It Sure Looks Like This Obamacare Program Has Led to More People Dying

Under the health law, Medicare started penalizing hospitals for too many readmissions. Now mortality rates are up.

By Peter Suderman of Reason. Excerpts:

"Take the hospital readmissions program built into Obamacare. The program derived from a simple observation that hospitals were treating lots of people who would then return for more treatment within the month. Unnecessary readmissions cost Medicare an estimated $17.5 billion a year. If hospitals were treating people effectively, the thinking went, those people shouldn't need to return so soon.

So the health law instituted a Medicare payment penalty for hospitals with too many readmissions for pneumonia, heart failure, and heart attack. Since 2012, Medicare has assessed about $2 billion in penalties on hospitals with too-high readmissions rates.

Hospital groups have argued that these payments are punitive and unfair, particularly to so-called safety net hospitals that serve the poorest, sickest patients. These patients tend to have higher readmissions rates, and the hospitals that treat them were more likely to be hit with payment reductions. (Earlier this year, the Trump administration changed the penalty structure for safety net hospitals.)"

"The study, published in the Journal of the American Medical Association (JAMA) and conducted by by researchers associated with Beth Israel Deaconess Medical and Harvard Medical School, looked at hospitalizations between 2005 and 2015. It found that "30-day post-discharge mortality"—the number of people who died within a month of leaving the hospital—increased for heart failure patients after the readmissions penalty program was implemented.

Although heart failure mortality was already on the rise, the rate of increase became more rapid after Medicare started penalizing readmissions. In addition, mortality rates amongst pneumonia patients, which had been stable, increased.

Fewer people were being readmitted to hospitals, but more people were dying.

This is not the first study to conclude that the program increased mortality. A separate JAMA study last year looked at about 115,000 Medicare patients and also found that although readmissions for heart failure were down, mortality had increased, with about 5,400 more people dying annually."

The new study notes that "the increase in mortality for heart failure and pneumonia were driven mainly by patients who were not readmitted within 30 days of discharge."

Let's not emphasize behavioral economics

By Scott Sumner.

"The Atlantic has an article decrying the fact that economists are refusing to give behavioral economics a bigger role in introductory economics courses. I’m going to argue that this oversight is actually appropriate, even if behavioral economics provides many true observations about behavior.

The core ideas of economics are extremely counterintuitive and are not accepted by most people.  Thus economists face a difficult challenge in teaching the subject to non-economists.  As an analogy, quantum mechanics seems very counterintuitive to me, and thus I have great difficulty in understanding the subject.  It’s hard work teaching basic economics.

Most people find the key ideas of behavioral economics to be more accessible than classical economic theory. If you tell students that some people have addictive personalities and buy things that are bad for them, they’ll nod their heads.  And it’s certainly not difficult to explain procrastination to college students. Ditto for the claim that investors might be driven by emotion, and that asset prices might soar on waves of “irrational exuberance.”  Thus my first objection to the Atlantic piece is that it focuses too much on the number of pages in a principles textbook that are devoted to behavioral economics.  That’s a misleading metric.  One should spend more time on subjects that need more time, not things that people already believe.

The article suggests that behavioral economics could be very useful to policymakers.  I see little evidence for this claim.  The author mentions the housing bubble, but how would behavioral economics have helped policymakers in that scenario?  If even the “masters of the universe” on Wall Street struggle to come up with behavioral finance theories capable of beating the market, does anyone seriously believe that bureaucrats in Washington will be able to “market time” well enough to spot asset price bubbles and regulate accordingly?  If so, we should provide them with a nest egg to invest and tell them that from now on they’ll earn no salary, rather they’ll have to survive on their profits from shorting asset price bubbles.

Seriously, the problems in 2008 were due to things like moral hazard in the financial system and unstable NGDP growth, which are well covered by conventional, non-behavioral economics.  And even if housing prices in 2006 were a bubble, it certainly didn’t cause the 2008 recession.  The Fed could have offset the effects of the housing slump with easier money in 2007 and 2008.

Politicians already tend to believe behavioral economic theories. Indeed there are many public policies that are almost entirely based on behavioral economics, most notably the war on drugs.  Politicians believe that people foolishly consume addictive drugs, which is why they have enacted laws that led to the imprisonment of 400,000 Americans in an attempt to stop this “irrational behavior”.  Has it worked?

Behavioral theories are sometimes used to justify policies that encourage saving.  And indeed some companies now make the adoption of a company pension the default option for newly hired employees.  Unfortunately, our government actually has a policy of discouraging saving.  Behavioral economics tells us that public policy should be more pro-saving, but then so does conventional economics.

