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Dispelling Two Objections To Free Trade

By David R. HendersonHoover Institution

FTC

In my recent Defining Ideas article titled “A Refresher Course on Free Trade,” I made the case for free trade. A large part of the economic case is that free trade makes people in the country that adopts it better off than if their government hadn’t adopted it. It makes imports cheaper, allows consumers to get a more varied range of goods, and causes labor and capital to be allocated to areas of the economy where they are most productive.

In the United States in recent years, there have been two main objections to free trade. The first is that when free or freer trade is introduced into a particular sector, producers in that sector, both owners of capital and laborers, will be worse off. Therefore, argue some of the people who make this point, either trade shouldn’t be liberalized or, at least, introduction of trade should be accompanied by government spending to compensate the losers. The second objection is that free trade benefits mainly the wealthy and does little for the workers who are living on the economic edge. The first objection is often true in the short run but almost always false in the long run; it also applies to any economic change whether that change is caused by international trade or purely domestic economic interactions; in short, the objection proves too much. The second objection is simply false.

Winners, Losers, and Compensation

In my earlier article, I pointed out that if the market for sugar were opened to unrestricted imports from other countries, the price of sugar in the United States would fall and US sugar producers would be hurt. That’s all true in the short run. In the long run, say ten years from now, it’s not clear that those who produce sugar now would be worse off then. Owners of capital would have had ten years in which to find alternate industries in which to invest and workers would have had ten years in which to find other jobs.

Still, ten years is a long time. Those who lose jobs can find others at lower wages but they might be employed at these lower wages for at least a few years before they build their skills and earn wages comparable to the ones they lost because of free trade. So one can understand why people who see the benefits of free trade want a government policy to subsidize the losers for a few years. Those who want such subsidies tend to focus on workers who lose their jobs but the same thinking would presumably apply to business owners, including shareholders, who suffer a wealth loss due to free trade.

There are a number of problems with such proposals, though. First, government is notoriously bad at targeting help to groups sorted by their particular circumstances. When politicians sense a gravy train coming, they tend to lobby their colleagues to include other groups and causes. We saw this with the initial Biden proposal for infrastructure. It included a large amount of money for activities that have never been considered to be infrastructure, activities like day care.

Second, there is nothing special about free trade. Indeed, in a large economy like that of the United States, most trade is not across borders but is between people within the US borders. In 2019, imports were about 14.6 percent of gross domestic product. That sounds high, and is high, but that number confirms that most trade in the United States is between and among people in the United States. When a new technology or even a new way of running a business helps consumers, it also destroys many businesses and hurts workers who lose their jobs or who must work at a lower pay to keep their jobs.

We don’t need to go back far to see such examples. When I taught in the business school at the University of Rochester in the late 1970s, some of my evening MBA students who worked at Kodak called it the “big yellow money machine.” Kodak was riding high on the technology that innovator George Eastman and his successors had created and perfected. But digital cameras in the 1980s and 1990s and, later, cell phones that got better and better at taking still shots and movies, virtually destroyed the market for Kodak’s product. It’s true that part of the causes was international trade in cell phones. But even without cell phones from other countries, US cell phone producers were plenty capable of competing Kodak into bankruptcy. 

Few of those who advocate compensating those who lose due to expanded trade across borders advocate compensating those who lose due to increased trade within borders. I hasten to add that I’m glad that they don’t. But the principle is the same.

Are the Rich the Main Gainers from International Trade?

In early 2016, UCLA professor Mark Kleiman wrote:

But the bottom line is that all of the gains, not merely from trade but from economic growth, have been concentrated in the hands of a relative few.

I was surprised when I read that. Historically, the opposite has been the case. Before considering recent history, let us turn to the famous repeal of the British Corn Laws, which happened in June 1846. The Corn Laws disallowed the import of wheat (which the British called corn) unless the domestic price of wheat hit a very high level. In practice this meant that imports of wheat were effectively banned. Because lower-income people spent a much higher percent of their income on food than higher-income people did, repeal of the Corn Laws helped low-income people disproportionately. Those who lost were primarily rich owners of agricultural land who, after 1846, had to face competition from other countries.

