Monday, November 30, 2015

‘I was tossed out of the tribe’: climate scientist Judith Curry interviewed

For engaging with sceptics, and discussing uncertainties in projections frankly, this Georgia professor is branded a heretic

By David Rose in The Spectator. Excerpts:
"Her record of peer-reviewed publication in the best climate-science journals is second to none, and in America she has become a public intellectual. But on this side of the Atlantic, apparently, she is too ‘challenging’. What is troubling about her pariah status is that her trenchant critique of the supposed consensus on global warming is not derived from warped ideology, let alone funding by fossil-fuel firms, but from solid data and analysis.

Some consider her a heretic. According to Professor Michael Mann of Pennsylvania State University, a vociferous advocate of extreme measures to prevent a climatic Armageddon, she is ‘anti-science’."

"Warming alarmists are fond of proclaiming how 97 per cent of scientists agree that the world is getting hotter, and human beings are to blame. They like to reduce the uncertainties of climate science and climate projections to Manichean simplicity. They have managed to eliminate doubt from what should be a nuanced debate about what to do.

Professor Curry, based at the Georgia Institute of Technology in Atlanta, does not dispute for a moment that human-generated carbon dioxide warms the planet. But, she says, the evidence suggests this may be happening more slowly than the alarmists fear."

"This debate will be conducted on the basis that there is a known, mechanistic relationship between the concentration of carbon dioxide in the atmosphere and how world average temperatures will rise.

Unfortunately, as Curry has shown, there isn’t. Any such projection is meaningless, unless it accounts for natural variability and gives a value for ‘climate sensitivity’ —i.e., how much hotter the world will get if the level of CO2 doubles. Until 2007, the UN Intergovernmental Panel on Climate Change (IPCC) gave a ‘best estimate’ of 3°C. But in its latest, 2013 report, the IPCC abandoned this, because the uncertainties are so great. Its ‘likely’ range is now vast — 1.5°C to 4.5°C."

"According to Curry, the claims being made by policymakers suggest they are still making new policy from the old, now discarded assumptions. Recent research suggests the climate sensitivity is significantly less than 3˚C. ‘There’s growing evidence that climate sensitivity is at the lower end of the spectrum, yet this has been totally ignored in the policy debate,’ Curry told me. ‘Even if the sensitivity is 2.5˚C, not 3˚C, that makes a substantial difference as to how fast we might get to a world that’s 2˚C warmer. A sensitivity of 2.5˚C makes it much less likely we will see 2˚C warming during the 21st century."

"the sensitivity value may still lower, in which case the date when the world would be 2˚C warmer would be even further into the future. On the other hand, the inherent uncertainties of climate projection mean that values of 4˚C cannot be ruled out — but if that turns out to be the case, then the measures discussed at Paris and all the previous 20 UN climate conferences would be futile. In any event, ‘the economists and policymakers seem unaware of the large uncertainties in climate sensitivity’, despite its enormous implications.

Meanwhile, the obsessive focus on CO2 as the driver of climate change means other research on natural climate variability is being neglected. For example, solar experts believe we could be heading towards a ‘grand solar minimum’ — a reduction in solar output (and, ergo, a period of global cooling) similar to that which once saw ice fairs on the Thames. ‘The work to establish the solar-climate connection is lagging.’"

" ‘I think that by 2030, temperatures will not have increased all that much. Maybe then there will be the funding to do the kind of research on natural variability that we need, to get the climate community motivated to look at things like the solar-climate connection.’"

Everything You Need to Know about Deductions, Loopholes, and Special-Interest Tax Provisions

By Daniel J. Mitchell of Cato. Excerpts:
"Why does the tax code require more than 10,000,000 words and more than 75,000 pages?
There are several reasons and none of them are good. But if you had to pick one cause for all the mess, it would be the fact that politicians have worked with interest groups and lobbyists to create myriad deductions, credits, exclusions, preferences, exemptions, and other loopholes.

This is a great deal for the lobbyists, who get big fees. It’s a great scam for politicians, who get lots of contributions. And it’s a great outcome for interest groups, who benefit from back-door industrial policy that distorts the economy.

But it’s not great for the American people or the American economy.

Writing for Reason, Veronique de Rugy of the Mercatus Center explains that the net result is a Byzantine tax code that imposes very harsh compliance costs on the productive sector.
According to a 2012 study from the Internal Revenue Service (IRS) and the Treasury Department, …corporations alone spent $104 billion complying with the tax code in 2012. …The cost to individuals may be even higher. According to a 2013 study by Jason Fichtner and Jacob Feldman of the Mercatus Center, Americans face nearly $1 trillion annually in hidden tax-compliance costs. …Why does tax compliance cost so much? The answer is largely that the Internal Revenue Code…is riddled with exclusions, exemptions, deductions, preferential rates, and credits.
And she also points to a solution.
Genuine reform would cut out loopholes that tilt the playing field in favor of those with political connections. It would also aim to provide lower tax rates, fewer tax brackets, and less double taxation of income that is saved and invested. Such measures would be good for growth, but they would also mean taking on the interest groups that benefit from swapping tax preferences for campaign cash.
Since I want to rip up the tax code and replace it with a simple and fair flat tax, this is music to my ears."

"As a practical matter, we can now identify provisions in the tax code that are clearly loopholes, such as the healthcare exclusion, the municipal bond exemption, and the state and local tax deduction (the mortgage interest deduction is misguided, but isn’t technically a loophole since one of the goals of tax reform is to give business investment the same tax-income-only-one-time treatment now reserved for residential real estate).

We also know that the capital gains tax rate isn’t a “preferential” loophole, but instead is the mitigation of a penalty that shouldn’t exist. Similarly, it’s not a loophole when companies deduct expenses when calculating income. And you’re not getting some sort of handout simply because Uncle Sam isn’t imposing double taxation on your retirement account. At the risk of repeating myself, all income should be taxed in a neutral system, but only one time.

Let’s close by looking at a few secondary - but still important - implications of a neutral tax code.
First, getting rid of loopholes won’t put a burden on poor and middle-income taxpayers for the simple reason that an overwhelming share of the benefits of these provisions go to high-income taxpayers.
I’ve already shown how the vast majority of charitable deductions are taken by those making more than $200,000 per year.

The same is true for the state and local tax deduction and the healthcare exclusion.
And the Washington Post just editorialized that the home mortgage interest deduction is a boon for rich taxpayers as well.
The mortgage interest deduction is also a significant cause of after-tax income inequality: The top 20 percent of earners get 75 percent of the benefits; the top 1 percent get 15 percent, according to the Congressional Budget Office. …Specifically, 10 metropolitan “hot spot” counties (among them Los Angeles in California and Fairfax in Virginia) with the greatest number of mortgages larger than $500,000 accounted for 45.1 percent of all such mortgages nationally. Just eight California urban and suburban counties accounted for 40 percent of the national total. Outside of such tony coastal precincts, the only big-mortgage hot spots were resort destinations such as Martha’s Vineyard, Mass., and Vail, Colo. — where many homes are vacation places, not primary residences.
To be sure, the Post is misguided in that it wants to restrict tax preferences in order to finance a larger burden of government spending.

So I’m not expecting the editors to join a coalition for pro-growth tax reform.

The second implication is that a neutral tax system means less corruption.

