America’s high national living standards lead us to consider things like abundant access to clean water, comprehensive cellular service, and a reliable electric grid commonplace. Much of the rest of the world regards them as luxuries unavailable to many people.
Consequently, we tend to think about these things only when they don’t work. Cloudy water creates a crisis. A cell phone outage leaves us stranded. Failures in the power market leave us, literally and figuratively, in the dark about what to do.
The critics of how the market allocates the distribution of electric power allege competition would lead to more brown- and blackouts. Despite abundant evidence they are wrong, they don’t trust the competitive market system to keep the lights on. Even now they’re waging a campaign to upend the market structure in places like my home state of Virginia, where competition has overall helped maintain reliable and affordable electricity.
Electricity generators in the United States operate under different structures, dictated by state and the federal governments. Historically, utilities have been integrated vertically, creating geographic monopolies on the production and sale of electric power. Unified ownership of the different parts of the supply chain – generation, transmission, and distribution of power – by a single producer/distributor creates exclusive service territories with captive customers.
Economics teaches that monopolies are bad, even at the state level. Dependence on a single source for anything leaves customers without the freedom to decide what’s best. Competition is the consumer’s friend. Just look at the explosion in services offered by the telephone companies thanks to the competition created by the breakup of Ma Bell.
The explosion in content creation driven by the internet is analogous to what might happen to power generation if competitive pressures were introduced to the generation of electricity in states currently lacking choice. There are nuances of course but, in general, the restructuring of power markets would end the distribution monopolies. Existing utilities would maintain control on distribution networks, but in most cases will be separated from the generation of power.
Currently, there are seven Regional Transmission Organizations (or RTOs) and Independent System Operators (or ISOs) in the United States that run competitive wholesale power markets. They facilitate open access to power transmission and operate the transmission system independently of, and foster competition for, electricity generation among wholesale market participants.
In short, they replace the cost-based regulatory model with a market-based competitive model, functioning as “power pools” from which multiple independent utilities can draw and share reserves to make power cheaper for you and me. Over time, they have evolved to optimize generator output over wide geographic regions – again, generally reducing consumer costs.
According to U.S Energy Information Administration data, between 1997 and 2017, increases in retail electricity prices in states with competitive electric markets and monopoly states were about the same, while customers in monopoly states saw a slightly higher percentage increase in rates. A Retail Energy Supply Association found that customers in states that still have monopoly utilities saw their average energy prices increase nearly 19 percent from 2008 to 2017, while prices fell 7 percent in competitive markets over the same period.
In competitive markets, electricity is purchased at market-determined wholesale prices. Customers, you and me, can choose a provider rather than be required to purchase our electricity from our local utility. The monopoly system, equally or more expensive from a price perspective, is often tainted by political corruption and scandal. In the last year or so, scandals involving utilities seeking to influence legislation or secure taxpayer bailouts led to the toppling of the top lawmaker in both the Ohio and Illinois House of Representatives.
“Pick a year, and you will find some scandal among monopoly utilities. The corruption shows no sign of slowing down. Instead, the breadth, depth, and cost of such scandals only seem to multiply,” the Conservative Energy Network notes.
It’s time to pull the plug on the old system. Competition in the electricity market produces cost savings for customers, improves service and reliability, and encourages innovations leading to environmental benefits. The drive to gain new customers that comes once a restructured, competitive wholesale market for electricity is introduced – and which several states are in the process of creating – empowers customers, reduces costs, and keeps the lights on.
For a variety of reasons, the U.S.-China rapport established by Richard Nixon has cooled considerably over the past few years. Some experts believe a return to what seemed to be a mutually beneficial status quo is possible once the Trump-era trade war comes to an end.
That’s a fantasy. The relationship between the two superpowers has been on the decline for some time, largely due to unfair trade practices on the part of the Chinese. They do not play fair and no amount of waiting on the part of the U.S. will cause them to change their stripes.
China makes billions by forcing U.S. companies to turn over valuable intellectual property in exchange for entry to its markets. Refusal to cooperate cuts off access to more than a billion potential customers. If America’s leaders aren’t demanding a change, a demand backed up with action, then what incentive is there for Beijing to change its policy?