In a recent discussion to celebrate the 175th anniversary of the repeal of the Corn Laws, British historian Steve Davies of the Institute of Economic Affairs in London put it well. The successful popular campaign to repeal the Corn Laws, he observed,

fixed in the minds of the British working class in particular, right up to the present day, the profound belief that free trade is good for the poor and the working man and woman and that protectionism is basically a conspiracy by the rich and special interests to screw over the working class.

Now let’s turn to recent history, which is quite consistent with the nineteenth-century British history.

Although trade may hurt various low-income people in their role as competing workers, it helps lower-income people, as consumers, proportionally more than high-income people. The reason is that the particular goods that are traded tend to be those that are a larger proportion of a lower-income household’s income. Think about who shops at Walmart and where Walmart buys many of the items it sells. Lower-income people are disproportionately represented among Walmart shoppers and many of the items, typically low-end, that Walmart sells are imported, especially from China. In an article in the Quarterly Journal of Economics, UCLA economist Pablo D. Fajgelbaum and Columbia University economist Amit K. Khandelwal lay out the facts about the gains from trade.

In correspondence with me about their findings, Professor Khandelwal considered the gains that would be captured by various income groups if prices for imports fell by 5 percent. For food, people at the 10th percentile—those whose income is below that of 90 percent of the population—would have an annual gain of 0.39 percent of income. People in the 90th percentile and 99th percentile, by contrast, would gain zero. Similarly, a 5 percent price cut for manufactured goods would raise real income for people at the 10th percentile by 0.81 percent and for people at the 90th and 99th percentile by only 0.22 percent and 0.10 percent, respectively.

In many cases, moreover, those who lost their jobs due to the opening of trade had had substantially higher incomes than the lower-income people who made out big from trade. Consider the case of clothing. The US economy lost 650,000 apparel jobs between 1997 and 2007, which was the period during which Chinese imports increased so rapidly. Not all of those people found jobs at a pay as high as they earned before. That’s the downside. The upside is that, with the increase in international trade, clothing became much cheaper. In his book The Rise and Fall of American Growth, Northwestern University economist Robert J. Gordon reports that between 1980 and 2013, clothing prices fell by an annual average of 2.6 percent. Compounded over the period from 1997 to 2007, that’s a 24 percent drop. The actual drop is probably even more because the opening to China brought down clothing prices annually even more quickly than the average annual drop from 1980 to 2013.

For 2019, the latest data available, households in the bottom two quintiles, which is about 53 million households, spent an average of $1,032 per year on clothing. That’s out of an average after-tax income of $22,591. So they spent 4.6 percent of their income on clothing. Because clothing prices fell over that time, they would have bought more clothing at the lower price. So we will understate their gain if we assume that they were insensitive to price and bought the same amount of clothing that they would have at the higher pre-expanded-trade price. Even assuming no further drop in clothing prices after 2103, the 24 percent drop in price was important for a household with such limited means. The clothing they would have bought in 1997 would have cost an inflation-adjusted amount of $1,358.  So the average family in the two bottom fifths of the income distribution saved $326 on clothing alone. Over 53 million households, that is a gain of about $17.3 billion. Assuming that the 650,000 people who lost their jobs lost as much as $10,000 each per year, which is probably an overestimate, their loss was $6.5 billion, which is less than 38 percent of the gain. Moreover, the average worker in a clothing factory in the United States, along with her or her family, almost certainly earned more than $22,591, the average income of the bottom two-fifths.

There may be other objections to free trade but two objections fail. First, even though some people lose in the short run when trade is made freer, almost everyone gains in the long run. Second, those who gain disproportionately from free trade are lower-income people, not higher-income people.


A Carbon Tax Would Harm Working-Class Americans

By George LandrithInside Sources

A Carbon Tax Would Harm Working-Class Americans

U.S. Representatives Steve Scalise (R-La.) and David B. McKinley, P.E. (R-W.Va.) introduced a resolution that, if passed, would express the sense of Congress that a carbon tax would be detrimental to the United States economy and harm working-class Americans the most.

This is self-evidently true. In fact, it is so obviously true, a reasonable person might ask why such a resolution is even necessary. Do we really need a resolution that is as obvious as the sun rises in the east?

Sadly, even though the resolution’s point — that carbon taxes are harmful — is painfully obvious, the resolution is necessary. There are many voices on the national stage that support virtually any new tax and particularly any energy tax. The Biden administration has made it clear it considers the energy sector the enemy — killing pipelines, proposing new taxes, and advocating for new burdensome regulatory regimes and mandates. But this is counterproductive!

