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Corporate Social “Wokeness”

By Richard A. EpsteinHoover Institution

The global debate over climate change entered into a new and more dangerous stage this past week. Two American corporate icons, Microsoft and BlackRock, have committed themselves to resisting what they perceive as the unacceptable risks of global warming. Microsoft has announced that it will be “carbon negative by 2030,” and that by 2050 it will have removed from the environment all of its carbon emissions dating back to its founding. It has also pledged one billion dollars to a climate innovation fund to deal with global warming—peanuts for a firm with over $125 billion in annual revenues.

Not to be outdone, BlackRock, the world’s largest asset manager with over $7 trillion in assets under management, has proudly declared through its Chairman and CEO Larry Fink that it will “place sustainability at the center of our investment approach, including: making sustainability integral to portfolio construction and risk management; existing investments that present a high sustainability-related risk, such as thermal coal producers; launching new investment products that screen for fossil fuels. . . .”

To Fink, there is no real conflict for his company between its social responsibility and its financial performance, as he is convinced that “incorporating environmental, social and governance (ESG) factors into investment analysis and decision-making. . . can provide better risk-adjusted returns for investors.” Ironically, if that point were true, he would have no need to depart from traditional investment standards, as all firms would flock to the new BlackRock standard.

These powerful initiatives are driven by the proposition that climate change poses the greatest threat to humankind society has ever faced. Without any documentation or meaningful argument, Microsoft and Blackrock accept that the accumulation of carbon dioxide in the earth’s atmosphere will result in elevated global temperatures. In making these statements, both companies write as if all the “world’s climate experts” within the “scientific community” speak with one voice in concluding that the release of greenhouse gases since the beginning of the industrial revolution is the source of this alleged mortal peril.

However, a close reading of these two corporate statements shows the dangers of consensus thinking around climate change, which can lead to lazy and incomplete arguments. The first issue concerns the supposed magnitude of the risk. It is clear that carbon dioxide levels have increased over time, especially over the past seventy or so years. But it is important to remember that the increase in temperatures began before the concentration of carbon dioxide in the atmosphere reached 350 parts per million in 1987, a level which has, without justification, been posited as the tipping point for climate catastrophe. Notably, this means that much of the temperature increase over the past five decades took place in low carbon dioxide environments.

The Microsoft statement claims that “the average temperature on the planet has risen by 1 degree Celsius during the past 50 years and that carbon dioxide emissions have been a primary driver of this.” Yet that is at odds with a report from the NASA Earth Observatory which concluded “the average global temperature on Earth has increased by about 0.8 Celsius (1.4 Fahrenheit) since 1880. Two-thirds of the warming [0.53°C] has occurred since 1975, at a rate of roughly 0.15-0.20°C per decade.” Indeed, the situation is even more complex because of the high degree of annual variability. As a result, much turns on the choice of the first and last year of the desirable interval. One recent study reported a decline of 0.16 Celsius between April 2018 and May 2019.

In any event, the explanation that carbon dioxide emissions are the sole driver of climate change is surely contestable, given that a complete account must also take into consideration population increases, solar flares, ocean currents and volcanic activity, among a vast array of other factors. The graphs included in Microsoft’s announcement duly record the huge increases in carbon dioxide emissions over the last 30 years, but those trends only weakly correlate to the modest temperature increases over that interval, including a sharp decline that extends as late as May 2019.

Thus the graph below for the 41 years from 1978 to May 2019 shows a net increase of just under 0.8 degrees centigrade. It is of course possible to present other data sets that might be susceptible to alternative interpretations, but either way, there is no rock-solid scientific consensus of the sort that Microsoft and BlackRock posit.

Microsoft and Blackrock’s presentations also suffer from other key defects. These corporate pledges assume that their proposed changes in carbon policy will reduce the increase in global temperatures, perhaps by as much as 1 degree Celsius. But what is missing from these projections is any estimate about either the financial costs of these innovations or their net impact on global temperature. If the sources of temperature changes are multi-causal, why should anyone believe that the ingenious efforts of companies like Microsoft to cleanse their supply chains of excess carbon dioxide will have more than a trivial effect on global temperatures, even if such actions are imitated by other firms?

And moreover, these effects could be totally undone if China or India decides to boost coal production in ways that more than offset any small reductions in carbon outputs by American firms. Thus, it is possible to spend billions of dollars on potential mitigation with little or nothing to show for it.

To make matters worse, there are better targets for intervention. The greatest causes of carbon dioxide emission in the past two years were the huge forest fires in Northern California and Australia. The recent California fires released about 68 million tons of carbon dioxide, or roughly the level of emissions needed to provide electricity for the state for an entire year. Taking effective steps to stop these consistent fires would dwarf anything that Microsoft can do through its supply chains or BlackRock through its sustainable investment policy. Nonetheless, A-list celebrities regularly champion the causes of global warming without once thinking about the dangerous management strategies adopted by the modern environmental movement that have contributed to such fires, a movement which opposes the removal of dead wood or the use of controlled burns to reduce fire risk. It would be far better for Microsoft and BlackRock to lobby for government reforms in forest management, a topic on which they remain silent.

