Evaluating the free market by comparing it to the alternatives (We don't need more regulations, We don't need more price controls, No Socialism in the courtroom, Hey, White House, leave us all alone)
"Had it not
been so exceptionally calm in the run up to this autumn equinox, one
could call the energy crisis a perfect storm. Wind farms stand idle for
days on end, a fire interrupts a vital cable from France, a combination
of post-Covid economic recovery and Russia tightening supply means the
gas price has shot through the roof – and so the market price of both
home heating and electricity is rocketing.
But the root of the crisis lies in the
monomaniacal way in which this government and its recent predecessors
have pursued decarbonisation at the expense of other priorities
including reliability and affordability of energy.
It is almost tragi-comic that this crisis
is happening while Boris Johnson is in New York, futilely trying to
persuade an incredulous world to join us in committing eco self-harm by
adopting a rigid policy of net zero by 2050 – a target that is almost
certainly not achievable without deeply hurting the British economy and
the lives of ordinary people, and which will only make the slightest
difference to the climate anyway, given that the UK produces a meagre 1
per cent of global emissions.
As for the middle-class Extinction
Rebellion poseurs and their road-closing chums from Insult Britain,
sorry Insulate Britain, they are basing their apocalyptic predictions of
‘catastrophe’ and billions of deaths on gross exaggerations. And while
preventing working people earning a livelihood may make them feel good,
it does nothing to solve the real problem of climate change.
Yet this crisis is a mere harbinger of the candle-lit future that awaits us if we do not change course.
It comes upon us when we have barely
started ripping out our gas boilers to make way for the expensive and
inefficient heat pumps the Government is telling us to buy, or building
the costly new power stations that will be needed to charge the electric
cars we will all soon require.
When David Cameron’s energy bill was being
discussed in Parliament in 2013, the word on everybody’s lips was
‘trilemma’: how to ensure that energy was affordable, reliable and
low-carbon. Everybody knew then that renewables were unreliable: that
wind power fully works less than one-third of the time, and that solar
power is unavailable at night (of course) and less efficient on cloudy
winter days. Yet whenever we troublemakers raised this issue, we were
told not to worry – it would resolve itself, they said, either because
wind is usually blowing somewhere, or through the development of
electricity storage in giant battery farms. This was plain wrong. The
task of balancing the grid and maintaining electrical frequency has
grown dangerously the more reliant on wind power we have become – as
demonstrated by the widespread power cuts of August 2019. The cost of
grid management has soared to nearly £2billion a year in the last two
decades.
Wind can indeed be light everywhere and
the grid still needs vast extra investment to transfer wind power from
northern Scotland to southern England. One of the cables built at huge
expense to do just that has failed multiple times and Scottish wind
farms are frequently paid extra to switch off because there’s not enough
capacity in the cables.
As for batteries, it would take billions of pounds to build ones that could keep the lights on for a few hours let alone a week.
So the only way to make renewables
reliable is to back them up, expensively, with some other power source,
responding to fluctuations in demand and supply.
Nuclear is no good at that: its operations
are slow to start and stop. So, ironically, renewables have only
hastened the decline of nuclear power, their even lower-carbon rival
(remember it takes 150 tonnes of coal to make a wind turbine). And in
any case, an inflexible approach to regulation has caused the cost of
new nuclear to balloon – despite it being perhaps the most obvious
solution to our long-term energy needs.
Coal – the cheapest option and the only
energy source with low-cost storage in the shape of a big heap of the
stuff – was ruled out as too carbon-rich, even though countries such as
China are currently building scores of new coal-fired plants. Unlike
those countries, the UK Government has rushed to close its remaining
coal power stations – and banned the opening of a opencast coalmine at
Highthorn on the Northumberland coast last year, despite it winning the
support of the county council, the planning inspector and the courts
when the Government appealed.
Ministers decided they would rather throw
hundreds of Northern workers out of a job, turn down hundreds of
millions of pounds of investment and rely instead – for the five million
tonnes of coal per year gap that we still need for industry – on energy
imports from those famously reliable partners, Russia and Venezuela.
To add insult to injury, the Government
has been handing out hefty subsidies to a coal-fired power station in
Yorkshire, Drax, to burn wood instead of coal, imported from American
forests, even though burning wood generates more emissions than coal per
unit of electricity generated. The excuse is that trees regrow, so it’s
‘renewable’, which makes zero sense then you think it through (trees
take decades to grow – and then we cut them down again anyway).
So that leaves gas with the task of keeping the lights on.
Gas turbines are fairly flexible to switch
on and off as wind varies, they’re relatively cheap, highly efficient
and much lower in emissions than wood, coal or oil. But until 2009, the
conventional wisdom was that gas was going to run out soon.
Then came the shale gas revolution,
pioneered in Texas. A flash in the pan, I was told by energy experts in
this country: and ‘could never happen here anyway’. So Britain – whose
North Sea gas was running out – watched on in snobbish disdain as
America shot back up to become the world’s largest gas producer, with
their gas prices one-quarter of ours, resulting in a gold-rush of
industry and collapsing emissions as a result of a vast, home-grown
supply of reliable, low-carbon energy.
We, meanwhile, decided to kowtow to
organisations like Friends of the Earth, which despite being told by the
Advertising Standards Authority to withdraw misleading claims about the
extraction of shale gas, embarked on a campaign of misinformation,
demanding ever more regulatory hurdles from an all-too-willing civil
service. Nobody was more delighted than Vladimir Putin, who poured scorn
on shale gas in interviews, and poured money into western
environmentalists’ campaigns against it. The secretary general of Nato
confirmed that Russia ‘engaged actively with so-called non-governmental
organisations – environmental organisations working against shale gas –
to maintain Europe’s dependence on imported Russian gas’.
By 2019, shale gas exploration in Britain
was effectively dead, despite one of the biggest discoveries of gas-rich
rocks yet found: the Bowland shale, a mile beneath Lancashire and
Yorkshire.
Just imagine if we had stood up to the
eco-bullies over shale gas. Northern England would now be as brimming
with home-grown gas as parts of Pennsylvania and Texas. We would have
lower energy prices than Europe, not higher, a rush of manufacturing
jobs in areas such as Teesside and Cheshire, rocketing wealth, healthy
export earnings, no reliance on Russian whims (they control the
reliability of supply and the price we pay for imported electricity, as
we are experiencing right now) – and no fear of the lights going out.
But in lieu of that, we could at least
invest in gas-storage facilities, to cushion against the Moscow threat
and any potential disruptions to supply. But no, we chose to close the
biggest of them, Rough, off East Yorkshire, in 2017 and run down our gas
storage to just under 2 per cent of annual demand, far lower than
Germany, Italy, France and the Netherlands.
Why? Presumably because the only forms of
energy that ministers and civil servants respect are wind and solar. Gas
is so last-century, you know!
Yet your electricity bill is loaded with
‘green levies’ that in part go to reward the crony capitalists who
operate wind farms to the tune of around £10billion a year and rising.
Because energy is a bigger part of the household budget of poorer people
than richer people, this is a regressive tax. Because of the price cap
on domestic bills, these levies hit industrial users even harder than
domestic, and thus put up the prices of products in shops and deter
investment in jobs too.
In the past, coal gave Britain an
affordable supply of electricity that was also reliable so long as the
miners’ union allowed it to be. The market mechanisms introduced by
Nigel Lawson in the 1980s gave us greater efficiency, the dash for gas,
cheaper electricity, a highly reliable supply and falling emissions.
The central planning of the 2010s has
given us among the most expensive energy on the planet, futile price
caps, bankrupt energy suppliers, import dependence, rising worries about
the reliability of supply and – because of the fading influence of
nuclear power – not much prospect of further falls in emissions.
So, it’s time to tear up the failed
policies of today. What would I do? Take a leaf out of Canada’s book and
reform the regulation of nuclear power so that it favours newer,
cheaper and even safer designs built in modular form on production lines
rather than huge behemoths built like Egyptian pyramids by Chinese
investors.
Look to America’s example and restart the
shale gas industry fast. Do everything to encourage fusion, the almost
infinitely productive technology that looks ready to go by 2040. And
call the bluff of the inefficient wind and solar industries by ceasing
to subsidise them.
