Updated daily, InsiderOnline (insideronline.org) is a compilation of publication abstracts, how-to essays, events, news, and analysis from around the conservative movement. The current edition of The INSIDER quarterly magazine is also on the site.
July 20, 2012
Latest Studies: 47 new items, including an American Action Forum estimate of the economic costs of Taxmaggedon, a Center of the American Experiment report on voter ID in Minnesota, and a Kansas Policy Institute report of the costs of Kansas’s renewable energy standards
Notes on the Week: Dodd-Frank’s two years of havoc, Obama’s tax increase will cost 700,000 jobs, fewer and fewer have skin in the game, and more
To Do: Milton Friedman’s 100th Birthday
Budget & Taxation
• The Economic Effects of the Fiscal Cliff – American Action Forum
• If You Don’t Buy Insurance, Will You Really Pay the Tax? – American Enterprise Institute
• Shallow Loss: The 2012 Farm Bill’s New Subsidy Program – The Heritage Foundation
• Future Marketplace: Free and Fair – Hudson Institute
• $203 Billion and Counting: Total Debt for State and Local Retirement Benefits in Illinois – Illinois Policy Institute
• Everyone’s Talking Bankruptcy – Public Interest Institute
• The $250,000 Threshold: How Does It Work? – Tax Foundation
Crime, Justice & the Law
• American Family Law and Sharia-Compliant Marriages – Federalist Society
• The Drug-Policy Roulette – National Affairs
Economic and Political Thought
• Understanding the Difference Between Positive and Negative Rights – Alabama Policy Institute
Economic Growth
• Wishful Thinking Isn’t Economic Analysis – Hoover Institution
• The Road to Recovery – Manhattan Institute
• Constitutional Limited Government and the Path to Economic Recovery – Public Interest Institute
Education
• Choice and Federalism: Defining the Federal Role in Education – Hoover Institution
• The End of Teachers Unions – Hoover Institution
• Educational Market Share: Despite the Growth of School Choice, Public Schools Dominate – John Locke Foundation
Foreign Policy/International Affairs
• Key Asian Indicators: A Book of Charts – The Heritage Foundation
• U.S.–Vietnam Defense Relations: Investing in Strategic Alignment – The Heritage Foundation
• Why the Euro Baffles Americans – Hoover Institution
Government Reform
• Longstanding Court Precedent Clearly Supports Putting Voter ID on the Ballot – Center of the American Experiment
• Misleading Statistics Driving Voter ID Criticism in Pennsylvania – National Center for Public Policy Research
Health Care
• $20 Billion in Obamacare Regulatory Costs Remain – American Action Forum
• Primer: Skilled Home Health Care – American Action Forum
• The Supreme Court’s Medicaid Decision: The Obamacare Mess Just Got Messier – The Heritage Foundation
• Turning Medicare into True Social Insurance – The Heritage Foundation
• A Better Direction for Health Reform – Independent Women’s Forum
Information Technology
• FCC Over-Regulation of Video Services Undermines Free Speech – Free State Foundation
• Sledgehammering the False Narrative for Regulating Broadband Internet – Free State Foundation
Monetary Policy/Financial Regulation
• Mistaken Ideas about Money-Market Funds – American Enterprise Institute
• Why So Many Financial Crises? – American Enterprise Institute
• Federal Reserve’s Operation Twist Takes Wrong Turn – The Heritage Foundation
• Unhappy Anniversary: Dodd–Frank Hits the Terrible Twos – The Heritage Foundation
• 2012 Proxy Season: Season-End Report – Manhattan Institute
National Security
• Keeping America Safe: Why U.S. Bases in Europe Remain Vital – The Heritage Foundation
• Securing U.S. Computer Networks with SECURE IT – The Heritage Foundation
• Conceptual Challenges of Nuclear Deterrence – Hudson Institute
• Recommendations for Improving Airport Screening – Reason Foundation
Natural Resources, Energy, Environment, & Science
• The Economic Impact of the Kansas Renewable Portfolio Standard – Kansas Policy Institute
• Unleashing the North American Energy Colossus: Hydrocarbons Can Fuel Growth and Prosperity – Manhattan Institute
Regulation & Deregulation
• Liquor Privitizations: Just the Facts – Commonwealth Foundation for Public Policy Alternatives
• The Regulatory State – National Affairs
The Constitution/Civil Liberties
• The Supreme Court’s Decision on the Patient Protection and Affordable Care Act – Alabama Policy Institute