Even supposing, however wrongly, that all the temperature increases and observed fires were exclusively attributable to carbon dioxide, the case for massive corporate intervention is still weak. BlackRock’s Larry Fink suggests with a straight face that the market for municipal bonds and home mortgages will collapse “if lenders can’t estimate the impact of climate risk over such a long timeline, and if there is no viable market for flood or fire insurance in impacted areas.”

Get real. These risks will exist whether or not Blackrock’s policies are implemented, and no matter what the carbon dioxide levels are. And the view that there should always be a viable market for flood or fire insurance ignores the huge moral hazard that is created when subsidized insurance is provided to persons who build too close to combustible forests or on coastal properties in hurricane zones.

Worse still, the fears that drive both BlackRock and Microsoft have not yet been observed over the past decade. Markets are supposed to price long-term risk into capital assets, but there is no sign that real estate, agricultural, insurance, or financial markets price this alleged climate risk in. Why is this, when our ability to forecast has never been better given the available quantitative estimates of climate-related risk?

One explanation is a recent study from climate scientists Giuseppe Formetta and Luc Feyen which concluded that: “Results show a clear decreasing trend in both human and economic vulnerability, with global average mortality and economic loss rates that have dropped by 6.5 and nearly 5 times, respectively from 1980-1989 to 2007-2016. We further show a clearly negative relationship between vulnerability and wealth, which is strongest at the lowest income levels.” The study’s abundant graphs all show the same downward projections, whether one looks at floods, heat, cold or wind related damages. In other words, the historical decline of these various risks also have to be priced into any long-term financial instrument.

A similar attack on the BlackRock-Microsoft position was also launched by Marlo Lewis, whose thesis is contained in his title: “Warmest Decade – Climate Crisis Still a No Show.” In stark contrast to the data-free presentations of both companies, Lewis tracks the key worldwide indicators of long-term global health—life expectancy, crop yields, per capita income, and climate related deaths. His data tells the same story as the study—everything is better today than it has ever been. The increases in societal wealth accumulation have inured to the benefit of all, rich and poor alike.

The cavalier attitude toward any contrary scientific evidence has led Microsoft and BlackRock to endorse proposals that will do little, if anything, to stop global warming, but which will, if widely followed, reduce the ability of societies around the world to deal with global warming or any other climate calamity, should one occur. There are real social and human costs to following BlackRock and Microsoft’s lead.


Wages Soar Fastest among Those with the Least

A bipartisan plan to erase barriers to equity ownership would be productive and beautiful.

By DEROY MURDOCKNational Review

It’s an article of liberal faith: Thanks to President Donald Trump’s $1.5 trillion Tax Cuts and Jobs Act, the prosecco is popping on Wall Street, while the unsold Pepsi gathers dust on Main Street, where Americans are too poor to buy soft drinks.

“Workers are delivering more, and they’re getting a lot less,” former vice president Joe Biden told the Brookings Institution last summer. “There’s no correlation now between productivity and wages.”

Americans “are sick and tired of the income and wealth inequality that sees the rich getting much richer,” Senator Bernie Sanders (I., Vt.) told CapitalAndMain.com last month.

Wages have largely stagnated,” the campaign website of Senator Elizabeth Warren (D., Mass.) complains, while “fundamental changes in our economy have left millions of working families hanging on by their fingernails.”

These grim, lachrymose myths cannot mask this incredibly upbeat fact: The sparkling wine is flowing on Wall and Main streets, and it’s running more rapidly on Main, where take-home pay is expanding the most among those with the least.

Never mind the liberal lies. Hard data reveal this reality. The Atlanta Federal Reserve Bank’s monthly Wage Growth Tracker shows that Americans are making more money, particularly those who have been forgotten for decades.

Between November 2018 and November 2019, overall median wage growth climbed 3.6 percent, a healthy pace that should lift spirits, too. Those in the bottom 25 percent saw wages advance 4.5 percent, while the top 25 percent lagged, with pay rising just 2.9 percent. This is the 180-degree exact opposite of what Democrats relentlessly bellow. They have equal access to the Atlanta Fed’s website. This confirms their rank dishonesty.

  • When it comes to race, wage growth for whites was a tick behind, at 3.5 percent, while non-whites charged ahead at 4.3 percent.
  • In terms of age, the young and the restless rule. Those ages 16 to 24 saw wages climb 8.4 percent. Americans 25 to 54 enjoyed 3.9 percent higher paychecks. And the typically higher-income 55-plus crowd was behind the curve, with 2.5 percent wage growth.
  • Bachelor’s degrees generated 3.7 percent wage boosts for those who held them. But those who went no further than high-school graduation also savored 3.7 percent higher pay. Those with associate degrees saw their checks grow just 3.2 percent.
  • While those in finance and business services scored 4.1 percent higher salaries, workers in manufacturing, construction, and mining were in a photo finish with them at 4.0 percent.
  • While job stayers earned 3.2 percent more money, job switchers scored an extra 4.3 percent.
  • Interestingly enough, those with low, medium, and high skills all shared 3.6 percent wage increases, matching the nationwide bonus.

For further sanguine results of Trumponomics, see Sentier Research’s analysis of the Census Bureau’s Current Population Survey. Sentier clocked U.S. median household income last November at $66,043 — $5,070 higher than this key metric’s position when President Trump was inaugurated on January 20, 2017: $60,973. This 8.3 percent increase in middle-class income in less than three years crushes the two-term, eight-year performances of Obama ($1,043, up 1.7 percent) and G. W. Bush (an emaciated $401, or a paltry 0.7 percent boost).