A carbon tax — no matter who they tell you will pay it — will hit the economy hard and will hit lower-income Americans the hardest. A carbon tax would increase the cost of everything Americans buy — from groceries, to electricity and gasoline, to home heating in the winter, to everyday household products. Moreover, having a reliable source of affordable energy is foundational to a strong job market and strong economic growth. The rich don’t need a strong job market or strong economic growth to build a better future for themselves and their families. They’ve already got that. But the working middle class and the working poor need a robust jobs market and economic growth to push wages higher.

The additional costs imposed on the working class by a carbon tax are difficult to bear. Their budgets are already tight. Are they going to go to work less often or heat their home less in the winter? They are kind of stuck. If you increase their energy costs, they have to give up other necessities. And if you damage the economy, their hope for better times and brighter days ahead evaporates. That’s way too high a price to pay for whatever false promises the elites are offering.

America achieved energy independence when only a few short years ago, it was widely perceived that we would always be forced to import energy and rely upon energy from hostile nations. Energy independence had obvious economic benefits, but it also had national security benefits. For much of the last two generations, American foreign policy had to worry about keeping the oil flowing from the Middle East. Given the volatility of the region, that often forced some unpleasant foreign policy considerations on American policymakers. But with energy independence, hostile powers could no longer hold us hostage or use energy as a leverage point. Thus, we were more secure. A carbon tax would put all of this at risk.

Some privileged elites see their support for a carbon tax as some sort of virtue. And they think it makes them look good. But what is there to feel so superior about in forcing working-class Americans to pay higher energy bills, transportation costs, and higher costs for food and household items — all while also being forced to suffer lower or suppressed wages?

This resolution tells Congress and the Biden administration that Americans expect accountability in their government. The Biden Administration is attacking energy through its attempts to force us into expensive electric vehicles and to use legitimate infrastructure needs as cover for redistributing taxpayer money to favored technologies like windmills and solar panels. This is all reminiscent of Solyndra, which gave away hundreds of millions of taxpayer dollars to well-heeled political donors in the guise of energy policy but was ultimately a boondoggle and nothing more.

Rather than trying to use energy policy as a way to push Americans into the buying preferences of a few political elites, let’s unleash the power of the free market and human creativity!  We can have reliable, affordable energy and a clean environment.  But only if we allow and encourage innovation, rather than imposing government mandates and taxes.


Biden trade policy should focus on International Trade Commission

By Peter RoffImperial Valley Press

When you break it down, Donald Trump’s trade policy was simple. “No more bad deals,” he’d say while flexing America’s economic muscle and bringing miscreant trading partners back into line.

Joe Biden, on the other hand, has yet to make his trade priorities clear.

There are a few things we do know. One, he’s eager to reunite with partners on the world stage. With the pandemic and climate change as the centerpieces of his administration’s international efforts, we can expect trade pacts to be less important. Two, the president says he wants to fix or build back America before he launches any trade initiatives. Three, he wants to be sure trade initiatives will be “worker-centered” but hasn’t explained what that would look like.

Going forward, the priorities for U.S. trade policy overall ought to be bringing U.S. jobs and manufacturing back from overseas and encourage emerging industries to develop new technologies here in the United States. Internationally, as an example, the White House must convince much of the world to eschew products made by Chinese-owned Huawei when building out 5G networks.

At home, the president and his trade team need to make sure that the innovative activities of companies creating emerging technologies on which we’re all dependent are not being crushed by government bodies like the U.S. International Trade Commission, a six-member, independent, quasi-judicial federal agency that settles certain kinds of trade disputes.

Of late, the commission is a place where non-practicing entities (they’re more commonly called “patent trolls”) are violating patent rights. Through expensive and extensive litigation, patent trolls ask the International Trade Commission to find that a company manufacturing and innovating some product is making illegitimate use of a non-practicing entity’s intellectual property — and, because of it, any device using said infringed-upon patents must be banned from the U.S. marketplace.

That is exactly what Swedish telecom giant Ericsson is asking the commission to do to Samsung and a range of other smart devices and its 5G-related infrastructure equipment. Ericsson is a telecom infrastructure equipment manufacturer, but these days close to a third of its operating profit comes from IP licensing.

