and railroad employees to be fired if they don’t pay dues or administrative fees to a union, putting bargaining power back, the senator said, in the hands of America’s workers. A companion bill has been introduced in the U.S. House of Representatives by Joe Wilson, R-S.C.
At their peak, unions represented more than a third of American workers. Now, after several decades of continuing decline, less than 10% of workers in the private sector are part of organized labor. And with so much of American manufacturing having moved offshore to escape the less-than-friendly business climate the politicians created, that’s not really news.
What some people don’t know is how union leadership has continued to cozy up to progressive politicians pushing policies that are antithetical to the interests of the rank and file.
On his first day in office, President Joe Biden – who campaigned as a moderate — signed an executive order killing the Keystone XL pipeline and, with it, more than 10,000 good-paying union jobs. Among Democrats, that’s par for the course. The vocal progressives dominating the Democratic Party these days are in command of the agenda.
In another case, the United Food and Commercial Workers’ Union has been pushing for at least ten months for “hazard pay” that doesn’t mesh with the interests of its members. UFCW International President Marc Perrone is demanding some of the nation’s largest grocery chains commit to the pay bump because of COIVD.
Initially, he wanted $2 an hour. Now he wants $4, even $5 an hour in several West Coast cities. For this, he’s finding support from city and county politicians whose campaigns are union-funded.
Shortages caused by the lockdowns have made it challenging for grocers and their frontline employees. The UFCW’s on them, after they’ve already invested billions to improve safety measures ignores the facts and smacks of ingratitude. Some grocery chains, like Kroger, are already offering $100 bonuses to employees who get a COVID vaccine.
But what of what the union wants? A letter to the editor recently appearing in the Los Angeles Times said it well: “I fully agree that the grocery store workers are heroes. However, how does requiring them to be paid more solve the problem here? Are we saying to workers that it’s OK if you get sick, so long as you are paid more?”
Whatever the companies agree to give, it will probably never be enough for the union leadership The UFCW and Marc Perrone care more about proving they’ve got muscles to flex than the effect these demands will have on working families. In Long Beach, California – which has already mandated hazard pay for grocery workers – Kroger was forced to announce it would close two underperforming stores because the move increased labor costs by more than 20%.
How does that play out? A California Grocers Association study recently found the state’s hazard pay ordinances could raise grocery costs for the average family of four by $400 a year while hundreds of workers, most of them UFCW members, will lose their jobs. It’s a pyrrhic victory that may be repeated regardless of the impact on workers because it generates good headlines for the unions.
Ironically, Perrone and other UFCW leaders won’t suspend the collection of weekly dues payments during the pandemic, a move that would help an awful lot of households stretch their budgets and increase purchasing power.
Perrone seems to think more of non-union chains like Trader Joe’s, which he has praised for boosting so-called “hero pay” to $4 during the pandemic but that may be because of the pressure it puts on chains like Kroger and Albertson’s.
What he doesn’t mention is that Trader Joe’s CEO admitted the pay bump takes midyear raises off the table and that it might not last if cities “continue to increase the hourly rate above $4 or have the premium remain after the pandemic.”
There are grocery chains like Kroger, Albertson’s, and Ahold that recently made multi-billion-dollar investments to secure and stabilize the pensions of more than 50,000 unionized grocery workers. It was a pro-worker move that not only put people over profits but was made necessary because the UFCW plan was significantly underfunded. Most grocers provide their employees fair wages, industry-leading benefits in pensions and healthcare, and COVID-19 vaccines. What does the union do? It’s time for the workers to start asking.
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.
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.
So many of our institutions failed us during the pandemic. Free enterprise isn’t one of them.
When future historians tell the story of this pandemic, I hope American capitalism is not so despised and maligned by the professoriate that they leave out the pivotal role private enterprise and individual autonomy played, not just in slowing and ultimately defeating the virus, but in getting the country back to work.
It was individual Americans who started socially distancing in March, as COVID-19 took hold in Italy and many mayors and governors were still calling fears of contagion from China overblown, if not bigoted. By the time our leaders came around to the crisis, millions of American workers and their employers were already taking steps to keep each other safer. And while Republicans and Democrats in Washington played politics with financial aid aimed at blunting the great economic pain necessitated by shutdowns, thousands of businesses, trade associations, and patrons were starting relief funds for the most heavily impacted.
Among the companies that could stay open, I will admit I am biased in my pride for one in particular.
Home Depot, the company I helped found, boosted wages and doubled overtime to acknowledge the valor of workers who wanted to stay on the job during some very scary times. Knowing that kids were at home because schools were closed, Home Depot expanded paid time off to help parents and made hours more flexible for older workers who were deemed at risk for COVID-19 infection. Many other companies offered similar incentives.