Most American businesses have been advised by policymakers to wait. They’re stuck, hoping for relief — from international trade organizations to which the Chinese belong (thanks to the U.S. insisting they be admitted) or from U.S. politicians. Nothing will happen unless the pressure on Beijing is maintained.
When President Donald Trump talked about bad trade deals, he usually didn’t mention the World Trade Organization, the U.S. International Trade Commission, and the other multi-national and U.S. governmental bodies that are supposed to referee disputes. Maybe he should have, so that what these organizations accomplish – or more importantly fail to accomplish – will get the scrutiny needed.
Changes must occur. The ITC, for example, continues to show itself to be toothless. It’s failed to be tough on the non-practicing business entities known as “patent trolls” that exist almost solely to make the potentially lucrative charge that deep-pocketed entities have infringed on intellectual property rights so how can we expect tough action from them against China.
Patent trolls are a serious problem and a danger to economic growth and to consumers. They hinder innovation and can force higher prices on consumer technology and other goods now considered critical to life in the 21st century. Yet the ITC refuses to crack down on them, leaving China well-positioned to benefit from the mess they cause.
The commission is currently considering claims lodged by the Irish patent troll Neodron that its patents were infringed upon by major global tech companies including Apple, Microsoft, and Dell. It wants the ITC to grant an exclusion order baring these companies from selling all their major touchscreen mobile devices in the U.S. market.
What’s happening has been likened by some to extortion, with the productive companies being pressured to pay the complaining troll off rather than leave things to the ITC to decide.
Imagine if the ITC decides the issue in Neodron’s favor. The cost of smartphones, tablets, computers, and other devices covered by its order would immediately skyrocket to provide the rents Neodron is demanding. According to some estimates, nearly 90% of smartphones and tablets currently available in the U.S. market would disappear, be replaced by devices from China. The range consumers have when choosing a device would be narrowed while the prices for what they could buy would rise.
China already has a clear lead in developing and deploying 5G wireless devices. Given the critical technology race between the U.S. and China over who will dominate in 5G, how can a U.S. agency even consider a litigation outcome that forces U.S. consumers to buy their 5G devices (as well as their other touchscreen devices) only from China?
Tensions between the world’s two largest economies are already heightened, in part because the U.S. accused China of sponsoring criminal hackers trying to gain access to private data from biotech firms around the world working on coronavirus vaccines and treatments. The FBI said the Chinese government was acting like “an organized criminal syndicate.”
Neodron’s complaint to the ITC places the proverbial thumb on the scale for the Chinese and the technology they manufacture. If they win it would devastate the U.S. tech sector while helping Chinese tech companies gain a greater share of the global market, probably permanently. Like all patent trolls, Neodron’s claim cannot justify this kind of disproportionate and devastating result.
The ITC doesn’t have to go along with this. They can institute policy revisions that will thwart the efforts of Neodron and other patent trolls like them to use the ITC for monetary gain. Those changes should be made now before any more damage is done. There are bigger fish to fry.
In Washington, bad ideas are like bad pennies: They keep turning up.
In early 2019 a group of well-connected Washington insiders was suggesting with the utmost sincerity that it would be best to have the Pentagon in charge of the push to 5G, the next-level communications network. The primary reason for this, they said, was national security and the threat posed by China.
President Donald J. Trump, a man who is in no way soft on China, wisely rejected their advice. In a Rose Garden press conference with Federal Communications Chairman Ajit Pai, he rejected the government-led approach, calling it “not as good, and not as fast.” Instead, he committed to a 5G buildout that would be “private sector driven, and private sector led,” ending talk of a nationalized network.
Or so we thought. The Wall Street Journal recently reported that the idea of a 5G network run out the Pentagon is once again on the table. A new proposal for a government-managed system under the supervision of a single company is once again under discussion. And, as before, the firm the DoD has in mind has little to no experience managing large information clusters.
The reason the idea’s come back has more to do with the swamp-dwellers who profit off big government contracts than with the science involved, the efficiency needed to bring 5G to life quickly, or the ability of firms in the private sector to make it all happen. It’s crony capitalism at its worst.