Today’s Employment Situation also is encouraging. As the Bureau of Labor Statistics reported at 8:30 a.m., the unemployment rate remains steady at 3.5 percent, maintaining the lowest joblessness level since 1969 — Richard Nixon’s first year in office. Employers created 145,000 new jobs last month, a healthy, if not breathtaking, number. And 2.9 percent wage growth, from December 2018 to December 2019, lags the Atlanta Fed’s figures but still approximates the 3 percent mark that seems to trigger warmth and toastiness. Scarlett O’Hara’s words should soothe any naysayers here: “Tomorrow is another day.”

Democrats should stop loathing Trump long enough to show some love for the poor people they claim to represent. Democrats should stop lying to themselves and the country about low-income wages lagging those of the affluent. This is not happening. Democrats should acknowledge the wonders that Trump and Republicans have done via tax reduction, regulatory relief, and a pro-business tone in Washington.

Then, Democrats should make this challenge to Republicans. The 55 percent of Americans who are in the stock markets, per Gallup, are seeing their portfolios soar, as the S&P 500, Dow Jones Industrial Average, and Nasdaq break records. Since Trump’s victory, these markets have rocketed 53 percent, 58 percent, and 77 percent, respectively, as of Thursday’s highest-ever closing bells.

But the 45 percent of Americans who own no stocks — directly or as part of 401(k)s or IRA accounts — are missing this bonanza.

Democrats should ask Republicans to work with them to make it as easy as possible for those not invested in the stock market to buy in. A bipartisan plan to erase barriers to equity ownership would be productive and beautiful.

Conversely, Democrats can keep weeping among themselves as their have-not base actually grows richer more swiftly than the haves the Democrats love to hate.


Good economic news this holiday season

By ANALYSIS/OPINION:The Washington Times

How good is the U.S. economy? So good that even CNN, the monomanically anti-Trump television network, was forced to admit it last week.

“As 2019 comes to a close, the US economy earns its highest ratings in almost two decades,” CNN reported, dourly relaying findings of a poll it commissioned. “Overall, 76% rate economic conditions in the US today as very or somewhat good, significantly more than those who said so at this time last year (67%). This is the highest share to say the economy is good since February 2001, when 80% said so. Almost all Republicans (97%) say economic conditions are good right now, as do 75% of independents and 62% of Democrats. Positive ratings are up across parties compared with August of this year, when 91% of Republicans, 62% of independents and 47% of Democrats said the economy was in good shape.”

It’s no surprise that Americans are pleased with their economic situation this holiday season. Consider the data: The unemployment rate is 3.5 percent, indicating essentially full employment. Anyone who wants a job can get one, in other words. Wage growth, long stagnant, is ticking up, likely because of full employment — and, perhaps because illegal immigration has been somewhat curtailed. Total gross domestic product is chugging along, growing at more than 2 percent annually. The stock market is stratospheric, buoying not only individual investors but also anybody who has a retirement account. What’s all the more striking is that earlier this year there was plenty of loose talk about a looming recession. Sure, that could still happen (and eventually it will), but it doesn’t seem to be on the immediate horizon.

The strength of the economy can be chalked up to Republican tax cuts (which unfortunately also contributed to yawning federal deficits), deregulation and the unrelenting optimism of the American consumer. Some 70 percent of U.S. GDP is attributable to consumer spending, so the economy rises and falls with it. That Americans are spending on everything from houses to cars to dinners out contributes to economic growth and healthy jobs figures — which in turn likely contribute to more consumer spending. This is a classic virtuous cycle.

The strength of the economy no doubt has political effects as well. President Donald Trump will certainly benefit. Even CNN conceded that Americans’ bulging wallets will “[potentially boost] President Donald Trump in matchups against the Democrats vying to face him in next year’s election.”

“As perceptions of the economy have brightened, the poll also shows matchups between the top Democrats vying for the 2020 nomination and Trump tightening. In October, four Democrats tested in hypothetical head-to-head contests with Trump among registered voters led by anywhere from 6 to 10 percentage points, all advantages outside that poll’s margin of sampling error,” CNN continued. “Now, just two of those candidates hold edges at or above the error margin: former Vice President Joe Biden leads Trump nationally 49% to 44%, and Vermont Sen. Bernie Sanders tops Trump 49% to 45%. Massachusetts Sen. Elizabeth Warren and South Bend, Indiana, Mayor Pete Buttigieg each run about even with the President.”

Mr. Trump will face significant headwinds in next year’s election to be sure: a fired up opposition, various global crises and an intemperate personality that many Americans, understandably, find distasteful. But he will no doubt delight in asking Americans: “Are you better off than you were four years ago?” For large majorities, the answer will be yes.


Present at the Demolition

Column: The post-WWII order is ending—and nothing has replaced it

By Matthew ContinettiThe Washington Free Beacon

Economists at the World Bank and International Monetary Fund must feel pretty lucky these days. They work for just about the only institutions set up in the aftermath of World War II that aren’t in the middle of an identity crisis. From Turtle Bay to Brussels, from Washington to Vienna, the decay of the economic and security infrastructure of the postwar world has accelerated in recent weeks. The bad news: As the legacy of the twentieth century recedes into the past, the only twenty-first century alternatives are offered from an authoritarian surveillance state.