To cite one example, consider the oleaginous way that politicians deal with so-called tax extenders. Marc Short and Andy Koenig explain in a column they wrote for the New York Times.
Congress will soon take up the so-called tax extenders package, which has more than 50 tax breaks affecting a variety of industries and issues. …this bill mostly helps the wealthy and the well connected.
The fact that rich insiders benefit is no surprise, but what makes “tax extenders” so odious is that what began in 1988 as a supposedly one-time fix now has become a regular part of the process, a scam that gives lobbyists and politicians a way of generating fees and contributions.
The first tax-extender package…opened a door that lobbyists and lawmakers were all too willing to run through. …A 2014 analysis by Americans for Tax Fairness found that more than one out of every 10 lobbyists in Washington focused specifically on the extenders package. Given that this bill comes up about every year or two, special interests constantly have the opportunity to demand new handouts.
By the way, some of the extenders actually are good policy. They’re in the mitigation-of-penalties category I discussed above.

But those good provisions should be made permanent and the bad provisions should be jettisoned."

Sunday, November 29, 2015

Not Proof But Indicative Of LA's Job Losses From The $15 Minimum Wage

By Tim Worstall of Forbes. Excerpt:
"Back a while when LA City announced that it was going to raise its minimum wage to $15 I noted one of the reports that had been made to the City Council about the effects of doing so. Which was that there would be a reduction in the number of jobs in LA City. Do note this report wasn’t from some horrible free market loon like myself, rather it came from Michael Reich and his colleagues at Berkeley. And it recommended that the rise went ahead even though there would be such job losses. And yes, their report did include the effects of more spending being done as the working stiffs tend to spend all of their income, richer people not so much. And yet still it showed job losses:
These effects on the level of economic activity correspond to a cumulative net reduction in employment in Los Angeles City of 1,552 jobs by 2017 and 3,472 jobs by 2019, or 0.1 and 0.2 percent of all employment, respectively.
So, even from this official report we expect job losses as a result of a rise in the minimum wage. And now on to something ever so slightly different. LA City also passed a law stating that hotel workers should get higher wages. Hotel workers specifically and only, on a much faster timescale than the more general minimum wage rise. So, given what we know already, given what we know about the effects of minimum wage rises in general, what would we expect to happen? Yup, we’d expect to see job losses.

Please do note that the research showing not much effect of moderate minimum wage rises does in fact say that. We have absolutely no research whatsoever that says there will be no unemployment effects from large minimum wage rises. All we have is a series of highly disputed papers that show that the effects of moderate rises are, at best, not very much. The disputation coming from the fact that we’ve got an equal number, if not more, of similar studies showing that the effects of moderate minimum wage rises are indeed moderate and negative, that is they cause unemployment.

So, given this, what do we expect among the employment of hotel workers in LA City as a result of a large rise in the minimum wage? Yup, unemployment effects:


Medicare Waste, Fraud, and Abuse Means the System Needs Reform

Bureaucracy diminishes the program's effectiveness.

By Veronique de Rugy at Reason. Excerpts:
"Medicare is rife with fraud, and every year, billions of dollars are improperly paid out by the federal government's giant health care bureaucracy. According to the government's latest estimates, Medicare fee-for-service (parts A and B) made $46 billion in improper payments last year. And Medicare Advantage (Part C) and Medicare Prescription Drug Coverage (Part D) combined for another $15 billion in improper payments. Even more disturbing is the possibility that these numbers underestimate the annual losses to taxpayers from fraud and bureaucratic bungling. According to the work of Harvard University's Malcolm Sparrow, fraud could account for as much as 20 percent of total federal health care spending, which would be considerably higher than what the government's figures indicate."

"That's because the Centers for Medicare & Medicaid Services is instead looking to gut its Recovery Audit Contractor program, which has been successful in recovering taxpayer dollars that otherwise would have been lost to improper payments. The RAC program is geared toward correcting improper payments instead of punishing perpetrators. It's tasked with finding both overpayments and underpayments, but because the system is already stacked toward handing out taxpayer money without accountability, overpayments are what the RACs typically find.

RACs are paid on a contingency fee basis at a rate negotiated when their contract is awarded. The auditors thus pay for themselves with the money they recoup instead of simply being handed a lump-sum check. That the RAC program has an incentive to reduce wasteful spending and save taxpayers money makes it fairly unusual among government initiatives. In 2014, RACs returned a net $2.2 billion to taxpayers. They did even better in 2013, when $3.7 billion was recovered. However, CMS scaled back certain audit activities and temporarily suspended the program for several months."

"Rather than empower these fraud hunters, they are drastically reducing the number of paid claims that auditors can review every 45 days (from 2 percent down to just 0.5 percent). The new limits will make it that much harder for auditors—whose cost already amounts to just a drop in the bucket—to recoup taxpayer losses. Agency failure is routinely rewarded in Washington with bigger budgets and greater authority, but here success will not be."

Saturday, November 28, 2015

Small Businesses With a Big Stake in the Pacific Trade Deal

The Trans-Pacific Partnership has detailed provisions to give smaller U.S. exporters a leg up.

See By Ed Gerwin, a senior fellow at the Progressive Policy Institute. Excerpts:
"the agreement includes groundbreaking provisions that better enable smaller businesses to prosper by exporting to the 12 countries that are in the partnership. The growing markets in these countries account for some 40% of the global economy.

Ninety-eight percent of America’s 300,000 exporters are small or medium-size enterprises (SMEs)—firms with fewer than 500 employees. Together they account for about a third of the $1.6 trillion in annual goods exports. And because only 5% of SMEs currently export, there’s a significant potential for growth.

Small businesses account for almost two-thirds of America’s net new jobs and—according to economists—are essential building blocks for economic mobility. Smaller firms that export are especially prolific creators of good jobs for diverse groups. Census Bureau data show that the average American women-owned exporter, for example, employs five times more workers and pays an average salary almost $17,000 more than women-owned non-exporters. Similarly, minority-owned exporters employ three times more workers and pay nearly $16,000 more.

TPP negotiators were keenly aware that trade barriers like high duties and costs, unnecessarily complex regulations and customs red tape often pose inordinate burdens for smaller exporters, who lack the resources, personnel and extensive contacts of larger traders. And they heard repeatedly from small business that the challenges of navigating foreign rules, competing for customers, clearing customs and getting paid often keep many small traders on the sidelines.

The trade agreement, unlike any previous U.S. trade deal, includes detailed provisions specifically designed to support smaller traders. One chapter establishes a permanent SME committee to monitor how the TPP is promoting SME trade and propose additional reforms. Other chapters—including those on competitiveness, customs, development and e-commerce—also include provisions of particular importance to small traders. The customs chapter requires expedited customs procedures for express shipments—a vital delivery channel for many smaller exporters. Among many other reforms, customs authorities must generally release express shipments within six hours after submission of the required documents."

"The TPP would further empower smaller exporters to connect digitally with foreign customers. It would require countries to create user-friendly digital portals that detail their trade rules; support e-commerce through required consumer protection, privacy, e-signature and electronic payment rules; encourage the use of electronic customs forms; and ensure vital cross-border data flows among the 12 countries of the partnership.

Despite what critics suggest, most of the TPP is about the traditional nuts and bolts of any trade agreement—eliminating tariff and nontariff barriers. The agreement slashes 18,000 tariffs, including high duties on key American small business exports like consumer goods and machinery (currently up to 70%) and fresh fruit (up to 40%). The TPP’s goods chapter would eliminate all tariffs on American manufactured goods and nearly all U.S. farm products. The majority of the tariff eliminations would occur immediately, while the rest would be phased in.