The best way to get to 5G is to allow the best minds and best engineers in the best firms to develop competing technologies – with the winner to be chosen in the marketplace. The plan being pushed yet again by the DoD gives one company – in this case, most likely Rivada Networks – control of the spectrum and its allocation as well as access to the protected intellectual property of those who’d be doing the job if the Pentagon had not taken the project over. At least that’s the opinion of 19 U.S. Senators who wrote the department complaining the way it wanted to move forward “contradicts the successful free-market strategy that has embraced 5G.”
Somehow what President Donald J. Trump likes to call “the race to 5G” is again in danger of being taken over by the officials in charge of it. Instead of fair competition, a vital future national and economic security project is being influenced unfairly by what leading congressional Democrats including House Energy and Commerce Committee Chairman Frank Pallone, D-N.J., say is a plan “specifically crafted to enrich President Trump’s cronies.”
Partisan hyperbole aside, it’s easy to see Pallone’s point. Building a national 5G network requires more than influential political connections. Rivada Networks, the company lobbying hardest to win the bid, is not exactly known for its ability to build out and manage broadband networks. Its proposal to manage FirstNet, a nationwide public safety broadband system, was shot down due to concerns at the Interior Department over concerns about the insecurity of its technology.
One might think this would give the Pentagon pause, yet Rivada’s advocates within the department say they are confident the company can get the job done and have an operating network functioning within three years. Of course these are some of the same people who have already spent more than a decade and hundreds of billions or more on the development of the new multi-service Joint Strike Fight and still haven’t gotten it right.
Chairman Pai, a national hero for his work preventing the Internet from coming under the thumb of the U.S. government as a regulated utility, has dismissed the effort to get to a nationalized 5G run by the Pentagon as being a costly and counterproductive distraction from what America ought to be doing. The federal government moves slowly by design. Processes that work quickly in an authoritarian country like China don’t work in America. Here, roadblocks and rulemaking are the order of the day. Washington can’t compete with the U.S. private sector. In Beijing, the private and public sectors are indistinguishable.
Thanks to President Trump, Chairman Pai, and others who understand the stakes, America is a lot farther down the road to a working 5G network than people might believe. Thanks to a competitive market where the nation’s three largest carriers have all prioritized building the nation’s biggest, fastest 5G network, we’ll get there faster and in better shape than if we let the government do it.
In late spring, oil prices dipped below zero for the first time ever. Futures contracts for May delivery traded as low as negative $37 a barrel, as producers and speculators paid refineries and storage facilities to take excess crude off their hands.
In some sense, this historic moment was inevitable. Oil markets are completely saturated. Worldwide coronavirus lockdowns have depressed energy demand. And in March, Saudi Arabia and Russia announced they would increase production, thus exacerbating the glut.
President Trump has tried to help beleaguered U.S. producers. He recently mediated a deal between Saudi Arabia, Russia, and other major oil producers, who collectively agreed to cut production by nearly 10 million barrels a day.
But prices are still falling. And now, the White House is toying with other ways to prop up U.S. oil producers, ranging from tariffs on imported oil to direct cash payments to energy companies.
This desire to help energy companies, and the millions of workers they employ, is commendable — but ultimately counterproductive. In the long run, the industry will emerge stronger if the White House allows the free market to resolve this crisis.
This pandemic-induced economic crisis is going to be painful for the energy sector. Cost-cutting and layoffs are already underway.
But the industry is strong and adaptive, and has bounced back from past crises by investing in technology. In fact, economic pressure encourages the kind of innovation and belt-tightening that helps companies thrive in the long run.
The United States last faced low oil prices in 2014 and 2015, when Saudi Arabia ramped up output to try to cripple U.S. producers that specialized in fracking — a technique used to extract oil from underground shale rock. By early 2016, prices had dropped below $30 a barrel, well below what U.S. shale producers needed to break even.
The government didn’t come to the rescue, which forced frackers to get creative. They researched how to extract more oil for less, and came up with a variety of new techniques, like drilling several wells simultaneously and using drones to detect faulty equipment. As a result, the average break-even price for frackers dropped from $69 a barrel in 2014 to an average of $40 a barrel by 2017. Had the government tried to solve the problem by slapping tariffs on Saudi crude, the U.S. oil industry likely would have never set its all-time production record of 13.1 million barrels a day in February.