The pressure is both external and internal. Revisionist powers such as China, Russia, Iran, and North Korea undermine the foundations of global governance and hijack institutions to the detriment of the liberal international order. The institutions themselves lack the self-confidence necessary to further the cause of human freedom. Meanwhile, the most powerful nation in the world has turned inward. Its foreign policy is haphazard and improvisational, contradictory and equivocal. The confusion and zigzagging contribute to the erosion of legitimacy. It delays the emergence of new forms of international organization.

The breakdown was visible at last week’s NATO summit in London. Remarkably, the source of the immediate ruckus wasn’t President Trump. It was French president Emmanuel Macron, who doubled down on his criticism of the Atlantic alliance that he’d expressed in a recent interview with the Economist. Trump disagreed with Macron’s description of NATO as “brain dead.” He and other allies didn’t back Macron’s call for rapprochement with Russia and China and renewed focus on terrorism.

Macron wasn’t the only troublemaker. Turkey’s autocratic leader, Recep Tayyip Erdogan, who recently tested his Russian S-400 air defense systems againsthis American F-16s, said he would block a Balkan defense plan unless NATO designates the Kurdish YPG a terrorist group. The summit ended with a leaked video of Macron, Justin Trudeau, Boris Johnson, and Dutch prime minister Mark Rutte sharing a laugh at Trump’s expense. Haughty euro-elites mocking the American president is always an affront, but it is especially counterproductive now when the alliance is under attack from prominent voices within the United States.

When it was founded, NATO was one part of a strategy whose goal was the prevention of another global war. Security guarantees and the forward deployment of conventional forces bound America to Europe and the Europeans to each other. Another part of the strategy led to the EU. It integrates the economies of nations that unleashed the two most devastating conflicts in human history. It was thought that trade relations contribute to peace and nationalities can be submerged under a continent-sized umbrella. What the architects of Europe didn’t anticipate was popular resentment of bureaucratic administration, the imbalances and fiscal consequences of monetary union without political union, and the reassertion of national identity that results from large-scale immigration.

Today the politics of every major European country is a mess. I write these words on the day of a British election that will determine whether the United Kingdom leaves the EU and whether an anti-Semitic socialist lives in 10 Downing Street. Germany flirts with recession, its chancellor is a lame duck, the grand coalition hosts an SPD under far-left leadership, and the largest opposition party is the Alternative for Germany. Macron might want to spend more time on domestic politics: His approval rating is around 30 percent, striking workers have paralyzed France, and 13 French soldiers were killed in Mali.

National populism has transformed Hungary, Poland, and the Czech Republic and plays a significant role in Germany, France, Austria, and Sweden. No longer deputy prime minister of Italy, Matteo Salvini remains the most significant political figure in his country. “Recent opinion polls indicate that if elections were held tomorrow, Mr. Salvini would not only easily become prime minister, but that a coalition of the League, the post-fascist Brothers of Italy and the remainder of Mr. [former prime minister Silvio] Berlusconi’s Forza Italia would command an absolute majority in parliament,” writesMiles Johnson of the Financial Times. The European leaders who fear Salvini are nonetheless ambivalent about the threat posed by Vladimir Putin and by Ayatollah Khamenei. They are happy to advance the Nord Stream 2 and TurkStream pipelines and circumvent U.S. sanctions against Iran.

Frenetic institution building accompanied victory in World War II. The Allies created organizations devoted to international security, diplomacy, health, and economics. The first to go was the Bretton Woods agreement on international finance, which ended when Richard Nixon took America off the gold standard in 1971. The next was the United Nations, which revealed its corruption and domination by dictatorships in its resolution equating Zionism and racism in 1975. The Iraqi nuclear facility at Osirak (fortunately destroyed by the Israeli Air Force in 1981) was evidence that the Non-Proliferation Treaty is only as good as the regimes that sign it. NATO and the EU survived the Cold War and flourished in the two decades after the dissolution of the Soviet Union but both have run up against the limits of expansion. Both have lost sight of their historic function to preserve the peace.

Sometimes changing circumstances render institutions powerless. That is happening to the World Trade Organization. The WTO, endowed in 1995, was built for a unipolar world. When China joined in 2001, its GDP was one-tenth the size of America’s. Now it’s more than half and China has emerged as a military, industrial, and technological rival. But the WTO still designates China as a “developing” country, which entitles it to certain advantages. President Trump’s campaign against this exorbitant privilege reached an impasse December 10, when his administration blockedjudicial appointments to the organization’s dispute-resolution court. It no longer has the capacity to arbitrate. The WTO is toothless. Hollowed out. What will replace it? Nothing has been proposed.

The motive power behind all of these institutions was American commitment. What upheld the structure was our willingness to sustain the costs of international security and global defense of democracy. That engagement began to wane after the Cold War. By 2008 it was practically nonexistent. The president’s disinterest in foreign affairs is a reflection of his countrymen’s. His administration, to its credit, has proposed great power competition as the basis for a renewed American grand strategy. The follow-through has been difficult.