When it came time to attack the virus itself, businesses around the country showed the same decency and ingenuity, quickly repurposing to meet demand for personal protective equipment (PPE) such as masks and gowns for frontline medical workers. Apparel company Brooks Brothers and MLB uniform tailor Fanatics switched their stitch to make masks. So did hockey company Bauer and retail stores David’s Bridal and Jo-Ann Stores. A NASCAR team, North Carolina-based Stewart-Haas Racing, helped its neighbors by putting idle racing transports back on track, delivering 2 million medical masks to Novant Health facilities in North Carolina, South Carolina, and Virginia. Whiskey and vodka distilleries, especially small, locally owned ones, switched to making bottles of alcohol-based hand sanitizer.
Cutting-edge manufacturers used 3-D printers to make PPE. Charlottesville-based women’s shoemaker OESH made a mask that had soft edges, making its seal as strong if not better than what would be provided by N95-rated masks. There wasn’t time for FDA approval (which is a question we should take up later), but the skillful engineering made the mask a success.
One Delaware company, ILC Dover, worked with the National Institute for Occupational Safety and Health to shorten the regulatory review process from one month to a week. That way the company could make its new Powered Air Purifying Respirator hood, which provides 100 times the protection of an N95 mask, available to health-care workers attending to patients with COVID-19.
National big-box stores, corner-store pharmacy chains, and delivery services really stepped up in hiring temporary workers. Wal-Mart, Walgreens, CVS, Costco, 7-Eleven, Ace Hardware, Dollar Tree, Dollar General, Domino’s, Pizza Hut, Papa John’s, Instacart, FedEx, UPS, and grocery chains around the country all upped their hiring to meet demand and provide opportunities to the recently unemployed.
Perhaps most strikingly of all, tech companies have really shined. Amazon, Uber Eats, GrubHub and dozens like them made it possible to keep a social distance while keeping the homestead supplied with groceries and supplies. Tech companies didn’t just keep us fed, they kept us on the job. Employers used existing, but often untapped, IT capabilities provided by companies such as Zoom, Microsoft, Apple, and Google to transform a cubicle and conference-room workforce into a remote team interacting through a camera and video screen. In the short term this kept a company’s productivity up, and long-term applications could create a more flexible workplace that could better support parents or employees who want to live in a rural area.
Of course, the biggest heroes are yet to earn their fame. Hard at work are the world’s leading scientific and research minds toiling for vaccines and treatments. Eli Lilly, Johnson & Johnson, and Moderna all have billion-dollar investments into fast-tracking a cure.
Throughout this entire ordeal, which is far from over, our blinkered press has focused on the negative, on anecdotes of price gouging, temporary supply-chain disruptions and shortages, and companies that saw outbreaks in the workplace.
But it takes a special kind of dumb to look at all the institutions that came up short under the pandemic and put free enterprise anywhere near the top of the list. Our free-enterprise system is the best at allocating resources and responding to crises. The private sector should be praised, not demonized, for its efforts during this pandemic. The examples are numerous, and they keep on coming.
The best thing the government did, arguably, is get out of the way. Government watchdog Americans for Tax Reform has identified more than 600 rules or regulations that were changed to give companies the room to innovate and adapt to meet the demand for equipment and other goods created by the pandemic. My hunch is these are probably 600 regulations that do not need to come back once this is over.8
We are not a perfect country, but we do have something that will always help us prevail — either over a pandemic or the next pitfall we encounter. We have regular people who dare to do heroic things.
Americans don’t need to be told what to do, and companies don’t need command-and-control regulation to do what’s best for a community. That’s because Americans’ entrepreneurial spirit is the biggest factor flattening the curve.
ALEXANDRIA, Virginia, June 10 — The 60 Plus Association issued the following letter:
To: President Donald J. Trump, The White House, 1600 Pennsylvania Avenue, NW, Washington, D.C. 20500; The Honorable Alex M. Azar, Secretary, U.S. Department of Health and Human Services, 200 Independence Avenue, SW, Washington, D.C. 20201; Vice President Michael R. Pence, The White House, 1600 Pennsylvania Avenue, NW, Washington, D.C. 20500; The Honorable Seema Verma, Administrator, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244; Brooke Rollins, Assistant to the President, Director, Domestic Policy Council, 1600 Pennsylvania Avenue, NW, Washington, D.C. 20500
President Trump, Vice President Pence, Secretary Azar, Administrator Verma, Mrs. Rollins:
On behalf of millions of taxpayers and consumers across the United States, the Coalition Against Rate-Setting (CARS) urges you to oppose price controls on the healthcare system. For the past year, some members of Congress and some individuals in the Trump administration have repeatedly floated the idea of “fixing” the pressing problem of surprise medical billing through a “rate-setting” system. These fatally flawed proposals would have Washington, D.C.bureaucrats dictating to doctors the prices they should charge patients. Recently, Politico reported that the administration is considering a plan that would, “outlaw health care providers from putting patients on the hook for thousands of dollars in expenses — but without mandating how doctors and hospitals would recover their costs from insurers.”