Smaller exporters—who often have a single person responsible for exporting and regulatory compliance—would especially appreciate the TPP’s many requirements to speed and simplify customs processing; increase transparency; and reduce unnecessary testing, certification and paperwork requirements."

40% of cancer patients in the U.S. attempt to join a clinical trial to get access to potentially lifesaving treatments, but only 3% succeed

See Winning the Right to Save Your Own Life: As the FDA dawdles, 24 states pass ‘right-to-try’ laws giving terminally ill patients access to drugs by Darcy Olsen, president of the Goldwater Institute, is the author of “The Right to Try,” out this month from HarperCollins. Excerpt:
"According to the Boston-based Center for Information and Study on Clinical Research Participation, 40% of cancer patients in the U.S. attempt to join a clinical trial to get access to potentially lifesaving treatments, but only 3% succeed. Hundreds of thousands of patients who want access to promising new medicines cannot get them—and are forced to deteriorate or die while the drugs wind their way through the FDA.

The lack of access to lifesaving drugs is not limited to cancer. Idiopathic pulmonary fibrosis (IPF) is a fatal lung disease that kills about 40,000 Americans each year. There were no effective treatments until InterMune, a U.S. company, developed a breakthrough therapy called Esbriet. The FDA finally approved it for use in the U.S. in October 2014—nearly five years after an FDA advisory committee had recommended approval. Meanwhile, Esbriet was available in Japan seven years earlier, in Europe four years earlier, and in Canada two years earlier.

According to President Obama’s Council of Advisors on Science and Technology, it now takes, on average, 14 years to bring a new drug to market in the U. S.—up from eight years in the 1960s. As a result, Americans with terminal illnesses typically are forced to rely on treatments that were developed 10 or 15 years ago, with cutting-edge innovations and cures locked behind the bars of archaic federal policy.

Americans with terminal illnesses are supposed to have access to investigational drugs through the FDA’s “compassionate-use” program, but that’s not happening either. The FDA claims that it approves nearly all applications for compassionate use, roughly 1,800 last year. What the agency neglects to mention is that 99% of patients never complete the application process. Why? In part, because the application process is so complex it takes an average of about 100 hours to complete. Another obstacle is that, under the rules of the compassionate-use program, companies can’t charge for treatments above cost, so there is little financial incentive to participate.

This is why the “right-to-try” movement at the state level is so important. Right-to-try legislation, once passed by state lawmakers and signed into law, allows patients with terminal illnesses access to investigational drugs that show promise in clinical trials but still may be years away from receiving FDA approval."

Friday, November 27, 2015

Fudging Nudging: Why ‘Libertarian Paternalism’ is the Contradiction It Claims It's Not

Click here for the link.

University of Illinois College of Law

November 10, 2015

Georgetown Journal of Law and Public Policy, Forthcoming


In this piece I argue that so-called “libertarian paternalism” is as self-contradictory as it sounds. The theory of libertarian paternalism originally advanced by Richard Thaler and Cass Sunstein, and given further defense by Sunstein alone, is itself just a sexy ad campaign designed to nudge gullible readers into thinking that there is no conflict between libertarianism and welfare utilitarianism. But no one should lose sight of the fact that welfare utilitarianism just is welfare utilitarianism only if it sacrifices individual liberty whenever it is at odds with maximizing societal welfare. And thus no one who believes that people have rights to craft their own lives through the exercise of their own choices ought to be duped into thinking that just because paternalistic nudges are cleverly manipulative and often invisible, rather than overtly coercive, standard welfare utilitarianism can lay claim to being libertarian.

After outlining four distinct strains of libertarian theory and sketching their mutual incompatibility with so-called “libertarian paternalism,” I go on to demonstrate at some length how the two most prevalent strains — namely, opportunity set libertarianism and motivational libertarianism — make paternalistically-motivated nudges abuses of state power. As I argue, opportunity set libertarians should recognize nudges for what they are — namely, state incursions into the sphere of liberty in which individual choice is a matter of moral right, the boundaries of which are rightly defined, in part, by permissions to do actions that do not maximize welfare. And motivational libertarians should similarly recognize nudges for what they are — namely, illicitly motivated forms of legislative intervention that insult autonomy no less than do flat bans that leave citizens with no choice but to substitute the state’s agenda for their own. As I conclude, whatever its name, a political theory that recommends to state officials the use of “nudges” as means of ensuring that citizens’ advance the state’s understanding of their own best interests is no more compatible with libertarianism than is a theory that recommends more coercive means of paternalism."

Most of Econ 101 Is Right

Noah Smith doesn't even try to argue otherwise 

By David R. Henderson at FEE.
"Economist Noah Smith has a recent article titled “Most of What You Learned in Econ 101 Is Wrong.” He doesn’t actually make the case that would support that title. But he also probably didn’t choose the title. However, he did choose this statement:

But [N. Gregory] Mankiw’s book, like every introductory econ textbook I know of, has a big problem. Most of what’s in it is probably wrong.

Here’s what’s striking: In an article that purports to show that Mankiw is wrong on many issues, he doesn’t point out how he’s wrong on any issues.

Moreover, he doesn’t even try. At no point in his piece, does Smith ever relate anything he says to specific things that Mankiw claimed.

Of course, it’s possible that Smith doesn’t think he needs to do so because he takes as given that his audience knows what’s in Mankiw’s text.

So let’s look at that. On the minimum wage, Smith writes:

For example, Econ 101 theory tells us that minimum wage policies should have a harmful impact on employment. Basic supply and demand analysis says that in a free market, wages adjust so that everyone who wants a job has a job — supply matches demand. Less productive workers earn less, but they are still employed.

If you set a price floor — a lower limit on what employers are allowed to pay — then it will suddenly become un-economical for companies to retain all the workers whose productivity is lower than that price floor. In other words, minimum wage hikes should quickly put a bunch of low-wage workers out of a job.

And Smith gives his criticism in the next paragraph:

That’s theory. Reality, it turns out, is very different. In the last two decades, empirical economists have looked at a large number of minimum wage hikes, and concluded that in most cases, the immediate effect on employment is very small. It’s only in the long run that minimum wages might start to make a big difference.

In other words, in most cases there is a small, presumably negative, effect on employment. And presumably in the other cases there is a large effect. How, exactly, does this contradict the claims that Mankiw makes and that many of us teach in our equivalents of Econ 101? It doesn’t.

Now it is true that in the 5th edition (2009) of his text, Mankiw writes:

Although there is some debate about how much the minimum wage affects unemployment, the typical study finds that a 10 percent increase in the minimum wage depresses teenage employment [by] between 1 and 3 percent.

In light of the more recent studies that Smith is referring to, Mankiw might need to soften that statement. But he need not change his conclusion that the minimum wage puts some teenagers out of work. So Smith, in an article purporting to disagree with Mankiw on this, finds himself agreeing.

The other issue on which Smith takes issue with how Econ 101 is taught — or is it Mankiw’s text? — is on welfare. Smith writes:

Another example is welfare. Econ 101 theory tells us that welfare gives people an incentive not to work. If you subsidize leisure, simple theory says you will get more of it.