Energy is not just another product: it’s what makes civilisation possible."
"The Wall Street Journal’s editors have written another great editorial,
this time on the expansion of the child tax credit into an UBI
[Universal Basic Income] for children. Parents can now claim a maximum
of $3,000 for those ages 6 to 17 and up and $3,600 for children under
age 6, up from its previous $2,000 level. The expanded part of the
credit begins to decrease as income rises above $75,000 for individuals,
$112,500 for heads of household, and $150,000 for married couples. The
$2,000 credit starts phasing out when income reaches $200,000 for
individuals and $400,000 for married couples.
The credit isn’t just bigger, it is also fully refundable, meaning
that parents who don’t make enough money to pay the income tax will
receive cash from the government in the full amount of the credit
regardless of their income. There is also no work requirement attached
to the benefit and the cash is distributed in monthly payments. These
payments started in July and the Democrats want to expand them through
2025.
The WSJ rightly explains that this is a typical case of government programs starting small and getting bigger overtime.
…what started as a $500 political sop in
the 1990s is no longer really a tax credit. It has kicked free of any
connection to income or taxes and is now a full-fledged entitlement. The
credit traditionally “phased in” as parents earned a modest amount of
income, an attempt to ensure the benefit flowed to families with a
working parent. No longer.
Both parties deserve blame for expanding a program that shouldn’t
even exist – a program that only adds further distortions of the tax
code. And today, some Republicans, like Senator Mitt Romney of Utah, and other conservatives are pushing similar types of child UBI as the one described above.
Here are the kind of benefits we are talking about:
Taxpayers should understand the magnitude
of the benefits. Before the expansion, the average child credit for a
family below 100% of the poverty line was about $975, according to
estimates from the Congressional Research Service. Now it’s $5,421. That
comes on top of other transfer programs such as food stamps and the
earned-income tax credit.
And in case the sentence “The $2,000 credit starts phasing out when
income reaches $200,000 for individuals and $400,000 for married
couples” didn’t give you an clue that this isn’t really an anti-poverty
program, the WSJ explains:
The new child entitlement will reach well
into the middle class, which is part of the political goal. A couple
earning $100,000 that has three children ages 7, 4 and 2 would be
eligible for $10,200 in payments.
For all the talk of getting people out of poverty, this policy will
likely backfire. As shown by the work of Robert Doar, president of the
American Enterprise Institute – and someone who, having run New York
City’s welfare programs from 2007 to 2013, also happens to have a better understanding of this issue than most people who write about welfare – poverty isn’t just about money. Back in June, for instance, he wrote:
My decades of work in New York’s social services agencies make me
skeptical [that these checks will reduce child poverty]. People weather
all kinds of challenges and hardships, and nothing is as simple as it
seems. Sending money is sometimes helpful, but it rarely addresses the
underlying issues.
… This new, no-strings-attached cash from Washington, for example,
will leave unaddressed the serious problems of substance abuse. By
sending checks directly, the Biden administration will sever the contact
between parents and social workers, which helps uncover signs of
addiction.
Not every unmarried, nonworking mother who dropped out of high school has a substance-abuse problem. But many do.
Doar’s experience is confirmed by many scholarly works, including his own, as well as by that of his colleagues at AEI and in other places. Scott Winship, for instance, has a detailed paper
on what the academic evidence says and doesn’t say about the ability of
child allowances, à la Biden or à la Romney, on work and marriage
incentives. As always, it’s complicated. But the bottom line is that
these programs “run the risk of increasing the number of single-parent
families in which no one is employed,” which “would potentially worsen
entrenched poverty in the long run reversing gains the nation has made
since the welfare reforms of the 1990s.”
It’s useful to remember that before the 1990s welfare reforms requiring welfare recipients to work or prepare for work, not only were nearly nine in 10 families on welfare were workless, unwed births rose significantly and most of these families were stuck in long-term poverty, thus fueling a trend of unending, intergenerational child poverty.
While money can help in the short run, the truth is that no country ever got out of poverty because of income redistribution
(a point economist Thomas Sowell took great pains to demonstrate in his
work). If such ‘redistribution’ could deliver such a happy outcome, the
U.S. should have no child poverty at all. As Robert Rector of the
Heritage Foundation recently noted, “before the COVID-19 recession, the U.S. spent nearly $500 billion on means-tested cash, food, housing, and medical care
for poor and low-income families with children. This is seven times the
amount needed to eliminate all child poverty in the U.S., according to
Census figures.”
This is in part due to the fact that most of these benefits aren’t
counted as income in official government poverty reports. But the
reality is that, to make a noticeable improvement on the poverty front,
people need to improve their ability to earn and move up the income
ladder.
One final note: While I may not want a return to the pre-1990s
welfare policies, many Republicans and conservatives seem intent to
rewind ever further back in time, pre-1980s, when their support for
government intervention rendered them indistinguishable from the left.
Sadly, they’ll soon find out this won’t put them ahead because the
Democrats will use this as a way to ask for even more. The WSJ seems to agree:
Republicans have been missing in action on
this seismic policy change, in part because their big government wing
has been pushing the family subsidy as well. We’ve long warned that
Democrats would outbid the GOP once Republicans conceded the principle
of making the tax code an engine of social policy, and here we are."
Democrats plan a federal program to cover childless adults. Insurers will win big but health won’t
By Brian Blase. Mr. Blase, who served as a special assistant to President Trump at the National Economic Council, is president of Paragon Health Institute. Excerpts:
"Medicaid expansion has already fueled insurer profits: A 2018 White House Council of Economic Advisers report
showed insurer stock doubling the growth of the S&P 500 from 2014
through 2018. Improper Medicaid payments have grown to $100 billion
annually."
"But more important, this won’t be good health coverage for the Americans
who rely on it. Low Medicaid payment rates—about half of what private
insurers pay for primary-care services—discourage doctors from
participating. A 2019 government report
found that only 70% of providers accept new Medicaid patients, versus
90% for private coverage. The disparity is more pronounced for
family-practice doctors and psychiatrists.
Perhaps most notably, obstetrician-gynecologists are 20% less likely
to accept Medicaid in expansion states than in non-expansion states.
This statistic is especially worrisome since Medicaid pays for more than
40% of all U.S. births.
Medicaid expansion increases demand for healthcare but does
nothing to increase the number of doctors or nurses who treat patients.
Expansion has led to a surge in unnecessary emergency-room use,
delays in care from longer appointment wait times, and longer waits for
ambulances. In California, emergency room visits by Medicaid recipients
surged 75% from 2012 to 2016, according to a study from a state
government health-planning office. States that expanded Medicaid also
suffered larger increases in opioid deaths from 2013 to 2015, according
to data compiled by HHS.
A gold-standard study
on Medicaid’s health outcomes came out of Oregon. It randomly assigned
Medicaid enrollment to presumably lucky winners. But the winners didn’t
experience a statistically significant improvement on any measure of
physical health assessed.
Massachusetts Institute of Technology economist
Amy Finkelstein
has noted that 60% of spending to expand Medicaid to new
recipients “ends up paying for care that the nominally uninsured already
receive, courtesy of taxpayer dollars and hospital resources.”
Thus, it should not be surprising that a study conducted by Ms.
Finkelstein and others found that Medicaid recipients value the program
at only between 20 to 40 cents on the dollar. With a per enrollee
Medicaid expansion cost of about $7,000, at least half of enrollees
would prefer $2,800 in cash to $7,000 of government spending through
Medicaid on their behalf."
Stock buybacks and lavish executive pay make easy targets for
raising more tax revenue, but some proposals to curb them would create
more problems than they solve
"One proposal is an excise tax on companies that buy back a “significant” amount of their own stock."
"Stock buybacks are a sorely misunderstood punching bag. Uncommon before a
rule change in 1982, they have exploded over the last couple of decades
to overtake dividends as the most common way companies return money to
shareholders. Companies in the S&P 500 paid out $178 billion via
buybacks in the first quarter of this year. Analysts at DataTrek
Research believe they could top $1 trillion in the next 12 months. In
the last decade,
Apple Inc.
alone has bought back $442 billion of its shares and three other
American companies have repurchased more than $100 billion apiece,
according to S&P Global.