While such reporting gives cause for cautious optimism, we recognize that much remains to be negotiated. As such, the Coalition would like to reiterate that any mandates or price controls would make surprise billing problems worse and disrupt care for millions of patients across the country. These effects would be particularly devastating as the COVID-19 pandemic continues to claim far too many lives. We therefore urge you to reject rate-setting and embrace market-oriented solutions to solve the pressing problem of surprise medical billing.
During the worst public health emergency in our lifetimes, millions of patients across the country have found themselves in emergency rooms and healthcare clinics. Many of them reasonably assumed their troubles would be over after being discharged, only to receive a surprise medical bill in the mail days or even weeks after being discharged.
Each year, 1 in 7 patients in the U.S. receive these unwanted, unexpected expenses after being sent home by their doctors. This devastating problem stems from increasingly narrow health insurance networks which increasingly refuse to compensate attending doctors at in-network medical facilities. Far-reaching pieces of legislation such as the Affordable Care Act (aka Obamacare; signed into law in 2010) have simply made the problem worse, and now, an estimated three-quarters of Obamacare plans feature narrow insurance networks.
Yet, despite federal interventions and regulations making the problem worse, some government officials want to double-down on bureaucratic control over the healthcare system. Members of Congress such as Sen. Lamar Alexander(R-Tenn.) and Rep. Frank Pallone (D-N.J.) have proposed rate-setting for doctors and repeatedly tried to insert this “fix” in Coronavirus-related relief legislation. Officials in the Trump administration have worked hard to get a thorough understanding of this issue and deliberate on their own plan to end unwanted medical expenses. But rate-setting would only make the problem worse, and lead to the widespread consolidation of hospitals, clinics, and doctor’s offices across the country. California has already tried this failed approach, implementing healthcare price controls in 2017. According to a 2019 American Journal of Managed Care study examining the law, rate-setting has led to healthcare facilities closing their doors and merging with other, larger practices. Doctors are even contemplating leaving California altogether.
On January 22, 14 advocacy groups and think-tanks formed CARS to warn lawmakers and the Trump administration about the myriad unintended consequences of rate-setting. CARS is now 34 groups strong, and its work has been cited extensively by national and state media. On April 28, CARS released a letter signed by more than 160 economists urging officials to reject healthcare price-controls.
CARS urges you to take these scholars’ arguments into account, and remain vigilant against federal overreach in the healthcare system. Millions of doctors are on the frontlines of the COVID-19 pandemic treating patients, and now would be the worst possible time to impose onerous price controls on them. Thank you for your time and consideration of this pressing issue.
Tim Andrews, Executive Director Taxpayers Protection Alliance
Christopher Sheeron, President, Action For Health
Bob Carlstrom, President, AMAC Action
Brent Wm. Gardner, Chief Government Affairs Officer, Americans for Prosperity
Norman Singleton, President, Campaign 4 Liberty
Ryan Ellis, President, Center for a Free Economy
Andrew F. Quinlan, President, Center for Freedom and Prosperity
Jeffrey L. Mazzella, President, Center for Individual Freedom
Thomas Schatz, President, Citizens Against Government Waste
Twila Brase, RN, PHN, President & Co-Founder Citizens’ Council for Health Freedom
Matthew Kandrach, President, Consumer Action for a Strong Economy
Jason Pye, Vice President of Legislative Affairs, FreedomWorks
George Landrith, President, Frontiers of Freedom
Saulius “Saul” Anuzis, President, 60 Plus Association
Mario H. Lopez, President, Hispanic Leadership Fund
Andrew Langer, President, Institute For Liberty
Harry C. Alford, Co-Founder, President/CEO, National Black Chamber of Commerce
Pete Sepp, President, National Taxpayers Union
Robert Fellner, Vice President & Policy Director, Nevada Policy Research Institute
Wayne Winegarden, Ph.D, Senior Fellow & Director, Center for Medical Economics and Innovation Pacific Research Institute
Joshua H. Crawford, Interim Executive Director, Pegasus Institute
Renee Amar, Vice President for Policy and Government Affairs, Pelican Institute for Public Policy
Paul Gessing, President, Rio Grande Foundation
Robert Alt, President & CEO, The Buckeye Institute
David McIntosh, President, The Club For Growth
James Taylor, President, The Heartland Institute
James L. Martin, Founder/Chairman, 60 Plus Association
Jessica Anderson, President, Heritage Action For America
The judge’s temporary restraining order sets the stage in Illinois and perhaps nationally for a legal battle over public health experts’ far-reaching demands for public confinement.