Whenever I speak with non-economists, they almost always seem more enthusiastic when the discussion comes around to behavioral economics.  “That’s what economists should focus on!”  They all seem to think that economists assume too much rationality, and that we should switch to a more behavioral approach.  But here’s the problem.  Non-economists also tend to reject the central ideas of basic economics, and for reasons that are not well justified.  For the economics profession, our “value added” comes not from spoon feeding behavioral theories that the public is already inclined to accept, rather it is in teaching well-established basic principles of which the public is highly skeptical.  Thus we should try to discourage people from believing in the following popular myths:

1.    People don’t respond very strongly to economic incentives.  (I.e., the demand for life-saving drugs is very inelastic.)
2.    Imported goods, immigrant labor, and automation all tend to increase the unemployment rate.
3.    Most companies have a lot of control over prices.  (I.e. oil companies set prices, not “the market”.)
4.    Policy disputes over taxes and regulations are best thought of in terms of who gains and who loses.
5.    Experts are smarter than the crowd.
6.    Speculators make market prices more unstable.
7.    Price gouging hurts consumers.
8.   Rent controls help tenants.

These myths are all widely believed by the general public.  Teaching behavioral economics is not a good way to get people to “think like an economist”, indeed it gets in the way.  Our primary goal should not be to add new information, it should be to have people unlearn false ideas about the world.  I’m not knowledgeable enough to have a good overview of the utility of behavioral economics.  But even if it is useful it doesn’t really belong in a principles of economics course, except as a way of briefly acknowledging that the rational choice model is a useful fiction and not a perfect description of human behavior.  We first need to teach basic economic principles.

That doesn’t mean that I agree with the way that economics majors are currently being taught.  Our intermediate level courses are far too theoretical; they waste students’ time on lots of minor theories that would only be useful for people planning to do graduate work in economics.  (Most students do not.)  Too many homework problems with Cobb-Douglas utility, Hicksian demand, marginal rates of substitution, Giffen goods, gross substitutes, indifference curves, etc.  Some of that is appropriate, but all economics courses should focus heavily on applied economics.  Outside of grad school, every course should be taught as if it’s the last time students will ever encounter those theories, because it usually is. Just teach enough theory for students to handle the applied courses in their major.

When I was young, an intermediate micro textbook by Deirdre McCloskey was less mathematical than many current books, and did a nice job of providing an interesting set of applications.  When I look at what young economics students are forced to learn today, I feel sorry for the millennials.

Indeed we’d probably be better off using principles texts for our intermediate economics courses.  Teach out of the exact same book as in the principles courses, but do so at a higher intellectual level.  Just as a literary scholar might re-read Hamlet 50 times, each time gaining a deeper understanding."

New Cato Report: A Border Wall Won’t Stop Drug Smuggling—Marijuana Legalization Has

By David Bier.

"President Trump has repeatedly cited drug smuggling as a reason to build a wall along the Southern border. But my new Cato policy analysis shows that, if stopping drug smuggling is the goal, a border wall is about the worst possible investment. Here are a few of the main findings:

• Hundreds of miles of border fences built from 2003 to 2009 had no effect on marijuana smuggling.
• Marijuana legalization starting in 2014 has cut marijuana smuggling between ports of entry (i.e. where a wall would go) 78 percent from 114 pounds per agent in 2013 to just 25 pounds per agent in 2018.  
• Since marijuana is the primary drug smuggled between ports of entry, the total value of all drugs seized by the average Border Patrol agent fell 70 percent from 2013 to 2018.
• As a result, the average inspector at ports of entry made drug seizures that were three times more valuable than those made by Border Patrol in 2018. In 2013—prior to legalization—the average Border Patrol agent made more valuable seizures.
• By weight, the average port inspector seized 8 times more cocaine, 17 times more fentanyl, 23 times more methamphetamine, and 36 times more heroin than the average Border Patrol agent seized at the physical border in early 2018.

The best proxy measure for changes in drug smuggling is the amount of drugs seized by Border Patrol. To control for enforcement levels, the paper looks at seizures per agent. From 2003 to 2013, the rate of seizures per agent was virtually constant, even as the number of agents doubled and the government constructed hundreds of miles of border fences. But enforcement didn’t stop the flow—only when states, starting in 2014, started to fully legalize marijuana did marijuana smuggling decline

Because marijuana is primarily smuggled between ports of entry, the most valuable drug smuggling now occurs at ports of entry. As Figure 2 shows, Border Patrol was seizing more drugs—by value—in 2013, but by 2018, value of drugs seized at ports of entry was three times the value of drugs seized between ports of entry by Border Patrol. In other words, a border wall would not target the most valuable drugs crossing the border.

All of this should inform policymakers on how to address illegal immigration as well. Policies that make legal immigration easier undermine the incentivizes for black market activity. As Figure 3 shows, when lesser-skilled guest worker admissions increase, the number of apprehensions per Border Patrol agent declines. Since 1949, a 10 percent increase in guest workers was associated with an 8.8 percent decrease in apprehensions per agent. The current H-2A and H-2B guest worker programs for seasonal workers are already helping the situation greatly, but they could be improved and expanded on to cut illegal entries further.

If Congress wants to address drug smuggling, it should legalize marijuana nationwide and invest in better ports of entry, not build a wall. The same lessons that drug smuggling have provided should apply to illegal immigration, cutting demand for illegal immigration by making more legal options available to immigrants."

Russia's farm sector increases output after becoming more capitalistic

See Another neoliberal miracle by Scott Sumner. Excerpt:

"So how did this miracle occur?