Ericsson is currently negotiating with Samsung to renew a patent cross-licensing agreement. Instead of continuing to negotiate, Ericsson is using the threat of a massive U.S. import ban on Samsung products to try to get its way.

If Ericsson’s backup strategy prevails and Samsung devices including cell phones and tablets are excluded from the U.S. market, or if it gets the International Trade Commission to block one of its key competitors in the 5G infrastructure market, it would be a disaster. The digital divide would widen just as the Biden Administration is proposing trillions in new infrastructure spending including broadband.

Spending billions of taxpayer dollars on broadband while at the same time excluding Samsung infrastructure equipment and devices from the market makes no sense. The International Trade Commission will have given Ericsson dominant market power in 5G infrastructure equipment and limited device choices for U.S. consumers. It would be shockingly counterproductive to give Apple a virtual monopoly on sales of sophisticated phones while opening the door to Chinese manufacturers like Huawei, ZTE or their home-grown rivals to service the rest of the U.S. market at a time when the U.S. government is working to prevent Chinese tech attacks on U.S. information security.

There is a better way to settle what is essentially a dispute over patent royalties – the traditional court system.

Ericsson took its complaints to the International Trade Commission because it knows that an exclusion order would nearly cripple its rival. At a minimum, it would give it tremendous negotiating leverage.

It’s time for the president to propose and for Congress to reform the International Trade Commission by addressing weaknesses that enable these kinds of manipulative and illegitimate cases.


Instead Of Tax Increases, President Biden Should Cut Spending And Use Public-Private Partnerships

Infrastructure projects that are paid for by users, not by federal taxes, can be a big boost to the economy.

By Adrian MooreReason Foundation

Instead Of Tax Increases, President Biden Should Cut Spending And Use Public-Private Partnerships
206957011 © Ordinka26 | Dreamstime.com

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.


PRO? Con

By The EditorsNational Review

President Biden speaks at the White House in Washington, D.C., February 5, 2021. (Kevin Lamarque/Reuters)


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.


Rand Paul Bill Seeks Choice for America’s Workers

By Peter RoffAmerican Action News

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.


Unions Must Stop Prioritizing Politics Over Jobs

By Peter RoffIssues & Insights

Photo by Charles Edward Miller

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.


Leaving Socialism Behind: A Lesson From Germany

Editor’s note: This is an excerpt from a fuller essay by Professor Berman, “Leaving Socialism Behind: A Lesson From German History,” that is published by the Hoover Institution as part of a new initiative, Socialism and Free-Market Capitalism: The Human Prosperity Project.

By Russell A. BermanThe Hoover Institution

The images of East Germans eagerly pouring into West Berlin on the night of November 9, 1989, have become symbols of the beginning of the end of the Cold War and, more specifically, evidence of the failure of communist rule in the German Democratic Republic (GDR, or East Germany) and its socialist economic system. Yet that historic moment was only the final dramatic high point in the long history of dissatisfaction with living conditions in the eastern territory of Germany, first occupied by the Red Army during the defeat of Nazi Germany in 1945 and, four years later, established as the GDR when, in Winston Churchill’s words, the Iron Curtain fell across the continent.

Between the formal political division of Germany in 1949 and the final hardening of the border with the construction of the Berlin Wall in 1961, a constant population flow from east to west took place, a movement away from Soviet-style socialism and toward Western capitalism. East Germans stopped voting with their feet only when the construction of the Wall in Berlin made it impossible to leave; outside the capital, prohibitive barriers already had stretched across the whole country. Nonetheless, many continued to try to escape, and hundreds lost their lives, shot by border guards in brave attempts to “flee the republic,” as the crime was cynically designated.

To state the obvious: there are no similar accounts of throngs of westerners clamoring to enter East Germany. Between 1950 and 1989, the GDR’s population decreased from 18.4 million to 16.4 million, while that of West Germany (the Federal Republic of Germany, or FRG) grew from 50 million to 62 million.This tally is an indisputable judgment on the failure of socialism. The GDR system was unable to persuade its population to remain willingly. Only the Wall and the rifles of the border guards prevented East Germans from departing.