• How Unions Violate Free Speech – Hoover Institution
• Obama: Counterterrorist-in-Chief – Hoover Institution
• The Supreme Court’s Other Bogus Ruling – Hoover Institution
Transportation/Infrastructure
• Which Is Better for the Environment: Transit or Roads? – National Center for Policy Analysis
Transportation/Infrastructure
• Key Facts about Clark County Transit (C-TRAN) – Washington Policy Center
Miss Free Checking? The Dodd-Frank Wall Street reform law is two years old this week, and it’s nothing to celebrate, says Diane Katz:
Coming in at some 2,300 pages, Dodd–Frank presented a challenge to implement within the statutory deadlines: at least 400 separate rulemakings affecting virtually the entire financial sector. As of July 2, 63 percent of the deadlines have been missed, which has intensified the cloud of uncertainty enveloping the finance sector—and the economy—since passage of the act. Thousands of businesses do not know what the government demands they do differently or when they must do it. With financial firms constrained by undue caution, consumers will experience tight credit, higher fees, and fewer service innovations. Job creation will suffer.
The proposed and final rules issued in the past 12 months reveal the alarming extent to which the federal government is seizing control of financial services—from individual checking accounts to the $300 trillion “swaps” market. As a result, financial firms of all sizes are shelling out hundreds of millions of dollars for regulatory compliance officers and attorneys rather than making loans for new homes and businesses.
Just last month, Moody’s Investors Service cut the ratings of 15 of the world’s biggest banks, in part because of looming regulatory burdens. Community bankers, meanwhile, are restraining growth to remain below the asset threshold at which the more stringent Dodd–Frank rules kick in. And consumers are paying more for financial services: The number of large banks that offer free checking has declined from 96 percent in 2009 to 34.6 percent in 2011. [Internal citations omitted.] [The Heritage Foundation, July 17]
Doing Things Together—Obama’s Way: In a speech you may have heard about over the weekend, President Obama said: “[W]hen we succeed, we succeed because of our individual initiative, but also because we do things together.” He’s not exactly out on a limb there, but—as the President’s supporters insist—let’s put his speech in context: It was an argument for raising taxes on the top 2 percent of income earners. Obama’s idea is that we need more teamwork from the 2 percent who already shoulder over 40 percent of the income tax burden. (According to recent CBO data , the top 1 percent alone pay 38.7 percent of all income taxes.)
Politicians say inane things all the time, but in this case, it may just be that the President really believes that people don’t normally do things together unless the government is force marching them into it. As Aaron Ross Powell puts it: “At some fundamental level, Obama simply doesn’t understand that ‘we’ are not the state. For him, acting together simply is the same thing as legislating, regulating, and taxing.” [Cato-at-Liberty, July 16 ]
Over the weekend, before the President’s Roanoke speech became the buzz, Jack and Suzy Welch took to the Wall Street Journal to argue, contra Elizabeth Warren: “Of course corporations are people”:
[P]eople in corporations do indeed love and cry and dance. If you don’t know that, you’ve never been part of a team that has pulled together over coffee and late nights and shouting and laughing and created something amazing to hit a deadline. You’ve never been in the room when a longtime client says it’s not working anymore and she’s taking her business to your biggest competitor. You’ve never sat in the lunch room when someone runs in and says the new medical device that no one thought had a chance, the little heart valve or something like it that every engineer in the place has been working on for two years, has just passed its first human clinical trials with flying colors. [Wall Street Journal, July 15 ]
A pretty good reminder, as if one were needed, that corporations exist because people have decided to do something together. So if Obama wants more of that, he’ll tell Nancy Pelosi to stop attacking the Constitutional rights of people who come together to form corporations.