This roaring output is the result of a confluence of short- and long-term factors. Since the Soviet Union’s collapse, farming has undergone a gradual transformation from “a fantastically ineffective collective model to effective capitalism”, says Andrei Sizov, head of SovEcon, an agricultural consultancy in Moscow. Although the state’s overall role in Russia’s economy has grown, agriculture has largely remained in private hands, fuelling competition."

President Xi Embraces Marx, Rejects Coase And The Facts

By Steve Hanke.

"China is slowing down. Forget all the reported statistics and those that have recently been discontinued—like Guangdong’s monthly purchasing managers’ index—money and credit tell the tale. Indeed, there is a strong link between the broad money growth in China and nominal GDP growth. For example, during the 2003-2017 period, the money supply (M2) grew at an average annual rate of 14.92% and nominal GDP grew at a 14.67% annual rate.

The chart below indicates that both money and credit growth rates in China have declined rapidly over the past two years and are well below their trend rates of growth. The money supply (M2) rate of growth is only about 8% yr./yr.; whereas, its trend rate is nearly double that.

So, China’s economic slowdown is baked in the cake. In addition to that, deepening international trade tensions and the heightened degree of nervousness among the Chinese public set the stage earlier this week for President Xi’s address to some 3,000 officials and guests in the Great Hall.

The occasion for Xi’s much anticipated address was the 40^th anniversary of China’s opening towards a more capitalist, market-oriented economic system—an opening that was presided over by the late Deng Xiaoping. The ensuing doses of capitalism worked their magic and have fueled the world’s greatest economic leap forward on record.

China’s leap forward has been documented and analyzed by my good friend and the late Nobel Laureate Ronald Coase and his co-author Ning Wang in How China Became Capitalist (Palgrage Macmillan, 2012). Of note is the fact that Coase celebrated his 101^st birthday in 2012, the year in which this brilliant, and Coase’s last, book was published.

Contrary to Chinese Communist Party propaganda, which holds that the Party’s “visible hand” was responsible for China’s rise, Coase and Wang show that it was Adam Smith’s “invisible hand” that did the trick in China.

Coase and Wang prove that China’s embrace of capitalism and free markets was driven by four “marginal revolutions.” First, there was the “household responsibility system” in agriculture. This arose spontaneously and allowed farmers to sell some of their products at free-market prices. The second revolution was in townships and villages, where they were allowed to operate like businesses that produced and sold output at market prices. The third revolution allowed budding entrepreneurs to participate in the “individual economy” (read: the private, free-market economy). And the fourth revolution involved setting up “special economic zones”—most notably in the Guangdong and Fujian provinces, such as in the city Shenzhen, and in many coastal cities, like Shanghai.

As a result of these revolutions, Coase and Wang concluded that a vibrant non-state sector arose like a phoenix in China and stood in sharp contrast to the stagnant state sector. In short, China’s phenomenal growth story is one of incremental openings to capitalism and free markets. The Chinese lesson is clear: to grow, you must liberalize the economy.

Apparently, President Xi has rejected Nobelist Coase’s facts and analysis. During his address, Xi dusted off the well-worn Communist Party, Marxist-Leninist doctrine. As Xi put it, “Let contemporary Chinese Marxism shine even more brilliant rays of truth.” He stressed that everyone must worship at the altar of the Communist Party, and that there would be no debate about the Party’s visible hand that would control the economy and defend the state sector (read: zombie state-owned enterprises).

Although President Xi presented no specifics, he was clear that the Coasian capitalist party never occurred, or if it did, that it was over. There is only one party in China: The Communist Party."

Climatologist counters climate-disaster predictions with sea-level report

By Valerie Richardson of The Washington Times. Excerpts:

"In her latest paper, Ms. [Judith] Curry found that the current rising sea levels are not abnormal, nor can they be pinned on human-caused climate change, arguing that the oceans have been on a “slow creep” for the last 150 years — before the post-1950 climb in carbon-dioxide emissions."

"Her Nov. 25 report, “Sea Level and Climate Change,” which has been submitted for publication, also found that sea levels were actually higher in some regions during the Holocene Climate Optimum — about 5,000 to 7,000 years ago.

“After several centuries of sea level decline following the Medieval Warm Period, sea levels began to rise in the mid-19th century,” the report concluded. “Rates of global mean sea level rise between 1920 and 1950 were comparable to recent rates. It is concluded that recent change is within the range of natural sea-level variability over the past several thousand years.”"

"the disaster scenarios are driven by the most extreme forecasts of carbon-dioxide emissions, known as RCP8.5, which she and other critics have described as so extreme as to be implausible."

"a more appropriate estimate would be about 0.2 to 1.5 meters, or six inches to five feet, and that anything over two feet is “increasingly weakly justified.” Mean sea level has risen by about seven to eight inches since 1900."

"Ms. Curry agreed that there is a human-caused component to the problem, but said it has more to do with the earth sinking than the oceans swelling.

"She cited groundwater withdrawal in the Chesapeake Bay area, which has also caused sinking.

“That’s really underappreciated, this whole issue of problems with coastal engineering that we’ve caused that have made things worse,” Ms. Curry said."