But a lot of criticism has been heaped on buybacks from people who get the most basic things wrong about them. For example, an incendiary article
in a major magazine commenting on Apple becoming the first trillion
dollar company in 2018 called the achievement a “scam” achieved through
buybacks rather than great products like the iPhone. The writer, whose
thesis was repeated elsewhere,
got his math backward. Buybacks reduce the number of shares as they
boost earnings per share. While this often helps to boost the share
price, the same can’t be said for total market capitalization. Apple
might have reached the $1 trillion milestone sooner by instead hoarding
cash. Meanwhile, pension and retirement accounts that hold the shares
were the overwhelming beneficiaries of those buybacks, not executives.
And, in a critique of the corporate tax cuts passed during the Trump
administration, Americans for Tax Fairness pointed out that much of the
windfall was used for buybacks and that they “mostly enrich the already
wealthy, including CEOs, because rich people own most corporate stock.”
Well, yes, but the same could be said of any dollar of profit earned by a
company. The fact that it is used to buy back stock rather than pay
down borrowings, invest in a new project or go into the company’s bank
account makes no difference to the owner’s wealth.
What does make a difference is if it is misspent. A politician
who would never think to tell a local restaurant owner who just had a
good year to use the windfall to expand her dining room
or keep the money in the bank earnings peanuts instead of giving
herself a raise. Using tax policy to sway that sort of a decision by big
companies could lead to lousy investments.
Capping executive pay at a certain ratio would raise problems too. Consider two similarly compensated CEOs,
Daniel O’Day
of
Gilead Sciences
and
James Quincey
of
Coca-Cola.
Mr. O’Day makes 76 times his average employee’s pay while the
slightly lower-paid Mr. Quincey makes 1,621 times as much, according to
executive compensation tracker Equilar. People who make and distribute
soft drinks tend to earn a lot less than scientists so the ratio is
skewed, but Mr. Quincey’s company earns more profit. Enforcing pay
ratios would send the top executive talent to investment banks, software
companies or biotech firms instead of retailers, trucking companies or
restaurant chains."
"What Democrats’ $3.5 trillion budget bill taketh from affluent Americans
in higher taxes, it giveth some back in green welfare. Behold their
gussied-up $12,500 electric-vehicle handout.
Electric vehicles make up a mere 3% of car sales in the U.S. despite
the current $7,500 federal tax credit and generous state subsidies.
About 40% of the country’s EV registrations are in California, which
offers EV buyers rebates up to $7,000, access to carpool lanes and lower
electric rates. Nearly 80% of battery-powered cars sold last year in
California were Teslas.
An electric vehicle costs between $10,000
and $15,000 more than a similar gas-powered model, which is why they
remain a luxury item purchased mainly by coastal dwellers who have cash
to burn. Democrats are effectively conceding this in their bill.
The bill in the House Ways and Means Committee would extend the
existing $7,500 EV tax credit through 2031 and remove the 200,000 car
per-manufacturer cap, which both GM and Tesla have hit. Currently
there’s no vehicle price-limit on the credit, so people can use it to
buy electric
Porsche
s. Anyone who can afford a Porsche doesn’t need government help to buy one.
As a small bow to their class-war principles, the new EV tax credit
excludes sedans costing more than $55,000, SUVs above $69,000 and trucks
above $74,000. But these limits would disqualify only a few luxury and
sports car models. Eligibility would extend to couples making up to
$800,000 (and individuals up to $400,000). The tax-rate increase in the
House Ways and Means bill hits at $450,000 for couples, so buy a Tesla
and wipe out part of that new tax penalty.
The bill also creates a $1,250 to $2,500 tax credit (depending on
battery capacity) for used electric cars, which would phase out for
couples making more than $150,000. Democrats don’t want the middle-class
buying used Priuses in lieu of new, more expensive EVs that auto makers
are being forced to make to comply with the Biden Administration’s
fuel-economy rules.
Democrats are also sweetening the tax credit by $4,500 for EVs
produced at facilities “under a union-negotiated collective bargaining
agreement” and an additional $500 if their battery cells are made in the
U.S. This is to help U.S. auto makers whose plants are unionized and
have higher labor costs.
They also want to help their United Auto Workers friends
organize Tesla and foreign-owned plants. The $4,500 fillip would put
non-unionized manufacturers at a competitive disadvantage, so they have
no choice but to roll over to the UAW. Democrats don’t care about
workers at foreign-owned car plants in the South because they are almost
all represented by Republicans and the workers have consistently voted
against joining the United Auto Workers.
The $12,500 EV tax credit exposes a central contradiction of
the vast spending bill. Democrats want to raise taxes on the affluent
while at the same time subsidizing them to embrace their green
priorities. The bill will be paid by middle-class workers and families."
"But his national mandate on business is needless overkill in a free
country. He’s forcing all private employers with more than 100
workers—two-thirds of the workforce—to require vaccinations or weekly
testing. The non-compliant can be dunned $14,000 per violation.
Many large businesses already require vaccinations or regular testing,
and some have offered workers financial incentives to get inoculated. A
few have been more forceful. Yet many businesses have been reluctant to
mandate shots because they respect individual conscience or worry some
employees will quit. Workers have been hard to hire amid the incentives
Democrats have created not to work. Mr. Biden thinks that’s not his
problem.
Employers understandably have concerns about compliance and
enforcement. Are they supposed to pay for unvaccinated workers’ weekly
testing, and what kind of proof of testing or vaccination must they
require? Will franchisees and corporations be liable as joint employers?
Nobody knows.
The Occupational Safety and Health Administration’s (OSHA)
Emergency Temporary Standards code allows it to enact a rule if “workers
are in grave danger due to exposure to toxic substances or agents
determined to be toxic or physically harmful or to new hazards.” But Mr.
Biden is stretching the government’s authority.
OSHA has typically applied this to particular industries. In
June it required healthcare facilities to create plans to prevent Covid
transmission, though nearly all were already doing this. It has also
required employers whose employees may be exposed to Hepatitis B to pay
for worker vaccinations. But OSHA has never mandated vaccinations.
Mr. Biden’s logic is also contradictory. In his speech he
stressed that the vaccinated are safe from serious Covid. Yet he said
the unvaccinated must protect the vaccinated. In fact, the unvaccinated
are mainly a danger to themselves and their loved ones who aren’t
vaccinated.
The President blamed unvaccinated Americans for clogging up
“emergency rooms and intensive care units, leaving no room for someone
with a heart attack, or pancreatitis, or cancer.” This is false. Some
hospitals have cancelled elective surgeries, but they’ve done so to
ensure that people who need urgent care can get it—whether for Covid or
something else."
"states with Democratic governors like Louisiana, North Carolina and
Oregon have also experienced virus surges this summer, and few of them
have imposed vaccine mandates.
Vaccination rates are also no better in big cities controlled
by Democrats than in GOP states. In Miami-Dade County, 79% of those
eligible are fully vaccinated and 66% in Orange County (Orlando). That’s
higher than in Chicago’s Cook County (63%), the Bronx (62%), Clark
County around Las Vegas (54%) and Detroit’s Wayne County (53%)."
By Edward Cliff and Brian Fernandes in The NY Times. Dr. Cliff is a hematology doctor in Melbourne, Australia. Dr. Fernandes is a palliative care doctor in Sydney. Both worked in Covid-19 wards at their hospitals. Excerpts:
"Despite more than half of Australia’s 25 million inhabitants living under very harsh restrictions . . . cases have soared to more than 1,400 a day, the most since the pandemic
began. As authorities tighten restrictions, hospitals are reaching capacity with Covid-19 patients"
"The country’s slow vaccination start stemmed from its inability to produce mRNA vaccines locally and its struggle to procure other vaccine options, leaving it dependent on the AstraZeneca vaccine as its vaccination program’s backbone. When rare cases of blood clots were tied
to the AstraZeneca vaccine, the country was unable to pivot. Though
well intentioned, Australia’s scientific advisory group for
immunizations urged
people under 60 to wait for the Pfizer vaccine. Politicians bickered,
the local media attacked the AstraZeneca vaccine relentlessly, and vaccine hesitancy spread. With its vaccination rate the lowest among high-income countries, Australia was a sitting duck for Delta’s arrival."