Occupy’s Chaos Is Intended: There was a method to the Occupy Movement’s madness, and it wasn’t too different from that of the Brown Shirts. That’s one of the things you learn from the new Citizens United’s new film, Occupy Unmasked. The Daily Caller has a few details:
While many of the students were “well intentioned,” there were more radical elements at work, [filmmaker Steve] Bannon said. “Occupy would always need a continual flow of college kids to give it mass. Useful idiots. That’s why Occupy had no demands. They didn’t want to. It’s all about creating structured chaos.”
Part of the way that Occupy created this “structure,” according to Bannon, was through Lisa Fithian and other organizer’s three-tiered model adopted from the 2008 Republican National Convention protest.
One group, “green,” consisted of regular liberal citizens, who came to protest. A second “yellow” group was individuals willing to break the law, like handcuffing themselves across a road. The last “red” group of the most violent anarchist organizers and professional agitators was there to create a scene that swept innocent “greens” into confrontations with the police. [Daily Caller, July 19]
The film’s makers plan to release it later this summer. For what it’s worth, the Occupy movement’s Wikipedia page contains a box noting that the movement’s protests have led to 7,250+ arrests, 320+ injuries, and 30 deaths. There is no analogous box on the Tea Party’s Wikipedia page.
Over the past five years, net worth per Canadian household has exceeded net worth per American household (total combined value of liquid and real estate assets minus debt) for the first time.
Currently, the average Canadian household is more than $40,000 richer than the average American household. (According to the latest Environics Analytics WealthScapes data, the average household net worth in Canada was $363,202 in 2011; in the U.S. it was $319,970.) And these are not 60-cent dollars, but Canadian dollars more or less at par with the U.S. greenback. Furthermore, these figures ignore public-sector (government) debt that presumably people on both sides of the border or their children will some day have to pay. Such debt is higher in the U.S. as a percentage of GDP than it is in Canada. [The Globe and Mail, June 30]
But don’t credit socialism for this result. Canada has ranked higher in economic freedom than the United States since 2009. [2010 Index of Economic Freedom, Chapter 7, The Heritage Foundation/Wall Street Journal; see also Country Rankings at 2012 Index of Economic Freedom]
A caveat: The wealth comparison doesn’t count U.S. 401(k) wealth. [Fox Business, July 18] Still, the trend has been clear. Between 1997 and 2007 Canada had the highest rate of economic growth of any of the G7 countries; that followed a program of austerity in which Canada reduced government spending as a share of the economy from 16.2 in 1994 to 13.1 percent n 1996. [See Brian Lee Crowley, Jason Clemens, and Niels Veldhuis, “The Canadian Beacon: What Washington Can Learn from Ottawa,” The Insider, Summer 2011.]
Killing Jobs: Obama’s proposed tax increase would hurt the economy, says a new study buy Ernst & Young:
Through lower after-tax rewards to work, the higher tax rates on wages reduce work effort and labor force participation. The higher tax rates on capital gains and dividend increase the cost of equity capital, which discourages savings and reduces investment. Capital investment falls, which reduces labor productivity and means lower output and living standards in the long-run.
Specifically, the study finds that long-run output would fall by 1.3 percent, or $200 billion, in today’s economy; long-run employment would fall by 0.5 percent or, roughly 710,000 fewer jobs, in today’s economy; and real after-tax wages would fall by 1.8 percent. The study explains:
The concern over higher individual tax rates has also been a focus because of the prominent role played by flow-through businesses—S corporations, partnerships, limited liability companies, and sole proprietorships—in the US economy and that a large fraction of flow-through income is subject to the top two individual income tax rates. These businesses employ 54% of the private sector work force and pay 44% of federal business income taxes. The number of workers employed by large flow-through businesses is also significant: more than 20 million workers are employed by flow-through businesses with more than 100 employees. [Robert Carroll and Gerald Prante, “Long-Run Macroeconomic Impact of Increasing Tax Rates on High-Income Taxpayers in 2013,” Ernst & Young, July 2012]
Curtis Dubay adds:
President Obama is fond of saying his tax increase wouldn’t impact 97 percent of small businesses. But those 97 percent of small businesses aren’t job creators. […] The businesses that would pay this tax increase are the businesses that hire millions of workers. [The Foundry, July 18]
ObamaCare’s Mandate-Tax Might Not Be Very Effective: It has no teeth, explain Joseph Antos and Michael Strain:
First, the tax (nee penalty) is too small to matter to the people who are its target. In 2014, the tax will be the larger of $95 or 1 percent of taxable income for an individual. By 2016 it rises to $695 or 2.5 percent of income. Young people would not want to pay a dollar if they could avoid it, but avoiding the tax means signing up for insurance that many do not think they need. That insurance is not free. Even with subsidies, they will pay at least 3 percent of their incomes for premiums and up to 6 percent of the cost of the insurance in deductibles and copayments. That adds up to a lot more than 95 bucks.