We can be confident the U.S. energy industry will apply its ingenuity to this crisis, too — because these days, it excels at invention. In 2019, the oil and gas sector increased adoption of digital technologies, including cloud data storage and new software. Over the next five years, digitizing could slash the cost of oil production by almost 10 percent.
By using sensor technology — tiny, data-tracking devices attached to oil-field gear — producer ConocoPhillips recently cut in half the amount of time it took to drill new wells in South Texas. Other companies are using data analytics to search for the best drilling locations.
In short, the pressures of a downturn are likely to encourage even more future-focused transformation. The industry doesn’t need to hide behind tariffs. If we trust the free market to encourage creativity, in the long run, we’ll all benefit from a cheaper and more efficient energy supply.
Unexpected expenses are never welcome and no one likes a costly surprise. So it’s no wonder that there is a lot of talk in Washington and Congress about “protecting” patients from surprise medical bills. Current legislation — SB 1895 — sponsored by Senators Lamar Alexander (R-Tenn) and Patty Murray (D-Wash.) makes such claims. It sounds good until you realize that all the “protecting” talk is just that — talk. Even worse, is that rather than protecting consumers, it will make things worse.
The most common cause of a surprise medical bill is when a person uses a healthcare provider that is not in their insurance plan’s network of providers. While it doesn’t happen that often, it most typically happens in a hospital emergency room — either because the patient is not able to consent to care or because the patient received inaccurate information about insurance coverage.
Insurance companies have contracts with healthcare providers (both doctors and hospitals) to provide medical services at pre-negotiated discounted rates. That makes them “in-network.” The “out-of-network” providers charge a price without any pre-negotiated discounted rates, meaning the out of network costs are greater.
While it is true that most doctors are in most insurance networks and hospitals often have ways to shield their patients from higher costs, there are occasional gaps that remain. And while it is uncommon, it can be costly when it occurs. But despite their rarity, these circumstances are used by politicians to make us think they are proactively solving problems for our benefit. Sadly, they are doing nothing of the sort.
There are a number of proposals currently under consideration in the halls of Congress to fix surprise billing, but they have a couple important things in common. In one-way or another, all of these pieces of legislation entrust the government with the power to set prices. This will impose heavy costs even if executed properly, an idea that is almost laughable given the government’s track record on reducing costs.
This reminds me of the Obama-Biden repeated promise that they had a plan that would save us all thousands of dollars every year and allow us to keep our healthcare plan if that’s what we wanted. Obviously, Obama and Biden failed to deliver on that promise. It was the lie of the year even as judged by liberal fact checkers. Literally, millions of Americans lost their preferred plans and virtually everyone saw their health insurance costs increase, not decrease, by thousands.
So a healthy dose of skepticism about promises to fix surprise billing with government price controls is entirely justified. It should not be enough for politicians to repeat over and over the mantra that they’ve got the fix. We’ve seen this play before. It doesn’t end well.
Government-imposed price controls skew incentives and reduce the availability of quality healthcare. To make things worse, government-imposed price controls also reduce the likelihood of future healthcare innovations and slow the development of promising medicines and procedures. But the bad news doesn’t end there — current proposals shift more and more power to health insurance companies, rather than giving consumers more control over their own healthcare.
Regardless of what their true motives were or are, the results we have witnessed in the last 50 years from politicians promising “fixes” has been that things end up costing a lot more than promised, and government gets more and more control. Those who can afford lobbying efforts may escape the costly impact of these government mandates. But rarely do these promised fixes on balance help the average citizen.
The marketplace — and the negotiations that take place when you have two or more parties all trying to maximize the value that they receive — has a knack for providing high quality goods and services for the lowest possible prices. That is the process that has brought us smart phones that have more computing power than was used in the 1960s in the Apollo program. It’s also the process that allows consumers to own huge flat screen televisions at a cost of several hundred dollars. We need to harness that power and that drive to high quality and low prices in the medical arena.
Instead of continuing to empower government and those who can afford lobbyists to protect their interests, let’s try reforms that put economic power back in the hands of healthcare consumers. Let’s trust the marketplace to do what it does so well — boost quality and keep prices comparatively low. We trust the marketplace to provide us with food, housing, technology, and a thousand other things, why not our healthcare as well?