"Governments are increasingly relying on police and military forces for enforcement, and lockdowns are costing the Australian economy billions.
In spite of restrictions, case numbers continue to rise, and “Covid
zero” is becoming increasingly out of reach. Australians are tired,
frustrated and lonely, and recent protests are turning violent."
"At some point, Australia’s political and health leaders must acknowledge
that the country cannot escape Covid forever and must prepare the
community to live with Covid."
"To do so, Australia must add fuel to its vaccination rollout through incentives: immunization stations in accessible locations such as shopping centers"
"targeted marketing campaign to get more people vaccinated."
"As leaders encourage people to adhere to restrictions in the coming
weeks, they must simultaneously begin to prepare Australians for the
likelihood that there will be high case numbers when restrictions ease."
"If these alternatives to detention models sound like wishful thinking in
a country as allergic to social spending as the United States, consider
that in 2016, the Obama administration tried an initiative similar to
Belgium’s system, the Family Case Management Program, which provided
social services and referrals to qualifying families. According to the Niskanen Center, “The program achieved 99 percent compliance for check-ins and 100 percent compliance for court hearings.”"
"One of these strategies is provisional
release from detention, most often on bond or humanitarian parole. In
both cases, the people detained are released to live with sponsors —
family members or friends, generally — are required to check in
regularly with an ICE agent, either by phone or in person, and are
sometimes given an ankle bracelet for electronic monitoring.
In an early study
conducted by the Government Accountability Office, 99 percent of
participants enrolled in ICE’s comprehensive Alternatives to Detention
program from 2011 to 2013 showed up at their court dates. Several years
later, Mr. Trump falsely claimed that fewer than 1 percent of immigrants
appeared on their court date after being released from detention, but
government data puts that number closer to 83 percent. As of August, roughly 117,000 people were enrolled in Alternatives to Detention."
"While ending immigrant detention is first and foremost a matter of human
rights, it is also an economic imperative. Since the Department of
Homeland Security was created in 2003, the federal government has spent an estimated $333 billion on immigration enforcement. In 2018, it spent almost $3.1 billion on detention alone. While it costs taxpayers roughly $134 a day
to keep someone in a detention center, the alternatives, such as case
management and electronic monitoring, cost an average of roughly $6 each day."
"According to the government’s own policies, asylum seekers who can prove
their identity and demonstrate that they do not pose a flight risk or
threat to public safety should be released."
"A bipartisan group of Senators introduced the Facilitating American-Built Semiconductors (FABS) Act this week to create a permanent 25 percent investment tax credit
for investments in semiconductor manufacturing equipment and
construction of related facilities—but their proposal would not address
underlying bias against investment that exists in the tax code today.
Rather than provide industry-specific tax subsidies, lawmakers should
make sure the basic structure of the tax code is not tilted against
domestic investment generally.
The FABS Act would provide firms a tax credit (or a direct payment)
equal to 25 percent of their qualified investment in semiconductor
manufacturing facilities and property, reducing a firm’s tax liability
and decreasing the after-tax cost of making such investments. However,
the bill would leave the current depreciation
system unchanged, meaning businesses would have to deduct the costs of
building new facilities over extended periods, a delay that diminishes
the real value of the deductions due to inflation and the time value of
money.
Semiconductor manufacturing facilities, called “foundries,” and the
related manufacturing equipment are extremely expensive to build. For
example, Samsung is considering a $17 billion foundry
in Austin, Texas, and the Taiwan Semiconductor Manufacturing Company is
constructing an almost $20 billion foundry in southern Taiwan. The bill
text itself emphasizes that a building and its structural components
are “an integral part of a semiconductor manufacturing facility.”
Under current law,
investment in industrial factories, such as a semiconductor foundry,
cannot be deducted immediately but instead must be deducted over a
39-year period. The tax treatment of short-lived assets, such as some of
the machinery and equipment that would go inside a foundry, is
currently eligible for 100 percent bonus depreciation. That provision
allows full write-offs in the year an asset is placed in service, but it
will begin phasing out in 2023. Research and development expenses, also
crucial to the semiconductor industry, are currently eligible for full expensing, but beginning next year will instead be amortized over five years.
If a business builds a foundry, it would not be able to fully deduct
the cost of its investment, increasing the after-tax cost of the
project. In 2021, structures such as industrial factories face a marginal effective tax rate of 21 percent, compared to 7.5 percent for equipment. By 2030, the rates will rise to 25.6 percent and 23.7 percent, under current law.
PWBM projects that President Biden’s American Jobs Plan (AJP)
would spend $2.7 trillion and raise $2.1 trillion dollars over the
10-year budget window 2022-2031.
The spending provisions of the AJP, in absence of any tax
increases, would increase government debt by 4.72 percent and decrease
GDP by 0.33 percent in 2050, as the crowding out of investment due to
larger government deficits outweighs productivity boosts from the new
public investments.
The tax provisions proposed in the AJP, in the absence of any new
spending, would decrease government debt by 11.16 percent in 2050.
Despite the reduction in public debt, the AJP’s tax provisions
discourage business investment and thus reduce GDP by 0.49 percent in
2050.
Considered
together, the tax and spending provisions of the AJP would increase
government debt by 1.7 percent by 2031 but decrease government debt by
6.4 percent by 2050. The AJP ends up decreasing GDP by 0.8 percent in
2050."
Canadians
often misunderstand the true cost of our public health care system.
This occurs partly because Canadians do not incur direct expenses for
their use of health care, and partly because Canadians cannot readily
determine the value of their contribution to public health care
insurance.
In 2021, preliminary estimates suggest the average
payment for public health care insurance ranges from $3,842 to $15,039
for six common Canadian family types, depending on the type of family.
Between
1997 and 2021, the cost of public health care insurance for the average
Canadian family increased 3.4 times as fast as the cost of clothing,
2.2 times as fast as the cost of food, 1.7 times as fast as the cost of
shelter, and 1.6 times faster than average income.
The 10
percent of Canadian families with the lowest incomes will pay an average
of about $726 for public health care insurance in 2021. The 10 percent
of Canadian families who earn an average income of $75,300 will pay an
average of $6,521 for public health care insurance, and the families
among the top 10 percent of income earners in Canada will pay $41,916."
"In a piece at the Atlantic titled
“Americans Have No Idea What the Supply Chain Really Is,” Amanda Mull
writes, “Americans are habitually unattuned to the massive and
profoundly human apparatus that brings us basically everything in our
lives.”
Indeed we are, and we might say that’s the beauty of
a well‐functioning market economy: We don’t need to know how it works.
We know our own little bit–what wages are like in our community, and
what we could do to earn more; what customers tend to order on weekdays
and weekends; what’s happening with condo and single‐family prices in
our area. But we don’t really need to know why.
Economists, especially of the Austrian or market‐process variety, have often made similar points. In his classic essay “The Use of Knowledge in Society” the Nobel laureate F. A. Hayek writes of the work of the entrepreneur:
There is hardly anything that happens anywhere in the
world that might not have an effect on the decision he ought to make.
But he need not know of these events as such, nor of all their effects.
It does not matter for him why at the particular moment more screws of
one size than of another are wanted,why paper bags are more readily
available than canvas bags, or why skilled labor, or particular machine
tools, have for the moment become more difficult to obtain. All that is
significant for him is how much more or less difficult to procure they
have become compared with other things with which he is also concerned,
or how much more or less urgently wanted are the alternative things he
produces or uses. It is always a question of the relative importance of
the particular things with which he is concerned, and the causes which
alter their relative importance are of no interest to him beyond the
effect on those concrete things of his own environment.