Several distinct, if interrelated, factors contributed to the economic limitations of the GDR. As noted, it emerged from the Soviet Occupation Zone, and the Soviet Union’s treatment of its defeated wartime adversary was harsh. Extensive manufacturing capacity was systematically dismantled and moved to the Soviet Union, further undermining an industrial base already reduced through wartime destruction, although this phenomenon declined by the early 1950s. In contrast, West Germany was benefiting from the very different American occupation and the positive effects of the Marshall Plan. While the West German economy profited from access to the world economy, East German trade remained largely constrained to the Soviet bloc. In addition, from 1949 to 1961, the population flight to the west disproportionately involved middle-class and relatively wealthy East Germans, who took their skills and amplified capital flight. Each of these elements arguably put East German economic performance at a disadvantage.

Yet the primary difference between East German underperformance and the West German “economic miracle” involved the antithetical organization of the countries’ economic systems and the philosophical assumptions underpinning them. Jaap Sleifer writes:

The difference between the two systems may be characterized by the structure of ownership and the degree of centralization in decision-making. West Germany, as a capitalist country, mainly relies on private and individual ownership and control of the business enterprise, whereas in East Germany, as a socialist country, state enterprises were predominant. Regarding the degree of centralization, capitalism provides wide areas of discretion for freedom of individual choice, which leads to decentralization of economic decisions, whereas socialism shows a more centralized approach towards economic decisions.2

The comparative performance of the East and West German economies therefore provides a nearly textbook case of the difference between socialist and capitalist economic paradigms. To be sure, other factors played a role, such as the countries’ differing treatments by occupation forces and the ongoing migration from east to west. Yet each of these two potentially mitigating circumstances was also simultaneously symptomatic of the opposed economic systems: the East German economy was disadvantaged precisely because the Soviet Union imposed its model of socialist planning, while the brain drain (and capital drain) to the west was a function of and response to the effects of the socialist model. In contrast to the imposition of the Soviet model—a derivative of the Marxist ideological legacy—in the GDR, West Germany benefited from the free market vision of thinkers such as Walter Eucken and Ludwig Erhard, who steered it toward its successful model of a social market economy: i.e., a capitalist economy tempered by a social safety net and restrictions on monopolies.

As a result, the contrast between East and West German economic performance became a set piece in representations of the Cold War. In 1960, Bellikoth Raghunath Shenoy, a prominent classical economist from India, provided a journalistic account of his visit to Berlin, not yet divided by the Wall, which included these trenchant observations:

The main thoroughfares of West Berlin are nearly jammed with prosperous-looking automobile traffic, the German make of cars, big and small, being much in evidence. Buses and trams dominate the thoroughfares in East Berlin; other automobiles, generally old and small cars, are in much smaller numbers than in West Berlin. One notices cars parked in front of workers’ quarters in West Berlin. The phenomenon of workers owning cars, which West Berlin shares with the USA and many parts of Europe, is unknown in East Berlin. In contrast with what one sees in West Berlin, the buildings here are generally grey from neglect, the furnishings lack in brightness and quality, and the roads and pavements are shabby, somewhat as in our [Indian] cities.3

He goes beyond economic observations to remark on the culture he sees:

Visiting East Berlin gives the impression of visiting a prison camp. The people do not seem to feel free. In striking contrast with the cordiality of West Berliners, they show an unwillingness to talk to strangers, generally taking shelter behind the plea that they do not understand English. At frequent intervals one comes across on the pavements uniformed police and military strutting along. Apart from the white armed traffic police and the police in the routine patrol cars, uniformed men are rarely seen on West Berlin roads.4

Evidently more is at stake than contrasting consumer cultures or access to privately owned cars. East Berlin is, in Shenoy’s view, symptomatic of a repressive society in which the inhabitants fear authority and shy away from contact with outsiders lest they draw attention to themselves:

The main explanation lies in the divergent political systems. The people being the same, there is no difference in talent, technological skill, and aspirations of the residents of the two parts of the city. In West Berlin efforts are spontaneous and self-directed by free men, under the urge to go ahead. In East Berlin effort is centrally directed by Communist planners. . . . The contrast in prosperity is convincing proof of the superiority of the forces of freedom over centralized planning.

The Perils of Selective Memory

Today it is especially important to remember both objective economic differences between the two Germanies and these subjective experiences: i.e., the dynamic excitement Shenoy felt in the west as opposed to the timidity of the east. Preserving these insights is vital because of current attempts to idealize socialism retrospectively by pointing to allegedly positive aspects of the East German performance.