That has left us with entropy. The international scene is filled with decayed institutions and unpalatable choices. On one hand is the status quo. On the other is China’s Belt and Road Initiative and Made in China 2025. “The crisis consists precisely in the fact that the old is dying and the new cannot be born,” wrote philosopher Antonio Gramsci. “In this interregnum, a great variety of morbid symptoms appear.” And no one has a cure.


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

By Peter CoveRealClear Policy

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

By Christopher JacobsThe Federalist

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

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

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

Everyone’s Taxes Will Go Up—a Lot

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

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

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

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

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

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

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

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

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

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

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

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

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

Taxing Only the Rich Won’t Pay for Single Payer

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

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

Socialized Medicine Will Permanently Shrink the Economy

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

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

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

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


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

By Sen. Rand PaulFox News

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

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

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

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

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

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

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

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

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

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

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

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


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

By George LandrithRedState

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

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

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

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

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

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

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

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

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

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

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

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


The Best Economic News No One Wants to Talk About

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

By Derek ThompsonThe Atlantic

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

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

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

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

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

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

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

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

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

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

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

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


Tax Backed by 2020 Dems Would Hurt Retirement Accounts, Report Finds

Average retirement account would lose $20,000 to tax

By Charles Fain LehmanWashington Free Beacon

A financial transaction tax, though popular with 2020 Democrats, would raise little revenue and substantially shrink the U.S. economy, a recently released report concludes.

A transaction tax takes a percentage from financial trades, such as the sale or purchase of stocks, bonds, or derivatives. The United States levies an extremely small charge on each transaction to fund the Securities and Exchange Commission. A number of Democrats would like to bring a full-fledged financial transaction tax (FTT) back for the first time since 1965.

The idea’s most vocal proponent is presidential contender Sen. Bernie Sanders (I., Vt.) who has introduced a plan to charge a 0.5 percent fee on financial transactions. Sanders has made the tax “on Wall Street” a central revenue source to pay for his exorbitant spending proposals.

Sen. Elizabeth Warren (D., Mass.) introduced her own FTT proposal in 2015, Sen. Kamala Harris (D., Calif.) wants one to pay for expanding Medicare, and Mayor Pete Buttigieg has also said that he is “interested in” implementing an FTT. Congressional Democrats have supported the idea outside of the campaign trail. Sen. Brian Schatz (D., Hawaii) has his own0.1 percent proposed FTT — the bill has more than 200 co-sponsors in the House, including Rep. Alexandria Ocasio-Cortez (D., N.Y.).

These Democrats and others cite several justifications for an FTT. The tax is aimed at “Wall Street,” a preferred target of populist liberals—at least in principle, that means it also falls more heavily on those who hold a lot of wealth in investments. Additionally, such a tax would impose major restrictions on so-called high-frequency trading, which involves computer-run trades at fractions of a penny—profits that could be wiped out by the tax.

“This Wall Street speculation fee, also known as a financial transaction tax, will raise substantial revenue from wealthy investors that can be used to make public colleges and universities tuition free and substantially reduce student debt,” a brief from Sanders’s office reads. “It will also reduce speculation and high-frequency trading that is destabilizing financial markets. During the financial crisis, Wall Street received the largest taxpayer bailout in the history of the world. Now it is Wall Street’s turn to rebuild the disappearing middle class.”

The scope of the tax, however, would extend beyond the confines of Manhattan, according to a report from the Center for Capital Market Competitiveness, an affiliate of the Chamber of Commerce. The report argues that FTTs shrink the economy and hurt every-day Americans, not just Wall Street fat cats.

“Main Street will pay for the tax, not Wall Street,” the report argues. “The real burden [of an FTT] will be on ordinary investors, such as retirees, pension holders, and those saving for college.”

Much like a sales tax, the costs of a financial transaction tax would be passed on to consumers, who would pay more for each trade. Taxing transactions does not just drive up costs for the ultra-wealthy, but the 6 in 10 American households that own some kind of investment. Increased costs would have substantial effects on American savings. Under the Sanders plan, for example, the report estimates that a typical retirement investor will end up losing about $20,000 on average from his IRA.

These direct effects are arguably less significant than the overall effect that an FTT would have on the financial side of the economy. As multiple Democrats have acknowledged, the goal of an FTT would be to crack down on complicated financial instruments, such as high-frequency trades, to reduce what they perceive as dangerous market instability.

These instruments mostly serve vital functions greasing the wheels of the economy, according to the center’s report. An FTT would erase the razor-thin margins on which market makers operate, and severely constrain other forms of arbitrage. They would also reduce the use of vital risk-management tools, like many derivatives and futures contracts.

An FTT, the report argues, would thus serve to substantially slow the economy. Trade volume would fall; consumer good prices would rise; municipal bonds would generate less revenue for infrastructure; the cost of credit would increase, making mortgages more expensive—in turn exacerbating the homelessness crisis, depressing young home-ownership, and reducing family formation.

Obviously, each of these effects may not be massive—the U.S. economy grew substantially even during the 50-year period when we had an FTT. But, the new report argues, the experience of other nations indicates that the costs to the economy would substantially outweigh any benefit.