So how do businesspeople get the information they need? Sure, they
may read newspapers and trade journals, they talk to customers and
suppliers, they observe. But mostly the price system conveys essential
information. Hayek went on, “It is more than a metaphor to describe the
price system as a kind of machinery for registering change, or a system
of telecommunications which enables individual producers to watch merely
the movement of a few pointers, as an engineer might watch the hands of
a few dials, in order to adjust their activities to changes of which
they may never know more than is reflected in the price movement.” The
grocer doesn’t really need to know why oranges are getting more
expensive; maybe there’s a freeze in Florida, maybe consumer demand is
rising, maybe it’s inflation. But when the price goes up, she and her
customers can make adjustments.
Leonard Read also illuminated this point in his famous essay “I, Pencil.”
He pointed out, in the voice of the pencil, that “no single person on
the face of this earth knows how to make me.” Many of the people
involved in making a pencil, from the tree grower to the copper miner,
have no idea that their work will end up in a pencil. But each of them
pursuing his own interest is led by the price system to produce what
others need.
Now, to be sure, it’s a problem for our political economy when people
are completely unaware of what a marvel the market system is and how
easily government intervention can reduce the abundance it produces. So
it’s a good thing at least a few people study economics. And if you do
want to know more about supply chains and why they seem to be faltering
these days, you can read Ms. Mull at the Atlantic or Scott Lincicome on the Cato website."
"A magician tricks his audiences by distracting them. While people
focus on something that is attractive but irrelevant (a shiny object,
the magician's beautiful assistant in a skimpy outfit), the magician can
more easily hide his deception.
In a new CEA blog post,
the Biden economics team does something similar. It asks what the
average tax rate of the 400 wealthiest families would be if unrealized
capital gains were included in the measure of their income.
This
is a mildly interesting question. But why is the Biden team taking the
time from their busy schedules to ask it? Because they want to convince
you that the rich aren't paying their fair share in taxes.
The
problem is that this question has little connection to the policies now
being discussed. As I understand it, the essence of the plan under
consideration is not a tax on the unrealized capital gains of the 400
richest families. Instead, the plan aims to raise the corporate tax
rate, which in turn is paid by the many shareholders, workers, and
customers of the companies. (Economists debate the relative incidence.)
In addition, the plan aims to raise the tax rates applied to the
already-taxed income earned by people making more than $400,000 a year. I
would guess that this latter group includes about 1.5 million
taxpayers. Needless to say, 1.5 million is a much larger number than
400. And the finances of the 400 are in no way representative of the
finances of the 1.5 million.
A number of firms have developed cheap, paper-strip tests
for coronavirus that report results at-home in about 15 minutes but
they have yet to be approved for use by the FDA because the FDA appears
to be demanding that all tests reach accuracy levels similar to the PCR
test. This is another deadly FDA mistake.
…The PCR tests can discover virus at significantly lower concentration levels than the cheap tests but that extra sensitivity doesn’t matter much in practice.
Why not? First, at the lowest levels that the PCR test can detect, the
person tested probably isn’t infectious. The cheap test is better at
telling whether you are infectious than whether you are infected but the
former is what we need to know to open schools and workplaces.
It’s great that other people including the NYTimes are now understanding the problem. Here is the excellent David Leonhardt in Where are the Tests?
Other experts are also criticizing the
Biden administration for its failure to expand rapid testing. Even as
President Biden has followed a Covid policy much better aligned with
scientific evidence than Donald Trump’s, Biden has not broken through
some of the bureaucratic rigidity that has hampered the U.S. virus response.
In the case of rapid tests, the F.D.A.
has loosened its rules somewhat over the past year, allowing the sale of
some antigen tests (which often cost about $12 each). But drugstores,
Amazon and other sellers have now largely run out of them. I tried to
buy rapid tests this weekend and couldn’t find any.
The F.D.A.’s process for approving rapid
tests is “onerous” and “inappropriate,” Daniel Oran and Dr. Eric Topol
of Scripps Research wrote in Stat News.
For the most part, the F.D.A. still uses
the same cumbersome process for approving Covid tests that it uses for
high-tech medical devices. To survive that process, the rapid tests must
demonstrate that they are nearly as sensitive as P.C.R. tests, which
they are not.
But rapid tests do not need to be so
sensitive to be effective, experts point out. P.C.R. tests often
identify small amounts of the Covid virus in people who had been
infected weeks earlier and are no longer contagious. Rapid tests can
miss these cases while still identifying about 98 percent of cases in
which a person is infectious, according to Dr. Michael Mina, a Harvard
epidemiologist who has been advocating for more testing
Identifying anywhere close to 98 percent
of infectious cases would sharply curb Covid’s spread. An analysis in
the journal Science Advances found that test frequency matters more for reducing Covid cases than test sensitivity.
As I said on twitter what
makes the FDA’s failure to approve more rapid antigen tests especially
galling is that some of the tests being sold cheaply in Europe are
American tests just ones not approved in the United States. If it’s good
enough for the Germans it’s good enough for me!"
"The Census Bureau released its annual report last Tuesday on “Income and Poverty in the United States: 2020”
with lots of updated data on household income and household
demographics. Based on those new data, I present my annual post titled “Explaining US Income Inequality by Household Demographics.”
Most of the discussion on income inequality focuses on the relative
differences over time between low-income and high-income American
households. But it’s also informative to analyze the demographic
differences among income groups at a given point in time to answer
questions like:
How are high-income households different demographically from
low-income households that would help us better understand income
inequality?
For low-income households today who aspire to become
higher-income households in the future, what lifestyle and demographic
changes might facilitate the path to a higher income?
The chart above (click to enlarge) shows some key demographic
characteristics of US households by income quintiles (five equal groups
of 25,986 US households) for 2020, using Census Bureau data available here and here.
Below is a summary of some of the key demographic differences between
American households in different income quintiles in 2020:
1. Mean Number of Earners per Household. On average,
there are five times more income earners per household in the top
income quintile households (2.0) than earners per household in the
lowest-income households (0.40). Also note that the average number of
earners per household increases for each higher income quintile,
demonstrating that one of the main factors in explaining differences in
income among US households is the number of earners per household. Also, the unadjusted ratio of average income for the highest to the lowest quintile of 17.4-to-1 ($253,484 to $14,589) falls to a ratio of only 3.5-to-1
when comparing “income per earner” between those two quintiles:
$126,742 for the top quintile to $36,473 for the bottom quintile.
2. Share of Households with No Earners. More than
six out of every ten American households (64.7%) in the bottom fifth of
households by income had no earners in 2020. In contrast, only 4.5% of
the households in the top fifth of households had no earners last year,
providing more evidence of the strong relationship between average
household income and income earners per household.
3. Marital Status of Householders. Married-couple
households represent a much greater share of the top income quintile
(77.3%) than for the bottom income quintile (16.7%), and single-parent
or single households represented a much greater share of the bottom
one-fifth of households (83.3%) than for the top one-fifth (22.7%).
Consistent with the pattern for the average number of earners per
household, the share of married-couple households also increases for
each higher income quintile, from 16.7% (lowest quintile) to 34.3%
(second-lowest quintile) to 46.7% (middle quintile) to 61.5%
(second-highest quintile) to 77.3% (highest quintile).
4. Age of Householders. Nearly 7 out of every 10 US
households (69.1%) in the top income quintile included Americans in
their prime earning years between the ages of 35-64, compared to fewer
than half (41.1%) of households in the bottom income quintile who had
householders in that prime earning age group last year. The share of
householders in the prime earning age group of 35-64 year-olds increases
with each higher income quintile, from 41.1% (lowest quintile) to 42.9%
to 50.2% (middle quintile) to 58.8% to 69.1% (highest quintile).
Compared to members of the top income quintile of American households
by income, household members in the bottom income quintile were more
likely (17.3% for the lowest quintile vs. 14.9% for the highest
quintile) to be in the youngest age group (under 35 years), and 2.6
times more likely (41.6% vs. 16.0%) to be in the oldest age group (65
years and over).
By average age, Americans in the highest three income groups are the
youngest (about 50 years on average) and the lowest two income groups
are slightly older at an average of 52-53 years.