What’s Smith’s objection? He writes:

But recent empirical studies have shown that such effects are usually very small. Occasionally, welfare programs even make people work more. For example, a study in Uganda found that grants for poor people looking to improve their skills resulted in people working much more than before.

But here he’s attacking a straw man. Economists who have claimed that welfare discourages work have generally had in mind welfare programs that impose a very high implicit marginal tax rate because the people on welfare lose a lot of their welfare payments when they work more.

Go to the link he cites and you find that he’s talking about the kind of welfare is typically in the form of unrestricted cash grants that, presumably, they don’t lose if they work more. That means that such welfare programs do not — repeat do not — subsidize leisure.

That certainly doesn’t contradict the standard exposition in Econ 101 or the exposition in Mankiw’s text. Mankiw discusses a hypothetical welfare program in which the government guarantees an annual income of $15,000 and then takes away one dollar of welfare for every dollar earned. He writes:

The incentive effects of this policy are obvious: Any person who would make under $15,000 by working has little incentive to find and keep a job.

Why? Mankiw explains:

In effect the government taxes 100 percent of additional earnings.

Do the studies the linked article that Smith cites contradict this? No. In fact, here’s what the linked article states:

There’s no doubt that poorly designed social programs can deter work. Aid to Families With Dependent Children, the pre-welfare reform welfare program, was found to decrease hours worked by 10 to 50 percent among recipients; that likely has something to do with the fact that AFDC benefits were taken away at a rate of 100 percent, so every dollar earned on the job was a dollar not received from AFDC. Who would work under that condition?


Thursday, November 26, 2015

Turing reneges on drug price cut, rival’s version sells well

From the Associated Press. Excerpts:
"After weeks of criticism from patients, doctors and other drugmakers for hiking a life-saving medicine to more than 50 times its former price, Turing Pharmaceuticals is reneging on its pledge to cut the $750-per-pill price.

Instead, the small biotech company is reducing what it charges hospitals, by up to 50 percent, for its parasitic infection treatment Daraprim. Most patients’ co-payments will be capped at $10 or less a month. But insurers will be stuck with the bulk of the $750 tab. That drives up future treatment and insurance costs.

Daraprim is a 62-year-old pill whose patent expired decades ago. It is the preferred treatment for a rare parasitic infection, toxoplasmosis, which mainly threatens people with weak immune systems — such as organ transplant and HIV patients — and pregnant women, because it can kill their baby."

"Turing’s move comes after a pharmacy that compounds prescription drugs for individual patients, Imprimis Pharmaceuticals, started selling a custom-made version for 99 cents per capsule."

"Imprimis chief executive Mark Baum said Wednesday that orders are pouring in for its version of Daraprim from doctors, and the company has dispensed more than 2,500 capsules since Oct. 22."

Environmental Lawyer Seth Jaffe says we can solve with more use of markets, not less

See Some Hard Truths About Addressing Climate Change
"On November 23, 2015 Boston Globe had an op-ed by Joshua Goldstein and Steven Pinker concerning some “Inconvenient Truths for the environmental movement.”  I’m sorry to say that I agree with pretty much every word of it.  Why am I sorry?  Because Goldstein and Pinker make clear – even though they don’t mention his name – that the Pope was completely wrong in his prescription for addressing climate change.  How so?  It’s really pretty straightforward. 
People want more economic development, not less.  They want more markets, not less.  It may be that some wealthy societies could still have a relatively smooth transition to renewable fuels without sacrificing economic growth.  Unfortunately, that’s not where we have to address the demand for fossil fuels.  We have to do so in China and India and other developing countries.  I’m sorry, but I’ve seen the projected demand for fossil fuels outside the US and Europe and it’s not pretty.  Anyone who thinks that we can quickly and easily eliminate fossil fuel use in those countries and still allow them the economic growth that their citizens demand is delusional.

Which brings us to Goldstein’s and Pinker’s second inconvenient truth; nuclear power has to be a large part of the solution.  And I’m afraid that’s probably the end of the conversation for many of my environmental friends, so I’ll cut this short.

I’m still an optimist.  I believe that we can still solve climate change.  We can do so however, with more use of markets, not less.  And we must do so with more economic growth, not less, because the rest of the world won’t be satisfied with less."

Wednesday, November 25, 2015

A Cost-Benefit Analysis of Government Compensation of Kidney Donors

From Alex Tabarrok of Marginal Revolution.
"The latest issue of the American Journal of Transplantation has an excellent and comprehensive cost-benefit analysis of paying kidney donors by Held, McCormick, Ojo, and Roberts. Earlier, Becker and Elias estimated that a payment of $15,000 per living donor would be sufficient to eliminate the US waiting list. The authors adopt a larger figure of $45,000 for living donors and $10,000 for deceased donors and find that even at these rates paying donors generates benefits far in excess of costs.

In particular, a program of government compensation of kidney donors would provide the following benefits (quoting from the article):
  • Transplant kidneys would be readily available to all patients who had a medical need for them, which would prevent 5000 to 10 000 premature deaths each year and significantly reduce the suffering of 100 000 more receiving dialysis.
  • This would be particularly beneficial to patients who are poor and African American because they are considerably overrepresented on the transplant waiting list. Indeed, it would be a boon to poor kidney recipients because it would enable them to reap the great benefits of transplantation at very little expense to themselves.
  • Because transplant candidates would no longer have to spend almost 5 years receiving dialysis while waiting for a transplant kidney, they would be younger and healthier when they receive their transplant, increasing the chances of a successful transplantation.
  • With a large number of transplant kidneys available, it would be much easier to ensure the medical compatibility of donors and recipients, which would increase the success rate of transplantation.
  • Taxpayers would save about $12 billion each year. Dialysis is not only an inferior therapy for end-stage renadisease (ESRD), it is also almost 4 times as expensive pequality-adjusted life-year (QALY) gained as a transplant."

Singapore: the Power of Economic Freedom

By Marian L. Tupy of Cato. Excerpt:
"The Telegraph ran a fascinating collection of photos from different statges of development of the Asian city state of Singapore. The first photo is from 1900, the second is from the 1970s and the last photo is contemporary. The incredible transformation of Singapore from a sleepy outpost of the British Empire to a global commercial and technological hub was partly facilitated by a very high degree of economic freedom. In 1970, the first year for which data is available, Singapore had the third freest economy in the world (behind Hong Kong and Canada). Singapore maintained a high degree of economic freedom over the next 45 years and ranks as the second freest economy in the world today (behind Hong Kong). As late as 1970, per person income in Singapore was 54 percent of the global average. Today it is 321 percent of the global average."

The invisible hand of the market, not the heavy hand of the government, brings economic prosperity to Kenya

From Mark Perry.
"There was a fascinating segment on “60 Minutes” last night (“The Future of Money“) about the “mobile money” revolution this has swept Kenya, where people can send and receive money on their cell phones – without using banks, bank accounts or credit cards.  Kenya’s mobile money system is called “M-PESA” and it now acts as a terrific platform that has helped launched other technological innovations to the point that the East African county is being called the “Silicon Savannah.” Not surprisingly, when M-PESA started, Kenya’s commercial banks, like any entrenched industry, lobbied for the government to impose regulations to impede its development, but the government decided to take a hands-off approach and allow Schumpeterian “creative destruction” to flourish. And flourish M-PESA has, bringing economic prosperity and growth to a poor country and giving poor people across Kenya greater access to water and electricity. And all of this new economic prosperity came to Kenya largely because of market forces, innovation, and technology and not because of the World Bank, United Nations, the IMF, or taxpayer-funded aid from foreign governments.