"She said she doesn’t believe her findings on sea-level rise are particularly controversial, saying that they jibe with those of the U.N.’s Intergovernmental Panel on Climate Change.

“It’s pretty well-documented in the literature,” said Ms. Curry."

‘Means Tested’ Welfare Means Nothing in Practice

By Robert Doar. He is a fellow at the American Enterprise Institute and a former commissioner of the New York City Human Resources Administration. Excerpts: 

"In previous periods of rising employment and income, takeup rates in assistance programs dropped. This hasn’t been the case in the years following the Great Recession, even after accounting for ObamaCare’s expansion of Medicaid. What gives?

A recent report on Medicaid in Louisiana may provide some insight. It includes findings that Sen. John Kennedy has called “stunning” and “breathtaking.” To those of us who follow enrollment numbers in Medicaid and SNAP, it was hardly a surprise at all."

" Federal and state program administrators have consciously and significantly loosened the verification processes that once were part of enrolling applicants in SNAP, Medicaid and other programs."

"It used to be a given that before enrolling an applicant in a means-tested program, administrators would ensure that his income was low enough to qualify. We would later verify our findings using other data sources to see if the applicant had earnings he hadn’t reported on his application. And there was a required “asset test” to make sure that the public wouldn’t get stuck paying for health insurance for property owners who tried to game the system.

But over the past decade the federal government has streamlined the application process in an effort to enroll as many people as possible. Regulators have told states they no longer have to run many of these checks, and have even prohibited states from requiring certain tests. As a result, people who once would have been caught underreporting their income are now slipping through, and more people receive benefits than are truly eligible.

ObamaCare’s Medicaid expansion bears most of the blame. The new law made people earning up to 138% of the federal poverty line eligible to receive Medicaid. The Medicaid marketplace it created includes no mandatory verification processes, allowing people simply to declare their income and start receiving benefits. As described in a 2013 issue brief from the Centers for Medicare and Medicaid Services touting “simplified, real-time verification”: “Eligibility will be verified primarily through self-attestation.” Simplified indeed."

"Under the “federal matching” framework in Medicaid, the federal government reimburses states for their health spending in a way that encourages states to spend more and care little about the cost."

"ObamaCare also eliminated asset testing in Medicaid altogether"

"The same trend of minimizing verification requirements has occurred with SNAP."

There’s little evidence that the economic-development incentives offered by cities and states work

See The Amazon HQ2 Fiasco Was No Outlier by Nathan M. Jensen. He is a professor of government at the University of Texas, Austin and the co-author (with Edmund J. Malesky) of Incentives to Pander: How Politicians Use Corporate Welfare for Political Gain. Excerpts:

"When Amazon announced last month that it would split HQ2 between New York City and Arlington, Va., losing applicants cried foul: They accused Amazon of an extraordinary bait-and-switch, enticing dozens of bidders to increase the competition and the incentive offers, only to end up with two of the most obvious candidates all along.

The reality is that this sort of competition for big projects, while unusually large in the Amazon case, is the rule not the exception in economic development and has been for a long time. It has been happening in the U.S. since Alexander Hamilton received local tax exemptions in 1791 to build up the city of Paterson, N.J. as an industrial center. What’s different in our own era is that most companies aren’t actually changing their decisions based on incentives but are pocketing substantial benefits anyway.

Studies show that the cost and frequency of incentive packages—which cities and states typically offer companies to either relocate or stay put—have been rising. Secrecy surrounding many of the deals makes a full accounting difficult, but a new database assembled last year by the Upjohn Institute for Employment Research covers programs for 47 cities in 33 states. It found that the cost of such incentives more than tripled from 1990 to 2015, to $45 billion.

A Washington, D.C.-based watchdog group, Good Jobs First, has compiled data on deals worth more than $50 million each and reports that cities and states have awarded companies nearly 400 incentive packages of that size since the late 1970s—more than a third of them just since 2012. Nineteen of those deals surpassed $1 billion each. The largest package ever accepted was Washington state’s $8.7 billion in response to Boeing’s threat to leave the state in 2013, the group says. The biggest deal known to have been offered without being accepted was disclosed this week through a public-records request: more than $22 billion over 99 years from Dallas-Forth Worth International Airport and nearby cities, for HQ2.

Despite the giant dollar amounts, the Upjohn Institute found that investors mostly don’t change their investment decisions based on incentives. A 2018 review by economist Tim Bartik of 30 different studies of incentive offers concluded that 25% or fewer of the investors were swayed by the offers. The other 75% or more were coming anyway, Dr. Bartik found; they were just capturing added benefits from taxpayers."

"numerous companies applied for incentives after they had already broken ground and, in some cases, after they had completed building. A few even noted in their applications that they weren’t looking at other states for their investments. Yet all of these companies received taxpayer dollars for doing what they would have done anyway."

"Though incentives are rarely effective in changing firms’ investment decisions, they do allow politicians to attend ribbon-cutting ceremonies where they can highlight their own role in attracting a new company (or retaining an old one) and creating jobs."