While socialist-era statistics are notoriously unreliable, it is likely that East German standards of living were in fact consistently the highest in the Eastern bloc: i.e., better than in the other satellite states and certainly superior to the Soviet Union. Yet that hardly proves the success of GDR socialism; Germany long had been wealthier than its eastern neighbors. GDR standards of living also reflected the political pressure on East German leadership to attempt to keep up with the standard of living in the west, of which the East German population was well aware. This constant comparison with the Federal Republic is one unique feature of East German socialism; Poland never had to compete with a West Poland, or Hungary with a West Hungary. Yet artificially propping up the standard of living in East Germany contributed to the indebtedness of the state and its ultimate fragility, and, in any case, the GDR’s living standards never came close to matching what West Germans grew to expect. East Germany’s per-capita GDP has been measured at only 56 percent of GDP in the west.5

Nonetheless, one can hear apologists for the GDR and its socialist system argue that the East German state provided social goods such as extensive child care, correlating to a relatively higher degree of participation by women in the workforce. In post-unification debates, such features are sometimes taken as evidence of the accomplishments of the GDR. Yet in fact they represent instances of making a virtue out of necessity: in light of migration to the west and the dwindling population, raising labor force participation through the inclusion of women became unavoidable.

Such retrospective considerations arise from rosy false memories in the context of post-unification reality. The past may look attractive to those who do not have to relive it. Yet there is in fact no evidence of any significant interest on the part of former GDR citizens in returning to the socialist regime. One can observe some dissatisfaction in the former East Germany with the character of the unification process for various reasons, including a perceived condescension on the part of West Germany. East Germans at times experience the western critique of the GDR as offensively triumphalist, and, worse, they believe that the western critique of the socialist system simultaneously belittles their own lives within the system. This dynamic can generate defensiveness on an individual level, but it rarely turns into a reactive identification with the former regime.

The abrupt transformation of life through the unification of 1990, the economic disruption as East German enterprises collapsed, and the GDR’s sudden integration into a West German and, more broadly, cosmopolitan world has produced the phenomenon of Ostalgie, a nostalgia for the east. Sometimes it is expressed merely as a yearning for the (few) consumer products of one’s childhood, and sometimes it is a more complex psychological orientation toward a remembered youth in an allegedly simpler past. In Ostalgie discourse, the repressive aspects—the role of the Stasi, the secret police, the extensive surveillance network, the lack of a free press—are minimized or absent. The psychological appeal of Ostalgie—of succumbing to the glow of a wrongly remembered past—can be used by left-of-center politicians to conjure the illusion of a better past in order to advocate for statist policies in the present.

The failure of East German socialism to establish its legitimacy by maintaining the loyalty of its population—who, given the chance, evidently would have largely decamped to the west—was a matter of economics, but not only of economics. At stake was instead the broad infringement on human freedom that made life in the GDR undesirable. It is not only in terms of material prosperity that socialism fails.

“We Are the People”

Two pieces of literary and historical evidence testify to the indigenous flaws in the mindset of the East European satellite countries and especially the GDR, where patterns of subordination, obsequiousness, and obedience worked against the disruptive capacities of individuality, creativity, and spontaneity that drive change and growth. The “really existing socialism,” as it was labeled, held a systemic bias against the recognition of any signals that might allow for autocorrection. Infallibility and determinism, hallmarks of socialist thought, systematically eliminate opportunities to undertake modifications on the basis of experience.

The first piece of evidence is the poem “Song of the Party” (Lied der Partei), which became the anthem of the ruling Communist Party of the East Germany. It was written by German-Czech Communist poet Louis Fürnberg in 1949, and remembered particularly for its repeated line that conveys the core message “the Party is always right.”

The Party, the Party, it is always right!

And Comrades, may it stay that way;

For whoever fights for the right

Is always in the right.6

It conveys an unironic insistence on absolute obedience to the organization, which in turn is regarded as all-defining for the existence of its members. Worse, the song propagates a radical consequentialism: if one is fighting for the right, one is necessarily in the right—the end justifies the means. No room remains for any ethical limitation on the instruments one uses to reach a goal. As a document of the psychology and values of GDR socialism, “Song of the Party” helps explain the widespread suppression of individuality. Fürnberg’s ethos also displays the desiccation of political life that radical revolutionary writer Rosa Luxemburg foresaw years earlier as a result of the essence of the Bolshevik program and the socialist enterprise.7