For Kenya’s newfound economic prosperity, it can thank the “invisible hand of the market,” rather than the more traditional “visible, heavy hand of governments” and government-funded forms of economic aid."

Tuesday, November 24, 2015

On the ACA, forecasters overestimated total exchange enrollment, the share of higher-income individuals enrolling, and the general health of those who did enroll

See Downgrading the Affordable Care Act: Unattractive Health Insurance and Lower Enrollment by Brian Blase of Mercatus. Excerpt:
  • Enrollment figures fell short of projections. Initial Congressional Budget Office (CBO) projections overestimated the number of 2014 enrollees by 2.5 million and 2015 enrollees by 3.5 million, and other forecasting organizations overestimated by even more.
  • Enrollment of all but the near-poor is far below projections. Individuals and families earning more than 200 percent of the federal poverty line, who do not qualify for subsidies that significantly reduce high exchange plan deductibles, are largely shunning exchange plans.
  • The individual mandate failed to motivate as many uninsured to enroll as predicted. Projections assumed that a large noneconomic motivation to conform to a social norm of having insurance would motivate people to comply with the mandate, but financial incentives to remain uninsured appear to be dominating insurance decision-making for the middle class.
  • The pool of enrollees is sicker and more costly than projected. Despite an $8 billion subsidy to cover most of the cost of their expensive enrollees, in 2014 insurers suffered losses equivalent to about 12 percent of the premiums of ACA plans (plans satisfying the law’s new rules and requirements). Insurers are increasing premiums, raising deductibles, and narrowing provider networks in response to unexpectedly large losses on ACA plans.

As Congress was debating the ACA in March 2010, CBO released initial projections of ACA exchange enrollment. They were followed by more optimistic projections by the Centers for Medicare and Medicaid Services and RAND Corporation later that year. The three-year projections are displayed in table 1.

In July 2012, CBO revised its estimates slightly upward following the Supreme Court’s ruling that Medicaid expansion would be at the option of the states, which meant more people just above the poverty line gained eligibility for subsidized exchange plans.
Following the initial failures of, CBO revised its projections downward, and has repeatedly downgraded its estimates over the past three years. However, data from the Department of Health and Human Services show that even the downgraded estimates are overly optimistic. Table 2 shows CBO projections over time and compares them with actual enrollment data.

Low enrollment figures have been driven, in large part, by the exchange plans’ failure to attract middle-class uninsured people. Most recently, CBO projected 3 million unsubsidized enrollees in 2015, when in fact there were only 1.6 million. In early 2015, the Urban Institute estimated that 25 percent of enrollees in 2016 would be earning more than 400 percent of the federal poverty line; at the end of the 2015 open enrollment period, only 2 percent of enrollees fell into that income class. Most strikingly, only 2 percent of eligible individuals earning more than 400 percent of the federal poverty line chose to purchase exchange plans.

A contributing factor to these forecasting errors was the assumption that the individual mandate would be a more effective tool than it has been thus far. Several forecasting organizations assumed a large noneconomic motivation to conform to laws and to a new social norm for having health insurance. However, a recent study found that most households above 200 percent of the poverty line would be financially better off forgoing ACA insurance for economic reasons, an effect that appears to be dominating decision-making more than any noneconomic desire to conform to the mandate. Moreover, numerous exemptions to the mandate allow people with a broad range of financial difficulties to remain uninsured and not pay the penalty.


Early results from the risk corridor program, an ACA-created profit- and loss-sharing program between insurers, show significant losses for insurance companies selling ACA plans. Specifically, profitable insurers owed $360 million, while unprofitable insurers filed claims for $2.9 billion, a shortfall of $2.5 billion. The risk corridor data indicate that insurers’ 2014 losses on ACA plans equaled about 12 percent of the premiums collected.

The performance of the risk corridor program falls short of CBO projections and reflects a significantly sicker (and thus more expensive) pool of enrollees than originally expected. The sicker-than-expected risk pool, together with the phase-out of a large back-end subsidy program to offset insurers’ costs for the most expensive enrollees, is already translating into plans with higher premiums, higher deductibles, and narrower networks. These changes will make ACA plans look even less attractive to the relatively healthy uninsured, creating conditions for an adverse-selection “death spiral” in the individual market."

Inconvenient truths for the environmental movement

By Joshua S. Goldstein and Steven Pinker. Joshua S. Goldstein is emeritus professor of international relations at American University and a research scholar at the University of Massachusetts Amherst. Steven Pinker is professor of psychology at Harvard University and the author of “The Better Angels of Our Nature.” Excerpts:
"The first is that, until now, fossil fuels have been good for humanity. The industrial revolution doubled life expectancy in developed countries while multiplying prosperity twentyfold. As industrialization spreads to the developing world, billions of people are rising out of poverty in their turn — affording more food, living longer and healthier lives, becoming better educated, and having fewer babies — thanks to cheap fossil fuels."

"Nuclear power is the world’s most abundant and scalable carbon-free energy source. In today’s world, every nuclear plant that is not built is a fossil-fuel plant that does get built, which in most of the world means coal. Yet the use of nuclear power has been stagnant or even contracting."

"Nuclear today is relatively expensive, but that is largely because it must clear massive regulatory hurdles while its fossil competitors have been given relatively easy passage. New fourth-generation nuclear designs, a decade away from deployment, will burn waste from today’s plants and run more cheaply and safely."

"Without nuclear power, the numbers needed to solve the climate crisis simply do not add up. Solar and wind are growing quickly, but still provide about 1 percent and 4 percent respectively of electricity production, and cannot scale up fast enough to supply what the world needs. Moreover, these intermittent energy sources could power the grid only with big advances in battery technology that are still in the basic-science stage. Even with them, we must not triple-count the energy promised by renewables: they cannot supplant existing fossil fuel use and replace decommissioned nuclear plants and meet the skyrocketing needs of the developing world."

"These arguments have been forcefully made by pragmatic environmentalists such as James Hansen and Stewart Brand."

"The second priority is carbon pricing: charging people and companies to dump their carbon into the atmosphere. Economists across the political spectrum agree that such a price would incentivize conservation, decarbonization, and R&D far more effectively than regulating specific industries and products (to say nothing of sermonizing for a return to an abstemious preindustrial lifestyle). Without carbon pricing, fossil fuels — which are uniquely abundant, portable, and energy-dense — simply have too great an advantage. Yet despite a strong campaign by Citizens’ Climate Lobby, a policy that ought to be a no-brainer has yet to catch on with politicians or the public." 

Monday, November 23, 2015

Will Obama Make Housing Affordable?

By Randal O'Toole of Cato.
"Property-rights and housing-affordability advocates were surprised and elated that the chair of President Obama’s Council of Economic Advisors, Jason Furman, gave a speech blaming housing affordability problems on zoning and land-use regulation. They shouldn’t be: while Furman is correct in general, he is wrong about the details and the prescriptions he offers could make the problems worse than ever. 
There is no doubt, as Furman documents in his speech, that land-use regulation is the cause of growing housing affordability problems. Yet Furman fails to note the fact that these problems are only found in some parts of the country. This is a crucial observation, and those who fail to understand it are almost certain to misdiagnose the cause and propose the wrong remedies.