Today, the average American eats better and spends a lot less to feed themselves than our great grandparents did. As a result, we have access to all manner of foods — something even kings didn’t have a few generations ago. Additionally, we work far fewer hours to obtain that food. As a result, we have more money for larger, more comfortable homes, nice automobiles, vacations, and hospitals — something average Americans in 1776 didn’t even dream about.
So if we want to see more affordable and better quality healthcare available to us all — why not harness the power of the marketplace? Where’s the proof that government-run schemes produce the needed quality and low costs? In contrast, the marketplace has a strong track record. Let’s try it!
By Havasu News•
The coronavirus crisis has likely changed American business forever, as politicians use the deadly pandemic to push for changes that will have a major impact on how corporations operate.
How business respond will determine the future of American commerce for years. Important business leaders like Black Rock’s Larry Fink are pushing companies to expand their mission beyond maximizing value for shareholders into things that are on progressives’ political wish list.
What Fink and others are advocating for drifts harmfully towards what progressives promote as they seek to control the business sector and move to a centrally planned economy.
If the American economy is to survive, let alone thrive, we need corporate leaders to step up in defense of the free market. They need to eschew the insider deals and crony capitalism that have caused many Americans, especially the young, to lose faith in what, as Churchill might have quipped, is the worst of all possible economic systems except for all the others.
There are heroes out there like Tesla’s Elon Musk, who recently stood up to Gov. Gavin Newsome and other officials who would not permit his California manufacturing plant to reopen and get people back to work. To Musk’s credit, even though his empire is built on questionable tax breaks, credits, and subsidies, he pushed back where other business leaders have sheepishly complied. He announced he’d be taking his company and the jobs he created to Texas or Nevada, where they would be welcomed. Faced with that, Newsome and company seem to have backed down.
For every hero, there are goats like Alan Armstrong, the CEO of Williams Co., an energy pipeline company. According to recent allegations made in a Delaware court, he secretly worked to undermine a 2016 board-approved merger between his firm and Energy Transfer, a Texas-based pipeline company, that would have paid shareholders a significant premium over the then-market value of their shares.
Nearly four years since it fell through, Williams continues to seek more than a billion dollars in breakup fees, despite Armstrong’s recently alleged involvement in the deal’s demise. According to court documents, he even worked behind the scenes with a former Williams senior vice president by using a personal account and leaking inside information to assist a lawsuit filed to block the proposed and ultimately unconsummated merger. As a result, half of his board of directors resigned days after the deal was called off, citing a lack of confidence in his ability to lead the company.
The reason he acted as he did, the court was told, was out of a desire to maintain his position as CEO even if his continued leadership of the company was detrimental to shareholder interests.
Actions like these in the corporate community have regular Americans – more and more of whom join the investor class every day through their 401Ks, Roth IRAs, and by trading stocks online – wondering if their money is safe, or if they’re just feeding corporate cats growing fat off their investments.
Warren Buffet, one of the country’s most respected financial leaders, argued in a recent interview that not enough attention is paid to corporate leadership and governance. “Almost all of the directors I have met over the years have been decent, likable and intelligent,” he said. “Nevertheless, many of these good souls are people whom I would never have chosen to handle money or business matters. It simply was not their game.”
If the CEOs and boards of America’s companies don’t step up to restore public confidence in who they are and what they do, then the politicians will – as House Speaker Nancy Pelosi tried to do in the first coronavirus relief bill. Other than the privileged few that would have been picked to serve on boards if her proposed amendment requiring diversity on corporate boards had been adopted, it would have been bad for business and everyone else.
The clock is running.
By Ben Southwood • National Review
Health care in the United States is famous for three things: It’s expensive, it’s not universal, and it has poor outcomes. The U.S. spends around $7,000 per person on health care every year, or roughly 18 percent of GDP; the next highest spender is Switzerland, which spends about $4,500. Before Obamacare, approximately 15 percent of the U.S. population were persistently uninsured (8.6 percent still are). And as this chart neatly shows, their overall outcome on the most important variable — overall life expectancy — is fairly poor.