The second piece of literary evidence comes in the summer of 1953, after spontaneous worker protests erupt across East Germany, reaching a high point on June 17 with strikes in all major industrial areas. The Soviet occupation forces suppress the uprising quickly, as protestors are shot and executions follow. Poet and playwright Bertolt Brecht responded to the suppression with a poem that has been repeatedly cited to show the mismatch between statist governance and democratic legitimation. In “The Solution” (Die Lösung), he describes the head of the Communist writers’ organization handing out flyers criticizing the workers for disappointing the government. Brecht’s laconic suggestion: the government should “dissolve the people and elect another.”8

The poem captures the distortion of political life inherent in East Germany, corroborating the prediction in Luxemburg’s critique of the Bolsheviks: that the hollowing-out of democracy and the elimination of rights, consistent with Karl Marx and Friedrich Engels’s animosity to “civil society” and merely bourgeois liberty, produces dictatorship as the defining feature of socialism.

Such was Communist culture in the early years of the GDR. Later, just before the end of the socialist regime, matters had begun to change. There is evidence that servility and subordination were giving way to different personality types no longer consistent with authoritarian rule. “Sometimes this results in exaggerated anti-authoritarian behavioral patterns,” wrote Walter Friedrich, the director of the Youth Institute, in 1988. There also were expectations of greater freedom in personal lives and in relationships, such as “the demand for freedom in choosing a partner, and surely also the phenomenon of cohabitation and the high divorce rates here,” Friedrich wrote. “The greater demands by women, especially younger ones, for self-determination should also be regarded from this perspective—right up to feminist postulates.”9 He went on to report on how changes in personality characteristics were also leading to greater engagement in organizations such as church groups and the environmental movement. A protest potential was growing.

A year later, the East Germans were pushing their way into West Berlin. Even after the border opened, some continued to harbor illusions that the GDR might remain a separate state. Parts of the East German intelligentsia and cultural elite promoted this idea; after all, they had often benefited from relatively privileged positions. But in the voices of the demonstrators during the fall of 1989, especially in Leipzig, where a series of “Monday demonstrations” unfolded, and then in Berlin, an important transition took place. The crowds expressed aspirations to end not only the dictatorship but also eventually the division of Germany. Before the opening of the Wall, in October and early November, the demonstrators regularly chanted, “Wir sind das Volk” (We are the people), asserting the democratic claim on popular sovereignty against a regime that had never achieved legitimacy through a free election. “We are the people” was, in effect, a call for a realization of the democracy that had been consistently denied by the dictatorial character of GDR socialism, precisely as Luxemburg had predicted would develop out of Lenin’s pattern of suppressing of elections and civil rights. As in Russia, so too in Germany.

On October 3, 1990, East Germany—or, more precisely, the five Länder in the territory of East Germany—joined the Federal Republic, leading to the formation of a single German state and the end of the post–World War II division. Whether this unification was inevitable is a matter of academic speculation at best. What one can say with certainty is that the specifically socialist character of the GDR—its poor economic performance and its constitutively repressive character that precluded political processes of democratic legitimation—made the continuity of an independent state deeply unappealing.

In the end, East Germans chose to abandon socialism to pursue greater prosperity and political freedom through integration into the liberal democracy and social market economy of the Federal Republic. There are few regrets. 


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.


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.


Four Cheers for Capitalism in a Time of COVID

So many of our institutions failed us during the pandemic. Free enterprise isn’t one of them.

By KEN LANGONENational Review

A General Motors worker uses a sonic welder while producing Level 1 medical masks at the former GM Transmission facility in Warren, Mich., April 23, 2020. (Rebecca Cook/Reuters)

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.


60 Plus Association: Coalition Letter Urging Opposition to Price Controls on the Healthcare System

By George LandrithFrontiers of Freedom

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.

Sincerely,

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


Judge Stops Illinois Governor From Extending State Lockdown

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.

By Dennis ByrneThe Federalist

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.


WJLA-TV and FedInsider: Hosting Jones Act News Program on April 7, 2020 from 1 to 2 pm EST

By Frontiers of Freedom

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.


Democratic Capitalism: The American way

The Right to Life, Liberty and the Pursuit of Happiness

By Dr. Larry Fedewadrlarryonline.com

Before Capitalism

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).

What happened?

Capitalism happened

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.


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