5. Work Status of Householders. More than four times
(4.5X) as many top quintile households included at least one adult who
was working full-time in 2020 (78.4%) compared to the bottom income
quintile (only 17.6%), and more than five times as many households in
the bottom quintile included adults who did not work at all (70.4%)
compared to top quintile households whose family members did not work
(13.4%). The share of households having one or more full-time workers
increases at each higher income quintile (17.6% to 47.0% to 61.6% to
72.1% to 78.4%).
6. Education of householders. Family members of
households in the top fifth of US households by income were four times
more likely to have a college degree (69.3%) than members of households
in the bottom income quintile (only 17.1%). In contrast, householders in
the lowest income quintile were 13.7 times more likely than those in
the top income quintile to have less than a high school degree in 2020
(19.2% vs. 1.4%). As expected, the Census data show that there is a
significantly positive relationship between average educational
attainment and average household income.
Summary: Household demographics, including the
average number of earners per household and the marital status, age, and
education of householders are all very highly correlated with
Americans’ household income. Specifically, high-income US
households have more income-earners on average than lower-income
households, and individuals in high-income households are far more
likely on average than individuals in low-income households to be
well-educated, married, working full-time, and in their prime earning
years. In contrast, individuals in lower-income US households are far
more likely than Americans in higher-income households to be
less-educated, working part-time, either very young (under 35 years) or
very old (over 65 years), and living in single-parent or single-member
households.
The good news about the Census Bureau is that the key demographic
factors that explain differences in household income are not fixed over
our lifetimes and are largely under our control (e.g., staying in school
and graduating from high school and college, getting and staying
married, working full-time, etc.), which means that individuals and
households are not destined to remain in a single-member, low-income
quintile forever. Fortunately, studies that track people over time find
evidence of significant income mobility in America confirming that
individuals and households move up and down the income quintiles over
their lifetimes, as the key demographic variables highlighted above
change, see related CD posts here, here and here. Those links highlight
the research of social scientists Thomas Hirschl (Cornell) and Mark Rank
(Washington University) showing that as a result of dynamic income
mobility nearly 70% of Americans will be in the top income quintile for
at least one year while almost one-third will be in the top quintile for
ten years or more (see chart below).
As Thomas Sowell pointed out in his syndicated column in March 2013 titled “Economic Mobility”:
Most working Americans who were
initially in the bottom 20% of income-earners [when they were young and
unmarried], rise out of that bottom 20%. More of them end up in the top
20% [when older and married] than remain in the bottom 20%. People who
were initially in the bottom 20% in income have had the highest rate of
increase in their incomes, while those who were initially in the top 20%
have had the lowest. This is the direct opposite of the pattern found
when following income brackets over time, rather than following
individual people.
MP: It’s highly certain that almost all of today’s
high-income, college-educated, married Americans who are now in their
peak earning years were in a lower-income quintile in their prior
younger years when they were single and before they acquired education
and job experience. It’s also likely that individuals and households in
today’s top income quintiles will move back down to a lower-income
quintile in the future during their retirement years, which is just part
of the natural dynamic lifetime cycle of moving up and down the income
quintiles for a large majority of Americans. So when the incessant
chatter from the mainstream media and progressive politicians about an
“income inequality crisis” in America, we should keep in mind that basic
household demographics go a long way towards explaining the differences
in household income in the United States. And because the key
income-determining demographic variables are largely under our control
and change dynamically over our lifetimes, income mobility and the
American dream are still “alive and well” in the US."
"Energy prices are soaring in Europe, and the effects are rippling across
the Atlantic. Blame anti-carbon policies of the kind that the Biden
Administration wants to impose in the U.S.
Electricity prices in the U.K. this week jumped to a record £354
($490) per megawatt hour, a 700% increase from the 2010 to 2020 average.
Germany’s electricity benchmark has doubled this year. Last month’s
12.3% increase was the largest since 1974 and contributed to the highest
inflation reading since 1993. Other economies are experiencing similar
spikes.
Europe’s anti-carbon policies have
created a fossil-fuel shortage. Governments have heavily subsidized
renewables like wind and solar and shut down coal plants to meet their
commitments under the Paris climate accord. But wind power this summer
has flagged, so countries are scrambling to import more fossil fuels to
power their grids.
European natural-gas spot prices have increased five-fold in
the last year. Some energy providers are burning cheaper coal, but its
prices have tripled. Rising fossil-fuel consumption has caused demand
and prices for carbon permits under the Continent’s cap-and-trade scheme
to surge, which has pushed electricity prices even higher.
Russia has exploited the chaos by slowing gas deliveries, ostensibly to
increase pressure on Germany to finish the Nord Stream 2 pipeline
certification.
Vladimir Putin
last week took a swipe at the “smart alecs” in the European
Commission for “market-based” pricing that increased competition in gas,
including from U.S. liquefied natural gas imports.
Mr. Putin can throw his weight around in Europe because the rest of
the world also needs his gas. Drought has reduced hydropower in Asia,
and manufacturers are using more energy to supply the West with more
goods. Due to a gas and coal shortage, China has rationed power to its
aluminum smelters and aluminum prices this week hit a 13-year high.
The U.S. is the world’s largest gas producer, but it isn’t
immune from turmoil in energy markets. Natural gas spot prices in the
U.S. have doubled over the past year in part because producers have
increased exports to Europe and Asia. Exports are up more than 40%
during the first six months this year over last.
This underscores how fossil fuels are a U.S. economic and
strategic asset. The Biden Administration’s plan to curtail oil, gas and
coal production by regulation would empower adversaries, especially
Russia, Iran and China, which are the world’s three largest gas
producers after the U.S.
Americans are already feeling the pain of rising energy prices.
Electricity and utility gas prices were up 5.2% and 21.1%,
respectively, over the last 12 months in August. Higher energy costs are
bleeding into inflation. Some analysts predict that gas prices could
double this winter if U.S. production doesn’t increase and global demand
remains high.
Europe is showing the folly of trying to purge CO2 from the
economy. No matter how heavily subsidized, renewables can’t replace
fossil fuels in a modern economy. Households and businesses get stuck
with higher energy bills even as CO2 emissions increase. Europe’s
problems are a warning to the U.S., if only Democrats would heed it."
"In “Congress Needs to Rein In a Too-Powerful Federal Reserve”
(op-ed, Sept. 2),
Judy Shelton
is correct that the Fed’s bond-buying program, commonly known as
quantitative easing, is distorting the allocation of credit while
increasing income inequality. She might also have noted that QE broke an
over 60-year policy of not interfering with the allocation of credit.
Based on the well-recognized fact that markets allocate credit
better than government agencies, the Fed had a tradition of conducting
open market operations using very short-term Treasurys. It did this to
minimize the effect of its operations on interest rates and the
allocation of credit.
When QE was being discussed at the Fed’s
December 2008 meeting, no fewer than five Reserve Bank presidents raised
concerns that the program would distort the allocation of credit. These
concerns were noted and ignored. With the federal-funds rate at zero
and weak employment and output growth, the Fed didn’t want to be seen
doing nothing. It didn’t know what else to do.
That QE has been largely ineffective is obvious: From the third quarter
of 2009 to the fourth quarter of 2019 economic growth was historically
low, only 2.3%. Since Q3 2009, the S&P 500 index has more than
tripled and interest rates on certificates of deposit and other safe
investments available to retirees and others on fixed incomes have been
historically low.
Dan Thornton
Des Peres, Mo.
Mr. Thornton is a retired VP of the Federal Reserve Bank of St. Louis."
"These controls would raise, not lower, the price Americans pay for
better health. Price controls will harm innovation, and new drugs are a
form of reducing prices. A new drug, even an expensive one, offers
society something that wasn’t previously available. Until recently,
someone with HIV, breast cancer or hepatitis C couldn’t buy a longer
life at any price. But then came innovative drugs. Covid-19 vaccines
similarly slashed the cost of preventing infection and serious illness.
Generics, which make up about 95% of prescriptions, help push prices
down but aren’t possible without the price reductions from that first
innovative drug.
Unfortunately, the debate is being informed by erroneous Congressional
Budget Office analysis. CBO says that price controls will cut
prescription drug prices 57% to 75% among the most expensive 250 drugs
that form the base of U.S. profits. Somehow, though the U.S. is home to
roughly 70% of the world’s drug profits, the supply of new drugs will
only be reduced by 5% from 2021 to 2039, a loss of only two drugs a
year.