"Defenders of economic incentives often argue that, though the system is flawed, it is necessary in order for localities to compete, or that the benefits more than pay for themselves. Yet some cities and states have studied their own programs and found reasons to re-evaluate. Virginia’s 2017 examination of its film incentive program found that every $1 in tax credits yielded only 20 cents in tax revenue, spurring recommendations to reform or cancel it. Washington, D.C.’s November evaluation of its economic development incentives showed that numerous programs have targeted firms that were coming anyway. California’s Legislative Analyst’s Office reviewed the state’s flagship economic development incentive program, California Competes, and called for ending it."

The PUC should let competition work in the Texas electricity market

By Bill Peacock. He is the vice president of research at the Texas Public Policy Foundation. Excerpts:

"Before Texas began its transition to a competitive electric market in January 2002, Dallas ratepayers were forced to buy their electricity from one electric utility at one price — about 14 cents per kilowatt- hour in 2018 dollars.

 

Today, Dallas consumers can choose from more than 80 plans offered by about 30 retail electric providers at an average price of about 10 cents per kWh, with fixed plans as low as 7 cents. That’s half the price of electricity 17 years ago."

"The push for less competition started back in 2012 with generators, and their Wall Street bankers, pointing to less-than-satisfactory profit margins as the cause of lower reserve margins. The reserve margin measures the cushion of extra generating capacity during times of peak electricity demand. The PUC commissioners appear concerned the reserves are insufficient, even though, after seven years, no problems have occurred."

"Generators don’t trust the Texas market because they are not sure they can compete well enough to earn a profit; in other states power generation companies can go to the government to get money. Regulators have a hard time trusting markets because they can’t control them, and if the lights go out regulators will get blamed, even though it is might not be their fault.

How might this lack of trust undermine the Texas market?

Texas has the most competitive, successful electricity market in the world. What sets it apart is that market participants — not the government — determine how much generation is built using market prices to guide them. Texas consumers pay only for the energy they use, unlike in other markets where consumers pay for both the electricity and the generation capacity to produce it.

However, the generators’ distrust of their ability to earn sufficient profits has led to hints that if the commissioners don’t intervene in the market by forcing prices higher — as much as $4 billion a year — power generation companies may decide not to build enough new generation to keep the lights on.
A $4 billion price hike would mean an increase in electricity costs of about 13 percent. The way the PUC would achieve this is by abandoning market pricing at key times in order to boost reserve levels. Which means Texas’ “energy-only” market would cease to exist, or would exist in name only. In its place we essentially would have a capacity market, where consumers pay generators just to stay in business."

"The change PUC commissioners are considering, implemented through something called the operating reserve demand curve, or ORDC . . . Whatever the market price is for electricity, when certain conditions are met the ORDC would kick in and automatically increase the price that consumers pay generators. All in the hope (not guaranteed) that the generators will use the money to build new generation capacity, i.e., plants. If consumers wind up needing the electricity, though, they will have to pay for it again in their electricity bills.

The Texas electricity market is not a failure; reserves are projected to be 8 percent this summer, rising to more than 12 percent within two years. Price increases over the last year resulted in hundreds of millions of dollars in additional revenue to generators last summer, signaling that returns on investment are improving."

New report says millennials are broke because they’re making choices out of order

By Kathleen Elkins of CNBC. Excerpts:

"86 percent of young people who got married before having kids are among the middle or top third of earners. Just 53 percent who put childbearing first have incomes in the middle or top third, meaning 47 percent of millennials who have a baby first are considered lower income."

"The new findings support the idea of a “success sequence, ” which was first introduced by Ron Haskins and Isabel Sawhill of the Brookings Institution in 2009. It says that the path to economic success and away from poverty is to do things in order: 1) Earn at least a high school diploma, 2) get a full-time job, and 3) marry before having kids.

“Only three percent of millennials who followed all three steps, in sequence, are poor by the time they reach their late 20s or early 30s,” the AEI and IFS report. On the flip side, more than half (53 percent) of millennials who didn’t follow the sequence are in poverty."

A life-long Marxist says irresponsible behavior is a major cause of poverty

See Oscar Lewis, Personal Responsibility, and Poverty: The Marxist anthropologist's findings were credible precisely because his findings clashed with his ideology and loyalties, but others didn't see it that way by Bryan Caplan. Excerpts:

"In the 50s and 60s, Oscar Lewis could easily have been the world’s most famous anthropologist. He wrote a whole series of painstaking ethnographies of poor families from Mexico, Puerto Rico, and India. My 12th-grade AP Government class actually made his Five Families: Mexican Case Studies in the Culture of Poverty required reading. Only recently, though, have I realized that these books aren’t just fascinating in their own right; they’re also illuminating at the meta level.

Here’s how.

1. Lewis, an avowed Marxist, spends his career closely studying poor families. The resulting empirics are beyond bleak: Lewis describes social worlds full of impulsive sex, poor work habits, substance abuse, violence, and cruelty to children in appalling detail.