Citing Jane Jacobs (who was wrong at least as often as she was right), Forman blames affordability problems on zoning that “limits density and mixed-use development.” Such zoning is found in almost every city in the country except Houston, yet most cities don’t have housing affordability problems. Thus, such zoning alone cannot be the cause of rising rents and home prices.

Based on this erroneous assumption, Furman endorses what he calls the administration’s agenda, which is its Affirmatively Furthering Fair Housing program. Rather than making housing more affordable, this program is aimed at ending racial segregation of middle-class suburbs by requiring the construction of multifamily housing in suburbs that are not racially balanced relative to their urban areas. It assumes that multifamily housing is less costly (and thus more affordable to low-income minorities) than single family, but that is only true because units are smaller: on a dollar-per-square-foot basis, multifamily costs more than single family, especially for mid-rise and high-rise apartments. Multifamily also uses more energy per square foot than single family, which means heating bills will be higher.

In other words, the fundamental assumption of Affirmatively Furthering Fair Housing is that it is “fair” to put low-income minorities in cramped apartments with little privacy so long as those apartments are in the same suburbs as single-family homes with large private yards occupied by the middle class. It also assumes that the solution to problems created by zoning is even more government interference in the market, either through regulations mandating certain housing types or subsidies to that housing (another part of the administration’s agenda). It is worth noting further that nothing in the program would insure that the people in those apartments are, in fact, racial minorities.
In any case, even when accompanied by housing subsidies, building expensive apartments in middle-class suburbs does little or nothing to make housing more affordable, mainly because even the most aggressive subsidy programs will build too little housing to have much of an effect on the market. This is especially true since this prescription will be diluted by applying it as much to regions like Dallas or Raleigh, which don’t have housing affordability problems but may have suburbs that are not racially balanced, as to places with real housing affordability issues such as the San Francisco Bay Area, Seattle, and Boston.

Once we recognize that housing affordability is a crisis only in some urban areas and not others, we have to ask what it is about those urban areas that makes housing expensive. It is not zoning that limits density or mixed-use, which is found almost everywhere; it is growth-management planning that limits development at the urban fringe, which is found mainly in coastal states (CA, FL, HI, MA, MD, OR, VA, WA, and most New England states)–not coincidentally, the very places where housing affordability is a major issue.

Without land-use regulation outside of the cities, all the city zoning in the world won’t stop developers from meeting demands for affordable high- or low-density housing outside city limits. On the other hand, if growth management, whether through urban-growth boundaries, urban-service boundaries, large-lot zoning, greenbelts, or other means, limits expansion of the urban area, then housing will become both more expensive and more volatile.

Personally, I would be willing to give up all city zoning restricting density and mixed-use development provided we also give up all zoning and land-use regulation outside of city limits. This will allow developers to meet whatever demand there is for high-density housing as well as for traditional suburbs. Neighborhoods could continue to protect themselves from unwanted intrusions and nuisances using deed restrictions, as is done in much of Houston, one of the nation’s most affordable cities and urban areas.

One of the major points of my 2012 book, American Nightmare, is that zoning was originally developed to keep not just racial minorities but the working class in general out of middle-class neighborhoods (a point more recently made in Sonia Hirt’s 2014 book, Zoned in the USA). When that failed to work due to rising working-class incomes, middle-class planners supplemented zoning with growth management. That policy appears to be working as blacks and other working-class populations are fleeing many of the urban areas that have applied it, urban areas that celebrate themselves as havens for the “creative class,” which is simply another name for the middle class.
In short, Furman’s and the administration’s focus on zoning is wrong and will fail to make housing more affordable. Instead, they should look at growth management as the cause of housing affordability problems and at eliminating such growth management as the solution."

An Anonymous First-Rate Economist On the Economics of the Minimum Wage

From Don Boudreaux of Cafe Hayek. Excerpts:
"First-year GMU economics masters student Ash Navabi sent to me notice of a commenter at on this post at Economics Job Market Rumors.  According to Ash, the commenters “Economist 1C88” and “Economist E446” are the same person.  Whoever this commenter is, I tip my hat to him or her.  He or she says in these seven short comments at least as much as, and perhaps more than, I’ve said about the minimum wage in dozens of longer blog posts – and he or she says it more eloquently, clearly, thoroughly, and cogently.  I paste these seven comments [I only post some-CM] with my own numbering, but without further edit or comment by me, below the fold.  Read these comments and treat yourself to the reasoning of a first-rate economics mind.  Every word below the fold (save for the obvious quotations from other commenters) is that of Economist 1C88/E446.  (For the record, I have no idea who this economist is.)"

"suppose that for every single margin, you’ve found a way to argue that the supply and demand responses are inelastic. Now take a step back and think about the hypothetical world you’ve created. In this world, both the supply and demand curves for low-wage labor are near-perfectly vertical. This means, of course, that any shocks to supply or demand must result in massive equilibrating movements in the market-clearing wage. Does this actually happen? Not even close: 10th percentile wages are surprisingly stable relative to 50th percentile wages, and the big changes that do occur tend to come from the minimum wage itself.

So the project of denying every supply and demand response at the low end of labor markets is doomed from the start. But this doesn’t stop many of you from attempting it. I call this (forgive the alliteration) the Selective Skepticism of Substitution Syndrome.

Whenever someone mentions a margin along which firms or households could substitute in response to changing prices, thereby creating unintended consequences from the policy you support, you’ll dig deep and find a way to argue (earnestly as ever) that the substitution response is actually close to zero. Then they’ll mention another margin; again, you’ll find a way to deny it, and so on it goes…

The problem with all this Selective Skepticism of Substitution is that it makes you look silly. Surely there are, in reality, plenty of ways in which agents substitute in response to changing relative prices. That’s how the economy works! It would really be quite a coincidence if substitution happened to be shut down in only those cases that matter for the minimum wage.


I want you to look at the table of occupations from the BLS’s Occupational Employment Statistics, and sort by median wage. Think about all those occupations with median wages below $15 – and then also think about all the occupations with median wages a bit above $15 that still have 20 or 30 or 40 percent of workers making below $15.

If we raise the minimum wage to $15 and entry-level fast food or cashier jobs are just as easily available as they are today, do you really think that none of the kinds of people who currently train for the other jobs with median wages below $15 will be tempted to just pick the lower-end jobs instead? “Pest Control Workers” have a median wage of $14.74 – are you really so confident that none of them will say “f*** pest control, I’m going to earn the same wage working the counter at McDonald’s”? The 25th percentile wage for “rock splitters, quarry” is only $12.81 – are you really so sure that none of them will get tired splitting all those rocks and take the Safeway cashier job closer to home instead, once it pays just as much?

The answer is that of course some of them will be tempted to switch jobs (or choose different jobs in the first place). It won’t necessarily happen right away – there are costs to moving between jobs, and even bigger costs to switching careers, so you’re not going to do it in response to a fleeting, idiosyncratic, almost below-the-radar change in the minimum wage (like, erm, virtually all of the cross-state minimum wage changes used for identification in existing “cleanly identified” studies). But it will happen in the long run, and even a very small response would be enough to swamp low-end labor markets – which are quite small relative to the vast middle of the distribution – and displace the existing workers.