But some of this criticism is wrongheaded and simplistic: when you slice the data up more reasonably, U.S. outcomes look impressive, but being the world’s outlier is much more expensive than following behind. What’s more, most of the solutions people offer just don’t get to the heart of the issue: If you give people freedom they’ll spend a lot on health care. Continue reading
The government should incentivize healthy choices rather than prohibit unhealthy ones.
by Peter Roff • US News
That lesson seems to be lost on New York City Mayor Michael Bloomberg, who is spending an inordinate amount of time trying to protect people from things that are supposedly not good for them. First it was cigarettes. Then it was trans-fat. Now it’s large sodas. Where will it end?
Actually, that’s an important question. We live in a country where Congress and the president can collude to produce a law forcing everyone to purchase health insurance or pay fines and penalties. Does that mean, as more than one person has asked, they can likewise enact laws intended to force people to eat broccoli? Continue reading
While the 2000s may have been a lost decade for the American dream, a revival of our model’s advantages is still a real, worth-desiring possibility.
Because it was tax day recently, because he mentions me and because I’m easily provoked, below the quote you’ll find three rejoinders to Jonathan Cohn’s admirably forthright argument that American society would be much better off if most of us were writing larger considerably larger checks to Uncle Sam:
Maybe you don’t like tax day … [because] it reminds you of how high taxes are—and you think that, because of those high taxes, the economy grows more slowly. That would mean fewer jobs and less pay for you—and the country as a whole. It’s not a crazy argument … But the evidence for this point of view turns out to be thinner than you’ve probably heard. Relative to other countries, tax rates in the U.S. are relatively low, even when you throw in local and state taxes and add them to federal levies. Overall, according to the Tax Policy Center and Center on Budget and Policy Priorities … taxes in the U.S. are among the lowest in the developed world. The average for countries in the Organization for Economic Cooperation and Development, an organization of rich countries, is higher. And in countries like Sweden, Norway, and the Netherlands countries, the average is much higher. In those nations, taxes account for more than half of total national income. Continue reading
President Obama has repeated claimed that the Republicans have only voted to repeal ObamaCare, but have no ideas or proposals of their own. This was, and is, entirely false – just like when Obama said, “If you like your health plan, you can keep your health plan.” You may ask why does he so consistently say demonstrably false things? Because the media won’t hold him accountable. He does it because he can. Here’s just one of the many Republican plans for healthcare reform.
by Philip Klein
Louisiana Gov. Bobby Jindal came to Washington on Wednesday with a message to those arguing that conservatives would have to operate within the policy framework created by President Obama’s health care law: “I absolutely do not think we can give up the fight to repeal Obamacare.”
The potential 2016 Republican presidential candidate was in town to promote a new health care plan developed by his America Next policy group that would not only repeal Obamacare in its entirety, but also make sweeping changes to the system that existed prior to the law’s implementation.
Under Jindal’s proposal, Obamacare would be replaced with a system that equalizes the tax treatment of health insurance. Instead of merely giving tax advantages to those who obtain insurance through their employers, the Jindal plan would create a standard deduction for health insurance for all taxpayers. Continue reading
If you offer people something that is too good to be true, you will always find takers. Ask Bernie Madoff. Or ask Barack Obama. He recently proposed an increase in the minimum wage — an idea that suits the natural predilections of many people enough to distract them from the unsentimental and unwelcome logic of economics.
One poll found that 63 percent of Americans favor raising the federal floor from the current $7.25 to $10.10, as the president recommends doing over two years. The reasons are obvious. Wages have stagnated, low-income Americans are getting a smaller share of national income and many working people are stuck in poverty despite their best efforts. A higher minimum wage is the obvious solution.
Obvious, but wrong. The proposal rests on the assumption that the government can decree the price of a commodity — in this case, labor — in defiance of the dictates of the market, without ill effects. But that view requires a heroic suspension of disbelief. Continue reading
There are now 175,000 pages’ worth of federal laws. Local governments add more.
I’m not so cynical that I think politicians pass laws just to control us. Someone always thinks: “This law is needed. This will protect people.”
But the cumulative effect of so many rules is to strangle life.
Yet lawyers like George Washington Law professor John Banzhaf want more rules. Continue reading
Margaret Thatcher was a friend to the United States and the principles of liberty. She rescued the U.K. from economic malaise with economic policies that empowered the individual and harnessed the power of the marketplace. She joined with Ronald Reagan to win the Cold War using the “peace through strength” doctrine. She empowered her people, strengthened her nation, and made the world a safer, better place. She will be missed.