In one of the nation’s first successful legal challenges to mandatory quarantine directives, an Illinois state judge has thrown a wrench into Gov. J.B. Pritzker’s extension of his stay-at-home order until at least May 30.
The judge’s temporary restraining order sets the stage in Illinois and perhaps nationally for a legal battle over public health experts’ far-reaching demands for public confinement against the rising fear about the drastic consequences of a nationwide economic shutdown.
In the case, Downstate Circuit Court Judge Michael McHaney on Monday temporarily restrained Pritzker from enforcing the lockdown order against state Rep. Darren Bailey, a Downstate Republican from tiny rural Xenia. Bailey sued Pritzker for violating a provision of the state Emergency Management Act that allows such drastic closure actions for only 30 days. Because Pritzker originally issued his order on March 8, Pritzker’s authority expired on April 8, Bailey argued.
Bailey said he is “irreparably harmed each day he is subjected to” Pritzker’s executive order. In a statement, he said, “Enough is enough! I filed this lawsuit on behalf of myself and my constituents who are ready to go back to work and resume a normal life.” The judge cited in his order Bailey’s right, in “his liberty interest to be free from Pritzker’s executive order of quarantine in his own home’
The suit follows an argument made earlier made by Northbrook, Illinois attorney Michael Ciesla, who first pointed out on his law firm blog how Pritzker’s extension violated the 30-day provision and that even the governor is required to follow the law. Ciesla’s argumentation was widely ignored while Pritzker, Democratic Chicago Mayor Lori Lightfoot, and the Chicago media scorned or dismissed the suit as a cheap political stunt.
So when McHaney saw enough merit in the lawsuit to issue an injunction against the extension, Pritzker and Lightfoot claimed the action threatens everyone’s health. But they utterly failed to address the heart of the lawsuit—the plain language of the act that clearly lays out the 30-day restriction.
Technically the decision applies only to Bailey, but legal experts agree that the precedent gives weight to any Illinoisan who chooses to challenge the order. Just how seriously Pritzker and Lightfoot take the decision can be measured by the depth of their denunciations.
Pritzker warned that if his order were immediately lifted “people would die” and deaths would “shoot into the thousands by the end of May…. Our hospitals would be full, and very sick people would have nowhere to go.” Lightfoot called the decision “troubling and wrong” and despite it would continue her lockdown policies “to stay the course.”
The “course” is some of the country’s most stringent controls, such as Lightfoot’s closing of parks and other outdoor activities. Pritzker’s new order, effective May 1, would among other things require everyone in Illinois to wear a face mask outdoors, while including some modifications such as opening state parks.
Bailey says he was hoping to push Pritzker into creating a “more realistic plan” reflecting the fact that Illinois is such a diverse region, requiring different approaches for the mostly rural Downstate and metropolitan Chicago. Bailey’s hometown of Xenia has a population of 364. It’s located about 100 miles east of St. Louis in Clay County, which has recorded just two confirmed coronavirus cases and no deaths.
Chicago’s Cook County has 31,953 confirmed cases and 1,347 deaths, but the most feared outcome hasn’t materialized. The city’s sprawling exhibition hall, McCormick Place, had been fitted with 3,000 emergency beds to handle the expected overflow from jammed hospitals, but because of low usage, 2,000 beds are now being removed.
Tensions between the state’s two regions are an historic constant. Most recently those differences show up in a growing movement by Downstaters to separate Chicago from the rest of the state. In this, Illinois is but a microcosm of how heavily infected, urbanized New York and vast swathes of Middle America are vastly different and require tailored approaches in the fight against the coronavirus pandemic. It also reflects the argument—opposed by many liberals—that the fight is best carried on the local level.
Illinois’ regional differences will play out in an expected high-speed appeal of McHaney’s stay. The Downstate appeals court that would hear the case is dominated by Republicans, who, being elected, would not be expected to overturn McHaney’s decision. The Illinois Supreme Court, which could hear the appeal directly, is controlled by Democrats, and considered likely to ultimately back Pritzker.
Still, with growing sentiment that the various shutdown orders have gone too far, with increasing public protests against the restrictions, crushing unemployment, and the unease that epidemiologists and their models are running the country, what’s happening in Illinois could presage even more objections to unprecedented assaults on liberty.