They’ll say that some kind of Keynesian channel, with minimum wage workers spending out of their now-higher wages, boosts demand and undoes the negative effect. (This is deliciously innumerate: only a tiny fraction of the marginal consumption basket of minimum wage workers flows through to other minimum wage workers. Perhaps 189d is trying to argue otherwise by complaining that “preferences are not homothetic” – with the presumption, I suppose, that at the margin minimum wage workers happen to spend 100% of their income on McDonald’s, even though the inframarginal share is more like 5%!)

– They’ll say that it’s really a story of monopsony – where firms face upward-sloping supply curves for labor, and use this market power to pay workers less than their marginal product. If you force them to pay a minimum wage, the story goes, then monopsony considerations will disappear and firms will actually demand more labor. (Of course, unless the monopsony wedge is huge, it’s not clear how this story can justify an aggressive minimum wage – and if the monopsony wedge was really that big, it would imply massive returns to employee recruitment that are hard to reconcile with the evidence. Nor is it clear why monopsony is such a big deal in the low-end labor market – of all places!


To top it all off, none of these stories can explain the key feature of the minimum wage literature that supporters are always citing – which is that estimates for the disemployment effect are generally near zero. Not positive or negative depending on the exact balance of the monopsony and substitution effects (which might vary predictably based on the features of the industry or occupation), but zero.

To be precise, the estimates cluster around zero, with these researchers never able to reject the null hypothesis of zero at a rate higher than you’d expect from chance alone, and the most precise point estimates getting closer and closer to zero (as you may have seen in all those funnel graphs). Taking all the evidence at face value, in fact, you must believe that we have a rather precise quantification of the effect of the minimum wage, at almost exactly zero.

How remarkable that the monopsony or Keynesian or whatever channels happen to precisely cancel out the substitution channel in every environment that left-leaning labor economists study!"

Sunday, November 22, 2015

The future of Obamacare now looks like more money for less generous coverage than its architects had hoped in the first few years

See Obamacare Insurers Are Suffering. That Won't End Well. by Megan McArdle. Excerpts:
"UnitedHealth abruptly said it expected to lose hundreds of millions of dollars on its exchange policies in 2015 and 2016, and would be assessing whether to pull out of the market altogether in the first half of next year."

"Stories included not just UnitedHealth’s dire warnings, but also updates in the ongoing saga of higher premiums, higher deductibles and smaller provider networks that have been coming out since open enrollment began.

It now looks pretty clear that insurers are having a very bad experience in these markets. The sizeable premium increases would have been even higher if insurers had not stepped up the deductibles and clamped down on provider networks. The future of Obamacare now looks like more money for less generous coverage than its architects had hoped in the first few years.

But of course, that doesn’t mean insurers need to leave the market. Insurance is priced based on expectations; if you expect to pay out more, you just raise the price. After all, people are required to buy the stuff, on pain of a hefty penalty. How hard can it be to make money in this market?

What UnitedHealth’s action suggests is that the company is not sure it can make money in this market at any price. Executives seem to be worried about our old enemy, the adverse selection death spiral, where prices go up and healthier customers drop out, which pushes insurers' costs and customers' prices up further, until all you’ve got is a handful of very sick people and a huge number of very expensive claims."

"Most of the people buying exchange policies are subsidized, so to them, it doesn’t much matter whether their premiums go up, because the price of the cheaper plans is capped as a percentage of their income."

"To be sure, over the long term, that could change, because the subsidy calculation has a weird time bomb in it. Right now, subsidies are calculated so as to make the second-cheapest Silver plan on the exchange cost a fixed percentage of your income, or less. That percentage is calculated on a sliding scale -- low for people near the federal poverty line, and rising to around 10 percent for folks making closer to four times the baseline. (People who make more than that aren’t eligible for subsidies.) But the moment that subsidies start costing the government more than 0.504% of GDP, which would currently be about $85 billion, the expenditure is supposed to be capped, which would mean that subsidies would have to be decreased or withdrawn for some folks.

So concerns about the death spiral never quite went away. But they did recede, because, thanks to lower-than-expected enrollment, subsidy expenditures are supposed to come well below $30 billion this year. It’s unlikely that we’ll hit the trigger until 2019 or later, if indeed we ever do.

But on the conference call, Stephen Helmsley, the CEO of UnitedHealth, expressed concerns that the exchanges were seeing adverse selection anyway. Not just that the Obamacare insurance pool is sicker and more expensive than expected, which we already knew. But that the pool is experiencing adverse selection over the course of the year, as healthy people stop paying their premiums, and sicker people buy in. According to Helmsley, the people who bought insurance from them through the exchange, but outside of the open enrollment period, are averaging about 20 percent more expensive than the rest of the pool."

"possibility that only two years in, people have figured out how to game the special enrollment process so that it’s safe for them to go without insurance, and then sign up for coverage if they get sick."

"UnitedHealth really is losing money on these policies right now. It really is seeing something that looks dangerously like adverse selection."

Evidence of employers paying women 23% less than men for doing the same work is as elusive as Bigfoot sightings

From Mark Perry.
"There is widespread acceptance by the general public, especially among women, progressives and Democrats, of the completely bogus claim that women are paid “77 cents on the dollar for doing the same work as men,” in the words of President Obama. Hillary Clinton repackaged the bogus claim by stating recently that “On average, women need to work an extra two hours each day to earn the same paycheck as their male co-workers.” The National Committee on Pay Equity claims that women have to work until sometime in mid-April each year to earn the same amount of income a typical man made the previous year. A recent report from the World Economic Forum claims that it will take 118 years – until 2133 – to close the world gender pay gap

Despite the widespread acceptance of the “77 cents on the dollar for the same job” claim, there is rarely ever any specific evidence presented showing that specific firms are in violation of federal law by paying women 23% less than men for doing the same job. What Obama, Clinton and gender activists are really implying is that firms across the country are illegally violating the Equal Pay Act of 1963 by paying women 77 cents on the dollar for doing the same work as men, and those deliberate and ongoing violations are somehow going undetected. If there were such ubiquitous gender wage disparities in violation of federal law, why are there not extensive investigations by the Department of Justice or the Office of Civil Rights? And why isn’t there a cottage industry of law firms specializing in representing women who are victims of the supposed pervasive gender discrimination, the way there are hundreds of law firms representing mesothelioma victims who were exposed to asbestos on the job?

Just where do we find these companies that apparently have illegal dual-wage policies: one wage schedule for men and another one for women at wages 23% below their male co-workers for doing the same job? Where are the organizations that are paying women 23% less than men and exposing their organizations to legal prosecution, fines and penalties? Those questions are never answered by Obama, Clinton, the National Committee on Pay Equity, or the gender activists.