Second, the law counts on most of the scofflaws turning themselves in. If you do not have insurance and think you owe the tax, then you will be asked to check a box to that effect on your tax return. If you choose to ignore the mandate, you might also choose not to check the box. But even those who do confess that they do not have insurance may not be liable for the new tax. Illegal aliens, Native Americans, prisoners, those who are without insurance for less than 3 months, those who do not have to file an income tax return, anyone who faces a hardship or cannot find affordable coverage, and others are all exempt. [The American, July 17]
Nothing written here is to be construed as an attempt to encourage taxpayers to deceive the Internal Revenue Service.
Big Government Looks Out for the Big and Powerful: That’s the way politics works, explains Matt Zwolinski:
Tipping Points: We’ve noted previously that the rising percentage of non-taxpayers creates a serious problem for a democracy: If a large group of people bear none of the cost of the political choices they make, they will make choices that are very costly to the rest of society. Indeed, Will Freeland and Scott Hodge have a new report out this week finding that the percentage of tax filers with zero income tax liability reached a new high of 41 percent in 2010, the latest year for which IRS data are available. [Tax Foundation, July 20]
But when you take into account the combined effects of both taxing and spending policies, maybe we have already blown past the tipping point. As Greg Mankiw notes, spending and taxing are two sides of the same coin, and recent data now show that “the middle class, having long been a net contributor to the funding of government, is now a net recipient of government largess.”
Here’s what Mankiw found, using data from supplemental table 7 of the recent CBO report, “The Distribution of Household Income and Federal Taxes, 2008 and 2009”:
Bottom quintile: -301 percent
Second quintile: -42 percent
Middle quintile: -5 percent
Fourth quintile: 10 percent
Highest quintile: 22 percent
Top one percent: 28 percent
For every dollar it earns, the typical family in the bottom quintile receives $3 in transfer payments minus taxes. The data go back to 1979, and Mankiw notes that, for the middle quintile, this measure of redistribution had been positive (the quintile was a contributor to government funding) for every year up until 2007. [Greg Mankiw’s Blog, July 14]
The Cost of Getting a Degree in California Has Gone Way Up: Here’s a look at what’s wrong, from the American Council of Trustees and Alumni:
• Celebrate the birthday of one the greatest champions of individual liberty we’ve ever had: Milton Friedman’s 100th birthday is July 31, 2012. Numerous organizations will hold events throughout the week, including these: Beacon Center of Tennessee, Cascade Policy Institute (Oregon), The Friedman Foundation for Educational Choice, Grassroot Institute of Hawaii, Idaho Freedom Foundation, Pacific Research Institute, Show-Me Institute (Missouri). You can find many more Milton Friedman events listed at the Free to Choose Network.
• Get ready for Americans for Prosperity’s Defending the American Dream Summit. It will be August 2 – 4 in Washington, D.C. Among the speakers will be Gov. Scott Walker (Wis.), Rep. Paul Ryan (Wis.), and American Enterprise Institute President Arthur Brooks.
• Hear John Goodman explain why the solution to America’s health care crisis is to stop suppressing markets in health care. Goodman will be speak at 12:30 p.m. on July 24 at The Heritage Foundation about his new book Priceless: Curing the Healthcare Crisis.
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