2. A few non-leftists notice that, despite his Marxist interpretation of his own findings (capitalism has to be the root cause, right?), Lewis basically confirms their “reactionary” view that poverty is largely caused by irresponsible behavior of the poor themselves. After all, impulsive sex, poor work habits, substance abuse, violence, and cruelty to children are very bad ways to make extra money or stretch tight family budgets. Any sensible low-income person would avoid them like the plague.

3. Leftists hear what these “reactionaries” are saying—and lash out at Lewis for “blaming the victim.”

4. Other leftists push back, insisting that Lewis was a Marxist in good standing, full of sympathy for the poor, and therefore definitely not guilty of “blaming the victim.”

Before you dismiss this as a caricature, read Harvey and Reed’s “The Culture of Poverty: An Ideological Analysis” (Sociological Perspectives, 1996), which provides a well-written window into the whole Lewis affair."

"By normal standards, of course, this grossly undermines any favorable thing Lewis has to say about the poor. If you’re a Marxist who idolizes the working class, unions, and “the downtrodden,” we should expect you to “find” that the poor are blameless victims of a wicked society.

Lewis’ research is credible precisely because his findings clash with his ideology and loyalties. And that’s why his left-wing critics are strategically wise to condemn him. When non-leftists say that irresponsible behavior is a major cause of poverty, you can plausibly object, “Sure, that’s what reactionaries like you find.” But when a life-long Marxist says the same, logic tells you to change your mind. Or kill the messenger."

The Myth That Standard Oil Was a “Predatory Monopoly”

John D. Rockefeller obsessed over improving efficiency and cutting costs through economies of scale and vertical integration

By David Weinberger of FEE. Excerpt:

"Take the case against Standard Oil, which is regarded today as textbook evidence of predatory monopoly power. In 1870, when it was in its early years, Standard Oil owned just 4 percent of the petroleum market. John D. Rockefeller, however, obsessed over improving efficiency and cutting costs. Through economies of scale and vertical integration, he vastly improved oil-refining efficiency. His business grew as a result.

By 1874, his share of the petroleum market jumped to 25 percent, and by 1880 it skyrocketed to about 85 percent. Meanwhile, the price of oil plummeted from 30 cents per gallon in 1869 to eight cents in 1885. Put simply, Rockefeller increased production and lowered prices while creating thousands of well-paid jobs along the way (he usually paid his workers significantly more than his competition did). His business was a model of free-market efficiency.

But neither his competitors nor the US Supreme Court seemed to take note. In 1911, the court declared Standard Oil a monopoly and ordered its breakup. Revealingly, as scholars have noted, the court made no mention of either predatory pricing or withholding production, as monopoly theory maintains. In fact, economist John S. McGee reviewed over 11,000 pages of trial testimony, including the charges brought by Standard Oil’s competitors. Publishing his findings in the Journal of Law and Economics, he concluded that there was “little to no evidence” of wrongdoing, adding that “Standard Oil did not use predatory price cutting to acquire or keep monopoly power."

Furthermore, and also in contradiction to monopoly theory, Standard Oil’s share of the market had declined from close to 90 percent in the late 1800s to about 65 percent at the time of the court’s ruling. These facts, however, did not faze the judiciary. The court ruled that because Standard Oil had consolidated some 30 divisions under one single management structure it counted as a monopoly. In other words, Standard Oil did precisely the opposite of what monopoly theory maintains—it reduced rather than raised prices, it increased rather than cut production, it lost rather than “controlled” market share, and it paid its employees more rather than less than its competitors—yet the theory that Standard Oil engaged in “predatory practices” and “exploited” consumers has prevailed in our history books.

But the truth is the theory is as lacking as the evidence is scarce. First, it is incredibly risky for a company to artificially hold down its prices in hopes that it drives competitors out of the market. No company knows how long that might take—weeks, months, years? Who can afford that risk? Second, at any point a competitor could enter the market and force a predatory business to continue driving its prices down, thus inflicting even more financial pain. Third, artificially low prices encourage increased consumer demand, meaning a business that sells product below cost must step up its production to meet higher demand, accelerating its financial losses."

Low-Tax States, Led By Texas, Outpace Job Growth In High-Tax States By 71%

By Chuck DeVore. Excerpt:

"One important aspect of the 2017 tax law was its limitation of the State and Local Tax (SALT) deduction for filers who itemize their individual income taxes. The new tax code limits the SALT deduction to $10,000 per household, reducing the federal subsidy of state and local taxes. As a result, the federal tax law change acted to change the relative tax burden at the state level as if all 50 states adjusted their tax rates at once. So while most taxpayers received a federal tax cut, some higher income earners in high-tax states like California saw a smaller tax cut than their counterparts in low-tax states like Texas. A select few, however, saw an increase in their overall tax burden.


Since businesses with fewer than 100 workers employ 57% of the U.S. workforce and a large share of these firms are organized as sole proprietorships (where the small business owner pays personal income taxes instead of corporate income taxes), it stands to reason that the new tax law’s limitation on the SALT deduction may have an effect on job growth at the state level. This is likely because the ability to make and keep more of the money you earn is even more affected by the taxes in your home state.