Well, let’s start by considering some examples of cases where it’s pretty clear that we would NOT find the kind of blatant gender discrimination that would result in women earning “77 cents on the dollar for doing the same work as men.” Here are some of those examples:
  1. Women-owned businesses. According to this report, there are nearly 9.1 million women-owned businesses in the United States, employing nearly 8 million workers or 1 of every 7 jobs in privately held firms. It seems highly unlikely that women would engage in the highly illegal and highly unethical activity of paying other women who work for them 23% less than their male co-workers. If the implication of “77 cents on the dollar” is that women are being victimized by employers, we wouldn’t accuse women of being the victimizers of other women, would we? Not likely.
  1. Female CEOs. According to the BLS, there are 421,000 women holding the position of “Chief Executive” of their organization. Would these female CEOs have any tolerance for an illegal company compensation policy that paid female employees 23% less than their male co-workers for the same job? Not likely.
  1. Union Members. In 2014, there were more than 16.2 million wage and salary workers represented by unions. Unions typically negotiate for pay based on seniority, not gender, and it would be impossible that unions would violate federal law by negotiating contracts with employers that called for paying women 23% less than men for the same position with the same seniority.
  1. Workers Paid by Commission. There are almost 1 million real estate agents in the US who are paid by commission, and 55% of them are women. There are more than half a million insurance sales agents and nearly half of them are female. When compensation for these sales agents is primarily determined by commission, and those commissions are based on some percentage of sales volume, there doesn’t seem to be much support for any claims of a 23% gender pay gap in those industries. For example, when have you ever heard that “female realtors or insurance agents are paid 77 cents on the dollar for selling the same amount of real estate or insurance as their male colleagues”? Just what I though — never.
  1. Government Employees. There are about 22 million Americans who work for the government at the federal (2.7million), state (5 million), and local level (14 million). Illegal discrimination by paying a female government employee 23% less than a man for doing the same government job? Not likely at all. Salaries are strictly determined by job classification, experience and seniority, and are clearly not gender-based.
  1. Waiters and Waitresses. There are about 2 million waiters and waitresses in America, and nearly 72% are female. Because their compensation is based primarily on tips, I don’t think there could be any case made that “waitresses are paid 23% less on average than waiters for doing the same job, working the same number of hours, serving the same number of customers that generated the same dollar amount of sales.” Unless, of course, customers discriminate against women and give waiters tips that are 23% higher than the tips they leave for waitresses? Not likely.
  1. Public School Teachers and College Professors. There are nearly 5 million teachers at the elementary and secondary level, and another 1.2 million college professors. Of course, some of these educators might also be represented in “Union Members” and “Government Employees” categories above, but when have you ever heard a female elementary school teacher or female college professor claim that they were being paid 23% less than their equally-qualified male colleagues? Never.
  1. Human Resource Professionals. There are about 236,000 human resource managers in the US, and roughly 75% of them are female. Would it be even remotely possible that any of the nearly 200,000 female HR managers are engaged in illegal activity and violating federal law by paying other women in their organizations 23% less than men for the same position? Not likely.
  1. Many Large Companies Have Females as Their Top HR Executive. For example, the top HR position at the Target Corporation — Executive Vice President and Chief Human Resources Officer – is held by a woman; and five of Target’s top 11 executives are female. Any possibility that Target is violating the Equal Pay Act, exposing its organization to possible lawsuits, penalties and fines by paying female Target employees 23% less than men for the same job? Nope. Likewise, Walmart’s top two HR executives are women. Any possibility that those female HR executives would tolerate systematic illegal and unethical gender pay discrimination that would result in Walmart paying women 23% less than men and thereby expose the organization to lawsuits and investigations by the Office of Civil Rights? Not likely.
Of course, the list above is not exhaustive and does not completely cover all industries, all occupations, and all female workers, but it should challenge the narrative that women are routinely paid 23% less than men – across the board in all industries and for every occupation, even in firms owned or managed by women, or whose HR departments are headed by a woman.

So where are the organizations that have blatant dual-pay schedules that compensate women 23% less than men for the same job? In reality, those companies are as rare as a sighting of Bigfoot or the Loch Ness monster. And shouldn’t the nearly complete absence of any actual documented cases of women being paid 23% less than men for doing the same job lead us to reject the “77 cents on the dollar” myth once and for all? Apparently not. The myth just keeps getting recycled over and over again, and occasionally repackaged by Hillary Clinton and others. The fact that the myth is clearly unsupported by any actual evidence doesn’t seem to matter to most women nor to nearly all Democrats.

Perversely perhaps, maybe the false “77 cents on the dollar” narrative is actually perpetuated by the total lack of any evidence that any employers actually pay women 23% less than men for the same job. After all, it’s better to keep those mythical violations very vague, ambiguous, and undocumented as a way to keep the myth alive, like very rare sightings of Bigfoot. If the bogus myth of widespread 23% gender wage gaps throughout the economy was ever exposed to the sunlight of evidence and truth, it would wilt and disappear, no longer available as a popular issue to generate political support and votes from women.

So maybe it’s just the distant hope that someday there could be actual evidence of an organization paying women 23% less than men for doing the same work, or that there could someday be a sighting of Bigfoot, that keep those myths alive.

Bottom Line: If there are actually employers who are illegally paying women 23% less than men for doing the same job, those companies should be exposed, publicized and prosecuted. Just like if the Loch Ness monster and Bigfoot do actually exist, they should be exposed and publicized with video footage. But just like the elusiveness of actual evidence for Bigfoot and the Loch Ness monster should make us question their existence, the elusiveness of any actual evidence of “77 cents on the dollar for doing the same work as men” should also make us question that unsubstantiated gender pay gap myth.
Unfortunately, the 23% gender pay gap for the same work claim is a statistical fraud that keeps getting recycled and promoted by politicians like Obama and Clinton because it apparently has a huge political payoff for uniformed voters. And it will continue to have a political payoff as long as average Americans, especially women, buy the statistical snake-oil promoted by Democrats that women are paid 23% less than men on average for doing the same job. Along with the myths of Bigfoot and the Loch Ness monster, the 23% wage gap claim is a myth that just won’t die, regardless, or maybe because of, the scant evidence."

Saturday, November 21, 2015

CBO: Tangled Web of Welfare Programs Creates High Tax Rates on Participants

By Charles Hughes of Cato. Excerpts:
"The dozens of different programs that form our tangled welfare system often impose high effective marginal tax rates that make it harder for low-income people to transition out of these programs and lift of those programs and into the middle class. As the people in these programs enter the workforce, get a promotion, or work more hours, they can lose a significant portion of those earnings through reduced benefits and increased taxes. A new report from the Congressional Budget Office (CBO) illustrates this predicament: many households hovering around the poverty level face steeper effective marginal tax rates than even the highest earners. These prohibitively high tax rates can discourage work and limit their prospects, ultimately making them less likely to escape poverty."

"CBO’s analysis looks at the range of effective marginal tax rates households face at different levels of income. The median marginal tax rate for households just above the poverty level is almost 34 percent, the highest for any income level. Some households that receive larger benefits or higher state taxes have even higher effective rates: 10 percent of households just above the poverty line face a marginal rate higher than 65 percent. For each additional dollar earned in this range, these households would lose almost two-thirds to taxes or lost benefits. The comparable rate for the highest earners, households above 400 percent of the poverty level, is only 43.4 percent. If anything this analysis might understate how steep the effective marginal rates are for some households. CBO only considers the combined effect of income taxes, payroll taxes, SNAP and ACA exchange subsidies, so households that participate in other programs like TANF or housing assistance could face even higher rates. These results mirror some of Cato’s past work investigating the issues and trade-offs involved with these welfare programs.

The nature of the welfare system contributes to the prevalence of these poverty traps. A House and Ways Human Resources Subcommittee recently held a hearing on issue and released a chart illustrating the complex, labyrinthine nature of the welfare system."

"New programs were grafted onto the existing system over time, each intended to address a perceived problem afflicting people in poverty, but they can interact in ways that can deter people from striving to create a better life for their families. That’s part of the reason the status quo system, which the Government Accountability Office estimates spends $742 billion at the federal level each year, has achieved such lackluster results to date."