For example, they cite an economic analysis of a proposed 0.1 percent transaction tax in the EU—the authors found that “such a tax would lower GDP by 1.76 percent while raising revenue of only 0.08% percent of GDP.” Sweden’s 1 percent FTT caused a 5.3 percent drop in the Swedish market—meaning a 0.5 percent FTT, as Sanders proposes, would analogously cut nearly $800 billion from U.S. market capitalization. The evidence runs the other way, too: In the year following the repeal of the U.S. transaction tax, New York Stock Exchange trade volume increased by 33 percent.

All of this is why many countries—including Spain, the Netherlands, Germany, Sweden, Norway, Portugal, Italy, Denmark, Japan, Austria, and France—have eliminated such transaction taxes.

“Bad ideas have a habit of coming around again. The U.S., like many other nations, experimented with an FTT and wisely got rid of it. Yet each generation seems to be tempted by the false promise of a painless revenue stream,” the report said. “It would be wise to pay attention to the wisdom of experience and again avoid this false temptation. After all, those who fail to learn from history are doomed to repeat it.”


WITH AN ECONOMY THIS STRONG, NO DEMOCRAT CAN DEFEAT TRUMP—BUT THE TRADE WAR WITH CHINA MIGHT | OPINION

By PETER ROFFNewsweek

President Donald Trump planned on seeking a second term based largely on the strength of the economy. Unemployment is down to a 50-year low. The Bureau of Labor Statistics reports the creation of nearly 6 million new jobs since he came into office. Wages and profits and revenues to the federal Treasury are up. The stock market is generally surging, and economic growth is once again the order of the day.

It’s an enviable economic record, especially when compared with his two most recent predecessors. Things are going so well, some of the president’s bitterest foes predict it’s strong enough to carry him across the 2020 finish line first.

The naysayers—those who’ve never liked Trump—point to a few statistics to suggest the fundamentals of the economy are softer than they appear. The inverted yield curve that appeared this week, now that the yield on 10-year U.S. government bonds is lower than that for two-year notes, has some people saying a recession sometime in the next two years is possible.

The U.S. economy is the world’s strongest right now but, says the president, would be even stronger had the Federal Reserve not raised interest rates too high too fast. Others say if things head south, it will be because of the ongoing trade war with China.

“I think we’re going to have a very long period of wealth and success,” Trump told reporters on Thursday. “Other countries are doing very poorly, as you know. China is doing very, very poorly. The tariffs have really bitten into China. They haven’t bitten into us at all.”

In response to the U.S. imposition of tariffs on its exports, Beijing weakened the yuan, effectively blunting their effect. Trump countered by delaying until December the next round of tariffs, mostly on consumer goods, scheduled to take effect on September 1 until mid-December.

That’s right in the middle of U.S. retailers’ most profitable period and could cause trouble at home. These and other moves have caused dramatic fluctuations in the stock market. The U.S. Trade Representative says everything’s just “next steps” in the process of getting China to do a deal.

Whether that’s true is a subject for debate. Capital Alpha Partners’ James Lucier counseled investors to view the delay of the tariff imposition as being as advertised and not as “backtracking in policy or a ‘blink’ by the U.S.” and “a case of the White House and President Trump, in particular, getting ahead of his own administrative machinery.”

If the economics are sound, the politics are shaky. A second Trump term depends on Midwestern farmers and industrial workers and others whom the tariffs potentially affect adversely in critical states like Florida, Michigan, and Ohio.

These are places where the economy is always issue No. 1, where the three things voters care about most are jobs, jobs and more jobs. And, as of now, the tariffs are not working to the president’s advantage. As much as the China-bashing rhetoric may excite his base, it’s not helping them make ends meet.

Florida’s exports to China total about $1.6 billion annually. That includes $533 million in gold because Miami is now the leading hub for refiners and processors who then sell to China for use in manufacturing. Civil aircraft parts, the state’s second-biggest export, brings in $126 million now and more in the future as China becomes, over the next 20 years, the world’s largest single market for civilian aircraft sales.

The Miami Customs District alone did $7 billion worth of business with China in 2017. In South Florida, manufacturers are suffering because of the steel and aluminum tariffs.

Michigan has a $3.6 billion export relationship with China, with $1.2 billion comprising car parts. The Wolverine State contains 75 percent of North America’s auto R&D, and China is, by volume, the world’s largest automaker. The Alliance of Automobile Manufacturers says higher-priced cars resulting from the tariffs could potentially lead to the loss of 700,000 American jobs.

It’s not just cars. Over half of all U.S. soybeans are exported, with 60 percent of them going to China and $700 million coming from Michigan. “The noose is getting tighter,” Jim Byrum, president of the Michigan Agri-Business Association, told the Detroit Free Press in May. “We have lost market opportunities. We’re not shipping soybeans around the world like we normally would. We’re not shipping them to China. China was our biggest soybean consumer, and they’re not moving.”

Ohio’s exports to China total $3.9 billion, with more than $691 million worth of soybeans—the state’s top agricultural export—shipped to China in 2017. “This will be tough to take. China takes one out of every three rows [of soybeans],” Bret Davis, a Delaware County farmer and governing board member of the American Soybean Association of China, told The Columbus Dispatch about proposed tariffs in 2018. An Ohio Manufacturing Extension Partnership survey of 457 Ohio manufacturers conducted in January found that 14 companies were hurt by tariffs for each it helped.