The Jones Act Webinar is part of WJLA-TV’s Government Matters series on “Sea-Air-Space 2020 Virtual Edition.” It will include Frontiers of Freedom Senior Fellow, the Honorable Ernest Istook, who served in the U.S. House of Representatives from 1993 to 2007 and is currently teaching at Brigham Young University.
The Host will be Francis Rose. Topics will include: What is the Jones Act? Why is it both a commercial and national security issue? What are common misconceptions about the Jones Act? How does it work? How does China and its “One Belt, One Road” plan play into this issue?
If you are in the Washington DC metro area, you can watch the program on WJLA 24/7 News (formerly NewsChannel 8). If you are anywhere else you can watch it at FedInsider.com.
It will be broadcast on Tuesday, April 7, 2020 from 1 p.m. to 2 p.m. Eastern Time.
The Right to Life, Liberty and the Pursuit of Happiness
Through most of human history, there have been two ways by which humans have organized themselves: tribal and totalitarian. Tribes were based on families which came together to form clans, which combined to create tribes. In the end, what united the various clans into a tribe was the culture they all shared – language, values, customs and religion.
The primary driving factor in this move toward greater numbers was the greater power -and defense – afforded by greater numbers and the greater accumulation of wealth made possible by a greater variety of skills and a heightened group ability to take on ever larger projects, such as cities, roads, dwellings, and monuments. These factors eventually resulted in cities and nations. And empires. It was called “civilization”.
Nevertheless, the original loyalties to families and tribes have remained forceful elements in all societies.
As the more advanced “civilizations” grew in power and wealth, they grew also in territory, mostly by conquest of other countries. The management of the conquered territories was solved by the creation of a hierarchy of different classes of inhabitants: the ruler, his direct followers (usually military), the wealthy who provided financial resources, and the poor who were the vast majority of the population, whether slaves, peasants, serfs or servants, who supplied the labor on which the entire nation depended.
The average life span of mankind was about 35 years. This pattern, with a few exceptions, endured for most of human history. Until the 18th century. Then human life began a radical series of changes. Between 1700 and 2020 human life span grew from 35 years to over 70. The average annual income grew from a few dollars a year to $10,000 a year. (Gallup 2012) And world population grew from an average 1% annual increase for 1000’s of years to about 610 million in 1700 and nearly 8 billion in 2020 (Source: Worldometer).
It started with one of the exceptions to totalitarianism mentioned above. Beginning in the early Middle Ages (c. 11th century), some European merchants began to form caravans to travel from place to place buying and selling merchandise. Since merchants in general were discriminated against in Medieval Europe, they were not subject to any specific prince, and they were freemen. They soon banded together for defense against outlaws and princes alike forming the Great Caravans of Europe. In time, many began to accumulate wealth and became bankers as well as traders. They were the first middle class, instrumental in the formation of the guilds of tradesmen which consolidated the identity of a middle class — neither nobility, peasants nor clergy – all of whom opposed them. [Note: trade routes and caravans existed throughout the ancient world from time immemorial but were not “free” of any jurisdiction.]
There had been numerous intellectuals who taught the separation of Church and State (including Thomas Aquinas in the 13th century) and limited government (e.g. John Wycliff in the 14th century), but none had the political and financial strength to effect cultural changes. In the 18th century, however, these ideas combined with an emerging middle class to begin the most radical change in history. A new movement came into being and caused the revolutions which characterized the next two centuries, from the American Revolution (1776) to the Russian Revolution (1917).
This movement yielded three major views of how a country should be run: socialism and democracy as political systems and capitalism as an economic system. All involved the overthrow of the totalitarian government. The difference was in who led the revolt: the Europeans (and later the South Americans and others) were led by the poor people; the Americans by the middle class. The poor people had no experience of handling money or building an economy. They considered the wealth of the nobility a bottomless pit and they invented socialism. The Americans were led by wealthy middle class lawyers, plantation owners and merchants. They feared the power of governments and invented democratic capitalism.
The different types of socialism will be discussed next week. But first, let’s look at America’s democratic capitalism.
The American Way
The United States of America was a land controlled by people who had escaped both the walls and the comforts of the Old World and had survived in an environment which rewarded courage, skill and endurance, rather than birth and privilege. Their bias was against rather than favorable to government. They saw government as a greedy king out to take away their liberty. They therefore fashioned a government which was limited in every way by competing forces: the federal government by the states, the president by the legislature, each House of Congress was limited by the other, everybody by the courts – and so on down the line to the local dogcatcher.