The CBO minimizes the harmful effects on innovation, but the entire
supply chain that funds medical R&D relies on rate-of-return
assessments driven by future earnings. An analysis I released this week finds 10 times the effect on R&D, a loss of up to some 340 drugs over the same period.
The White House also claims that price controls won’t hamstring
innovation because they only govern top-selling drugs. But the
occasional blockbuster funds the roughly 90% of pipeline drugs that
never pass Food and Drug Administration review. CBO even acknowledges
that only the top 7% of Medicare drugs drive U.S. profits. Targeting
financially successful drugs could make large segments of the
development portfolio unprofitable, even if such drugs aren’t affected
by price controls.
Another theme of the White House’s proposal is to increase
payments for drugs based on their value to patients. This sounds
nice—until you realize that bureaucrats, not the market, will determine
that value. The bureaucrats often don’t count important drug benefits,
such as the enormous value of the economic activity that resumed after
Covid-19 vaccines became available."
You shouldn’t need three years of ABA-accredited education to provide basic advice on a contract.
By Clifford Winston. He is a senior fellow at the Brookings Institution. Excerpts:
"Legal advice is what economists call a “credence good” because, like
auto repairs and medical procedures, its quality is difficult for
consumers to evaluate accurately, even after purchase. Thanks to
technological advances, many industries have made strides toward
reducing the cost of imperfect information associated with credence
goods. Websites like Angie’s List (now Angi) and
Yelp,
as well as social media platforms, inform consumers about the
quality, reputation, and performance of service providers, such as
plumbers, electricians and landscapers. Similar websites, such as Avvo
and Martindale-Hubbell, let consumers search for lawyers.
The consequence of unnecessary restrictions on legal education
is to pad lawyers’ pockets, not to benefit consumers of legal services.
Indeed, limited access to justice, which subsumes access to legal
representation and to the courts, is a reality for most people. The
nonprofit Legal Services Corporation estimates that the legal profession
fails to serve 80% of the public and limits access to their services. Nearly 90% of the civil legal problems reported by low-income Americans “received inadequate or no legal help,” according to the organization’s 2017 “Justice Gap” report.
Considering the limited extent of legal representation, does anyone
believe that a graduate of the Yale M.S.L. program couldn’t improve
access to justice by providing some legal services? At the very least,
graduate students at a great university learn the best material to read
and the best people to consult for advice. Apparently, the self-taught
can provide effective legal advice, because a 15-year-old high school
student became the most requested legal expert
on the website AskMeHelpDesk.com. Graduates of Yale’s M.S.L. program,
who wouldn’t be burdened by three years of debt and absence from the
labor force, could provide inexpensive civil legal help to people who
otherwise wouldn’t even consider hiring a lawyer because of the cost."
"Alternative educational institutions would offer new programs, including
night school and vocational and online courses that could be completed
in less than a year and provide certification for specialized
practitioners. New programs could let undergraduates major in and
receive a bachelor’s degree in law—as universities in Canada, the United
Kingdom, France and other countries do. Some college graduates could
immediately provide legal services that don’t require advanced study or
considerable practical experience, such as small-claims court
representation and advice on simple contracts."
"It’s one of the strangest, and most destructive, juxtapositions in
political history. Even as vaccines developed by drug companies are
saving the world from Covid, the Democratic Party wants to rob these
firms of the reward for innovation that is essential to developing
future cures.
That’s one of the big stories as Democrats scramble to finance their
$3.5 trillion expansion of the entitlement state. Even they can’t find
more than $2.2 trillion in taxes to raise, so they’re hoping to fill the
gap with $500 billion in savings from price controls on drugs.
Three Democrats on the Energy and
Commerce Committee voted Wednesday against a House provision directing
the Health and Human Services secretary to dictate drug prices. But a
similar provision passed Ways and Means, and Speaker
Nancy Pelosi
may try to jam it through on the House floor.
Democrats claim the bill would simply allow Medicare to “negotiate” what
they deem “fair” prices as foreign governments with national
health-care systems do. The bill sets a price ceiling of 120% of the
average drug price in Australia, Canada, France, Germany, Japan and the
U.K. The secretary could decide to pay less.
The bill directs HHS to focus on the 250 most expensive and common
brand-name drugs without generic competitors. The secretary would be
required to “negotiate” at least 25 drugs (or insulin) in the first year
of the program (2025) and 50 in future years.
Companies that refuse the government’s price must pay a 95%
excise tax on all revenue they generate from that drug in the U.S.
They’d also have to offer the government price to private insurers.
There’s no “negotiation” when a gun is pointed at your head.
A new study in the Journal of the American Medical Association
estimates that drug spending in the U.S. would have been 52%, or about
$83.5 billion, lower in 2020 based on the bill’s formula. The research
outfit Vital Transformation estimates the bill would reduce
bio-pharmaceutical earnings by $102 billion a year.
Major pharmaceutical companies invested $91 billion in research
and development in 2020. Democrats would be confiscating almost all the
profits companies use to finance clinical trials. This tax on
innovation would damage big pharma companies like
Pfizer
and Merck, but it would be a death blow to small biotech firms where many breakthroughs originate.
Biotech startups patented nearly two-thirds of new drugs in
2018, and in their early stages they rely almost entirely on venture
capital. Later they often cooperate with or license their discoveries to
large drug makers. Only about 15% of drugs and vaccines that enter
clinical trials are approved. The rate for oncology therapies is 3%. If
Democrats slash the return on drug investment, startups won’t be able to
raise money. This would be a tragedy as we enter an era of great
biotech discovery.
The hugely successful mRNA Covid vaccines are the result of
years and billions of dollars in research. BioNTech initially set out to
create cancer vaccines and linked up with Pfizer in 2018 to work on a
more effective flu vaccine. Biotech firms are trying to use mRNA
technology for personalized cancer vaccines, autoimmune treatments and
gene therapies.
The bill would “immediately have the effect of putting many
early-stage biotech companies out of business,” says Strand Therapeutics
CEO
Jake Becraft.
He adds that Moderna would never have been able to raise capital
if the bill had passed 10 years ago.
Progressives claim that the National Institutes of Health can
make up for private investment. But the NIH only funds basic research at
nonprofit and academic institutions. It doesn’t have the capacity to
run or fund thousands of drug trials, and bureaucrats do a lousy job of
allocating capital in any case.
***
At least a few Democrats in Congress seem to get
some of this. Credit to California’s
Scott Peters,
New York’s
Kathleen Rice,
and Oregon’s
Kurt Schrader
for opposing the House drug price controls, though they voted for a
similar bill in December 2019 when it had no chance of passing the GOP
Senate.
Oregon Sen. Ron Wyden
has said the House price controls currently lack the votes to pass
the Senate. Yet Democrats’ Senate alternative could be nearly as
destructive by using price controls to ration treatments for seniors.
American drug innovation leads the world, and during the
pandemic it has shown its capacity to save millions of lives. It would
be a harmful act for the ages against public health if Democrats steal
this vital industry’s incentive to produce the cures of the future."
The central bank could bind itself to its own forecasts if it were good at predicting the future, but it isn’t.
By Benn Steil and Benjamin Della Rocca. Mr. Steil is director of international economics at the Council on Foreign Relations, where Mr. Della Rocca is an analyst. Excerpts:
"Against a backdrop of economic gloom, the Fed’s “forward
guidance”—that it would keep policy highly accommodative for three years
or more—seemed to make sense. Gross domestic product plunged by 9% in
the second quarter of 2020, and the Fed was anxious to assure markets it
would keep its foot on the gas. After all, the more the markets
believed what the Fed said, or so the Fed reasoned, the less it would
actually need to do—in terms of buying bonds.
There is, however, a fundamental problem with this strategy. As we have explained on these pages, the Fed isn’t good at predicting economic data—and has been particularly poor at it since March 2020.