The Trump tariffs have already impacted negatively states that were key to him winning the presidency in 2016 and will be just as important in 2020. If the president wants to continue his record of economic success, he should focus on ending the trade war before Florida, Michigan and Ohio swing in the other direction.


FDR’s Folly: How Roosevelt and His New Deal Prolonged the Great Depression

By Burton W. Folsom, Jim PowellFoundation for Economic Education

The Great Depression of the 1930s was by far the greatest economic calamity in U.S. history. In 1931, the year before Franklin Roosevelt was elected president, unemployment in the United States had soared to an unprecedented 16.3 percent. In human terms that meant that over eight million Americans who wanted jobs could not find them. In 1939, after almost two full terms of Roosevelt and his New Deal, unemployment had not dropped, but had risen to 17.2 percent. Almost nine and one-half million Americans were unemployed.

On May 6, 1939, Henry Morgenthau, Roosevelt’s treasury secretary, confirmed the total failure of the New Deal to stop the Great Depression: “We are spending more than we have ever spent before and it does not work. . . . I say after eight years of this Administration we have just as much unemployment as when we started. . . . And an enormous debt to boot!” (For more information, see “What Caused the Great Depression?“)

In FDR’s Folly, Jim Powell ably and clearly explains why New Deal spending failed to lift the American economy out of its morass. In a nutshell, Powell argues that the spending was doomed from the start to fail. Tax rates were hiked, which scooped capital out of investment and dumped it into dozens of hastily conceived government programs. Those programs quickly became politicized and produced unintended consequences, which plunged the American economy deeper into depression.

More specifically, Powell observes, the National Recovery Administration, which was Roosevelt’s centerpiece, fixed prices, stifled competition, and sometimes made American exports uncompetitive. Also, his banking reforms made many banks more vulnerable to failure by forbidding them to expand and diversify their portfolios. Social Security taxes and minimum-wage laws often triggered unemployment; in fact, they pushed many cash-strapped businesses into bankruptcy or near bankruptcy. The Agricultural Adjustment Act, which paid farmers not to produce, raised food prices and kicked thousands of tenant farmers off the land and into unemployment lines in the cities. In some of those cities, the unemployed received almost no federal aid, but in other cities — those with influential Democratic bosses — tax dollars flowed in like water.

Powell notes that the process of capturing tax dollars from some groups and doling them out to others quickly politicized federal aid. He quotes one analyst who discovered that “WPA employment reached peaks in the fall of election years. In states like Florida and Kentucky — where the New Deal’s big fight was in the primary elections — the rise of WPA employment was hurried along in order to synchronize with the primaries.” The Democratic Party’s ability to win elections became strongly connected with Roosevelt’s talent for turning on the spigot of federal dollars at the right time (before elections) and in the right places (key states and congressional districts).

Powell’s book is well researched and well organized. His chapter titles are a delight. He synthesizes a mass of secondary sources (and some primary sources) in making a strong and persuasive case that the New Deal was a failure and that the Roosevelt presidency, at least in its first two terms — was a disaster. Powell covers all the major New Deal programs; he draws on the research of historians both “liberal” and conservative; and he is nuanced — this is no hatchet job — in that he concedes that some of Roosevelt’s policies, such as tariff revision, were more economically sound than, say, his industrial and agricultural policies.

FDR’s Folly takes its place on the shelf alongside Gary Dean Best’s Pride, Prejudice, and Politics and his more recent Retreat from Liberalism as liberating revisionist works that challenge the long-standing adulation of Roosevelt given by almost all historians. In the most recent Schlesinger Presidential Poll (1997), the historians and “experts” chosen by Arthur Schlesinger, Jr., collectively ranked Roosevelt as the greatest president in American history, even though every other American president had lower unemployment rates than Roosevelt did for his first eight years in the White House. As late as 1999, David Kennedy won the Pulitzer Prize for a book (Freedom from Fear) that largely praised the New Deal as a legislative program and Roosevelt as its author.

With the dawning of the 21st century, we may be witnessing the final departure of Roosevelt’s loyal academic propagandists and those targeted recipients of his federal largess. In such a climate, Jim Powell has given us, with FDR’s Folly, a refreshing, must-read account of the New Deal.


Senate Republicans Should Chuck Ham-Handed Price Control Proposal

By George LandrithRedState

A new proposal under discussion by the Senate Finance Committee is a perfect example of the folly of trying to centrally design the economy — in this case by a ham-handed attempt at price controls.

The proposal, from Sen. Ron Wyden (D-OR) and under consideration by Chairman Chuck Grassley (R-IA), would change the Medicare Part D prescription drug rebate to penalize drugs whose prices rise faster than the rate of inflation.

It’s ironic the proposal targets Part D, one of the few islands of economic sanity to be found in the health care sector, which, beset by rampant government intervention, suffers from a wide variety of perverse unintended consequences.

Part D is one of the few government health care programs to successfully foster price-based productivity increases. In most parts of the economy, over time, prices go down and quality goes up, due to increases in productivity. The underlying mechanism driving this is competition.

One sign of how successful Part D has been in wielding competition is that in its first decade of existence, it cost over 40% less than what the Congressional Budget Office estimated it would, a historical and underappreciated achievement.