The purpose behind this design was to keep government officials from ascending to the powers of that old king. They understood intuitively the saying of John Lord Acton a century later: “Power tends to corrupt, and absolute power corrupts absolutely.”
What they have left us is the American version of a capitalist society. It is dynamic, constantly changing. The poor may not always be poor; the rich may not always be rich. In fact, most Americans (58.5 percent) will spend at least one year below the poverty line at some point between ages 25 and 75 according to Yale University’s Jacob S. Hacker (The Great Risk Shift, New York, 2006). The wealth of the society is expected to grow constantly through the creation of new opportunities, new products and services, new jobs, new skills, and new technologies, leading to new and expanding wealth.
For Americans, the fundamental error of socialism is that it does not account for the creation of that wealth in the first place. Government cannot confiscate what isn’t there. Socialists foresee the proverbial pie of underclass income being cut into more and more pieces; Americans keep creating a bigger pie.
America’s Democratic Capitalism
The United States of America has brought together economic capitalism and political democracy in a dynamic tension which we call democratic capitalism, and which has produced the most prosperous nation in the history of the world. Its greater attribute is that it provides hope – hope that the poor may be able to escape the bonds of poverty as so many Americans have done in the past. This hope is the shining city on the hill which still attracts the envy of millions.
It has taken Americans most of our history as a nation to achieve the balance by which capitalism is accountable to democracy, and there are still many problems to be solved. Nevertheless, Americans are always optimistic.
The motivation for individual Americans to persevere in pursuit of their personal goals is provided by the real and potential ownership of private property. No other motivator – not coercion, not slavery, not charity, not communal property – not even religion – has ever been found which can impel vast numbers of individuals in a society to be hard working and creative. Providing a good life for oneself and one’s family is a motivator above all others.
Life, Liberty and the Pursuit of Happiness – the American Way
Our history has proven that personal freedom is a necessary prerequisite for the success of this system. An oppressive government – even if well-intentioned – sucks out the initiative required to make an ever-better life for all of us. Personal freedom without economic freedom is no freedom at all. Capitalism, in a refined and mature linkage with democracy, provides the economic power which makes freedom possible.
The challenge to Americans is not to change an evil system; it is to live up to the ideals which are required for that system to succeed.
Freelancers are rising up in opposition to the state’s new law regulating “gig workers.”
By City Journal•
Are California Democrats—responsible for the state’s new anti-gig-worker law, AB5—so out of touch that they’re not aware of the growing anger of their constituents? It appears so.
Since AB5 took effect on January 1, hundreds of thousands of Californians are finding their businesses in tatters. Musicians can’t join bands for a one-night gig, chefs can’t join forces with caterers, nurses can’t work at various hospitals, and writers must cap their submissions per media outlet to 35 per year. Under the law, these freelancers can no longer conduct the same business-to-business transactions they have for years or even decades. Clients with whom they fostered valuable relationships are gone—as are their successful careers and incomes. An overwhelming majority of professionals in fields affected by AB5 identify as liberals and have generally voted along the blue line. Today, however, many are so disillusioned with their representatives that they’re changing political loyalties.
When Gloria Rivera, a San Diego-based, Peruvian-born translator and interpreter, achieved U.S. citizenship, the first thing she did was register as a Democrat. “Now I’m seeing a lot of people like me who are either going Independent or Republican,” she says, “myself included. The Democrats are not listening to us.”
Lorena Gonzalez, the San Diego assembly member who authored AB5, faces public condemnation wherever she goes. Online and in person, independent contractors are confronting Gonzalez and demanding a repeal of the law. Her condescending response: independent contractors need the protection of union-driven labor laws. In a damning KUSI news interview, Gonzalez denied that AB5 has resulted in widespread income loss. Her dismissive attitude has fueled outrage against Democrats. “Lorena Gonzalez is doing a great job turning everybody red,” says Rivera.
Gonzalez deserves much of the blame for the AB5 train wreck, but she had plenty of support from her party: nearly every assembly member who approved AB5 is a Democrat, including Governor Gavin Newsom. Those opposed: Republicans and Independents. Senator Patricia Bates, a Republican state senator representing parts of Orange and San Diego counties, has been hearing from constituents who had no idea that they were swept up in the AB5 net. “They’re asking, ‘Who did this to me?’” says Bates. “I don’t like to make it partisan, but I have to tell them the majority party that runs the show did it. There’s a new awareness about the anti-business environment and how it affects their right to work, to be free.”