Take predictions for economic growth. In June 2020, the Fed expected
real GDP for the year to shrink 6.5% from its 2019 level. Yet despite
the dismal second quarter, growth rebounded sharply in the latter half
of the year and outpaced Fed projections. Real GDP ended the year down
only 3.4%.
On inflation, the central bank has performed no better. From
February to March 2021, core PCE inflation (the Fed’s preferred measure)
rose from 1.5% to 2%—twice as high as the FOMC’s projection in June
2020. And so the Fed revised its forecast for 2021 inflation up to 2.2%.
By June, inflation had surged to 3.6%, and the Fed again revised its
forecast—up to 3.4%.
Yet even as inflation climbed, and the Fed’s expectations for
inflation with it, the Fed’s policy stance did not budge. It continued
to anticipate zero rates until 2023.
The Fed’s persistent dovishness breaks with precedent. Research
shows that Fed expectations for inflation nine months ahead have,
historically, correlated closely with its nine-month forecasts for its
own policy rate. Precedent therefore suggests that the Fed should,
during the pandemic, have been raising its rate guidance in tandem with
its inflation forecasts. It also implies that, had the Fed accurately
predicted 2021 inflation in 2020, it would have tightened monetary
policy significantly. Specifically, it implies that if FOMC members had
foreseen today’s inflation at their December 2020 meeting, its policy
rate would now be at 1.9% instead of zero."
"the Centers for Disease Control and Prevention failed utterly. It’s now
well known that the CDC didn’t follow standard operating procedures in
its own labs, resulting in contamination and a complete botch of its
original SARS-CoV-2 test. The agency’s failure put us weeks behind and
took the South Korea option of suppressing the virus off the table. But
the blunder was much deeper and more systematic than a botched test. The
CDC never had a plan for widespread testing, which in any scenario
could only be achieved by bringing in the big, private labs.
Instead of working with the commercial labs, the CDC went out of its way
to impede them from developing and deploying their own tests. The CDC
wouldn’t share its virus samples with commercial labs, slowing down test
development. “The agency didn’t view it as a part of its mission to
assist these labs.” Dr. Gottlieb writes. As a result, “It would be
weeks before commercial manufacturers could get access to the samples
they needed, and they’d mostly have to go around the CDC. One large
commercial lab would obtain samples from a subsidiary in South Korea.”
At times the CDC seemed more interested in its own “intellectual
property” than in saving lives. In a jaw-dropping section, Dr. Gottlieb
writes that “companies seeking to make the test kits described extended
negotiations with the CDC that stretched for weeks as the agency made
sure that the contracts protected its inventions.” When every day of
delay could mean thousands of lives lost down the line, the CDC was
dickering over test royalties.
In the early months of the pandemic the CDC impeded private firms from
developing their own tests and demanded that all testing be run through
its labs even as its own test failed miserably and its own labs had no
hope of scaling up to deal with the levels of testing needed. Moreover,
the author notes, because its own labs couldn’t scale, the CDC played
down the necessity of widespread testing and took “deliberate steps to
enforce guidelines that would make sure it didn’t receive more samples
than its single lab could handle.”"
"On Jan. 28, 2020, one month before the United States recorded its first
Covid death, he [Dr. Gottlieb] and a co-author warned in these pages that we must “Act
Now to Prevent an American Epidemic.” Correctly predicting that testing
would be a bottleneck, he urged the CDC to bring in private test
suppliers as quickly as possible. One wonders how many deaths might have
been averted had Dr. Gottlieb’s advice been followed."
"The CDC failed. What worked? The American model worked. Namely, private
incentive and ingenuity backed by a supportive federal government.
Operation Warp Speed, the Trump administration’s effort to produce
vaccines, was the shining jewel of the American model. The federal
government promised to buy hundreds of millions of doses of vaccine from
private manufacturers (so long as the vaccines worked but regardless of
whether they would be needed). It also supported very large and
expensive clinical trials, and it lifted burdensome rules and
regulations. The advance market-commitment model is very powerful in an
emergency. We should have used a similar model for masks and tests."
Uncontrolled Spread: Why Covid-19 Crushed Us and How We Can Defeat the Next Pandemic by Scott Gottlieb
The Biden vaccine mandates will bring out basic truths about the pandemic.
"Natural immunity. Courts have already been asked to review
employer mandates as applied to workers who previously had Covid. Our
vaccines were never tested on this group; the immunity they receive
after surviving the disease appears to be roughly as good as the
vaccine. That’s already 150 million Americans for whom mandatory
vaccination may be hard to justify.
The age skew. For most people in most circumstances, the
vaccine is a good bet and a no brainer for those whose risk from Covid
is much greater than any risk the vaccine might pose. But the net
benefit declines quickly as you go down the age table. A shot for a
75-to-84 year-old is 22,000% more likely
to save a life than a shot for an 18-to-29. For the youngest cohort,
the FDA has yet to resolve whether the very slight benefits of
vaccination outweigh the very slight risks."
"In a story on Monday acknowledging that Covid won’t be eliminated, it
will likely become endemic like the flu, this newspaper generously
added that Covid was a disease “that many public-health authorities once
believed they could conquer.”
This is not quite right. It was only in the miasma of their
rhetoric that they seemed to believe this. Multiple strains of flu and
cold-causing coronaviruses once emerged as novel pathogens and now
circulate routinely. Any epidemiologist would have told you to expect
the same of Covid, at least until they fell insensibly in line with the
rhetoric demanded by the career imperatives of active politicians facing
the prospect of re-election."
"House Democrats are moving ahead
with a huge bill to raise taxes on businesses and individuals, increase
welfare handouts, and micromanage numerous industries. It is a complex
proposal that would increase taxes $2.1 trillion over 10 years with 66
provisions and would distribute tax breaks and spending with another 79
provisions.
The following table is my summary of the bill based on the official estimates.
The bill would raise $2.073 trillion in taxes, distribute $1.202
trillion to infrastructure, green, and safety net programs, and leave
$871 billion in higher taxes to be used for other spending in the
overall Democratic agenda. Of the $1.202 trillion, 43 percent is tax
cuts and 57 percent is spending through refundable tax credits.
Here is a brief summary of the Democratic tax plan:
Subtitle F, Infrastructure. The main provisions are
subsidies for infrastructure bonds, building rehabilitation, and the
low‐income housing tax credit (LIHTC). The LIHTC is an awful,
fraud‐ridden program that mainly benefits developers. That the tax
bill would expand it by $29 billion illustrates the absence of
evidence‐based policymaking in Washington.
Subtitle G, Green Energy. The main provisions are subsidies
for electric utilities, biofuels, energy efficiency, and electric
vehicles. The subsidies are mainly in the form of tax credits, which are
nearly always complex and difficult to administer.
Subtitle H, Safety Net. The main provisions would expand
the child tax credit (CTC), the earned income tax credit (EITC), and the
child and dependent care tax credit (CDCTC). The official score shows that three‐quarters of CTC and EITC benefits are spending, not tax cuts.
Subtitle I, Tax Increases. The $2.1 trillion in tax hikes
include raising the corporate tax rate ($540 billion), raising taxes on
business foreign operations ($424 billion), and raising income and
capital gains taxes on individuals and small businesses ($1 trillion).
The Democratic tax plan would seize $2.1 trillion from the
private economy and use it to micromanage industries and buy votes with
handouts to favored interests. The actions of seizing, micromanaging,
and handing out benefits would each distort the economy and reduce
overall national income.
There would be other costs of the plan. The 145 provisions and the
follow‐on regulations would generate large administrative and
compliance costs, which would only benefit high‐paid lawyers and
accountants. Another cost would be diverting the energies of the
nation’s business leaders and entrepreneurs from making better products
to dealing with all the new rules.
Below is a JCT table
showing projected taxes by income level under present law and under the
Democratic proposal in 2023. I circled the overall effective tax rates,
meaning total federal income, payroll, and excise taxes as a percent of
income. Under present law, the average tax rate at the top is 30
percent, which compares to 0–10 percent for groups at the bottom. If the
tax plan passed, the average tax rate at the top would rise to 37
percent, while tax rates at the bottom would fall, going negative for
some groups as CTC and EITC expansion wiped out all federal taxes for
many additional households."