The monthly state level jobs data supports the theory that the tax law has fundamentally altered the tax incentive environment at the state level. This is clear when looking at the 50 states and separating them into three tax levels, each having about the same employment base. Looking at the average itemized SALT deduction in 2014, there are 19 low-tax states, 21 medium-tax states, and 10 high-tax states.

Since the Trump tax cut in December 2017, private sector job growth has been 70.5% higher in the low-tax states than in the high-tax states through November 2018.

States Grouped by State & Local Tax Burdens		Average SALT Deduction Claimed in 2014	Private Sector Jobs (seasonally adjusted in 000s)		Comparative Employment Growth Dec. 2017 to Nov. 2018
States	Tax Burden		December 2017	October 2018	Growth Rate	Low-Tax Job Rate vs. Other
19	Low	$6,889	42,433	43,561	2.66%	-
21	Average	$9,710	41,418	42,104	1.66%	60.3% Higher
10	High	$15,000	40,455	41,086	1.56%	70.5% Higher

Before the tax cut, job growth in the low-tax states was marginally higher than in the high-tax states over the prior two years.

The table below shows private sector job growth from December 2017 to November 2018 in the three most-populous states in each tax category. The three most-populous low-tax states do not have a personal income tax.

Low Tax	Job Growth %
Texas	3.37%
Florida	2.98%
Washington	3.18%
Medium Tax
Pennsylvania	1.14%
Ohio	2.24%
Georgia	2.29%
High Tax
California	1.65%
New York	1.32%
Illinois	0.76%

Nationwide, the rate of private sector job growth over the past 11 months was 2%. Of the 19 low-tax states, 13 experienced job growth at or above the national average. Among the 21 medium-tax states, seven saw faster job growth than the nation as a whole. With the ten high-tax states, however, only two, Oregon and Maryland, added jobs at a faster rate than did the nation.

In Oregon’s case, that state was at the lowest end of claimed SALT deductions, with an average of only $11,800, compared to $21,000 in New York. Further, relative to California’s very high taxes, Oregon’s tax burden seems a comparative bargain, leading many Californians to make the move north. As for Maryland, it, along with Virginia, a mid-range state for taxes, both continue to benefit from the growth of the federal contractor workforce in the greater Washington, D.C. area.

Along with the incoming House Speaker Rep. Nancy Pelosi (D-CA), many Democrats (especially those representing high-tax states) would like to repeal the $10,000 cap on SALT deductions, even though an analysis by a left-of-center think tank determined that 56.5% of the tax break would accrue to households in the top 1% of income."

Trump's Tax Cuts: One Year Later, There's Much To Celebrate

Investor's Business Daily editorial. Excerpt:

"Early last year, for example, the Congressional Budget Office's pre-tax-cut forecast had 2018 growth at just 2% and the unemployment rate at 4.4%. GDP growth is well ahead of that pace, and the unemployment rate is just 3.7%.

Contrary to Democrats' claims, workers are clearly sharing in the tax-cut windfall. Not just through tax-cut bonuses and lower withholdings, but through increased opportunities and wage growth.

As we noted in this space yesterday, blue collar workers are now in short supply, "reversing a decades-long trend in the U.S." Average hourly wages are rising at 3.1%, the fastest rate since 1999. Unemployment rates are at lows not seen since 1969, and for minority groups, they're lower than any time on record. Median household income is at all-time highs.

None of this is a continuation of the Obama economy, which had flatlined the year before Trump took office. Growth was so sluggish that conventional wisdom was the U.S. economy was destined for slow growth in perpetuity.

But even if Trump's tax cuts did boost the economy, surely critics are right that they are driving the deficit into the stratosphere.

Nope.

Take a look at the nearby chart. It shows the growth in spending and revenues since 2001, the last year the federal government ran a budget surplus.

What you see is that revenues are up roughly 75%. But spending has more than doubled.

And over the next five years, revenues will continue to climb, even with the Trump tax cuts in place. But the CBO says that, if nothing else changes, federal spending will continue to climb at a faster pace.

The chart reveals something else. After rebounding from the recession, revenue growth flatlined starting in 2015. That was three years before the Trump tax cuts went into effect. The CBO expects revenues to resume their steady climb starting next year. So, revenues flatlined before Trump's tax cuts went into effect, and will steadily rise after, and we're supposed to believe that the tax cuts are the problem?"

Eliminating student debt isn’t progressive

By David Leonhardt.

"The fatal flaw of universal student-debt cancellation is that it’s not, in fact, progressive. It mostly benefits the upper middle class. “Education debt,” as Sandy Baum and Victoria Lee of the Urban Institute have written, “is disproportionately concentrated among the well-off.” The highest-earning quarter of the population holds about half of all student debt, according to Baum and Lee. Which means that universal student debt cancellation would be a giant welfare program for the bourgeoisie."

"A recent Brookings Institution study by Judith Scott-Clayton found that the loan-default rate for borrowers with a bachelor’s degree was less than 8 percent. The default rate for borrowers without any degree was a miserable 40 percent.

I know that some four-year college graduates really are struggling. But this country has too many big problems to start showering the upper-middle-class with enormous government benefits."