Independent contractors are entering new territory. Suddenly, a more conservative approach seems more attractive. “My entire political mindset has changed drastically following the enactment of AB5,” says Cathy Hertz, a freelance copyeditor of STM (science-technology-medicine) books, from Loma Linda. Hertz campaigned for Barack Obama cross-country at her own expense in 2008; she campaigned for him locally, in Los Angeles, in 2012. “Now I feel that the rights of entrepreneurs are being stifled, trampled upon, violated,” she says. “Free enterprise is one of the main pillars of modern democracy.”
Apparently oblivious to the reaction in California, congressional Democrats have passed HR 2474, a national version of AB5, known as the “Protecting the Right to Organize” or “PRO Act.” The PRO Act, designed to boost union membership, will put 57 million independent contractors across the country out of work if it becomes law. These enterprising professionals will be forced into low-paying jobs—if they can find them—with none of the autonomy, flexibility, or opportunity that they currently enjoy. When the Trump administration denounced the bill, people who normally hiss at mention of the president’s name found themselves in a peculiar position: feeling grateful.
As for Gonzalez, she’s up for reelection this year and is aiming for secretary of state in 2022. Her campaigns will be tougher than she likely imagines. The movement against her is ramping up.
“I see a revolution on the horizon,” says David Mills, a musician from Lake Elsinore who created the Facebook group Freelancers against PRO Act. “This may be the final straw that breaks the camel’s back. But I think it’s leading to something good. The American people on all sides are waking up. We’ve gotten too caught up in partisan support. Now we’re paying attention. There is a huge uprising. People had to lose their jobs to find out what it was.”
Kevin Kiley, a Republican assembly member representing a large swath of Sacramento and a vocal ally of independent contractors, agrees. In January, he led a rally on the steps of the state capitol against AB5 and introduced a bill to repeal it. “We have a capital that’s controlled by special interests, and the public good isn’t even considered,” says Kiley. “That disconnect is stark. I’m more motivated to change this law than anything I’ve ever worked on because it has such a direct and negative impact on peoples’ lives. I believe very deeply in economic freedom, the right to pursue your calling. AB5 is a grave moral offense. So if there’s a silver lining to all this, it’s giving a diverse range of people a window into the dysfunctional nature of politics in Sacramento. For those who are disenchanted with the political majority, there is now an opportunity for alternatives.”
Such alternatives are popping up around the state. Evan Wecksell, a comedian and tutor by trade, is running for state senate as a write-in candidate for District 25, which encompasses parts of Los Angeles and San Bernardino county. He was registered as a Democrat until recently. Today, he’s a Libertarian.
“I definitely sense a change,” says Wecksell. “People who swore they would never vote for a Republican are doing it. We were not up to speed with knowing what was going on in Sacramento, but AB5 was a lesson and we’re learning from it. They’re taking away our natural human rights.”
Independent contractors are a unique bunch. Deeply committed to individual liberty, they’re becoming a unified group of fighters in California. They come from all walks of life and political persuasions, and if voting differently means that they can continue to run their businesses as they see fit, then so be it. Unless Democrats change course, the AB5 revolt may be the Brexit that the U.S. never saw coming. California certainly didn’t.
Raising concern “about the direction the health care policy debate is moving” – particularly among conservative lawmakers – the National Center for Public Policy Research has joined with more than 70 other conservative and free-market organizations to warn Congress about the dangers of price fixing.
In trying to remedy the issue of surprise medical bills for out-of-network emergency treatment, and insurers balking at covering all of such costs, some typically conservative politicians are favoring proposals to essentially enact price controls on these health care services. This would prohibit doctors and hospitals from setting their own rates and potentially make them operate at a loss.
Senator Rand Paul has explained that this could compromise the quality of American health care by driving people out of the medical field. “If you fix the price that ER doctors work at,” he said, “you will get a shortage.” He suggested that what has happened to the economy in Venezuela could happen in the United States as a result of such changes to the marketplace.
In a letter to conservative lawmakers on Capitol Hill, the National Center and others note:
[W]hat is troubling is how often otherwise right-of-center policymakers are resorting to one of the key pillars of the Medicare for All playbook – government imposed price controls. Whether it is called price fixing, rate setting, subsidy capping or inflation capping, government price controls have wormed their way into the healthcare reform plans of too many of our friends in Washington.
The National Center is joined on the letter by organizations including Americans for Tax Reform, the Competitive Enterprise Institute, Frontiers of Freedom, the Discovery Institute, the Institute for Policy Innovation and Eagle Forum.
The coalition letter concludes:
This was a bad idea a half century ago with gasoline line rationing, and it’s a bad idea today in health care. Something can only be affordable if it’s available to buy in the first place.
To read the entire letter and see all of its signers, click here.