Tacking on feel-good, one-off pricing rules like Wyden’s “faster than inflation” penalty could easily disrupt the market-based dynamics that enabled Part D to flourish in the first place.

It’s just silly to think that something as complex, distributed and organic as a worldwide market for pharmaceutical drugs could be controlled by something as ramshackle as a “faster than inflation” rule.

Consider the variety of pricing mechanisms that exist in well-functioning markets. In retail, there are coupons, package deals, membership plans and other discounts. In the stock market, there is the “continuous auction,” providing ongoing price discovery that can react to new information in a matter of seconds.

Amazon’s server rental business offers clients a tremendous range of pricing options, split by eighteen datacenter regions, dozens of server types, and several tiers of availability.

There is a whole world of financing, from store-offered, no interest payment plans to credit cards to mortgages. Stores employ all manor of psychological pricing tricks, such as charging 99 cents instead of $1. One of the more incredible such tricks, which would be hard to believe without the well-established research backing it up, is that prices that contain fewer syllables (when read out loud) are more attractive than those with more syllables. For instance, $28.16 (five syllables) is better than $27.82 (seven syllables).

The incredible diversity in pricing practices stems from the decentralized nature of the market. You could never ask a single committee, or even a large organization, to come up with this level of creativity and variety on its own. It’s only from the organic interaction between millions of businesses and billions of customers, each expertly seeking their own interests, that it can ever arise.

You might compare Wyden’s “faster than inflation” proposal to the fences in Jurassic Park — “life finds a way,” as Dr. Ian Malcolm tells us, foreshadowing the inability of the park to contain the beasts contained within. Except, at least the 40-foot electric fences were a good faith effort. Wyden’s proposal is more like if they attempted to keep the T-Rex at bay with only the thin walls of the bathroom hut the hate-able lawyer ran and hid inside, shortly before becoming a dinosaur’s dinner.

In other word’s this “faster than inflation” rule is a laughable, pitiful attempt at something that isn’t even achievable by the most expert, determined effort — something like, say, the Soviet Union, which tried, and failed, to put price controls into practice at super power scale.

But that’s not to say it can’t do harm. At the very least, it will increase the cost of participating in the market, both in terms of compliance costs, and in the changed incentives and their inevitable unintended consequences. For example, a company that requires more revenue to survive might raise the prices slightly on all its products, instead of steeply on just one. How this all plays out is impossible to predict. What can be said for certain is the market’s “logic” would now be less about providing the most value for customers at the lowest price, and now more about the political ramifications of pricing decisions.

More specifically, as it relates to the Part D drug market in particular, the rule could crowd out existing rebates negotiated by the plans buying the drugs. Many plans have already secured “price protection rebates” which kick in if prices increase more rapidly than some agreed-upon threshold. In other words, the market has already invented, in a much more sophisticated and dynamic way, the “faster than inflation” rule on its own.

The worst case scenario is more dire. Generally speaking, fostering well-functioning markets in the health care sphere is exceedingly difficult, given the immense government intervention at every level. Part D’s success in doing so is nearly unique. Additional rules that make supply and demand less important to how the market functions could result in it ceasing to function as a market entirely. It certainly would not be the first time the government accidentally killed a market.

Wyden’s proposal exemplifies the folly of centrally-designed price controls. It will harm one of the only well-functioning parts of the federal government’s health care policy. For those reasons, Chairman Grassley and Committee Republicans should cast it in the dustbin of bad socialist ideas.


Why Do Some Local Economies Thrive While Others Struggle? Liberals Won’t Like The Answer

Investor’s Business Daily

Americans continue to be on the move. According to North American Moving Services, California and New York were losing residents and had some of the highest rates of outbound moves (based on moving truck rental data) in 2018, while Texas and Florida were among the states with highest rates of inbound moves.

Broadly speaking, Texas and Florida tend to have public policies that support a free-market economy, whereas states like New York and California tend to do the opposite. The case can be made that residents seem to be voting with their feet in favor of economic freedom.

Economic Freedom Varies

While economic freedom varies across states within the U.S., it also varies within states, as my new study published by the Reason Foundation shows.

The “U.S. Metropolitan Area Economic Freedom Index” uses nine different measures of state and local government policies to produce an overall score for each of the nation’s 382 metropolitan statistical areas (MSAs). For purposes of rankings, the 52 largest with over a million residents were examined separately. Continue reading


Yes, the economy is thriving and you can thank President Trump

By Andy Puzder • The Morning Call

Anyone listening to President Donald Trump and to Democratic presidential hopefuls hears an almost Dickensian tale of two very different Americas.

The president takes “the best of times” view and spoke during his State of the Union address about “an unprecedented economic boom” in which “our economy is thriving like never before.”

Democratic presidential hopefuls take the “the worst of times” view and speak of an America that works only for the rich, while working-class paychecks fail even to keep up with the cost of living and people are struggling to get by.

Is either side right?

The American public appears to increasingly share Trump’s sunny view. A Gallup poll released on Monday, under the headline “Americans’ Confidence in Their Finances Keeps Growing,” found that more than two-thirds — 69 percent — of Americans expect to be better off in the coming year. That’s “only two percentage points below the all-time high of 71%” recorded 20 years ago. The poll was based on telephone interviews with 1,017 adults conducted between Jan. 2 and Jan. 10. Continue reading


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