Single Payer’s Misleading Statistics

Mediocre U.S. rankings in infant mortality and life expectancy have little to do with health-care quality.

By Scott W. Atlas. Excerpts:

"America’s rate of infant mortality—death within the first year after birth—was 5.9 per 1,000 live births in the latest statistics, 32nd among 35 developed countries, according to the Organization for Economic Cooperation and Development. But these aren’t apples-to-apples comparisons. Unlike many other countries, the U.S. strictly adheres to the World Health Organization’s definition, recording as a live birth any baby, “irrespective of the duration of the pregnancy,” who “breathes or shows any other evidence of life.”

By contrast, WHO noted in a 2008 report, it is “common practice in several western European countries to register as live births only those infants who survived for a specified period.” Infants who don’t survive are “completely ignored for registration purposes.” A British Journal of Obstetrics and Gynaecology study of Western Europe found that terminology alone caused up to 40% variation and 17% false reductions in infant mortality."

"A Centers for Disease Controlstudy found that standardizing for gestational age eliminated 68% of the difference in infant mortality between Sweden and the U.S. The CDC concluded “the primary reason for the United States’ higher infant mortality rate when compared with Europe is the United States’ much higher percentage of preterm births.”

American physicians consistently make heroic efforts to save extremely premature infants—unlike their European counterparts, who limit necessary technology and then don’t even count such babies when they die. Official data from the U.S. National Center for Health Statistics and the European Perinatal Health Report show that when it comes to newborns who need medical care and have the highest risk of dying, the U.S. has the world’s third-best infant-mortality rate—trailing only Sweden and Norway."

"Throughout the developed world, racial and ethnic minorities have double the infant mortality of the majority—including in countries with government-run medical systems like Canada and England. U.S. population heterogeneity is four to eight times as high as in countries like France, Norway, Sweden and the U.K. Countries with more homogeneous populations have lower infant mortality, but that doesn’t necessarily reflect better health-care quality."

"The U.S. has a substantially higher obesity rate than any other developed nation—again, a problem, but not one of inferior medical care. According to the Organization for Economic Cooperation and Development’s Health Statistics 2018, 40% of the U.S. population is obese, compared with 17% in France, 13% in Sweden, 10.3% in Switzerland, 9.8% in Italy and 4.2% in Japan, the country with the longest life expectancy. Based on the estimated 6.5 years of lost life expectancy, obesity alone accounts for approximately 40% or more of the differences in life expectancy between the U.S. and almost every other country."

"Two-thirds of deaths among Americans between 1 and 24 are not from illness, and so are more than 40% of deaths from 25 to 44. For men between 20 and 24, accidents and homicides account for 84% of the gap in mortality rates between Canada and the U.S."

"The world’s leading medical journals report the U.S. has superior results, including for cancer, heart disease, high blood pressure, diabetes, and high cholesterol; the quickest access to life-changing surgeries that permit pain-free mobility and restore vision; superior screening rates for cancer; the earliest access to new drugs; and broad access to safer, more accurate diagnostic technology that forms the crux of modern health care. Even for the lowest-priority care, U.S. wait times are far shorter than for seriously ill patients in peer countries like Canada and the U.K."

The size of American manufacturing continutes to grow

From Don Boudreaux. 

"from page 3 of Michael Hicks’s and Srikant Devaraj’s June 2015 paper, “The Myth and the Reality of Manufacturing in America“:

The size of American manufacturing as represented by the total value of goods produced (GDP) has enjoyed a healthy growth trend almost since the founding of the republic. This trend continued throughout the last several decades, across recessions and trade agreement regimes.

DBx: Yes. But for at least two reasons this truth is not popularly known.

– Most people see only finished manufactured goods, the ones for sale on Amazon, at Walmart, and in Miss Becky’s Country Gifts. The great majority of these goods sport labels that read “Made in [somewhere other than America].” Most people thus conclude that very little is made in America. Most people pause to consider neither that “Made in” labels indicate only the country of any good’s final assembly (which, by the way, is generally a very low-value-added part of the entire production process) nor that many manufactured outputs are intermediate goods that are used in the production of final goods and services.

– Manufacturing employment has fallen – a reality that, as Hicks and Devaraj find, has been driven overwhelmingly by increased worker productivity. Yet it’s easy for demagogues, out of ignorance or guile or both, to use manufacturing-employment figures to frighten voters into swallowing the false line that there is a free-fall in American manufacturing output.

But the most fundamental point to make here is that the fetish for manufacturing is foolish. If you’re a young person who doubts that the fetish for manufacturing is foolish, ask yourself what career you wish to have. Almost certainly the answer is one in the service sector. If you’re a bit older and have children – or much older and have grandchildren – ask yourself what careers you hope your children or grandchildren will have. Almost certainly the answer is careers in the service sector. (My dear, late father, who dropped out of school in the 6th grade and who worked for most of his adult life in the manufacturing sector – specifically, fitting pipes and welding in a shipyard – would have thought me insane had I abandoned my much-higher-paying and far-more-pleasant career in the service sector in order to follow in his footsteps.)"