Last week, the California Senate passed a new bill that will cause somewhere between one million to two million workers, perhaps even more, to lose their status as independent contractors. If California governor Gavin Newsom signs the bill, an independent contractor will have to satisfy the following legally binding criteria:
The first of these three requirements highlight just how difficult it will be to qualify as an independent contractor in California. And all three requirements taken together will make it nearly impossible to be classified as an independent contractor. The obvious intent of this worker reclassification bill is to force workers who presently work as independent contractors into old-school employer-employee contracts.
Are you looking to hire a gardener, housekeeper, handyman? Be careful, because according to this new bill, all these people may be required to be treated as your formal employees.
This is an incredibly dangerous bill, and not just for gig-economy companies such as Uber and Lyft. Following the bill’s passing in the state senate, media headlines trumpeted “Big Win for Labor,” but this is about as misleading as can be. Rather, this bill is likely to be a big loss for most everyone other than unions, politicians who are supported by unions, and the state’s unemployment and disability reserves. And the biggest losers will be those whom the bill’s “winners” claim to support: immigrants, workers without advanced education, lower-income households, and women, who often require much more flexible schedules than men.
Sharply curtailing the use of independent contractors will raise business costs, which in turn will raise prices, reduce demand, increase business failures, and depress economic activity. When analyzing economic policies, there is no more of an inconvenient truth than the laws of supply and demand, which tell us that this bill will be a huge negative for the State. But the bill’s supporters are turning a blind eye to this.
Higher business costs will not be due to businesses that previously were “exploiting workers and shirking their social responsibilities,” as has been frequently argued by supporters of the bill, including Newsom. Rather, app-based businesses will have to completely change their organizational structure and create entirely different business plans.
App-based businesses such as Uber and Lyft are rightly concerned, because forcing them to hire their independent contractors as formal employees requires them to depart sharply from what they currently do, which is to create proprietary software that matches drivers with riders, and manage how that software is used.
Instead, Uber and Lyft will now become taxi companies, in which they will need a much larger human resources department, as well as a scheduling and strategy department to figure out where to send drivers and when. They would need to deal with the myriad issues that arise when managing employees, including determining which drivers get peak-demand schedules, such as Friday nights, and which get low-demand schedules, such as Sunday mornings.
Not surprisingly, Uber and other app-based companies have pledged $90 million to fight this bill should it become law.
There is no doubt that the costs of complying with this bill will be much higher for gig-economy businesses such as Uber. An important reason this bill is so dangerous is that much of our recent economic growth is from these gig-economy businesses. Forbes estimates that roughly 36 percent of today’s workers are in the gig economy, accounting for about 57 million US jobs.
These 57 million jobs have been created in just the last 10 years. The Great Recession was kept from being much worse because the gig economy developed around the same time and created new and much-needed economic opportunities when jobs across many traditional sectors, including autos, construction, and finance, were plummeting.
Governments should be thanking those who took enormous risks, particularly at the time of the Great Recession, to create these entirely new app-based businesses. They are now a fundamental part of the US economy and are creating substantial new economic opportunities, as well as providing new services that consumers desire.
But instead, California is risking killing the goose that laid those 57 million golden eggs. It is hard to conceive of a worse state-level economic policy that realistically could become law.
So who benefits from this? It is potentially a win for unions, who want the bill because it creates a large new pool of potential union members. I say “a potential win,” because unionization in the private sector is now below six percent, and there is no reason to expect that trying to unionize gig businesses will be any different. And since unions want the bill, it is no surprise that state lawmakers, who are supported by unions, want it.
But this bill can devastate economic opportunities for those who are presently independent contractors and who would be forced to become employees. A recent Los Angeles Times column included interviews with those who presently are independent contractors but who would lose that classification if the bill becomes law.
The interviews predictably show that current independent contractors value schedule flexibility very highly and are extremely concerned about scheduling difficulties should they become employees. One Uber driver noted that his wife was fighting breast cancer, and his ability to determine his own driving schedule meant that he was able to take her to all her medical appointments. He worries about what will happen if he must become an employee and lose his ability to determine his own driving schedule.
Another Uber driver, one who supports the bill, claims that his pay is too low, and hopes that this reclassification will increase his pay. And Uber, which lost $5 billion last year and is currently laying off some of its professional staff, might agree with him that his driving services are undervalued. But what matters is the market value that riders – not rideshare drivers – place on this service. Rideshare drivers who support this bill may very well be in for a negative surprise if this bill becomes law.
Not so long ago, this bill would not have seen the light of day in California. At one time, state political leaders understood that their job was to promote freedom and economic opportunities for all. Sadly, this is no longer the case, and the most vulnerable in the state are the ones who will lose the most if this bill becomes law.